After all the unsubstantiated talk about Deutsche Bank having to pull back from Wall Street simply so that it can pay its DOJ fine, you might be feeling a bit worried about the stability of your job at a European investment bank in North America. 

Well, these fears are entirely rational, according to a report published this week from Bernstein Research. European banks on Wall Street are stuck between a rock and a hard place and their predicament is likely to become more apparent over the next 18 months.

It’s All About The New Capital Requirements...   Bernstein says it all boils down to the introduction of U.S. Intermediate Holding Companies (IHCs) in July this year. Since then, the U.S. branches and subsidiaries of global banks that have more than $50Bn in assets have been ring-fenced within the U.S. They are now treated as U.S. institutions when it comes to stress tests and capital planning. 

Moreover, the application of U.S. rules to European banks is likely to tighten. Bernstein points to a recent speech from Daniel Tarullo of the Federal Reserve in which he said he plans to revisit whether the “global market shock and counterparty default component” of U.S. banks’ capital assessments should be applied to European banks’ U.S. arms too.  This is a problem, because European banks are already under-capitalized globally