Foreign banks should start reviewing their governance and reporting practices ahead of a plan that would subject them to the same capital rules as large U.S. banks, according to consultants from PricewaterhouseCoopers.
A proposal announced by the Federal Reserve this month would force foreign banks with U.S. operations to organize their subsidiaries under a holding company and maintain stronger capital positions in the United States.
The intent of the rule is to make sure the banks have enough capital so that the government doesn't have to use taxpayer funds to bail them out in a crisis.
The proposal is set to come into effect on July 1, 2015. Once the plan is effective, foreign banks with more than $50 billion in assets would face U.S. capital rules, stress testing, and reporting requirements.
The banks also have to develop a risk management framework for the holding company and set up a risk committee to monitor "liquidity risks" in case they run out of cash.
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