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F ederal r es e r v e Ba n k o f Dallas
DALLAS, TE X A S
75222
Circular No. 83-21
February 10, 1983
REGULATION K
INTERNATIONAL BANKING OPERATIONS
(Proposed Rulemaking Relating to Investments in Export Trading Companies)
TO ALL MEMBER BANKS,
BANK HOLDING COMPANIES,
EDGE AND AGREEMENT CORPORATIONS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Board of Governors of the Federal Reserve System has issued for
public comment proposed regulations to implement that portion o f the Export
Trading Company A ct o f 1982—the Bank Export Services A ct—which authorizes
investm ents in export trading companies by bank holding companies and certain
other banking organizations.
Printed on the following pages are copies of the Board's press release
and the notice as published in the Federal R egister. Responses to the request for
com m ents regarding this proposal must be in writing and include the Docket
Number R-0445.
Comments should be addressed to the Secretary, Board of
Governors of the Federal Reserve System, Washington, D.C., 20551, and received
no later than March 14, 1983.
Questions regarding the proposed regulations may be directed to
David W. Dixon of the Holding Company Supervision Department, Extension 6182.
Additional copies of this circular will be furnished upon request to the
Public Affairs Department, Extension 6289.
Sincerely yours,
William H. Wallace
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)
FEDERAL RESERVE press release
For immediate release
January 17, 1983
The Federal Reserve Board today proposed for public comment draft
regulations to implement the Bank Export Services Act (BESA) authorizing
investments in export trading companies by bank holding companies and certain
other banking organizations.
The BESA is part of the Export Trading Company Act
of 1982.
The Board asked for comment by March 14, 1983.
In proposing the regulations the Board said:
The Board's regulations have been framed to achieve two
objectives set forth in the BESA: to facilitate the
export of goods and services produced in the United
States and to help avoid adverse effects on the subsid
iary banks of the bank holding companies involved.
Initially, information in some detail will have to be
supplied to comply with the provisions of the Export Trading
Company Act; as experience is gained with bank holding
company involvement in this unfamiliar activity it is antic
ipated that these requirements can be revised and procedures
further simplified.
Notifications of proposed investments in this activity will
be reviewed expeditiously, and carefully, to ensure that the
bank holding companies and their subsidiary banks are in a
condition sufficiently satisfactory to engage in export
trading company activities. The specific kinds of activities
proposed and the risks attached to them will be evaluated in
relation to the condition of the banking organization and the
financial structure of the export trading company.
The regulations proposed by the Board were limited, in light of the
directives of the Export Trading Company Act on implementation of the law, to
clarification of ambiguities in the law, provision of key definitions and
provision of basic guidance to investors as to the policies and procedures
the Board will follow in carrying out its responsibilities under the Act.
-
2-
The BESA, in providing for Federal Reserve review of investments
in export trading companies by eligible banking organizations, requires 60 days
prior written notice to the Board.
If the Board does not disapprove the invest
ment within this time (which the Board may extend by 30 days if it needs
additional information) the investment may be made.
The Board may disapprove proposed investments to prevent unsafe or
unsound banking practices, undue concentration of resources, decreased or unfair
competition or conflicts of interest, material adverse effects on bank subsidiaries
of bank holding companies, or if accurate or material information is not filed.
Investment in export trading companies may be made by bank holding
companies directly, or indirectly through an Edge or Agreement corporation subsid
iary, but not through a bank.
The Act imposes certain investment ceilings and
prohibits export trading companies from engaging in manufacturing or agricultural
production and from speculating.
All provisions of Section 23A of the Federal
Reserve Act governing lending by banks to affiliates will apply to extensions of
credit by banks to affiliated export trading companies.
To meet the Act's requirements that an export trading company must be
exclusively engaged in international trade and principally engaged in exporting
for the purpose of promoting United States exports, the Board proposed that its
regulations define an export trading company as one that is exclusively engaged in
activities related to international trade and that derives more than half its
revenues from the export of, or facilitating the export of, goods or services
produced in the United States by persons not affiliated with the export trading
company or its subsidiaries.
The proposed regulations would require a description of each activity
of the export trading company in the required notification to the Board, and
fiiJTther notification when additional investments are made, or when the export
trading company expands into new areas that would alter the fundamental character
of the? company's operation.
-
3-
The Board invited comment on whether a general consent procedure
should be provided for small investments in export trading companies.
Notification procedures would not differ for investments in joint
venture export trading companies.
The proposed regulations would prohibit
lending to a partner in a joint venture on terms more favorable than terms
available to others.
This would apply to partners with at least a 10 percent
interest in the joint venture export trading company.
The proposal reiterates the Act's prohibition of speculation but
indicates that this does not prohibit bona fide hedging.
The proposed regulations would amend the Board's Regulation K —
International Banking Operations —
and companies filing notifications of invest
ment will follow the checklist of information used for Regulation K applications,
including information as to the leveraging characteristics of the export trading
company.
The Board's notice spelling out its proposals is attached.
In relation to the Board's proposals, the Board discussed but made no
decision on reporting requirements for export trading companies.
Initially, these
reporting requirements may be more frequent than for other bank holding company
subsidiaries, due to lack of experience in this new area of activity for bank
holding companies.
Reporting requirements could be relaxed at a later time in
the light of experience.
Export trading companies will be subject to examination
automatically when the parent company is examined.
It is contemplated that an
export trading company would be subject to a special on-site examination within
one calendar year after investment by a banking organization in the company.
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Attachment
0-
3376
Federal Register / Vol. 48, No. 17 / Tuesday, January 25, 1983 / Proposed Rules
prior Board review of these investments
and providing guidance on how the
Board intends to administer the statute.
DATE: Comments must be received by
March 14,1983.
ADDRESS: Comments, which should refer
to Docket No. R-0445, may be mailed to
William W. Wiles, Secretary, Board of
Governors of the Federal Reserve
System, 20th & Constitution Avenue,
NW., Washington, D.C. 20551, or
delivered to Room B-2233 between 8:45
a.m. and 5:15 p.m. Comments received
may be inspected at Room B-1122
between the hours of 8:45 a.m. and 5:15
p.m., except as provided in the Board’s
Rules Regarding Availability of
Information (12 CFR 261.6(a)).
FOR FURTHER INFORMATION CONTACT:
FEDERAL RESERVE SYSTEM
12CFR Part 211
[Docket No. R-0445]
Regulation K; International Banking
Operations; Export Trading Companies
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
agency:
SUMMARY: The Bank Export Services
Act (Pub. L. 97-290, Title II (1982))
amended the Bank Holding Company
Act of 1956 to permit bank holding
companies, their subsidiary Edge or
Agreement corporations, and bankers'
banks to invest in export trading
companies. The regulation proposed for
comment implements and interprets this
provision by establishing procedures for
Nancy Jacklin, Assistant General
Counsel (202/452-3428), or Kathleen
O’Day, Senior Attorney (202/452-3786),
Legal Division: or Frederick R. Dahl,
Associate Director (202/452-2726), or
James Keller, Manager, International
Banking Applications (202/452-2523),
Division of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System.
SUPPLEMENTARY INFORMATION: On
October 8,1982, the Export Trading
Company Act of 1982 ("ETC Act") was
enacted into law. The purpose of the
statute is to encourage U.S. exports by
facilitating the formation and operation
of export trading companies and the
expansion of export trade services
generally. Title II of the ETC Act, known
as the Bank Export Services Act
(“BESA”), amends section 4 of the Bank
Holding Company Act (“BHC Act”) to
permit bank holding companies to invest
in export trading companies subject to
certain limitations and after prior Board
review. The objective of the BESA is to
allow for meaningful and effective
participation by bank holding
companies in the financing and
development of export trading
companies.
The terms of the statute and the
legislative history of the BESA seek to
encourage bank holding companies to
own and participate in export trading
companies. The Board intends to fulfill
its responsibilities under the BESA in
accordance with the spirit motivating
and underlying the legislation and
notifications of proposed investments in
this activity will be reviewed
expeditiously. The Board’s regulations
have been framed to achieve two
objectives set forth in the BESA: To
facilitate the export of goods and
services produced in the United States
and to help avoid adverse effects on the
subsidiary banks of the bank holding
companies involved. Initially,
information in some detail will have to
be supplied to comply with the
provisions of the ETC Act; as experience
is gained with bank holding company
involvement in this unfamiliar activity, it
is anticipated that these requirements
can be revised and procedures further
simplified.
At the same time, the Board is
cognizant of its responsibilities for the
supervision of bank holding companies
and their subsidiary banks. It will
review notices of proposed investments
carefully to ensure that the bank holding
companies and their subsidiary banks
are in a condition sufficiently
satisfactory to engage in export trading
company activities. The specific kinds of
activities proposed and the risks
attached to them will be evaluated in
relation to the condition of the banking
organization and the financial structure
of the export trading company.
Investors Covered by the BESA
Section 4(c)(14) of the BHC Act (12
U.S.C. 1843(c)(14)) provides that bank
holding companies and certain other
banking organizations may invest in
export trading companies. A bank that
is organized solely to do business with
other banks and their officers, directors
or employees,-is owned primarily by the
banks with which it does business, and
does not do business with the public—
commonly called a “bankers’ bank”—is
regarded as a bank holding company for
purposes of Section 4(c)(14), and is the
only type of U.S. bank that is authorized
by federal law to invest in export
trading companies. A state-chartered
bankers’ bank may invest in export
trading companies if such investment is
consistent with State law. Foreign
banking organizations also may invest
in export trading companies on the same
basis and under the same procedures as
a bank holding company.
Edge corporations and Agreement
corporations are companies that operate
under sections 25(a) and 25,
respectively, of the Federal Reserve Act
and conduct international banking
operations. An Edge or Agreement
corporation may invest in export trading
companies if it is a subsidiary of a bank
holding company and not a subsidiary
of a bank. An Edge or Agreement
corporation must file notice of a
proposed investment in an export
trading company in the same manner as
a bank holding company.
Activities of Export Trading Companies
An export trading company is defined
in section 4(c)(14) of the BHC Act as "a
company * * * which is exclusively
engaged in activities related to
international trade, and which is
Federal Register / Vol. 48, No. 17 / Tuesday, January 25, 1983 / Proposed Rules
organized and operated principally for
the purposes of exporting goods and
services produced in the United States
or for purposes of facilitating the
exportation of goods and services
produced in the United States by
unaffiliated persons by providing one or
more export trade services.” 12 U.S.C.
1843(c)(14)(F)(i). The legislative history,
in discussing the definition, emphasized
that the Board was to regulate export
trading companies "in a manner
consistent with the Congressional intent:
that ETCs promote, increase, and
maximize U.S. exports.” H. Rep. No. 924,
97th Cong., 2d Sess. 22 (1982). In order to
assist in determining whether a bankaffiliated export trading company is
principally engaged in exporting or
facilitating exports of goods and
services produced in the United States,
the Board proposes to define “export
trading company” as a company that, by
engaging in one or more export trade
services, annually derives more than
half its revenues from U.S. exports or
the facilitation of U.S. exports produced
by unaffiliated persons. The export
trading company would be able to
engage, where necessary or useful in the
conduct of its primary business of
exporting, in activities related to
importing, third party and barter trade
up to half of its business. In determining
whether goods are produced in the
United States, reference may be made to
the definitions used in preparing the
Shipper’s Export Declaration (a
Department of Commerce form) for
domestic merchandise exports from the
United States. In determining whether
services are “produced in the United
States,” for purposes of the BESA,
references may be made generally to the
concepts applied by the Department of
Commerce in compiling the U.S. balance
of payments accounts as to services
exports, following the general rule that
services performed by U.S. residents for
non-U.S. residents would be considered
covered by the term. The Board believes
that the foregoing definition will allow
the export trading company maximum
flexibility in organizing and operating its
business.
As to the specific activities of a bankaffiliated export trading company, the
company may provide any single export
trade service or combination of services
listed in section 4(c)(14)(F)(ii) and any
other services that serve to facilitate the
export of U.S. goods and services
produced by unaffiliated persons. In
addition, the export trading company
may engage in this same range of trade
services with respect to importing and
third party trade so long as the company
overall is principally engaged in
exporting and facilitating U.S. exports
produced by unaffiliated persons.
Consistent with the language and
legislative history of the BESA, goods
and services of “unaffiliated persons”
means goods and services produced by
persons other than the export trading
company itself or its subsidiaries.
Because the services listed at section
4(c)(14)(F)fii) do not all have precise or
generally accepted meanings, the
investor, in its notification and reports
to the Board, is to describe the nature of
the activities in which the export trading
company proposes to engage in
sufficient detail to allow the Board to
determine that the investment is
consistent with the purposes and
provisions of the BESA.
The statute does prohibit an export
trading company from engaging in
certain specific activities. For example,
section 4(c)(14)(D) permits the Board to
order termination of a bank holding
company’s investment in an export
trading company if the company takes
positions in commodities or commodity
contracts, securities or foreign
exchange, except as may be necessary
in the course of its business. As in the
past, the Board would not regard an
organization as speculating where the
transactions are necessary in the course
of business operations such as for bona
fide hedging (e.g., as that term has been
applied by the Board in connection with
forward and financial futures contracts
or by the Commodities Futures Trading
Commission in connection with
commodity contracts).
Investments and Extensions of Credit
The legislation authorizes banking
organizations, as described above, to
invest in export trading companies
subject to certain prudential limits on
aggregate financial exposure by each
organization in this new activity. The
proposed regulations incorporate the
statutory limitations on investment, i.e.,
a bank holding company, Edge or
agreement corporation or bankers’ bank
may invest a total of five per cent of its
consolidated capital and surplus in
export trading companies. An Edge or
Agreement corporation not engaged in
banking (i.e., deposit-taking in the
United States from unaffiliated persons)
may invest a total of up to 25 per cent of
its consolidated capital and surplus in
export trading companies.
The legislation also contains certain
restrictions on extensions of credit by
banking organizations to affiliated
export trading companies and their
customers. A bank holding company’s
total outstanding extensions of credit,
on a consolidated basis, to affiliated
export trading companies are limited to
3377
10 per cent of the bank holding
company’s consolidated capital and
surplus, and this limitation is reflected
in the proposed regulations. Extensions
of credit by a bank holding company’s
subsidiary bank to an affiliated export
trading company are also subject to the
provisions of section 23A of the Federal
Reserve Act, as recently amended by
Pub. L. 97-320.
In addition to limiting the financial
risk to affiliated banks by limiting the
investor’s financial exposure in export
trading companies, the legislation
contains a further provision specifically
intended to mitigate potential conflicts
of interests and associated risks where a
banking organization is linked with a
commercial venture. A bank holding
company or its subsidiary may extend
credit to an affiliated export trading
company or its customers on terms no
more favorable than those afforded
similar borrowers in similar
circumstances. The proposed regulation
provides that the term “customer”
includes affiliates of the customer in
order to prevent potential evasions of
the purpose of this statutory provision.
The proposed regulation also applies
the foregoing limitation on preferential
lending to extensions of credit by a bank
holding company to a co-investor with
at least a 10 per cent interest in an
export trading company or to affiliates
of the co-investor. The Board solicits
comments on whether this limitation
should apply only to “significant” credit
transactions and on what transactions
should be considered “significant.” The
Board is concerned that joint ventures,
particularly between banking and
nonbanking organizations, create a
serious potential for conflicts of interest
and concentration of economic
resources. However, the Board
recognizes that the legislation
specifically authorizes joint ventures
both between banking organizations and
between banking and nonbanking
organizations. The limitations contained
in the proposed regulations on
preferential lending, which are designed
to reduce potential conflicts of interest
and unsound banking practices that
might result from joint venture export
trading companies, do not in any way
affect the ability of the bank holding
company or its affiliated banks to offer
to the export trading company, its
customers, or a co-investor any rate that
is based on the established
creditworthiness of the borrower.
Rather, the provision merely
incorporates principles of sound banking
practice.
In light of the foregoing limitations on
preferential lending, the banking
3378
Federal Register / Vol. 48, No. 17 / Tuesday, January 25, 1983 / Proposed Rules
organization investor shall maintain
adequate information on all transactions
with its affiliated export trading
companies, their customers and
affiliates of customers, and co-investors
covered by these provisions of the
regulations and their affiliates.
Procedures
Section 4(c)(14) of the BHC Act
provides that a bank holding company
may make an investment in an export
trading company after giving the Board
60 days’ prior written notice if the Board
does not within that time disapprove the
investment based on the criteria
specified in the statute. The Board may
extend the time for disapproval for 30
days if the bank holding company has
not provided material or accurate
information as required in connection
with any notice.
The procedure provide that the bank
holding company submit its notice to the
appropriate Reserve Bank. A bank
holding company should provide in
letter or outline form the information
required by the regulation concerning its
activities (including the four-digit
Standard Industrial Classification (SIC),
developed by the Office of Management
and Budget) and managerial resource^,
and, the nature and detail of the
information provided should be
generally similar to that provided in
connection with applications for specific
consent filed by investors under Subpart
A of Regulation K.
The Board anticipates that as a
general matter notices will be processed
within the 60-day period. In order to
expedite the processing of notices, the
proposed regulations allow for
substantial flexibility in the investment
decisions of banking organizations. An
investor in an export trading company
may either propose at the outset an
investment in an export trading
company providing a wide range of
permissible services or, alternatively,
propose an investment in an export
trading company that performs a more
limited range of activities—such as
activities involved largely in the
provision of professional and financial
services.
A banking organization may choose
initially not to committ the capital
required or not to invest in the
managerial resources needed for an
investment in a "full service” export
trading company. The proposed
regulations in that case allow the
banking organization to engage in the
new activity in incremental stages, by
notifying the Board of its initial
investment. If the export trading
company is a subsidiary of the investor,
a subsequent notice, which would be
regarded as a notice of a further
investment, would be required at such
time as there is a significant change in
the character of the export trading
company. The Board seeks comments on
whether banking organizations plan to
invest in export trading companies in
this manner and consequently whether
the proposed regulation will facilitate
banking organization involvement in
export trading companies. In addition,
the Board solicits comments on the
types of export trading company
activities that the proposed regulation
lists as necessitating a further notice by
the banking organization investor under
these procedures.*
As the System gains experience with
export trading companies, the Board will
consider delegating consideration of
investment notices to the Reserve Banks
and adopting a general consent
procedure for limited investments in
export trading companies. The Board
invites comment on whether and in
what circumstances a general consent
procedure might be adopted, including
suggested amount and percentage
limitations, and the reasons supporting
these recommendations.
Supervision and Reporting
The Board intends to monitor the
establishment and operation of export
trading companies in a manner that
minimizes regulatory burden, and is
consistent with the Board’s
responsibility, established by Congress,
of ensuring that export trading
companies operate to promote U.S.
exports without posing serious risk to
affiliated banks.
In order to carry out its
responsibilities, the Board will require
reports on the activities and operation of
the export trading company to
determine compliance with the
provisions of the BHCA, the BESA, and
the Board’s regulations. The Board will
attempt to meet its informational needs
through adaptations of reporting
requirements currently required under
the BHCA or the Federal Reserve Act.
At least initially, however, separate
reports may be required of export
trading companies. These reports may
be required on a more frequent basis
than is usual for other types of
nonbanking subsidiaries, but it is
* As is the practice under Regulation Y, an
eligible investor that has acquired 25 per cent o p
more of the shares of an export trading company in
accordance with these regulations would not be
expected to notify the Board of the export trading
company's formation of a wholly-owned subsidiary
to engage in activities permissible for the parent
export trading company.
anticipated that frequency would be
reduced as the System and the industry
gain experience with export trading
company activities.
The Board also may request such
information as may be necessary to
enable the Board to report to the
Congress as required by Section 205 of
the BESA on the effectiveness of bank
participation in export trading
companies and to make
recommendations concerning the
appropriateness of further legislation.
Regulatory Flexibility Act Analysis
For the purposes of regulatory
flexibility, the major goal of the
proposed regulations is the orderly
provision and maintenance of
information by bank holding companies
so that the Board can effectively
exercise its supervisory authority under
the BHC Act as amended by the BESA.
The main class of small business
entities affected by the proposed
regulations is small bank holding
companies. The ETC Act generally
contemplates investments in export
trading companies by bank holding
companies with some international
experience, acquired, for example,
through foreign offices or customers.
Hence one relevant group of small
business entities is the class of small
bank holding companies with such
experience, which are relatively few in
number. For this group, the costs of the
proposed regulations are likely to be
substantially the same as for large
multinational bank holding companies.
While none of the provisions of the
proposed regulation has been
specifically designed for small business
entities, they should benefit from the
simplicity and brevity of the proposed
regulations, as well as from a liberal
definition of an export trading company.
The Board has also sought comment on
other possible provisions that might be
useful to small entities, such as the entry
into export trading company activities
by stages and the adoption of a general
consent procedure that exempts an
investor from the prior notification
requirement in making a limited
investment in an export trading
company.
List of Subjects in 12 CFR Part 211
Banks, banking, Federal Reserve
System, Foreign banking, Investments,
Reporting requirements.
Pursuant to its authority under section
5 of the Bank Holding Company Act (12
U.S.C. 1844), the Board proposes to
amend 12 CFR Part 211 by adding a new
Subpart C, reading as set forth below.
Federal Register / Vol. 48, No. 17 / Tuesday, January 25, 1983 / Proposed Rules
Sections 211.601 and 211.602 which
currently appear in Subpart B are
transferred to the end of this new
Subpart C; the text remains unchanged.
The text of new §§ 211.31 through 211.34
is set forth below.
PART 211—INTERNATIONAL
BANKING OPERATIONS
*
*
*
*
*
S u b p a rt C—E x port T rading C o m p an ie s
Sec.
211.31 Authority, purpose and scope.
211.32 Definitions.
211.33 Investments and extension of credit.
211.34 Procedures for filing and processing
notices.
211.601 Status of certain offices for
purposes of the International Banking
Act restrictions on interstate banking
operations.
211.602 Investments by United States
banking organizations in foreign
companies that transact business in the
United States.
Authority: Federal Reserve Act (12 U.S.C.
21 et seq.)\ Bank Holding Company Act of
1956, as amended (12 U.S.C. 1841 et seq.\, the
International Banking Act of 1978 (Pub. L. 95
369; 92 Stat. 607; 12 U.S.C. 3101 et seq.)\ and
the Bank Export Services Act (Title II, Pub. L.
97-290, 96 Stat. 1235 (1902)}.
Subpart C—Export Trading Companies
§ 211.31
A uthority, p u rp o se a n d sc o p e .
(a) Authority. This Subpart is issued
by the Board of Governors of the
Federal Reserve System (“Board”) under
the authority of the Bank Holding
Company Act of 1956, as amended (12
U.S.C. 1841 et seq.) ("BHCA”), and the
Bank Export Services Act (Title II, Pub.
L. 97-290, 96 Stat. 1235 (1982)) (“BESA”).
(b) Purpose and scope. This Subpart is
in furtherance of the purposes of the
BHCA and the BESA, the latter statute
being designed to increase U.S. exports
by encouraging investments and
participation in export trading
companies by bank holding companies
and the specified investors. The
provisions of this Subpart apply to: (1)
Bank holding companies as defined in
section 2 of the BHCA (12 U.S.C.
1841(a)); (2) Edge and Agreement
corporations as described in § 211.1(b)
of this Part, that are subsidiaries of bank
holding companies but are not
subsidiaries of banks; (3) bankers’ banks
as described in section 4(c)(14)(F)(iii) of
the BHCA (12 U.S.C.
§ 1843(c)(14)(F)(iii)); and (4) foreign
banking organizations as defined in
§ 211.23(a)(2) of this Part. These entities
are hereinafter referred to as “eligible
investors.”
§211.32
Definitions.
The definitions of § 211.2 in Subpart A
apply to this Subpart subject to the
following:
(a) “Export trading company” means a
company that is exclusively engaged in
activities related to international trade
and, by engaging in one or more export
trade services, derives more than onehalf its annual revenues from the export
of, or from facilitating the export of,
goods and services produced in the
United States by persons other than the
export trading company or its
subsidiaries;
(b) “Extensions of credit” means
extensions of credit as defined in § 215.3
of this Chapter (Regulation 0) but does
not include investments under this
Subpart;
(c) The terms “bank,” “company" and
"subsidiary” have the same meanings as
those contained in section 2 of the
BHCA (12 U.S.C. 1841).
§ 211.33
cred it.
in v e s tm e n ts a n d e x te n s io n s of
(a) Amount o f Investments. In
accordance with the procedures of
§ 211.34 of this Subpart, an eligible
investor may invest no more than five
per cent of its consolidated capital and
surplus in one or more export trading
companies, except that an Edge or
Agreement corporation not engaged in
banking may invest as much as 25 per
cent of its consolidated capital and
surplus but no more than five per cent of
the consolidated capital and surplus of
its parent bank holding company.
(b) Extensions o f credit. (1) Amount.
An eligible investor in an export trading
company or companies may extend
credit directly or indirectly to the export
trading company or companies in a total
amount that at no time exceeds 10 per
cent of the investor’s consolidated
capital and surplus.
(2) Terms. An eligible investor in an
export trading company may not extend
credit directly or indirectly to the export
trading company or any of its customers
or to any other investor holding 10 per
cent or more of the shares of the export
trading company on terms more
favorable than those afforded similar
borrowers in similar circumstances, and
such extensions of credit shall not
involve more than the normal risk of
repayment or present other unfavorable
features. For the purposes of this
provision, an investor in or customer of
an export trading company includes any
affiliate of the investor or customer.
3379
§ 211.34 Procedures for filing and
processing notices.
(a) Filing notice. (1) Prior notice of
investment. An eligible investor shall
give the Board 60 days’ prior written
notice of any investment in an export
trading company. The investor shall
include in its notice a description of the
nature and extent of, and the managerial
resources related to, each activity in
which the export trading company is
engaged or proposes to engage,
including the four-digit Standard
Industrial Classification for each
activity, and such other information as
the Board may prescribe.
(2) Subsequent notice. An eligible
investor shall give the Board 60 days’
prior written notice of changes in the
activities of an export trading company
that is a subsidiary of the investor if the
export trading company expands its
activities beyond those described in the
initial notice to include; (i) The buying or
selling of goods; (ii) product research
and design; (iii) freight forwarding; (iv)
product modification; or (v) other
activities not specifically covered by the
list of services contained in section
4(c)(14)(F)(i) of the BHCA. Such an
expansion of activities shall be regarded
as a proposed investment under this
Subpart.
(b) Time period for Board action. (1) A
proposed investment that has not been
disapproved by the Board may be made
60 days after the Reserve Bank accepts
the notice for processing. A proposed
investment may be made before the
expiration of the 60-day period if the
Board notifies the investor in writing of
its intention not to disapprove the
investment.
(2) The Board may extend the 60-day
period for an additional 30 days if the
Board determines that the investor has
not furnished all necessary information
or that any material information
furnished is substantially inaccurate.
The Board may disapprove an
investment if the necessary information
is provided within a time insufficient to
allow the Board reasonably to consider
the information received.
(3) Within three days of a decision to
disapprove an investment, the Board
shall notify the investor in writing and
state the reasons for the disapproval.
By order of the Board of Governors,
January 19,1983.
William W. Wiles,
Secretary o f the Board.
|FR Doc. 83-1514 Filed 1-24-83; 8:45 am )
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