Recent changes in US regulation of large foreign banking organizations

Abstract

Purpose

This paper aims to highlight some of the more important changes in US prudential regulation and their implications for the operation of large foreign banking organizations (FBOs) in the USA.

Design/methodology/approach

This paper begins with a summary of the regulatory status of FBOs prior to the crisis. It then discusses developments during the US financial crisis of 2007-2009 that motivated stricter US prudential regulation. The third part discusses some major post-crisis changes in prudential regulation. Finally, the paper considers two areas where important changes in US rules could not be applied in a straightforward manner to FBOs: non-bank financial subsidiaries and branches and agencies.

Findings

Most of the regulatory changes will enhance US financial stability, albeit in some cases at the cost of weakening FBOs consolidated risk management. However, a few of the regulatory changes have given foreign branches and agencies a significant competitive advantage in US money markets.

Originality/value

The paper provides an integrated analysis of both the why and the what of changes in US regulation with some discussion of the economic consequences.

Citation

Wall, L.D. (2017), "Recent changes in US regulation of large foreign banking organizations", Journal of Financial Regulation and Compliance, Vol. 25 No. 3, pp. 318-332. https://doi.org/10.1108/JFRC-02-2017-0018