Foreign banks’ asset reallocation in response to the introduction of the intermediate holding company rule of 2016

Teodora Paligorova and Judit Temesvary

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: We examine the effect of the 2016 intermediate holding company (IHC) rule on the asset allocation of foreign banking organizations (FBOs) in the United States. Given the costs to establish and maintain an IHC, FBOs may try to reduce the regulatory weight by reallocating assets from the U.S.-regulated IHC-subject activities towards less regulated U.S. branches and agencies (including those located abroad) or downsize the IHC's total assets. We use data on within-FBO transactions to show that the introduction of the IHC rule spurred FBOs to reallocate their assets from (“U.S.-regulated”) U.S. subsidiaries toward their (“less regulated”) U.S. branches and agencies.

Keywords: Foreign banks; Bank regulation; Branches and subsidiaries (search for similar items in EconPapers)
JEL-codes: G21 G34 G38 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Foreign banks' asset reallocation in response to the introduction of the Intermediate Holding Company rule of 2016 (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000708

DOI: 10.1016/j.frl.2022.102750

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