New rules have been finalised by the US Federal Reserve Board that tailor its regulations for domestic and foreign banks to closely match their risk profiles.
The rules decrease compliance needs for companies with less risk while maintaining the most stringent requirements for the largest and most complex banks.
The rules set up a framework that sorts banks with $100bn or more in total assets into four different categories depending on various factors.
According to the Federal Reserve Board, the final rules simplify the proposals by applying liquidity standards to a foreign bank’s U.S. intermediate holding company (IHC) based on the risk profile of the IHC, instead on the integrated US operations of the foreign bank.
For larger companies, the final rules apply standardised liquidity needs at the higher end of the range that was proposed for both domestic and foreign banks.
The final rule also builds upon the agencies’ practice of differentiating requirements among banking organisations based on one or more risk-based indicators.
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Federal Reserve Board Chair Jerome Powell said: “Our rules keep the toughest requirements on the largest and most complex firms.
“In this way, the rules maintain the fundamental strength and resiliency that has been built into our financial system over the past decade.”
The Federal Reserve System is the central bank of the US. It carries out five general functions to promote the effective operation of the US economy and the public interest.