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From The Fed, A New Chill Toward Foreign Banks

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http://www.nytimes.com/2013/04/26/business/foreign-banks-in-us-face-greater-restrictions.html?ref=business&_r=0

There was a time, not long ago, when bank regulators around the globe trusted one another.

Those days are gone. Despite a lot of talk about the need for international cooperation in regulation, it now appears that American regulators intend to assure that foreign banks operating in the United States have adequate capitalization.

It was not always such. Until the financial crisis, the Federal Reserve was happy to allow American subsidiaries of foreign banks to have no capital at all, and some did not. At the end of 2007, Deutsche Bank’s American operations reported having a negative $8.8 billion in capital.

How could any regulator allow that? The idea was that the presumably well-capitalized parent back home would stand behind the American operation if it ran into trouble. And the United States could, of course, rely on home countries to both regulate their banks and, if something went badly wrong anyway, provide bailouts.

But as the crisis approached, some funny things were happening. Until the turn of the century, American operations of foreign banks tended to receive financing from home. But as the credit party grew after 2003, those banks increasingly borrowed in America’s short-term markets and sent the money back home to the parent.

When the credit crisis appeared, that financing — a significant part of which had come from selling short-term securities to United States money market funds — dried up.

So foreign banks took advantage and the Fed was quite happy for them to do so up until the bubble popped, then it's someone else's fault.

Trust is still leaving the banking system, although the global banking system is far too interlinked for it to be separated easily without it probably causing a collapse.

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  • 243 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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