Fed proposes tougher capital rules for foreign banks

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http://www.washingtonpost.com/business/economy/fed-proposes-tougher-capital-rules-for-foreign-banks/2012/12/14/49f2c236-461e-11e2-8e70-e1993528222d_story.html



Fed proposes tougher capital rules for foreign banks
By Danielle Douglas, Published: December 14

The Federal Reserve said Friday it would press big foreign banks operating in the United States to keep far more money in their reserves to reduce risks to the financial system, a move that could have broad effects on the banking landscape.

The plan essentially would pull foreign banks in line with their American competitors by forcing them to adhere to many of the same standards. Many foreign firms have been lending aggressively in the United States but setting aside far less to cover losses.

But lobbying groups for the foreign banks and some analysts are concerned that stricter rules would result in higher costs for the millions of U.S. businesses that rely on the services of these lenders, which issue about 25 percent of all commercial loans in the nation.

“There is no doubt this plan will cost foreign banks more money, require much more management,” said attorney Douglas Landy, head of the regulatory practice at Allen & Overy. “If banks face significantly higher costs, they are going to pass them on to customers. That’s just the way it is.”