The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FE D E R A L R ESER VE BANK OF N EW YORK J ["Circular No. 71611 June 7.1973 REGULATIONS K AND M Statement of Policy on Availability of Information to Facilitate Supervision by Board of Governors o f Foreign Operations o f Member Banks To All Member Banks, and Others Concerned, in the Second Federal Reserve District: Printed below is the text o f an interpretation o f Regulation K, “ Corporations Engaged in Foreign Banking and Financing Under the Federal Reserve A c t,” and Regulation M, “ Foreign Activities o f National B an k s,” issued May 31 by the Board o f G overnors o f the Federal Reserve System. The interpre tation consists o f a statement o f policy by the Board o f G overnors on the availability o f inform ation to facilitate supervision by the Board o f G overnors o f foreign operations o f mem ber banks. Additional copies o f this circular will be furnished upon request. A L F R E D H AYES, President. [Regs. K and M] 12 CFR PART 211— CORPORATIONS ENGAGED IN FOREIGN BANKING AND FINANCING UNDER THE FEDERAL RESERVE ACT 12 C FR PART 213— FOREIGN ACTIVITIES OF NATIONAL BANKS § 211.110 Statement of policy on availability o f infor mation to facilitate supervision o f foreign operations o f member banks. For text o f interpretation, see § 213.104 o f this chapter. § 213.104 Statement of policy on availability o f infor mation to facilitate supervision o f foreign operations o f member banks. system in the United States. The Board o f Governors and other federal banking supervisory authorities have been given specific statutory responsibilities to assure that banking institutions are operated in a safe and prudent manner affording protection to depositors and providing adequate and efficient banking services to the public on a continuing basis. These responsibilities and concerns are shared by central banks and bank super visors the world over. For the guidance of member banks having foreign operations, the Board publishes the following statement of policy regarding availability o f information pertain ing to member banks' foreign branches and subsidiaries .to enable proper supervision o f those operations: (b) Under sections 25 and 25(a) o f the Federal Re serve Act. the Board has particular responsibilities to superv ise the international operations of member batiks in the public interest. In carrying out these responsibil ities. the Board has sought to assure that the interna (a) The Board of Governors of the Federal Reserve tional operations of member banks would not only System, as a central bank, is properly concerned with foster the foreign commerce of the United States but the preservation and promotion o f a sound banking that they would also be conducted so as not to encroach (Over) on the maintenance o f a sound and effective banking structure in the United States. In keeping with the latter consideration, the Board believes it incumbent upon member banks to supervise and administer their foreign branches and subsidiaries in such a manner as to assure that their operations are conducted at all times in ac cordance with high standards o f banking and financial prudence. agement’ s ability to meet its obligations from available resources, reports should identify the general sources and character o f the deposits, borrowings, etc., em ployed in the branch or subsidiary with special reference to their terms and volatility. Information should be available on sources of liquidity— cash, balances with banks, marketable securities, and repayment flows— such as will reveal their accessibility in time and any risk elements involved. (c) Proper administration and supervision o f foreign (3) Contingencies. Data on the volume and nature branches and subsidiaries require the use o f effective o f contingent items such as loan commitments and systems o f records, controls, and reports that will keep guaranties or their equivalents that permit analysis o f the bank’s management informed o f the activities and potential risk exposure and liquidity requirements. condition o f its branches and subsidiaries. At a minimum, such systems should provide the following: (4) Controls. Reports on the internal and external audits o f the branch or subsidiary in sufficient detail to (1) Risk assets. To permit assessment o f exposure to permit determination of conformance to auditing guide loss, information furnished or available to head office lines. Such reports should cover (i) verification and should be sufficient to permit periodic and systematic identification of entries on financial statements; (ii) in appraisals o f the quality of loans and other extensions come and expense accounts, including descriptions o f of credit. Coverage should extend to a substantial significant charge-offs and recoveries; (iii) operation o f proportion o f the risk assets in the branch or subsidiary, dual-control procedures and other internal controls; (iv) and include the status of all large credit lines and o f con form an ce to head office guidelines on loans, credits to customers also borrowing from other offices o f deposits, foreign exchange activities, proper accounting the bank. Information on credit extensions should procedures, and discretionary authority o f local man include (i) a recent financial statement of the borrower agement; (v) compliance with local lav/3 and regula and curicnt information on his financial condition; (ii) tions; and (vi) compliance with applicable U.S. laws and credit terms, conditions, and collateral; (iii) data on any regulations. guarantors; (iv) payment history; and (v) status o f cor rective measures employed. By order of the Board o f Governors o f the Federal Reserve System, May 31, 1973. (2) Liquidity. To enable assessment o f local man
@FedFRASER