Born in the USA December 19, 2012 at 8:38 am

If you weren’t, and you are a bank, times are about to get tougher. From a Shearman & Sterling memo on the FED’s latest announcement on the regulation of foreign banks in the US:

[It is proposed that] foreign banks under Federal Reserve supervision be subject to requirements that (1) they establish a US intermediate holding company for all US subsidiaries, (2) the holding company comply with US capital adequacy requirements and liquidity constraints, and (3) US branches and agencies comply with unspecified liquidity constraints and limits on cross-border funding and derivatives activities.

I suspect the hard part about this will not just be complying, but demonstrating compliance. Foreign banks historically have not had to calculate the full panoply of US capital ratios, so their systems will have a hard time coming up with the numbers. The trade is clearly long consultants, short foreign banks.

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