Tarullo Says Views on Regulation Altered by Deutsche Bank Change

Federal Reserve Governor Daniel Tarullo said Deutsche Bank AG’s change in the legal structure for its U.S. unit in response to new capital requirements has influenced how he views regulation of financial institutions based outside the U.S.

“As I think about the appropriate modes of regulation and supervision of foreign banking organizations in the U.S., the development to which you just alluded has certainly affected my thinking about how we do structure regulation of foreign banking organizations,” Tarullo said today in testimony to the Senate Banking Committee. His comments were in response to a question on the implications of Deutsche Bank’s change for government authority in winding down failing institutions.

“I think we will need to respond to that,” Tarullo said, without elaborating on any possible response or on how the bank’s actions influenced his thinking. After the hearing he declined to comment further.

The Wall Street Journal reported that the Frankfurt-based bank on Feb. 1 reorganized its U.S. subsidiary, known as Taunus Corp., to skirt new regulations that would have required the firm to inject new capital into the U.S. division.

To contact the reporter on this story: Jeff Kearns in Washington at jkearns@bloomberg.net.

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net