Clifford Chance

US Regulators Propose to Use Global Assets to Determine US Systemic Significance

14 April 2011

Many experts have said that a determination of systemic significance requires an understanding of a wide range of characteristics of a financial institution and its business. Nonetheless, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") emerged from Congress with a threshold that effectively deems as systemically significant any company that controls a US bank and has US$50 billion or more in consolidated assets. Presumably because of their significance to the US financial system, each of these US bank holding companies will be subject to "enhanced prudential requirements."

But what about non-US banks that are deemed to be US bank holding companies because they have US banking operations? Many non-US banks are deemed to be US bank holding companies simply because they operate a branch or an agency in the United States. Now the Federal Reserve and the Federal Deposit Insurance Corporation (the "FDIC") have proposed rules that would bring under the scope of the Dodd-Frank Act provisions for systemically significant institutions any non-US bank with US banking operations that has US$50 billion or more in consolidated global assets. Consequently, it would not matter if a non-US-based bank had only insignificant US operations. If it has US$50 billion or more in consolidated global assets, it will be treated in the same manner as the most systemically significant US bank holding company.

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