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January 7, 1971

To the Addressee:
E nclosed is a reprint, in the new size, of Regulation M, as amended
effective Ja n u a r y 7 , 1971-

It replaces your small-size printing of the

regulation, as revised effective M a r c h 15, 19&7* anc^

'the amendments thereto,

effective September 4, 19&9 an(^ Ja n u a r y 7, 1971-




Circulars Division
Federal Reserve Bank of New York




BOARD OF GOVERNORS
of the

FEDERAL RESERVE SYSTEM

FOREIGN ACTIVITIES OF NATIONAL BANKS

R E G U L A T IO N M
(12 CFR 213)
As amended effective January 7, 1971

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Bank of the Federal Reserve district in which the inquiry arises.

CONTENTS

Page

Page
S e c . 2 1 3 .1 — A

u t h o r it y

S e c . 2 1 3 .2 — D

e f in it io n s

and

Sc

o p e

.............. ........3

(c )

R equired in fo r m a t io n ............................. ...... 5

( d ) R eports ........................................................ ...... 5
.................................... ........3
S e c . 2 1 3 .5 — L o a n s
S e c . 2 1 3 .3 — F o r e ig n

Br anch es

...................... ........4

E x t e n s io n s

or

of

C r e d it t o F o r e ig n B a n k s . .

5

(a ) Establishing foreign b r a n c h e s ............ .......4
( b ) Further pow ers o f foreign branches .

4

( c ) Lim itations ................................................. .......4
(d ) Suspending operations during dis­

S e c . 2 1 3 .6 — C o n d i t i o n s
S e c . 2 1 3 .7 — R e s e r v e s
Branch

turbed c o n d i t io n s .......................................4

.............................................. 5
A g a in s t

F o r e ig n

D

.............................. 6

e p o s it s

(a ) Transactions with parent b a n k .......... .......6
S e c . 2 1 3 .4 — A

c q u is it io n

and

H

o l d in g

of

S t o c k in F o r e ig n B a n k s . .

( b ) Credit
5

(a ) G eneral ........................................................ .......5
( b ) Lim itations ........................................................5




extended

residents
St a t u t o r y

to

United

States

........................................................6

A p p e n d ix

............................................... .....7

REGULATION M
(12 CFR 213)

As amended effective January 7, 1971

FO R EIG N AC TIV ITIE S OF N A T IO N A L B AN K S *

S E C T IO N 213.1— A U T H O R IT Y A N D S C O P E 1

(b)
any

Pursuant to authority conferred upon it by
section 25 o f the Federal Reserve A c t (the

“ Foreign country”
foreign

nation

or

or

colon y ,

“ country”

means

dependency,

or

possession thereof, any overseas territory, depen­
dency, or insular possession o f the United States,
or the C om m onw ealth o f Puerto R ico.

“ A c t ” ), as am ended (12 U .S.C. 601-604a), the
Board o f G overnors o f the Federal Reserve Sys­

(c) “ Foreign bank” means a bank organized
under the law o f a foreign country and not en­
gaged, directly or indirectly, in any activity in the
United States except as, in the judgm ent o f the

tem (the “ B oard” ) prescribes the follow in g regu­
lations relating to (a) foreign branches o f national
banks, (b) the acquisition and holding o f stock in
foreign banks by national banks, and (c) loans or
extensions o f credit to or fo r the account o f such
foreign banks by national banks.2

Board, shall be incidental to the international or
foreign business o f such foreign bank.

* This text corresponds to the Code of Federal Regula­
tions, Title 12, Chapter II, Part 213, cited as 12 CFR
213. The words “ this Part,” as used herein, mean Regula­
S E C T IO N 21 3.2— D E F IN IT IO N S
tion M.
1 Insofar as provisions of Federal law are concerned,
F or the purposes o f this Part—
the provisions of this Part apply to State member banks
(a )
“ Foreign branch” means any branch es­ of the Federal Reserve System as well as to national
banks.
tablished by a national bank pursuant to section
2The subject matter of this Part is in addition to that
25 o f the A ct.
contained in 12 CFR Part 211 (Reg. K ).




3

REGULATION M

§ 213.3

S E C T IO N 21 3.3— F O R E IG N
(a) Establishing foreign

BRANCHES

branches. A

foreign

branch m ay be established with prior Board per­
mission. I f a national bank has established a
branch in a foreign country, it may, unless other­
wise advised by the Board, establish other
branches in that coun try after thirty days’ notice
to the B oard with respect to each such branch.
( b ) Further powers of foreign branches. In
addition to its other pow ers, a foreign branch may,
subject to §§ 2 1 3 .3 (c ) and 213.6 and so far as

usual in connection with the transaction of the
business of banking in the places where it shall
transact business:
( 1 ) Guarantee custom ers’ debts or otherwise
agree fo r their benefit to make paym ents on the
occu rren ce o f readily ascertainable events,3 if the
guarantee or agreement specifies its m axim um
m onetary liability thereunder; but, except to the
extent secured with respect thereto, n o national
bank m ay have such liabilities outstanding ( i) in
an aggregate am ount exceeding 50 per cent o f its
capital and surplus or (ii) for any custom er in
excess o f the am ount by w hich 10 per cent o f its
capital and surplus exceeds the aggregate o f such
custom er’s “ obligations” to it w hich are subject
to any limitation under section 5200 o f the R e­
vised Statutes (1 2 U .S.C 8 4 );
( 2 ) A cce p t drafts o i bills o f exchange drawn
upon it, w hich shall be treated as “ com m ercial
drafts or bills” fo r the purposes o f paragraphs
( c ) , ( d ) , and (e ) o f § 203.1 o f Part 203 (R eg.

C);
(3 )

A cqu ire

and

hold

securities

(including

certificates or other evidences o f ow nership or
participation)
o f the central bank, clearing
houses, governm ental entities, and developm ent
banks o f the country in w hich it is located, unless
after such an acquisition the aggregate am ount
invested by the branch in such securities (e x clu ­
sive o f securities held as required by the law o f
that country or as authorized under section 5136
o f the Revised Statutes (1 2 U .S.C. 2 4 ) ) w ould
exceed one per cent o f its total deposits on the
preceding year-end call report date (o r on the
3 Including, but not limited to, such types of events as
nonpayment of taxes, rentals, customs duties, or costs of
transport and loss or nonconformance of shipping docu­
ments.




date o f such acquisition in the case o f a newly
established branch w hich has not so rep orted );
( 4 ) Underwrite, distribute, buy, and sell obli­
gations o f the national governm ent o f the cou n ­
try in w hich it is lo c a t e d ,4 but n o bank m ay hold,
or be under com m itm ent with respect to, ob li­
gations o f such a governm ent as a result o f
underwriting, dealing in, or purchasing fo r its
ow n accoun t in an aggregate am ount exceeding
10 per cent o f its capital and surplus;
(5 ) Take liens or other encum brances on fo r ­
eign real estate in conn ection with its extensions
o f credit, whether or not o f first priority and
whether or not such real estate is im proved or has
been appraised, and w ithout regard to the m a­
turity or am ount limitations or am ortization re­
quirements o f section 24 o f the A c t (1 2 U .S.C.
3 7 1 );
( 6 ) Extend credit to an executive officer o f the
branch in an am ount not to exceed $50,000 or
its equivalent in order to finance the acquisition
or construction o f living quarters to be used as
his residence abroad, provided each such credit
extension is prom ptly reported to its hom e office;
( 7 ) Pay to any officer o r em ployee o f the
branch a greater rate o f interest op deposits than
that paid to other depositors on similar deposits
with the branch.
( c ) Limitations. N othing in § 213.3(b) shall
authorize a foreign branch to engage in the gen­
eral business o f producin g, distributing, buying,
or selling goods, wares, or m erchandise or, except
as permitted by § 213.3(b) (4), to engage or partic­
ipate, directly or indirectly, in the business o f
underwriting, selling, or distributing securities.
(d) Suspending

operations

during

disturbed

conditions. T h e officer in charge o f a foreign
branch m ay suspend its operations during dis­
turbed conditions w hich, in his judgm ent, make
con du ct o f such operations im practicable; but
every effort shall be m ade b efore and during such
suspension to serve its depositors and customers.
Full inform ation concern in g any such suspension
shall be prom ptly reported to the branch’s hom e
office,

w hich

shall

im m ediately

send

a

cop y

thereof to the Board through the Federal Reserve
Bank o f its district.
4 Including obligations issued by any agency or instru­
mentality, and supported by the full faith and credit, of
such government.

REGULATION M

§§ 213.4-213.6

S E C T IO N 21 3.4— A C Q U IS IT IO N A N D
H O L D IN G O F S T O C K IN F O R E IG N B A N K S

in a foreign bank pursuant to this section shall
furnish full inform ation concern in g such foreign
bank including (unless previously furnished): (1)
the cost, num ber, and class o f shares to be ac­

(a) General. W ith the prior consent o f the
Board, and subject to the provisions o f section 25
o f the A ct and this Part, a national bank may

quired, and the proposed carrying value o f such
shares on the b ook s o f the national bank; (2)
recent balance sheet and in com e statement o f the
foreign bank; (3) brief description o f the foreign

acquire and hold directly or indirectly 5 the stock
or other evidences o f ow nership in on e or m ore
foreign banks: Provided, That the aggregate
am ount invested directly or indirectly (other than
through a corporation operating under section 25

bank’s business (including full inform ation c o n ­
cerning any direct or indirect business transacted
in the United States); (4) lists o f directors and

o f the A ct o r organized under section 25(a) o f the
A ct) in the stock o r other evidences o f ownership

principal officers (with address and principal busi­
ness affiliation o f each) and o f all shareholders

o f all foreign banks, taken together with invest­

know n to the issuing bank holding 10 per cent

ments by the national bank in the shares o f corp ­
orations operating under section 25 o f the A ct
or organized under section 25(a) o f the A ct, shall
not exceed 25 per cent o f the national bank’s
capital and surplus. N othing contained in this
Part shall prevent the acquisition and holding o f
stock or other evidences o f ow nership in a foreign
bank where such acquisition is necessary to pre­
vent a loss upon a debt previously contracted in

or m ore o f any class o f the foreign bank’s stock
or other evidences o f ow nership, and the am ount
held by each; and (5) inform ation con cern in g the
rights and privileges o f
shares outstanding.

the various classes o f

(d)
Reports. A national bank shall im mediately
inform the Board through the Federal Reserve
Bank o f its district with respect to any acquisition
or disposition o f stock in a foreign bank including

g ood faith; but such stock or other evidences o f
ownership shall be disposed o f within twelve

the cost and num ber o f shares acquired pursuant
to this section.

months from the date o f acquisition unless such
time is extended by the Board.
(b) Limitations. Stock or other evidences o f
ow nership in a foreign bank shall be disposed o f

S E C T IO N 21 3.5— L O A N S

as prom ptly as practicable if (1) such bank should
engage in the business o f underwriting, selling, or
distributing securities in the United States or (2)

A national bank w hich holds directly or indi­
rectly 6 stock or other evidences o f ow nership in
a foreign bank m ay make loans or extensions o f

the national bank is advised by the Board that its

credit to or fo r the accoun t o f such foreign bank

holding is inappropriate under section 25 o f the

without regard to the provisions o f section 2 3 A

A c t or this Part. The terms “ stock ” , “ shares” ,
and “ evidences o f ow nership” in this section in­

o f the A ct (1 2 U .S.C . 3 7 1 c ).

E X T E N S IO N S
BANKS

S E C T IO N 213.6— C O N D IT IO N S

clude any right to acquire stock, shares, or evi­
dences o f ow nership, except that prior Board

(a ) T h e continued or prospective exercise o f
any pow er under this Part shall be subject to any
notice interpreting or applying it that a national
bank m ay receive from the Board, and such bank

consent is not required for the acquisition and
exercise o f stock rights in lieu o f dividends
w hich are declared on shares already held by a
national bank and w hich do not result in an in­
crease in percentage ow nership o f

OR

O F C R E D IT T O F O R E IG N

shall im m ediately com ply therewith.
( b ) T he Board m ay from time to time re­

the foreign

quire a national bank to make reports at such time
and in such form as the Board m ay prescribe re­
garding the exercise o f any pow er hereunder and
to submit inform ation regarding com plian ce with

bank.
(c) Required information. A national bank ap­
plying for the consent o f the Board to acquire
and hold stock or other evidences o f ow nership

this Part.
5 However, prior consent of the Board is not required
hereunder for indirect acquisitions in the stock of foreign
banks made pursuant to the general consent provisions of
§ 211.8 of Part 211 (Reg. K ).




5

6 Whether through a corporation operating under sec­
tion 25 of the Act or organized under section 25(a) of
the Act, or otherwise.

REGULATION M

§ 213.7

Provided,

S E C T IO N 213.7— R E S E R V E S A G A IN S T
F O R E IG N B R A N C H D E P O S IT S
(a)
Transactions with parent bank. D uring each
week o f the fou r-w eek period beginning O ctober
16, 1969, and during each w eek o f each successive
fou r-w eek (“ m aintenance” ) period, a m em ber
bank having on e or m ore foreign branches shall
maintain with the Reserve Bank o f its district, as
a reserve against its foreign branch deposits, a
daily average balance equal to 20 per cent o f the
am ount by w hich the daily average total o f
(1) net balances due from its dom estic offices
to such branches, and
(2) assets (including participations) held
such branches w hich w ere acquired from

by
its

dom estic offices,7
during the fou r-w eek (“ com pu tation ” ) period
ending on the W ednesday fifteen days before the
beginning o f the m aintenance period, exceeds the
greater o f
(i) the correspon din g daily average t o t a l8 for

That

the

applicable

base

com puted

under ( i ) or (ii) shall be reduced by the daily
average am ount o f any deposits o f the m em ber
bank subject to § 2 0 4 .5 (c ) o f this chapter (R eg u ­
lation D ) during the com putation period.
(b)

Credit extended to United States residents.

During each w eek o f the four-w eek period be­
ginning O ctober 16, 1969, and during each week
o f each successive four-w eek maintenance period,
a m em ber bank having one or m ore foreign
branches shall maintain with the Reserve Bank o f
its district, as a reserve against its foreign branch
deposits, a daily average balance equal to 20 per
cent o f the am ount by w hich daily average credit
outstanding from such branches to United States
residen ts9 (other than assets acquired and net
balances due fr o m its dom estic offices), during the
four-w eek com putation period ending on W ednes­
day fifteen days before the beginning o f the m ain­
tenance period, exceeds the corresponding daily
average total during the four-w eek period ending

the com pu tation period ending N ovem b er 25,
1970, o r the lowest corresponding daily average
total fo r any com putation period beginning after

on N ov em b er 25, 1970: Provided, That this para­
graph does not apply to credit extended ( 1 ) by a
foreign branch w hich at no time during the c o m ­
putation period had credit outstanding to United
States residents exceeding $5 m illion, ( 2 ) to

that date, w hichever am ount is the lesser, or
(ii) 3 per cent o f the m em ber bank’s daily

enable the borrow er to com p ly with requirements
o f the Office o f Foreign D irect Investments, D e ­

average deposits subject to § 204.5(a) o f this
chapter (Regulation D ) during the current c o m ­

partment o f C om m erce,10 or ( 3 )

putation period, or, if the bank has had a foreign
branch in operation for m ore than 90 days, the
lowest correspon din g daily average total fo r any
com putation period beginning on or after D ecem ­
ber 24, 1970, w hichever am ount is the lesser:
7Excluding (1) assets so held on June 26, 1969, repre­
senting credit extended to persons not residents of the
United States and (2) credit extended or renewed by a
domestic office after June 26, 1969, to persons not resi­
dents of the United States to the extent such credit was
not extended in order to replace credit outstanding on
that date which was paid prior to its original maturity
(see definition of United States resident in footnote 9).
8Excluding assets representing credit extended to per­
sons not residents of the United States.




com m itm ents
1970.

under binding

entered into before D ecem ber

1,

9 (a) Any individual residing (at the time the credit is
extended) in any State of the United States or the Dis­
trict of Columbia; (b) any corporation, partnership,
association or other entity organized therein (“ domestic
corporation” ); and (c) any branch or office located
therein of any other entity wherever organized. Credit
extended to a foreign branch, office, subsidiary, affiliate or
other foreign establishment (“ foreign affiliate” ) controlled
by one or more such domestic corporations will not be
deemed to be credit extended to a United States resident
if the proceeds will be used in its foreign business or that
of other foreign affiliates of the controlling domestic cor­
poration (s).
10The branch may in good faith rely on the borrower’s
certification that the funds will be so used.

STATUTORY APPENDIX

REGULATION M

STATUTORY APPENDIX

Section 25 o f the Federal Reserve A ct provides
in part as follow s:
S e c . 25. A n y

national

banking

association

possessing a capital and surplus o f $1,000 ,0 00 or
m ore m ay file application with the Board o f G o v ­
ernors o f the Federal Reserve System for permis­
sion to exercise, upon such conditions and under
such regulations as may be prescribed by the said
board, the follow in g pow ers:
First. T o establish branches in foreign cou n ­
tries or dependencies or insular possessions o f the
United States fo r the furtherance o f the foreign
com m erce o f the United States, and to act if re­
quired to d o so as fiscal agents o f the United

Every national banking association operating
foreign branches shall be required to furnish in­
form ation concerning the condition o f such
branches to the C om ptroller o f the C urrency upon
dem and, and every m em ber bank investing in the
capital stock o f banks or corporations described
above shall be required to furnish inform ation
concern in g the condition o f such banks or c o rp ­
orations to the Board o f G overn ors o f the Federal
Reserve System upon demand, and the Board o f
G overnors o f the Federal Reserve System m ay
order special examinations o f the said branches,
banks, or corporation s at such time or times as
it m ay deem best.
[U.S.C., title 12, sec. 602.]

States.
* * *

Third. T o acquire and hold, directly or indi­
rectly, stock or other evidences o f ow nership in
on e or m ore banks organized under the law o f a
foreign coun try or a dependency or insular pos­
session o f the United States and not engaged,
directly or indirectly, in any activity in the United
States except as, in the judgm ent o f the Board
o f G overnors o f the Federal Reserve System,
shall be incidental to the international or foreign
business o f such foreign bank; and, notwithstand­
ing the provisions o f section 2 3 A o f this A ct, to
make loans or extensions o f credit to or fo r the
accoun t o f such bank in the m anner and within
the limits prescribed by the Board by general or
specific regulation or ruling.

*

*

*

*

pow ers applied for, and the place or places where
the banking or financial operations proposed are
to be carried on. The Board o f G overnors o f the
Federal Reserve System shall have pow er to ap­
prove or to reject such application in w hole or in
part if fo r any reason the granting o f such appli­
cation is deem ed inexpedient, and shall also have
pow er from time to time to increase or decrease
the num ber o f places where such banking opera­
[U.S.C., title 12, sec. 601.]




branches established by it and o f its hom e office,
and shall at the end o f each fiscal period transfer
to its general ledger the profit or loss accrued at
each branch as a separate item.
[U.S.C., title 12, sec. 604.]
Regulations issued by the Board o f G overnors
o f the Federal Reserve System under this section,
in addition to regulating pow ers w hich a foreign
branch m ay exercise under other provisions o f
law, m ay authorize such a foreign branch, sub­
ject to such conditions and requirements as such
regulations m ay prescribe, to exercise such further
pow ers as m ay be usual in con n ection with the

*

Such application shall specify the name and
capital o f the banking association filing it, the

tions may be carried on.

E very such national banking association shall
con d u ct the accounts o f each foreign branch
independently o f the accounts o f other foreign

transaction o f the business o f banking in the places
where such foreign branch shall transact busi­
ness. Such regulations shall not authorize a foreign
branch to engage in the general business o f p ro­
ducing, distributing, buying o r selling goods,
wares, or m erchandise; nor, except to such lim­
ited extent as the Board m ay deem to be neces­
sary with respect to securities issued by any “ fo r ­
eign state” as defined in section 2 5 (b ) o f this
A ct, shall such regulations authorize a foreign
branch to engage or participate, directly or indi­
rectly, in the business o f underwriting, selling, or
distributing securities.
[U.S.C., title 12, sec 604a.]