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20 february 2014

Stricter US financial rules will hurt European banks

The final version of the new rules on foreign banks adopted by the US Federal Reserve (the Fed) on 18 February will have a negative impact on European banks operating in the United States.

 

The new regulations impose major constraints on large banking institutions established in the United States through the application of stricter financial standards. Since US banks established in Europe are not subject to such requirements, European banks will be faced with a distorted competitive environment.


The FBF regrets the adoption of these regulations, which represent a step back from the principle of good trans-border cooperation between national supervisors. It further regrets that the regulations are being applied at a time when Europe is establishing a single supervisory scheme, an important partner of the Federal Reserve on these issues.


It should be acknowledged, however, that the US regulator made some improvements to the initial proposal. The threshold at which foreign banks operating in the United States will be required to establish a new entity subject to US bank ratio requirements was raised from US$10 billion to $50 billion in assets. In addition, the implementation of the rules, initially planned for July 2015, was postponed one year to 1 July 2016.

 
 
 
 
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