Final federal reserve rules for foreign banking organisations

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By Joseph T Lynyak, III and Rodney R Peck

This alert describes the final regulations issued by the Federal Reserve Board (FRB) on 18 February 2014 that radically modify the former requirements applicable to foreign banking organisations (FBOs) pursuant to the FRB’s Regulation K. The final rules impose various requirements on large FBOs that previously have been applied to large US domestic bank holding companies and banks under the Dodd-Frank Act. In addition, however, the final rules also alter many of the former approaches to the regulation of FBOs in general, including the necessity for many FBOs to form ‘US intermediate holding companies’ for their US operations.

Regardless of the category an FBO falls into, the final rules present significant additional compliance burdens.

In December 2012, the FRB issued for public comment a proposed comprehensive modification to the rules governing the operations of FBOs in the US. Premised upon very broad interpretations of sections 165 and 166 of the Dodd-Frank Act, the FRB proposed to create an enhanced prudential standards scheme to apply to FBOs — with a layering of increased structural and operational procedures and substantive compliance requirements based upon the amount of an FBO’s global and US-based assets. Among other things, these proposed requirements addressed the following…

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