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federal reserve Bank DALLAS. TEXAS of Dallas 75222 Circular No. 80-102 May 28, 1980 REGULATION K - INTERNATIONAL BANKING OPERATIONS AND REGULATION Y - BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL N otice of Proposed Rulemaking R elating to Nonbanking A ctivities o f Foreign Bank Holding Companies and Foreign Banks TO ALL MEMBER BANKS, BANK HOLDING COMPANIES, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of Governors o f the Federal Reserve system has issued for com m ent, proposed amendments to its Regulations K and Y relating to the nonbanking a ctiv ities of foreign bank holding companies and foreign banks that have banking o ffic e s in the United States. The proposals would grant certain lim ited exemptions from the nonbanking prohibitions o f the Bank Holding Company Act. The proposals also address the questions o f the types o f foreign institutions that would be eligible for exem ption and the types of nonbanking a ctiv ities by foreign institutions that would be eligible for exem ption as well. Printed on the following pages is a copy o f the Board's notice as published in the Federal R egister. Any com m ents or views should be submitted in writing to Theodore E. Allison, Secretary, Board o f Governors o f the Federal Reserve System, Washington, D.C. 20551 and should be received no later than June 30, 1980. All material submitted concerning the proposed amendments should refer to Docket No. R-0291. Any questions concerning the proposed amendments should be directed to Ms. Sherry L. Conley, Senior Attorney, o f our Holding Company Supervision Department, Ext. 6182. Sincerely yours, Robert H. Boykin First Vice President Banks and others are encouraged to use the following incoming W AT 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) 30082 Federal Register / Vol. 45, No. 90 / Wednesday, May 7 1980 / Propcfted Rules , T h e o d o r e E. A llis o n , S e c r e ta r y , B o a r d o f G o v e r n o r s o f t h e F e d e r a l R e s e rv e S y s te m , 2 0 th S t r e e t a n d C o n s titu tio n A v e n u e , N W „ W a s h in g to n , D .C . 20551, o r d e li v e r e d to R o o m B -2223 b e t w e e n 8:45 a.m . a n d 5:15 p .m . C o m m e n ts re c e iv e d m a y b e i n s p e c t e d a t R o o m B 1122 b e t w e e n 8:45 a .m . a n d 5:15 p.m ., e x c e p t a s p r o v i d e d in s e c ti o n 261.6(a) o f th e B o a r d ’s R u le s R e g a rd in g A v a i la b i li t y o f In f o r m a tio n (12 C F R 261.6(a)). FOR FURTHER INFORMATION CONTACT: F r e d e r ic k R. D a h l, A s s o c ia t e D ir e c to r (2 0 2 /452 -2726), D iv is io n o f B a n k in g S u p e r v is io n a n d R e g u la tio n ; C. K e e fe H u rle y , Jr., S e n io r C o u n s e l (202/452 3269), o r K a th le e n M . O 'D a y , A t t o r n e y (2 0 2 /4 5 2 -3 7 8 6 ), L e g a l D iv isio n , B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m . 12 CFR Parts 211,225 Reg. K; Docket No. R0291] Nonbanking Activities of Foreign Bank Holding Companies and Foreign Banks AGENCY: B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m . ACTION: P r o p o s e d ru le . SUMMARY: F o re ig n b a n k s t h a t h a v e b r a n c h e s , a g e n c ie s , o r c o m m e rc ia l le n d in g c o m p a n y s u b s id i a r ie s in th e U .S., c o m p a n i e s c o n tr o llin g s u c h fo re ig n b a n k s , a n d fo re ig n c o m p a n i e s t h a t h a v e b a n k s u b s id i a r ie s in t h e U .S. a r e s u b je c t to th e n o n b a n k in g p r o h ib itio n s o f th e B a n k H o ld in g C o m p a n y A c t (12 U .S.C . 1841 et seq.). T h a t A c t a ls o a ff o rd s e x e m p t io n s fro m th e n o n b a n k in g p r o h ib itio n s fo r q u a lify in g fo re ig n o r g a n iz a tio n s . T h e r e g u la tio n p r o p o s e d fo r c o m m e n t i m p le m e n ts a n d in te r p r e ts th o s e e x e m p t io n s b y d e s c r ib in g th e t y p e s o f fo re ig n o r g a n iz a tio n s t h a t a r e e lig ib le to u s e t h e e x e m p t io n s a n d th e ty p e s o f n o n b a n k in g a c t i v it i e s a n d i n v e s tm e n ts t h a t a r e p e rm is s ib le . DATE: C o m m e n ts m u s t b e r e c e iv e d b y J u n e 3 0 ,1 9 8 0 . ADDRESS: C o m m e n ts , w h i c h s h o u ld r e f e r to D o c k e t N o. R -0291, m a y b e m a i l e d to 6 T h e “h is to ri c a l c o s t ” of a n i n v e s t m e n t c o n s is ts o f the a c tu a l a m o u n ts p a i d fo r s h a r e s o r o th e r w i s e c o n t r ib u te d to the c a p ita l a c c o u n ts , a s m e a s u r e d in d o lla rs at th e e x c h a n g e r a te in effec t a t th e tim e e a c h i n v e s t m e n t w a s m a d e . It d o e s n o t in c lu d e s u b o r d i n a t e d d e b t o r u n p a i d c o m m it m e n t s to i n v e s t e v e n th o u g h th e s e m a y b e c o n s id e r e d i n v e s t m e n t s for o th e r p u r p o s e s o f this P art. F o r i n v e s t m e n t s a c q u ir e d in d ire c tly a s a r e s u lt of th e a c q u is iti o n o f a s u b s i d ia ry , th e h is to ri c a l c o s t to t h e i n v e s t o r is m e a s u r e d a s o f th e d a t e o f a c q u is itio n ; ^t t h e n e t a s s e t s v a lu e o f th e e q u i ty i n t e r e s t in t h e c a s e o f s u b s i d ia r i e s a n d joint v e n tu r e s , a n d b y t h e b o o k c a r ry in g v a l u e in th e c a s e o f p o rtfo lio in v e s t m e n t s . s u p p le m e n ta ry in fo r m a tio n : S e c tio n 8(a ) o f th e I n t e r n a t io n a l B a n k in g A c t o f 1978 (12 U .S.C . 3101 et seq.) (“ IB A " ) p r o v i d e s t h a t a fo re ig n b a n k t h a t d o e s b u s i n e s s in th e U n ite d S t a t e s th ro u g h a b r a n c h , a g e n c y o r c o m m e r c ia l le n d in g c o m p a n y s h a ll b e s u b j e c t to th e p r o v is io n s o f th e B a n k H o ld in g C o m p a n y A c t (“B H C A ” ) in th e s a m e m a n n e r a n d to th e s a m e e x t e n t a s a b a n k h o ld in g c o m p a n y . C o m p a n i e s t h a t o w n s u c h f o re ig n b a n k s a r e a ls o s u b j e c t to th e p r o v i s i o n s o f th e B H C A . F o re ig n b a n k s a n d c o m p a n i e s t h a t c o n tr o l U .S. b a n k s a r e “b a n k h o ld in g c o m p a n i e s " a n d , th e r e f o r e , s u b j e c t to th e n o n b a n k in g p r o h i b it i o n s o f th e B H C A . S e c tio n s 4(c)(9) a n d 2(h) o f th e B H C A a ffo rd fo re ig n i n s t it u t i o n s c e r t a i n e x e m p t io n s fro m t h o s e p r o h ib itio n s s u b j e c t to r e g u la tio n b y t h e B o a rd . T h e s e e x e m p t io n s a r e i n t e n d e d to lim it th e e x tr a t e r r i to r i a l i m p a c t o f th e p r o h ib itio n s o n th e n o n b a n k in g b u s i n e s s o f f o re ig n o r g a n iz a tio n s . S e c tio n 4(c)(9) a u th o r i z e s th e B o a r d to e x e m p t b y r e g u la tio n o r o r d e r n o n b a n k in g a c tiv itie s o f fo re ig n o r g a n iz a t i o n s th e g r e a t e r p a r t o f w h o s e b u s i n e s s is o u ts id e th e U .S. w h e r e th e B o a r d d e te r m in e s t h a t th e e x e m p t io n is n o t s u b s ta n t ia l ly a t v a r ia n c e w ith th e p u r p o s e s o f th e B H C A a n d is in t h e p u b lic i n te r e s t. S e c tio n 225.4(g) o f R e g u la tio n Y (12 C F R 225.4(g)) im p le m e n ts s e c ti o n 4(c)(9). S e c tio n 2(h) p e r m i t s a fo re ig n o r g a n iz a t i o n t h a t i s p r in c ip a lly e n g a g e d in th e b a n k in g b u s i n e s s o u ts id e th e U .S. to a c q u ir e a n d h o ld s h a r e s o f fo re ig n n o n b a n k in g c o m p a n ie s , a n d d ir e c tly to e n g a g e in n o n b a n k in g a c t i v it i e s in th e U n ite d S t a te s . T h e r e is c o n s i d e r a b l e o v e r la p b e t w e e n th e e x e m p t io n s a f f o rd e d u n d e r s e c ti o n s 2(h) a n d 4(c)(9). F o r e x a m p le , b o t h p e r m it a f o re ig n o r g a n iz a tio n to e n g a g e in a n y t y p e o f n o n b a n k in g a c t i v it y a b r o a d , y e t, th e r e a r e e s s e n t i a l d if f e r e n c e s b e t w e e n th e tw o . S e c tio n 4(c)(9) d e p e n d s u p o n th e B o a r d fo r its i m p l e m e n t a t i o n b o t h a s to t h e k i n d s o f o r g a n iz a t i o n s t h a t q u a lif y f o r th e e x e m p t io n a n d th e ty p e s o f n o n b a n k in g a c t i v it i e s e x e m p te d . T h e B o a r d h a s b ro a d d isc re tio n a ry p o w e r u n d e r th a t s e c tio n . S e c tio n 2(h), o n t h e o t h e r h a n d , is s e lf-im p le m e n tin g , b u t r e q u ir e s B o a r d r e g u la tio n fo r c la r i f ic a t i o n a n d i n te r p r e ta t io n . B y i ts te r m s it a p p li e s o n ly to fo re ig n in s t it u t i o n s " p r in c ip a lly e n g a g e d in th e b a n k in g b u s i n e s s o u ts id e th e U n ite d S ta te s .” U nder the B oard’s proposals: 1. Foreign organizations in order to qualify for either exem ption w ould be required to be principally engaged in the banking business outside the U nited S tates [i.e., more than h alf of their business m ust be banking an d more than half of their banking business m ust be outside the U nited States). 2. Foreign organizations th a t fail to qualify for tw o consecutive years w ould no longer be entitled to the exem ptions. 3. Foreign organizations th a t do not qualify under the proposed num erical criteria w ould have an opportunity to petition the B oard for specific determ inations as to eligibility for the exem ptions. 4. Perm issible nonbanking activities in the U.S. w ould be determ ined by reference to the four-digit “establishm ent” category o f the S tandard Industrial C lassificaiton (SIC). 5. A c tiv itie s in t h e U n i t e d S t a t e s t h a t a r e i n c l u d e d in D iv is io n H o f t h e S IC ( F in a n c e , I n s u r a n c e a n d R e a l E s ta te ) c o u ld o n ly b e e n g a g e d in w i t h s p e c if ic B o a r d a p p r o v a l u n d e r s e c ti o n s 4(c)(8) o r 4(c)(9) o f th e B H C A . The B oard h a s attem pted to resolve issues in connection w ith these tw o exem ptions in a m anner consistent w ith the purposes of the statu tes an d their legislative histories. T here follows a discussion of these issues an d the B oard's proposed responses: Qualifying foreign organizations. B e c a u s e m a n y fo re ig n b a n k s e n g a g e in n o n b a n k in g a c t i v it i e s a b r o a d t h a t w o u l d n o t b e p e r m i s s ib l e f o r U.S. b a n k h o ld in g c o m p a n ie s , th e f a ilu r e o f a fo re ig n i n s t it u t i o n to q u a lif y fo r t h e e x e m p t io n s o f s e c ti o n s 2(h) a n d 4(c)(9) w o u l d p r e s e n t it w i t h th e c h o ic e o f e ith e r fo re g o in g d o in g a b a n k in g b u s i n e s s in th e U.S. o r c o n fo r m in g its w o r l d w i d e a c t i v it i e s to t h e s t a n d a r d s t h a t a p p ly to d o m e s ti c b a n k h o ld in g c o m p a n ie s . In A p r il 1979, t h e B o a r d p r o p o s e d to c h a n g e th e d e f in i t io n o f “ f o re ig n b a n k h o ld in g c o m p a n y ” i n § 225.4(g) o f R e g u la tio n Y to e n s u r e t h a t o r g a n iz a t i o n s t h a t q u a lif y f o r th e e x e m p t io n a f f o r d e d b y s e c ti o n 4(c)(9), in a d d i t i o n to b e in g fo re ig n , a r e p r i n c i p a ll y Federal Register / Vol. 45, No. 90 / Wednesday, May 7 1980 / Proposed Rules , e n g a g e d in b a n k in g o u t s i d e th e U .S. (44 F R 24,864). T h e p r o p o s a l r e f le c t e d th e B o a r d ’s p o lic y t h a t o n ly fo re ig n o r g a n iz a t i o n s w i t h c o n s i d e r a b l e b a n k in g e x p e r i e n c e s h o u l d b e p e r m i t te d to a c q u i r e U .S. b a n k s . T h a t p r o p o s a l , o n w h i c h n o fin a l a c t i o n w a s t a k e n , is s u b s u m e d in t h e c u r r e n t p r o p o s a l s . It c o n ti n u e s to b e th e B o a r d ’s v i e w t h a t a fo r e ig n o r g a n iz a t i o n t h a t c o n tr o ls a d o m e s tic b a n k s h o u l d b e p r in c ip a lly e n g a g e d in b a n k in g a b r o a d to e n s u r e t h a t it is a s o u r c e o f f in a n c ia l a n d m a n a g e r i a l s t r e n g th to th e s u b s i d i a r y b a n k . M o r e o v e r, it is th e B o a r d ’s v ie w t h a t a f o re ig n o r g a n iz a t i o n t h a t e n g a g e s in th e b a n k in g b u s i n e s s in t h e U n ite d S t a te s th ro u g h a b r a n c h , a g e n c y , o r c o m m e r c ia l le n d in g c o m p a n y s h o u ld a ls o b e p r e d o m i n a n tl y a b a n k in g o rg a n iz a tio n . T h u s , th e B o a r d is p ro p o s in g t h a t th e s t a t u t o r y r e q u ir e m e n t o f s e c tio n 2(h), t h a t a n o r g a n iz a t i o n b e p rin c ip a lly e n g a g e d in b a n k in g o u ts id e th e U n ite d S t a te s , a l s o b e u s e d fo r th e e x e m p t io n s a f f o r d e d b y s e c ti o n 4(c)(9). F o re ig n b a n k h o ld in g c o m p a n i e s a n d fo r e ig n b a n k s w i t h b r a n c h e s a n d a g e n c i e s in t h e U .S. w o u l d r e c e iv e c o m p a r a b l e t r e a t m e n t u n d e r th e e x e m p tio n s . T h e B o a r d ’s p r o p o s e d r e d e f i n i ti o n o f “ fo re ig n b a n k h o ld in g c o m p a n y ” i n c l u d e d th e te r m “ p r in c ip a lly e n g a g e d in t h e b a n k i n g b u s i n e s s o u t s i d e t h e U n i t e d S t a te s .” S e v e r a l c o m m e n te r s o n t h a t p r o p o s a l p o i n t e d o u t t h a t th e te rm is s u s c e p t ib l e t o s e v e r a l m e a n in g s . It is t h e B o a r d 's v i e w t h a t th e m o s t r e a s o n a b l e i n te r p r e ta t io n o f th e te r m a n d th a t m o st c o n s is te n t w ith C o n g r e s s io n a l i n te n t is t h a t w h ic h w o u l d in c lu d e o n ly fo re ig n o r g a n iz a t i o n s fo r w h i c h m o r e t h a n h a l f o f t h e i r a c t i v it i e s w o r l d w i d e a r e b a n k in g a n d m o r e t h a n h a l f o f t h e i r b a n k in g a c t i v it i e s a r e l o c a t e d o u t s i d e th e U n ite d S ta te s . D efinition o f “Banking Business” U n d e r th e IBA , a fo re ig n b a n k w i t h a U .S. b r a n c h o r a g e n c y is s u b j e c t to th e n o n b a n k in g p r o h ib itio n s o f t h e B H C A . “F o re ig n b a n k ” is d e f in e d in s e c ti o n 1(b)(7) erf th e IB A a s in c lu d in g , in a d d it i o n to c o m p a n i e s t h a t e n g a g e in th e b u s i n e s s o f b a n k in g , “ fo re ig n c o m m e r c ia l b a n k s , fo re ig n m e r c h a n t b a n k s and other foreign institutions that engage in banking activities usual in connection with the business o f banking in the countries where such foreign institutions are organized." (E m p h a s is a d d e d .) T h is e x p a n s i v e d e f in itio n b rin g s w i t h in t h e s c o p e o f th e B H C A f o re ig n in s t it u t i o n s o n th e b a s i s o f b a n k in g a c t i v it i e s t h a t a r e u s u a l in th e i n s t it u t i o n ’s h o m e c o u n tr y . It w o u l d a p p e a r t h a t t h e o b je c tiv e o f e n s u r in g t h a t a fo re ig n o r g a n iz a t i o n t h a t d o e s a U .S. b a n k in g b u s i n e s s is a s o u r c e o f f in a n c ia l a n d m a n a g e r i a l s t r e n g th to t h o s e b a n k in g o p e r a t i o n s c a n b e a c c o m p li s h e d b y a t e s t t h a t i s b r o a d e r t h a n c o m m e r c ia l b a n k in g in t h e U.S. c o n te x t. T h e B o a r d p r o p o s e s to t r e a t a s “b a n k in g ” th e a c t i v it i e s in § 211.5(d) o f R e g u la tio n K (12 C F R 211.5(d)) t h a t h a v e b e e n d e te r m in e d to b e u s u a l in c o n n e c t io n w i t h b a n k in g o r f in a n c ia l o p e ra tio n s a b ro a d . Measurement o f banking business. U n d e r th e p r o p o s e d c r ite r ia , a f o re ig n in s titu tio n m u s t m e e t t w o t e s t s in o r d e r to q u a lif y fo r n o n b a n k in g e x e m p tio n s . F irst, m o r e t h a n h a l f o f i ts w o r l d w i d e b u s i n e s s m u s t b e b a n k in g ; a n d s e c o n d , m o r e t h a n h a lf o f its b a n k in g b u s i n e s s m u s t b e o u t s i d e th e U .S . T h e f irs t te s t in v o lv e s a m e a s u r e m e n t o f b a n k in g v e r s u s n o n b a n k in g b u s in e s s ; th e s e c o n d , fo re ig n b a n k in g v e r s u s U .S. b a n k in g . M e a s u r e m e n t o f b a n k in g a n d n o n b a n k in g b u s i n e s s p o s e s p r o b l e m s p r im a r ily b e c a u s e u n d e r m o s t a c c o u n t in g c o n v e n t i o n s c o n s o l id a t io n o c c u r s a t o w n e r s h i p l e v e ls a b o v e 50 p e r c e n t, w h ile c o n tr o l is a s s u m e d a t 25 p e r c e n t le v e ls o f o w n e r s h i p u n d e r th e B H C A . T h e p r o p o s e d r e g u la tio n w o u l d a d d r e s s t h e s e p r o b l e m s b y u s in g a s a m e a s u r e m e n t t o ta l a s s e t s or to ta l re v e n u e s , le a v in g it to th e fo re ig n o r g a n iz a t i o n to c h o o s e t h e le v e l o f o w n e r s h i p (25 o r 50 p e r c e n t) a t w h ic h c o n s o l id a t io n o r c o m b in in g w ill t a k e p la c e . M e a s u r e m e n t o f fo re ig n v e r s u s U.S. b a n k in g p r e s e n t s f e w e r p r o b l e m s o n c e it is d e te r m in e d w h ic h a c t i v it i e s w ill b e c o n s i d e r e d b a n k in g . T h e B o a r d p r o p o s e s t h a t a fo re ig n o r g a n iz a t i o n b e r e q u ir e d to m e e t th is t e s t o n th e b a s i s o f m o re t h a n h a lf o f its b a n k in g a s s e t s b e in g lo c a t e d or b a n k in g r e v e n u e s b e in g d e r iv e d o u t s i d e th e U .S. It is a ls o p r o p o s e d t h a t a ll o f th e a s s e t s a n d re v e n u e s o f a U .S. s u b s id i a r y b a n k , b r a n c h , o r a g e n c y b e c o u n te d a s U .S., r e g a r d l e s s o f w h e t h e r th e a s s e t s o r r e v e n u e s a r e b o o k e d a t fo re ig n o ffic e s o f th e U .S. b a n k o r r e c e iv e d fro m o r b e lo n g to fo re ig n r e s i d e n t s . Change in status. In its p r o p o s a l to r e v is e th e d e f in itio n o f " f o re ig n b a n k h o ld in g c o m p a n y ," th e B o a r d i n v ite d c o m m e n t o n th e q u e s t io n o f w h e t h e r th e te s t s h o u ld b e a p p li e d o n ly a t th e tim e o f a n a p p li c a t i o n to fo rm a b a n k h o ld in g c o m p a n y o r c o n ti n u o u s l y th e r e a f te r . C o m m e n ts o n th is i s s u e w e r e d iv id e d . It w a s p o i n te d o u t t h a t u n d e r t h e t e s ts p r o p o s e d , u n c o n tr o l l a b l e e v e n t s s u c h a s e x c h a n g e r a t e f l u c t u a ti o n s c o u ld r e s u l t in t e m p o r a r y d is q u a li f i c a t io n o f s o m e o r g a n iz a tio n s . T h e B o ard p ro p o se s th a t a n o r g a n iz a t i o n t h a t f a ils to q u a lif y fo r tw o 30083 c o n s e c u t i v e y e a r s , a s r e f le c t e d in its a n n u a n l r e p o r t file d w i t h th e B o a rd , l o s e i ts e lig ib ility fo r th e e x e m p tio n s . S u c h a n o r g a n iz a t i o n c o u ld a p p l y f o r a s p e c ific d e te r m in a t io n a s d i s c u s s e d b e lo w . A c tiv itie s a n d i n v e s tm e n ts u n d e r t a k e n w h ile a fo re ig n o r g a n iz a t i o n q u a lif ie d fo r t h e e x e m p t io n s c o u ld b e r e t a i n e d a f t e r th e l o s s o f q u a lif ie d s t a tu s . H o w e v e r , a c t i v it i e s o r i n v e s tm e n ts u n d e r t a k e n a f t e r th e e n d o f th e firs t f is c a l y e a r in w h i c h th e o r g a n iz a t i o n d i d n o t m e e t th e c r ite r ia w o u ld n o t b e g r a n d f a t h e r e d . S u c h a n o r g a n iz a t i o n w o u ld , in e ffe c t, b e o n n o t ic e 6 f th e p o s s ib l e lo s s o f q u a lif ie d s t a tu s . Other foreign organizations— M o s t fo re ig n i n s t it u t i o n s c u r r e n tly c o n d u c tin g a b a n k in g b u s i n e s s in th e U .S. w o u l d q u a lif y u n d e r th e r e c o m m e n d e d d e fin tio n o f “ p r i n c i p a ll y e n g a g e d in th e b a n k in g b u s i n e s s o u t s i d e t h e U n ite d S t a te s ." In a d d it i o n , m o s t fo re ig n o r g a n iz a t i o n s w i t h tie r e d s t r u c tu r e s w o u l d q u a lify s in c e th e t e s t w o u l d b e a p p li e d o n a c o n s o l id a t e d b a s i s . T h ere are, h o w e v e r, in s ta n c e s w h e re l a rg e r e p u t a b l e fo re ig n b a n k s o w n e d b y in d u s t r ia l g r o u p s w o u ld f a il to q u a lif y u n d e r th e r e c o m m e n d e d t e s t e v e n o n a c o n s o l id a t e d b a s i s . S o m e o f t h e s e in s t it u t i o n s m a y h a v e th e f in a n c ia l h is to r y , c o n d itio n a n d b a n k in g e x p e r i e n c e to e n a b l e th e m to o p e r a t e o n a s a f e a n d s o u n d b a s i s in t h e U .S. b a n k in g m a r k e t. S tr ic t a p p li c a t i o n o f th e “ p r in c ip a lly e n g a g e d ” t e s t w o u l d f o rc e th e p a r e n t s o f s u c h fo e rig n b a n k s to e it h e r fo re g o d o in g a b a n k in g b u s i n e s s in th e U .S. o r d i v e s t th e i r n o n b a n k in g (fo re ig n a s w e ll a s U .S.) i n te r e s t s . T h e B o a rd h a s th e a u th o r i t y u n d e r s e c ti o n 4(c)(9) to g r a n t e x e m p t io n s o n a c a s e - b y - c a s e b a s i s to f o re ig n o r g a n iz a t i o n s w h e r e t h e B o a rd d e te r m in e s t h a t u n d e r th e c ir c u m s t a n c e s th e e x e m p t io n w o u l d n o t b e su b s ta n tia lly a t v a ria n c e w ith th e p u r p o s e s o f th e A c t a n d w o u l d b e in th e p u b lic in te r e s t . T h e B o a r d w o u l d e x e r c is e th is a u th o r i t y w h e r e a p p li c a t i o n o f th e q u a lify in g t e s t s w o u l d p r e v e n t s o u n d a n d r e p u ta b l e f o re ig n b a n k s fro m d o in g b u s i n e s s in t h e U .S. T h e B o a r d p r o p o s e s to p e r m i t t h e s e o r g a n iz a t i o n s to a p p ly fo r e x e m p t io n fro m th e n o n b a n k in g p r o h i b it i o n s o f th e B H C A . T h e B o a r d w o u l d e x a m i n e th e p a r t i c u l a r f a c t s a n d c ir c u m s t a n c e s o f e a c h c a s e to d e te r m in e i f g r a n ti n g th e e x e m p t io n w e r e a p p r o p r ia t e u n d e r s e c ti o n 4(c)(9). If t h e B o a r d w e r e to d e te r m in e t h a t a p o t e n t i a l fo r a b u s e e x is ts , th e B o a rd c o u ld d e n y th e e x e m p t io n o r a p p r o v e t h e a p p li c a t i o n c o n d it i o n e d in a m a n n e r to p r e v e n t t h e o ccu rren ce o f su c h a b u se s. 30084 Federal Register / Vol. 45, No. 90 / Wednesday, May 7 1980 / Proposed Rules , Nonbanking activities in the United States — S e c tio n 2(h) p e r m its a f o re ig n o r g a n iz a t i o n to e n g a g e in a c t i v it i e s in th e U .S. th ro u g h a fo re ig n n o n b a n k in g c o m p a n y w h e r e th e U .S. a c tiv itie s a r e in th e s a m e g e n e r a l lin e o f b u s i n e s s o r in a b u s i n e s s r e l a t e d to t h a t o f th e fo re ig n n o n b a n k in g c o m p a n y . T h e fo re ig n c o m p a n y m u s t b e p r in c ip a lly e n g a g e d in b u s i n e s s o u ts id e th e U .S. a n d th e e x e m p t io n m a y n o t b e u s e d to e n g a g e in th e s e c u r it i e s b u s i n e s s in th e U .S. B a n k in g a n d f in a n c ia l a c t i v it i e s a n d a c t i v it i e s p e r m i s s ib l e u n d e r s e c ti o n 4(c)(8) o f th e B H C A m a y o n ly b e e n g a g e d in w i t h t h e B o a r d ’s a p p r o v a l. It is c le a r fro m th e l e g is la tiv e h i s to r y o f th e IB A t h a t C o n g r e s s i n t e n d e d th e B o a r d to u s e th e S t a n d a r d I n d u s t r i a l C la s s if ic a tio n s y s te m fo r d e te r m in in g th e c o m p a r a b i l i ty o f U .S . a n d fo re ig n n o n b a n k in g a c tiv itie s . W h il e th e SIC s y s te m c a te g o rie s a r e n o t p re c is e , th e y d o a p p e a r to a f f o r d a r e a s o n a b l e b a s i s fo r c o m p a r in g a c tiv itie s . B e c a u s e it c o n fo rm s to C o n g r e s s io n a l in te n t , a n d d u e to th e c o m p le x ity a n d b u r d e n o f d e v is in g a n a lt e r n a t i v e c la s s if ic a tio n s y s te m , th e B o a r d p r o p o s e s t h a t th e S IC b e u s e d a s t h e s t a n d a r d b y w h i c h U.S. a c tiv itie s o f e x e m p t fo re ig n o r g a n iz a tio n s a r e m e a s u r e d . T h e B o a rd in v ite s c o m m e n ts o n th e f e a s ib ility o f u s in g th e S IC f o r d e te r m in i n g w h e t h e r U .S. a n d fo re ig n n o n b a n k in g a c t i v it i e s a r e in th e s a m e g e n e r a l lin e s o f b u s in e s s . S e c tio n 2(H)(2)(1)(B) s t a t e s t h a t a n e x e m p t fo re ig n c o m p a n y : m a y en g ag e in the U n ite d S ta te s in a n y banking or financial operations o r ty p e s o f activ itie s p e rm itte d u n d e r se c tio n 4(c)(8) o r in a n y o rd e r o r re g u la tio n iss u e d b y th e B o a rd u n d e r su c h s e c tio n only with the Board's prior approval under that section (e m p h a sis added) T h e le g is la tiv e h i s to r y o f t h a t p r o v is io n i n d ic a te s t h a t its p u r p o s e w a s to p r e s e r v e c o m p e titiv e e q u a lity w ith d o m e s ti c o r g a n iz a t i o n s b y lim itin g th e b a n k in g a n d f in a n c ia lly r e l a t e d a c tiv itie s t h a t a fo re ig n in s t it u t i o n c o u ld c o n d u c t u n d e r t h a t e x e m p tio n , a n d n o t to in h ib it in v e s tm e n ts b y c o m m e r c ia l a n d in d u s t r ia l c o m p a n i e s t h a t h a v e a fo re ig n b a n k in th e i r o w n e r s h i p s t r u c tu r e s . It is p r o p o s e d t h a t b a n k in g o r f in a n c ia l o p e r a t i o n s in th e U .S. o n ly b e p e r m i t te d w h e r e s u c h a r e p e r m is s ib le u n d e r s e c tio n 4(c)(8) o f th e B H C A o r u p o n a p p lic a tio n u n d e r s e c tio n 4(c)(9). D iv is io n H ( F in a n c e , I n s u r a n c e a n d R e a l E s t a t e ) o f th e S IC w o u l d b e u s e d to d e te r m in e w h i c h a c tiv itie s a r e “ b a n k in g o r f in a n c ia l.” I n a d d i t i o n to c o m m e n ts o n th is g e n e r a l a p p r o a c h to t h e issu e , s p e c if ic c o m m e n ts a r e i n v it e d a s to a n y a c t i v it i e s w i t h in D iv is io n H t h a t s h o u ld t r e a t e d a s b a n k in g o r f in a n c ia l o p e r a tio n s . S e c tio n 8 o f th e IB A p e r m a n e n t l y g r a n d f a t h e r e d n o n b a n k in g a c t i v it i e s o f fo re ig n b a n k s t h a t w e r e c o m m e n c e d o r a p p l i e d fo r p r io r to J u ly 2 6 ,1 9 7 8 . C o m m e n t e r s o n th e p r o p o s e d r e g u la t io n s m a y w i s h t o t a k e t h e o p p o r t u n it y to c o m m e n t o n a n y in te r p r e ti v e i s s u e s w i t h r e s p e c t to th e g r a n d f a t h e r p r o v is io n s o f t h e IBA. P u r s u a n t to its a u th o r i t y u n d e r th e I n t e r n a t io n a l B a n k in g A c t o f 1978 (12 U .S.C . 3101 etseq.) a n d th e B a n k H o ld in g C o m p a n y A c t (12 U .S .C . 1841 et seq.), th e B o a rd p r o p o s e s to a m e n d R e g u la tio n Y (12 CFTt P a r t 225) a n d R e g u la tio n K (12 C FR P a r t 211) a s fo llo w s: 604(a)); 1 a n d to b a n k h o ld in g c o m p a n i e s w i t h r e s p e c t to th e e x e m p t io n fro m th e n o n b a n k in g p r o h ib itio n s o f th e B H C A a f f o r d e d b y s e c ti o n 4(c)(13) o f t h e B H C A (12 U .S.C . 1843(c)(13)j; to f o r e ig n b a n k s w ith r e s p e c t to t h e l im ita tio n s o n i n t e r s t a t e b a n k in g u n d e r s e c ti o n 5 o f t h e IB A (12 U .S .C . 3103); a n d to f o re ig n b a n k s a n d fo re ig n b a n k h o ld in g c o m p a n i e s w ith r e s p e c t to t h e e x e m p t io n s fro m th e n o n b a n k in g p r o h ib itio n s o f th e B H C A a n d th e IB A a f f o r d e d b y s e c ti o n s 2(h) a n d 4(c)(9) o f t h e B H C A (12 U .S.C . 1841(h) a n d 1843(c)(9)). 3. R e g u la tio n K w o u l d b e a m e n d e d b y a d d in g a S u b p a r t B.* W it h i n S u b p a r t B, a n e w s e c tio n , 211.23, w o u l d b e a d d e d a s fo llo w s: PART 225—BANK HOLDING COMPANIES § 211.23 Nonbanking activities of foreign banking organizations. not b e 1. S e c tio n 225.4(g) o f R e g u la tio n Y w o u l d b e r e v is e d to r e a d a s fo llo w s: § 225.4 Nonbanking activities. * * * * * (g) Foreign banks and foreign bank holding companies. In a d d i t i o n to t h e e x c e p t io n s a f f o rd e d b y th is P a r t, fo re ig n b a n k s a n d fo re ig n b a n k h o ld in g c o m p a n i e s m a y e n g a g e i n a c t i v it i e s a n d m a k e in v e s tm e n ts u n d e r P a r t 211 (R e g u la tio n K). PART 211—CORPORATIONS ENGAGED IN FOREIGN BANKING AND FINANCING UNDER THE FEDERAL RESERVE ACT 2. R e g u la tio n K w o u l d b e a m e n d e d b y d e s i g n a t i n g s e c ti o n s 211.1 th r o u g h 211.7 a s S u b p a r t A . S e c tio n 211.1(b) o f R e g u la tio n K w o u ld b e r e v i s e d to r e a d a s fo llo w s: §§ 211.1-211.7 [Redesignated a s Subpart A] Subpart A § 211.1 Authority, purpose and scope. * * * * i t (b) Purpose and scope. T h is P a r t is in f u r t h e r a n c e o f th e p u r p o s e s o f th e FR A , th e B H C A , a n d th e IBA. I t a p p li e s to c o r p o r a t i o n s o r g a n iz e d u n d e r s e c tio n 2 5 (a ) o f th e F R A (12 U .S .C . 611-631), “E d g e C o r p o r a ti o n s ” ! to c o r p o r a t i o n s h a v in g a n a g r e e m e n t o r u n d e r ta k i n g w i t h th e B o a r d u n d e r s e c ti o n 25 o f th e F R A (12 U .S .C . 601-6 0 4 (a)), “ A g r e e m e n t C o r p o r a ti o n s ” ; to m e m b e r b a n k s w ith r e s p e c t to t h e i r fo re ig n b r a n c h e s a n d i n v e s t m e n t s in fo re ig n b a n k s u n d e r ' s e c t i o n 25 o f th e F R A (12 U .S .C . 6 0 1 - Subpart B (a) Definitions. T h e d e f in itio n s o f s e c ti o n 211.2 a p p ly to th is s u b s e c t io n s u b j e c t to t h e fo llo w in g : (1) “ D ir e c tly o r in d ir e c tl y " w h e n u s e d in r e f e r e n c e to a c t i v it i e s o r in v e s tm e n ts o f a f o re ig n b a n k in g o r g a n iz a t i o n m e a n s a c t i v it i e s o r i n v e s tm e n ts o f th e fo re ig n b a n k in g o r g a n iz a t i o n o r o f a n y s u b s id i a r y o f th e f o re ig n b a n k in g o rg a n iz a tio n . (2) " F o re ig n b a n k in g o r g a n iz a tio n ” m e a n s a fo re ig n b a n k t h a t o p e r a t e s a b r a n c h , a g e n c y o r c o m m e r c ia l le n d in g c o jn p a n y s u b s id i a r y in th e U n ite d S ta te s ; a fo re ig n b a n k t h a t c o n tr o ls a b a n k in th e U n ite d S ta te s ; a n d A c o m p a n y o f w h i c h s u c h f o re ig n b a n k is a s u b s id i a r y . (3) “ S u b s id i a r y ” m e a n s a n o r g a n iz a tio n m o re t h a n 25 p e r c e n t o f th e v o tin g s to c k o f w h i c h is h e ld d ir e c tly o r i n d ir e c tly b y a fo re ig n b a n k in g o r g a n iz a tio n o r w h i c h is o t h e r w is e c o n tr o lle d o r c a p a b l e o f b e in g c o n tr o lle d b y a fo re ig n b a n k in g o r g a n iz a tio n . (b) Qualifying foreign banking organizations. T o q u a lif y fo r th e e x e m p t io n s a f f o r d e d b y th is s e c ti o n a fo re ig n b a n k in g o r g a n iz a tio n , u n l e s s s p e c ific a lly m a d e e lig ib le fo r th e e x e m p t io n s b y t h e B o a rd , s h a ll m a e t th e fo lo w in g r e q u ir e m e n ts : (1) M o re t h a n 50 p e r c e n t o f its t o ta l a s s e t s s h a ll b e b a n k in g a s s e t s o r m o r e t h a n 50 p e r c e n t o f its t o ta l r e v e n u e s s h a ll b e d e r iv e d fro m th e b a n k in g b u sin e ss; a n d 'Section 25 of the FRA, which refers to national banking associations, also applies to State member banks of the Federal Reserve System by virtue of section 9 of the FRA (12 U.S.C. 321). * Also included within new Subpart B will be regulations concerning interstate banking operations of foreign banks and bank holding companies, designated as section 211.22. (See 44 F.R. 62902) Federal Register / Vol. 45, No. 90 / Wednesday, May 7, 1980 / Proposed Rules (2) m o r e t h a n 50 p e r c e n t o f its to ta l b a n k in g a s s e t s s h a ll b e l o c a t e d o u t s i d e th e U n i t e d S t a t e s o r m o re t h a n 50 p e r c e n t o f to ta l b a n k in g r e v e n u e s d e r iv e d fro m o u ts id e t h e U n ite d S t a te s . A ll a s s e t s a n d r e v e n u e s o f a U n i t e d S t a te s s u b s id i a r y b a n k , b r a n c h , a g e n c y , o r c o m m e rc ia l le n d in g c o m p a n y s h a ll n o t b e c o n s i d e r e d a s “o u t s i d e th e U n ite d S t a te s ." (c) Determing assets and revenues. (1) F o r p u r p o s e s o f p a r a g r a p h (b) o f th is s e c tio n , th e t o ta l a s s e t s a n d r e v e n u e s o f a n o r g a n iz a tio n s h a ll b e d e te r m in e d o n a c o n s o l id a t e d o r c o m b in e d b a s i s . A s s e t s a n d r e v e n u e s o f c o m p a n i e s in w h i c h th e fo re ig n o r g a n iz a t i o n o w n s 50 p e r c e n t o r m o r e o f th e v o tin g s h a r e s s h a ll b e i n c l u d e d w h e n d e te r m in in g t o ta l a s s e t s o r r e v e n u e s . T h e fo re ig n o r g a n iz a tio n m a y in c lu d e a s s e t s o r r e v e n u e s o f c o m p a n i e s in w h i c h it o w n s 25 p e r c e n t o r m o r e o f th e v o tin g s h a r e s if a ll s u c h c o m p a n i e s w i t h in th e o r g a n iz a tio n a r e in c lu d e d ; (2) A s s e ts o r r e v e n u e s t h a t in v o lv e a c t i v it i e s l is te d in 5 211.5(d) s h a l l b e c o n s i d e r e d b a n k in g a s s e t s o r b a n k in g r e v e n u e s w h e n c o n d u c t e d w i t h in th e fo re ig n b a n k in g o r g a n iz a t i o n b y a fo re ig n b a n k o r i ts s u b s id ia r ie s . (d) Loan o f eligibility for exemptions. A fo re ig n o r g a n iz a tio n t h a t q u a lif ie d u n d e r p a r a g r a p h (b) o f th is s e c ti o n s h a ll c e a s e to b e e lig ib le f o r th e e x e m p tio n s o f th is s e c tio n if it f a ils to m e e t t h e te s t o f p a r a g r a p h (b) fo r tw o c o n s e c u tiv e y e a r s a s r e f le c t e d in i ts A n n u a l R e p o rts (F.R. Y -7 ) file d w i t h th e B o a rd . A fo re ig n o r g a n iz a tio n t h a t c e a s e s to b e e lig ib le fo r th e e x e m p t io n s m a y c o n tin u e to e n g a g e in a c t i v it i e s o r r e ta i n in v e s tm e n ts c o m m e n c e d o r a c q u i r e d p r io r to th e e n d o f th e f ir s t f is c a l y e a r fo r w h i c h its A n n u a l R e p o rt r e f le c ts n o n c o n f o r m a n c e w ith p a r a g r a p h (b) o f th is s e c tio n . A c tiv itie s c o m m e n c e d o r in v e s tm e n ts m a d e a f te r t h a t d a t e m a y c o n tin u e to b e e n g a g e d in o r h e ld o n ly w i t h th e c o n s e n t o f t h e B o a r d u n d e r p a r a g r a p h (e) o f th is s e c tio n . (e) Specific determination of eligibility for nonqualifying foreign banking organizations. A fo re ig n o r g a n iz a t i o n t h a t d o e s n o t o t h e r w is e q u a lify f o r t h e e x e m p t io n s a f f o r d e d b y th is s e c tio n , in c lu d in g o r g a n iz a t i o n s t h a t c e a s e to b e e lig ib le fo r th e e x e m p tio n s , m a y a p p ly to th e B o a r d f o r a sp e c ific d e te r m in a i to n o f e lig ib ility fo r th e e x e m p tio n s . I n d e te r m in in g w h e t h e r e lig ib ility f o r t h e e x e m p t io n s w o u l d b e c o n s i s t e n t w i t h th e p u r p o s e s o f th e B H C A a n d in th e p u b lic in te r e s t , th e B o a r d s h a ll c o n s i d e r th e h i s t o r y a n d th e f in a n c ia l a n d m a n a g e r i a l r e s o u r c e s o f t h e o rg a n iz a tio n , th e a m o u n t, t y p e a n d l o c a t io n o f its n o n b a n k in g a c tiv itie s , a n d w h e t h e r e lig ib ility o f th e fo re ig n o r g a n iz a t i o n w o u l d r e s u l t in u n d u e c o n c e n t r a t io n o f r e s o u r c e s , d e c r e a s e d o r u n f a ir c o m p e titio n , c o n f lic ts o f in te r e s t s , o r u n s o u n d b a n k in g p r a c t i c e s . S u c h d e te r m in a t io n s h a l l b e s u b j e c t to a n y c o n d itio n s a n d l im ita tio n s i m p o s e d b y t h e B o a rd . (f) Permissible activities and investments. A f o re ig n o r g a n iz a t i o n t h a t q u a lif ie s u n d e r p a r a g r a p h (b) m a y ; (1) E n g a g e in a c t i v it i e s o f a n y k in d o u t s i d e t h e U n i t e d S ta te s ; (2) E n g a g e d ir e c tly in a c t i v it i e s in th e U n i t e d S t a te s t h a t a r e in c i d e n ta l to its a c t i v it i e s o u ts id e t h e U n i t e d S ta te s ; (3) O w n o r c o n tr o l v o tin g s h a r e s o f a n y c o m p a n y t h a t is n o t e n g a g e d , d i r e c t ly o r i n d ire c tly , in a n y a c t i v it i e s in th e U n i t e d S t a t e s e x c e p t a s s h a l l b e in c i d e n ta l to t h e i n t e r n a ti o n a l o r fo re ig n b u sin e ss o f su c h com pany; (4) W it h th e p r io r s p e c if ic c o n s e n t o f t h e B o a rd , o w n o r c o n tr o l (i) v o tin g s h a r e s o f a c o m m e r c ia l le n d in g c o m p a n y ; o r (ii) 25 p e r c e n t o r m o r e o f t h e v o tin g s h a r e s o f a n o t h e r fo r e ig n b a n k in g o r g a n iz a tio n ; (5) O w n o r c o n tr o l v o tin g s h a r e s o f a n y c o m p a n y in a f i d u c ia r y c a p a c i t y u n d e r c ir c u m s t a n c e s t h a t w o u l d e n title s u c h s h a r e h o ld i n g to a n e x e m p t io n u n d e r s e c ti o n 4(c)(4) o f th e B H C A i f th e s h a r e s w e r e h e ld o r a c q u i r e d b y a b a n k ; (6) S u b je c t to th e fo llo w in g lim ita tio n s , o w n o r c o n tr o l v o tin g s h a r e s o f a fo re ig n c o m p a n y t h a t is e n g a g e d d ir e c tly o r i n d ir e c tl y in b u s i n e s s in th e U n ite d S ta te s : (i) m o re t h a n 50 p e r c e n t o f th e fo r e ig n c o m p a n y 's c o n s o l id a t e d a s s e t s s h a l l b e l o c a te d , a n d c o n s o l i d a t e d r e v e n u e s d e r i v e d fro m , o u t s i d e th e U n i t e d S ta te s ; (ii) th e fo r e ig n c o m p a n y s h a l l n o t e n g a g e d ir e c tly o r in d ir e c tly in th e b u s i n e s s o f u n d e r w r itin g , se llin g , o r d is tr ib u tin g s e c u r it i e s in th e U n i t e d S t a t e s e x c e p t to th e e x t e n t p e r m i t te d b a n k h o ld in g c o m p a n ie s ; (iii) if th e fo re ig n c o m p a n y i s a s u b s id i a r y o f th e fo re ig n b a n k in g o r g a n iz a tio n , its d i r e c t o r in d ir e c t a c t i v it i e s in th e U n i t e d S t a te s s h a ll b e s u b j e c t to t h e fo llo w in g lim ita tio n s : (A ) T h e fo re ig n c o m p a n y ’s a c t i v it i e s in t h e U n i t e d S t a t e s s h a ll b e th e s a m e k in d o f a c t i v it i e s o r r e l a t e d to th e a c t i v it i e s e n g a g e d in b y t h e fo re ig n c o m p a n y a b r o a d a s m e a s u r e d b y th e “e s t a b l i s h m e n t ” c a t e g o rie s o f th e S t a n d a r d I n d u s t r i a l C l a s s i f ic a ti o n (SIC ) ( a n a c tiv ity in t h e U n ite d S t a t e s s h a ll b e c o n s i d e r e d r e l a t e d to a n a c tiv ity o u t s i d e t h e U n ite d S t a t e s if it c o n s i s t s o f su p p ly , d i s t r ib u t i o n o r s a l e s in f u r t h e r a n c e o f t h e a c tiv ity ); (B) T h e f o re ig n c o m p a n y m a y a c q u ir e t h e a s s e t s o r s h a r e s o f a U n i t e d S t a te s c o m p a n y t h a t w o u l d c a u s e m o r e t h a n 50 p e r c e n t o f th e fo re ig n c o m p a n y ’s a s s e t s 30085 o r r e v e n u e s a s s o c i a t e d w i t h a p a r ti c u la r S IC c a t e g o r y to b e l o c a t e d in o r d e r iv e d fro m t h e U n i t e d S t a t e s o n ly a f t e r th e p a r e n t fo re ig n b a n k in g o r g a n iz a t i o n h a s g iv e n 60 d a y s p r i o r w r i t t e n n o tic e to th e B o a rd . T h e B o a r d m a y , d u r in g th e n o t if i c a t i o n p e r io d , d i s a p p r o v e th e in v e s tm e n t, s u s p e n d th e p e r io d , o r a u th o r i z e t h e a c q u i s i t io n to b e m a d e p r i o r to t h e te r m i n a t i o n o f th e n o t if i c a t i o n p e r io d ; (C) T h e fo re ig n c o m p a n y m a y e n g a g e i n a c t i v it i e s in th e U n i t e d S t a t e s t h a t c o n s i s t o f b a n k in g o r f i n a n c i a l o p e r a t i o n s , o r t y p e s o f a c t i v it i e s p e r m i t te d b y r e g u la tio n o r o r d e r u n d e r s e c ti o n 4(c)(8) o f th e B H C A , o n ly w i t h t h e p r i o r a p p r o v a l o f t h e B o a rd . A c t iv i t ie s w i t h in D iv is io n H (F in a n c e , I n s u r a n c e , a n d R e a l E s ta te ) o f th e S IC s h a l l b e c o n s i d e r e d b a n k in g o r f in a n c ia l o p e r a t i o n s fo r th is p u r p o s e . (g) Exemptions under section 4(c)(9) o f the BHCA. A fo re ig n o r g a n iz a tio n t h a t is o f th e o p in io n t h a t o t h e r a c t i v it i e s o r i n v e s tm e n ts m a y , in p a r ti c u la r c ir c u m s t a n c e s , m e e t t h e c o n d itio n s fo r a n e x e m p t io n u n d e r s e c ti o n 4(c)(9) o f t h e B H C A m a y a p p ly to th e B o a r d f o r s u c h a d e te r m in a t io n b y s u b m ittin g to t h e R e s e r v e B a n k o f th e d i s t r ic t in w h i c h i ts b a n k in g o p e r a t i o n s in th e U n ite d S t a t e s a r e p r in c ip a lly c o n d u c t e d a l e t t e r s e ttin g f o rth th e b a s i s fo r t h a t o p in io n . (h) Reports. A fo re ig n o r g a n iz a tio n s h a ll in fo rm t h e B o a rd , th ro u g h su c h R e s e r v e B a n k w i t h in 30 d a y s a f te r th e c lo s e o f e a c h q u a r te r , o f a ll s h a r e s o f c o m p a n i e s e n g a g e d , d ir e c tly o r in d ir e c tly , in a c t i v it i e s in th e U n ite d S t a t e s t h a t w e r e a c q u i r e d d u rin g s u c h q u a r t e r u n d e r t h e a u th o r i t y o f th is s e c tio n . S u c h in f o r m a tio n s h a ll ( u n le s s p r e v io u s ly f u r n is h e d ) in c lu d e a b r i e f d e s c r ip t i o n o f th e n a tu r e a n d s c o p e o f e a c h c o m p a n y 's b u s i n e s s in t h e U n ite d S t a te s . I n f o r m a tio n r e q u ir e d n e e d b y g iv e n o n y i n s o f a r a s it is k n o w n o r r e a s o n a b l y a v a i l a b l e to a fo re ig n o r g a n iz a tio n . If a n y r e q u ir e d in f o r m a tio n is u n k n o w n a n d n o t re a s o n a b ly a v a i l a b l e to t h e fo re ig n b a n k in g o r g a n iz a tio n , e it h e r b e c a u s e th e o b t a i n i n g t h e r e o f w o u l d in v o lv e u n r e a s o n a b l e e ffo rt o r e x p e n s e o r b e c a u s e it r e s t s p e c u l i a r l y w ith in th e k n o w le d g e o f a c o m p a n y t h a t i s n o t c o n tr o l l e d b y th e o rg a n iz a tio n , th e i n f o r m a t io n n e e d n o t b e p r o v id e d , b u t t h e o r g a n iz a t i o n s h a ll (1) g iv e s u c h in f o r m a tio n o n th e s u b j e c t a s it p o s s e s s e s o r c a n a c q u ire w ith o u t u n r e a s o n a b l e e f f o rt o r e x p e n s e to g e t h e r w i t h th e s o u r c e s th e re o f, a n d (2) in c lu d e a s t a t e m e n t e it h e r s h o w in g t h a t u n r e a s o n a b l e e ff o rt o r e x p e n s e w o u ld b e in v o lv e d o r i n d ic a tin g t h a t th e c o m p a n y w h o s e s h a r e s w e r e a c q u i r e d is 30086 Federal Register / Vol. 45, No. 90 / Wednesday, May 7. 1980 / Proposed Rules n o t c o n tr o l l e d b y th e o r g a n iz a t i o n a n d s t a ti n g th e r e s u l t o f a r e q u e s t m a d e to s u c h c o m p a n y fo r i n f o r m a tio n . N o s u c h r e q u e s t n e e d b e m a d e , h o w e v e r , to a n y f o re ig n g o v e r n m e n t, o r a n a g e n c y o r i n s t r u m e n t a l i ty th e r e o f , if, in t h e o p in io n o f t h e o rg a n iz a tio n , s u c h r e q u e s t w o u ld b e h a r m f u l to e x is tin g r e la t io n s h ip s . B oard o f G overnors of the Federal R eserve System . April 30.1960. T heodore E. Allison, Secretary of the Board. (FR Doc. 80-14070 Filed 5-8-80: 8:45 am) BH U N S CODE S210-01-M
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