Global Banking: Regulations Force a Retreat

Tougher U.S. capital rules on foreign lenders is a game changer for international firms
Illustration by Patric Sandri

As global credit markets seized up in late 2008, European banks with U.S. operations borrowed heavily from the U.S. Federal Reserve discount window, the primary program for providing cash to banks facing a liquidity squeeze. At the time, these foreign lenders didn’t have to meet Fed capital rules to cover losses on American-based units provided their parent company was properly capitalized. They competed and borrowed in the U.S.—but didn’t have to play by the house rules.

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