OCC 95-15
Subject:  Allowance for Loan and Lease Losses     Description:  Clarification of OCC 
          in Federal Branches and Agencies                  Requirement

TO:  General Managers of all Federal Branches and Agencies

In early December, 1994, the Banking Regulation and Supervision
staff of the Board of Governors of the Federal Reserve System
("the Board") informally announced the Board's intention to
eliminate the practice in some Federal Reserve Districts of
requiring that U.S. branches and agencies of foreign banks
establish and maintain an Allowance for Loan and Lease Losses
(ALLL).  On January 17, 1995, the Board issued a formal
announcement of this decision to all of the Federal Reserve
System District Banks ("Reserve Banks").  The Reserve Banks will
be sending all U.S. branches and agencies, including Federal
branches and agencies ("Federal branches"), a letter explaining
this change in the Federal Reserve's ALLL policy.

The purpose of this memorandum is to clarify the relationship of
the Federal Reserve's announcement to the existing ALLL policy of
the Office of the Comptroller of the Currency ("OCC") for Federal
branches.  As you know, the OCC's ALLL policy for Federal
branches is articulated in Banking Circular 201 (Revised), dated
February 20, 1992, and Federal Branch and Agency Circular #1
(Revised), dated July 29, 1993.  While the latter issuance
requires that an ALLL be maintained for each Federal branch
adequate to absorb all estimated inherent losses in the assets
booked at the branch, it specifically provides a process by which
a foreign bank, with the approval of the OCC, need not book the
ALLL at the Federal branch.  A number of foreign banks have
availed themselves of that flexibility since this policy was
established.  We also note that the Board's policy explicitly
recognizes that individual federal and state licensing
authorities, for statutory or other reasons, may require an ALLL
at a branch or agency.

The Federal Reserve's decision uniformly to eliminate any
requirement by Reserve Banks for an ALLL does not alter the OCC's
requirement that each Federal branch maintain an ALLL within the
flexible requirements of the above-mentioned circulars.  However,
the OCC will continue to review this matter, and we welcome any
comments that you may wish to provide.


                                           
Jon K. Hartzell
Deputy Comptroller
International Banking and Finance
Date:  March 13, 1995