Navigating “Year Two”: Regulatory landscape and challenges for foreign banks and their IHCs

After the July 1, 2016 compliance deadline for foreign banking organizations (FBOs) to establish US intermediate holding companies (IHCs) and implement the enhanced prudential standards,1 we noted that, although the effective date marked a key milestone on the journey toward effective compliance, the “long road to operationalizing run-the-bank (RtB) functions has just begun.”2 Heading into Year Two, FBOs with their US IHCs and broader combined US operations (CUSO) contend with the reality that there is a significant road yet to be traveled in a regulatory environment focused on local/jurisdictional implementation that challenges the global model.

Four key focus areas underpinning the supervisory strategy

Although FBOs have made notable progress leading up to and after last year’s “go-live” date under Regulation YY, they continue to face substantial challenges across aspects of the Federal Reserve Board’s (FRB) four key supervisory focus areas:

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Fed FAQs for FBOs

The Securities and Exchange Commission Reforms Money Market Rules

On June 26, 2014, the Federal Reserve (Fed) published answers to a list of frequently asked questions (FAQs) from foreign banking organizations (FBOs) that face enhanced prudential standards — including formation of an intermediate holding company (IHC) for non-branch U.S. operations and submission of an Implementation Plan. Many of the questions were generated from a town hall meeting the Fed conducted in May 2014 to help selected FBOs understand the planning requirements and timing associated with the enhanced standards.

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