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Banks with more than $50bn of assets in the US will have to shore up their balance sheets by billions of extra dollars in order to pass the Fed’s annual “stress tests”
The rules will take effect a year later than originally proposed, and institutions with less than $50bn of capital have been sparedPhoto: Alamy
By Katherine Rushton
6:09PM GMT 19 Feb 2014
America is to place the same capital requirements on foreign banks with major operations in the US as it does on its own lenders, effectively walling the US financial system off from the rest of the world.
The ruling by the US Federal Reserve is designed to ensure that America does not have to bail out the US arms of foreign banks, as it did in the wake of the 2008 financial crisis. However, it is likely to reignite a long-running row with the European Union over the best way to coordinate global banking regulation.
It also comes as a major blow to financial institutions headquartered in Europe, like London-based Barclays, UBS and Credit Suisse in Switzerland, and Deutsche Bank in Germany. Each of those banks is likely to have to raise billions of dollars of extra capital or reduce their US activity in order to meet the new legislation.
The rules, which come into force in July 2016, stipulate that banks with more than $50bn of assets in the US have to shore up their balance sheets by billions of extra dollars in order to pass the Fed’s annual “stress tests”.
Deutsche Bank, whose US unit has almost no capital, will face a shortfall of around $7bn under the new rules, according to analysts at Citigroup. Barclays will also have a so-called “capital gap”, analysts at Morgan Stanley said, and is likely to shrink its balance sheet to address at least some of the shortfall.
America launches capital crackdown on foreign banks - Telegraph
The rules will take effect a year later than originally proposed, and institutions with less than $50bn of capital have been sparedPhoto: Alamy
By Katherine Rushton
6:09PM GMT 19 Feb 2014
America is to place the same capital requirements on foreign banks with major operations in the US as it does on its own lenders, effectively walling the US financial system off from the rest of the world.
The ruling by the US Federal Reserve is designed to ensure that America does not have to bail out the US arms of foreign banks, as it did in the wake of the 2008 financial crisis. However, it is likely to reignite a long-running row with the European Union over the best way to coordinate global banking regulation.
It also comes as a major blow to financial institutions headquartered in Europe, like London-based Barclays, UBS and Credit Suisse in Switzerland, and Deutsche Bank in Germany. Each of those banks is likely to have to raise billions of dollars of extra capital or reduce their US activity in order to meet the new legislation.
The rules, which come into force in July 2016, stipulate that banks with more than $50bn of assets in the US have to shore up their balance sheets by billions of extra dollars in order to pass the Fed’s annual “stress tests”.
Deutsche Bank, whose US unit has almost no capital, will face a shortfall of around $7bn under the new rules, according to analysts at Citigroup. Barclays will also have a so-called “capital gap”, analysts at Morgan Stanley said, and is likely to shrink its balance sheet to address at least some of the shortfall.
America launches capital crackdown on foreign banks - Telegraph
