Deutsche Bank and Barclays have been lobbying against tougher new capital requirements for foreign banks in the U.S. for the last four years, but the Federal Reserve has decided to press ahead anyway.
Banks with over $50bn in non-branch assets – which includes Barclays, Deutsche Bank, Credit Suisse and UBS – need to follow enhanced new liquidity and capital standards and create a new U.S. holding company on top of their current subsidiaries in the country.
In theory, the new proposals are designed to ensure that the U.S. government never has to bail out the American subsidiary of a foreign bank. However, large banks have seen this as a big enough deal to campaign against the proposals for the past four years, and some have suggested that one reaction could be to downsize and move some functions back to their home country.
So, who has the most to lose? As a percentage of assets allocated to U.S. subsidiaries, it’s Deutsche Bank, with 37%, followed by Credit Suisse (36%), Barclays (23%) and UBS (17%), according to Morgan Stanley research.
However, when it comes to any impact on headcount UBS could feel the most pain if revenues are hit – it has 33% of total employees based in the U.S, according to its Q4 report, or over 20,000 people.
Whether this is a huge issues for Swiss banks, however, remains to be seen. Andreas Venditti, an analyst at Vontobel, says that both UBS and Credit Suisse have the capital available in Switzerland and elsewhere and that it will “only be moved” to meet the new U.S. capital requirements. “The banks will be, however, less flexible and less efficient in terms of their liquidity – this costs money,” he adds.
What’s more, although Barclays and Deutsche Bank have fewer employees in the U.S., the majority are employed in their investment banks, where capital requirements are higher. UBS, meanwhile, has around 16,000 people working for its wealth management unit in the country.