BPI to Fed: Recalibrate Capital, Resolution Rules for Foreign Banks' U.S. Holding Firms

The Bank Policy Institute ("BPI") urged the Federal Reserve to recalibrate capital and resolution requirements written for parent-level bank holding companies but applied to U.S. intermediate holding companies of foreign banks, arguing the mismatch traps capital without improving safety and soundness.

Foreign banks with $50 billion or more in U.S. non-branch assets must generally hold their U.S. subsidiaries through a U.S. intermediate holding company under Section 165 of the Dodd-Frank Act, implemented through the Fed's Regulation YY, even though the foreign parent remains subject to home-country consolidated oversight.

In a report, BPI said the Fed sets internal total loss-absorbing capacity ("internal TLAC") for intermediate holding companies of foreign Global Systemically Important Banks ("G-SIBs") at 90 percent of the parent-level standard while leaving risk-weighted assets undiscounted. BPI noted that 90 percent is the top of the range in the Financial Stability Board's guiding principles on internal TLAC. BPI said a related scaling factor can push required capital above what an orderly U.S. resolution would need, prompting firms to shrink their U.S. balance sheets. BPI called for lower internal long-term debt requirements for firms with credible global resolution plans. The report follows an August 2026 letter in which the Institute of International Bankers and five other groups, BPI among them, asked the Fed to cut the internal TLAC calibration to 75 percent (see prior coverage).