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Federal Reserve Bank
OF DALLAS
ROBERT
D. M c T E E R , J R .
AND CHIEF EXECUTIVE O F F IC E R
April 28, 1992
D a l l a s .t e x a s 75222
Notice 92-36
TO:
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
R e q u e s t for C o m m e n t s and I n t e r i m A m e n d m e n t s
to R e g u l a t i o n K ( In t e r n a t i o n a l B a n k i n g O p e r a t i o n s )
and R e g u l a t i o n Y (Ba nk H o l d i n g C o m p a n i e s
and C h a n g e in B a n k C o n t r o l )
DETAILS
The Federal Reserve Board has issued interim rules to implement the
Foreign Bank Supervision Enhancement Act of 1991. The Board has requested
public comment on these proposed revisions to Regulation K (International
Banking Operations) and Regulation Y (Bank Holding Companies and Change in
Bank Control).
The interim regulations are effective immediately.
The recently enacted law requires that a foreign bank applying to
operate in the United States must be subject to comprehensive supervision or
regulation by its home country authorities on a consolidated basis. An
applicant must supply any information to the Board necessary for the Board to
adequately evaluate an application, including information about the regulatory
structure of the home country.
Discretionary standards for Board action on an
application are set forth in the regulation.
The interim regulations also
detail the procedures to be used in the filing of applications by foreign
banks to operate in this country through a branch, agency, representative
office, or commercial lending company.
An applicant will be required to describe applicable secrecy laws,
if any, in its home country that would restrict the provision of information
to the Board.
If the restrictions significantly impede the monitoring of the
foreign b a n k ’s operations, the Board could deny an application.
The interim
regulation also addresses the termination of offices of a foreign bank,
hearing procedures, examination of offices and affiliates of foreign banks,
the limitation on loans to one borrower, and activities of state branches and
agencies.
The Board
15, 1992. Comments
of Governors of the
ton, D.C.
20551.
must receive comments on the proposed revisions by June
should be addressed to William W. Wiles, Secretary, Board
Federal Reserve System, 20th and C Streets N.W., Washing
All comments should refer to Docket No. R-0754.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
ATTACHMENT
A copy of the Bo a r d ’s notice as it appears on pages 12992-13002,
Vol. 57, No. 73, of the Federal Register dated April 15, 1992, is attached.
MORE INFORMATION
For more information, please contact Ann Worthy at (214) 744-7439.
For additional copies of this B a n k ’s notice, please contact the Public Affairs
Department at (214) 651-6289.
Sincerely yours,
J t).
.
12992
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
FEDERAL RESERVE SYSTEM
12 CFR Parts 211, 225, 263, 265
[Docket No. R-0754J
Regulation K—International Banking
Operations and Regulation Y—Bank
Holding Companies and Change in
Bank Control
AGENCY: Board of G overnors of the
Federal Reserve System.
ACTION: Interim rule w ith request for
com ments.
This interim rule im plem ents
the Foreign Bank Supervision
E nhancem ent A ct of 1991 (FBSEA or
SUMMARY:
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
Act), Subtitle A of Title II of the Federal
D eposit Insurance C orporation
Im provem ent A ct of 1991, w hich m ade
changes to the authority of the Board of
Governors of the Federal Reserve
System (Board) u nd er the International
Banking A ct of 1978 (IBA). Regulation K
is am en ded to reflect the B oard's new
authority in the supervision an d
regulation of foreign ban k s seeking to do
business in the U nited States.
Regulation Y is am end ed to require that
foreign banking organizations acquiring
more than 5 p ercen t of the sh ares of a
U.S. b an k or b an k holding com pany file
an application w ith the Board un der the
Bank Holding Com pany A ct (BHC Act).
T hese am endm ents are intend ed to
im plem ent the provisions of the FBSEA
that en han ce the B oard’s authority over
the establishm ent of U.S. offices by
foreign b an k s and other aspects of the
supervision of the U.S. operations of
foreign banks.
DATES: E ffe ctive D ate. This interim rule
is effective April 15,1992. C om m ent
D ate. Com m ents are requ ested and must
be subm itted by June 15,1992.
A D D RESSES: Comments, w hich should
refer to Docket No. R-G754, m ay be
m ailed to the Board of G overnors of the
Federal Reserve System, 20th S treet and
Constitution A venue, NW., W ashington,
DC 20551, to the atten tion of Mr.
W illiam W . W iles, Secretary. Com ments
ad d ressed to the attention of Mr. W iles
may b e delivered to the B oard’s
mailroom b etw een 8:45 a.m. an d 5:15
p.m., an d to the security control room
outside of those hours. Both the
m ailroom an d the security control room
are accessible from the courtyard
entrance on 20th S treet b etw e en
Constitution A venue an d C Street, NW.
Com ments m ay ba inspected in room B1122 b etw e en 9 a.in. an d 5 p.m., except
as provided in § 261.8 of the Board’s
Rules Regarding the A vailability of
Information, 12 CFR 281.8.
FOR FURTHER IN FO R M A TIO N C O N TACT:
K athleen M. O 'Day, A ssistan t G eneral
Counsel (202/452-3786), A nn E. M isback,
Senior A ttorney (202/452-3788), Gregory
A. Baer, A ttorney (202/452-3236), or
M argaret E. Miniter, A ttorney (202/4523900), Legal Division: M ichael G.
M artinson, A ssistan t D irector (202/4523640), Betsy Cross, M anager (202/4522574), Division of Banking Supervision
an d Regulation, B oard of G overnors of
the Federal R eserve System. For the
hearing im paired only.
Telecom m unication Device for the D eaf
(TDD), D orothea T hom pson (202/4523544), Board of G overnors of the F ederal
Reserve System, 20th an d C Streets,
NW., W ashington, DC 2055'*
SU PPLEM ENTARY IN FO R M A TIO N : The
FBSEA grants to the Board n ew pow ers
in the supervision an d regulation of
foreign b an k s operating or seeking to
operate in the U nited S tates. The Board
is am ending its Regulation K to conform
it to the n ew authority provided u n der
the FBSEA. T he am endm ents are
effective im m ediately. The Board is
seeking com m ent on these am endm ents
an d will consider further revisions as
appropriate on the b asis of the
com m ents received.
The B oard finds th a t it is n ecessary to
issue its rule on a n interim b asis subject
to public com m ent in order to conform
its regulations to the applicable statutes
an d to ensure th a t applications by
foreign b an k s to establish offices in the
United States will not be delay ed
pending the end of a notice and
com m ent period. T here w a s no
opportunity for the Board to publish
proposed regulations for com m ent prior
to the effective d ate of the FBSEA, as
the A ct w a s effective upon enactm ent.
Accordingly, the Board, for good cause,
finds that the notice an d public
com m ent procedure norm ally required is
im practical an d contrary to the public
interest under 5 U.S.C. 553(b)(B). The
Board further finds that, for the sam e
reasons, there is good cause u n d er 5
U.S.C. 553(d)(3) to m ake the interim rule
effective im m ediately, w ithout regard
for the 30-day p eriod p rovided for in 5
U.S.C. 553(d).
The enactm ent of the IBA in 1978
subjected the operations of foreign
b an k s in this country to federal
regulation for som e purposes. Since that
time, the p resen ce of foreign b an k s in
the U nited S tates h as ex p a n d ed
significantly. A s of D ecem ber 31,1991,
there w ere 304 foreign b an k s w ith
operations in the U nited S tates w ith
aggregate banking a s se ts of $866 billion.
Branches an d agencies of foreign b an k s
alone had aggregate assets of
approxim ately $ 7 1 8 billion, or 20 p ercent
of total banking a s se ts in this country,
as of y ea r end 1991. A pproxim ately 94
percent of the total assets of foreign
ban k b ran ch es a n d agencies w ere in 532
state-licensed b ran ch es a n d agencies,
w hile 6 percent w ere in 84 federally
licensed b ran ch es an d agencies.
Foreign b an k s h av e m ade significant
contributions to the banking
environm ent in the U nited S tates and
h av e b een an im portant source of credit
for A m erican b usiness. O ver the last
three years, how ever, the Board has
conducted investigations an d taken
enforcem ent actions w ith respect to
unlaw ful activities at the U.S. offices of
several foreign banks. In 1990, as a
result of one investigation, the Board
12993
forw arded recom m endations to the
Congress to subject a foreign b an k's
branches an d agencies in this country to
various provisions of the crim inal code
governing b ank fraud an d oth er b an k
crimes. T hose recom m endations w ere
acted upon by the Congress in the Crime
Control A ct of 1990.
In 1991 the Board conducted a further
review of the statutes, regulations an d
supervisory policies governing the
operations of foreign b an k s in the
U nited States, and concluded th at
legislation w as n eeded to strengthen the
system of federal regulation and
supervision of foreign b an k operations
in this country. In respo nse to a request
for legislative recom m endations from
the Congress, the Board sen t a
legislative proposal to the C hairm en of
the S enate and H ouse Banking
Com m ittees of the U nited States
Congress on M ay 9,1991. The Congress
enacted su bstan tial portions of this
proposal on D ecem ber 19,1391 as the
FBSEA.
In enacting the FBSEA, Congress
sought to provide federal regulators w ith
clear sta n d ard s to govern the
estab lishm en t of U.S. offices by foreign
ban k s an d w ith en hanced tools for
supervising their ongoing operations in
the U nited States. The B oard’s interim
rule am ends Regulation K to reflect
these an d other changes m ade by the
FBSEA. The Board h a s revised
Regulation K to establish procedures for
the exercise of the B oard’s
responsibilities relating to the approval,
exam ination an d term ination of foreign
b an k operations in the U nited States. It
h as also revised Regulation K to
im plem ent provisions of the FBSEA that
allow for disclosure of certain
inform ation to foreign supervisors and
estab lish limits on loans to a single
borrow er by sta te bran ches an d
agencies. In addition, the Board is
am ending Regulation Y to reflect that
foreign banking organizations acquiring
an interest of greater than 5 percent of
the voting shares of a U.S. b ank or ban k
holding com pany m ust file an
application w ith the Board u nd er the
BHC Act.
E stablishm ent of Foreign Bank Offices
B oa rd A p p ro va l
Regulation K is am ended to im plem ent
the statutory requirem ent th at a foreign
ban k obtain the prior approval of the
Board before it establishes a branch,
agency, rep resentative office, or
com m ercial lending com pany subsidiary
(collectively, “office”) in the U nited
States. The regulation provides that
changing the sta tu s of an office in a w ay
12994
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
that m akes a m aterial difference in the
activities of that office—for exam ple,
from a n agency to a b ranch —or the
relocation of a n office from one state to
a n o th er constitutes the establishm ent of
an office for w hich prior Board approval
is required. In c ertain circum stances, the
regulation also requires Board approval,
although not necessarily p rio r Board
approval, w h en a foreign b an k or p aren t
com pany of a foreign b ank acquires
ow nership or control of a com m ercial
lending com pany through acquisition or
merger, or w h en a foreign b an k assum es
the operations of a branch, agency, or
rep resentative office through certain
mergers or acquisitions.
The Board’s authority to approve new
foreign b an k offices parallels the
continuing authority of the Office of the
Com ptroller of the Currency
(Comptroller! to license n ew federal
branches an d agencies of foreign bank s
an d the authority of state banking
departm ents or authorities to license
new sta te bran ch es an d agencies. The
B oard’s approval authority does not
supplant the authority of the
Com ptroller an d the state regulatory
authorities to license n ew foreign b ank
offices in acco rd an ce w ith w hatev er
term s or conditions those authorities
might establish.
D efin ition s
The regulation adopts a new set of
definitions applicable to the provisions
im plem enting the FBSEA. It also m akes
com plem entary am endm ents to
definitions previously co ntain ed in
Subparts A an d B of Regulation K. W ith
resp ect to the definition of
rep resentative office, the regulation
describes the kinds of functions—
rep resentatio nal an d adm inistrative—
perm itted for represen tative offices. It
h as b een am en ded to specify that
certain activities w ould not be perm itted
for such offices.
U nder the FBSEA, Board approval is
required before a foreign b an k m ay
estab lish any office in the U nited S tates
or acquire control of a com m ercial
lending com pany. “E stablish” is defined
as opening a n d engaging in b u sin ess a t a
n ew office. It is also defined to include
the assum ption b y a foreign b an k
through merger, or the acquisition of the
operations, of a n office th at is open an d
conducting b usin ess in the U nited
States, w here the institution that will
o p erate the U.S. office c e ases operation
a s a se p arate entity or otherw ise
changes in corporate form following the
m erger or acquisition. Finally, the
definition of “establish " further includes
upgrading the sta tu s of a n office or
relocating an office from one sta te to
another. T he definition does not refer to
a change involving a com m ercial lending
com pany b ecau se approval by the
licensing or chartering authority, as w ell
a s by the Board, w ould b e required
w here a change in the corporate form of
a subsidiary is involved.
B ranch a n d A g en c y F unctions
It h as com e to the B oard’s attention
that certain offices or subsidiaries of
foreign bank s in the U nited S tates that
are not regulated as a bran ch or agency
by any banking authority in this country
are n evertheless performing functions
th at are app ro priate only to banks,
branches, or agencies licensed by U.S.
b an k regulatory authorities. T hese
functions go beyond soliciting business
on behalf of the foreign b an k to include
entering into contracts with custom ers
for the account of the foreign b an k
parent, w ith the resulting transaction
often being b oo ked a t one of the
offshore, shell bran ch es of the p aren t
bank. To the extent that em ployees of
these offices or subsidiaries in the
U nited S tates— or em ployees of the
foreign b ank operating from U.S. offices
or subsidiaries or o th er locations— are
contracting o n b eh a lf of the foreign b ank
to lend m oney or to take dep osits in this
country, these activities in the U nited
S tates a p p e ar to fall w ithin the
definition of “agency" or “b ran c h " in the
IBA. Such activities are only p erm issible
if the foreign b an k first o b tains a license
from the app rop riate sta te or federal
authority to op erate a b ran ch or agency.
T his app roach w ould not preclude a
foreign b an k w ith a n authorized U.S.
b ran ch or agency from also using
em ployees lo cated in the U nited States
to perform activities on b eh alf of an
offshore shell b ran c h or agency.
P rocedures fo r A p p lic a tio n s
A foreign b an k seeking to estab lish an
office m ust file a n application w ith the
B oard an d give notice of its application
to the public. T h e B oard's publication
requirem ent parallels th a t currently
em ployed b y the Com ptroller for
applications by a foreign b an k to
estab lish a federal b ran ch or federal
agency. For applications to establish a
federal b ran ch or federal agency,
com pliance w ith the publication
procedures of the Com ptroller will
satisfy the B oard’s requirem ent.
T he regulation provides for public
com m ent w ithin 30 d ays of the
publication of the notice an d for Board
action generally w ithin 60 d ays of
acceptan ce of the application. T he
B oard m ay req uest an y inform ation in
add ition to th a t supplied in the
app lication w hen die Board believes
th a t ad d itio n al inform ation is n ecessary
for its decision, an d m ay e x ten d the 60-
day period for decision if it determ ines
that an extension w ould serve the public
interest an d so notifies the applicant.
T hese rules are sim ilar to those for b an k
holding com pany applications.
Special procedures for obtaining afterthe-fact approval by the Board of
applications to establish offices are
provided to ad d ress the establishm ent of
U.S. offices through certain mergers or
acquisitions of foreign b anks. Such
establishm ent occurs w hen there is a
change in the corporate form of the
foreign b an k operating the branch,
agency, rep resentative office, or
com m ercial lending com pany in this
country, such as through a m erger of
th a t foreign b a n k into an o th er foreign
b an k or, in certain circum stances, the
acquisition of the assets or operations of
the foreign b a n k b y a n o th er foreign
bank. In order to allow the transaction
to be accom plished w ithout delay, the
B oard m ay perm it consum m ation to
occur before a n application h as been
filed w ith or a cted upon by the Board.
T he regulation sets forth the criteria on
w hich the B oard m ay b a s e such a
decision. T he B oard's after-the-fact
approval procedures apply only if the
n e w b ank resulting from a m erger or the
b a n k being acquired does no t control or
ow n more than 5 percent of the voting
sh ares of a U.S. bank. In all cases, the
Board reserves the right to deny the
application, an d a n applicant m ust agree
to abide by the B oard’s decision,
including by, if necessary, term inating
the activities of an y U.S. office as
required by the Board.
In contrast, no application is required
w here a foreign b an k w ith a U.S. office
is acquired by a foreign b ank or foreign
com pany if the acquired foreign bank
continues to operate in the sam e
corporate form as prior to the
acquisition, an d the acquired foreign
b ank does not control or ow n m ore than
5 p ercent of the shares of a U.S. bank. In
such circum stance, there w ould be no
change in the corporate form of the
foreign b an k that operates the U.S.
office, a n d for that rea so n no application
w ould be required. T he regulation does
require a w ritten notice w ithin 10 days
of the change in o w nership or control of
the foreign b an k w ith the U.S. office in
order for the B oard to be able to m onitor
w h eth e r o ther regulatory requirem ents—
such as the qualifying foreign banking
organization sta n d ard —are being m et
by the n ew consolidated organization.
T he Board w ishes to m ake clear that
un der no circum stances is a n
application to the Board required for a
m erger or acquisition of tw o or m ore
foreign b an k s th a t occurs w holly outside
the U nited S tates w here the foreign
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
ban k s h av e no U.S. offices an d do not
control a U.S. bank.
The B oard's regulation takes account
of the fact that the Board will be acting
on applications for foreign b an k offices
for w hich approval m ust also be
obtained from the Com ptroller or the
relev ant state banking authority. For
that reason, the Board envisions close
cooperation b etw e en itself a n d these
agencies. The Board will notify the
Com ptroller or the relev ant state
banking authority w hen an application
is received a n d will consult w ith th at
agency throughout the application
process. In acting on an application, the
Board will rely to the extent possible on
inform ation alread y supplied by the
applicant or otherw ise available to the
Com ptroller or the relev ant state
banking authority.
The Board will also consult w ith the
Comptroller, the Federal D eposit
Insurance Corporation (FDIC) an d the
state supervisors in an effort to develop
a uniform sta n d a rd form for applications
by foreign b an k s to estab lish branches,
agencies, represen tativ e offices, and
com m ercial lending com panies. Until a
form is issued, a n applicant should
subm it to the ap propriate Reserve Bank
a copy of its application to either the
sta te banking authority or the
Comptroller, an d should co ntact the
responsible Reserve Bank to determ ine
w h at additional inform ation should be
provided.
Sta n d a rd s fo r A p p ro va l o f A p p lica tio n s
to E sta b lish a B ranch, A gen cy, or
C om m ercial L ending C om pany
S u b sid ia ry
Regulation K is revised to im plem ent
the statutory requirem ents for approval
of foreign b an k applications an d
additional requirem ents im posed by the
B oard p u rsuan t to its statuto ry
authority. The Board m ay condition
approval of a n application as it deem s
necessary.
C om prehensive supervision or
regulation of a foreign b an k on a
consolidated basis by hom e country
authorities is one of the m and ato ry
requirem ents for the establishm ent of an
office in the U nited States. T he B oard’s
regulation p rovides a sta n d a rd for
assessing consolidated supervision or
regulation: w h ether a foreign b a n k is
supervised or regulated in such a
m an ner th a t its hom e country supervisor
receives sufficient inform ation on the
w orldw ide operations of the foreign
bank, including the relationship of the
b an k to affiliated com panies, to be able
to assess its overall financial condition
an d com pliance w ith law . In m aking
th a t determ ination, the Board will
assess, am ong other factors, the extent
to w hich the hom e country supervisor:
1. Ensures that the foreign bank has
adequate procedures for monitoring and
controlling its worldwide operations;
2. Obtains information on the condition of
the foreign bank and its subsidiaries or
offices, whether through examination, audit
reports, or otherwise;
3. Obtains information on the dealings and
relationship between the foreign bank and its
affiliates;
4. Receives financial reports that permit
analysis of the consolidated, worldwide
condition of the foreign bank:
5. Evaluates prudential standards on a
worldwide basis.
The Board recognizes th at the legal
system s for supervision a n d regulation
vary from country to country, an d th at
com prehensive supervision or regulation
on a con solidated basis can be achieved
in different w ays. The regulation
includes both the general sta n d a rd the
Board will apply in m aking its
determ inatio n an d the prim ary elem ents
it will consider in applying this
stand ard. A t the sam e time, the
regulation gives the B oard flexibility in
making case-by-case determ inations
w ithout imposing the U.S. regulatory
system on foreign b an k s outside the
U nited States.
The pro po sed factors focus on the
ability of the hom e country supervisor to
ob tain inform ation on, an d supervise,
the foreign b a n k ’s op eration s an d
overall condition, b u t they do not
m an d ate th a t the inform ation be
o b tained in a particular form or through
particular m ethods. T he B oard will
ob tain inform ation on these factors by
requiring the foreign b a n k to subm it in
its application a description of the
supervision to w hich it is subject, or a ny
changes in such supervision since the
la st relev ant B oard d eterm ination on
consolidated supervision in the foreign
b a n k ’s home country. The B oard will
also seek to g ath er inform ation from
outside sources, including the home
country authorities.
It is possible th a t different types of
institutions from the sam e country m ay
be supervised in a different m anner.
Thus, a decision in a p articu lar case
relating to a home country’s supervision
m ay not a lw a y s b e determ inative for
oth er applicants from th at country.
T here will also be applications from
ban k s in one country th a t are ow ned by
ban k s in an other country. In such a
case, both the applicant b an k a n d any
paren t foreign b an k m ust b e su bject to
consolidated home country supervision,
necessitating determ inations for m ore
than one country.
The discretionary sta n d ard s for
approval are a d o p ted from the statute
12995
an d further clarified by the regulation.
The financial an d m anagerial sta n d ard s
im posed by the regulation reflect those
required of dom estic b an k s u nd er the
Board’s Regulation Y. In addition, the
sta n d ard for m anagerial resources
includes consideration of m anagem ent’s
experience an d capacity to engage in
international banking an d any record of
a foreign b an k or its m anagem ent w ith
respect to com pliance w ith la w s and
regulations. W here the foreign b an k is
alread y p resen t in the U nited States, the
sta n d ard requires consideration of a
foreign b an k 's fulfillment of any
com m itm ents to, and"any conditions
im posed by, the Board in connection
w ith prior applications. The Board will
also exam ine w hether the foreign b a n k ’s
home country supervisor an d the
supervisor of any foreign b an k p arent
share inform ation abo ut the ban k w ith
the Board a n d other supervisors.
O ne of the discretionary sta n d ard s
estab lished by the FBSEA for
applications to estab lish a branch,
agency, or com m ercial lending com pany
is w h eth e r the foreign b an k h as
provided the Board w ith adequ ate
assu ra n ce s th at it will m ake available to
the Board inform ation on the operations
of the b a n k an d its affiliates n ecessary
to determ ine com pliance w ith U.S. law.
Although this sta n d ard is discretionary
for such applications, the FBSEA also
am end ed the BHC A ct to m ake these
assu ra n ce s a m andatory requirem ent for
the acquisition of a U.S. b an k by a
com pany, including a foreign b an k or
other foreign com pany.
In m aking such assu ra n ce s on
disclosure of inform ation to the Board,
the applicant is required to describe
applicable secrecy law s, an d how those
law s w ould restrict the provision of
inform ation to the Board. If the
restrictions are significant enough to
im pede m aterially the monitoring of the
foreign b a n k ’s operations, the sta n d ard
on disclosure of inform ation w ould
allow the Board to deny the application.
T here could, how ever, be in stan ces in
w hich such restrictions w ould not
im pede the review of a foreign b a n k ’s
operations. In such circum stances, if the
Board h as no rea so n to believe th at the
affiliates are engaged in violations of
law, the application could still be
approved subject to the im position of a
condition that activities of the foreign
b a n k ’s U.S. office or subsidiary m ust be
term inated if the inform ation restrictions
subsequently interfere w ith the Board's
ability to determ ine the safety and
soundness of the U.S. operations of the
foreign b an k or the foreign b an k's
com pliance w ith U.S. law s an d
regulations.
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Federal Register / Vol. 57, No. 73 / Wednesday. April 15, 1992 / Rules and Regulations
A b b re v ia te d P rocedures
T he C om ptroller currently m ay apply
ab b re v iated procedures for applications
to establish a n addition al federal branch
or federal agency w ithin a sta te in
w hich a foreign b an k alread y m aintains
a federal b ran ch or federal agency. The
Board is considering, an d is seeking
com m ent on, w h eth er to establish
sim ilar procedures after it has gained
experience in review ing applications
from foreign b an k s und er the new
regulations.
The Board m ay also consider more
stream lined procedures or delegation of
authority to the Reserve Banks for the
approval of certain applications for new
offices after the Board h as developed
experience in approving such
applications sufficient to provide a basi3
for identifying the appropriate
circum stances for m ore limited
procedures.
R ep resen ta tive O ffices
In acting on applications by foreign
ban ks to estab lish representative
offices, the Board will take into account
to the extent it deem s appropriate the
sta n d ard s for approval of applications
to establish branches, agencies, and
com m ercial lending com pany
subsidiaries. In so doing, the Board will
consider the nature an d exten t of the
proposed activities of the representative
office in the U nited States.
A pplications under the B ank Holding
C om pany Act
Section 207 of the FBSEA elim inated a
provision in section 8 of the IBA that
exem pted foreign ban k s an d com panies
controlling foreign b an k s from certain of
the requirem ents of section 3 of the BHC
A ct if the foreign b ank o perated in the
U nited S tates only through branches,
agencies, or com m ercial lending
com panies. As a result, a foreign bank
or a com pany that controls a foreign
b an k that m aintains a b ran ch or agency
in the U nited S tates o r controls a
com m ercial lending com pany in the
U nited S tates is now subject to all of the
provisions of the BHC A ct a s if the
foreign ban k or com pany w ere a bank
holding com pany u nd er the BHC Act.
T he Board has ado pted a conforming
am endm ent to Regulation Y that
specifies th at in general a foreign
banking organization w ith a branch,
agency, or com m ercial lending com pany
sub sid iary in the U nited S tates is
subject to the application requirem ents
of section 3 of the BHC A ct for the
acquisition of a direct or indirect
interest in a U.S. b an k or U.S. bank
holding com pany. The conforming
am endm ent also provides th a t an
application is not required u nd er section
3 for the acquisition of m ore th an 5
percent of the sh ares of a foreign
banking o rganization th at does not
control a b an k in the U nited S tates.
Term ination o f a n O ffice o f a Foreign
Bank in the U nited S tates
G rounds fo r T erm ination o f O ffices
Regulation K is revised to include the
statu to ry sta n d ard s for term ination b y
the Board of the operations in the U nited
S tates of a represen tativ e office or sta te
branch, sta te agency, or com m ercial
lending com pany of a foreign bank.
Before term inating any sta te bran ch or
sta te agency, the Board will requ est an d
consider the view s of the relev an t sta te
supervisor. T he regulation also reflects
the statutory requirem ent that the Board
recom m end to the Com ptroller that a
federal b ran ch or federal agency be
term inated if the term ination w ould be
w a rra n te d u n d er the sam e sta n d ard s
applicable to a sta te b ran ch or agency.
H earing
U nder the FBSEA, a term ination order
generally will be issued only after notice
a n d an opportunity for a hearing. T he
Board m ay ac t w ithout providing for a
hearing if it determ ines th a t doing so is
n ec essary in o rder to p ro tect the public
interest. W h e n such action is necessary,
the Board m ay take oth er actions
designed to give the foreign b an k notice
a n d an opportunity to p resent its views.
V o lun tary T erm ination
The B oard’s regulation requires notice
of the v oluntary term ination of an office
by a foreign b an k 30 days in ad v a n c e of
that term ination. Such a procedure is
n ec essary for the Board to m onitor a
foreign b a n k ’s presence in the United
States. T his notice requirem ent is in
addition to. an d does not satisfy, any
other requirem ent by federal or state
authorities relating to a voluntary
liquidation or b ran ch closing.
Exam inations o f Offices an d Affiliates
of Foreign Banks
U nder sections 7(c) an d 10(c) of the
IBA. the Board is gran ted authority to
exam ine any branch, agency, or
rep resen tativ e office of a foreign bank,
any com m ercial lending com pany or
bank controlled by one or m ore foreign
banks, an d an y other office or affiliate
of a foreign b an k th at conducts business
in the U nited States. M oreover, the
Board is authorized to coordinate
exam inations of the U.S. offices an d U.S.
affiliates of a foreign b an k w ith the
other federal an d state banking
regulators an d to conduct its ow n
exam inations of such offices. T he Board
h a s delegated the authority to
coordinate such exam inations to its
Director of the Division of Banking
Supervision a n d Regulation.
Regulation K is revised to im plem ent
the statutory requirem ent that each
branch an d agency of a foreign ban k be
exam ined on site at le ast once in every
tw elve-m onth period, beginning on the
d ate on w hich the m ost recent
exam ination ended, by one of the
federal or sta te banking agencies. This
interim rule also revises Regulation K to
im plem ent the statu to ry sta n d a rd that
represen tativ e offices shall be exam ined
in the m an ner an d w ith the frequency
determ ined by the Board. T he Board is
also exercising its discretion to add
com m ercial lending com panies to the
list of offices to be exam ined in every
tw elve-m onth period.
D isclosure o f Inform ation to Foreign
Supervisors
U nder section 15(a) of the IBA, the
Board is authorized to disclose
supervisory inform ation to a foreign
supervisor if such disclosure is
app ro priate an d w ould not prejudice the
interests of the U nited States. Before
disclosing any information, the Board is
required to obtain, to the extent
necessary, the agreem ent of the foreign
supervisor to m aintain the
confidentiality of the inform ation to the
extent possible un der applicable law.
The Board delegates to the G eneral
Counsel the authority to determ ine
w h eth er disclosure is appropriate in a
particular case a n d to negotiate any
confidentiality agreement. The G eneral
Counsel will consult w ith the other
federal banking agencies as appropriate
in deciding w hether to disclose
supervisory information.
Limitation on L oans to O ne B orrower
T he FBSEA am ends section 7 of the
IBA to provide th at a sta te b ran ch or
state agency m ust comply w ith the sam e
lim itations w ith resp ect to loans m ade
to a single borrow er as are applicable to
a federal branch or federal agency under
the IBA. U nder the IBA, a federal branch
or agency is subject to the limit on loans
to single b orrow ers found in the
N ational Bank Act. U nder th at Act, the
federal bran ch es an d agencies of the
sam e foreign b ank m ust aggregate all
their loans to the sam e borrow er to
determ ine com pliance w ith this limit.
The capital against w hich the loans are
m easured is the consolidated capital of
the foreign bank.
The regulation im plem ents the n ew
requirem ent in the FBSEA by requiring a
foreign b an k w ith a sta te bran ch or
agency to aggregate all loans m ade to
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
the sam e bo rro w er b y all o f its b ranches
a n d agencies in the U nited S tates—
regardless of w h ether they h ave federal
or s ta te licenses—for purposes of
determ ining com pliance w ith the
statutory limit. T he intent of the
provision is to put the operations of the
foreign b ank in the U nited S tates on a
com parable footing w ith dom estic b an k s
for lending purposes.
Activities of S tate Branches a n d
Agencies
Section 7(h)(1) of the IBA, as en acted
by the FBSEA, provides that a state
branch or state agency m ay not engage
in any type of activity not perm issible
for a federal bran ch unless the Board
has determ ined th at such activity is
consistent w ith sound banking practices.
In the case of insured branches, the
FDIC m ust also determ ine th at the
activity poses no significant risk to the
deposit insurance fund. T he Board
proposes to ad d re ss this provision a t a
later time, after consulting the FDIC.
Deposit Insurance Requirem ent for
Retail D eposit-Taking
T here is an unresolved issue
concerning the scope of section 6(c) of
the IBA, specifically w heth er a foreign
bank m ust establish a n insured bank
subsidiary if it m ain tains an y d eposits
w ith b alan c es u nd er $100,000, or
w hether a foreign b an k n eed only
estab lish an insured b ank subsidiary if
it accep ts or m aintains deposits w ith
balan ces un der $100,000 that are
dom estic retail deposits requiring
deposit insurance pursuant to sections
6(a) an d (b) of the IBA a n d the
regulations ad o p ted by the FDIC an d the
Comptroller. O n D ecem ber 19,1991. the
Board and the Com ptroller provided
guidance to foreign b an k s that, until the
agencies issued clarifying rules or
interpretations, the foreign ban k s w ould
not be considered to b e in violationSof
section 6(c) if they lim ited their deposittaking activities in bran ch es and
agencies to those perm itted by
regulations of the FDIC an d the
Com ptroller in effect on D ecem ber 19,
1991. T he Board is continuing to review
section 6(c) an d the intent of the
Congress w ith respect to this provision,
an d h as therefore reserved this p art of
the regulation for future promulgation.
R ules o f Practice for H earings
U nder am endm ents to the IBA m ade
by the FBSEA, the Board must, unless
expeditious action is required, hold
hearings before term inating the
activities of a sta te branch, sta te agency,
subsidiary, or represen tativ e office of a
foreign bank. Accordingly, the Board
h a s revised its hearing rules to m ake
them applicable in such cases.
Penalties for V iolation of the IBA
Section 208 of the FBSEA a d d e d a
new section 16 to the IBA th at provides
for civil m oney pen alties for violation of
the IBA. T h a t provision, like the rest of
the FBSEA, is currently effective. T he
Board is w orking w ith the other federal
banking agencies to determ ine w heth er
it is n ecessary to ado pt conforming
regulations, an d that effort w ill b e the
subject of a se p arate notice and
opportunity for comment.
Initial Regulatory Flexibility A nalysis
The Regulatory Flexibility A ct (5
U.S.C. 601-612) requires a n initial
regulatory flexibility an alysis w ith any
notice of proposed rulem aking. T w o of
the requirem ents o f a n initial regulatory
flexibility analysis— a description of the
reason s w hy the action by the agency is
being c on sidered a n d a statem en t of the
objectives of, an d the legal b asis for, the
proposed rule—are con tain ed in the
supplem entary inform ation above. The
B oard’s interim rule requires no
add itional reporting or recordkeeping
requirem ents o th er than a s are
n ec essary to im plem ent the statute; nor
are there relev an t federal rules that
duplicate, overlap, or conflict w ith the
prop osed rule, other th an as required by
law.
A nother requirem ent of the initial
regulatory flexibility analy sis is a
description of and, w h ere feasible, an
estim ate of the n um ber of sm all entities
to w hich the prop osed rule shall apply.
T he interim rule will apply to all foreign
offices, regardless of size. T he rule
should not h ave a significant economic
im pact on sm all branches, agencies,
rep resen tativ e offices, an d com m ercial
lending com panies, but rath e r will
im prove the supervision a n d regulation
of all such offices.
P aperw ork Reduction
The Board, acting p u rsu an t to
authority delegated to it by the D irector
of the Office of M anagem ent an d Budget
under 44 U.S.C. 35G7(e), h as approved
the collection of inform ation called for
by sections 211.25 an d 211.27 of the
B oard’s Rules an d sections 7 an d 10 of
the IBA.
List o f Subjects
12 CFR P art 211
Exports, Federal Reserve System.
Foreign banking, Holding com panies.
Investm ents. Reporting a n d
recordkeeping requirem ents.
12997
12 CFR P art 225
A dm inistrative p ractice and
procedure. Banks, banking. Federal
Reserve System , Holding com panies,
Reporting an d recordkeeping
requirem ents, Securities.
12 CFR P art 263
A dm inistrative practice an d
procedure. Federal Reserve System.
12 CFR P art 265
A uthority d elegations (G overnm ent
agencies). F ederal Reserve System.
For the reasons o utlined above, the
Board of G overnors is am ending 12 CFR
p arts 211, 225, 263 an d 265 to rea d as set
forth below:
PART 211—INTERNATIONAL
BANKING OPERATIONS
1. T he authority citation for 12 CFR
part 211 continues to re a d as follows:
Authority: Federal Reserve Act (12 U.S.C.
221 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. 95369; 92 Stat. 607; 12 U.S.C. 3101 et seq.)-, the
Bank Export Services Act (Title II, Pub. L. 97290, 96 Stat. 1235); the International Lending
Supervision Act (Title IX, Pub. L. 98-181,97
Stat. 1153.12 U.S.C. 3901 et seq.); and the
Export Trading Company Act Amendments
of 1988 (Title III. Pub. L. 100-118,102 Stat 1384
(1988)).
2. Section 211.2 is am ended by
revising parag raph (t) to rea d a s follows:
§211.2 Definitions.
*
*
*
*
*
(I) R ep re se n ta tiv e o ffice m ean s an
office that:
(1) Engages solely in representational
an d adm inistrative functions, such as
soliciting new business or acting a s
liaison b etw e en the organization’s head
office an d custom ers in the United
States; an d
(2) Does not h ave authority to m ake
any business decision for the account of
the organization it represents, including
contracting for any deposit o r d epo sit
like liability on b ehalf of the
organization.
*
*
*
•
*
3. Section 211.21 is am end ed by
removing the w ord “a n d " w here it
ap p e ars in parag raph (b)(1), by removing
the period a t the end o f parag raph (b)(2)
an d adding a semi-colon in its place,
an d by adding n ew p arag raph s (b)(3)
through (b)(8) to read as follows:
§211.21
*
*
Authority, purpose, and scope.
*
*
*
(b)* ‘ *
(3) Board approval o f the acquisition
or establishm ent of an office of a foreign
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Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
b an k in the U nited States und er § § 7(d)
an d 10(a) of the IBA (12 U.S.C. 3105(c),
3107(a));
(4) The term ination by the Board of a
foreign b a n k ’s rep resentative office,
sta te branch, sta te agency, or
com m ercial lending com pany subsidiary
in the U nited S tates u nd er sections 7(e)
an d 10(b) of the IBA (12 U.S.C. 3105(d),
3107(b));
(5) The exam ination of any office or
affiliate of a foreign b an k in the United
S tates under sections 7(c) a n d 10(c) of
the IBA (12 U.S.C. 3105(b), 3107(c));
(6) The disclosure of supervisory
inform ation to a foreign supervisor
u n d er section 15 of the IBA (12 U.S.C.
3109);
(7) The lim itations on loans to one
borrow er by state b ran ch es an d state
agencies of a foreign b an k un der section
7(h) of the IBA (12 U.S.C. 3105(g)); and
(8) The deposit insurance requirem ent
for retail deposit taking by a foreign
b an k un der section 6 of the IBA (12
U.S.C. 3104).
4. Sections 211.22 an d 211.23 are
redesignated as §§ 211.23 an d 211.24,
respectively.
5. N ew ly designated $ 211.23 is
am ended by removing paragraph (a) and
redesignating paragrap hs (b) through (e)
as paragrap hs (a) through (d),
respectively.
6. Newly redesignated S 211.24 is
am end ed by removing paragrap h (a) and
redesignating p arag raph s (b) through (i)
as paragraphs (a) through (h),
respectively.
7. A n ew § 211.22 is a d d e d to read as
follows:
§211.22
Definitions.
The definitions of $ 211.2 in su bpart A
of this part apply to this su b p art except
as a term is otherw ise defined in this
section:
(a) A ffilia te , of a foreign b an k or of a
p aren t of a foreign bank, m ean s any
com pany th at controls, is controlled by,
or is under com mon control with, the
foreign b ank or the p aren t of the foreign
bank.
(b) A g en c y m ean s any office or any
place of business of a foreign b ank
located in any sta te at w hich credit
balan ces are m aintained, checks are
paid, or m oney is lent, but a t w hich
deposits m ay not be accep ted from a
citizen or resident of the U nited States.
Obligations shall not b e considered
credit balan ces unless they:
(1) A re incidental to, or arise out of
the exercise of, other law ful banking
powers;
(2) A re to serve a specific purpose;
(3) A re not solicited from the general
public;
(4) A re not used to p ay routine
operating expenses in the U nited States
such as salaries, rent, or taxes;
(5) A re w ith d raw n w ithin a
reaso n ab le period of time after the
specific purpose for w hich they w ere
placed has b een accom plished; and
(6) A re d raw n upon in a m ann er
reaso n ab le in relation to the size and
nature of the account.
(c) B anking subsidiary, w ith respect
to a specified foreign bank, m ean s a
b an k that is a subsidiary as the term s
ba n k a n d su b sid ia ry are defined in
section 2 of the BHC A ct (12 U.S.C.
1841).
(d) B ranch m eans any place of
business of a foreign b an k located in
any state at w hich deposits are
received.
(e) C hange th e sta tu s of a n office
m eans convert a rep resen tativ e office
into a b ran c h or a n agency, o r convert
an agency into a branch.
(f) C om m ercial len d in g co m p a n y
m eans an y organization, oth er th an a
ban k or a n organization operating un der
section 25 of the FRA (12 U.S.C. 601604a), organized un der the la w s of any
state, that m aintains credit b alan c es
perm issible for an agency a n d engages
in the bu sin ess of m aking com m ercial
loans. C om m ercial len d in g co m p a n y
includes any com pany ch a rtered under
Article XII of the banking law of the
State of N ew York.
(g) C om ptroller m ean s the Office of
the Com ptroller of the Currency.
(h) C ontrol h a s the sam e m eaning
assigned to it in section 2 of the BHC
A ct (12 U.S.C. 1841), an d the term s
co n tro lled an d con trolling shall be
construed consistently w ith the term
control.
(i) D om estic branch m eans any office
or any place of business of a foreign
ban k located in any sta te th at m ay
accept dom estic deposits a n d deposits
that are incidental to or for the purpose
of carrying out transaction s in foreign
countries.
(j) A foreign b an k engages d ire ctly in
th e b u sin ess o f b a nking o u tsid e o f th e
U nited S ta te s if the foreign b ank
engages directly in banking activities
usual in connection w ith the business of
banking in the countries w here such
foreign b an k is organized or operating.
(k) To e sta b lish m ean s to:
(1) O pen an d conduct business
through a n office;
(2) Assum e, through merger, the
operations of a n office that is open an d
conducting business;
(3) A cquire an office through the
acquisition of a subsidiary w here such
subsidiary w ould cease to operate in the
sam e corporate form following the
acquisition;
(4) Change the status of an office; or
(5) Relocate an office from one state
to another.
(1)
F ederal agency, fe d e ra l branch,
sta te a g en cy a n d sta te branch h ave the
sam e m eanings as in section 1 of the
IBA (12 U.S.C. 3101).
(m) Foreign b a n k m eans an
organization that is organized un der the
law s of a foreign country an d that
engages directly in the business of
banking. T he term fo reig n b a n k does not
include central b an k s of foreign
countries th a t are not engaged in a
com m ercial banking business in the
U nited States.
(n) Foreign ba n kin g organization
m eans a foreign b an k (as defined in
section 1(b)(7) of the IBA (12 U.S.C.
3101(b)(7)) that operates a branch,
agency or com m ercial lending com pany
subsidiary in the U nited S tates or that
controls a b an k in the U nited States,
an d an y com pany of w hich such foreign
b an k is a subsidiary.
(0) H om e country, w ith respect to a
foreign bank, m eans the country in
w hich the foreign b an k is ch artered or
incorporated.
(p) H om e co u n try supervisor, w ith
resp ect to a foreign bank, m eans the
governm ental entity o r entities in the
foreign b an k 's hom e country w ith
responsibility for the supervision and
regulation of the foreign bank.
(q) L icensing a u th o rity m eans:
(1) W ith respect to an application to
estab lish a sta te b ranch or state agency
of a foreign bank, the relevant state
supervisor;
(2) W ith respect to a n application to
estab lish a federal b ran ch or federal
agency, the Comptroller.
(r) O ffice or o ffice o f a foreign b a n k
m eans any branch, agency,
representative office, or com m ercial
lending com pany subsidiary of a foreign
ban k in the U nited States.
(s) T he p a re n t of a foreign bank
m eans any com pany of w hich the
foreign b an k is a subsidiary; the
im m ed ia te p a re n t of a foreign b ank is
the com pany of w hich the foreign b an k
is a direct subsidiary; an d the u ltim a te
p a re n t of a foreign b an k is the paren t of
the foreign b an k th at is not the
subsidiary of any other company.
(t) R e le v a n t sta te su p erviso r m eans
the state entity that is authorized to
supervise an d regulate a sta te branch,
sta te agency or com m ercial lending
com pany.
(u) R ep re se n ta tiv e o ffice m ean s an
office that:
(1) Engages in rep resen tatio nal and
adm inistrative functions, such as
soliciting n ew bu siness or acting as
liaison b etw e en the foreign b an k ’s h ead
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
office an d custom ers in the U nited
States; and
(2) Does not h av e authority to m ake
any business decision for the account of
the foreign b a n k it represents, including
contracting for a n y deposit or deposituke liability on b eh alf of the foreign
bank.
(v) S ta te m ean3 an y sta te of the
United S tates or the District of
Columbia.
(w) S u b sid ia ry m ean s any
organization 25 percent or m ore of
whose voting sh ares is directly or
indirectly ow ned, controlled or held
w ith p ow er to vote b y a foreign banking
organization, or an y organization th at is
otherw ise controlled or capable of being
controlled by a foreign banking
organization.
(iii) The B oard is given reaso n ab le
a dvan ce notice of the proposed
acquisition or merger, an d each of the
relev an t foreign b an k s com mits in
w riting to abide b y the B oard’s decision
on the application, including, if
necessary, to term inate the activities of
any U.S. office as required by the Board.
(3) N o tifica tio n o f change in
ow n ersh ip o r co n tro l A foreign b an k
w ith a U.S. office shall notify the Board
in writing w ithin 10 days of a change in
its ow nership or control w here it is
acquired or controlled by ano th er
foreign b an k or com pany a n d the foreign
ban k w ith a U.S. office continues to
op erate in the sam e corporate form as
prior to the change in o w nership or
control.
(4) T ransactions su b ject to approval
8.
Sections 211.25 through 211.30 are u n d er R egulation Y. S ubpart B of the
a d d e d to read as follows:
B oard's Regulation Y (12 CFR 225.11
through 225.14) governs the acquisition
§211.25 Approval of offices of foreign
by a foreign b a n k or foreign banking
banks.
organization of direct or indirect
(a) B oard appro va l o f o ffic e s o f
ow nership or control of an y voting
fo reign b a n ks—{1} P rior B oard
securities of a b a n k or b a n k holding
approval.
com pany in the U nited S tates if the
(1) Except as otherw ise provided in
acquisition results in the foreign b a n k or
parag raph (a)(2) of this section, a foreign
foreign banking organization’s
bank shall o btain the approval of the
ow nership or control of m ore th a n 5
Board before it establishes a branch,
percent of an y c lass of voting securities
agency, rep resentative office or
of a U.S. b a n k or b an k holding com pany,
com m ercial lending com pany subsidiary
including through acquisition of a
in the U nited States.
foreign banking organization that ow ns
(ii) Except as otherw ise provided in
or controls m ore than 5 percen t of any
paragraph (a)(2) of this section, a foreign
class of the voting securities of a U.S.
b an k shall o btain the B oard's prior
approval before it acquires ow nership or b an k or b a n k holding com pany.
(b) P rocedures fo r a pp licatio n—(1)
control of:
Filing application. A n application for
(A) A com m ercial lending com pany,
the Board's prior ap prov al p u rsu an t to
or
this section shall be filed in the m an n er
(B) A foreign b a n k th at ow ns or
prescribed by the Board.
controls a com m ercial lending com pany
(2)
P ublication req u irem en t—(i) In
in the U nited S tates w h ere the acquired
general. E xcept w ith resp ect to a
foreign b an k w ould cease to operate in
proposed tran saction w here more
the sam e corp orate form following the
extensive notice is required b y statu te
acquisition.
or as otherw ise provided in p aragrap hs
(2) A fte r-th e-fa c t B o ard approval.
(b)(2)(ii) an d (b)(2)(iii) of this section, the
W here a foreign b an k p roposes to
app licant shall publish a notice in a
establish an office in the U nited S tates
n ew sp a p er of general circulation in the
through an acquisition of, or m erger
with, a foreign b an k w ith a n office in the com m unity in w hich the ap plicant
proposes to engage in business. The
U nited States, the Board m ay, in its
notice shall sta te th at an application is
discretion, allow the acquisition or
being filed as of the d ate of the notice
m erger to p ro ceed before a n application
a n d provide the nam e of the applicant,
to establish a n office has b een filed or
the subject m atter of the application,
a c te d upon u nd er this section w here:
an d the d ate b y w hich com m ents are
(i) The foreign b an k or b an k s will not
ow n or control more th an five percent of due p ursu an t to parag rap h (b)(3) of this
section. The ap plicant shall furnish w ith
a n y class of the voting securities of, or
its application to the Board a copy of the
control, a U.S. bank;
(ii) Prior to consum m ation of the
notice, the d a te of its publication, an d
acquisition or merger, ea ch o f the
the nam e a n d ad d re ss of the n ew sp a p er
in w hich it w as published.
relev ant foreign b an k s com m its in
w riting to com ply w ith the procedures
(ii) E xception. T he Board m ay m odify
to r an application u nd er this section
the publication requirem ent of
w ithin a rea so n ab le period of time or
parag raph (b)(2)(i) of this section in
has already filed a n application; and
app ro priate circum stances.
12999
(iii) F ederal branch or fe d e ra l agency.
in the case of a n application to establish
a federal b ran ch or federal agency,
com pliance w ith the publication
procedures of the Com ptroller shall
satisfy the publication requirem ent of
this section. Com m ents regarding the
application should be sent to the Board
an d the Comptroller.
(3) W ritten com m ents. W ithin 30 days
after publication as required in this
section, any person may subm it to the
Board w ritten com m ents an d d a ta on an
application. T he Board m ay extend the
30-day com m ent period if the Board
determ ines th a t additional relevant
inform ation is likely to b e provided by
interested person s or if other
extenuating circum stances exist.
(4) A ction on app lication —(i) Tim e
lim its. The Board shall act on an
application from a foreign b a n k w ithin
60 ca le n d ar day s after the foreign b an k
h as been notified th at its application h as
been accepted, unless the Board
determ ines that the public interest will
be served by providing additional time
to review the application an d notifies
the applicant th at the 60-day period is
being extended.
(ii) A d d itio n a l inform ation. The Board
m ay request any inform ation in addition
to that supplied in the application w hen
the Board believes th at additional
inform ation is n ecessary for its decision.
(5) C oordination w ith o ther
regulators. U pon receipt of an
application by a foreign b an k under this
section, the Board shall prom ptly notify,
consult with, an d consider the view s of
the licensing authority.
(c)
Sta n d a rd s fo r approval—(1)
M a n d a to ry stan dards— (i) A p p lica b le
standards. As specified in section 7(d) of
the IBA (12 U.S.C. 3105(c)), the Board
may not approve an application to
establish a bran ch or a n agency, or to
acquire ow nership or control of a
com m ercial lending com pany, unless it
determ ines that:
(A) T he foreign b an k an d any parent
foreign b an k engage directly in the
business of banking outside the United
S tates an d are subject to com prehensive
supervision or regulation on a
consolidated b asis by the appropriate
authorities in their hom e countries; an d
(B) The foreign b ank h a s furnished to
the Board the inform ation that the Board
requires in o rder to assess the
application adequately.
(ii) B a sis fo r determ inin g
co m p reh en sive su p ervisio n or
regulation on a co n so lid a ted basis. In
determ ining w heth er a foreign b a n k a n d
an y p are n t foreign b an k is subject to
com prehensive supervision or regulation
on a consolidated basis, the Board will
13000
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
determ ine w hether the foreign b an k is
supervised or regulated in such a
m ann er that its hom e country supervisor
receives sufficient inform ation on the
w orldw ide operations of the foreign
b an k (including the relationship of the
ban k to any affiliate) to a ssess its
overall financial condition an d
com pliance w ith law an d regulation. In
making such a determ ination, the Board
shall assess, am ong other factors, the
extent to w hich the home country
supervisor:
(A) Ensures th at the foreign bank has
adequ ate procedures for monitoring and
controlling its activities worldwide:
(B) O btains inform ation on the
condition of the foreign b an k an d its
subsidiaries and offices outside the
home country through regular reports of
exam ination, audit reports, or otherwise;
(C) O btains inform ation on the
dealings and relationship betw een the
foreign b an k and its affiliates, both
foreign and domestic:
(D) Receives from the foreign bank
financial reports that are consolidated
on a w orldw ide basis, or com parable
inform ation that perm its analysis of the
foreign b an k ’s financial condition on a
w orldw ide, consolidated basis;
(E) Evaluates prudential standards,
such as capital adequacy an d risk asset
exposure, on a w orldw ide basis.
(2)
D iscretion ary standards. In acting
on any application un der this subpart,
the Board m ay take into account:
(i) W hether the appropriate
authorities in the home country of the
foreign b ank hav e consented to the
proposed establishm ent of a branch,
agency or com m ercial lending com pany
subsidiary;
(ii) The financial resources of the
foreign b ank (including the foreign
b a n k ’s capital position, projected capital
position, profitability, level of
indebtedness, an d future prospects) an d
the condition of any U.S. office of the
foreign bank;
(iii) The m anagerial resources of the
foreign bank, including the com petence,
experience, an d integrity of the officers,
directors, and principal shareholders;
m anagem ent’s experience an d capacity
to engage in international banking; and
the record of the foreign b ank an d its
m anagem ent of complying w ith law s
an d regulations, an d of fulfilling any
com m itm ents to, an d any conditions
im posed by, the Board in connection
w ith any prior application;
(iv) W heth er the foreign b an k 's home
country supervisor an d the home
country supervisor of any p aren t of the
foreign b an k share m aterial inform ation
regarding the operations of the foreign
ban k w ith other supervisory authorities;
(v) W heth er the foreign ban k has
provided the Board w ith adequ ate
assurances th a t inform ation will be
m ade available to the Board on the
operations or activities of the foreign
ban k an d any of its affiliates that the
Board deem s n ec essary to determ ine
an d enforce com pliance w ith the IBA,
the BHC Act, an d other applicable
federal banking statutes; these
assurances shall include a statem ent
from the foreign b an k describing any
law s th at w ould restrict the bank or any
of its p aren ts from providing information
to the Board; and
(vi) W hether the foreign b ank an d its
U.S. affiliates are in com pliance w ith
applicable U.S. law, an d w h eth er the
applicant h as estab lished ad eq uate
controls an d procedures in each of its
offices to ensure continuing com pliance
w ith U.S. law, including controls
directed to detection of m oney
laundering a n d other u nsafe or unsound
banking practices.
(3) A d d itio n a l fa cto r. In acting on an
application, the Board m ay consider the
needs of the com m unity an d the history
of operation of the foreign b an k and its
relative size in its hom e country,
provided, how ever, th at the size of the
foreign bank shall not be the sole factor
in determ ining w h eth e r a n office of a
foreign b an k should b e approved.
(4) E sta b lish m en t o f conditions.
Consistent w ith the m andatory
sta n d ard s for approval, the Board m ay
im pose such conditions on its approval
as it deem s necessary, including a
condition requiring future term ination of
any activities b a s e d on a n inability of
the foreign b a n k to provide inform ation
on the activities of itself or its affiliates
n ecessary for the Board to determ ine
and enforce com pliance w ith U.S.
banking laws.
(d) R ep re se n ta tiv e o ffice s.— (1)
S ta n d a rd fo r approval. As specified in
section 10(a) of the IBA (12 U.S.C.
3107(a)), in acting on the application of a
foreign b an k to estab lish a
rep resentative office, the Board shall
take into account to the ex tent it deem s
appropriate the sta n d ard s for approval
set out in paragrap h (c) of this section.
(2) A d d itio n a l requirem ents. The
Board m ay im pose any additional
requirem ents th a t it determ ines to be
n ecessary to carry out the purposes of
the IBA.
(e) P reservation o f e x istin g authority.
Nothing in this su bp art shall be
construed to relieve any foreign b an k or
foreign banking organization from any
otherw ise applicable requirem ent of
federal or state law, including any
applicable licensing requirem ent.
§211.26 Termination of an office of a
foreign bank.
(a) G rounds fo r term ination. As
specified in section 7(e) and 10(b) of the
IBA (12 U.S.C. 3105(d), 3107(b)), the
Board m ay order a foreign bank to
term inate the activities of its
rep resentative office, state branch, state
agency, or com mercial lending com pany
subsidiary if the Board finds that:
(1) The foreign b an k is not subject to
com prehensive supervision or regulation
on a consolidated b asis by the
appropriate authorities in its home
country in accord ance with §
211.25(c)(l)(ii); or
(2)(i) T here is rea so n ab le cause to
believe that the foreign b an k or any of
its affiliates has com m itted a violation
of law or engaged in a n u nsafe or
unsound banking practice in the United
States; an d
(ii) As a result of such violation or
practice, the continued operation of the
foreign b an k ’s representative office,
sta te branch, sta te agency, or
com m ercial lending com pany subsidiary
w ould not be consistent w ith the public
interest or w ith the purposes of the IBA,
the BHC Act, or the Federal Deposit
Insurance A ct (FDIA) (12 U.S.C. 1811 e t
seq.).
(b) Factor. In m aking its findings
und er this section, the Board m ay take
into account the needs of the community
as well as the history of operation of the
foreign b an k an d its relative size in its
home country, provided, how ever, th at
the size of the foreign b an k shall not be
the sole determining factor in a decision
to term inate an office.
(c) C onsultation w ith relev a n t sta te
supervisor. Before issuing a n order
term inating the activities of a state
branch, sta te agency, or commercial
lending com pany subsidiary under this
section, the Board shall request and
consider the view s of the relev ant state
supervisor.
(d) Term ination pro cedures.— (1)
N o tice a n d hearing. Except as otherw ise
provided in paragrap h (d)(3) of this
section, a n order issued u n d er this
section shall be issued only after notice
to the relevant sta te supervisor an d the
foreign b an k an d an opportunity for a
hearing.
(2) P rocedures fo r hearing. H earings
under this section shall be conducted
pu rsu ant to the B oard’s Rules of Practice
for H earings (12 CFR part 263).
(3) E x p e d ite d procedure. The Board
m ay act w ithout providing an
opportunity for a hearing if it determ ines
that expeditious action is n ecessary in
order to protect the public interest.
W hen the Board finds that it is
n ec essary to act w ithout providing an
Federal Register / Vol. 57, 'No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
opportunity for a hearing, the Board
m ay, solely in its discretion, provide the
foreign b an k th at is the subject of the
term ination order w ith notice of the
intended term ination order, grant the
foreign b an k an opportunity to p resent a
w ritten subm ission opposing issuance of
the order, or take any other action
designed to provide the foreign bank
w ith notice an d an opportunity to
p resen t its view s concerning the order.
(e) T erm ination o f fe d e ra l branch or
fe d e ra l agency. The Board m ay transm it
to the Com ptroller a recom m endation
th a t the license of a federal b ran ch or
federal agency b e term inated if the
Board h as reaso n ab le cau se to believe
that the foreign b an k or any affiliate of
the foreign b an k h a s engaged in conduct
for w hich the activities of a sta te branch
or state agency m ay b e term inated
pursu an t to this section.
(f) V o lun tary term ination. A foreign
b an k shall notify the Board at le ast 30
d ay s prior to term inating the activities
of any office. Notice p ursu an t to this
parag raph is in addition to, an d does not
satisfy, an y other federal or state
requirem ents relating to the term ination
of a n office or the requirem ent for prior
notice of the closing of a b ranch
pursu an t to section 39 of the FDIA (12
U.S.C. 1831p).
§211.27 Examination of offices and
affiliates of foreign banks.
(a) C onduct o f exam ina tions. The
Board m ay exam ine an y branch, agency,
or rep resentativ e office of a foreign
bank, any com m ercial lending com pany
or b an k controlled by one or m ore
foreign b an k s or one or m ore foreign
com panies th at control a foreign bank,
an d any other office or affiliate of a
foreign b ank conducting b usin ess in any
state.
(b) C oordination o f exa m in atio ns. To
the extent possible, the B oard shall
coordinate its exam inatio ns of the U.S.
offices an d U.S. affiliates o f a foreign
ban k w ith the app rop riate supervisory
authorities, including sim ultaneous
exam inations of such U.S. offices and
U.S. affiliates of a foreign bank.
(c) A n n u a l o n -site exa m in atio ns. Each
branch, agency, or com m ercial lending
com pany subsidiary of a foreign b ank
shall be exam ined a t le ast once during
each 12-month period (beginning on the
d ate the m ost recent exam ination of the
office ended) by the Board or an
appropriate supervisory authority.
(d) E xa m in atio n o f re p rese n ta tive
offices. R epresentative offices shall be
exam ined in the m an ner a n d w ith the
frequency determ ined by the Board.
(e) D efinition. For p urposes of this
section, appropriate su p e rviso ry
a u th o rities m ean s the Federal Deposit
Insurance Corporation, if a n office or
affiliate of a foreign b an k accep ts or
m aintain s insured deposits; the
Comptroller, if an office or affiliate of a
foreign b an k is licensed by the
Comptroller; a n d the relevant state
supervisor, if the office or affiliate of a
foreign b an k is state-licensed.
§211.28 Disclosure of supervisory
Information to foreign supervisors.
(a) D isclosure b y Board. The Board
m ay disclose inform ation o btain ed in
the course of exercising its supervisory
or e xam ination authority to a foreign
b a n k regulatory or supervisory authority
if the Board determ ines th a t disclosure
is ap pro priate for b ank supervisory or
regulatory p urposes a n d will not
prejudice the interests of the United
States.
(b) C o n fid en tia lity requirem ent.
Before m aking an y disclosure of
inform ation p u rsu an t to paragrap h (a) of
this section, the Board shall obtain, to
the exten t necessary, the agreem ent of
the foreign b a n k regulatory or
supervisory authority to m aintain the
confidentiality of such inform ation to
the ex tent p o ssib le u n d er applicable
law.
§211.29 Limitation on loans to one
borrower.
T he total loans a n d exten sio ns of
credit by all the sta te b ran ch es an d sta te
agencies of a foreign b a n k outstanding
to a single b orrow er a t one time shall be
aggregated w ith the to tal loans and
extensions of credit by all federal
b ran c h es a n d federal agencies of the
sam e foreign b a n k outstanding to such
b o rro w er a t the sam e time an d shall be
subject to the lim itations an d other
provisions of section 5200 of the Revised
S tatutes (12 U.S.C. 84), an d the
regulations prom ulgated thereunder, in
the sam e m ann er th a t extensions of
credit by a federal b ran ch or federal
agency are subject to section 4(b) of the
IBA (12 U.S.C. 3102(b)).
§211.30 Deposit Insurance requirement
for retail deposit taking by foreign banks.—
[Reserved]
PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL
1. T he authority citation for 12 CFR
p art 225 continues to re a d a s follows:
Authority: 12 U.S.C. 1817(j)(13), 1818,1831i,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3907,
3909, 3310, and 3331-3351.
2. Section 225.11 is am en ded by
adding a n ew p arag rap h (f) to read as
follows:
13001
§225.11 Transactions requiring Board
approval.
*
*
*
*
*
(f) T ransactions b y a foreign banking
organization. A ny tran sactio n described
in p aragrap hs (a) through (e) of this
section by a foreign banking
organization that involves the
acquisition of an interest in a U.S. b an k
or b an k holding com pany for w hich
application w ould b e required if the
foreign banking organization w ere a
b an k holding com pany.
3.
Section 225.12 is am ended by
adding a n ew p arag rap h (f) to rea d as
follows:
§225.12 Transactions not requiring Board
approval.
*
*
*
*
*
(f) A cq u isitio n o f a fo reign b anking
organization. The acquisition of a
foreign banking organization w here the
foreign banking organization does not
directly or indirectly ow n or control a
bank in the U nited States, unless the
acquisition is also by a foreign banking
organization an d otherw ise subject to §
225.11(f) of this subpart
PART 263—RULES OF PRACTICE FOR
HEARINGS
1. The authority citation for 12 CFR
p art 263 is revised to rea d as follows:
Authority: 5 U.S.C. 504; 12 U.S.C. 248, 324.
504. 505.1817(j), 1818,1828(c), 1847(b),
1847(d), 1884(b), 1972(2)(F), 3105, 3107, 3108.
3907. 3909:15 U.S.C. 21, 78o-4, 78o-5, and 78u2.
2. Section 263.50 is am ended by
removing the w ord “an d" at the end of
p arag rap h (b)(7), removing the period at
the end of paragrap h (b)(8) and adding
in its place a semi-colon, an d by adding
p arag rap h s (b)(9) and (b)(10) to read as
follows:
§263.50 Purpose and scope.
*
*
*
*
*
(b)‘ * *
(9) T erm ination of the activities of a
sta te branch, sta te agency, or
com m ercial lending com pany subsidiary
of a foreign b an k in the U nited States,
p u rsu an t to section 7(e) of the IBA (12
U.S.C. 3105(d)); and
(10) T erm ination of the activities of a
represen tativ e office of a foreign b an k in
the U nited States, p ursuan t to section
10(b) of the IBA (12 U.S.C. 3107(b)).
3. Section 263.51 is am en ded by
removing the period a t the end of
parag raph (b) an d adding in its place a
semi-colon and by adding the following
n ew p aragraph (c) to rea d as follows:
13002
Federal Register / Vol. 57, No. 73 / Wednesday, April 15, 1992 / Rules and Regulations
§263.51 Definition*.
*
*
*
*
*
(c) In stitu tio n has the sam e m eaning
a s th at assigned to it in § 263.4, and
shaft also include any foreign bank w ith
a representative office in the U nited
States.
PART 265—RULES REGARDING
DELEGATION OF AUTHORITY
1. The authority citation for 12 CFR
p art 265 is revised to rea d a s follows:
Authority: Section 11 ( i ) and (k) of the
Federal Reserve Act, (12 U.S.C. 243(>) and
(k)); and sections 7(c) and 15 of the
Internationa! Banking Act of 1978 (12 U.S.C.
3015(e), 3109).
2. Section 265.8 is am en ded by adding
p ara g ra p h (b)(2) to read as follows:
§265.6 Functions delegated to General
Counsel.
*
*
*
*
*
(b)* * *
(2} D isclosure to fo reign a uthorities.
To m ake the determ inations required for
disclosure of inform ation to a foreign
b an k regulatory o r supervisory
authority, an d to obtain, to th e extent
necessary, the agreem ent of such
authority to m aintain the confidentiality
of such inform ation to the extent
possible u n d er applicable law (12 CFR
211.28).
*
*
*
*
*
3. Section 265.7 is am en ded by adding
parag raph (d)(8) to r e a d as follows:
§265.7 Functions delegated to Director of
Division of Banking Supervision and
Regulation.
*
*
*
*
*
(d)* * *
(8) C onduct a n d coordination o f
exam ina tion s. T o authorize th e conduct
of exam inations of the U.S. offices and
affiliates of foreign ban k s u n d er section
7(c) an d 10(c) of the IBA (12 U.S.C.
3105(b), 3107(c)), an d w here ap propriate
to coordinate those exam inations w ith
exam inations of the Office of the
Com ptroller of the Currency, the F ederal
D eposit Insurance Corporation, an d the
relev ant sta te supervisors.
*
*
*
*
*
Board of Governors of the Federal Reserve
System, April 9 , 1992.
William W. Wiles,
Secretary o f the Board.
(FR Doc. 92-8681 Filed 4-14-02 8:45 am)
B IL U N tt COOE t t t f r O t *
