Federal Reserve Issues Final Regulation Implementing Dodd-Frank Section 165 Enhanced Prudential Standards for Large US and Non-US Banking Organizations
3 March 2014
Mayer Brown Legal Update
The Board of Governors of the Federal Reserve System has approved a final rule implementing the enhanced prudential standards contained in section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) for US bank holding companies (BHCs) and foreign banking organizations (FBOs). Under the final rule, certain large US BHCs and FBOs will be subject to heightened capital, liquidity, risk management, and stress testing requirements. Application of the requirements varies depending upon the institution’s size, and for FBOs, upon the size and structure of their US operations. In a significant change from the proposed rule, the final rule requires only those FBOs with $50 billion – as opposed to $10 billion, as proposed – in US non-branch assets to organize their US subsidiaries (but not their US branches and agencies) under a US intermediate holding company. In addition, the final rule defers action on the single counterparty credit limit and early remediation requirements. The final rule will generally take effect for US BHCs on January 1, 2015, and for FBOs on July 1, 2016.