Regulations are something that cause a great deal of worry and concern for large industries. Government and other regulations often target these large industries, and CEOs, CFOs, COOs, and others have to exert a great deal of time, effort, and money to comply.
But given the extent to which the global economy was rocked in 2008, it’s understandable to expect regulatory changes, and they have happened in droves in the last four years. But when it comes to banks, an important source of financing and information for CFOs, regulations are changing once again.
Changes to Banking Regulations
According to Bloomberg Businessweek, the U.S. is now imposing “the same capital and liquidity rules on the U.S. operations of foreign lenders that apply to American institutions.”
A major part of the new regulation involves “forcing lenders to dedicate capital to local subsidiaries in multiple countries.” The reaction to this and other changes has been rather rough. In the past few weeks, Citi announced a cut of over 11,000 jobs globally, in addition to selling other assets in various countries. Back in October, UBS announced plans to cut 10,000 jobs. The Royal Bank of Scotland declared it would “close or sell its cash equities, mergers advisory, and equity capital markets divisions worldwide.”
Foreign banks now have a challenge ahead of them: they must decide how to best operate in the changing regulatory market of the US. For CFOs looking to expand internationally, this might limit the ability to find financing, as the banks are busy handling the situation, but anyone with a solid plan should still do just fine. At the very least, the regulations will increase the need for cash at international banking institutions. Operating as a global bank is going to become costlier and more difficult.
Hopefully the regulations and industry needs balance out in the future. Currently, there is a lot of skepticism and fear about the regulatory environment that is taking hold of the financial sector. Regulations make business harder, but when done properly, they can also do a lot of good for the economy and the populace.
What do you think about the regulations that international banking institutions are facing?