Royal Bank of Scotland has become the latest overseas bank to shrink its business in the US after announcing it would cut its mortgage trading business by two-thirds.
The London-based bank will eliminate hundreds of jobs over the course of two years as part of an effort to reduce its assets ahead of new rules set out by the Federal Reserve, according to people familiar with an internal announcement made by RBS on Tuesday.
The move by RBS is the most dramatic effort by a foreign bank to escape new regulations from the Fed. It also follows similar announcements at Barclays and UBS, both of which are shrinking or exiting businesses such as fixed income trading and commodities.
The RBS cuts primarily affect the non-agency mortgage business, and the British bank is expected to retain its securitisation and agency mortgage business.
The Fed has told each foreign broker-dealer with more than $50 billion in assets to set up a separately-capitalized holding company, with its own capital and liquidity requirements, subject to stress tests.