Foreign banks are looking to restructure their U.S. operations to circumvent capital requirements of the Dodd-Frank Act that could force them to inject billions into the units. The financial reform legislation ends a 2001 rule that exempted foreign banks from a 4% Tier 1 capital ratio requirement. Barclays’ unit, for example, had a 1.37% ratio and would have to inject $12 billion to meet the U.S. standard. To avoid it, Barclays deregistered its main U.S. unit as a bank holding company and instead formed a credit card operation in a new U.S. unit, which is now regulated by the Federal Deposit Insurance Corp., and thus no longer subject to the capital requirement. Other foreign banks are said to be considering similar moves.
