Fed delays compliance dates for foreign banks under single-counterparty credit limit rule

Compliance deadlines for foreign banking organizations (FBOs) under the Federal Reserve Board’s single-counterparty credit rule are delayed to July 2021 and January 2022 under a final rule announced Friday.

The Fed proposed extending the compliance deadlines last November and adopted those without change. In brief, the extension applies to the combined U.S. operations of foreign banks and provides additional time for foreign jurisdictions’ implementation of the standard to become effective.

The Fed Board adopted the single-counterparty credit rule in June 2018. The aim: to enhance financial stability by limiting the exposure that a large domestic or foreign bank can have to another counterparty. The rule applied those limits to both the intermediate holding company (IHC) and combined U.S. operations of foreign banks, which includes any U.S. branches. For the limits applied to combined U.S. operations, a foreign bank could comply by certifying that it meets a similar rule or standard of its home country.

Initial compliance deadlines under the 2018 final rule were July 1, 2020, for covered foreign entities that are not major FBOs or major U.S. IHCs; and Jan. 1, 2020, for major FBOs and major U.S. IHCs. Under the changes announced Friday, the largest foreign banks need to comply by July 1, 2021; smaller foreign banks, by Jan. 1, 2022.

“Certain foreign jurisdictions remain in the process of finalizing their rules or standards. The extension allows additional time for foreign banks to comply with the Board’s rule via certification with a similar home country rule or standard,” the Fed said in Friday’s announcement.

The Fed said all other parts of the rule remain unchanged.

Federal Reserve Board finalizes rule to extend by 18 months the initial compliance dates for certain parts of its single-counterparty credit limit rule