To Regulate Foreign Banks in the U.S., ‘Trust, but Verify’

The New York Times
February 18, 2014

The Federal Reserve is expected to finalize capital rules for “foreign bank organizations” on Tuesday, and it has reignited questions about whether the United States is being unduly harsh to European banks here.

Absolutely not.

In fact, not only have foreign banks not been required to be sufficiently capitalized to sustain unexpected losses, but also they have been even less capitalized than banks with headquarters in the United States. This means that European banks have been in a position to play regulatory arbitrage and book some of their riskier transactions in the United States. Financial lobbies, such as the Global Financial Markets Association, have been decrying the Federal Reserve rules, and like a weary Greek chorus, repeating their mantra that regulation will cause some foreign banks to leave the United States…Read More

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