Implementation for enhanced prudential standards compliance
Foreign banking organization considerations regarding Regulation YY rules
WHITE PAPER |
The risk profile of foreign banking organizations (FBOs) has changed dramatically since the 1990s. Up until 1999, most FBOs as a group were receiving funding on a net basis from their home/parent organizations.
Since that time, there has been a significant shift in funding sources for FBOs as short-term U.S. dollar funding raised in the United States has been used to supplement long-term U.S.-denominated projects and trade finance activities.
Dodd-Frank section 165 was intended to make these FBOs, depending on asset size, apply certain structural, risk management, capital, stress testing, liquidity and regulatory reporting requirements as part of their general risk management framework.
FBOs—regardless of their size and the regulatory requirement to submit a formal implementation plan—have until July 2016 to be in compliance with the Regulation YY rules.
In order for FBOs to build a robust risk management framework, it is important that they obtain strong risk management sponsorship from their leadership at the local and home office level in addition to building a strong organizational risk culture.
For FBOs, the keys to effective implementation of the Regulation YY rules are strong leadership and a culture that is focused on risk awareness and risk mitigation. Aligning the functions and people that must execute the implementation as well as getting the buy-in and support from their home office is also critical to be successful.