Following closely on the heels of Federal Reserve Governor Daniel K. Tarullo’s November 2012 speech, the Federal Reserve has proposed a tiered approach for applying U.S. capital, liquidity and other Dodd-Frank enhanced prudential standards, including single counterparty credit limits, risk management, stress testing and early remediation requirements, to the U.S. operations of foreign banking organizations with total global consolidated assets of $50 billion or more (“Large FBOs”). Most Large FBOs would have to create a separately capitalized top-tier U.S. intermediate holding company (“IHC”) that would hold all U.S. bank and nonbank subsidiaries. A Large FBO with combined U.S. assets of less than $10 billion, excluding its U.S. branch and agency assets, would not be required to form an IHC.

The IHC would be subject to U.S. capital, liquidity and other enhanced prudential standards on a consolidated basis. In addition, the Federal Reserve would have the authority to examine any IHC and any subsidiary of an IHC. Although the U.S. branches and agencies of a Large FBO’s foreign bank would not be required to be held beneath the IHC, they too would be subject to liquidity, single counterparty credit limits and, in certain circumstances, asset maintenance requirements. Large FBOs not required to form an IHC would also be subject to many of the new enhanced prudential standards.

This memorandum provides an overview of key aspects of the Federal Reserve’s proposal, which would become effective on July 1, 2015. We invite you to also read the accompanying diagrams and tables for a visual representation of these new requirements, available here. The comment period for the proposal ends on March 31, 2013.

…continue reading: Dodd-Frank Enhanced Prudential Standards for Foreign Banking Organizations

On June 20, the Office of the Comptroller of the Currency (“OCC”) issued interim final rules (including both the interim final rule and the preamble, the “Lending Limit Release”) to implement Section 610 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Section 610 expands the statutory definition of “loans and extensions of credit” in the lending limit provisions of the National Bank Act [1] and Home Owners’ Loan Act [2] to include the credit exposure from repurchase and reverse repurchase transactions and securities lending and borrowing transactions (collectively, “securities financing transactions”) and derivative transactions. [3] The Lending Limit Release sets out the procedures and methodologies for calculating the credit exposure for these newly covered transactions. The Lending Limit Release also establishes a single set of lending limit rules applicable to both national banks and federal and state-chartered savings associations. The lending limit rules are effective July 21, 2012, with an exemption until January 1, 2013 for credit exposures from derivatives and securities financing transactions.

…continue reading: OCC Lending Limit Rules