Full text of Federal Reserve Bank of New York Circulars : 8460. International Banking Act of 1978

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

FE D ER AL R ESER VE BAN K
O F N E W YO RK
f* Circular No. 8 4 6 0 1
1 November 17, 1978 J

IN T E R N A T IO N A L B A N K IN G A C T O F

1978

Change in Reserve R equirem ent Under Regulation K
To AH M em ber Ban/cs, anH OtRers CoacaraeH,
m Hie Second Federal Referee DM inct;

F o llo w in g is th e text o f a sta tem en t issu ed N o v e m b e r 16 b y th e B oa rd o f G o vern o rs o f
th e F e d e ra l R ese rv e S y stem :

Th e Federal Reserve Board today announced revisions of its Regulation K — concerning
corporations engaged in foreign banking and financing — to conform to certain provisions o f the
new International Banking Act.
A t the same tim e the Federal D eposit Insurance Corporation, the Com ptroller of the Currency
and the Federal Reserve Board issued a joint statement describing steps being taken b y the three
agencies to im plem ent the Act.
The International Banking A ct ( I B A ) , signed into law Septem ber 17, 1978, for the first time
makes the operations of foreign banks in the U nited States, through their branches, agencies and
lending companies, subject to Federal law in a manner similar to domestic banks.
The A ct assigns new responsibilities over the activities of foreign banks in the United States
to the Com ptroller of the Currency, the Federal D eposit Insurance Corporation and the Federal
Reserve Board.

The three agencies have form ed an interagency task force to im plem ent these

responsibilities.
Th e Board announced that:
1.

It is revising its Regulation K to remove the 10 per cent m inim um reserve requirement

that has applied to domestic deposits of E d ge A ct Corporations ( U.S. corporations that banks may
establish, under a provision of the Federal Reserve A ct — Sec. 2 5 ( a ) — to engage in foreign
banking and finance). E d ge Corporations will, instead, under the International Banking A ct and
Regulation K, be subject to the same reserve requirements on their domestic deposits as apply
to m em ber banks.
This am endm ent will be effective with the reserve computation period beginning N ovem ber
16, 1978. The new level of required reserves must be maintained beginning with the week ending
D ecem ber 6, 1978.
2.

T h e Board is advising the Reserve Banks to accept applications b y foreign banks for the

formation of E dge Corporations, and is revising the relevant application form

(F R

151)

to

conform to provisions of the IB A ( 1 ) authorizing foreign banks, w ith the approval of the Board,
to own a majority of the shares of an E d ge Corporation, and ( 2 ) removing the requirem ent that
only U.S. citizens m ay be directors of E d ge Corporations.
Th e A ct also authorizes the Board, after consultation with State bank supervisors, to impose
reserve requirements and interest rate limitations on branches and agencies of large foreign banks.
The Board expects to com m ence such consultations in the near future.

F ollow ing these consulta­

tions, and prior to the imposition of any reserve requirements and interest rate limitations,
proposed regulations will be published for comm ent.

E n c lo se d is a c o p y o f th e a m e n d m e n t, e ffectiv e N o v e m b e r 1 6 , 1 9 7 8 , to R e g u la tio n

K.

Q u estio n s on this m a tter m a y b e d ire c te d to our F o r e ig n B a n k in g A p p lic a tio n s D e p a r tm e n t
(T e l. N o. 2 1 2 -7 9 1 -5 8 7 8 ).
PAU L A . VOLCKER,

P resident.




Board of Governors of the Federal Reserve System
C O R P O R A T IO N S E N G A G E D IN FO R E IG N B A N K IN G A N D
F IN AN C IN G U N D E R T H E FE D E R A L R E SE R V E A C T
A M E N D M E N T T O R E G U L A T IO N K
(e^ecRue Nooem &er 1 6 ,1 9 7 8 )

A G E N C Y ; Board of Governors of the Federal
Reserve System.
A C T I O N ; Final Rule.
S U M M A R Y ; T h e recently enacted Interna­
tional Banking A ct of 1978 removed the statu­
tory requirement that corporations engaged
in international banking and financial opera­
tions — so
called
"E d g e
Corporations" —
maintain a minim um reserve of 10 per cent
on their U.S. deposits. The Board's regulation
governing E d ge Corporations imposes reserve
requirements on the U.S. deposits of E dge
Corporations subject to the former statutory
10 per cent minimum. This amendment re­
m oves the 10 per cent minim um reserve
requirement in the Board's regulation to con­
form to the International Banking Act. E d ge
Corporations will, however, continue to be
subject to reserve requirements as if they
were m em ber banks of the Federal Reserve
System.
E F F E C T I V E D A T E ; N ovem ber 16, 1978.
FOR
FURTHER
IN F O R M A T IO N C O N ­
T A C T . C . K eefe Hurley, Senior Attorney,
L egal Division, Board of Governors of the
Federal Reserve System.
S U P P L E M E N T A R Y I N F O R M A T I O N ; Sec­
tion 3 ( e ) of the International Banking A ct of
1978, (P u b. L . N o. 9 5 -3 6 9 ) amends the sixth
paragraph of section 2 5 ( a ) of the Federal
Reserve A ct (1 2 U .S .C . 6 1 5 ) b y removing the
m inim um 10 per cent reserve requirem ent on
the U .S. deposits of E d ge Corporations. Sec­

tion 2 1 1 .7 ( c ) , the Board's Regulation K, (1 2
C .F .R . $ 2 1 1 .7 ( c ) ) , imposes reserve require­
ments on E d ge Corporations subject to a 10
per cent minimum. In view of the removal
of the statutory 10 per cent minim um reserve
requirement, the Board has eliminated the
corresponding 10 per cent minim um reserve
requirement in its regulation. This am end­
ment will be effective with the computation
period com m encing N ovem ber 16, 1978. D e ­
posits of E d ge Corporations would, however,
continue to be subject to the reserve require­
ments contained in the Board's Regulation D
(1 2 C .F .R . $ 2 0 4 ). This action is taken pur­
suant to the Board's authority under the Rfth
paragraph of section 2 5 ( a ) of the Federal
Reserve A ct (1 2 U .S .C . 6 1 5 ) and section 13(a)
of the International Banking A ct of 1978
(P u b. L. N o. 9 5 -3 6 9 ).
The last sentence of section 2 1 1 .7 ( c ) of the
Board's Regulation K (1 2 C .F .R . § 2 1 1 .7 ( c ) )
is am ended to read as follow s:
S E C T IO N 211.7 — L I M I T E D O P E R A T IO N S
IN T H E U N I T E D S T A T E S

0

Board of Governors of the Federal Reserve
System, N ovem ber 16, 1978.

1 ) Regulation K, as amended effective January 7, 1969.
2 ) Amendment effective March 3, 1970.
3 ) This slip sheet.
PRINTED IN NEW YORK




0

(c ) . . . Such deposits shall be subject to
Parts 204 (Regulation D ) and 217 (R egu la­
tion Q ) o f this chapter and shall be reported
in the same manner as if the Corporation
were a m em ber bank of the Federal Reserve
System.

For this Regulation to be complete, retain:

[Enc. Cir. No. 8460]

6