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Federal Reserve Bank OF DALLAS ROBERT D. M C T E E R , J R . DALLAS, TE XAS p re 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 17, 1996 7 5 2 6 5 -5 9 0 6 Notice 96-12 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT CORRECTION TO NOTICE 96-05 Request for Public Comment on Proposed Amendments to Regulation K (International Banking Operations) DETAILS This Bank’s Notice 96-05, dated January 5, 1996, did not have the correct pages of the Federal Register attached. We apologize for this oversight. The Board must receive comments by February 5, 1996. 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-0911. ATTACHMENT A copy of the Board’s notice as it appears on pages 67100-02, Vol. 60, No. 249, of the Federal Register dated December 28, 1995, is attached. MORE INFORMATION For more information, please contact Howard Edmonds at (214) 922-6278. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, 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) 67100 Federal Register / Vol. 60, No. 249 / Thursday, December 28, 1995 / Proposed Rules proposing to amend its Regulation K regarding interstate banking operations of foreign banking organizations. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act) removed geographic restrictions on interstate banking by foreign banks effective September 29, 1995, and requires certain foreign banks without U.S. deposit-taking offices to select a home state for the first time. The proposed amendments to Regulation K would require these foreign banks to select a home state by March 31,1996, and would immediately remove outdated restrictions on certain mergers by U.S. bank subsidiaries of foreign banks outside the home state of the foreign bank. Obsolete and superseded provisions of Regulation K concerning home state selection would be deleted. The Board is also requesting comment on other aspects of the Interstate Act as it applies to foreign banks. DATES: Comments must be received by February 5,1996. ADDRESSES: Comments should refer to Docket No. R-0911 and may be mailed to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington D.C. 20551. Comments also may be delivered to Room B-2222 of the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the guard station in the Eccles building courtyard on 20th Street, N.W. (between Constitution Avenue and C Street, N.W.) at any time. Comments may be inspected in Room MP— of the Martin Building between 500 9:00 a.m. and 5:00 p.m. weekdays, except as provided in § 261.8 of the Board’s rules regarding availability of information, 12 CFR 261.8. FOR FURTHER INFORMATION CONTACT: 12 CFR Part 211 [R eg ulation K; D o ck et No. R -0911] International Banking Operations Board of Governors of the Federal Reserve System. ACTION: Proposed rule. AGENCY: The Board of Governors of the Federal Reserve System (Board) is SUMMARY: Kathleen M. O’Day, Associate General Counsel (202/452-3786), Ann E. Misback, Managing Senior Counsel (202/452-3788), Douglas M. Ely, Senior Attorney (202/452-5289), Legal Division; Michael G. Martinson, Assistant Director (202/452-3640), Division of Banking Supervision and Regulation, Board of Governors of the Federal Reserve System. For users of Telecommunication Device for the Deaf [TDD] only, please contact Dorothea Thompson (202/452-3544), Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., Washingtdh, D.C. 20551. SUPPLEMENTARY INFORMATION: The Interstate Act amended section 5 of the International Banking Act of 1978 (IBA), which governs interstate banking and branching operations of foreign banks. The Interstate Act also amended the Bank Holding Company Act of 1956 (BHC Act), the Federal Deposit Insurance Act and several other statutes regarding interstate banking operations of bank holding companies, national banks and state banks. In light of these amendments, the Board proposes to amend the provisions of its Regulation K regarding interstate banking operations of foreign banking organizations (12 CFR 211.22) as discussed below. Determination of Home State Section 104(d) of the Interstate Act modifies the existing definition of a foreign bank’s home state under section 5(c) of the IBA. Section 104(d) retains the provision of the IBA stating that the home state of a foreign bank that has any combination of branches, agencies, subsidiary commercial lending companies and subsidiary banks (U.S. banking operations) in more than one • state is whichever of these states is selected by the foreign bank, or by the Board if the foreign bank fails to choose. Section 104(d) also provides, for the first time, that if a foreign bank has U.S. banking operations, including agencies or subsidiary commercial lending companies, in one state only, that state is the foreign bank’s home state for purposes of interstate branching. The Board proposes the following amendments to 12 CFR 211.22(a) in order to reflect and implement these changes to the definition of a foreign bank’s home state. Abolition of Distinction Between Deposit-Taking Offices and NondepositTaking Offices Prior to the Interstate Act, the Board interpreted the IBA to require a foreign bank to have a home state only if the foreign bank had deposit-taking offices, i.e., branches or subsidiary banks. 44 FR 62903 (November 1,1979). This interpretation is set forth in § 211.22(a)(2) of Regulation K. Section 104(d) of the Interstate Act superseded this interpretation by providing for the first time that foreign banks with only agencies or subsidiary commercial lending companies have a home state. Accordingly, the Board proposes that § 211.22(a)(2) be deleted. The Board also proposes that § 211.22(a)(5) be deleted. This provision follows the Board’s interpretation of the IBA in § 211.22(a)(2) by requiring foreign banks to select as their home state the state where their first U.S. deposit-taking office is located. Since the Interstate Act has superseded that interpretation, § 211.22(a)(5) is proposed to be removed. Federal Register / Vol. 60, No. 249 / Thursday, December 28, 1995 / Proposed Rules Initial Home State Selection Under the Interstate Act Deletions o f Other Obsolete Sections The Board proposes that current §§ 211.22(a)(1),(3) and (4) be deleted. These sections governed initial selection of home states for foreign banks under the IBA as enacted in 1978 and the Board’ implementing regulations, s which were adopted in 1980. The foreign banks affected by these provisions selected a home state, or had one selected for them by the Board or through operation of Regulation K, several years ago. Accordingly, the Board proposes that these provisions be deleted. As noted, the Interstate Act for the first time requires foreign banks with only subsidiary commercial lending companies or agencies in the United States to have a home state. In order to implement this requirement, the Board proposes that any foreign bank required for the first time to have a home state because it has subsidiary commercial lending companies or agencies in more than one state, and no other U.S. banking operations, be permitted to select its home state. (Foreign banks Bank Mergers Outside Home State with domestic agencies and subsidiary commercial lending companies in one Section 211.22(c) of Regulation K state only are assigned that state as their provides that a foreign bank with one or home state by section 5(c)(2) of the IBA, more domestic banking subsidiaries as amended by section 104(d) of the outside its home state shall notify the Board if it proposes to acquire through Interstate Act.) Each foreign bank a subsidiary bank all or substantially all covered by the rule would be required to select its home state from those states of the assets of a U.S. bank which is larger than the subsidiary bank and is in which the foreign bank established located outside of the foreign bank’s U.S. agencies and subsidiary home state under the IBA. The Board commercial lending companies before may direct the foreign bank to September 29,1994 (the date of enactment of the Interstate Act), and has redesignate as its home state the state in which its subsidiary bank is locafed if continuously operated such offices. A the Board finds the proposed foreign bank covered by the rule shall acquisition would be inconsistent with select its home state by filing with the the foreign bank’s home state selection Board a declaration of home state by under the IBA. March 31, 1996. The Board adopted this rule in 1980 In the event a foreign bank required due to a concern that allowing a foreign to select a home state fails to do so, the bank to expand its deposit-taking Board would exercise its authority, as capabilities both by branching in its IBA contemplated by section 104(d) of the home state and through major Interstate Act, to determine a foreign acquisitions by merger outside its home bank’s home state. In such cases, the state might permit evasion of the Board proposes to designate as a foreign interstate restrictions then in place bank’s home state the state in which the under the IBA and the BHC Act. At that total assets of all its offices, net of time, a foreign bank with a subsidiary claims on affiliates or other offices of bank in one state (State X) and a branch the foreign bank, is the largest, as in another state (State Y) which reflected in the foreign bank’s most declared State Y as its home state under recent report of condition. the IBA generally could not acquire The Board also proposes to state in its more than 5 per cent of the shares of an additional bank in State Y, because such new rule that, as is provided in section 5(c)(2) of the IBA as amended by section acquisitions were subject to the geographic restrictions of section 3(d) of 104(d) of the Interstate Act, a foreign the BHC Act. These restricted purchases bank with branches, agencies, of banks outside a foreign bank’s home subsidiary commercial lending state for purposes of the BHC Act, in companies or subsidiary banks in one this case State X. In addition, such a state only shall have that state as its foreign bank generally could not acquire home state. A foreign bank that has more than 5 per cent of the shares of an already chosen a home state would not additional bank in State X as a result of be affected by the proposed rule. section 5(a)(5) of the IBA, which also The Board intends to review other applied the limits of section 3(d) of the issues raised by the Interstate Act BHC Act to interstate bank acquisitions relating to the interstate operations of by foreign banks outside their home foreign banks in a future rule-making state as determined under the IBA (in proceeding. The Board accordingly this case, State Y). The Board concluded invites comment concerning all aspects that a foreign bank might circumvent of the application of the Interstate Act these restrictions on interstate banking to foreign banks. by engaging, through a subsidiary bank, 671Q1 in a large merger outside its IBA home state (in this case, State X), and framed its interstate bank merger rule to allow the Board to redesignate the foreign bank’s home state to prevent this circumvention. The concerns underlying the rule no longer apply due to the changes made by the Interstate Act. The geographic limits on interstate bank purchases by foreign banks outside their IBA home state under section 5(a)(5) of the IBA have been abolished. In addition, section 3(d) of the BHC Act was amended as of September 29,1995 to phase out the principal geographic restrictions on interstate banking acquisitions applicable to domestic and foreign acquirors under the BHC Act. As of that date, there is no need to prevent foreign banks from circumventing geographic limits that no longer apply. Accordingly, the Board proposes that the bank merger r 'o of § 211.22(c) be deleted effective immediately. Retained Provisions The Board proposes that §§ 211.22(b) and (d) of Regulation K be retained with ' no change at this time. Section 211.22(b), which allows foreign banks to change their home states once, will be reviewed in the Board’s future rulemaking process discussed above. Until such time, foreign banks which have not previously changed their home states may change-their home state in accordance with § 211.22(b). Section 211.22(d), w hich concerns attribution of home states to foreign banking organizations controlled by other foreign banking organizations, also is proposed to be retained pending future review. Request for Comment The Board requests comment on all aspects of the proposed changes to Regulation K, and on all other aspects of the application of the Interstate Act to foreign banks which may be dealt with appropriately through rulemaking. Paperwork Reduction Act In accordance with section 3506 of the Paperwork Reduction Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.l), the Board reviewed the proposed rule under the authority delegated to the Board by the Office of Management and Budget. No collections of information pursuant to the Paperwork Reduction Act are contained in the proposed rule. Regulatory Flexibility Act Analysis 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 revisions to 67102 Federal Register / Vol. 60, No. 249 / Thursday, December 28, 1995 / Proposed Rules Regulation K would not have a significant economic impact on a substantial number of small entities that are subject to its regulation. List of 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 continues to read as follows: Authority: 12 U.S.C. 221 et seq., 1818, 1841 et seq., 3101 et seq., 3901 et seq. 2. In § 211.22, paragraph (a) is revised; paragraph (c) is removed; and paragraph (d) is redesignated as paragraph (c) to read as follows: § 2 1 1 .2 2 In te rs ta te b a n k in g o p e ra tio n s of fo reign b an k in g o rg a n iz a tio n s. (a) Determination o f home state. (1) A foreign bank (except a foreign bank to which paragraph (a)(2) of this section applies) that has any combination of domestic agencies or subsidiary commercial lending companies that were established before September 29, 1994, in more than one state and have been continuously operated shall select its home state from those states in which such offices or subsidiaries are located. A foreign bank shall do so by filing with the Board a declaration of home state by March 31,1996. In the absence of such selection, the Board shall designate the home state for such foreign banks. (2) A foreign bank that, as of September 29,1994, had declared a home state or had a home state determined pursuant to the law and regulations in effect prior to that date shall have that state as its home state. (3) A foreign bank that has any branches, agencies, subsidiary commercial lending companies, or subsidiary banks in one state, and has no such offices or subsidiaries in any other states, shall have as its home state the state in which such offices or subsidiaries are located. * * * * * By order of the Board of Governors of the Federal Reserve System, December 21,1995. Jennifer J. Johnson, D eputy Secretary o f the Board. [FR Doc. 95-31364 Filed 12-27-95; 8:45 am] BILUNG CODE 6 2 1 0 -0 1 -P
