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March 4, 2014

Federal Reserve Board Enhances Prudential Supervision of US and Non-US Banks

Summary: The Federal Reserve Board recently adopted substantial portions of Regulation YY, “Enhanced Prudential Standards,” subjecting US bank holding companies, US savings and loan holding companies and foreign banking organizations to a graduated series of requirements. These new standards—which impose a range of stress testing, risk management, and capital and liquidity requirements that were previously left to the home country regulators in the case of foreign banking organizations—suggests a continuation of the shift (applicable to both US and non-US institutions) toward regulation from the perspective of systemic risk, potential insolvency and tighter compliance standards and, to some extent, away from regulation from the perspective of permissible activities.