Switzerland's largest banks will soon have to pump up their U.S. subsidiaries with more liquidity if American policymakers have their way.
The timing couldn't be worse: American investment banks have consistently left their European rivals in the dust in recent years in key Wall Street league tables. Now, the U.S. Federal Reserve is mulling changes would make it even harder for the European firms to compete on even footing, according to «Reuters».
A key part of reforms being deliberated is rolling out more stringent liquidity requirements for U.S. subsidiaries of foreign-based banks like UBS, Credit Suisse and Deutsche Bank. The Fed's aim is to ensure the U.S. branches are able to make good on their short-term obligations.
Crisis Era Loophole
After the financial crisis of 2008/09, foreign lenders were forced to shift their non-branch assets into new companies. These in turn would held to the same post-crisis requirements as big U.S. banks such as stress tests to gauge their sturdiness in an emergency.
The Fed did let foreign banks to also keep using their branches, with the lighter-touch regulation, alongside the newly-created holding companies. Policymakers are now looking to close the loophole, according to «Reuters».
