This slide deck was designed to accompany a video webcast that included an interactive discussion by a moderator and three panelists. Enhanced Prudential Standards for FBOs, Final Rule Origination date: 12 March 2014 Join us for an update on the Federal Reserve's approved Final Rule establishing Enhanced Prudential Standards (EPS) for large Foreign Banking Organizations (FBOs) and US Bank Holding Companies. Topics included: • Key aspects of the Final Rule • Timeline • Scope of intermediate holding company (IHC) formation • New Implementation Plan requirement • Other EPS-related rule changes • Deferred compliance dates • Action plan for FBOs You are welcome to join the on-demand version of this interactive discussion by going to: http://bit.ly/1mWc2bI This webcast is part of an ongoing series. Register for any EY webcast and you will be asked if you want to receive invitations to future webcasts.

1. Enhanced Prudential
Standards for FBOs,
Final Rule
12 March 2014

2. Page 2 Enhanced Prudential Standards for FBOs, Final Rule
Disclaimer
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► This presentation is © 2014 Ernst & Young LLP. All Rights
Reserved.
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3. Page 3 Enhanced Prudential Standards for FBOs, Final Rule
Circular 230 disclaimer
► Any US tax advice contained herein was not intended
or written to be used, and cannot be used, for the purpose
of avoiding penalties that may be imposed under the
Internal Revenue Code or applicable state or local tax
law provisions.
► These slides are for educational purposes only and are
not intended, and should not be relied upon, as
accounting advice.

4. Page 4 Enhanced Prudential Standards for FBOs, Final Rule
Marc Saidenberg
Ernst & Young LLP
Principal
+1 212 773 9361
marc.saidenberg@ey.com
Adam Girling
Ernst & Young LLP
Principal
+1 212 773 9514
adam.girling@ey.com
Today’s presenters
Chris Maher
Ernst & Young LLP
Principal
+1 212 773 6524
chris.maher@ey.com
Peter Davis – Moderator
Ernst & Young LLP
Principal
+1 212 773 7042
peter.davis@ey.com

5. Page 5 Enhanced Prudential Standards for FBOs, Final Rule
Today’s agenda
► FBO EPS final rule overview
► FBO EPS final rule applicability
► Linkage to existing BHC regulation
► Legal entity structure
► Final rule timeline
► Key changes from the proposal – IHC requirements
► Key dates for IHC implementation
► Key elements of an implementation plan
► Implications and next steps
► One-minute recap

6. Page 6 Enhanced Prudential Standards for FBOs, Final Rule
FBO EPS final rule overview
On 18 February 2014, the Federal Reserve Board approved a final rule
establishing Enhanced Prudential Standards for both FBOs and US BHCs
► Follows industry comment on proposals issued in late 2011 (BHCs) and late
2012 (FBOs)
Objectives
► Address the financial stability risks posed by the US entity, branch and agency
operations of FBOs
► Impose comparable supervisory and regulatory standards on FBOs as
applicable to US banking organizations
► Establish ‘single point of entry’ to support resolution of US entities
► Ensure consolidated risk governance and integrated view over US operations
► Require FBOs to maintain financial resources in the US by enhancing the
quantitative prudential standards applicable to US operations (i.e., capital,
liquidity and counterparty limits)

7. Page 7 Enhanced Prudential Standards for FBOs, Final Rule
FBO EPS final rule applicability
Size Requirements
Global assets > US$10b <
US$50b
► If publicly traded: US risk committee
► Home country capital stress tests
Global assets ≥ US$50b
Combined US assets <
US$50b
► Home country risk-based and leverage capital
► US risk committee requirements
► Annual liquidity stress test requirement
► Debt to equity limits (if FBO is determined to be a “grave threat”)
Global assets ≥ US$50b
Combined US assets ≥
US$50b
► Formation of a US Intermediate Holding Company (IHC) if the US
non-branch assets ≥ US$50b
► US risk-based and leverage capital requirements
► US capital stress testing (CCAR)
► Risk management requirements (including US Chief Risk Officer
(CRO))
► US risk committee requirements
► US liquidity risk management, liquidity stress testing and buffer
► Debt to equity limits (if FBO is determined to be a “grave threat”)
► IHC expected to be subject to Bank Holding Company (BHC)
regulatory reporting requirements

8. Page 8 Enhanced Prudential Standards for FBOs, Final Rule
Linkage to existing BHC regulation
The EPS final rule is not a fully self contained regulation; in several areas it invokes other existing US BHC
regulation and supervisory guidance as applicable to the IHC:
EPS Final Rule
Basel III
Liquidity Risk
Management
IHC is required to
comply with the
Basel III market
risk and
standardized
credit risk rules in
the same manner
and to the same
extent as a US
BHC
Applies standards
similar to those in
Federal Reserve
letter SR 10-6,
Interagency
Policy Statement
on Funding and
Liquidity Risk
Management
Regulatory
Reporting
Expectation that
IHCs would be
subject to
substantially the
same regulatory
reporting regime
as US BHCs, to
be addressed by
future rulemaking
efforts
Capital and
Stress Testing
(CCAR)
IHC is required to
comply with the
capital plan rule
and stress testing
standards in the
same manner
and to the same
extent as a US
BHC
Pending
Regulation
US LCR Final
Rule
Single
Counterparty
Credit Limits
Early
Remediation
Basel III
Leverage
Revisions
Dodd Frank Act
Section 165

9. Page 9 Enhanced Prudential Standards for FBOs, Final Rule
Legal entity structure
Standards applicable to large FBOs with US non-branch assets of US$50b or more
Combined US operations
► US risk committee, CRO and governance
► Liquidity prudential standards
FBO consolidated parent
requirements
► Must meet home-country stress test
standards comparable to those of US
► Limited regulatory reporting
US branches/agencies
requirements
► 14-day stress liquidity buffer requirement
► Asset maintenance requirement and funding
restrictions (if parent does not meet home-
country stress tests)
FBO parent
US IHC
US branches/
agencies
US bank
US broker-
dealer
Other
subsidiaries
IHC requirements
► Risk-based capital
► Leverage capital
► Capital plan and Stress Testing (CCAR)
► Liquidity risk management, stress testing and buffers
► Risk management framework
► Expected compliance with BHC regulatory reporting requirements

10. Page 10 Enhanced Prudential Standards for FBOs, Final Rule
Key changes from the proposal – IHC
requirements
Formation of the IHC
► FBOs with US$50b or more of non-branch US assets will be required to form an IHC and consolidate
any existing BHC, US insured deposit subsidiaries, and 90% of any non-BHC and non-branch assets
under the IHC by 1 July 2016
Risk-based capital
► The IHC will be required to comply with US Basel III rules, including market risk and standardized
credit risk, but not the US Basel III credit and operational risk advanced measurement approaches
Capital planning and stress testing
► CCAR disclosures are phased-in – capital plan and stress tests are non-public in 2017, progressing
to full public disclosure of results under both bank and Federal Reserve models in 2018
Liquidity
► The liquidity requirements are largely consistent with the proposed rule, with FBOs subject to liquidity
risk management and internal stress test requirements for both the IHC and branch/agency network
Risk governance
► The Rule specifies that the IHC’s CRO must be based in the US and provides further clarification of
the expected risk management experience for the required independent director
Implementation plan
► The Rule introduces a substantial new requirement for IHCs to submit an implementation plan to the
Federal Reserve by 1 January 2015, which provides a detailed view of the proposed IHC, as well as a
transition plan to comply with applicable regulatory requirements.

11. Page 11 Enhanced Prudential Standards for FBOs, Final Rule
Key dates for IHC implementation (institutions
with $50 billion or more of US non-branch assets)
Final rule implementation dates
1 July 2015
US IHC asset threshold
determination to form IHC
30 September 2016
First US regulatory
reports filed (FR Y-9C)
1 July 2016
US IHC formation. Risk
governance and liquidity
requirements apply
30 September 2016
First US Basel III
standardized regulatory
calculation
5 January 2017
Capital plan and FR Y-14A
(non-public)
1 January 2015
Implementation plan due
5 January 2018
Capital plan and full
CCAR/DFAST (subject to
public disclosure)
18 February 2014
Final rule released
2015 2016 20172014 2018
1 July 2017
US IHC completion
(remaining 10% of
non-BHC/bank
assets)
30 June 2014
US IHC asset threshold
determination to submit
implementation plan
1 January 2018
Leverage ratio compliance (generally
applicable and supplementary leverage
ratio (SLR))

12. Page 12 Enhanced Prudential Standards for FBOs, Final Rule
Key elements of an implementation plan
The implementation plan must address the following areas:
► Structure
► A list of all US subsidiaries, with applicable ownership interests and an organizational chart,
which details the proposed IHC ownership hierarchy
► A projected timeline for the transfer by the FBO of ownership interests in US subsidiaries
to the IHC
► A description and supporting rationale for all entities not included under the IHC based on the
Rule or firm-requested exemptions
► Pro forma financials and capital ratios
► Quarterly pro forma financial statements for the IHC, pro forma regulatory capital ratios and
planned capital actions or strategies for capital accretion for the period from 31 December 2015
to 1 January 2018
► Compliance requirements
► FBOs must provide a description of the current practices and projected timeline, as well as
planned actions to comply with the regulatory requirements for risk management and governance,
liquidity risk management, liquidity stress testing, liquidity buffers and capital planning
► In addition, FBOs should reasonably expect to include compliance plans for stress testing, as well
as financial, bank regulatory and management reporting
The Rule introduces a substantial new requirement for FBOs with US$50b or more in non-
branch US assets to submit an implementation plan to the Fed by 1 January 2015.

13. Page 13 Enhanced Prudential Standards for FBOs, Final Rule
Implications and next steps
Final rule topic Potential implications
Timing and regulatory
expectations
► Potentially heightened supervisory expectations given extended
implementation timeline
► Review strategic vs. tactical approaches
IHC structure ► Scope of IHC consolidation confirmed; finalize tax, capital, liquidity
factors, product moves and business restructuring
► Re-evaluate options to designate BHC as IHC
Implementation plan ► Develop ‘plan for the plan’, including governance approvals
► Substantial work to generate pro forma financial statements and
capital ratios based on IHC structure selected
CCAR and stress testing ► Plan for strategic compliance – governance/process, models, data
and infrastructure
Risk-based capital ► Focus on standardized credit risk and market risk implementation
► Model risk approvals for market risk remain; re-evaluate possible
FRB model approvals for specific risk and IRC
► Re-assess any planned capital actions to meet risk-based capital and
leverage ratio requirements
SCCL ► Opportunity to better align to global efforts.
Other considerations ► Active regulatory dialogue around movement of business into a US
branch or to non US entities

14. Page 14 Enhanced Prudential Standards for FBOs, Final Rule
One-minute recap

15. Page 15 Enhanced Prudential Standards for FBOs, Final Rule
Key contacts
Peter Davis
Ernst & Young LLP
Principal
+1 212 773 7042
peter.davis@ey.com
Adam Girling
Ernst & Young LLP
Principal
+1 212 773 9514
adam.girling@ey.com
Chris Maher
Ernst & Young LLP
Principal
+1 212 773 6524
chris.maher@ey.com
Marc Saidenberg
Ernst & Young LLP
Principal
+1 212 773 9361
marc.saidenberg@ey.com

16. Page 16 Enhanced Prudential Standards for FBOs, Final Rule
Thanks for participating.