Local banks resist US proposal
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 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 "damage the US financial industry as some [foreign banks] review their operations in the US," it said.
"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 coordination with respect to regulation, and the Proposed Rule diverts from the long-standing approach of consolidated supervision by home-country regulators."
Among 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 global financial crisis.
The ABA has called for coordination 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.
Frequently Asked Questions about this Article…
The US Federal Reserve has proposed that foreign banks with US operations set up separate holding companies for those businesses and follow stronger capital and liquidity standards as part of post‑global financial crisis reforms.
The Australian Bankers' Association (ABA) argues the proposed rules are unnecessary for banks from countries like Australia that already have tight regulation. The ABA says the Fed's approach could add needless costs and doesn’t recognise Australia’s strong prudential regime.
The article mentions NAB, which owns US lender Great Western Bank (with more than US$9 billion in assets and close to 200 outlets in the US Midwest), and Macquarie Group, which has been expanding in US investment banking since the global financial crisis.
Yes. The ABA warned that the proposal may cause some foreign banks to review their US operations, and said that could in turn risk damaging the US financial industry if banks reduce or rethink their presence.
The ABA has urged the Fed to take a more flexible approach that recognises high‑quality home‑country regulation, and it has called for international coordination so countries implement bank regulation consistently rather than each adopting separate rules.
Tony Burke, the ABA’s director of industry policy and strategy, said the proposals don’t appear to give recognition to countries such as Australia that already have strong prudential regimes and stressed the importance of international coordination and home‑country supervision.
The ABA said many members would be "significantly impacted" and that the Fed’s proposed changes would add needless costs, largely by imposing additional capital, liquidity and structural requirements on US operations of foreign banks.
The ABA warned the proposal diverts from the long‑standing approach of consolidated supervision by home‑country regulators, raising concerns that other nations could respond by developing their own separate sets of rules rather than coordinating internationally.
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