Banks slam Fed proposal for foreign lenders to lift US capital reserves
Australian banks are pushing back against a US plan to force lenders with a US presence to hold more capital, saying the move may cause some foreign banks to review their presence in the market.
As part of its response to the global financial crisis, the US Federal Reserve has proposed requiring foreign banks to set up separate holding companies for their US operations and strengthen capital and liquidity standards.
In a letter to the Fed, the Australian Bankers' Association said some its members would be "significantly impacted" by the proposed changes, many of which were "unnecessary".
Australian banks were already tightly regulated and the local authorities were at the forefront of implementing more stringent global capital rules, it said, and the Fed's move would add needless costs. It urged the Fed to take a more "flexible" approach to banks from countries such as Australia that were globally recognised for regulating their banks well.
The plan threatened to "ultimately damage the US financial industry as some [foreign banks] review their operations in the US. The proposals do not appear to give recognition to countries such as Australia that already have strong prudential regimes," said the letter from Tony Burke, the ABA's director of industry policy and strategy.
"It is important that there continues to be international co-ordination with respect to regulation, and the proposed rule diverts from the long-standing approach of consolidated supervision by home-country regulators."
Among the big Australian banks, NAB owns the US lender Great Western Bank, with assets of more than $US9 billion and close to 200 outlets in the US Midwest. Macquarie Group has also been aggressively expanding its presence in US investment banking since the financial crisis.
Echoing criticism from European interests, the ABA called for co-ordination between countries in implementing bank regulation. It said there was a "long-standing" approach of home country regulators supervising their banks, and the US move could cause other nations to develop their own set of rules.
"If the proposals are implemented in their current form, it may well lead to other countries developing their own frameworks, leading to diverging regulatory frameworks, global inconsistency and an unwieldy cross-border regulatory regime across the globe," the letter said.
The Fed's proposed rules will apply to all banks that have a US presence with global assets of $US50 billion or more, with more stringent rules imposed on those with US assets of $US50 billion or more. The Commonwealth Bank, ANZ and Westpac each have offices in New York as part of institutional banks.