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Federal Reserve Bank
OF DALLAS
ROBERT

D. M c T E E R , J R .

P R E S ID E N T
A N D C H IE F E X E C U T I V E O F F I C E R

,,

_

January 3, 1995

DALLAS, TEXAS
75265-5906

Notice 95-07

TO:

The Chief Executive Officer of each
m em ber bank and others concerned in
the Eleventh Federal Reserve District

SUBJECT
Proposed Amendments to Regulation K
(International Banking Operations)
DETAILS
The Board of Governors of the Federal Reserve System has issued for public
comment a proposed amendment to Regulation K (International Banking Operations) to
provide criteria for use in evaluating the operations of any foreign bank in the United
States that the Board has determ ined is not subject to comprehensive supervision or
regulation on a consolidated basis by its home country supervisor.
Section 202 (e) (7) of the Foreign Bank Supervision Enhancem ent Act
requires the Board to develop these criteria in consultation with the Treasury D epart­
ment.
The Board must receive comments by February 13, 1995. Comments should
be addressed to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551.
All comments should refer to Docket No. R-0862.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 64171-73, Vol. 59, No.
238 of the Federal Register dated D ecem ber 13, 1994, is attached.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333 -4460; El Paso Branch Intraslate (800) 592-1631, Interstate (800) 351-1012; Houston
Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

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

MORE INFORMATION
For m ore information, please contact Howard Edmonds at (214) 922-6278.
For additional copies of this Bank’s notice, please contact the Public Affairs D epartm ent
at (214) 922-5254.
Sincerely yours,

Proposed Rules

Federal Register
Vol. 59, No. 238
Tuesday, December 13 1994

This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.

FEDERAL RESERVE SYSTEM
12 CFR Part 211
[Regulation K; Docket No. R-0862]

International Banking Operations

Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed rulemaking.
AGENCY:

Attorney (202/452-3900), Legal
Division; Michael G. Martinson,
Assistant Director (202/452-3640),
Betsy Roberts, Manager (202/452-3846),
Division of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System. For the hearing
impaired only, Telecommunication
Device for the Deaf [TDD], Dorothea
Thompson (202/452-3544), Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW
Washington, DC 20551
SUPPLEMENTARY INFORMATION:

The Statute

Section 202(e)(7) of the FBSEA
amended section 7 of the International
Banking Act of 1978 (IBA) by adding a
SUMMARY: The Board of Governors of the
requirement that the Board, in
Federal Reserve System (Board or
consultation with the Treasury, develop
Federal Reserve) is seeking public
and publish criteria to be used in
comment on a proposal to amend its
regulations to include criteria to be used evaluating the operation of any foreign
bank in the United States that the Board
in evaluating the operations of any
has determined is not subject to
foreign bank in the United States that
the Board has determined is not subject comprehensive supervision or
regulation on a consolidated basis. In
to comprehensive supervision or
developing such criteria, the Board is
regulation on a consolidated basis. The
required to allow reasonable
Board is required to develop such
opportunity for public review and
criteria, in consultation with the
comment. 12 U.S.C. 3105(e)(7). In order
Secretary of the Treasury (Treasury),
and to publish them for public comment to implement this statutory provision,
the Board is issuing this notice of
pursuant to section 202(e)(7) of the
Foreign Bank Supervision Enhancement proposed rulemaking pursuant to 12
CFR part 211 of its regulations
Act (the FBSEA or Act).
governing international banking
DATES: Comments must be received by
operations.
February 13,1995.
The Congress in enacting the FBSEA
A DDRESSES: Comments should refer to
recognized the importance of the
Docket No. R-0862 and may be mailed
comprehensive, consolidated
to William W Wiles, Secretary, Board of supervision of banks operating
Governors of the Federal Reserve
internationally. The FBSEA
System, 20th Street and Constitution
strengthened the role of U S banking
Avenue, NW„ Washington, DC 20551
supervisors as the host country
Comments also may be delivered to
supervisors of foreign banks operating
Room B-2222 of the Eccles Building
in this country The Act also recognized
between 8.45 a.m. and 5:15 p.m.
the importance of home country
weekdays, or to the guard station in the
supervision in assuring the overall
Eccles building courtyard on 20th
safety and soundness of foreign banks
Street, N.W (between Constitution
that conduct operations in the United
Avenue and C Street, N W.) at any time. States by requiring the Board:
Comments may be inspected in Room
1 To determine that a foreign bank is
MP-500 of the Martin Building between subject to comprehensive supervision
9-00 a.m. and 5:00 p.m. weekdays,
on a consolidated basis by its home
except as provided in 12 CFR 261.8 of
country supervisor in order to establish
the Board’s rules regarding availability
a new banking presence in this country;
of information.
and
FOR FURTHER INFORMATION CONTACT:
2. To establish, in consultation with
Kathleen M. O’Day, Associate General
the Secretary of the Treasury, these
Counsel (202/452-3786), Sandra L.
criteria in order to evaluate the
Richardson, Managing Senior Counsel
operation of any foreign bank in the
202/452-6406), Margaret E. Miniter,
United States that the Board has

determined is not subject to such
supervision.
As provided in sections 7(e) (1) and
(5) of the IBA, as amended, a
determination by the Board that a
foreign bank is not subject to
comprehensive supervision or
regulation on a consolidated basis is a
sufficient ground, in and of itself, for the
Board to require or, in respect of federal
branches or agencies, to recommend,
termination of the foreign bank’s U.S.
operations. 12 U.S.C. 3105(e)(1),(5).
Termination of a foreign bank’s U.S.
operations in these circumstances is not
mandatory, however. Instead, in
enacting section 7(e)(7) of the IBA,
Congress recognized that there may be
factors in particular cases that militate
against termination of a foreign bank’s
U.S. operations. 12 U.S.C. 3105(e)(7).
All determinations with regard to
whether a foreign bank is subject to
comprehensive supervision or
regulation on a consolidated basis will
be made in the context of the
supervision and regulation of the
foreign bank’s existing U.S. operations.
Just as is the case with other supervisory
or regulatory determinations, a foreign
bank generally will have an opportunity
to provide its views and any
information it considers to be relevant
in advance of any decision being made
with regard to question of
comprehensive, consolidated
supervision, unless expeditious action
is necessary to protect the public
interest.
The proposed criteria set out below
reflect the factors the Board considers
will be relevant for purposes of
evaluating the operations of any foreign
bank the Board determines is not subject
to comprehensive supervision or
regulation on a consolidated basis by its
home country supervisors in accordance
with 12 CFR 211.24(c)(1).
C r ite r ia

Following a determination by the
Board that a foreign bank is not subject
to comprehensive, consolidated
supervision by its home country
supervisor in accordance with
§ 211.24(c)(1) of Regulation K, the Board
proposes to take into account a number
of criteria in reaching a view regarding
whether the foreign bank’s U S.
operations should be terminated or
permitted to continue, and, if the latter
whether any supervisory constraints
should be placed upon the bank in

64172

Federal Register / Vol. 59, No. 238 / Tuesday, December 13, 1994 / Proposed Rules

connection with those operations. These
criteria are:
1. The proportion of the foreign bank’s total assets and total liabilities
that are located or booked in its home
country, as well as the distribution and
location of its assets and liabilities that
are located or booked elsewhere,
2. The extent to which the operations
and asjsets of the foreign bank and any
affiliates are subject to supervision by
its home country supervisor;
3 Whether the foreign bank has
effective and reliable systems of internal
controls and management information
and reporting, which enable
management properly to oversee the
bank’s worldwide operations;
4. Whether the foreign bank’s home
country supervisor has any objection to
the bank continuing to operate in the
United States;
5. Whether the foreign bank’s home
country supervisor and the home
country supervisor of any parent of the
foreign bank share material information
regarding the operations of the foreign
bank with other supervisory authorities;
6. The relationship of the U S.
operations to the other operations of the
foreign bank, including whether the
foreign bank maintains funds in its U.S
offices that are in excess of amounts due
from the foreign bank’s non-U S. offices;
7 The soundness of the foreign bank’s
overall financial condition,
8. The managerial resources of the
foreign bank, including the competence,
experience, and integrity of the officers
and directors and the integrity of its
principal shareholders;
9. The scope and frequency of
external audits of the foreign bank,
10. The operating record of the foreign
bank generally and its role in the
banking system in its home country;
11. The foreign bank’s record of
compliance with relevant laws, as well
as the adequacy of its money laundering
controls and procedures, in respect of
its worldwide operations,
12. The operating record of the U.S.
offices of the foreign bank and any
affiliates;
13. The views and recommendations
of the Office of the Comptroller of the
Currency (“OCC”) or the relevant state
banking regulator regarding the U S.
offices of the foreign bank,
14. Whether the foreign bank, if
requested, has provided the Board with
adequate assurances, that such
information will be made available on
the operations or activities of the foreign
bank and any of its affiliates as the
Board deems necessary to determine
and enforce compliance with the IBA,
the BHC Act, and other applicable
federal banking statutes, and

15. Any other information relevant to
the safety and soundness of the U.S
operations of the foreign bank.
These criteria address factors relating
both to the operations of the foreign
bank as a whole and to its U.S.
operations in particular. Evaluations of
both of these facets of a foreign bank’s
operations are necessary in order to
determine whether the bank’s U.S.
operadons should be permitted to
continue and, if so, whether these
operations should be subject to
supervisory constraints.
As subsection (c) of proposed § 211.30
of Regulation K provides, any foreign
bank that the Board determines is not
subject to comprehensive, consolidated
supervision may be required to enter
into an agreement to conduct its U.S.
operations subject to such restrictions as
the Board, having taken into account the
criteria, determines to be appropriate in
order to assure the safety and soundness
of the bank’s U S. operations. Where
appropriate, such an agreement could
require a suitable degree of insulation
between the foreign bank’s U.S.
operations and its operations (or those
of its affiliates) in other countries. For
example, one means of accomplishing
this would be to require the bank to
conduct its U.S. banking operations in
a “net due to” position vis-a-vis the rest
of the organization. Other restraints also
could be imposed where appropriate
(e.g., restricting transactions with other
parts of the organization or requiring
that international transactions of the
U.S. offices be conducted through a
correspondent acceptable to the Board).
Prior to imposing such restrictions, the
Board will consult with the OCC or the
appropriate state banking authority.
If any requirements imposed in such
an agreement were not adhered to, the
U.S. banking operations of the foreign
bank would be subject to further
enforcement action, including issuance
of an order terminating the activities of
the U.S. offices or transmittal of a
recommendation to the OCC for such
termination, as appropriate in the
circumstances.
Request for Comment

manner by banks that are subject to a
significant degree of supervision by
their home country authorities. The
Board, therefore, considers it to be
appropriate, in developing the proposed
criteria, to take into account the panoply
of tools available to the Board and other
banking regulators to regulate the
operations of foreign banks that are not
yet subject to full consolidated
supervision, which fall short of the
ultimate sanction of termination of their
U.S. operations.
As required by the Act, the Board has
consulted with the Treasury in the
development of the proposed criteria
and the Treasury has agreed that the
criteria may be published for comment.
Further consultation will take place
with the Treasury following the analysis
by both agencies of the comments
received The Board requests comment
on all aspects of the proposed criteria
Paperwork R eduction Act

No collections of information
pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S C
3501 et seq.) are contained in the
proposed rule
Regulatory F lexibility Act A nalysis

Pursuant to section 605(b) of the
Regulatory Flexibility Act (Pub L. 96354, 5 U S C. 601 et seq ), the Board
certifies that the proposed criteria
would not have a significant economic
impact on a substantial number of small
entities that are subject to its regulation
List o f Subjects in 12 CFR Part 211

Exports, Federal Reserve System,
Foreign banking, Holding companies.
Investments, Reporting and
recordkeeping requirements.
For the reasons set out in the
preamble, the Board proposes to amend
12 CFR part 211 as set forth below
PART 211—INTERNATIONAL
BANKING OPERATIONS
(REGULATION K)

1 The authority citation for Part 211
is revised to read as follows.Authority: 12 U S C. 221 et s e q . 1818,

The Board believes that the proposed
1841 et seq , 1843 e t seq , 3100 et seq . 3901
criteria will be sufficient to evaluate the et seq.
safety and soundness of the U S.
2 A new § 211 30 is added to subpart
operations of a foreign bank, to
B to read as follows
determine whether its U.S. operations
§211.30 Criteria for evaluating the U.S.
should be permitted to continue in the
absence of comprehensive, consolidated operations of foreign banks not subject to
consolidated supervision.
supervision by the home country
(a) Genera] Pursuant to the Foreign
authority, and, if so, on what basis. At
Bank Supervision Enhancement Act,
the same time, the Board does not wish
to impact unduly the existing operations Public Law 102-242,105 Stat 2286
(1991), (the FBSEA) the Board shall
of foreign banks, the vast majority of
develop and publish criteria to be used
which are operated in a safe and sound

Federal Register / Vol. 59, No. 238 / Tuesday, December 13, 1994 / Proposed Rules
in evaluating the operations of any
foreign bank in the United States that
the Board has determined is not subject
to comprehensive supervision or
regulation on a consolidated basis.
(b) Criteria. Following a
determination by the Board that a
foreign bank is not subject to
comprehensive, consolidated
supervision by its home country
supervisor in accordance with
§ 211.24(c)(1) of this subpart, the Board
shall consider the following criteria in
determining whether the foreign bank’s
U.S. operations should be permitted to
continue and, if so, whether any
supervisory constraints should be
placed upon the bank in connection
with those operations:
(1) The proportion of the foreign
bank’s total assets and total liabilities
that are located or booked in its home
country, as well as the distribution and
location of its assets and liabilities that
are located or booked elsewhere:
(2) The extent to which the operations
and assets of the foreign bank and any
affiliates are subject to supervision by
its home country supervisor;
(3) Whether the foreign bank has
effective and reliable systems of internal
controls and management information
and reporting, which enable
management properly to oversee the
bank’s worldwide operations;
(4) Whether the foreign bank’s home
country supervisor has any objection to
the bank continuing to operate in the
United States;
(5) Whether the foreign bank’s home
country supervisor and the home
country supervisor of any parent of the
foreign bank share material information
regarding the operations of the foreign
bank with other supervisory authorities;
(6) The relationship of the U.S.
operations to the other operations of the
foreign bank, including whether the
foreign bank maintains funds in its U.S.
offices that are in excess of amounts due
to its U.S. offices from the foreign bank’s
non-U.S. offices;
(7) The soundness of the foreign
bank’s overall financial condition;
(8) The managerial resources of the
foreign bank, including the competence,
experience, and integrity of the officers
and directors and the integrity of its
principle shareholders;
(9) The scope and frequency of
external audits of the foreign bank;
(10) The operating record of the
foreign bank generally and its role in the
banking system in its home country ;
(11) The foreign bank’s record of
compliance with relevant laws, as well
as the adequacy of its money laundering
controls and procedures, in respect of
its worldwide operations;

(12) The operating record of the U S.
offices of the foreign bank;
(13) The views and recommendations
of the Office of the Comptroller of the
Currency or the relevant state banking
regulator regarding the U.S. offices of
the foreign bank;
(14) Whether the foreign bank, if
requested, has provided the Board with
adequate assurances that such
information will be made available on
the operations or activities of the foreign
bank and any of its affiliates as the
Board deems necessary to determine
and enforce compliance with the
International Banking Act, the Bank
Holding Company Act, and other
applicable federal banking statutes; and
(15) Any other information relevant to
the safety and soundness of the U.S.
operations of the foreign bank.
(c)
Restrictions on U.S. operations—
(1) Terms o f agreement. Any foreign
bank that the Board determines is not
subject to comprehensive supervision or
regulation on a consolidated basis by its
home country supervisor pursuant to
§ 211.24(c)(1) of this subpart, may be
required to enter into an agreement to
conduct its U S. operations subject to
such restrictions as the Board, having
considered the criteria set forth in
paragraph (b) of this section, determines
to be appropriate in order to assure the
safety and soundness of its U.S.
operations.
(2)
Failure to enter into or comply
with agreement A foreign bank that is
required by the Board to enter into an
agreement pursuant to paragraph (c)(1)
of this section and either fails to do so
or fails to comply with the terms of such
agreement may be subject to
enforcement action in order to assure
safe and sound banking operations
under 12 U.S C. 1818, or to termination
or a recommendation for termination of
its U.S. operations under § 211.25(a) and
(e) of this subpart and section (7)(e) of
the IBA (12 US C . 3105(e)).

64173

DEPARTMENT OF LABOR
Occupational Safety and Health
Administration
29 CFR Part 1915
[Docket No. S-045]

Personal Protective Equipment for
Shipyard Employment

Occupational Safety and Health
Administration (OSHA), Department of
Labor.
ACTION: Proposed Rule; Request for
public participation in public meeting.
AGENCY:

By order o f the Board o f Governors o f the
Federal Reserve System , December 7 , 1994.

The Occupational Safety and
Health Administration (OSHA)
announces an informal public meeting
to provide an opportunity for oral and
written presentations regarding specific
issues raised through the reopening of
the Shipyard Employment Personal
Protection Equipment (PPE) rulemaking
record (59 FR 34586, July 6,1994) and
the incorporation of the general industry
PPE rulemaking docket (S-060).
DATES: Notices of intention to appear at
the public meeting must be postmarked
by January 11,1995. The public meeting
will be held on January 25,1995 in
Washington, D.C.
Any written information or comments
must be received by OSHA no later than
January 25,1995.
A D D RESSES: Submit all notices of
intention to appear and written
comments to Ms. Audrey K. Best,
Directorate of Safety Standards
Programs, Room N-3609, U.S.
Department of Labor, Occupational
Safety and Health Administration, 200
Constitution Avenue, NW , Washington,
DC 20210. Telephone (202) 219-7225,
FAX (202) 219-7477 Please submit four
copies of all written information.
Persons with disabilities, who need
special accommodations, should contact
Ms. Audrey Best, by January 11,1995 at
the address above.
The public meeting will be held in the
Frances Perkins Building, U.S.
Department of Labor, Conference Room
N3437(A and B), 200 Constitution
Avenue, NW., Washington, DC.

W illia m W . W ile s ,

FOR FURTHER INFORMATION CONTACT:

Secretary of the Board

Office of Information and Consumer
Affairs, Occupational Safety and Health
Administration, U.S. Department of
Labor, room N-3647, 200 Constitution
Avenue, N.W , Washington, D C. 20210.
Telephone (202) 219-8148.

iFR Doc. 9 4-30549 Filed 12-12-94; 8:45 am]
BILLING CO DE 6 2 1 0 -0 1 -P

SUMMARY:

SUPPLEMENTARY INFORMATION:

Background
On November 29,1988, OSHA
proposed to revise the personal

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DALLAS, TX 75265-5906

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