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4000 - Advisory Opinions
Whether a foreign bank could be considered a deposit broker, and
if they would be required to notify the FDIC of their status
FDIC--96--4
February 5, 1996
Valerie J. Best, Counsel
Thank you for your letter dated December 27, 1995, concerning
deposit brokers. Deposit brokers are prohibited from soliciting or
placing any deposit with an insured depository institution unless the
deposit broker has provided the FDIC with written notice that it is a
deposit broker. 1
Description of the Proposed Program
You advise that an unidentified U.S. bank and a foreign bank may
enter into an agreement whereby the foreign bank will offer its
customers the option of placing time deposits with the U.S. bank. The
foreign bank will refer its existing customers to the program and will
have all of the account opening materials on site. The foreign bank
will then remit the funds to the U.S. bank on the customer's behalf and
receive a fee for this service. You write that the interest rate that
the U.S. bank will pay on these time deposits is lower than the rate it
offers in its regular market area, and that the U.S. bank is well
capitalized. You advise that the entire operation, prior to the
remittance of the funds, will take place outside the U.S. You ask if
the foreign bank would be considered a deposit broker and so required
to notify the FDIC of its status as deposit broker.
Notification Requirement
Based upon my review of 12 U.S.C. 1831f--1 and informal discussions
with staff at the U.S. Department of Justice, it is my view that the
notification requirements set forth at 12 U.S.C. 1831f--1 do not apply
extraterritorially such that a foreign bank is required to notify the
FDIC of its status as a deposit broker.
My view is predicated on the understanding that the foreign bank is
not engaged, directly or indirectly, in any activity in the United
States other than the transmittal of the above-described funds. If the
foreign bank does engage in any other activity in the United States or
has operations in the U.S., the substance of my opinion may change.
This opinion does not address the situation where a U.S. depository
institution is operating a foreign branch.
Interest Rate Restrictions
As you may know, 12 U.S.C. 1831f limits the interest rates payable
by adequately capitalized and undercapitalized depository institutions.
The fact that the foreign bank in your example is not required to
notify the FDIC of its status as a deposit broker does not necessarily
mean that a bank or thrift that is not well capitalized may pay any
rate of interest it chooses on deposits attracted from outside the U.S.
Rather, the issue would be which market should be used as a reference
point in calculating the maximum rate
payable. 2
Since your U.S. bank is well capitalized, it is not subject to the
interest rate limitations imposed through 12 U.S.C. 1831f, and the
question of the appropriate benchmark to use when calculating the
maximum interest rate payable is academic at this time.
{{10-31-96 p.4973}}
The views expressed in this letter are those of the FDIC legal
staff, not of the FDIC itself. The FDIC issues formal interpretations
of its rules, but only pursuant to rule-making proceedings. The FDIC
does not issue formal interpretations in the form of individual letters
or rulings on particular cases.
I trust this fully responds to your
inquiry.
112 U.S.C. 1831f-1(a). 12
C.F.R. 337.6(h). Go Back to Text
2See FDIC Advisory
Opinion 93--4 (Jan. 26, 1993) concerning an adequately
capitalized U.S. bank. (Copy enclosed.) In that case we opined that the
bank should calculate the maximum rate payable by reference to its
normal market area; the fact that the depositors resided in Mexico did
not persuade us in that instance that Mexico was the bank's market area
(or alternatively, that the FDIC should permit the bank to use the
national rate). Go Back to Text
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