This is the page for Caroline Bradley’s International Finance Class at the University of Miami. In Spring 2014 we will meet on Tuesdays and Thursdays at 3.30 pm in F108.
WEEK 9: Mar. 10-14: Spring Break. I hope you enjoy the break. I will post assignments for the week after spring break at the end of next week – probably late on Friday (the 14th).
WEEK 8: March 3-7 Next week we will continue to focus on banking regulation, working through International Finance Materials 2014: Chapter 4: Cross Border Financial Regulation. On Tuesday we will begin with the Federal Reserve’s Rule on Foreign Banking Organizations looking at why the Fed decided to impose extra obligations on certain FBOs and the evolution from the proposal to final rule in response to comments. We will also be able to begin to think about dual banking regulation in the US. I said we would then be able to think about how in the US and EU there are roles for state and Member State regulators and also for Federal and EU-level regulators.
The issue of how regulators deal with foreign bank branches has a lot of different aspects. We have already seen some of these. Here is another: last year the SEC issued Financial Responsibility Rules for Broker-Dealers which include requirements broker-dealers have to meet when they deposit money to meet reserve requirements. The rules require broker-dealers to look at the equity capital of the bank, identified on reports the bank files (Call Reports). However, foreign bank branches do not have an equity capital line item in these reports because they are not capitalized separately. Does this mean that broker-dealers can’t place these deposits with US branches of foreign banks? The SEC is currently thinking about this issue and has issued a no action letter to say that it will not be enforcing compliance with the rule while it thinks.
For Thursday’s class, please read The UK Prudential Regulation Authority’s Consultation Paper Supervising International Banks: the PRA’s approach to branch supervision – CP4/14, published this week, and Deutsche Bank’s Resolution Plan (October 2013)
The Fed’s Resolution Plans page states:
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Federal Reserve periodically submit resolution plans to the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). Each plan, commonly known as a living will, must describe the company’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company, and include both a public and confidential section.