The Board of Governors of the Federal Reserve System ("Board") has devoted some time to considering how to address the potential threat to the financial stability of the United States posed by a foreign bank with banking operations in the United States ("foreign banking organization" or "FBO"). Proposed rules (the "Proposal") issued on December 14, 2012 conclude that the best, or at least most practical, solution is to require an FBO with a significant US presence to "ring-fence" in the United States capital and liquidity deemed sufficient to support its subsidiary bank and nonbanking operations in the United States. If the Board adopts this ring-fencing approach to financial stability in its final regulation, one cannot help but wonder if other nations will follow suit with their own ring-fencing regimes.
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