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e d er a l


e s e r v e


a nk


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





2 6 , 1993

dallas, texas 75222

Notice 93-38


The Chief Executive Officer of each
m e m b e r bank and others concerned in
the Eleventh Federal Reserve District
New Procedures R elating to A pplications F ile d
Under the Foreign Bank Supervision
Enhancement Act o f 1991

The Federal Reserve Board announced new procedures to be used in
processing applications filed by foreign banks under the Foreign Bank Sup e r v i ­
sion Enhancement Act of 1991 (FBSEA).
Under the FBSEA, a foreign bank may not establish a branch, agency,
re p r esentative office, or commercial lending company without the prior
approval of the Board.
The Board has taken a number of steps that are intended to expedite
processing and reduce the burden on applicants.
These steps include p r o c e ­
dures that

Require a simultaneous review of applications by the Board and
Reserve Bank staffs;


Urge all foreign bank applicants to meet with Board and Reserve
Bank staff prior to filing applications;


Require adherence to time frames in requesting information during
the acceptance process;


Establish new internal guidelines for processing applications
after acceptance; and


Inform the public that information files on home country sup e r v i ­
sion and bank secrecy laws are maintained and available in the
B o a r d ’s Freedom of Information Office.

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 (

- 2-

The FBSEA established uniform standards for all foreign banks
entering the United States and requires foreign banks to meet financial,
managerial, and operational standards equivalent to those required of U.S.
banking organizations.

A copy of the B o a r d ’s statement on the new procedures is attached.

For more information, please contact Ann Worthy at (214) 922-6156.
For additional copies of this B a n k ’s notice, please contact the Public Affairs
Department at (214) 922-5254.
Sincerely yours,


The Foreign Bank Supervision Enhancement Act of 1991
(the FBSEA), enacted on December 19, 1991, established uniform
standards for all foreign banks entering the United States,
requiring them generally to meet financial, managerial, and
operational standards equivalent to those required of U.S.
banking organizations.

Since the enactment of the FBSEA, the

Board has taken a number of actions to implement its provisions,
including issuing administrative guidance to Reserve Banks,
adopting interim and final regulations setting forth the
standards the Board uses in evaluating applications, and
publishing, together with the Treasury Department, two studies
mandated by the FBSEA, one on capital equivalency and the other
on whether to require foreign banks to operate in the United
States only through subsidiary banks.
Under the FBSEA, a foreign bank may not establish a
branch, agency, representative office or commercial lending
company subsidiary without obtaining the prior approval of the

The Board may not approve an application under the FBSEA

for a branch, agency or commercial lending company unless it
finds that the foreign bank applicant is subject to comprehensive
supervision and regulation on a consolidated basis by home
country authorities.

Under the FBSEA, the Board also considers

other factors, such as whether the home country authorities have
consented to the establishment of the proposed office, the


foreign bank's financial and managerial resources and its
capacity to engage in international banking, and whether the
foreign bank has provided adequate assurances that it will
provide access to information sufficient to allow the Board to
determine the bank's compliance with law.

The Board may take

account of all of these standards in evaluating an application to
establish a representative office.

Many of these standards are

not specifically addressed by the statutes and application forms
of the various state licensing authorities or the Office of the
Comptroller of the Currency.

For this reason, the Board must ask

for additional information from applicant foreign banks and from
the applicant's home country supervisor.
Questions have been raised by the industry and others
concerning the processing time for FBSEA applications.

The chief

source of delay in virtually all the FBSEA applications has been
the time necessary to complete the name checks requested by the
Board from other government agencies on the applicant foreign
bank, certain shareholders, and key personnel.

The name checks

potentially provide the Board with information relevant to a
number of the statutory standards and it is anticipated that
completion of these name checks will continue to delay processing
of the applications.

The Board, however, has taken a number of

steps designed to expedite the completion of name checks and
believes that the time frames for their completion may improve in
the future.

Other agencies have been cooperative in these

In addition, the Board believes that applications by


foreign banks to engage in limited nonbanking activities may, in
appropriate cases, require fewer inquiries than do applications
under the FBSEA, which will reduce the volume of name checks that
must be handled by other agencies.
In addition, in an effort to encourage more efficient
and timely processing of FBSEA applications, to reduce the burden
on foreign bank applicants and to improve communications between
applicants and Board and Reserve Bank staff, the Board has
adopted new procedures with respect to those aspects of the
application process under its direct control.

These new

procedures are consistent with the Board's flexible approach to
the implementation of the FBSEA.

Applications will be Reviewed Simultaneously by Board
and Reserve Banks Staffs

Applications under the FBSEA have been subject to the
usual process for System review: an application is first
submitted to the local Reserve Bank, which reviews the
application for informational sufficiency.

If the application

lacks necessary information, the Reserve Bank asks the applicant
to provide the information within a specified time period.


after the requested information is furnished is the application
accepted and forwarded to the Board for review.
Although this process has generally worked well in
applications under statutes where policies and procedures are
relatively well-defined, policies are not as well-defined under


the more recently enacted FBSEA.

Thus, in many cases, additional

information requests have been made by Board staff after the
application has been accepted.

The Board believes that the

process would be more efficient if FBSEA applications are
reviewed simultaneously by Reserve Bank and Board staff.

The two

staffs would coordinate requests for further information to be
sent to the applicant bank, which should reduce the frequency of
such requests and the burden such requests impose on the

The Board will reexamine the need for this special

procedure once the backlog of FBSEA applications is cleared and
policies and procedures are better defined.
Under the new procedure, the Reserve Bank will forward
to the Board copies of applications filed under the FBSEA within
one business day of receipt.

Board staff will be responsible for

reviewing the application within set time limits and coordinating
with Reserve Bank staff in preparing requests to the applicant
for additional information.

Copies of the applicant's responses

would also be forwarded immediately to Board staff for review.
Joint decisions then would be made on whether the application is
ready for acceptance.
This procedure is intended to improve processing times
and to facilitate communication by the applicants with staff.

This review process will not entirely eliminate the need
to request additional information in the latter stages of an
application. Analysis of information already received may give
rise to additional questions. The new procedure, however, should
reduce the number of times an applicant is contacted for more
information and reveal issues earlier.

All Foreign Bank Applicants Are Urged to Meet with Both
Board and Reserve B&nk Staff Prior to Filing Applications

The Board urges foreign banks to meet with Federal
Reserve staff at any time and particularly if the foreign bank is
proposing to expand in the United States.

The Board believes

that early discussions between applicants and both Board and
Reserve Bank staff are useful in identifying relevant issues.
Such meetings would assure that the foreign bank is apprised
before the application is filed of all relevant issues and would
enable staff to obtain necessary information at an earlier stage
of the process.
The Board also encourages applicants to consult with
Board and Reserve Bank staff at any time during the application
process concerning issues raised by the application, its status,
or processing problems.

Attached to this document are the names

and telephone numbers of appropriate Board and Reserve Bank staff
responsible for these matters.

Applicants should feel free to

contact these individuals.

Time Frames will be Followed during the Acceptance

In its implementing regulations and procedures, the
Board has attempted to be flexible in its approach, for example,
by imposing less rigid time limits on foreign bank applicants to
respond to information requests.

As a result of the forbearance

in imposing time limits for receipt of information, some
applicant banks have not responded promptly to requests for
further information, including information required to initiate


name checks, creating the erroneous impression that applications
were not receiving attention from the Federal Reserve.
Experience has indicated that the process could be made
more efficient if reasonable time limits are imposed both on the
Federal Reserve staff to ask for information and on the foreign
bank applicants to respond to such requests.

Consequently, the

Board has adopted the following time limits to be used in
connection with FBSEA applications.
The Reserve Bank and Board staff must review an
application and request additional information from an applicant
within 15 business days of receipt of the application by the
Reserve Bank.

The applicant must respond within 2 0 business

If the applicant does not respond within that time, the

application normally would be returned as informationally

If the applicant does respond within the time limit,

the Reserve Bank and Board staffs would have an additional 10
business days either to accept the application as complete or to
request additional information.

The applicant similarly would be

given 10 business days for response.
This proposal would ensure that an application does not
remain for an indeterminate period of time at a Reserve Bank when
the applicant has not furnished the information necessary to act
on the proposal.
New Guidelines will be Followed in Processing
Applications after Acceptance

Applications filed under the FBSEA are subject to the
same 60-day time schedule as applications filed under the BHC


However, as the Board acknowledged when it adopted final

rules under the FBSEA, it would normally be difficult to meet the
60-day schedule with respect to these applications.

Name checks

are often not complete by the end of that time period and in some
cases the response to staff's inquiries to home country
authorities has not been received.

An applicant is always

informed in writing as to the general reasons for the delay
beyond the 60-day time period but there is no required
communication with the applicant after that date (although in
practice, there are frequent telephone calls between staff and
The Board believes that foreign banks may appreciate a
more formalized communication schedule.

The Board has instructed

the staff as a general matter to inform an applicant that, in
light of all the information that must be received before the
record on the application may be considered complete, the
application would not be likely to be acted on within the 60-day
period but that it would be presented to the Board as soon as
possible after the record is completed.

Where the response from

the home country supervisor has not been received by the 12 0th
day, the staff would normally return the application as
informationally deficient.
In addition to sending the required 60-day letter
setting forth the reasons for the delay, the staff would also
send a letter at 12 0 days (assuming the application has not yet
been acted on) giving another report on the status of the

application, for example, if the Board is still awaiting name
In any event, the staff would not wait for completion
of name checks on any application that presents a significant
issue that otherwise would be dispositive of the case, such as
unsatisfactory financial considerations or where the applicant
has not provided requested information within a reasonable time.
These cases would be brought to the Board for resolution as soon
as the issue is defined and analyzed.
5.Files on Home Country Supervision and Bank Secrecy Laws
are Maintained and Available in the Board's Freedom of
Information Office

In connection with applications under the FBSEA,
information must be provided by a foreign bank applicant on home
country supervision and bank secrecy laws of the jurisdictions in
which it operates because such information is necessary for the
Board to make determinations required by the statute.


in order to reduce the burden on future applicants, the Board has
compiled files of information on these two subject areas.


files contain the information submitted to the Board in
connection with other applications and are available to the

Information in these files may be obtained by contacting

the Board's Freedom of Information Office at 202-452-3684.


Questions Regarding FBSEA Applications Should be Addressed to:
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

William A. Ryback
Associate Director
Division of Banking
Supervision and Regulation

Kathleen M. O'Day
Associate General Counsel
Legal Division
20 2 452-3786

202 452-2722

Federal Reserve Bank of Atlanta

Zane R. Kelley
Vice President
40 4 589-7203

Federal Reserve Bank of Chicago

James A. Bleumle
Vice President
312 322-5908

Federal Reserve Bank of New York

John S. Cassidy
Assistant Vice President
212 720-5859

Federal Reserve Bank of San Francisco

Kenneth R. Binning
Director, Banking Holding Company
and International Applications
415 974-3007


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