On Monday, the 8th of April, the US Federal Reserve had proposed a new regulatory legislation for some 23 foreign banks operational in United States, which may have proffer flexibility for some conventional lenders, while firming rules for foreign farms involved in riskier operations.
The proposal is part of a broader plan of US Fed to cement banking rules more in alignment with firms’ risk profiles, and it would be affecting operations of major multinational foreign lenders such as Swiss UBS & Credit Suisse, German Deutsche Bank and British HSBC in United States.
The proposed reforms would be making the capitals more flexible as beforementioned and strict testing requirements of the subsidies of foreign banks. Besides, the US Federal Reserve may incline harsher liquidity rules on the subsidiaries of foreign banks, which had extensively been relying on risky activities such as short-term funding and investments.
In fact, traditional banks usually rely on long-term investments for making money. Besides, the Fed had also added that they had been planning to impose strict liquidity requirements for opening branches of foreign banks for the first time.
Never the less, Fed had made it more flexible for the lenders on how frequently they would need to report their proposed measures in the events of failure based on their current liquid assets.