Federal Reserve proposes new rules for foreign banks

Federal Reserve building in Washington Karen Bleier/AFP/Getty Images

WASHINGTON The Federal Reserve is proposing that large foreign banks keep a bigger financial cushion against unexpected losses for their U.S. affiliates.

The rules proposed Friday are aimed at preventing another financial crisis. They were mandated by the 2010 financial overhaul and would apply to those foreign banks with $50 billion in worldwide assets that operate in the United States.

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That means their U.S. affiliates would be subjected to the same capital reserve requirements as U.S. banks. The U.S. operations would have to take the form of a bank holding company, putting them under the Fed's oversight.

The rules wouldn't take effect until July 2015. The Fed estimates that about 107 foreign banks would be affected.

Rules proposed previously for U.S. banks would require them to hold capital worth at least 6 percent of the value of their assets, in line with international standards being phased in.

The Fed's proposal would apply to 23 foreign banks that have both worldwide assets and assets in the U.S. of at least $50 billion each. Banks in that category include British bank HSBC (HBC), Germany's Deutsche Bank (DB), Canada's TD Bank (TD) and Dutch bank ING (ING).

A less strict level would apply to 84 foreign banks with $50 billion or more in worldwide assets but less than $50 billion in U.S. assets.

The proposal would be opened to public comment for 90 days and could be formally adopted by the Fed after that.

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