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4000 - Advisory Opinions
Reporting Requirements of Foreign Banks under
FIRIRCA
FDIC-81-9
April 2, 1981
Barbara Gersten, Attorney
This will respond to your letter of February 24, 1981, which
requests confirmation that foreign banks are excluded from the
reporting requirements of Titles VIII and IX of the Financial
Institutions Regulatory and Interest Rate Control Act of 1978
("FIRIRCA"), 12 U.S.C. § 1972(2)(G), 12 U.S.C. § 1817(k)(1).
A foreign bank is not covered by the reporting requirements under
Titles VIII and IX; however, the reporting requirements in general do
apply to: (1) a nonbank or individual principal shareholder controlling
a foreign bank that has an insured state nonmember bank subsidiary; (2)
an executive officer of a foreign bank who is also an executive officer
of the insured state nonmember bank subsidiary; and (3) an executive
officer of the insured state nonmember bank subsidiary.
Title VIII
Title VIII, in pertinent part, requires executive officers and
principal shareholders of an "insured
bank" 1
to report annually to their bank's board of directors on their
indebtedness (and indebtedness of their related interests) to the
bank's correspondents.
The statutory reporting requirements are implemented as to
"insured State nonmember banks" 2
by FDIC regulations. 12 C.F.R. Part 349. Form FFIEC 004 is recommended
for the reports.
A. Foreign Bank Having an Insured State Nonmember Bank
Subsidiary
Where the foreign bank is itself a principal shareholder of an
insured state nonmember bank, the foreign bank need not report on its
indebtedness to correspondents of the insured state nonmember bank.
Foreign banks, as defined in 12 U.S.C. § 3101(7),
3
have been specifically exempted by regulation from the reporting
requirements of Title VIII. As 12 C.F.R. § 349.2(e) indicates, the
applicable definition for the term "principal shareholder''
is
{{4-28-89 p.4072}}found in subpart A of Federal Reserve
Regulation O, 12 C.F.R.
§ 215.10(a)(2). 4
Since foreign banks and their U.S. bank subsidiaries deal with many of
the same correspondent banks, the inclusion of the foreign bank as a
principal shareholder would restrict, and in some cases prohibit,
normal transactions between the foreign bank and its own correspondent
banks. As such a result does not appear to have been intended by
Congress, foreign banks have been exempted.
A nonbank or individual principal shareholder controlling a foreign
bank that has an insured state nonmember bank subsidiary would be
required to report to the subsidiary bank's board of directors on
indebtedness (including indebtedness of related
interests) 5
to correspondents of the insured state nonmember bank subsidiary. The
applicable definition of the term "principal shareholder", 12
C.F.R. § 215.10(a)(2) (set forth in footnote 4), specifically
includes a person that "controls'' a principal shareholder
(e.g., a person that controls a bank holding company). As 12
C.F.R. § 349.2(b) indicates, the applicable definition of the term
"control'' is found in 12 C.F.R. § 215.2(b), and in general, the
term means that a person (1) directly or indirectly owns, controls or
has the power to vote 25% of the voting stock of a bank; or (2)
controls in any manner the election of the directors of the bank; or
(3) has the power to exercise a controlling influence over the
management or policies of the bank. In addition, certain rebuttable
presumptions of control are set forth. Thus, a nonbank or individual
principal shareholder that controls the foreign bank would be required
to report under Title VIII. This result obtains, even though the
regulations implementing the reporting requirements, 12 C.F.R.
§ 349.3(a), are somewhat unclear, in that they provide for the filing
of reports by principal shareholders of an insured state nonmember
bank.
Executive officers of a foreign bank that has an insured state
nonmember bank subsidiary would not be required to report on their
indebtedness (and that of their related interests) to correspondents of
the subsidiary, unless the executive officers are also executive
officers of the subsidiary bank. 6
Executive officers of the subsidiary bank must report on correspondent
indebtedness under 12 C.F.R. § 349.3. As 12 C.F.R. § 349.2(b)
indicates, the term "executive officer'' is defined in 12 C.F.R.
§ 215.2(d). An executive officer is a person who participates or has
authority to participate in major policymaking functions of the bank.
As provided by the regulation, certain persons are presumed to be
executive officers unless excluded from participation in policymaking
functions.
B. Foreign Bank Maintaining a United States
Branch 7
{{4-28-89 p.4073}}
In general, where a foreign bank maintains a branch in the United
States, whether or not deposits in the branch are insured in accordance
with the Federal Deposit Insurance Act, reports under Title VIII would
not be required. Neither the foreign bank nor its branch and personnel
are considered to be covered by the reporting
requirements. 8
Title IX
Title IX requires insured banks to annually provide the appropriate
Federal bank supervisory agency with a list of the bank's principal
shareholders and a report on indebtedness of the principal shareholders
and executive officers (and their related interests) to the bank. The
statutory reporting requirements are implemented as to insured state
nonmember banks by regulations promulgated by the FDIC. 12 C.F.R.
§ 304.4. Form FFIEC 003 is required for such reports. In addition,
excerpts of information required to be reported under Title VIII (Form
FFIEC 004) and filed with the bank must be reported by the bank on Form
FFIEC 003.
A. Foreign Bank Having an Insured State Nonmember Bank
Subsidiary
Where the foreign bank is itself a principal shareholder of an
insured state nonmember bank, the subsidiary bank need not report on
indebtedness of the foreign bank to the subsidiary bank. As 12 C.F.R.
§ 304.4(b)(2) indicates, the applicable definition of the term
"principal shareholder'' is found in Regulation 0, 12 C.F.R.
§ 215.10(a). A foreign bank is specifically excluded from being a
principal shareholder.
Under Title IX, an insured state nonmember bank subsidiary of a
foreign bank would be required to provide to the FDIC a list of nonbank
or individual principal shareholders that control the foreign bank, and
to report on indebtedness of such entities or persons (and their
related interests) to the subsidiary. Where a person is an executive
officer of the foreign bank and an executive officer of the subsidiary,
the subsidiary would be required to report on the indebtedness of the
executive officer (and related interests) to
it. 9
Where a person is an executive officer of the subsidiary, the
subsidiary would be required to report on indebtedness of such person
to it. In this respect, the reporting requirements under Title IX
correlate with those under Title VIII, for the reason that both 12
C.F.R. Part 349 and 12 C.F.R. § 304.4 rely upon the same definitions
(set forth above) of key terms, such as "principal shareholder",
"executive officer", "related interest", and
"control", found in Regulation O.
B. Foreign Bank Maintaining a United States Branch
In general, where a foreign bank maintains a branch in the United
States, whether or not deposits in the branch are insured in accordance
with the Federal Deposit Insurance Act, reports under Title IX would
not be required. Neither the foreign bank, nor its branch and personnel
would be covered by the reporting
requirements. 10
Should you have any questions regarding the substance of this
opinion, please do not hesitate to contact me.
{{4-28-89 p.4074}}
1 The Federal Deposit Insurance Act defines the term
"insured bank" to mean "any bank (including a foreign bank
having an insured branch) the deposits of which are insured in
accordance with the provisions of [the Federal Deposit Insurance] Act
. . ." 12 U.S.C. § 1813(h). Go Back to Text
2 The term "State bank" is defined by the Federal Deposit
Insurance Act, in pertinent part, to mean "any bank . . . which is
engaged in the business of receiving deposits other than trust funds
. . . and which is incorporated under the laws of any State, any
Territory of the United States, Puerto Rico, Guam, American Samoa, or
the Virgin Islands, or which is operating under the Code of Law for the
District of Columbia, any Territory of the United States, Puerto Rico,
Guam, American Samoa, or the Virgin Islands." 12 U.S.C.
§ 1813(a). Go Back to Text
3 "[F]oreign bank' means any company organized under
the laws of a foreign country, a territory of the United States, Puerto
Rico, Guam, American Samoa, or the Virgin Islands, which engages in the
business of banking, or any subsidiary or affiliate, organized under
such laws, of any such company. For the purposes of this chapter the
term "foreign bank' includes, without limitation, foreign commercial
banks, foreign merchant banks and other foreign institutions that
engage in banking activities usual in connection with the business of
banking in the countries where such foreign institutions are organized
or operating . . ." 12 U.S.C. § 3101(7). Go Back to Text
4 "Principal shareholder' . . . means any person (other
than an insured bank, or a foreign bank as defined in 12 U.S.C.
§ 3101(7) that, directly or indirectly, owns, controls, or has power
to vote more than 10 percent of any class of voting securities of the
. . . bank. The term includes a person that controls a principal
shareholder (e.g., a person that controls a bank holding
company). Shares of a bank (including a foreign bank), bank holding
company, or other company owned or controlled by a member of an
individual's immediate family are presumed to be owned or controlled
by the individual for the purposes of determining principal shareholder
status." 12 C.F.R. § 215.10(a)(2). Go Back to Text
5 As 12 C.F.R. § 349.2(e) indicates, the applicable
definition of the term "related interest'' is found in 12 C.F.R.
§ 215.10(a)(3), which provides: "Related interest' means any
company controlled by a person and any political or campaign committee,
the funds or services of which will benefit a person or that is
controlled by a person. . . . a related interest does not include a
bank or a foreign bank (as defined in 12 U.S.C. § 3101(7)).'' Go Back to Text
6 Footnote 2 accompanying 12 C.F.R. § 349.2(b) ("executive
officer'') provides that for the purposes of Part 349, executive
officers of an insured State nonmember bank do not include an executive
officer of a bank holding company of which such bank is a subsidiary,
or of any other subsidiary of the bank holding company, unless the
person is also an executive officer of the insured State nonmember
bank. This applies with regard to a foreign or domestic bank holding
company. Go Back to Text
7 The Federal Deposit Insurance Act defines the term
"insured branch" as ". . . a branch of a foreign bank any
deposits in which are insured in accordance with the provisions of
[the Federal Deposit Insurance Act]." 12 U.S.C. § 1813(s), 12
C.F.R. § 346.1. The International Banking Act of 1978 and FDIC
regulations provide that only branches of foreign banks may obtain
insurance. 12 U.S.C. § 3104, 12 C.F.R. § 346.4. Deposits in an
agency of a foreign bank maintained in the United States would not
qualify for insured status under the Federal Deposit Insurance Act. The
foreignbank, as well as the agency and its personnel, would not be
covered by the reporting requirements of either Title VIII or Title
IX. Go Back to Text
8 Where a foreign bank (1) is organized under the laws of a
United States Territory, Puerto Rico, Guam, American Samoa or the
Virgin Islands, and (2) has a branch the deposits of which
are insured in accordance with the Federal Deposit Insurance Act, the
reporting requirements of Title VIII (and Title IX) apply to
the following: a nonbank or individual principal shareholder
controlling the foreign bank, an executive officer of the foreign bank
(whether or not the person is also an executive officer of the insured
branch), and an executive officer of the insured branch. Footnote 2 of
the preamble to the reporting regulations implementing Titles VIII and
IX as published in the Code of Federal Regulations, (12
C.F.R. § 304.4, 12 C.F.R. Part 349) erroneously indicates that the
regulations are not to be so applied. Go Back to Text
9 Footnote 7 accompanying 12 C.F.R § 215.10(a)(1) correlates
with footnote 2 accompanying 12 C.F.R. § 349.2(b) ("executive
officer'') and similarly exempts from the reporting requirements of
§ 304.4 an executive officer of a bank holding company where the
person is not also an executive officer of an insured state nonmember
bank subsidiary. Go Back to Text
10 The discussion set forth in footnote 8 above with respect to
reporting under Title VIII applies equally with respect to reporting
under Title IX. Go Back to Text
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