US Eases Rules For Some Foreign Banks

by Philip Morton, Investors Offshore.com

06 March 2002

It emerged this week that the rules for some foreign banks operating in the United States are to be relaxed, in a move which is likely to free up around $1.6 billion in assets and administrative costs.

According to reports, the changes are likely to affect 52 US-based branches of foreign banks, including Switzerland's UBS, Royal Bank of Canada, Hong Kong's Bank of East Asia, and the Bank of China.

Under the previous rules, branches of foreign banks based in the US were required to set aside an amount equivalent to 5% of liabilities in capital equivalency deposits, which were held in trust at other banks.

However, the Office of the Comptroller of the Currency, the sector of the Treasury Department which regulates such entities, announced this week that it has decided to replace the 5% charge with a risk weighted system which will take into account the activities of the particular branch and the parent country risk.

The OCC has also announced that the minimum account that foreign branches are required to set aside will be slashed from $3 million to $1 million, and that the way in which it calculates liabilities will be changed so that funds held in offshore accounts will not be included.

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