NY regulator defends small foreign banks Foreign banks trying to escape a Federal Reserve proposal to increase their capital levels have found an unlikely champion in the New York regulator that threatened to put Standard Chartered out of business in the US. The New York State Department of Financial Services, run by Ben Lawsky, has advised the Fed that banks with less than $50bn of US assets, excluding those held in branches, should be exempt from moves to tighten capital and liquidity requirements in the US. IN Banks "Such an approach would focus more appropriately on an institution's US risk profile," Mr Lawsky wrote in a letter to the Fed, which also noted that more than 100 foreign banks were licensed by the DFS, employing more than 60,000 people in the state and paying $2bn in wages. Mr Lawsky is best known internationally for fining Standard Chartered $340m over allegations that it laundered money for Iran. During a stand-off with the UK-based bank, Mr Lawsky reached for a potentially devastating weapon by threatening to revoke its banking licence. But his department has been a cheerleader for New York's financial services industry as well as a regulator and enforcer. "As the world's leading financial centre, New York has attracted most major international banks," Mr Lawsky wrote. His proposal would exempt dozens of banks from the Fed's proposal, which places new restrictions on banks with $50bn of global assets and a second tier of rules for banks with $50bn of assets in the US. But it would also add off-balance sheet assets to the calculation, potentially snaring some organisations, and it would continue to target the likes of Deutsche Bank and Barclays, the main focus for the Fed because of their large capital markets operations in the US. The Fed's proposal has spurred a furious lobbying effort from institutions led by Deutsche Bank worried about the cost of injecting billions of dollars of additional capital into US subsidiaries. Deutsche's 65-page letter to the Fed was published by the central bank on Wednesday along with other submissions at the end of a deadline for comment. At the moment, foreign banks in the US can use more strongly capitalised parent groups - such as Deutsche in Germany - to offset more weakly capitalised US subsidiaries. The Fed is seeking to reverse this policy, against the protestations of other international regulators, out of concern that it might have to bailout an undercapitalised entity in the future.