Open Board Meeting April 8, 2019 | Summary and Q&A

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April 8, 2019
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Federal Reserve
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Open Board Meeting April 8, 2019

TL;DR

The Federal Reserve is proposing to modify the regulation of foreign banks operating in the United States based on their size, activities, and risks. They also aim to adjust the timing and content requirements for resolution plan submissions.

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Key Insights

  • 🏦 The proposed regulations aim to align prudential standards for foreign banks with the risks they pose to the U.S. financial system, creating a level playing field between foreign and domestic banks.
  • 🏦 The inclusion of liquidity requirements for foreign bank branches and agencies is a topic of discussion, with the Federal Reserve seeking public input on its advisability and possible approaches.
  • 💁 The proposed changes to resolution planning requirements aim to balance regulatory burden and the need for up-to-date information on firms' resolution preparedness.

Transcript

Transcript of Open Board Meeting April 8, 2019 CHAIR POWELL. Good morning everyone. I'd like to welcome our guests here at the Fed and also our online viewers. Today, we'll consider proposals in two areas. The first would modify our regulation of foreign banks based on their size, activities, and risks, just as we have proposed for domestic banks. ... Read More

Questions & Answers

Q: How would the proposed regulations affect foreign banks operating in the U.S. compared to domestic banks?

The proposed regulations would align the prudential standards for foreign banks with the risks they pose to the U.S. financial system. Foreign banks with larger cross-border profiles and higher levels of short-term funding would face more stringent regulation, similar to domestic banks engaged in the same activities.

Q: Why are liquidity requirements for branches and agencies of foreign banks not included in the proposal?

The proposal does not currently include standardized liquidity requirements for foreign bank branches and agencies. However, the Federal Reserve is seeking comments on whether to introduce such requirements in a later proposal, considering the liquidity risks posed by these entities.

Q: How would the proposed changes to resolution planning requirements affect firms?

The proposal would introduce longer filing cycles, ranging from two to three years, based on the size and complexity of firms. It would also allow for full plans, targeted plans, and reduced plans, depending on the risk profiles and activities of each firm. The aim is to reduce the burden of plan submissions while ensuring adequate information is provided for assessing resolution preparedness.

Q: Why are some institutions exempt from resolution planning requirements?

The proposal suggests exempting certain firms with limited U.S. operations or simpler legal structures from resolution planning requirements. These firms have lower risks to U.S. financial stability, and their limited activities would not significantly impact the financial system in the event of failure. The exemption also aims to reduce the regulatory burden on these institutions.

Summary & Key Takeaways

  • The proposals aim to implement a similar framework for prudential standards for foreign banks as for domestic banks, taking into account the unique structures and risks of foreign banks operating in the U.S.

  • The regulations would create categories of increasingly stringent regulation based on the risks posed by foreign banks. This aligns with the regulator's aim to treat foreign banks the same way they treat domestic banks.

  • The proposal also suggests changes to the resolution planning requirements, with different filing groups and reduced content plans for certain banks based on size and risk profiles.

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