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Statement by FDIC Chairman Jelena
McWilliams on Notice of Proposed
Rulemaking: Tailoring for Foreign Banking
Organizations
Maintaining strong capital and liquidity requirements at our nation’s largest, most
systemically important banks is an important policy objective. At the same time and
consistent with other recent actions taken by the FDIC, it is essential that we
periodically assess our regulations to ensure they are appropriate for the risk profile and
complexity of affected institutions.
In May of 2018, Congress passed the Economic Growth, Regulatory Relief, and
Consumer Protection Act (the “Act”), which raised the asset threshold for the application
of enhanced prudential standards under Dodd-Frank to $250 billion, while giving the
Federal Reserve Board the authority to apply enhanced standards to firms with total
consolidated assets between $100 billion and $250 billion under certain conditions. In
November 2018, the FDIC, the OCC, and the Federal Reserve Board (the “agencies”)
issued a proposed rulemaking to implement this provision for large domestic banking
organizations. Today, we consider a similar proposal for foreign banking organizations
operating in the United States.
This proposal would implement the Act by more finely tailoring the application of
regulatory capital and liquidity requirements based on a foreign banking organization's
size, risk profile, and systemic footprint. The proposal shares the same underpinnings
as the proposed rule issued in November 2018, using similar risk-based categories to
determine the stringency of standards. However, there are some differences between
the two proposals that attempt to account for the unique nature and structure of foreign
banks operating in the United States. I look forward to receiving feedback on the
proposed approach.
While the proposal would more finely tailor application of the existing capital framework,
all of the affected institutions would continue to be subject to robust capital
requirements. With respect to liquidity, the proposal recognizes that strong liquidity
buffers are critical for large foreign banking organizations. However, liquidity standards
can be better tailored among the affected institutions. For example, banks in categories
III and IV would be subject to liquidity requirements tailored based on each bank’s
reliance on short-term wholesale funding. We estimate that the cumulative expected
decrease in capital among banks with total consolidated assets above $100 billion is
less than 1 percent, while liquidity requirements would, in the aggregate, modestly
increase.
Statement by FDIC Chairman Jelena
McWilliams on Notice of Proposed
Rulemaking: Tailoring for Foreign Banking
Organizations
Maintaining strong capital and liquidity requirements at our nation’s largest, most
systemically important banks is an important policy objective. At the same time and
consistent with other recent actions taken by the FDIC, it is essential that we
periodically assess our regulations to ensure they are appropriate for the risk profile and
complexity of affected institutions.
In May of 2018, Congress passed the Economic Growth, Regulatory Relief, and
Consumer Protection Act (the “Act”), which raised the asset threshold for the application
of enhanced prudential standards under Dodd-Frank to $250 billion, while giving the
Federal Reserve Board the authority to apply enhanced standards to firms with total
consolidated assets between $100 billion and $250 billion under certain conditions. In
November 2018, the FDIC, the OCC, and the Federal Reserve Board (the “agencies”)
issued a proposed rulemaking to implement this provision for large domestic banking
organizations. Today, we consider a similar proposal for foreign banking organizations
operating in the United States.
This proposal would implement the Act by more finely tailoring the application of
regulatory capital and liquidity requirements based on a foreign banking organization's
size, risk profile, and systemic footprint. The proposal shares the same underpinnings
as the proposed rule issued in November 2018, using similar risk-based categories to
determine the stringency of standards. However, there are some differences between
the two proposals that attempt to account for the unique nature and structure of foreign
banks operating in the United States. I look forward to receiving feedback on the
proposed approach.
While the proposal would more finely tailor application of the existing capital framework,
all of the affected institutions would continue to be subject to robust capital
requirements. With respect to liquidity, the proposal recognizes that strong liquidity
buffers are critical for large foreign banking organizations. However, liquidity standards
can be better tailored among the affected institutions. For example, banks in categories
III and IV would be subject to liquidity requirements tailored based on each bank’s
reliance on short-term wholesale funding. We estimate that the cumulative expected
decrease in capital among banks with total consolidated assets above $100 billion is
less than 1 percent, while liquidity requirements would, in the aggregate, modestly
increase.
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I am pleased to support this proposal. It represents additional progress toward tailoring
the application of prudential standards within the banking industry. It is paramount for
regulators to review our regulatory framework every few years to ensure that the
requirements we impose on our regulated entities are appropriately tailored to
institutions’ risk profiles and business models.
I would like to thank the staff of the OCC and Federal Reserve who worked on this
proposed rule for achieving this goal. In particular, I would like to thank the staff of the
FDIC for all of their hard work.
I am pleased to support this proposal. It represents additional progress toward tailoring
the application of prudential standards within the banking industry. It is paramount for
regulators to review our regulatory framework every few years to ensure that the
requirements we impose on our regulated entities are appropriately tailored to
institutions’ risk profiles and business models.
I would like to thank the staff of the OCC and Federal Reserve who worked on this
proposed rule for achieving this goal. In particular, I would like to thank the staff of the
FDIC for all of their hard work.