In this report, we forecast the future of foreign banks in the U.S., following up on our analysis of the European Commission’s new financial framework (see Client Report REFORM132) and our alerts Friday on FRB. Gov. Tarullo’s agenda and Monday’s alert on Bill Dudley’s TBTF comments.  Combined with the stalemate over the “Basel IV” standards (see prior reports), these actions in concert with other U.S. rulemakings presage not only further U.S. ring-fencing, but also divergent regulatory-capital and resolution standards that still further complicate not only U.S. operations, but also M&A.  We here detail the impact of these developments and how the overall new framework, in the context of Trump Administration policy, affects FBO strategy. Given the critical importance of the U.S. market to FBOs and the need despite new headwinds to continue U.S. operations, these changes will require careful consideration to ensure continued operations at reasonable return to parent companies.

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