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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10622 "1
February 5, 1993
AMENDMENTS TO REGULATIONS K AND Y
— Final Rule Implementing the Foreign Bank Supervision
Enhancement Act of 1991
— Comments Requested by March 15 on
Representative Offices of Foreign Banks
To All State Member Banks, Bank Holding Companies,
Branches, Agencies, and Representative Offices of Foreign Banks, and
Edge and Agreement Corporations in the Second Federal Reserve District:
The following statem ent has been issued by the Board of Governors of the Federal Reserve
System:
T h e F ederal R e se r v e B oard has issu e d a fin a l ru le im p lem en tin g p o rtio n s o f th e F o reig n B ank
S u p e r v isio n E n h a n cem en t A ct o f 1 9 9 1 . T h e fin a l rule am en d s th e B o a rd ’s R eg u la tio n K (In tern ation al
B an k in g O p era tio n s) and R egu lation Y (B an k H old in g C o m p a n ies and C h a n g e in B ank C ontrol).
T h e ru le is e ffe c tiv e im m ed ia tely and rep laces an in terim regu lation is su e d in A p ril 1 9 9 2 .
T h e a m en d m en ts to R egu lation K refle c t the B o a r d ’s n ew au th ority to su p e r v ise and regu late
fo r e ig n ban k s that c o n d u c t or se e k to c o n d u c t a b an k in g b u sin e ss in th e U n ite d States.
T h e ru le req u ires that fo reig n ban k s se e k in g to c o n d u c t d irect b an k in g o p era tio n s in th e U n ited
States m u st be su b ject to c o m p r e h e n siv e su p e r v isio n b y their h o m e c o u n tr y a u th o rities on a
c o n so lid a te d basis.
T h e am en d m en t to R egu lation Y requires a fo reig n b an k in g o rgan ization to file an ap p lication
w ith th e B oard in order to acquire m ore than 5 p ercen t o f th e shares o f a U .S. ban k or bank h old in g
com pany.
T h e B oard a lso is req u estin g ad d ition al c o m m e n t on the d e fin itio n o f rep resen tative o ffic e and
th e ty p e s o f a c tiv itie s su ch an o ffic e m ay con d u ct.
T h e se c o m m e n ts m ust be r e c e iv e d by M arch 1 5 , 1 9 9 3 .
Enclosed — for the institutions addressed and others who m aintain sets of the B oard’s
regulations — is an excerpt from the Federal Register of January 2 8 , containing the text of the
am endm ents and the request for comments. Additional, single copies can be obtained at the Bank
(3 3 Liberty Street) from the Issues Division on the first floor, or by calling the Circulars Division
(Tel. No. 2 1 2 -7 2 0 -5 2 1 5 or 5216 ).
Com ments, regarding the definition or activities of representative offices of foreign banks,
should be subm itted by March 15 and should be sent to the Board, as indicated in the notice.
E. G e r a l d C o r r i g a n ,
President.
Thursday
January 28, 1993
Vol. 58, No. 17
Pp. 6348-6363
Regulations K and Y;
Docket No. R-0754
Final Rule Implementing the
Foreign Bank Supervision
Enhancement Act of 1991
Effective January 28, 1993; Comments
invited through March 15, 1993
[Enc. Cir. No. 10622]
6 348
Federal Register / Voi. 58, No. 17 / Thursday, January 28, 1993 / 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 Governors of the
Federal Reserve System.
ACTION: Final rule and request for
comment.
This final rule implements
portions of the Foreign Bank
Supervision Enhancement Act of 1991
(FBSEA), Subtitle A of Title II of the
SUMMARY:
Federal Deposit Insurance Corporation
Improvement Act of 1991, which made
changes to the authority of the Board of
Governors of the Federal Reserve
System (Board) under the International
Banking Act of 1978 (IBA). These
changes generally provided the Board
with new authority to approve the
establishment of U.S. offices by foreign
banks and to regulate and supervise the
U.S. operations of foreign banks. The
final rule replaces the previous interim
rule and reflects the Board’s authority
with respect to the supervision and
regulation of foreign banks that conduct
or seek to conduct a banking business in
the United States. The Board has also
requested additional comment on
aspects of the final rule concerning
representative offices of foreign banks.
Lastly, the final rule amends Regulation
Y to reflect the requirement that a
foreign banking organization must file
an application with the Board under the
Bank Holding Company Act (BHC Act)
in order to acquire more than 5 percent
of the shares of a U.S. bank or bank
holding company.
DATES: Effective Date. Effective January
28,1993. Comment Date. Comments are
requested and must be submitted by
March 15,1993.
ADDRESSES: Comments, which should
refer to Docket No. R-0754, may be
mailed to the Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551, to the attention of Mr.
William W. Wiles, Secretary. Comments
addressed to the attention of Mr. Wiles
may be delivered to the Board’s
mailroom between 8:45 am and 5:15
pm, and to the security control room
outside of those hours. Both the
mailroom and the security control room
are accessible from the courtyard
entrance on 20th Street between
Constitution Avenue and C Street, NW.
Comments may be inspected in room B1122 between 9 am and 5 pm, except as
provided in § 261.8 of the Board’s Rules
Regarding the Availability of
Information. 12 CFR 261.8.
FOR FURTHER INFORMATION CONTACT:
Kathleen M. O’Day, Associate General
Counsel (202/452-3786), Ann E.
Misback, Senior Attorney (202/4523788), Margaret E. Miniter, Attorney
(202/452-3900), or John W. Rogers,
Attorney (202/452-2798), Legal
Division; Michael G. Martinson,
Assistant Director (202/452-3640), or
Betsy Cross, Manager (202/452-2574),
Division of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System. For the hearing
impaired only, Telecommunication
Device for the Deaf (TDD), Dorothea
Thompson (202/452-3544), Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC 20551.
SUPPLEMENTARY INFORMATION: The
FBSEA (Pub. L 102-242,105 Stat. 2236,
2286-2305) provided the Board with
new authority to supervise and regulate
foreign banks that operate or seek to
operate in the United States. As the
FBSEA became effective upon
enactment, the Board issued an interim
rule on April 15,1992, with a request
for public comments. 57 FR 12992
(April 15,1992). In taking this action,
the Board stated that it would consider
revisions to the interim rule as
appropriate and on the basis of the
comments received. The comment
period ended on June 15,1992.
The Board received 19 public
comments on the regulation. Comments
were submitted by 7 foreign banking
organizations, 3 law firms, 6 trade
associations, a state banking supervisor,
an association of state banking
supervisors, and a foreign banking
supervisor. The Board has considered
the comments and, as a result of this
further review, has adopted several
provisions in this final rule that differ
from the provisions contained in the
interim rule.
The final rule amends Regulation K in
a number of areas, including definitions,
requirements for the establishment of a
branch, agency, commercial lending
company, or representative office of a
foreign bank in the United States
(collectively, “offices”), examination of
offices and affiliates of foreign banks,
termination of activities of foreign
banks, and limits on lending by a state
branch or state agency to a single
borrower. The final rule also amends
both Regulation K and Regulation Y to
reflect the requirement in the FBSEA
that a foreign banking organization must
apply under section 3 of the BHC Act to
acquire more than 5 percent of a U.S.
bank or bank holding company. Lastly,
the final rule reserves a section for the
future implementation of the provision
of the FBSEA that governs the activities
of state branches and agencies.
Comments were received on each of
these, and other, areas and are discussed
below.
Establishment of Foreign Bank Offices
Standards for Approval of Applications
to Establish an Office
The interim rule revised Regulation K
to implement the mandatory and
discretionary standards in the FBSEA
for Board approval of an application by
a foreign bank to establish a branch,
agency, or commercial lending
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
:ompany. These standards are all
lisoretionary for approval of an
ipplication to establish a representative
jffiee. The comments generally
upported the formulation of these
tandards, and focused on the means for
)roving that the standards are met.
Mandatory Standard of Comprehensive
Supervision on a Consolidated Basis
The final rule adopts the standard
)rovided in the interim rule for
letermining whether a foreign bank is
subject to comprehensive supervision or
egulation on a consolidated basis by its
lome country supervisor. This standard
s met if the bank is regulated in such
i manner as to allow its home country
supervisor to receive sufficient
nformation on the worldwide
)perations of the foreign bank
including its dealings with affiliates) to
issess the bank’s overall financial
:ondition and compliance with law.
The final rule also adopts five factors
bat, among other things, the Board will
:onsider when evaluating this standard.
Eight comments supported the
standard as providing the flexibility to
iccommodate different regulatory
systems, with one comment opposing
he standard as vague. The commenters
ilso recommended alternatives to the
Board’s case-by-case determinations
underfills standard, which they
opposed as burdensome. Finally, certain
:ommenters requested two substantive
additions, one to permit entry by foreign
lanks from countries that are
developing, but do not yet have, systems
for supervising a bank on a consolidated
aasis, and the other to acknowledge that
many countries do not regulate bank
holding companies or their nonbank
subsidiaries.
Alternatives to case-by-case
determinations. The commenters
Dpposing case-by-case determinations
under the comprehensive supervision
standard proposed alternatives to
requesting information from each
foreign bank applicant. Five
commenters suggested exclusive use of
internal resources or consultations with
the home country supervisor as more
reliable, less burdensome, and,
according to one commenter, consistent
with the Basle Committee Minimum
Standards for the Supervision of
International Banking Groups and Their
Cross-Border Establishments (June 1992)
(Basle Minimum Standards). Four other
commenters recommended granting
country-wide approval through the first
application from each country or
publishing a list of countries presumed
to exercise comprehensive supervision
in all cases.
The comprehensive supervision
standard is a bank-specific
determination that, in general, does not
permit blanket approval based on
categories of countries or general
information on bank supervision. Some
countries supervise all banks in the
same manner, and a decision on a bank
from such a country could be applicable
to applications by other banks from the
same country; such subsequent
applications would focus on the actual
supervision of the bank and any
material changes or differences in such
supervision since the approval of the
first application. Other countries may
tailor their supervision of banks
according to the type or organizational
structure of the bank. For this reason,
the FBSEA requires evaluation of the
supervision of a particular bank, not
simply the general supervisory system
of the bank’s home country. Thus, while
general country materials are usefril, the
Board cannot determine if a specific
bank is subject to comprehensive
supervision without considering the
particular supervisory and regulatory
revisions that apply to that foreign
ank applicant. Accordingly,
Information from the foreign bank on its
particular supervisory process forms an
integral part of the record. Exclusive use
of consultations with the home country
supervisors or internal Board resources
also poses problems. Formal
consultations take time, and setting up
procedures for relying solely on
govemment-to-govemment
communications would exacerbate
delays and further prolong processing.
In making its assessments, the Board
will continue to use each of the methods
suggested by the commenters. In
addition, the Board expects that, as it
acts on applications, the information
already reviewed regarding
comprehensive supervision in particular
countries may be used to make
judgments without requiring significant
additional input from similar applicants
chartered in file same country. Once a
determination is made for an applicant
from one country, a subsequent
applicant bank may specify the extent to
which it is supervised in the same
manner as an applicant previously
considered by tne Board, and identify
any material differences or changes in
the supervision of the applicant. The
Board believes that this approach
addresses many of the concerns
regarding case-by-case determinations
while remaining within the prescribed
statutory framework.
Countries developing comprehensive
supervision; supervision of affiliates.
Three comments recommended
permitting banks chartered in countries
6349
that are developing systems for
exercising comprehensive supervision
to enter the U.S. market through
branches, agencies, or commercial
lending companies. In support of this
approach, some comments dted the
Basle Minimum Standards which '
contemplate permitting a bank from a
country that is seeking to implement a
system for consolidated supervision to
establish branches or banks in a host
country. Suggestions included allowing
approval of an application by a foreign
bank chartered in a country that is
taking significant steps to provide
comprehensive supervision or giving
such a country three years to meet the
comprehensive standard. Another
commenter viewed the FBSEA as
permitting a foreign bank from a country
developing comprehensive supervision
to enter through a banking office if the
foreign bank voluntarily provides to
home country regulators the information
the supervisor would need in order to
exercise comprehensive supervision
over the applicant.
The Board strongly supports efforts to
implement systems for exercising
comprehensive, consolidated
supervision of banks. The FBSEA,
however, does not permit foreign banks
to enter file United States if such banks
are not supervised by a home country
authority on a consolidated basis, even
if the authority is in the process of
developing such a system. A foreign
bank from such a country, however,
could be authorized to open a
representative office, if the Board finds
all other applicable factors to be
satisfactory.
Although the United States subscribes
to the Basle Minimum Standards, these
are only minimum standards, and the
FBSEA imposes a higher threshold.
With regard to self-imposed reporting
practices, the Board believes that
comprehensive supervision necessarily
entails active regulation by a home
country supervisor, whether legally
compelled or otherwise. Such a
standard is not met solely through
receipt of unsolicited information from
a bank that self-imposes reporting to its
supervisors.
Certain commenters asked the Board
to recognize that some countries do not
regulate holding companies, other
owners of banks, or nonbanking
subsidiaries of banks. The Board notes
that the general standard is established
in the context of consolidated
supervision of the bank itself. With
regard to sister or parent companies of
the bank, the comprehensive
supervision standard focuses on how
the supervisor reviews transactions
between a foreign bank and its affiliates,
6350
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
rather than on direct supervision of
these companies.
Factors indicating comprehensive
supervision. Hie comments on the
illustrative factors that the Board
reviews in making comprehensive
supervision determinations generally
supported an objective review without
unduly favoring banks of a certain size
or from certain countries. The Board
reaffirms its support fen this position.
The Board also wishes to emphasize
that the factors are simply indicia of
comprehensive, consolidated
supervision. They are not mandatory
standards unto themselves.
With respect to comments on the
specific favors, one commenter
requested that the Board acknowledge
that there are different standards for the
evaluation of capital among countries.
The Board notes that it provided
guidelines for evaluating different
capital standards in the Capital
Equivalency Report, issued jointly with
the Department of the Treasury
(Treasury) on June 19,1992, and that
the Board intends to apply these
guidelines to assure capital equivalency
between foreign banks and domestic
banking organizations. The Board also
will consider the principles of
consolidation that are applied in the
home country of the foreign bank in the
context of reviewing comprehensive
supervision. Finally, the Board notes
that comprehensive supervision by
home country authorities contemplates
an ability of the home country
supervisor to conduct a broad review of
a foreign bank’s compliance with law.
Discretionary Standards
The FBSEA provides several other
standards that the Board may consider
in acting on an application, which are
further elaborated in the final rule.
These standards permit the Board to
take into account: whether home
country authorities have consented to
the establishment of the office; the
financial and managerial resources of
the applicant bank; whether the bank
has made adequate assurances on the
provision of information; and the bank’s
record of compliance with U.S. law. The
comments briefly discussed managerial
resources, and focused primarily on the
assurances standard.
Managerial resources. Four comments
suggested that, in order to avoid
processing delays, the Board should
limit review under the managerial
resources standard to an evaluation of
only these principals of the foreign bank
that participate in its management or
operations. The Board reiterates that it
will assess the competence and
experience of all such individuals and
any other persons that participate in
management or otherwise significantly
influence the foreign bank’s operations.*
Adequate assurances. The Board
received four comments on the standard
that considers whether the foreign bank
applicant has provided the Board with
adequate assurances of access to
information on its operations and
activities, and on those of its affiliates,
that is deemed necessary to review
compliance with federal banking laws
("necessary information”). The Board’s
procedures used in processing
applications under die interim rule
required applicants to describe any laws
that would restrict the bank and any
parent of the bank in their ability to
provide information to the Board. The
interim rule permitted the Board to
terminate an office in the future if a
bank is unable to provide necessary
information due to these laws. The
Preamble to the interim rule also stated
that the Board may approve an
application even where there may be
legal impediments to providing
privileged information, if there are no
suspected violations of law, and subject
to a condition that permits termination
of the U.S. activities of the foreign bank
should material impediments to
monitoring the foreign bank’s U.S.
operations arise.
The comments generally supported
this approach as appropriate and
flexible but, as with the comprehensive
supervision standard, recommended
alternative means for obtaining such
assurances in lieu of case-by-case
review. All of the comments
recommended consultation with the
home country supervisor as the primary
or, according to one commenter,
exclusive means of evaluating the
standard. Two of these comments
described the interim rule as
inconsistent with the Revised Basle
Concordat (April 1990), which
contemplates such consultation. Several
comments also recommended that the
Board develop a list of countries whose
laws do not materially impede access to
information. Other comments said the
Board should limit its consideration to
the laws of the home country. Finally,
the commenters were concerned that
banks cannot commit to provide
customer information.
The Board will continue to consult
with other bank supervisors on
disclosure of information to promote
coordination and to reduce burdens on
foreign banks. The Board has also
narrowed the information requested
under the adequate assurances standard
to require descriptions of impediments
that arise only in the jurisdictions in
which a foreign bank or its parents have
material operations. Operations in any
particular jurisdiction generally will be
considered material if the direct and
indirect activities in that country, in the
aggregate, account for 5 percent or more
of the consolidated, worldwide assets of
the foreign bank or its ultimate parent.
The Board expects this change to reduce
informational burdens for those
applicants with complex organizational
structures and worldwide operations.
With respect to comments on the
scope of assurances and the laws
reviewed, the Board confirms that this
standard primarily addresses assurances
of access to supervisory information.
The Board generally is not concerned
with access to specific customer account
information; such information would be
relevant only as it may relate to the
bank’s compliance with U.S. banking
laws or specific supervisory matters.
The Board disagrees, however, with one
request to state that a foreign bank need
only commit to provide information that
is not subject to bank secrecy laws.
Secrecy laws differ in scope and the
Board will consider their content in
each case.
The commenters that questioned the
need for any description of secrecy
laws, other than those of the home
country, argued that secrecy laws
generally apply only to customer
account information and that such
information is usually not necessary to
determine compliance with U.S. law.
The FBSEA provides for review of
whether a bank has provided "adequate
assurances” that it will provide
necessary information. As necessary
information may be subject to disclosure
under laws other than those of the home
country, a review of the adequacy of any
assurances is better informed by
information on the secrecy laws of
jurisdictions in which an institution
operates. For example, the Board may
consider there to be a material
difference in the adequacy of assurances
if a bank has only a relatively small
portion of its operations in "secrecy”
jurisdictions, as opposed to having
substantial operations in such
jurisdictions. Moreover, the Board’s
determination could also take into
account whether the authorities of
particular jurisdictions cooperate in
supervisory matters or have
mechanisms in place to assist in the
provision of information.
The Board recognizes that its
approach may require review of
multiple jurisdictions for banks with
extensive international operations.
Publishing a list of countries found not
to impede access to information is not
feasible at this time. However, the Board
will continue to encourage applicants to
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
efer to information previously
ubmitted in connection with other
pplications, and generally to limit their
ubmissions to the applicability of, and
naterial changes in or differences with,
his information. The Board will inform
pplicants if additional information is
lecessary.
Three comments questioned the
Soard’s ability to condition its approval
if an application so as to permit
ermination of the activities of an office
f material impediments to obtaining
lecessary information arise in the
uture. Other comments urged the Board
0 provide notice and an opportunity for
hearing prior to any such termination.
The FBSEA specifically permits the
loard to condition its approval of any
iffice application in a manner that is
tot inconsistent with the
omprehensive, consolidated
upervision standard. If the Board finds
hat a foreign bank has failed to comply
rith any such condition, including a
ondition relating to adequate
ssurances, the bank may be subject to
nforcement action, which may include
he Board requiring termination of any
J.S. activities of the bank or, in the case
if a federal branch or a federal agency,
ecommending such termination.
evaluation of Standards in
Representative Office Applications
The interim rule reflected that all of
he standards for approving a
epresentative office application,
ncluding the comprehensive
upervision standard, are discretionary,
"hree comments urged the Board to use
lexibility in reviewing the standards for
ipproval of an application to establish
1representative office. One comment
Iso recommended that such an
pplication consist only of a copy of the
tate application and information
egarding the reputation, management,
nd financial condition of the bank.
A representative office conducts more
imited activities than, for example, a
iranch or an agency. Thus, approving
he establishment of a representative
(ffice does not necessarily require as
igorous an application of the standards
is are applied to an office that engages
n banking activities. As discussed
>elow, this fact also will be reflected by
equesting less information in a
epresentative office application than in
i branch or an agency application.
Procedures for Applications
Methods of processing. A number of
:omments generally described the
ntemal guidelines and procedures for
)rocessing applications as unduly
mrdensome, time consuming, and
innecessary. These comments focused
on information requested, coordination
with the licensing authority, and timing
for processing.
Several commenters supported
streamlining the information requested
in an office application and relying on
more coordination with the licensing
authority. Measures suggested included
prompt development of a standard
application form and coordination of
background checks with the licensing
authorities.
The Board reaffirms its intent to
develop a standard application form. In
the interim, Board staff will issue
revised lists of information requested in
office applications that modify the prior
requests for information contained in
Board letter SR 92-6. Letter from
Director of Division of Banking
Supervision and Regulation to Reserve
Banks SR 92-6 (March 5,1992).
The revised requests for information
in branch, agency, or commercial
lending company applications will
continue generally to parallel the
information requirements for acquiring
a bank under Regulation Y. As
discussed above, these requests will
seek discussion of confidentiality laws
in jurisdictions where the foreign bank
has material operations. For similar
reasons, the lists also will request
summary financial information from a
subsidiary of the foreign bank or its
ultimate parent only where the
subsidiary is deemed material. A
material subsidiary is any subsidiary
that accounts for more than 1 percent of
the total, worldwide assets of the foreign
bank or its ultimate parent. This
measure is intended to identify
significant subsidiaries and reduce the
amount of information requested from
foreign banks with complex
organizational structures. Information
on particular subsidiaries or
jurisdictions that fall below these
thresholds may be requested in specific
cases. The revised requests for
information in representative office
applications will seek less information
to further reflect the less rigorous
approval requirements. In responding to
these requests, the Board encourages
applicants to refer to any information
previously provided to the Federal
Reserve System or contained in any
application submitted to the licensing
authority.
One commenter opposed the conduct
of background checks as unnecessary
and demeaning, and as preventing
action on foreign bank applications
within the prescribed regulatory time
periods. This commenter also
questioned the Board’s authority to
conduct background checks. Several
other comments recommended
6351
streamlining or eliminating these
checks.
Background checks can be an
important source of information in
evaluating applications for supervisory
and regulatory purposes. The Board
conducts these checks pursuant to its
general authority to regulate and
supervise foreign banks seeking to
operate in the United States, and to its
specific authority to evaluate the
standards for such entry provided in the
FBSEA. The Board recognizes that these
checks may delay the processing of an
application, and has taken measures to
reduce delays, including early initiation
of checks, frequent contact with
agencies conducting checks, and, where
>ossible, coordination with the icensing authority. The Board also has
reduced the background checks on
individuals to cover only those persons
who hold significant interests in the
foreign bank or its ultimate parent, or
who are at the highest levels of bank
management. The Board will continue
to pursue all steps that may reduce any
delay.
Several comments suggested that the
Board establish and adhere to deadlines
for processing applications, regardless
of whether all information has been
provided. Three comments specifically
recommended providing additional and
mandatory processing deadlines.
The Board cannot act on an
application without a complete record
that permits evaluation of the statutory
standards. Additional time periods and
arbitrary limits on presentation of
applications to the Board would prevent
action on a complete record. Regulation
K currently provides that applications
should be processed within 60 days of
acceptance, unless the applicant is
notified of the reasons for the delay. The
final regulation maintains this timing
requirement. The Board recognizes that
this time period has not been met with
respect to applications to establish
offices submitted ffius far. Moreover, in
light of the time necessary to complete
background checks, it is likely that
action on future applications also will
be delayed beyond the 60-day period,
perhaps significantly. However, every
effort will be made to minimize delays.
The Board, remains committed to
collecting information and acting upon
all applications as promptly as possible.
In the meantime, the 60-day schedule
will be*maintained as a goal.
Approval procedures. The interim
rule provided that, at least initially, the
Board would act on all applications to
establish offices. The Board, however,
indicated that it would consider more
streamlined or delegated approval
procedures after obtaining sufficient
f
6352
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
experience. Eight commenters made
various proposals for abbreviated
approval procedures, particularly for
applications from a foreign bank with an
existing U.S. office.
Some comments recommended
delegated approyal procedures for
foreign banks with existing U.S. offices
that seek to establish an additional
office, for any applications without
supervisory or policy issues, or for any
applications to change the status of an
existing office. One comment
recommended permitting the Reserve
Banks to review only the applications
that they may approve under such
delegated authority. Prior notification
procedures also were recommended for
certain foreign banks that seek to
establish an additional office in a state
where the bank has previously
established a Board-approved office,
that were previously reviewed by the
Board through examination or
otherwise, that seek to change the status
of a Board-approved office, or that apply
to establish a representative office.
After considering these
recommendations, the Board has
determined to delegate authority to the
Reserve Banks to approve a subsequent
application by a foreign bank that
previously received Board approval
under the FBSEA to establish an office
that has equal or greater powers than
this subsequent office, if the subsequent
application does notpresent significant
supervisory issues. This delegation
procedure permits the Board to review
the particular circumstances of a foreign
bank on an initial basis and provide a
ruling and factual record that serve as
precedent for the foreign bank’s
subsequent office applications. The
Board has also adopted general consent
and prior notice procedures for certain
categories of representative offices, as
discussed below. Delegated or
streamlined approval procedures for
more general categories of applications
would not at this time address the factspecific determinations required for
each foreign bank by the FBSEA. The
Board will consider further delegation
or streamlining measures as may
become feasible in the future.
Other procedures. These delegated
approval procedures supplement the
abbreviated procedure under which a
foreign bank that establishes an office
through certain mergers or acquisitions
may obtain after-the-fact approval from
the Board. In order to permit prompt
action, if necessary, the Board has also
delegated to its General Counsel and
Director of Division of Banking
Supervision and Regulation the
authority to approve the use of these
after-the-fact procedures.
Certain acquisitions that result in a
change in control of a foreign bank with
U.S. offices may not, as discussed
above, require Board approval if the
acquired foreign bank continues to
operate in the same corporate form
following the acquisition and does not
control or own more than 5 percent of
the shares of a U.S. bank. In order to
monitor other regulatory requirements,
the final rule continues to require
written notice to the Board within 10
days of this change in ownership or
control. For the same reasons, the final
rule requires notification of the
conversion of a branch to an agency or
a representative office, an agency to a
representative office, and, as discussed
below, a state license to a federal
license.
Representative Office Definition and
Activities
The interim rule modified the
definition of a representative office that
a U.S. bank may establish overseas, and
provided a new definition of a
representative office that a foreign bank
may establish in the United States. The
two definitions were similar, but not
identical. The Board received twelve
comments on the definition of
representative office and, while some
did not distinguish between the two
definitions, all focused on the new
definition of a representative office of a
foreign bank.
Representative office of a U.S. bank.
The comments that addressed the
definition of a representative office of a
U.S.’bank stated that prohibiting the
making of business decisions
improperly prevented basic operational
decisions. The Board has revised the
definition in the final rule to reflect that
a representative office of a U.S. bank
may make such internal operational
decisions.
Representative office of a foreign
bank. The comments regarding a
representative office of foreign bank
broadly focused on, first, the treatment
of a representative office under the
FBSEA as a residual category of office
and, second, the Board’s authority to
prescribe the activities that a
representative office may conduct.
Generally, these commenters took the
view that the Board’s definition was
overly narrow, and that the Board
should defer to state law to determine
the permissible activities of a
representative office.
Five commenters recommended
repeating in the final rule the definition
of representative office contained in the
FBSEA in order to avoid conflict with
state law. The FBSEA defines a
representative office of a foreign bank as
any office of a foreign bank which is
located in a state and is not a branch,
agency, or subsidiary of the foreign
bank. Under this definition, a
representative office is the category of
office through which all direct activities
of a foreign bank that are not branch or
agency activities must be conducted.
The interim rule reflected the
traditional view that a representative
office is confined to limited functions
related to banking, such as soliciting
new business or acting as liaison
between U.S. customers and the home
office, and may not engage in business
activities except in this limited capacity.
Commenters criticized this definition as
overly restrictive in light of the broader
definitions found in the FBSEA and
state law. They supported this argument
by noting that the FBSEA defines a
representative office in terms of what it
is not—i.e., it is not a branch, agency,
or subsidiary—and does not define what
a representative office is. The
commenters stated that a representative
office should not be prohibited from
engaging in activities that do not require
a branch or agency license.
Hie legislative history of the FBSEA
does not address this issue directly.
However, both the FBSEA and its
legislative history evidence a general
intent to require foreign banks to
conduct all of their direct U.S. activities
through a regulated office. Therefore,
the Board has amended the final rule to
define a representative office of a
foreign bank as any place of business of
a foreign bank that is not a branch,
agency, or subsidiary of a foreign bank.
This definition makes clear that any
activity conducted through a direct
office of a foreign bank in the United
States must be conducted through either
a branch, agency, or representative
office, each of which is subject to
regulation and examination by the
Board.
One commenter regarded the
exclusion of a subsidiary from the
definition of representative office as
inappropriate. In its view, a foreign
bank seeking to conduct representative
office activities may simply form a
subsidiary to perform such activities
and thereby avoid Board regulation. The
Board wishes to make clear that a
subsidiary, whether formed to conduct
representative functions or otherwise,
may not be used to evade the banking
laws. If the Board becomes aware of any
abuses or evasions of the banking laws
through such means, it will take further
action to regulate these subsidiaries as
banking offices.
As a result of the adoption of this new
definition of a representative office of a
foreign bank, certain additional direct
Federal Register / VoL 56, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
Dffices of a foreign bank may fall within
he representative office definition for
:he first time. In June 1992, the Board
provided a notice of a representative
office registration form to all known
-epresentative offices. Form F.R. 3072,
57 FR 31374 (July 15,1992). The
purpose of the form was to update
axisting records. Any offices of foreign
banks that meet the revised definition of
representative office and that have not
previously filed the information
:ontained in this form to the Board are
requested to do so by February 26,1993.
Permissible activities. Twelve
commenters discussed the Board’s
authority to define the activities that a
representative office may conduct. Ten
Df these commenters recommended
permitting a representative office to
conduct activities deemed permissible
under state law. Seven commenters
criticized the specific activities
permitted or prohibited by the interim
rule as overly restrictive or inconsistent
with the FBSEA.
All of the commenters that urged the
Board to allow a representative office to
conduct any activities permitted by state
law cited the FBSEA definition in
support of their position. They argued
that the Board’s authority to limit the
activities of a representative office
should be confined to prohibiting the
conduct of either branch or agency
activities or any other activities that are
prohibited by state law. Seven of these
commenters viewed this approach as
implicitly required by the FBSEA
definition. The commenters that
criticized the narrowness of the interim
rule similarly referred to the definition
of representative office in the FBSEA as
more expansive. While most
commenters recommended expanding
the permissible activities, six
commenters recommended more narrow
functions.
In implementing the provisions of the
FBSEA concerning a representative
office, the Board has determined to
adopt rules that set forth the permissible
representative functions that may be
performed on behalf of the foreign bank;
the rules also provide that other
activities that are not prohibited by state
law or rulings or orders of the Board
may be conducted by a representative
office. Thus, the final rule expressly
prohibits a representative office from
directly conducting banking activities,
such as contracting for deposits, that
may only be performed by a branch or
an agency. It also allows a
representative office to conduct
activities that are not linked to banking.
This approach implements the FBSEA’s
intent to treat a representative office as
any office of a foreign bank that is not
a branch or an agency.
Preventing a representative office
from conducting any activities
prohibited by Board rule or Order gives
the Board the flexibility that may be
necessary to address prudential or
supervisory concerns. An issue is
presented as to whether there may be
certain types of activities that a foreign
bank should not be permitted to
conduct through a representative office,
either because the activity is the
functional substitute of a banking
business, or because it may not be
administratively feasible for the Board
to monitor the activity to determine
compliance with law. In the Board’s
view, this is an issue primarily for
foreign banks that are not subject to the
nonbanking restrictions of the BHC Act
because they operate in the United
States only through one or more
representative offices. See 12 U.S.C.
3106(a). However, given the scope and
impact of provisions dealing with a
representative office, the Board seeks
additional comment on this issue, as
well as on the definition of and
standards for the activities of
representative offices.
General consent and prior
notification. The Board is of the opinion
that there are certain activities
conducted by representative offices that
require reduced regulatory scrutiny. A
foreign bank may conduct direct
activities through a representative office
that are so minimal that their conduct
does not raise any significant
supervisory or prudential concerns. For
example, a foreign bank may set up a
separate office for back office support or
to provide temporary facilities in the
event that the foreign bank’s banking
premises become inaccessible or
damaged. Opening such an office
constitutes the establishment of a
representative office and requires Board
approval. However, the Board has
determined to grant its general consent
to the establishment of such offices.
These offices may perform only limited
support functions in connection with
the banking activities of the foreign
bank that are both clearly defined and
the exclusive focus of the office. In
addition, these offices may not have
contact with customers. The Board must
receive notice that such an office is
being established, and retains full
regulatory and supervisory authority
with respect to its operations.
The Board also recognizes that a
foreign bank with banking operations in
multiple locations in the United States
may wish to establish a regional
administrative office, separate from its
existing offices, to coordinate and
8353
supervise the foreign bank’s operations
and those of its affiliates in a region.
Such an office is a representative office,
the establishment of which requires
Board approval. The Board wishes to
encourage the establishment of such
offices as a sound prudential practice
and has provided a prior notification
procedure for obtaining Board approval.
This procedure permits a foreign bank
to establish a regional administrative
office in the same dty in which the
foreign bank operates a branch, agency,
commercial lending company, or
subsidiary bank by providing the Board
with 45 days’ prior written notice.
Establishment of a Commercial Lending
Company
One comment raised an issue
regarding overlapping regulations
governing the establishment of a
commercial lending company by a
foreign banking organization. The
FBSEA and the interim rule require a
foreign bank to obtain prior Board
approval to establish a commercial
lending company. In addition, the
lending activities of a commercial
lending company are considered
nonbanking activities that, under
section 4(c)(8) of the BHC Act and
Regulation Y, a foreign banking
organization must obtain Board
approval to conduct. The commenter
sought clarification that obtaining
approval only under Regulation Y
suffices for a foreign banking
organization to establish a commercial
lendingcompany.
The FBSEA imposes mandatory
standards for Board approval to
establish a commercial lending
company. Obtaining approval to engage
in nonbanking activities under, the BHC
Act does not meet these standards.
Therefore, a foreign banking
organization that seeks to establish a
commercial lending company must
comply with the standards for
establishing the company and for
conducting the nonbanking activities.
One application may be filed in
connection with both processes. It
should be noted that this overlap does
not extend to an existing commercial
lending company that itself seeks to
establish an office. Only approval under
the BHC Act is required for this latter
office.
Transactions Subject to Approval under
Regulation Y
The interim rule implemented the
provision of the FBSEA that extended
section 3 of the BHC Act to require a
foreign banking organization to obtain
Board approval to acquire more than 5
percent of the voting shares of U.S. bank
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Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
or bank holding company. The interim
rule also clarified that Board approval is
not required for the acquisition of a
foreign banking organization that does
not directly or indirectly control a U.S.
bank, unless the acquiror is also a
foreign banking organization and
acquires control of a bank or bank
holding company, acquires all or
substantially all of the assets of a bank,
or merges with a bank holding
company.
The Board received two comments on
these provisions. One commenter
described these provisions as consistent
with national treatment of foreign
banks, but sought streamlined or
notification procedures for a foreign
banking organization to obtain Board
approval under section 3 to acquire a
minority interest in another foreign
banking organization that controls a
U.S. bank. This commenter noted that
foreign banks frequently take minority
positions in other foreign banks to
establish cross-border relationships.
Because acquiring an interest in a U.S.
bank is incidental to these largely
foreign transactions, the commenter
described a full-scope section 3
application as unwarranted and unduly
burdensome.
Although the Board seeks to minimize
the effect of U.S. regulation on foreign
transactions, the Board has little
flexibility to provide a general
exemption from this requirement.
Accordingly, the Board has not
provided the requested procedures in
the final rule.
The other commenter recommended
revising this provision in the final rule
to reflect that a foreign bank that does
not have a U.S. banking presence may
acquire more than 5 percent of a U.S.
bank (but presumably less than 25
percent) without requiring approval
under section 3 of the BHC Act. The
Board has revised the final rule to
reflect this change, but notes that any
foreign company, including a foreign
bank, must comply with the
requirements of Regulation Y before
acquiring control of a U.S. bank or bank
holding company,, whether control is
gained through acquisition of voting
shares or otherwise.
Definitions
The interim rule amended Regulation
K to include additional definitions of
terms necessary to implement the
FBSEA. The rule also repeated or made
complementary amendments to
definitions previously contained in
Subparts A and B of Regulation K. The
comments received generally sought
clarification of and, in some cases,
modifications to certain of these
definitions.
Agency
The interim rule incorporates the
long-standing definition of an agency as
a place of business that may maintain
credit balances, pay checks, or lend
money, but may not accept deposits
from a citizen or resident of the United
States. The definition also provides six
minimum criteria under which a
balance is presumed to be a credit
balance and not a deposit.
The Board received five comments on
this definition. Each of the five
commenters sought clarification of the
deposit-taking ability of an agency in
order to remove the implication that an
agency may only maintain credit
balances. Some states permit agencies to
accept deposits from non-residents of
the United States. Accordingly, the
Board has revised the definition of an
agency to confirm that, to the extent not
prohibited by state or federal law, an
agency may maintain certain deposits,
such as deposits of non-resident persons
and entities, as well as interbank and
international banking facility deposits,
without being considered a branch.
Regulation K does not place additional
restrictions on the operations of these
types of deposit accounts.
The five commenters also described
the criteria for identifying credit
balances as vague and burdensome.
These commenters suggested replacing
the criteria either with numerical limits
on transactions in an account or with
restrictions permitting maintenance of
accounts that are incidental to the
exercise of banking powers and that, for
U.S. residents or citizens, relate to
specific bank transactions.
The criteria for defining a credit
balance were adopted after careful
examination of existing practices and
are designed to ensure than an agency
does not engage in domestic deposit
taking, an activity prohibited for an
agency. Domestic deposits include
transaction accounts maintained by a
U.S. citizen or resident. Acceptance of
the commenters’ suggestions would
permit the solicitation and acceptance
of deposits from any U.S. resident or
citizen for use upon demand and would
violate the IBA. Accordingly, the final
rule retains the previously established
criteria for identifying a credit balance.
Branch
The interim rule defined a branch as
any place of business of a foreign bank
at which deposits are received. Four
commenters stated that this definition
improperly classified state agencies that
may take deposits from non-residents as
branches. To address this matter, the
Board has revised the definition of
branch to exclude a place of business
that functions as an agency. The Board
reaffirms, however, that any office that
may receive domestic deposits under
state law will continue to be considered
a branch for purposes of this rule and
the IBA.
Domestic branch
Four comments recommended that
the Board omit the definition of
domestic branch from the final rule as
unnecessary. These commenters also
suggested adding a definition of the
term “limited branch” because the term
appears in the IBA and. a foreign bank
may wish to establish a "limited
branch” as a first entry office.
The IBA does not use the term
“limited branch.” The Board defined
the term “domestic branch” in 1980 to
implement the interstate banking
provisions of the IBA, which were not
affected by the enactment of the FBSEA
These provisions permit a foreign bank
to take domestic deposits only in offices
located in its home state. Under section
5 of the IBA, however, a foreign bank
may also establish a branch outside of
its home state if the branch agrees to
limit its deposit-taking activities to
those permitted for an Edge corporation
it is to this concept that the commenters
apparently referred. Because the IBA
limits the interstate locations at which
a foreign bank may accept domestic
deposits, the Board believes that it is
appropriate to retain the term “domestic
branch.” Contrary to the implication of
the comments, a foreign bank may
establish a branch that limits its
deposits to Edge-type deposits as its firs
entry into the U.S. market. Regardless ol
the particular nomenclature for that
type of branch, the approval process
under the FBSEA for such an office
remains the same as for a full-service
branch.
Establish and change the status
The interim rule reflected the new
requirement under the FBSEA that a
foreign bank must obtain the approval oi
the Board to establish an office. It
defined establish to mean open and
operate an office, change the status of an
office, relocate an office to another state,
assume the operations of an existing
office through merger, or acquire an
office through the acquisition of a
subsidiary that changes its corporate
form following the acquisition. The
interim rule also defined the term to
change the status to mean to convert a
representative office into a branch or an
agency, or to convert an agency into a
branch. Comments on the definitions of
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
both terms generally sought clarification
of events that do not establish an office.
With respect to the establishment of
an office through merger or acquisition,
one commenter noted that a foreign
bank may assume the operations of an
office through a transaction that is not
labelled a merger. Tima, the definition
of establish has been amended to clarify
that such assumption of operations may
occur through merger, consolidation, or
any similar transaction. It is not
intended to cover the acquisition of a
foreign bank with a U.S. office where
the acquired foreign bank continues to
operate as a separate entity and has not
merged or otherwise consolidated its
operations with another entity. Another
commenter noted that a corporate
reorganization of a foreign bank may
technically result in the establishment
of aa office as an incident to the
reorganization. In such a case, the
foreign hank may seek a determination
from the Board as to whether approval
is necessary. Finally, several
commenter* asked the Board to specify
the transactions that do not establish an
office. These are the acquisition of a
foreign bank with a U.S: office in which
the acquired foreign bank continues to
operate in the same corporate form, i.eM
where the acquired foreign bank is not
merged into another bank or does not
otherwise lose its charter identity, and
the acquisition of, or merger or
consolidation with, a foreign bank with
no U.S. banking presence where the
bank with the U.S. office is die
surviving entity. The first transaction
requires written notification to the
Board within 10 days of this change in
control.
Several commentors also questioned
the scope of the definition of change the
status of an existing office. As stated in
the interim rule, effecting a material
difference in the activities of an existing
office through a change in its status
establishes that office. Thus, the Board
has determined, in response to
comments, that routine renewals of the
license of an existing office do not
change the status of that office because
such renewals make no change in the
activities that the office may conduct
Several commanters also argued that
a license conversion (eg., from state
license to federal license, from state
agency to a state branch, or from one
state to another) does not change the
status of an office. After reviewing these
comments, the Board has concluded
that converting from a state license to a
federal license does not effect a material
difference in the activities of the office
because a federal license is generally
more restrictive than a state license. The
Roard has determined at this time that
conversion from a federal license to a
state license continues to require an
application for Board approval. In its
separate rulemaking regarding the
provision of the FBSEA that permits
state branches and agencies to conduct
only the activities that are permissible
for a federal branch, the Board has
sought comment as to whether an
application should continue to be
required to convert an office from a
federal to a state license.
Another commenter recommended
adopting a functional test for identifying
a change in the status of an office. This
test would require a comparison of the
functions of the existing office to those
of the new office and require an
application when a material difference
results. The Board believes that the
current definition implicitly takes this
approach. Exclusive use of this
approach would create uncertainty by
requiring case-by-case determinations
instead of a clear standard.
The Board also has required a foreign
bank to submit notification within 10
days of any downgrade or conversion of
an existing office into another type of
office in instances in Which no
application to the Board is required.
This notice will permit the Board to
monitor these offices for supervisory
purposes.
Foreign bank
The IBA contains a definition of
foreign bank that differs slightly from
the corresponding definition in die
interim rule. Five commenters criticized
the interim rule for improperly
restricting the IBA definition by
requiring a foreign bank to engage
directly in banking outside of the United
States and by excluding foreign central
banks. They believe that the IBA
definition of foreign bank legally
preempts—and should replace—-the
regulatory definition.
The Board adopted the definition of
foreign hank in Older to implement the
provision in the FBSEA that permits the
Board to approve an application by a
foreign bank to establish a U.S. office
only if the foreign bank engages directly
in the business of banking outside of the
United States. The interim rule
definition, which is adopted in die final
rule, reflects this statutory limitation.
Three comments suggest that the
exclusion of central banks with no U.S.
commercial banking business from the
definition of a foreign bank exempts
central banks that wish to establish a
first commercial banking office in the
United States from the FBSEA. The
Board is of the view that a foreign
central bank that wishes to establish an
office to engage in a commercial
6355
banking business must apply for
approval and has revised the final rule
to clarify this requirement.
Other definitions
The Board received brief comments
on certain other definitions.
Five comments recommended
including in the definition of home
country the country in which the foreign
bank locates its head office as an
alternative home country. In the interim
rule, a foreign bank’s only home country
is its chartering country. The proposal
suggested by the comments would
ermit a foreign bank to change its
ome country by designating its
headquarters as being in another
country. The designation of a head
office is in many respects an arbitrary
decision, and may have litde to do with
a bank’s supervision. Since the laws
related to the consolidated operations of
a bank are those of its chartering
country, it appears clear that, to meet
the standards set forth in the FBSEA,
the chartering country must exercise
supervision. Therefore, the definition of
home country has not been changed.
Several comments recommended
including a state authority that licenses
representative offices in the definitions
of licensing authority and relevant state
supervisor. The Board has incorporated
this recommendation in order to ensure
consistent consultation with the
appropriate state banking authority
regarding either the establishment or
termination of a state-licensed
representative office.
Several comments suggested that the
definition of subsidiary be clarified by
setting forth the standards for
determining when a foreign
organization is considered capable of
controlling another company. The Board
notes that such determinations are
governed by the facts of individual
cases. The Board has also amended the
definition of subsidiary to apply to
companies owned or controlled by a
foreign bank, as well as by a foreign
banking organization. This amendment
ensures that companies controlled by a
foreign bank that has only a
representative office in the United
States will be considered subsidiaries of
that foreign bank.
Examination of Offices and Affiliates of
Foreign Banks
The interim rule implemented the
provisions of the FBSEA that granted
authority to the Board to examine the
offices and affiliates of a foreign bank
with U.S. banking operations, and the
representative offices of any other
foreign banks. The final rule
incorporates these provisions mid
E
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Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
continues to provide for annual on-site
examination of branches, agencies, and
commercial lending companies by a
U.S. banking supervisor as well as
coordination of such examinations.
Nine comments supported
coordination with other bank
supervisors to ensure that a foreign bank
office ordinarily undergoes only one
examination each year. Measures
recommended to achieve this objective
included prompt development of joint,
uniform examination procedures and
supervision guidelines on an
interagency basis, application of
uniform guidelines to foreign banking
organizations and domestic member
banks, formal agreements for joint
examinations with the other bank
supervisors, allocating responsibilities
among joint examiners, and issuing a
single, joint examination report.
In implementing a coordinated
examination program for foreign banks,
the Board is applying a flexible
approach designed to use resources
efficiently and to minimize the burdens
on the office examined, while obtaining
the information needed for the
examination. Under the FBSEA, an on
site examination of a branch or an
agency by its primary supervisor will
satisfy the statutory requirement that
such offices be examined annually. In
addition, the Board may conduct its
own examination of foreign bank
offices, rely on the examination of the
primary supervisor, alternate its
examination with the primary
supervisor every other year, or
participate in a joint examination. The
final rule also reflects that the Board
must coordinate such examinations, to
the extent possible, with the licensing
authority and, in the case of an insured
branch, the Federal Deposit Insurance
Corporation. The Reserve Banks will
seek to avoid duplicating the work of
other federal or state examiners. Where
possible, a joint report will be issued on
a joint examination.
With respect to future coordination
efforts, the Board is in the process of
developing, jointly with state and other
federal supervisors, a report form and
manual for examinations of branches
and agencies. In the interim, the Board
has developed an examination report
form for branches and agencies that will
be available for use by other banking
supervisors.
Two comments also recommended
ensuring that each Reserve Bank
uniformly implements Board policy,
asserting that Reserve Banks have
inconsistently applied the Board’s
policy regarding general loan loss
reserves. There is no general policy
requiring the maintenance of such
reserves by all U.S. branches and
agencies. For branches and agencies
with serious asset quality problems,
state or federal regulators would require
that the foreign bank take corrective
measures. The establishment of an
adequate allowance for loan losses
one of the options designed to remedy
asset quality deficiencies. The Board, in
conjunction with other federal and state
regulators, is currently developing a
uniform policy on the treatment of
branches and agencies with asset quality
problems.
A few comments focused on
examinations relating to representative
offices. Two comments sought
clarification that the FBSEA does not
generally authorize the Board to
examine the U.S. affiliates of a foreign
bank whose only U.S. presence is
through one or more representative
offices. The regulation has been
amended to reflect this comment. In
response to another commenter’s
concern for less rigorous examinations
of representative offices, the Board
generally expects to examine
representative offices in a manner
appropriate to their limited functions.
Termination of an Office of a Foreign
Bank in the United States
Grounds for Termination
The interim rule included the
statutory standards and procedures for
termination of the activities of a
representative office, state branch, state
agency, or commercial lending company
of a foreign bank and for recommending
termination of a federal branch or
agency to the Office of the Comptroller
of the Currency (Comptroller). The
comments on this provision
distinguished between mandatory and
voluntary termination and generally
sought clarification of the grounds for
each type of action.
Required termination. The comments
on the provision allowing the Board to
require termination sought modification
of both the grounds and procedures for
taking such actions. The Board may
require termination of state branches,
state agencies, or commercial lending
companies if there is reason to believe
a foreign bank or its affiliates has
committed a violation of law or is
engaged in unsafe and unsound banking
practices in the United States, or if the
foreign bank is not subject to
comprehensive home country
supervision. The Board may consider
other factors in such terminations,
including the needs of the community
and the history and size of the bank.
These terminations require consultation
with the state supervisor and notice and
an opportunity for a hearing for the
foreign bank, unless expeditious action
is necessary to protect tne public
interest.
Several comments suggested
restricting the first ground for
termination to material violations of
applicable U.S. banking laws. They
described this as necessary to cure an
overbroad statute that permits
termination for minor violations of any
laws. The FBSEA does not limit the
Board’s termination authority in this
fashion. Rather, it requires the Board to
find both that a violation of law is
reasonably likely to have occurred and
that the continued operation of the
office would be inconsistent with the
public interest, the FBSEA, the BHC
Act, or the Federal Deposit Insurance
Act. This grant of termination authority
is intended to provide the Board with
the flexibility to address a variety of
situations and is retained in the final
rule. In making its determinations, the
Board will consider all relevant matters,
including mitigating factors. The Board
also notes that termination is not the
sole enforcement measure available, and
that it expects to utilize the full range
of enforcement tools as circumstances
warrant.
Several comments suggested either
excluding the ground permitting
termination solely for lack of
comprehensive supervision or requiring
application of the guidelines to be
developed by the Board and the
Treasury under the FBSEA for
permitting continued operation by a
foreign bank that lacks comprehensive
supervision. Eliminating this ground is
contrary to the express language of the
FBSEA. However, as noted above, the
Board will take other factors into
account in making its termination
decisions. Furthermore, once issued, the
guidelines referenced above will inform
any termination on this ground. In
addition, the Board will address this
issue more fully in its separate request
for comment regarding these guidelines.
The commenters on the termination
procedures sought guidance on the
policy for termination, including the use
of lesser enforcement measures,
consultation with state licensing
authorities, termination of a single office
of a foreign bank with multiple U.S.
offices, and procedures for expedited
termination.
The commenters that recommended
the use of lesser enforcement measures,
such as cease and desist orders, sought
to assure that foreign banks receive
treatment similar to U.S. banks. The
Board will exercise its termination
authority in conformance with this
policy. In addition, the Board would
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1998 / Rules and Regulations
6 357
federal branch unless the Board has
determined that the activity is
consistent with sound banking
ractices, and, in the case of insured
ranches, the FDIC determines that the
activity poses no significant risks to the
deposit insurance fond.
Three commenters suggested
approaches to this future
implementation. Two commenters
recommended close coordination with
the states, and supported an
Deposit Insurance Requirement for
interpretation that applies the provision
Retail Deposit-Taking
to the same types of activities only, even
Under section 6(c) of the IBA, as
if state law imposes different conditions
amended by the FBSEA, a foreign bank
or limitations on the conduct of those
was required to establish an insured
activities. Another comment suggested
banking subsidiary if it wished to accept issuing a list of pre-approved activities
or maintain deposit accounts with
for branches ana agencies, and urged
balances under $100,000. In legislation
adoption of prior notification
enacted on October 28,1992, section
procedures for obtaining approval to
6(c) of the IBA was further amended to
conduct any impermissible activities.
clarify that this provision applies only
This provision is the subject of the
to the acceptance of domestic retail
separate rulemaking that is being
deposits in amounts under $100,000
conducted in consultation with the
requiring deposit insurance protection.
FDIC and the Comptroller.
Housing and Community Development
Delegation
Act of 1992, section 1604, Pub. L. 102550,106 Stat. 3672. Consequently,
The Board has determined to delegate
foreign banks may continue to conduct
certain authority in response to
their deposit-taking activities in
comments discussed above. This
conformance with regulations of the
includes delegating the authority to the
Comptroller and the FDIC, issued in
Reserve Banks to approve a subsequent
connection with sections 6(a) and 6(b)
office application by a foreign bank that
of the IBA. See 12 CFR 28.8, 346.6
has previously received approval under
(1992). The Board will review the need
the standards in the FBSEA, if the
for implementing regulations.
application doesnotpresentsignificant
One commenter seeks clarification
supervisory issues. The Board also
that a territorial or protectorate bank
delegated authority to the General
that is classified as a bank under the
Counsel to permit the use of the afterDisclosure o f Information to Foreign
BHC Act, is insured by the FDIC, and is the-fact approval procedures to establish
Supervisors
supervised by the FDIC and, in some
an office (with the concurrence of the
cases, the Federal Reserve, may
The final rule incorporates the
Director of the Division of Banking
continue
to
take
domestic
retail
deposits
provision of the FBSEA that permits the
Supervision and Regulation), to modify
Board to share supervisory information through new, insured branches despite
the requirement for publication of
the FBSEA provision that requires
with its foreign counterparts after,
notice of an office application, and to
foreign banks to conduct such activities disclose information to a foreign bank
among other things, obtaining an
only in an insured bank subsidiary. The supervisory authority. Lastly, the Board
agreement to maintain the
confidentiality of the information to the definition of foreign bank in the IBA
adopted in the final rule the delegation
and the interim rule also included banks of authority to coordinate examinations
extent possible.
chartered in Puerto Rico, Guam,
to the Director of the Division of
Limitation on Loans to One Borrower
American Samoa, the Virgin Islands, or Banking Supervision and Regulation.
The Board has adopted measures
a U.S. territory, in order to implement
provided in the interim rule that require the interstate banking provisions of the
M iscellaneous
a foreign bank to aggregate all loans to
IBA. The Board is of the view that
Advisory Committee
the same borrower by all of its federal
section 6 of the IBA, as amended, does
Three comments recommended
and state licensed offices for purposes of not preclude insured banks from the
forming an advisory committee of
determining compliance with the new
jurisdictions listed above from
bankers, lawyers, academics, and state
limitations on loans to one borrower
establishing additional branches
and federal regulators to assist in and
contained in the FBSEA. This provision because such institutions are insured
coordinate the implementation of the
puts the operations of a foreign bank in banks, fully subject to the Federal
FBSEA. The Board welcomes views of
the United States on a comparable
Deposit Insurance Act.
any interested parties on all matters
footing with domestic banks for lending
within its purview, including the
purposes in accordance with principles Limitation on Activities o f State
Branches and Agencies
FBSEA. Such input is an important and
of national treatment.
It has come to the Board’s attention
ongoing source of information. As there
The FBSEA provides that after
are already many avenues for providing
that there may be loans outstanding
December 19,1992 a state licensed
from a foreign bank to a single borrower branch or agency may not engage in any views to or holding discussion with the
Federal Reserve System, which any
that exceed the new lending limits
activity that is not permissible for a
intend to use early and extensive
consultation with state licensing
authorities for any terminations, as
contemplated by the final rule.
Qne commenter recommended
providing a hearing before the Board
exercises its power to terminate an
office on an expedited basis when
necessary to protect the public interest.
A termination order generally will be
issued only after notice and an
opportunity for a hearing. Expedited
termination is an extreme measure that
the Board expects would be used in
exigent circumstances. When expedited
termination procedures are necessary,
the Board may, to the extent possible,
take other actions designed to give the
foreign bank notice and an opportunity
to present its views. The Board also
notes that a foreign bank may obtain
review of any Board order in the U.S.
Court of Appeals for the circuit where
the office is located or in the U.S. Court
of Appeals for the District of Columbia
Circuit.
Voluntary termination. The interim
rule required 30 days’ advance notice of
the voluntary termination of an office.
Four comments contended that this
procedure exceeds the Board’s
authority, and that only the licensing
authority shpuld notify the Board of
such closures. The Board believes that
the notice of voluntary termination
permits the Board to track the offices it
supervises, and is consistent with the
Board’s statutory authority to supervise
the U.S. activities of a foreign bank.
because of the aggregation requirements.
The Board has determined that it will
not consider a foreign bank to be in
violation of this provision if the foreign
bank originated the non-conforming
loans prior to December 19,1991,
provided that such loans are not
renewed or their maturities extended.
Any new credits granted after December
19,1991, must be in compliance with
the new lending limits.
g
6358
Federal Register / Vol. 56, No. 17 / Thursday. January 28, 1993 7 Rules and Regulations
party is encouraged to use, such a
committee is not essential at this time.
H ernias
The Board else adopted, without
modification, die changes to die Board’s
Rules of Practice for Hearings, as set
forth in the interim rule.
Regulatory Flexibility Act Analysis
IX. Pub. L. 98-181,97 Stat. 1153,12 UJS.C.
3901 et seq.);, and the Export Trading
Company Act Amendments cf 1968 (ttfle TH,
Pub. L. 100-418,102 Stat. 1384 (1686)).
2. Section 211.2 is amended by
revising paragraph (t) to read as fallows:
S 211.2 Definitions.
*
*
*
*
*
(t) Representative office means an
Pursuant to section 605(b) of the
office that:
Regulatory Flenbility Ac* (Pub. L. 96(1) Engages solely in representational
854, 5 U.S.C. 601 et seq.), die Board of
and
administrative functions, such as
Governors ©fthe Federal Reserve
soliciting new business or acting as
System certifies that Hus final rule will
liaison between the organization’s bead
not have a significant economic impact office and customers in the United
on a substantial number of small entities States; and
that are subject to the regulation.
(2) Does not have authority to make
any business decision (other than
Paperwork Reduction
decisions relating to toe premises or
The Board, acting pursuant to
of the representative office)
authority delegated to it by the Director personnel
for
the
account
of the organization it
cf the Office of Management and Budget represents, including
contracting for any
under 4 4 LLSC. 3507(e), has approved
deposit or deposit-like liability on
the collection of information ceiled for
behalf of the organization.
b y §§ 211.25 and 211.27 of the Board’s
* *
*
*
*
Rules and sections 7 and 10 of the IBA.
3. Section 211.21 is redesignated as
List of Subjects
§ 211.20. Newly designated $ 211.20 is
amended by revising paragraphs (b)(3)
12 CFR part 211
through (b)(6) and by adding new
Exports, Federal Reserve System,
paragraphs (b)(9) and (c) to read as
Foreign banking, Holding companies,
follows:
Investments, Reporting and
recordkeeping requirements.
$211.20 Authority, purpose, and scope.
*
*
*
*
*
12 CFR part 225
(b)
*
*
*
Administrative practice and
(3) Board approval of toe
procedure, Banks, banking, Federal
establishment of an office of a foreign
Reserve System, Holding companies,
bank in the United States under sections
Reporting and recordkeeping
7(d) and 10(a) of the BA (12 U.S.C.
requirements, Securities
3105(d), 3107(a));
(4) The termination by the Board of a
12 CFR part 263
foreign
bank’s representative office,
Administrative practice and
state branch, state agency, or
procedure, Federal Reserve System.
commercial lending company
12 CFR part 265
subsidiary under sections 7(e) and 10(b)
of the BA (12 U.S.C. 3105(e), 3107(b))
Authority delegations (Government
and the transmission of a
agencies], Federal Reserve System.
recommendation to the Office cf the
For the reasons outlined above, the
Comptroller of the Currency to ^
Board of Governors is adopting as final
terminate a federal branch or federal
the interim rule, published at 57 FR
agency under .section 7(e)(5) of the IBA
12992 (April 15,1992), that amends 12
(12 U.S.C. 3105(e)(5));
CFR parts 211, 225, 263, and 265 with
(5) The examination of an office or
the following changes:
affiliate of a foreign bank in toe United
States as provided in sections 7( q) and
PART 211— INTERNATIONAL
10(c) of the IBA (12 U.S.C. 3105(c),
BAMONG OPERATIONS 1
3107(c));
(6) The disclosure of supervisoiy
1. The authority citation for 12 CFR
information to a foreign supervisor
part 211 continues to read as follows:
under section 15 of the IBA (12 U.S.C.
Authority: Federal Reserve Act (12 U.S.C.
3109);
221 et seqj; Bask Holding Company Ac* of
(7) The limitations on loans to one
1956, as amended (12U.SjC. 4641 ett seq.);
borrower by state branches and state
the International Banking Act of 1976 (Pub.
agencies of a foreign bank under section
L. 95-369; 92 Slat. 607; 12 U-S.CL 3101 at
7(h)(2) of toe IBA (12 U.SH 3105(h)(2));
seq J; the Bank Export Services Act .(title 11,
(8) The limitation of a stale branch
Pub. L. 97-290,96 Stat. 1235]; the
International Lending Supervision Act (title and a state agency to conducting only
activities that are permissible for a
federal branch under section (7HhMl) of
toe BA (12 LLS.C. 3105(h)(1)); end
(9)
The deposit insurance requirement
for retail deposit taking % a foreign
bank under section 6 of the BA (12
U.S.C. 3104).
(c)
Additional requirements.
Compliance by a foreign bank with the
requirements of this subpart end the
laws administered and enfeioed by the
Board does not relieve toe foreign bank
of responsibility to comply with the
laws and regulations administered by
the licensing authority,
4.
Section 211.22 is redesignated ns
§ 211.21 and is revised to read ns
follows:
§21121 Definitions.
The definitions contained in $ 211.2
insubpari A of this part apply to this
subpart except as a term is otherwise
defined m this section:
(a) Affiliate, of a foreign bank or of a
parent of a foreign bank, means any
company that controls, is controlled by ,
or is under common control with, the
foreign bank or toe parent of too foreign
bank.
(b) Agency means any place of
business of a foreign bank,-located in
any state, at which credit balances are
maintained, checks are paid, money is
lent, or, to toe extent ndt prohibited by
state or federal lew, deposits are
accepted from a person or entity that is
not a citizen or resident of the United
States. Obligations shall not he
considered credit balances unless they
are:
(1) Incidental to, or arise out of the
exercise of, other lawful banking
powers;
(2) To serve a specific purpose;
(3) Not solicited from the general
public;
(4) Not used to pay routine operating
expenses in the United States such as
salaries, rant, or taxes;
(5) Withdrawn within a reasonable
period of time after toe specific purpose
for which they were placed has been
accomplished; and
(6) Drawn upon in a manner
reasonable in relation to the size and
nature of the account.
(c) Banking subsidiary, with respect to
a specified foreign bank, means a bank
that is a subsidiary as the terms bank
and subsidiary are defined in section 2
of toe BBC Act (12 U.SXL 1641).
(d) Branch means any place of
business of a foreign bank, located in
any state, at which deposits are received
and that is not an agency, as that iann
is defined in paragraph (b) of this
section.
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
(e) Change the status of an office
means convert a representative office
into a branch or an agency, an agency
into a branch, a federal branch into a
state branch, or a federal agency into a
state agency, but does not include
renewal of the license of an existing
office.
(f) Commercial lending company
m6ans any organization, other than a
bank or an organization operating under
section 25 of the Federal Reserve Act
(FRA) (12 U.S.C. 601-604a), organized
under the laws of any state, that
maintains credit balances permissible
for an agency and engages in the
business of making commercial loans.
Commercial lending company includes
any company chartered under Article
XII of the banking law of the State of
New York.
(g) Comptroller means the Office of
the Comptroller of the Currency.
(h) Control has the same meaning
assigned to it in section 2 of the BHC
Act (12 U.S.C. 1841), and the terms
controlled and controlling shall be
construed consistently with the term
control.
(i) Domestic branch means any place
of business of a foreign bank, located in
any state, that may accept domestic
deposits and deposits that are incidental
to or for the purpose of carrying out
transactions in foreign countries.
(j) A foreign bank engages directly in
the business of banking outside of the
United States if the foreign bank engages
directly in banking activities usual in
connection with the business of banking
in the countries where the foreign bank
is organized or operating.
(k) To establish means to:
(l) Open and conduct business
through an office:
(2) Acquire directly, through merger,
consolidation, or similar transaction
with another foreign bank, the
operations of an office that is open and
conducting business;
(3) Acquire an office through the
acquisition of a foreign bank subsidiary
that will cease to operate in the same
corporate form following the
acquisition;
(4) Change the status of an office; or
(5) Relocate an office from one state
to another.
(l) Federal agency, federal branch,
state agency, and state branch have the
same meanings as in section 1 of the
IBA (12 U.S.C. 3101).
(m) Foreign bank means an
organization that is organized under the
laws of a foreign country and that
engages directly in the business of
banking outside of the United States.
The term foreign bank does not include
6359
located in any state, that is not a branch,
agency, or subsidiary of the foreign
bank.
(w) State means any state of the
United States or the District of
Columbia.
(x) Subsidiary means any organization
25 percent or more of whose voting
shares is directly or indirectly owned,
controlled, or held with the power to
vote by a company, including a foreign
bank or foreign banking organization, or
any organization that is otherwise
controlled or capable of being controlled
by a foreign bank or foreign banking
organization.
a central bank of a foreign country that
does not engage or seek to engage in a
commercial banking business in the
United States through an office.
(n) Foreign banking organization
means a foreign bank, as defined in
section 1(b)(7) of the IBA (12 U.S.C.
3101(7)), that operates a branch, agency,
or commercial lending company
subsidiary in the United States, or that
controls a bank in the United States, and
any company of which the foreign bank
is a subsidiary.
(o) Home country, with respect to a
foreign bank, means the country in
which the foreign bank is chartered or
incorporated.
(p) Home country supervisor, with
respect to a foreign bank, means the
governmental entity or entities in the
foreign bank’s home country with
responsibility for the supervision and
regulation of the foreign bank.
(q) Licensing authority means:
(1) The relevant state supervisor, with
respect to an application to establish a
state branch, state agency, commercial
lending company, or representative
office of a foreign bank; or
(2) The Comptroller, with respect to
an application to establish a federal
branch or federal agency.
(r) Office or office of a foreign bank
means any branch, agency,
representative office, or commercial
lending company subsidiary of a foreign
bank in the United States.
(s) The parent of a foreign bank means
any company of which the foreign bank
is a subsidiary; the immediate parent of
a foreign bank is the company of which
(a)
Board approval of offices offoreign
banks—(1) Prior Board approval of
branches, agencies, or commercial
lending companies offoreign banks, (i)
Except as otherwise provided in
paragraph (a)(3) of this section, a foreign
t h e fo r e ig n b a n k i s a d ir e c t su b s id ia r y ;
b a n k s h a l l o b ta in t h e a p p r o v a l o f t h e
and the ultimate parent of a foreign
bank is the parent of the foreign bank
that is not the subsidiary of any other
company.
(t) Regional administrative office
means a representative office that:
(1) Is established by a foreign bank
that operates one or more branches,
agencies, commercial lending
companies, or banks in the United
States;
(2) Is located in the same city as one
or more of the foreign bank’s branches,
agencies, commercial lending
companies, or banks in the United
States; and
(3) Manages, supervises, or
coordinates the operations of the foreign
bank or its affiliates, if any, in a
particular geographic region.
(u) Relevant state supervisor means
the state entity that is authorized to
supervise and regulate a state branch,
state agency, commercial lending
company, or representative office.
(v) Representative office means any
place of business of a foreign bank,
1211.23
[Redesignated]
5. Section 211.23 is redesignated as
§ 211.22.
§211.24
[Redesignated]
6. Section 211.24 is redesignated as
§ 211.23, paragraphs (a) through (h) of
newly designated § 211.23 are
redesignated as paragraphs, (b) through
(i) respectively, and a new paragraph (a)
is added and reserved.
7. Sections 211.25 through 211.29 are
redesignated as §§ 211.24 through
211.28, respectively, and are revised to
read as follows:
§ 211.24 Approval of offices of foreign
banks; procedures for applications;
standards for approval; representative
office activities and standards for approval;
preservation of existing authority.
Board before it:
(A) Establishes a branch, agency, or
commercial lending company
subsidiary in the United States; or
(B) Acquires ownership or control of
a commercial lending company
subsidiary.
(2)
Prior Board approval of
representative offices offoreign banks.
Except as otherwise provided in
paragraphs (a)(2) or (a)(3) of this section,
a foreign bank shall obtain the approval
of the Board before it establishes a
representative office in the United
States.
(i)
Prior notice for regional
administrative offices. After providing
45 days’ prior written notice to the
Board, a foreign bank may establish a
regional administrative office. The
Board may waive the 45-day period if it
finds that immediate action is required
by the circumstances presented. The
notice period shall commence at the
time the notice is accepted. The Board
may suspend the period or require
Board approval prior to the
6360
Federal Register / Vol. 56, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
establishment o f such an office if the
notification Taises significant policy,
lii) The conversion of a branch to an
agency or representative office, an
prudential, or supervisory concerns.
agency to a representative office, a state
(ii)
General consent for representativebranch to a federal branch, or a state
offices. The Board grants its general
agency to a federal agency.
consent for a foreign bank to establish
(5)
Transactions subject to approval
a representative office that solely
under "Regulation Y. Subpart B of the
engages in limited administrative
Board’s Regulation Y (12 CFR 225.11functions that are dearly defined, are
225.14) governs the acquisition by a
foreign banking organization of direct or
performed in connection with the
banking activities of the foreign bank,
indirect ownership or control of any
and that do not involve contact or
voting securities of a bank or bank
liaison with customers or potentia’
holding company in the United States if
customers (such as separately
the acquisition results in tire foreign
maintaining back office support
banking organization’s ownership or
systems), provided that the foreign bank control of more than 5 percent of any
notifies the Board in writing within 30
class of voting securities of a U.S. bank
or bank holding company, including
days of the establishment of the
representative office.
through acquisition of a foreign banker
(3) After-the-fact Board approval.
foreign banking organization that owns
Where a foreign bank proposes to
or controls more than 5 percent of any
establish a branch, agency ,
class of the voting securities of a U.S.
representative office, or commercial
bank or bank holding company.
(b)
Procedures for application—(1)
lending company in the United States
through the acquisition of, or merger or Filing application. An application for
consolidation with, a foreign bank with the Board’s approval pursuant to this
an office in the United States, the Board section shall be filed in the manner
prescribed by the Board.
may, in its discretion, allow the
(2) Publication requirement—(i)
acquisition, merger, or consolidation to
General. Except with respect to a
proceed before an application to
proposed transaction where more
establish the office has been filed or
extensive notice is required by statute or
acted upon under this section if:
(i) The foreign bank or banks resulting as otherwise provided in paragraphs
(b)(2)(ii) and (b)(2)(iii) of this section,
from the acquisition, merger, or
the applicant shall publish a notice in
consolidation, will not directly or
a newspaper of general circulation in
indirectly own or control more than 5
the community in which the applicant
percent of any class of the voting
p r o p o s e s t o e n g a g e in b u s in e s s . H i e
securities of, or control, a U.S. bank;
notice shall state that an application is
(ii) The Board is given reasonable
being filed as of the date of the notice
advance notice of the proposed
and provide the name of the applicant,
acquisition, merger, or consolidation;
(lii) Prior to consummation of the
the subject matter of the application, die
acquisition, merger, or consolidation,
place where comments should be sent,
and the date by which comments are
each of the relevant foreign banks
due pursuant to paragraph (b)(3) of this
commits in writing to comply with the
procedures for an application under this section. The applicant shall furnish
sectiqn within a reasonable period of
with its application to the Board a copy
time or has already filed an application; of the notice, the date of its publication,
and
and the name and address of the
(iv)
Each of the relevant foreign banksnewspaper in which it was published.
(ii) Exception. The Board may modify
commits in writing to abide by the
the publication requirement of
Board’s decision on the application,
including, if necessary, a decision to
paragraph (b)(2)(i) of this section in
terminate the activities of any such U.S. appropriate circumstances.
(iii) Federal branch or federal agency.
office, as the Board or the Comptroller
In the case of an application to establish
may require.
a federal branch or federal agency,
(4) Notice of change in ownership or
compliance with the publication
control or conversion of existing office.
procedures of the Comptroller shall
A foreign bank with a U.S. office shall
satisfy the publication requirement of
notify the Board in writing within 10
days of either:
this section. Comments regarding the
(i)
A change in the foreign bank’s
application should be sent to the Board
ownership or control where the foreign and the Comptroller.
bank is acquired or controlled by
(3) Written comments. Within 30 days
after publication as required in
another foreign bank or company and
paragraph (b)(2l of this section, any
the acquired foreign bank with a U.S.
person may submit to the Board written
office continues to operate in the same
corporate form as prior to the change in comments and data on an application.
The Board may extend the 30-day
ownership or control; or
comment period if the Board determines
that additional relevant information is
likely to be provided by interested
persons or it other extenuating
circumstances exist.
(4)
Board action on application—(!)
Time limits. The Board snail act on an
application from a foreign bank within
60 calendar days after the foreign bank
has been notified that its application has
been accepted, unless the Board
determines that the public interest will
be served by providing additional time
to review the application and notifies
the applicant that the 60-day period is
being extended.
(ii)
Additional information. The Board
may request any information in addition
to that supplied in the application when
the Board believes that additional
information is necessary for its decision.
(5 ) Coordination with other regulators.
Upon receipt of an application by a
foreign bank under this section, the
Board shall promptly notify, consult
with, and consider the views of the
licensing authority.
(c)
Standards for approval—(1)
Mandatory standards—(i) General. As
specified in section 7(d) of thelBAU2
U.S.C. 3105(d)), the Board may not
approve an application to establish a
branch or an agency, or to establish or
acquire ownership or control of a
commercial lending company, unless it
determines that:
(A) Each of the foreign bank and any
parent foreign bank engages directly in
the business of banking outside the
United States and is subject to
comprehensive supervision or
regulation on a consolidated basis by its
home countiy supervisor; and
(B) The foreign bank has furnished to
the Board the information that the Board
requires in order to assess the
application adequately.
(ii)
Basis for determining
comprehensive supervision or
regulation on a consolidated basis. In
determining whether a foreign bank and
any parent foreign bank is subject to
comprehensive supervision or
regulation on a consolidated basis, the
Board shall determine whether the
foreign bank is supervised or regulated
in such a manner that its home country
supervisor receives sufficient
information on the worldwide
operations of the foreign bank
(including the relationships of the bank
to any affiliate) to assess the foreign
bank’s overall financial condition and
compliance with law and regulation. In
making such a determination, the Board
shall assess, among other factors, the
extent to which the home country
supervisor:
Federal Register / Vbl. 5®, No; 17 / Thursday, January 2 8 ; 1 9 9 8 • / Rules and Regulations
0361
section 10(a)(2)1offoe IBA (12 U.S.C
applicable* federal banking statutes;
(AJ Ensures that die foreign bank has
3107fa)(2)>, in acting err foe application
adequate procedures for monitoring and these assurances shall1include a
of a foreign bank to establish a
statement from the foreign bank
controlling its activities worldwide;
(0)
»Obtains information on the
representative office, foe Board shall
describing foe laws foot would restrict
condition of the foreign bank and its
foe foreign bank or any of its parents
take into account tie foe extent it deems
subsidiaries and offices outside the
from providing information to foe
appropriate the standards for approval
home country through regular reports of Boara;
set out in paragraph (c) of this section.
(vi)
Compliance with U.S. law.
(3> Additional requirements. The
examination, audit reports, or
Whether foe foreign bank arid its U.S.
Board may impose any additional
otherwise;
affiliates are in compliance with
(Q Obtains information on the
requirements that it determines to be
applicable U.S.law, and whether the
dealings and relationships between the
necessary to carry out foe purposes of
applicant has established adequate
foreign bank and its affiliates, both
foe IBA.
controls and procedures in each of its
(e)
Preservation of existing authority:
foreign and domestic;
offices to ensure continuing compliance Nothing in* this subpart shall be
(D| Receives from the foreign bank
financial reports that are consolidated
with U.S.law, including controls
construed to relieve any foreign bank or
on a worldwide basis,, or comparable
directed to detection of money
foreign banking* organization from any
information that permits analysis of the laundering and other unsafe or unsound otherwise applicable requirement of
banking practices.
foreign bank’s financial condition on a
federal or state few, including any
(3) Additionalfactor. In acting on an
worldwide, consolidated basis;
applicable licensing requirement
(E)
Evaluates prudential standards, application, foe Board may consider the
needs of the community and foe history § 211.25 Twratoattoa at offices at foreign
such as capital adequacy and risk asset
banks.
of operation of foe foreign bank and its
exposure, on a worldwide basis.
(a) Grounds for termination—(I f
(Z) Discretionary standards. In acting relative size in its home country,
General Under sections 7(e) mid 10(b)
on any application under this subpart,
provided, however, that the size of foe
the Board may take into account:
foreign bank shall not be foe sole factor of the IBA (12 U.S.C 2105(e), 3*07fb)|,
the Board may order a foreign bank to
(1) Consent of home country
in determining whether an office of a
tenninato the activities of its
supervisor. Whether the home country
foreign bank should be approved.
(4) Board conditions on approval The representative office, state branch, state
supervisor of the foreign bank has
agency, or commercial fending company
Board may impose such conditions on
consented to the proposed
subsidiary if foe Board finde that:
establishment of a branch, agency, or
its approval as it deems necessary,
(i) The foreign bank is not subject to
including a condition which may permit
commercial lending company
comprehensive supervision car
subsidiary;
future termination of any activities by
regulation cm a consolidated basis by its
(ii) Financial resources. The financial the Board or, in foe case of a federal
home country supervisor in accordance
resources of the foreign bank (including branch or a federal agency, by the
with § 211.24(e)(1) of this subpart; or
the foreign bank’s capital position,
Comptroller, based on the inability of
(ii)
(A) There is reasonable cause to
projected capital position, profitability, the foreign bank to provide information
believe that the foreign bank or any erf
level of indebtedness, and future
on its activities or those of its affiliates
its affiliates has committed a violation
prospects) and the condition of any U.S. that the Board deems necessary to
office of the foreien bank;
determine and enforce compliance with of law or engaged in an unsafe or
unsound banking practice in the United
(iii) Managerial resources. The
U.S. banking laws.
managerial resources of the foreign
States; and
(d)
Representative offices—(1)
(B) As a result of such violation car
bank, including the competence,
Activities. A representative office may
practice, the continued operation af foe
experience, and integrity of the officers engagein:
foreign bank’s representative office,
fl) Representational and
and directors; the integrity of its
state branch, state agency, or
administrative functions in connection
principal shareholders; management’s
with the banking activities of foe foreign commercial fending company
experience and capacity to engage in
international banking; and the record of bank which may include soliciting new subsidiary would not be consistent with
the public interest or with the purposes
the foreign bank and its management of business for the foreign bank,
of tire IBA, foe BBC Act, or the Federal
conducting research,, acting as liaison
complying with laws and regulations,
Deposit Insurance Act (FDi Act) (12
between foe foreign bank’s head office
and of fulfilling any commitments to,
and customers in foe United States,
U.S.C. lM l etseq.)s
and any conditions imposed by , the
[2} Additional ground. The Board may
performing any of foe activities
Board in connection with any prior
also enforce any condition imposed in
described in 12’CFR 250.141(h), or
application;
connection with an order issued under
(iv) Sharing information with
performing back office functions, but
supervisors. Whether the foreign bank’s shall not include contracting for any
§ 211.24r of this subpoet.
(b) Factor, hr making its findings
home country supervisor and the home deposit or deposit-like liability, lending
under this section, foe Board may take
country supervisor of any parent of the
money, or engaging in any other
into account foe needs of the
Foreign bank share material information banking activity for the foreign bank;
community as well as the history of
regarding the operations of the foreign
and
bank with other supervisory authorities;
(ii)
Other functions for or on behalf ofoperation of foe foreign bank and its
(v)
. Assurances to Board. Whether the
the foreign bank or its affiliates, such as relative size in its home country,
Foreign bank has provided the Board
provided, however, font foe size of tile
operating as a regional administrative
with adequate assurances that
foreign bank shall not be foe sole
office of foe foreign bank, but only to
information will be made available to
the extent that such other functions are determfning factor in a decision to
‘he Board on the operations or activities not banking activities and are not
terminate an office.
(ef Consultation with reievanr state
af the foreign bank and any of its
prohibited by applicable federal or state
supervisor. Except rre foe ease of
iffiliates that the Board deems necessary law or by ruling or order of foe Board.
termination pursuant to paragraph (d)(3)
(2)
Standards for approval a f
:o determine and enforce compliance
of tins section, before issuing mt order
with the IBA, the BHC Act,, and other
representative offices. As specified in
6362
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Rules and Regulations
terminating the activities of a state
branch, state agency, representative
office, or commercial lending company
subsidiary undeT this section, the Board
shall request and consider the views of
the relevant state supervisor.
(d) Termination procedures—(1)
Notice and hearing. Except as otherwise
provided in paragraph (d)(3) of this
sefction, an order issued under
paragraph (a)(1) of this section shall be
issued only after notice to the relevant
state supervisor and the foreign bank
and after an opportunity for a hearing.
(2) Procedures for hearing. Hearings
under this section shall be conducted
pursuant to the Board’s Rules of Practice
for Hearings (12 CFR part 263).
(3) Expedited procedure. The Board
may act without providing an
opportunity for a hearing if it
determines that expeditious action is
necessary in order to protect the public
interest. When the Board finds that it is
necessary to act without providing an
opportunity for a hearing, the Board,
solely in its discretion, may provide the
foreign bank that is the subject of the
termination order with notice of the
intended termination order, grant the
foreign bank an opportunity to present
a written submission opposing issuance
of the order, or take any other action
designed to provide the foreign bank
with notice and an opportunity to
present its views concerning the order.
(e) Termination offederal branch or
federal agency. The Board may transmit
to the Comptroller a recommendation
that the license of a federal branch or
federal agency be terminated if the
Board has reasonable cause to believe
that the foreign bank or any affiliate of
the foreign bank has engaged in conduct
for which the activities of a state branch
or state agency may be terminated
pursuant to this section.
(f) Voluntary termination. A foreign
bank shall notify the Board at least 30
days prior to terminating the activities
of any office. Notice pursuant to this
paragraph is in addition to, and does not
satisfy, any other federal or state
requirements relating to the termination
of an office or the requirement for prior
notice of the closing of a branch
pursuant to section-39 of the FDI Act (12
U.S.C. 1831p).
f 211.26 Examination of offices and
affiliates of foreign banks.
(a)
Conduct of examinations—(1)
Examination of branches, agencies,
commercial lending companies, and
affiliates. The Board may examine any
branch or agency of a foreign bank, any
commercial lending company or bank
controlled by one or more foreign banks
or one or more foreign companies that
same foreign bank outstanding to such
control a foreign bank, and any other
borrower at the time and shall be subject
office or affiliate of a foreign bank
to the limitations and other provisions
conducting business in any state.
(2)
Examination of representative
of section 5200 of the Revised Statutes
offices. The Board may examine any
(12 U.S.C. 84), and the regulations
representative office in the manner and promulgated thereunder, in the same
with the frequency it deems
manner that extensions of credit by a
appropriate.
federal branch or federal agency are
lb) Coordination of examinations. To subject to section 4(b) of the IBA (12
the extent possible, die Board shall
U.S.C. 3102(b)) as if such state branches
coordinate its examinations of the U.S.
and agencies were federal branches and
offices and U.S. affiliates of a foreign
agencies.
bank with the licensing authority and,
(b)
Preexisting loans and extensions
in the case of an insured branch, the
of credit. Any loans or extensions of
Federal Deposit Insurance Corporation
credit to a single borrower that were
(FDIC), including through simultaneous originated prior to December 19,1991
examinations of the U.S. offices and
by a state branch or state agency of the
U.S. affiliates of a foreign bank.
same foreign bank and that, when
(c)
Annual on-site examinations. Eachaggregated with loans and extensions of
branch, agency, or commercial lending
credit by all other branches and
company subsidiary of a foreign bank
agencies of the foreign bank, exceed the
shall be examined on-site at least once
limits set forth in paragraph (a) of this
during each 12-month period (beginning section, may be brought into compliance
on the date the most recent examination with such limitations through routine
of the office ended) by:
repayment, provided that any new loans
(1) The Board;
or extensions of credit, including
(2) The FDIC, if the branch of the
renewals of existing unfunded credit
foreign bank accepts or maintains
lines or extensions of the dates of
insured deposits;
maturity of existing loans, to the same
(3) The Comptroller, if the branch or
borrower shall comply with the limits
agency of the foreign bank is licensed by set forth in paragraph (a) of this section.
the Comptroller; or
8.
A new § 211.29 is added and
(4) The state supervisor, if the office
reserved to read as follows:
of the foreign bank is licensed or
chartered by the state.
§ 211.29 Applications by state-licensed
§ 211.27 Disclosure of supervisory
information to foreign supervisors.
branches and agencies to conduct activities
not permissible for federal branches—
[Reserved]
(a) Disclosure by Board. The Board
may disclose information obtained in
PART 225— BANK HOLDING
the course of exercising its supervisory
COMPANIES
AND CHANGE IN BANK
or examination authority to a foreign
bank regulatory or supervisory authority CONTROL
if the Board determines that disclosure
1. The authority citation for 12 CFR
is appropriate for bank supervisory or
part 225 continues to read as follows:
regulatory purposes and will not
A uthority: 1 2 U.S.C. 1 8 1 7 (j)(1 3 ), 1 8 1 8 ,
prejudice the interests of the United
1 8 3 1 i, 1 8 4 3 (c )(8 ), 1 8 4 4 (b ), 1972(1), 3 1 0 6 ,
States.
(b) Confidentiality. Before making any 3 1 0 8 , 3 9 0 7 , 3 9 0 9 , 3 3 1 0 , and 3 3 3 1 - 3 3 5 1 .
disclosure of information pursuant to
2. Section 225.11 is amended by
paragraph (a) of this section, the Board
revising paragraph (f) to read as follows:
shall obtain, to the extent necessary, the
agreement of the foreign bank regulatory § 225.11 Transactions requiring Board
or supervisory authority to maintain the approval.
*
*
*
*
*
confidentiality of such information to
the extent possible under applicable
(f)
Transactions by foreign banking
law.
organization. Any transaction described
in paragraphs (a) through (e) of this
§211.28 Limitation on loans to one
section by a foreign banking
borrower.
(a)
Limitation. Except as otherwise organization (as defined in 12 CFR
211.21(n)) that involves the acquisition
provided in paragraph (b) of this
section, the total loans and extensions of of an interest in a U.S. bank or in a bank
holding company for which application
credit by all the state branches and
would be required if the foreign banking
agencies of a foreign bank outstanding
to a single borrower at one time shall be organization were a bank holding
company.
aggregated with the total loans and
3. Section 225.12 is amended by
extensions of credit by all federal
revising paragraph (f) to read as follows:
branches and federal agencies of the
Federal Register / Vol. 58, No. 17 / Thursday, January 28, 1993 / Roles and Regulations
§225.12 Transactions not requiring Board
approval.
*
* * * *
(f)
Acquisition offoreign banking
organization. The acquisition of a
foreign banking organization (as defined
in 12 CFR 211.21(n)) where the foreign
banking organization does not directly
or indirectly own or control a bank in
the United States, unless the acquisition
is also by a foreign banking organization
and otherwise subject to § 225.11(f) of
this subpart.
PART 263— RULES OF PRACTICE FOR
HEARINGS
1. The authority citation for 12 CFR
part 263 is revised to read as follows:
Authority: 5 U.S.C 504; 12 U.S.C 248,
324, 504, 5 0 5 ,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, 78o5, and 78u-2.
2. Section 263.51 is amended by
revising paragraph (c) to read as follows:
1263.51
*
*
Definitions.
*
*
*
(c) Institution has the same meaning
is that assigned to it in § 263.3(f) of
mbpart A, and includes any foreign
)ank with a representative office in the
Jnited States.
’ ART 265— RULES REGARDING
DELEGATION OF AUTHORITY
1. The authority citation for 12 CFR
>art 265 continues to read as follows:
Authority: 12 U.S.C 248(i) and (k).
2. Section 265,6 is amended by
evising paragraph (b)(2) and by adding
i new paragraph (f) to read as follows:i
i265.6 Functions delegated to General
Counsel.
*
*
*
*
estab lish a r e p r e se n ta tiv e o ffic e in th e
the-fact application for the Board’s
U nited States p ursuant to § 2 1 1 .2 4 o f
approval to establish that office
Regulation 1C (1 2 CFR 2 1 1 .2 4 ). p rovided
pursuant to § 2 1 1.24(a )(3) o f Regulation
K (1 2 CFR 211.24(a )(3)); and
that:
(2 )
T o m odify the requirem ent that a (A) T he foreign bank p reviously
foreign bank that has ap p lied to
rece iv e d approval from d ie B oard to
estab lish a branch, agency, com m ercial
establish a branch, agency, com m ercial
lending com pany, or representative
len d in g com pany, or representative
office pursuant to § 2 1 1 .2 4 (a ) o f
office in th e U n ited S tates pursuant to
Regulation K (1 2 CFR 2 1 1 .2 4 (a )) shall
2 1 1 .2 4 o f R egulation K (1 2 CFR 2 1 1 .2 4 k
publish notice o f th e application in a
and
n ew spaper o f general circulation in th e
(B ) T h e ap p lication r a ise s n o
significan t p o lic y or supervisory issu es.
com m unity in w h ich the applicant
*
*
*
*
*
p roposes to engage in b u sin ess as
provided in § 2 1 1 .2 4 (b )(2 )(ii) o f
By order of the Board of Governors of the
Regulation K (1 2 CFR 211.24 (b )(2)(ii)).
Federal Reserve System, January12,1993.
3. S ection 2 6 5 .7 is am ended by
revising paragraph (d)(8) to read as
follows:
W illiam W. W iles,
§ 265.7 Functions delegated to Director of
Division of Banking Supervision and
Regulation.
BILLING CODE «1 O -0 1 -f
*
*
*
*
*
(d) * * *
(8)
Conduct and coordination of
examinations. To authorize the conduct
of exam inations o f the U.S. offices and
affiliates o f foreign hanks as provided in
section s 7(c) an d 10(c) o f th e IBA (1 2
U.S.C. 3 1 0 5 (c ), 3 1 0 7 (c )), and, w here
appropriate, to coordinate those
exam inations’w ith exam inations o f the
Office o f the Comptroller o f the
Currency, the Federal D eposit Insurance
Corporation, and the state entity that is
authorized to supervise or regulate a
state branch, state agency, com m ercial
lending com pany, or representative
office.
*
*
*
*
*
4. S ection 2 6 5 .1 1 is am ended by
adding paragraph ( d ) ( l l ) to read as
follows:
§ 265.11 Functions delegated to Federal
Reserve Banks.
(b) * * *
*
( 2)
(d) * * *
( l l ) Establishment of additional office
by foreign bank— (i) Additional branch,
Disclosure to foreign authorities.
'o make the determinations required for
lisclosure of information to a foreign
iank regulatory or supervisory
uthority, and to obtain, to the extent
ecessary, the agreement of such
uthority to maintain the confidentiality
f such information to the extent
•ossible under applicable law (12 CFR
*
*
*
*
agency, or commercial lending
company. To approve an application
by
a foreign bank to establish an additional
branch, agency, or com m ercial lend in g
com pany in the U nited States pursuant
to § 2 1 1 .2 4 o f Regulation K (1 2 CFR
11.27).
2 1 1 .2 4 ), provided that:
*
*
*
*
(A) T he foreign bank previously
(f) International banking. (1) With the received approval from th e Board to
oncurrence of the Board’s Director of
establish a branch, agency, or
tie Division of Banking Supervision and com m ercial lend in g com pany in the
:egulation, to grant a request by a
U nited States pursuant to § 2 1 1 .2 4 of
dreign bank to establish a branch,
Regulation K (1 2 CFR 21 1.24 ); and
gency, commercial lending company,
(B) The application raises n o
r representative office through certain
significant p o licy or supervisory issues.
cquisitions, mergers, consolidations, or
(ii)
Representative1office. To approve
imilar transactions, and to file an after- an application by a foreign bank to
6383
Secretary of the Board.
(FR Dog. 93-1864 Filed 1-27-93; 8:45 amj
Federal Reserve Bank of N ew York
N ew York, N.Y. 10045-0001
A R E A C O D E 212-720-5000
February 5, 1993
To the Chief Financial Officer at Each Foreign Bank or
Representative Office in the Second Federal Reserve District:
SUBJECT :
Registration of U.S. Representative Offices of Foreign
Banks
Enclosed is a copy of our Circular No. 10622, regarding
the issuance by the Board of Governors of the Federal Reserve
System of a final amendment to its Regulation K (International
Banking Operations) to implement the Foreign Bank Supervision
Enhancement Act of 1991, together with the Board's official
notice of this action, as published in the Federal Register. In
response to comments, included in the final rule is a revision of
the definition of a U.S. representative office of a foreign bank.
Subpart B of Regulation K now provides that a representative
office of a foreign bank is "any place of business of a foreign
bank, located in any state, that is not a branch, agency, or
subsidiary of the foreign bank."
Your bank may have already registered its
representative offices as requested in a prior Federal Register
notice issued in July 1992 (57 Fed. Reg. 31374). If your bank is
currently operating a representative office (as defined above)
that you did not register pursuant to the prior notice, please
fill out one copy of the attached form FR 3072 for each such
office. In addition, please review each FR 3072 you may have
filed pursuant to the prior notice to confirm that the
representative office you previously registered falls within the
new definition. Please note that the information provided in any
new FR 3072 you file should be as of December 31, 1992, rather
than as of June 30, 1992 as indicated in the instructions to the
form. In addition, please disregard the definition of
representative office contained in the "Definitions" section of
the instructions to the form. The definition to be used in
completing any new FR 3072 is the definition set forth in the
(Over)
FEDERAL RESERVE BANK OF NEW YORK
2
first paragraph of this letter. All representative offices must
be registered with this Federal Reserve Bank by submitting the
attached FR 3072 form to the attention of the Foreign Banking
Applications Division bv February 26. 1993. If your initial
filing of FR 3072 was complete, no further action is required.
Also, please note that the definition of a foreign bank
includes banks chartered in Puerto Rico, Guam, American Samoa,
the Virgin Islands, or a U.S. territory. The Board of Governors
will continue to review this definition to determine whether
representative offices of foreign banks in these geographical
areas are fully subject to the new requirements of Regulation K.
In the interim, any foreign bank chartered in a protectorate or
territory that operates a representative office as defined in
Regulation K should register any such office as described above.
If you have any questions regarding the completion of
FR 3072, please call Joseph Bell, of the Foreign Banking
Applications Division (Tel. No. 212-720-5678).
Any comments your bank may have pertaining to the final
rule amending Regulation K should be directed to the Board of
Governors, as instructed in the Federal Register notice.
ROBERTA J. PUSCHEL,
Executive Vice President.
FR 3072
O M B No. 7100-0256
Hours per resoon se: 0.17
Expires: S e p te m o e r3 0 ,1992
FOREIGN REPRESENTATIVE OFFICE REGISTRATION FORM
This report is required by law (12 U.S.C. §3107].
form seeks information concerning each representative office of a foreign bank currently operating in the United States. If respondent
epresentative office, please complete items 1-7 and 9-11. If respondent no longer operates as a representative office, please complete
items 2 and 8 through 11.
.egal name and address of representative office
2. Legal name of foreign bank and address of head office
.egai Name
Legal Name
itraat Address
Street Address
*y
County
City
State
Zip Coda
Country
Date regulatory authority of
Postal Code
approved opening of representative office:
name ot state
Date representative office commenced business: _
montrvday/year
montn/day/year
3rincipai activities conducted by this office (Check as many as apply):
H Loan production or solicitation
O Advisory services for customers
EZ3 Economic research
□ Other liaison activities (If activity represents greater than 25 percent of total business conducted, please describe below.)
Federal Reserve regards inform ation subm itted in response to Item s 6 and 7 as confidential [5 U.S.C. §552(b)(4)].
dumber of staff (full time equivalent)______________
** s
Total expenses incurred by representative office in 1991 (in SOOO's)____________________________________
f respondent no longer operates as a representative office, check the reason or reasons that most accurately explain why and provide
be effective date when this occurred.
□ upgraded to an agency
□ other (please explain) _
I I ceased operations
EU upgraded to a branch
Effective date
montfvday/yeir
Marne and title of person to be contacted concerning this report
jtame
Tide
‘•tapnone Num oar (inducing area coda)
F A X Numoar
If different than item 9, name and title of the senior representative official authorized to sign this report
>iama
Title
signature
Data
(PLEASE SUBMIT THIS FORM TO THE FOREIGN BANKING APPLICATIONS DIVISION
OF THE FEDERAL RESERVE BANK OF NEW YORK.)
PH 3072
INSTRUCTIONS FOR PREPARATION OF
THE FOREIGN REPRESENTATIVE OFFICE REGISTRATION REPORT
(FR 3072)
Page 1
Public reoorting burden forthis information collection is estimated to average
10 minutes per response including time to gatner and maintain data in tne
required form and to review instructions and complete the information
collection. Comments regarding this burden estimate or any other aspect of
this information collection, including suggestions for reducing the burden,
may be sent to Secretary, Board of Governors of the Federal Reserve
System. Washington, D.C. 20551, and to the Office of Management and
Budget, Paperwork Reduction Project (7100-0256), Washington, D .C .20503.
Item 5—In the spaces provided, check the activities conducted by
your office which fit the categories listed. If the respondent performs
an activity which entails greater than 25 percent of business activ
ities conducted, name the activity(ies) in the space provided.
PURPOSE OF THE REPORT
Item 7—Provide the total amount of expenses incurred by the
representative office for the past calendar year. This would indude
but is not limited to office salaries, lease and other overhead
expenses incurred in operating as a representative office.
The Federal Reserve seeks information on a one-time basis con
cerning each representative office of a foreign bank currently
operating in the United States. The responsibility for the registration
of representative offices was transferred from the Department of the
Treasury to the Federal Reserve effective May 22, 1992. The
Federal Reserve has the authority to collect any further information
deemed necessary on these offices.
WHO MUST REPORT
Ail representative offices of foreign banks—see definitions below
(excluding central banks) which are operating in the United States.
WHERE AND WHEN TO REPORT
The original copy of the completed report should be submitted to the
Federal Reserve Bank in whose district the reporting representative
office is located. The report must be submitted within 10 business
days of receipt of the report
s'
AS OF DATE
The information collection will be as of June 30, 1992, except for
items 3, 4 and 8.
GENERAL INSTRUCTIONS
Item 1—Provide the name and complete address of the represen
tative office. The address should identify the physical location of the
office, not a post office box.
Item 2—Provide the name and complete foreign address of the
foreign bank which the office is representing.
Item 3— Indicate the state in which this office was approved to
operate and the date on which such approval was obtained.
Item 4— Provide the date on which the office started functioning as
a reoresentative office. This may be different than the license/
approval date (item 3).
Item 6—Provide the number of staff employed on behalf of the
representative office on a full-time equivalent basis.
Item 8—If respondent is no longer operating as a representative
office, piease check the appropriate category which best explains
why. If none of the categories is appropriate, describe the reason in
the space provided.
Item 9—State the name and title of person to be contacted concern
ing this report Also provide the telephone number and facsimile
machine if available.
Item 10—Name and title of senior representative offidal authorized
to sign this report if different from the contact person named in
item 9.
Item 11—Signature of person authorized to sign the report The
original of the report shall be manually signed on the report submit
ted, by a duly authorized officer of the reporting office. The correct
ness of the submitted report shall be attested by the signature of the
senior executive official of the reporting office.
DEFINITIONS
A representative office means an office that
(1) Engages solely in representational and administrative func
tions, such as soliciting new business or acting as liaison
between the organization's head office and customers in the
U.S.; and
(2) Does not have authority to make any business decision for the
account of the organization it represents, including con
tracting for any deposit or deposit-like liability on behalf of the
organization.
A foreign bank means an organization that is organized under the
laws of a foreign country and that engages directly in the business
of banking. The term foreign bank does not include central banks of
foreign countries that are not engaged in a commercial banking
business in the United States.
@FedFRASER