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New U.S. Banking Opportunities for FBOs Come with Familiar Challenges

Changing U.S. banking regulations and approaches to supervision are creating new opportunities for Foreign Banking Organizations (“FBOs”) to expand their U.S. operations and deploy new technology. While this is encouraging news for the banking industry, the lack of consistency in global regulation and supervision creates new challenges for risk managers and Boards as they navigate shifts in home country and U.S. expectations. Strategic decisions are further complicated by increased competition from less regulated competitors in private markets, and technology firms disrupting core revenue sources in underwriting, lending and cross-border payments.

As FBOs shift their strategy in the U.S. and assess the revenue potential from new businesses, their risk management and oversight capabilities must keep pace. Post-financial crisis investments in controls and more mature governance models leave their U.S. operations better positioned to capitalize, and it’s timely to revisit core components of both, including:

Risk Appetite – How does new business fit within global and local risk appetite frameworks?
Risk Management – Can new or increased risks in the U.S. be managed locally?
Governance – Does the U.S. Risk Committee have the relevant skills and experience to provide effective oversight?

In each case, the analysis is further complicated by the long-standing challenge of navigating multiple regulatory regimes and differing supervisory expectations.

Local Opportunities with Global Requirements

The recent Interagency Statement on Recission of Interagency Leveraged Lending Guidance Issuances¹ from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation demonstrates U.S. regulators’ commitment to simplifying written supervisory expectations. Setting aside the legal status of guidance vs. regulation, this represents a tangible reduction in the regulatory compliance cost of participating in leveraged transactions. While the Federal Reserve Board of Governors (“Federal Reserve”) did not formally rescind its version of the guidance, broader statements from Federal Reserve suggest a similar approach to simplification.

Welcome news in the U.S. perhaps, but comparable rules and guidance in other jurisdictions remain. The 2017 European Central Bank Guidance on leveraged transactions² (and follow-up ‘Dear CEO letter in 2022)³ and the Japanese Financial Services Authority amendment to its regulatory capital requirements for Japanese financial institutions investments in securitizations⁴ are some examples. So, what to do in the U.S.?

For FBOs contemplating more direct lending to non-investment-grade credits or increased participation in other leveraged-loan structures, consideration should be given to:

U.S. Risk Appetite Statement – Engage with global business leads to assess whether associated risks fit within approved global risk tolerances, and ensure risk-taking capacity is allocated to the U.S.
Risk Management Capabilities – If a new U.S. strategy introduces more complex transactions or entry into a new industry segment, FBOs should ensure their current risk management capabilities can measure, monitor and mitigate associated risks responsibly. Consideration should be given to risks that are unique to the U.S. and how the bank will monitor and respond to any change in home country regulation and supervision.
Board Oversight – Federal Reserve supervisors will expect U.S. Risk Committee oversight of new activities in keeping with requirements established under Enhanced Prudential Standards,⁵ inclusive of adequate management information and relevant subject matter expertise to inform Board decision-making. Does the Board have the necessary skills and experience?

There are similar considerations for banks lending to Non-Bank Financial Institutions (“NBFIs”) and the private credit market. Takeaways from a recent Loan Market Association roundtable in Brussels⁶ note the importance of private markets to the real economy and the blend of competition and integration with traditional banks. This interconnectedness will keep private credit and NBFIs an area of supervisory focus across jurisdictions for the foreseeable future.

U.S. Banking Opportunities Present New Risk and Compliance Challenges

Passage of the GENIUS Act⁷ and the publication of America’s AI Action Plan⁸ are providing needed clarity on the current administration’s approach to permitting, regulating and supervising the deployment of new technology in the financial services sector. Similarly, Comptroller of the Currency Jonathan Gould’s recent statements about the importance of de novo banks to the financial system make it clear that FBOs will face new competitors in the coming years.⁹ The perception that the U.S. is now “open for business” is a common theme across industry events and forums. What receives less coverage in the press, however, is federal regulators’ steadfast commitment to preserving the safety and soundness of the U.S. financial system. “Open for business” doesn’t mean you can proceed without a robust business plan, risk-based suite of controls and an effective risk governance framework.

Foreign financial services regulators are, in some cases, ahead of the U.S. in establishing clear legal frameworks around the use of emerging technologies. In the EU, for example, the European Securities and Markets Authority published the Markets in Crypto Assets Regulation¹⁰ in June 2023 to cover crypto-assets that were not previously regulated by existing financial services legislation. More recently, the EU Artificial Intelligence Act,¹¹ published in June 2024, provided a uniform legal framework for the use of AI across the EU. As FBOs execute their digital assets initiatives, and explore AI use cases in U.S. operations, care must be taken to ensure compliance with regulations across all impacted jurisdictions. AI deployment is further complicated by inconsistencies in data privacy, data retention and cross-border data movement obligations.

Digital assets and AI also present new challenges for Risk Management functions and FBO Boards. Many firms are making significant investments in technology and data infrastructure to support new products and maintain resilience. IT risk management and data management professionals with financial services experience and the required skills to oversee these projects can be hard to find. While the demand for skilled resources on the product development and revenue generating side of these businesses remains high, it is harder to fill independent risk management roles. FBOs must compete for talent with the U.S. Global Systemically Important Banks and the large technology firms. The skills gap can be even wider at the Board level, and traditional protocols for adding or replacing Board members may be too slow to address the rapid change in business models and risks. FBO Boards must ensure they have an appropriately skilled pool of external advisors to fill these gaps.

Mind Your Thresholds

When pursuing new businesses in the U.S., FBOs should ensure their strategies and controls over balance sheet management and cross-jurisdictional activity are nimble and routinely revisited. Close coordination between the front office, finance, risk and operations is essential if rapid growth in assets or affiliate transactions is contemplated in new strategies. Product development teams should consult their risk management colleagues and consider various scenarios for product uptake and whether current risk appetite limits offer a sufficient buffer for higher-than-expected volumes. Initial limits on new products are helpful, but if clients want to do more, it may prove difficult to turn them away. It’s also prudent to review the bank’s legal entity structure in the U.S. and identify the optimal booking location for new business. Crossing the non-branch asset threshold, triggering the U.S. Intermediate Holding Company requirement, comes with significant cost in resources, time and expense.

What Was Past is Present

A key lesson learned from the 2008 financial crisis was the peril of rapid growth and increased product complexity without commensurate uplift in controls, risk management capabilities, and risk governance. FBOs faced additional challenges managing risks originated in the U.S. within their legacy, parent-level governance frameworks. As the financial services market in the U.S. adapts to new regulations and a different approach to supervision, compelling business opportunities will continue to emerge. It’s essential that FBOs align business strategy across geographies, invest in their risk and compliance functions, and ensure their Boards can provide effective oversight.

Footnotes:

1: Office of the Comptroller of the Currency, Leveraged Lending: Interagency Statement on Recission of Interagency Leveraged Lending Guidance Issuances, OCC Bulletin 2025-44 (Dec. 5, 2025).

2: European Central Bank, Guidance on leveraged transactions (May 16, 2017).

3: European Central Bank, Dear CEO Letter (Mar. 28, 2022).

4: “The Japanese Risk Retention Rule” (Mar. 15, 2019).

5: 12 C.F.R. pt. 252 (2026) (Regulation YY).

6: Alblas, Evelien, “Private markets under the spotlight: What lies ahead and what it means for the financial ecosystem,” Loan Market Association Roundtable (Jan. 22, 2026).

7: Guiding and Establishing National Innovation for U.S. Stablecoins Act (the GENIUS Act), Pub. L. No. 119-27, 139 Stat. 419 (2025).

8: White House, Winning the Race: America’s AI Action Plan (July 23, 2025).

9: Jonathan V. Gould, Comptroller of the Currency, Remarks at the Blockchain Association Policy Summit (Dec. 8, 2025).

10: European Securities and Markets Authority, Markets in Crypto-Assets Regulation (MiCA) (June 2023).

11: Regulation (EU) 2024/1689 of the European Parliament and of the Council of 13 June 2024, 2024 O.J. (L 1689) 1 (June 13, 2024).