Enhanced Prudential Standards, EPS

Perspectives

Enhanced prudential standards for foreign banks

One year in, and miles to go

February 2015 marks a year since the Federal Reserve released the final rule on Enhanced Prudential Standards (EPS) for large Foreign Banking Organizations (FBOs). So why doesn’t it feel like old news?​

Just getting started

​​In practice, EPS implementation is really just getting started, even with the completion of the Implementation Plan filing January 1, 2015. Leaders in some institutions may be finding that they have underestimated the scale of the transformation it will require, the scope of the decisions that they may have to make, and the amount of time that they have to get it done, particularly with July 1, 2016 looming closer.

For some FBOs, the last 12 months have been more advanced than for others. Federal Reserve officials have provided guidance through multiple forums and delivered speeches, and on-site teams have followed-up with their institutions. Importantly, FBOs have gained a reservoir of first-hand knowledge from their compliance efforts so far; however, more intensive work is still to come and stands to reflect a significant transformation across the organization in the US and at the respective parent bank and other operations. Looking forward, large FBOs will need to double-down on their EPS efforts–or, if necessary, accelerate efforts to meet the effective dates.

​Lessons learned and critical next steps

Here are a few highlights of potential “lessons learned” by the FBOs, as the EPS completes its first lap around the calendar.

  • Significant business impacts with dynamic capabilities is expected
  • Cultural alignment and implementation of US-centric governance model is a key
  • Building data and IT capabilities to support the IHC and US operations is challenging
  • Critical implementation considerations in preparation for go-live
  • Robust program management is critical

What are some of the critical next steps?

  • Develop and track an implementation plan follow-up list–the “worry list” and “back pocket list” of follow-ups, questions, issues, and additional decisions that were outstanding at the time of filing
  • Facilitate senior management and board oversight to clear implementation bottlenecks with a critical path view that at this point should not change
  • Review program scope and structure and launch additional work streams that represent horizontal or integrated views
  • Calibrate funding requests and subject-matter expert (SME) assignments based upon the critical path and milestones that are necessary for the EPS program
  • Build a program communications work stream that focuses on internal and external stakeholders to assist in the recognition of the level of change and transformation the organization could experience
  • Focus on execution and evaluation of organization-level readiness for the effective date and beyond

These developments mean significant transformation for many institutions. In many cases, the transformation is likely to challenge the parent’s global operating model and desire to implement globally aligned cost efficient solutions.

To learn more detail about these potential “lessons learned” and critical next steps, download the attached piece for additional insights.

Enhanced prudential standards for foreign banks
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