Overseas Banks Can No Longer Bypass Fed RulesBanker Resource
March 12, 2014 — 1,293 views
Overseas banks that have a major Wall Street presence will no longer benefit from the loopholes in the system, which exempted them from some of the tougher laws placed. The Federal Reserve had made certain amendments and additions to the legality regarding banking practices post the financial meltdown in 2008. Foreign banks managed to bypass a number of these regulations because of ambiguity and other discrepancies in the documentation.
Foreign banks to face same legal implications as domestic banks
In recent news, the Federal Reserve has polished their regulations, including overseas banks in the equation. Large banks with a name on Wall Street will no longer benefit from earlier privileges once these legislations are put into action. Instead, they will be at par with national banks. Foreign banks were able to bypass the legislation because their headquarters were located in different countries.
Also, these prominent figures on Wall Street lobbied against the motion stating that they have adequate monitoring from the regulations in their respective countries. This motion was set to become law in 2012, when many such issues came up. Now, the motion has come to its last stage as of Tuesday, and is said to be implemented in the near future. There are multiple debates on the effectiveness of this change.
Arguments for and against the motion
Some critiques say that the diminished freedom does not promote globalization and a free market. Those who are for the motion argue that the large presence of foreign banks has negative implication on domestic banks. The economy of the country is being affected because funds are effectively going out of the United States, according to them. One of the major roles of the Federal Reserve is to reduce inequality and monitor such happenings. Although they had much resistance from the overseas banks, there were only a few concessions made.
Most of what was decided will still be a part of the final draft. Angered banks in the sector continue to resist the changes being made to the system, arguing that there is already a fair amount of regulation on their overseas activities from governing bodies in their home countries. This is likely to make no difference, as the process has already been completed, and the motion should pass into law very soon. The ongoing debate has lasted for a couple of years now, and is unlikely to be reverted.