Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Attention: Ann E. Misback, Secretary
Docket No. R-1658; RIN 7100-AF45; and
Docket No. R-1628; RIN 7100-AF21

Office of the Comptroller of the Currency
400 7th Street, SW, Suite 3E-218
Washington, DC 20219
Attention: Legislative and Regulatory Activities Division
Docket ID OCC-2018-0037; RIN 1557-AE56

Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: Robert E. Feldman, Executive Secretary
RIN 3064-AE96

Re: SIFMA Comment on Proposals Revising Applicability of Enhanced Prudential Standards for Foreign Banking Organizations

Dear Sirs and Madams:

The Securities Industry and Financial Markets Association (“SIFMA”) appreciates the opportunity to comment on the following proposals by the federal banking agencies (the “Agencies”) to revise the enhanced prudential standards that apply to foreign banking organizations (“FBOs”):

• the proposed rule of the Board of Governors of the Federal Reserve System (the “Board”) to revise Regulation YY (the “Board Proposal”); and
• the Agencies’ proposed rule to revise interagency liquidity and capital requirements (the “Interagency Proposal,” and together with the Board Proposal, the “Proposals”).

SIFMA has separately submitted comments to the Agencies related to certain potential changes in liquidity standards for large banking organizations.  The purpose of this comment letter is to address the Proposals’ changes to the enhanced prudential standards that apply to FBOs.

FBOs are important participants in the U.S. capital markets and engines of U.S. economic growth.  Yet, enhanced prudential standards have limited the extent to which FBOs are willing or able to serve these important functions in our capital markets and economy.  When Congress enacted the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”), it intended for the Agencies to address this problem by providing regulatory relief from enhanced prudential standards based on size and other appropriate risk-related factors.

SIFMA acknowledges and appreciates that the Proposals would tailor existing enhanced prudential standards in certain limited respects.  The Proposals would also, however, increase the stringency of liquidity, capital, and other prudential requirements for many FBOs, thereby undermining the regulatory relief the Agencies have sought to achieve.  This broadening of enhanced prudential standards is due to fundamental flaws in the way the Agencies have structured the Proposals.

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