Final US regulatory requirements for financial holding companies improve competitive prospects for German banks in the United States

Berlin, 5 February 2001 – The US Federal Reserve regulatory requirements for financial holding companies which came into force on 2 February 2001 improve German banks’ competitive prospects in the United States according to the Association of German Banks.

The provisions handicapping foreign banks were softened considerably in the final version of the Fed rules. As a result, it will be easier for German banks to obtain and preserve US financial holding company status in future, creating a much more level playing field than before with US bank holding companies applying for the same status.

Since March last year the Gramm-Leach-Bliley Act has for the first time allowed financial holding companies in the USA to conduct banking, investment and insurance business through separate subsidiaries. This step towards universal banking was, however, made tougher for foreign banks with US branches by the Fed’s imposition of provisional capital and management requirements that had extraterritorial and discriminatory effect. Together with the German government and German banking supervisors, the Association of German Banks had pressed for a relaxation of these requirements.