On Nov. 29, 2018, the Board of Governors of the Federal Reserve System (FRB) published for public comment proposed regulations to revise the current prudential standards regulatory framework for U.S. banking organizations according to their risk profiles. At the time, the FRB stated that similar proposals for non-U.S. banks with banking operations in the United States would be proposed later. On April 8, 2019, the FRB announced that it was issuing a notice of proposed rulemaking to revise the prudential standards regulatory framework for non-U.S. banks that operate in the United States, also to align the standards more closely to the risk profiles of the particular banks. The FRB also proposed specific liquidity management requirements for the U.S. operations of non-U.S. banks. This month’s column will discuss highlights of both proposals.

A Little Background

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), banking organizations, both U.S. banking organizations, and non-U.S. banking organizations with U.S. banking operations, that had total consolidated assets of $50 billion or more were deemed by statute to be a risk to the financial stability of the U.S. financial system and became subject to a series of regulatory requirements imposed by the FRB, including stress testing, liquidity risk management, capital buffers, enhanced risk management, and single counterparty credit limits. In 2018, the $50 billion threshold was raised to $250 billion in the Economic Growth, Regulatory Relief, and Consumer Protection Act.

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