The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 substantially changed how foreign banking organizations (FBOs) operating in the United States are regulated. Previously, most of the regulation of an FBO fell on its primary regulator in its home country, and there were few restrictions on either the capital or organizational structure of its U.S. operations.1
Dodd–Frank’s new regulations changed that. Foreign banks above a certain size now have to organize their U.S. subsidiaries under a holding company subject to the same regulations as domestic bank holding companies (BHCs) and financial holding companies (FHCs). The new regulations also attempt to ensure that only banks that are regulated up to certain standards in their home countries can open or operate branches or agencies in the U.S. The higher regulatory costs and the differential regulation of subsidiaries and foreign branches could encourage FBOs to withdraw from U.S. markets or change the structure of their U.S. operations.
This paper examines how FBOs operate in the U.S., describes the regulatory changes due to Dodd–Frank, and provides some preliminary evidence about how FBOs have changed their operations following passage of the law. I find evidence that FBOs have shifted activities away from the U.S. market. But the changes have not been dramatic, and other factors like the European financial crisis probably played a significant role.
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This article appeared in the Third Quarter 2019 edition of Economic Insights. Download and read the full issue.
 See Berlin (2015).