Are you a Volcker Rule FBO?
David Millar, risk consultant, trainer and former COO at global risk management association, PRMIA, looks at the Volcker Rule and examines its impact on Asian banks. July 31, 2012 | David MillarThe US has a habit of introducing regulations which impact unsuspecting foreign banks that had hitherto not realised that their non-US activities could be affected by US initiatives. First, there was the Sarbanes-Oxley Act which impacted all banks that had launched secondary capital floatations in the US market. This was followed by the Patriot Act, where suspected money laundering activities overseas could result in fines. Recently, we had Foreign Account Tax Compliance Act (FATCA), where virtually all non-US banks (at least those with US clients, US counterparties, or counterparties that in turn have US clients and counterparties) found themselves either having to declare their US-linked activities or, at a minimum, sign off the fact that they have processes in place to ensure they don’t have any US-linked activities – with a July 2013 deadline. FATCA created the Foreign Financial Institutions (FFI) classification. Now we have Foreign Banking Organisation s(FBOs). So what is an FBO? FBOs were created by the Volcker Rule which was established to prevent another credit crunch similar to the 2008 financial crisis. Basically, the Volcker Rule prohibits “banking entities” from engaging in proprietary trading, investing in or sponsoring private equity and hedge funds. The term “banking entity” also includes all foreign banks that maintain branches or agencies in the US or have stakes in any US bank or lending company. These foreign banks, including their parent or holding companies, are termed as FBOs and are subject to the Volcker Rule. Most Asian banks operating internationally will have some form of agency in New York or Chicago, , which acts as an intermediary for its international cash, remittance or trade requirements. This operation will now be regulated, resulting in its parent bank being a Volcker FBO. The same rules apply to proprietary trading or investing in hedge funds or private equity initiates. So, ... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, Regulation, Risk and RegulationCapital & Strategic Issues,riskregulation,Risk and Regulation, Capital & Strategic Issues,Regulation,Risk and Regulation, Keywords:Volcker Rule, FBO, FFI, Dodd-Frank, FATCA, Patriot Act, Sarbanes-Oxley Act, 2008 Financial Crisis Volcker Rule, FBO, FFI, Dodd-Frank, FATCA, Patriot Act, Sarbanes-Oxley Act, 2008 Financial Crisis
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