"There is a certain amount of ambiguity, because one of the pressures we've been under is to come up with a more simplistic business model, and we've been trying to do that," said Colin Church, chief risk officer for Europe, the Middle East and Africa at Citi. At the same time, regulators have also made it clear they would be "sensitive to consolidation of booking," he added.

Shailesh Shah, chief risk officer for treasury at UBS, said: "We had a discussion with the PRA about different models. We continue to look at booking models as a way to optimise the environment we are in."

 

Risk's sister publication, Asia Risk, reported on September 24 that Goldman Sachs and JP Morgan plan to book more trades in Asian subsidiaries. Other US banks are expected to follow. Lawyers told Asia Risk that the strongest push comes from supervisors that want to disperse trade booking.

There are other potential motives. Compliance with post-crisis swap reforms can be easier for subsidiaries than branches – the former are more likely to be subject to rules written by their parent's home regulator, which could clash with the local rules facing a branch.

 

But it comes with a cost. Supervisors increasingly expect arms of foreign banks to keep liquidity and capital locally, rather than holding it at the group level and promising to funnel it to where it is needed. The US has led the way with regulations requiring foreign banking organisations that have US non-branch assets of $50 billion or more to establish a local holding company, which will be subject to the same prudential rules as US bank holding companies.

 

Harmonisation is a long way off, though. While the US has made its expectations explicit, supervisors elsewhere are quietly telling banks to do more or less the same.

 

Uncertainty about what requirements different jurisdictions will impose on subsidiaries makes putting together a business model to fit the new regulatory world difficult. For example, UBS recently announced it is going to create a new holding company structure with the purpose of issuing debt or equity to pass down to subsidiaries.

 

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