An article from Wednesday's Wall Street Journal discusses new rules that will be imposed on some foreign banks with U.S. operations. These rules will subject them to the same types of capital requirements, debt levels, and annual stress tests, that are now imposed on U.S. banks under Basel III. The regulation is an effort to prevent further government bailouts and moral hazard when banks become "too big to fail." The rules are geared toward enforcing better risk management and will require banks to have some "skin in the game," that is, if their legal teams can't figure out a way to sidestep the new rules.
Foreign banks with U.S. operations must have $10 billion or more in assets in order to be forced to adhere to the Fed's new rules. The rules will not be imposed until July 2016, which will give the banks' lawyers plenty of time to devise strategies to thwart them. Perhaps they will move their U.S. operations overseas, or sell off assets so that they come in under the threshold.
The Fed justifies extending the rules to foreign banks, by saying that foreign banks dealing with American customers must be kept on the same playing field as their U.S. competitors.
An interesting working paper on minimum capital requirements and their effect on WACC can be found here or here.
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