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FED ER A L RESERVE BANK OF DALLAS
DALLAS, T E X A S

75222
Circular No. 82-6
January 22, 1982

INTERNATIONAL BANKING FACILITIES
Interpretation

TO ALL MEMBER BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Board o f G overnors o f th e Federal R e se r v e S ystem has issued
an in terp retation o f its rules for International Banking F a c ilitie s (IBFs) w ith
r e sp e c t to purchases and sa le s o f finan cial a s s e ts in th e secondary m arket.
The Board's in terp retation and conditions are s e t forth in the
en closed le t t e r to the presidents o f the Federal R e se r v e Banks. Also en closed
is a copy o f th e Board's press r e le a s e dated D ecem b er 17, 1981.
Q uestions regarding th e International Banking F a c ilitie s should be
d irected to U. Anderson, Ext. 6275 o f our Bank's Bank Supervision and
R egulations D ep artm en t.
Additional c o p ies o f this circular will be furnished upon request to
the D e p artm en t o f C om m unications, Financial and Com m unity A ffairs, Ext.
6289.
Sincerely yours,

William H. W allace
First Vice President

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERA^RESERVEpressrelease
For immediate release

December 17, 1981

The Federal Reserve Board today issued an interpretation of
its rules for International Banking Facilities with respect to purchases
and sales of financial assets in the secondary market.
IBFs are banking facilities that may be established —
December 3 —

beginning

in the United States by U.S. depository institutions, by

Edge and Agreement corporations and by branches and agencies in the United
States of foreign banks.

When operated under the Board's rules, their

deposits are free of reserve requirements and interest rate ceilings.

They

may accept deposits from and extend credit only to foreign residents, their
establishing entity and other IBFs.
The question has arisen with whom IBFs may deal in buying and
selling, in the secondary market, such assets as loans, securities,
Eurodollar certificates of deposit and bankers' acceptances.
The Board decided that since purchases and sales of assets do not
result in extensions of credit, IBFs may buy assets eligible to be held by
IBFs from, or sell them to, both domestic and foreign parties, under certain
conditions.
The Board's interpretation, and conditions, are set forth in the
attached letter to the presidents of the Federal Reserve Banks.

Attachment

BOARD O F G O V E R N O R S
OF THE

FEDERAL RESERVE SYSTEM
W ASH IN G TO N ,

D. C . 2055!
AD D R EBB

OFFICIAL
TO

THE

C □ « R CB P □ N OK NO C
BOARD

December 16, 1981

Questions have been raised concerning the extent to which
International Banking Facilities may purchase (or sell) IBF-eligible
assets such as loans (including loan participations), securities, CDs,
and bankers' acceptances from (or to) third parties. Under the Board's
regulations, as specified in § 204.8 of Regulation D, IBFs are limited,
with respect to making loans and accepting deposits, to dealing only
with certain customers, such as other IBFs and foreign offices of other
organizations, and withthe entity establishing the IBF. In addition,
an IBF may extend credit to a nonbank customer only to finance the borrower's
non-U.S. operations and may accept deposits from a nonbank customer
that are used only to support the depositor's non-U.S. business.
Consistent with the Board's intent, IBFs may purchase IBFeligible assets— from, or sell such assets to, any domestic or foreign
customer provided that the transactions are at arm's length without
recourse. Therefore, an IBF may not purchase such assets from, or sell
such assets to, affiliates of the institution establishing the IBF.
(However, this restriction does not affect the IBF's ability to purchase
(or sell) assets directly from (or to) the institution establishing
the IBF; such purchases from the institution establishing the IBF would
continue to be subject to Eurocurrency reserve requirements except during
the initial four-week transition period.) Since repurchase agreements
are regarded as loans, transactions involving repurchase agreements
are permitted only with customers who are otherwise eligible to deal
with IBFs, as specified in Regulation
D.
In the case of purchases of assets, in order to determine
that the Board's use-of-proceeds requirement has been met, it is necessary
for the IBF (1) to ascertain that the applicable IBF notices and acknowledgments
have been provided, or (2) in the case of loans or securities, to review
the documentation underlying the loan or security, or accompanying the
security (e.g., the prospectus or offering statement), to determine

1/ In order for an asset to be eligible to be held by an IBF, the obligor
or issuer of the instrument, or in the case of bankers' acceptances,
the customer and any endorser or acceptor, must be an IBF-eligible customer.

-2 -

that the proceeds are being used only to finance the obligor's operations
outside the U.S., or (3) in the case of loans, to obtain a statement
from either the seller or borrower that the proceeds are being used
only to finance operations outside the U.S., or in the case of securities,
to obtain such a statement from the obligor, or (4) in the case of bankers'
acceptances, to review the underlying documentation to determine that
the proceeds are being used only to finance the parties' operations
outside the United States.
Under the Board's regulations, IBFs are not permitted to issue
negotiable Euro-CDs, bankers' acceptances, or similar instruments.
Accordingly, consistent with the Board's intent in this area, IBFs may
sell such instruments issued by third parties that qualify as IBF-eligible
assets provided that the IBF, its establishing institution and any affiliate
of the institution establishing the IBF do not endorse, accept, or otherwise
guarantee the instrument.
Sincerely yours,

William W. Wiles
Secretary

TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
AND OFFICERS IN CHARGE OF BRANCHES


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102