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Fed's Tarullo proposes new oversight rules for foreign banks' U.S. operations

Nov 29 2012 Jonathan Spicer, Reuters

A top Federal Reserve official launched a plan to subject foreign banks to the same tough oversight rules as their U.S. rivals, a policy shift that could make it less attractive for banks to do business in America. Fed Governor Daniel Tarullo outlined a three-pronged approach that would force the largest U.S. divisions of foreign banks to establish holding companies over all subsidiaries. Under this proposal, the Fed would stop relying on foreign oversight of banks. The proposal, which the Federal Reserve Board is now refining, would require foreign banks' U.S. holding companies to comply with the same capital rules that apply to U.S. banks, and it would make liquidity standards "broadly consistent" with domestic rules, he said. Tarullo, who plays a leading role on regulatory issues at the U.S. central bank, characterized his plan as "a middle course" for foreign banks doing big business in the United States. He said he aimed to make it "minimally disruptive." But foreign banks

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