Federal Reserve Board Introduces Dodd-Frank Enhanced Prudential Supervision and Early Remediation Rules for Foreign Banking Organizations
By V. GERARD COMIZIO & LAWRENCE KAPLAN
The Federal Reserve Board ("FRB") recently announced the issuance of proposed rules to impose enhanced prudential standards and early remediation requirements on certain foreign banking organizations (FBOs) and foreign nonbank financial companies operating in the U.S. designated for supervision by the FRB (FBO Rules). If adopted, the FBO Rules which implement Sections 165 and 166 of the Dodd-Frank Act would significantly change the way the FRB has regulated FBOs, establishing enhanced prudential standards and early remediation requirements parallel to those announced by the FRB in December 2011 for U.S. bank holding companies with greater than $50 billion in total consolidated assets and nonbank financial companies designated for supervision by the FRB. The FBO Rules represent a major shift from the FRBs longstanding largely case-by-case supervisory approach towards the regulation of FBOs. As such, the FBO Rules impact all foreign banks with bank subsidiaries, branches and agencies in the U.S., and the parent companies of such foreign banks.