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Federal Reserve Bank of Dallas ROBERT D. McTEER, JR. DALLAS, TEXAS PRESIDENT AND CHIEF EXECUTIVE OFFICER 75265-5906 September 28, 1998 Notice 98-88 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Interim Rule and Request for Public Comment on a Proposal to Expand the Examination Frequency Cycle DETAILS The Board of Governors of the Federal Reserve System, along with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, has issued an interim rule and request for public comment on a proposal to expand the examination frequency cycle for certain financial institutions. Implementation of this ruling will make U.S. branches and agencies of foreign banks (with total assets of $250 million or less) eligible for an 18-month examination cycle rather than a 12-month cycle. The 18-month examination cycle applies to institutions that meet the qualify ing criteria set out in the interim rule, which became effective August 28, 1998. The Board must receive comments by October 27, 1998. Please address comments to Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551. All comments should refer to Docket No. R-1012. ATTACHMENT A copy of the agencies’ notice as it appears on pages 46117-22, Vol. 63, No. 167, of the Federal Register dated August 28, 1998, 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 Intrastate (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) -2- MORE INFORMATION For more information, please contact Dick Burda at (713) 652-1503. For additional copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Friday August 28, 1998 Part V Department of the Treasury Office of the Comptroller of the Currency 12 CFR Part 4 Federal Reserve System 12 CFR Part 211 Federal Deposit Insurance Corporation 12 CFR Part 347 Extended Examination Cycle for U.S. Branches and Agencies of Foreign Banks; Final Rule 46117 46 1 1 8 Federal Register/Vol. 63, No. 167/Friday, August 28, 1998/Rules and Regulations DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 4 [Docket No. 98-11] RIN 1557-AB60 FEDERAL RESERVE SYSTEM 12 CFR Part 211 [Regulation K; Docket No. R-1012] FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 347 RIN 3064-AC15 Extended Examination Cycle for U.S. Branches and Agencies of Foreign Banks Office of the Com ptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; and the Federal Deposit Insurance Corporation. ACTION: Interim rule w ith request for comment. AGENCIES: The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) are issuing this joint interim rule w ith request for com m ent to im plem ent the provisions related to an extended exam ination cycle for U.S. branches and agencies of foreign banks set out in section 2214 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). U nited States branches and agencies of foreign banks w ith total assets of $250 m illion or less are eligible to be considered for the 18-month exam ination cycle if they m eet the qualifying criteria set out in this interim rule. The interim rule reduces the regulatory burden associated w ith more frequent on-site exam inations for certain sm all U.S. branches and agencies of foreign banks. DATES: This interim rule is effective August 28,1998. Comments m ust be received by October 27,1998. ADDRESSES: Comments should be directed to: OCC: Com m unications Division, Office of the Comptroller of the Currency, 250 E Street SW., W ashington, DC 20219, Attention: Docket No. 98-11. Comments w ill be available for public inspection and photocopying at the same location. SUMMARY: Comments may also be sent by facsimile transm ission to (202) 874-5274 or by electronic m ail to regs.comments@occ.treas.gov. Board: Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW., W ashington, DC 20551, and refer to Docket No. R 1012. Comments addressed to Ms. Johnson may also be delivered to the Board’s mail room betw een 8:45 a.m. and 5:15 p.m., and to the security control room outside of those hours. Both the m ail room and the security control room are accessible from the courtyard entrance on 20th Street between Constitution Avenue and C Street, NW. Comments may be inspected in room M P-500 betw een 9:00 a.m. and 5:00 p.m., except as provided in Section 261.14 of the Board’s Rules Regarding the Availability of Information. FDIC: Robert E. Feldm an, Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance Corporation, 550 17th Street, NW., W ashington, DC 20429. Comments may be h and delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days betw een 7:00 a.m. and 5:00 p.m. (Fax num ber (202) 898-3838; Internet address: comments@fdic.gov) Comments may be inspected and photocopied in the FDIC Public Information Center, Room 100, 801 17th Street, NW., W ashington, DC betw een 9:00 a.m. and 4:30 p.m. on business days. FOR FURTHER INFORMATION CONTACT: OCC: M artha Clarke, Senior Attorney, International Activities (202/874-0680); or H oward Blacker, Senior International Advisor, International Banking & Finance (202/874-4730). Board: Norah M. Barger, Assistant Director (202/452-2402), or Joseph J. Sciortino, Supervisory Financial A nalyst (202/452—2294), Division of Banking Supervision and Regulation; or Sandra Richardson, Managing Senior Counsel (202/452-6406) or Jonathan D. Stoloff, Senior Attorney (202/452-3269), Legal Division. FDIC: Karen Walter, Chief, International, Division of Supervision (202/898-3540); or Mark Mellon, Counsel, Regulation and Legislation Section, Legal Division (202/898-3854). SUPPLEMENTARY INFORMATION: Background The International Banking Act of 1978 (the IBA),1 as am ended by the Foreign Bank Supervision Enhancem ent Act of 1Pub. L. 95-369, 92 Stat. 607. 1991,2 subjected U.S. branches and agencies of foreign banks to a 12-month exam ination cycle. Section 2214 of the Economic Growth and Regulatory Paperw ork Reduction Act of 1996 (EGRPRA)3 am ended the IBA to provide that U.S. branches and agencies of foreign banks shall be subject to on-site exam ination as frequently as a national or state bank w ould be by its appropriate federal banking agency. In general, national and state banks m ust be exam ined every 12 months. However, section 111 of the Federal Deposit Insurance Corporation Im provem ent Act of 19914 authorized an 18-month exam ination cycle for certain national and state banks w ith a composite rating of 1 u nder the Uniform Financial Institutions Rating System (UFIRS) and total assets of $100 m illion or less. Section 306 of the Riegle Com m unity Development and Regulatory Im provem ent Act of 19945 expanded the availability of the 18m onth exam ination cycle to certain national and state banks w ith a composite rating of 1 under UFIRS and total assets of $250 m illion or less, as well as to certain national and state banks w ith a com posite rating of 2 under UFIRS and total assets of $100 m illion or less. Section 2221 of EGRPRA 6 provided that anytime after Septem ber 23, 1996, U.S. bank supervisory agencies could extend the 18-month exam ination frequency cycle to certain national and state banks w ith a composite rating of 2 and total assets of $250 m illion or less. Effective April 2,1998, the Agencies issued a final rule that extended the exam ination cycle to 18 m onths for certain national and state banks that satisfy the requirements of section 2221 of EGRPRA.7 To be eligible for the extended cycle, the national or state bank must: (a) Have total assets of $250 m illion or less; (b) Be rated a composite 2 or better under the UFIRS; (c) Be well capitalized; (d) Be well managed; (e) Not be subject to a formal enforcement action; and (f) Not have experienced a change of control during the preceding 12-month period in w hich a full-scope, on-site exam ination w ould have been required but for the extended cycle. 2Pub. L. 102-242,105 Stat. 2286. 3Pub. L. 104-208, 110 Stat. 3009 (section 2214 is codified at 12 U.S.C. 3105(c)(1)). 4Pub. L. 102-242,105 Stat. 2236 (section 111 is codified at 12 U.S.C. 1820(d)). 5Pub. L. 103-325, 108 Stat. 2160. 6 Section 2221 is codified at 12 U.S.C. 1820(d)(10). 7 63 FR 16377 (April 2,1998). Federal Register/Vol. 63, No. 167/Friday, August 28, 1998/Rules and Regulations federal and state law) in an am ount not less than 108 percent of the preceding quarter’s average third party liabilities and sufficient liquidity is currently available to m eet its obligations to third parties; (d) Not be subject to a formal enforcement action or order by the Board, FDIC or OCC; and (e) Not have experienced a change in control during the preceding 12-month period in w hich a full-scope, on-site exam ination w ould have been required but for the extended cycle. Each agency retains the authority to examine a U.S. branch or agency of a foreign bank as frequently as the agency deems necessary. Factors that the Agencies w ill consider w hen deciding w hether m ore frequent exam inations are necessary include, but are not lim ited to, whether: (a) Any of the individual com ponents of the ROCA rating of the U.S. office is rated 3 or worse; (b) the results of any off-site supervision indicate a deterioration in the condition of the office; (c) the size, relative im portance, and role of a particular office w hen reviewed in the context of the foreign bank’s entire U.S. operations otherwise necessitates an annual exam ination (including, for example, w hether the office generates a significant level of assets that are booked elsewhere); and (d) the Description of the Interim Rule condition of the foreign bank itself gives U nder this interim rule, a U.S. branch rise to such a need. In general, the Agencies w ill make their determ ination or agency of a foreign bank is eligible to w hether to apply the 18-month be considered for an 18-month exam ination cycle if the office meets the exam ination cycle to a particular U.S. branch or agency based on the overall criteria listed below and if there are no risk assessm ent for that office, as w ell as other factors that cause the appropriate the factors noted herein. federal banking agency to examine the Section 2214 of EGRPRA directs that branch or agency more frequently. To the U.S. branches and agencies of qualify for an 18-month exam ination foreign banks should be subject to on cycle, the U.S. branch or agency of a site exam inations as often as U.S. banks. foreign bank must: The criteria for determ ining eligibility of (a) Have total assets of $250 m illion U.S. offices of a foreign bank for an or less; expanded exam ination cycle differ in (b) Have received a composite ROCA supervisory rating of 1 or 2 at its most certain respects from the criteria applicable to U.S. banks for this recent exam ination;8 (c) Satisfy the requirem ents of either purpose. These differences are the following paragraph (1) or (2): necessary to adjust for the obvious (1) The foreign bank’s m ost recently structural differences that exist betw een reported capital adequacy position U.S. banks and U.S. offices of foreign consists of, or is equivalent to, Tier 1 banks (e.g., the U.S. offices of foreign and risk-based capital ratios of at least banks often constitute only a small part 6 percent and 10 percent, respectively, of foreign banks’ w orldw ide operations on a consolidated basis; or and the role of the Agencies w ith regard (2) The branch or agency has to the U.S. offices is lim ited to that of m aintained on a daily basis over the host country supervisor), as well as the past three quarters, eligible assets supervisory im plications that flow from (determined consistent w ith applicable these basic structural differences. The Agencies w ill use a num ber of 8 The supervisory rating system for U.S. branches criteria as a proxy for the well-managed and agencies of foreign banks is referred to as criterion applicable to U.S. banks, ROCA. The four components of ROCA are: risk including the ROCA com ponent and management, operational controls, compliance, and composite ratings, the existence of any asset quality. In view of the changes to the exam ination frequency of national and state banks, the Agencies are issuing an interim rule that sim ilarly extends the exam ination cycle for certain U.S. branches and agencies of foreign banks. Accordingly, U.S. branches and agencies of foreign banks w ith total assets of $250 m illion or less may be considered for an 18-month exam ination cycle provided that they m eet the eligibility criteria described in this interim rule. The Agencies are seeking com m ent on any aspect of this rule. The Agencies believe that an extended exam ination cycle for eligible U.S. offices of foreign banks w ill perm it the Agencies to focus their resources on those offices that present the most imm ediate supervisory concern, w hile concom itantly reducing the regulatory burden on sm aller offices that do not pose a sim ilar level of supervisory concern. The Agencies w ill continue to use off-site supervision techniques, including the subm ission of regulatory reports, to m onitor the condition and any changes in the risk profile of offices scheduled to be exam ined on the extended 18-month cycle. Each agency retains authority to examine the offices of a foreign bank as frequently as the agency deems necessary. 46119 formal enforcement action or order issued by an agency, and the other discretionary standards described above. W ith regard to the wellcapitalized criterion applicable to U.S. banks for these purposes, the Agencies w ill take into account the foreign b ank’s capital adequacy ratios, as w ell as, in appropriate circum stances, w hether the U.S. offices of the foreign bank have sufficient eligible assets and liquidity to m eet their obligations to third parties. The Agencies believe that evaluating the U.S. branches and agencies of foreign banks on the basis of the criteria described above for purposes of determ ining eligibility for an expanded exam ination cycle is consistent w ith the requirem ents of section 2214 of EGRPRA. Effective Date of Interim Rule The Agencies find good cause for issuing this interim rule w ithout prior notice and the opportunity for comment, as w ell as for dispensing w ith the 30-day delayed effective date ordinarily prescribed by the A dm inistrative Procedure Act (APA), 5 U.S.C. 551 et seq. The interim rule confers a benefit on certain small U.S. branches and agencies of foreign banks by reducing the regulatory burden associated w ith more frequent on-site examinations. Conversely, this interim rule does not increase the frequency of exam inations or otherwise increase the regulatory burden for any U.S. branch or agency of a foreign bank. Such institutions, therefore, are not adversely affected by the interim rule. U nder these circum stances, the Agencies conclude that prior notice and com m ent procedures are unnecessary and w ould be contrary to the public interest. 5 U.S.C. 553(b)(B). In addition, the Agencies have determ ined that this interim rule relates to exam ination schedules, w hich are a m atter of internal agency procedure rather th an a rule of substantive effect on bank activities and authority. See Donovan v. W ollaston A lloys, Inc., 695 F.2d 1, 9 (1st Cir. 1982). Determining w hen a regulated institution is to be exam ined is based, in part, on exam iner availability, the A gencies’ need to plan exam iner tim e in advance, and other issues relevant to the internal operations of the Agencies. Therefore, this interim rule is exem pt from the APA’s public notice requirem ent. 5 U.S.C. 553(b)(3)(A). Regulatory F lexibility A ct An initial regulatory flexibility analysis u n d er the Regulatory Flexibility Act is only required w henever an agency is required to 46120 Federal Register/Vol. 63, No. 167/Friday, August 28, 1998/Rules and Regulations publish a general notice of proposed rulem aking for any proposed rule. 5 U.S.C. 603. As noted previously, the Agencies have determ ined that this proposed rulem aking is exem pt from the requirem ents of the APA. Accordingly, an initial regulatory flexibility analysis is not required. Even if the Act w ere to apply, the interim rule w ill not have a significant economic im pact on a substantial num ber of small entities. The interim rule w ill reduce regulatory b urden on eligible U.S. branches and agencies of foreign banks w ith assets of $250 m illion or less. In addition, those entities that are not eligible for the exem ption from the statutorily prescribed 12-month exam ination cycle w ill not be adversely affected by the interim rule. List o f Subjects Paperwork Reduction A c t Office of the Comptroller of the Currency In accordance w ith the Paperwork Reduction Act of 1995 (44 U.S.C. 3506), the Agencies have determ ined that no collections of inform ation pursuant to the Paperw ork R eduction Act are contained in this interim rule. OCC Executive Order 12866 Statem ent The OCC has determ ined that this interim rule is not a significant regulatory action u n d er Executive Order 12866. OCC U nfunded M andates A ct o f 1995 Statem ent Section 202 of the U nfunded M andates Reform Act of 1995, Pub. L. 104-4, 109 Stat. 48 (March 22, 1995) (U nfunded M andates Act), requires that an agency prepare a budgetary im pact statem ent before promulgating a rule that includes a federal m andate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 m illion or more in any one year. If a budgetary im pact statem ent is required, section 205 of the U nfunded M andates Act also requires an agency to identify and consider a reasonable num ber of regulatory alternatives before prom ulgating a rule. Because the OCC has determ ined that this interim rule w ill not result in expenditures by state, local, and tribal governments, in the aggregate, or by the private sector, of m ore than $100 m illion in any one year, the OCC has not prepared a budgetary im pact statem ent or specifically addressed the regulatory alternatives considered. As discussed in the preamble, this interim rule w ill have the effect of reducing regulatory b urden on certain institutions. 12 CFR Part 4 Banks, banking, Freedom of information, Organization and functions (Government agencies), Reporting and recordkeeping requirements. 12 CFR Part 211 Exports, Federal Reserve System, Foreign banking, Holding companies, Investm ents, Reporting and recordkeeping requirem ents. 12 CFR Part 347 Banks, banking, Bank deposit insurance, Bank mergers, Credit, Foreign banking, Foreign branches, Foreign investments, Insured branches, International lending, International operations, Investments, Reporting and recordkeeping requirem ents. 12 CFR Chapter I Authority and Issuance For the reasons set forth in the joint preamble, part 4 of chapter I of title 12 of the Code of Federal Regulations is am ended as follows: PART 4— ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF INFORMATION, CONTRACTING OUTREACH PROGRAM 1. The authority citation for part 4 is revised to read as follows: Authority: 12 U.S.C. 93a. Subpart A also issued under 5 U.S.C. 552; 12 U.S.C. 481, 1820(d), and 3105(c)(1). Subpart B also issued under 5 U.S.C. 552; E.O. 12600 (3 CFR, 1987 Comp., p. 235). Subpart C also issued un d er 5 U.S.C. 301, 552; 12 U.S.C. 481, 482, 1821(o), 1821(t); 18 U.S.C. 641, 1905, 1906; 31 U.S.C. 9701. Subpart D also issued under 12 U.S.C. 1833e. 2. In Subpart A, the heading of § 4.6 is revised to read as follows: § 4.6 Frequency of examination of national banks. 3. In Subpart A, a new § 4.7 is added to read as follows: § 4.7 Frequency of examination of Federal agencies and branches. (a) General. The OCC examines Federal agencies and Federal branches (as these entities are defined in § 28.11 (h) and (i), respectively, of this chapter) pursuant to the authority conferred by 12 U.S.C. 3105(c)(1)(C). Except as noted in paragraph (b) of this section, the OCC w ill conduct a full-scope, on-site exam ination of every Federal branch and agency at least once during each 12m onth period. (b) 18-m onth rule fo r certain small institutions—(1) M andatory standards. The OCC may conduct a full-scope, on site exam ination at least once during each 18-month period, rather than each 12-month period as provided in paragraph (a) of this section, if the Federal branch or AGENCY: (1) Has total assets of $250 m illion or less; (ii) Has received a composite ROCA supervisory rating (which rates risk management, operational controls, com pliance, and asset quality) of 1 or 2 at its m ost recent examination; (iii) Satisfies the requirem ents of either the following paragraph (b)(l)(iii) (A) or (B): (A) The foreign bank’s m ost recently reported capital adequacy position consists of, or is equivalent to, Tier 1 and total risk-based capital ratios of at least 6 percent and 10 percent, respectively, on a consolidated basis; or (B) The branch or agency has m aintained on a daily basis, over the past three quarters, eligible assets (determ ined consistent w ith applicable federal an d state law) in an am ount not less th an 108 percent of the preceding quarter’s average third party liabilities and sufficient liquidity is currently available to m eet obligations to third parties; (iv) Is not subject to a formal enforcement action or order by the Federal Reserve Board, the Federal Deposit Insurance Corporation, or the OCC; and (v) Has not experienced a change in control during the preceding 12-month period in w hich a full-scope, on-site exam ination w ould have been required but for this section. (2) Discretionary standards. In determ ining w hether a Federal branch or agency is eligible for an 18-month exam ination cycle pursuant to this paragraph (b), the OCC may consider additional factors, including, but not lim ited to, whether: (i) A ny of the individual com ponents of the ROCA rating of the Federal branch or agency is rated “3” or worse; (ii) The results of any off-site supervision indicate a deterioration in the condition of the Federal branch or agency; (iii) The size, relative im portance, and role of a particular office w hen reviewed in the context of the foreign b ank’s entire U.S. operations otherwise necessitate an annual examination; and (iv) The condition of the foreign bank gives rise to such a need. (c) A uth ority to conduct m ore frequent exam inations. N othing in paragraph (a) or (b) of this section limits the authority of the OCC to examine any Federal Register/Vol. 63, No. 167/Friday, August 28, 1998/Rules and Regulations Federal branch or agency as frequently as the OCC deems necessary. Dated: August 12, 1998. Julie L. Williams, A cting Comptroller o f the Currency. Authority and Issuance For reasons set forth in the joint preamble, the Board am ends 12 CFR Part 211 as set forth below: PART 211— INTERNATIONAL BANKING OPERATIONS (REGULATION K) 1. The authority citation for part 211 continues to read as follows: Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 3101 et seq., and 3901 et seq. Subpart B— Foreign Banking Organizations 2. In Subpart B, § 211.26 is am ended by revising paragraph (c) to read as follows: § 211.26 Examination of offices and affiliates of foreign banks. * * * * * (c) Frequency o f on-site exam ination—(1) General. Each branch or agency of a foreign bank shall be exam ined on-site at least once during each 12-month period (beginning on the date the m ost recent exam ination of the office ended) by: (1) The Board; (ii) The FDIC, if the branch of the foreign bank accepts or m aintains insured deposits; (iii) The Comptroller, if the branch or agency of the foreign bank is licensed by the Comptroller; or (iv) The state supervisor, if the office of the foreign bank is licensed or chartered by the state. (2) 18-month cycle fo r certain sm all institutions—(i) M andatory standards. The Board m ay conduct a full-scope, on site exam ination at least once during each 18-month period, rather than each 12-month period as required in paragraph (c)(1) of this section, if the branch or Agency: (A) Has total assets of $250 m illion or less; (B) Has received a composite ROCA supervisory rating (which rates risk m anagement, operational controls, com pliance, and asset quality) of 1 or 2 at its most recent examination; (C) Satisfies the requirem ent of either the following paragraph (c)(2)(i)(C) (2) or (2): (J) The foreign bank’s m ost recently reported capital adequacy position consists of, or is equivalent to, Tier 1 and total risk-based capital ratios of at least 6 percent and 10 percent, respectively, on a consolidated basis; or (2) The branch or agency has m aintained on a daily basis, over the past three quarters, eligible assets (determ ined consistent w ith applicable federal and state law) in an am ount not less than 108 percent of the preceding quarter’s average third party liabilities and sufficient liquidity is currently available to m eet its obligations to third parties; (D) Is not subject to a formal enforcement action or order by the Board, FDIC, or OCC; and (E) Has not experienced a change in control during the preceding 12-month period in w hich a full-scope, on-site exam ination w ould have been required but for this section. (ii) Discretionary standards. In determ ining w hether a branch or agency of a foreign bank is eligible for an 18m onth exam ination cycle pursuant to this paragraph (c)(2), the Board m ay consider additional factors, including, but not lim ited to whether: (A) Any of the individual com ponents of the ROCA supervisory rating of a branch or agency of a foreign bank is rated “ 3” or worse; (B) The results of any off-site surveillance indicate a deterioration in the condition of the office; (C) The size, relative importance, and role of a particular office w hen review ed in the context of the foreign b ank’s entire U.S. operations otherwise necessitate an annual examination; and (D) The condition of the foreign bank gives rise to such a need. (3) A uth ority to conduct more frequent exam inations. Nothing in paragraphs (c) (1) and (2) of this section limits the authority of the Board to examine any U.S. branch or agency of a foreign bank as frequently as it deems necessary. 46121 2. Section 347.214 is added to subpart B to read as follows: §347.214 Examination of branches of foreign banks. (a) Frequency o f on-site exam ination. Each branch or agency of a foreign bank shall be exam ined on-site at least once during each 12-month period (beginning on the date the m ost recent exam ination of the office ended) by: (1) The Board of Governors of the Federal Reserve System (Board); (2) The FDIC, if the branch of the foreign bank accepts or m aintains insured deposits; (3) The Office of the Comptroller of the Currency (OCC), if the branch or agency of the foreign bank is licensed by the Comptroller; or (4) The state supervisor, if the office of the foreign bank is licensed or chartered by the state. (b) 18-m onth cycle fo r certain sm all institutions—(1) M andatory standards. The FDIC m ay conduct a full-scope, on site exam ination at least once during each 18-month period, rather than each 12-month period as provided in paragraph (a) of this section, if the branch or Agency: (1) Has total assets of $250 m illion or less; (ii) Has received a com posite ROCA supervisory rating (which rates risk management, operational controls, com pliance, and asset quality) of 1 or 2 at its m ost recent examination; (iii) Satisfies the requirem ent of either the following paragraph (b)(l)(iii) (A) or (B): (A) The foreign bank’s m ost recently reported capital adequacy position consists of, or is equivalent to, Tier 1 and total risk-based capital ratios of at least 6 percent and 10 percent, respectively, on a consolidated basis; or (B) The branch or agency has m aintained on a daily basis, over the past three quarters, eligible assets By order of the Board of Governors of the (determ ined consistent w ith applicable Federal Reserve System, A ugust 24,1998. federal and state law) in an am ount not Jennifer J. Johnson, less than 108 percent of the preceding Secretary o f the Board. quarter’s average th ird party liabilities Authority and Issuance and sufficient liquidity is currently available to m eet its obligations to third For the reasons set forth in the joint parties; preamble, the Board of Directors of the (iv) Is not subject to a formal FDIC am ends part 347 of chapter III of enforcement action or order by the title 12 of the Code of Federal Board, FDIC, or the OCC; and Regulations as follows: (v) Has not experienced a change in control during the preceding 12-month PART 347— INTERNATIONAL period in w hich a full-scope, on-site BANKING exam ination w ould have been required 1. The authority citation for part 347 b ut for this section. continues to read as follows: (2) D iscretionary standards. In determ ining w hether a branch of a Authority: 12 U.S.C. 1813, 1815, 1817, foreign bank is eligible for an 18-month 1819, 1820, 1828, 3103, 3104, 3105, 3108; Title IX, Pub. L. 98-181, 97 Stat. 1153. exam ination cycle pursu an t to this 46122 Federal Register/Vol. 63, No. 167/Friday, August 28, 1998/Rules and Regulations paragraph (b), the FDIC m ay consider additional factors, including, but not lim ited to, whether: (i) Any of the individual com ponents of the ROCA supervisory rating of a branch of a foreign bank is rated “ 3” or worse; (ii) The results of any off-site m onitoring indicate a deterioration in the condition of the branch; (iii) The size, relative im portance, and role of a particular branch w hen review ed in the context of the foreign b ank’s entire U.S. operations otherwise necessitate an annual examination; and (iv) The condition of the parent foreign bank gives rise to such a need. (c) A utho rity to conduct more frequent exam inations. Nothing in paragraphs (a) and (b) of this section lim its the authority of the FDIC to examine any U.S. branch or agency of a foreign bank as frequently as it deems necessary. By order of the Board of Directors. Dated at Washington, DC, this 7th day of July, 1998. Federal Deposit Insurance Corporation. James D. LaPierre, D eputy Executive Secretary. [FR Doc. 98-23077 Filed 8 -2 7-9 8 ; 8:45 am] BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P
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