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2000 - Rules and Regulations
Subpart BForeign Banks
§ 347.201 Authority, purpose, and scope.
(a) This subpart is issued pursuant to sections 5(c) and 10(b)(4)
of the Federal Deposit Insurance Act (FDI Act)
(12 U.S.C. 1815(c) and
1820(b)(4)) and sections 6,
7, and 15 of the International Banking Act of 1978 (IBA)
(12 U.S.C. 3104,
3105, and
3109).
(b) This subpart implements the insured branch asset pledge and
examination commitment requirement for foreign banks in the FDI Act. It
also implements the deposit insurance, permissible activity, and
cross-border cooperation provisions of the IBA regarding the FDIC.
Sections 347.203--347.211 apply to state and federal branches whose
deposits are insured. Sections 347.204 and 347.207 are applicable to
depository institution subsidiaries of a foreign bank. Section 347.212
applies to insured state branches and §§ 347.213--347.216 apply to
state branches whose deposits are not insured by FDIC.
[Codified to 12 C.F.R.
§ 347.201]
§ 347.202 Definitions.
For purposes of this subpart:
(a) Affiliate means any entity that controls, is
controlled by, or is under common control with another entity. An
entity shall be deemed to "control" another entity if the entity
directly or indirectly owns controls, or has the power to vote 25
percent or more of any class of voting securities of the other entity
or controls in any manner the election of a majority of the directors
or trustees of the other entity.
(b) Branch means any office or place of business of a
foreign bank located in any state of the United States at which
deposits are received. The term does not include any office or place of
business deemed by the state licensing authority or the Comptroller of
the Currency to be an agency.
(c) Deposit has the same meaning as that term in section
3(l) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(l)).
(d) Depository means any insured state bank, national
bank, or insured branch.
(e) Domestic retail deposit activity means the
acceptance by a federal or state branch of any initial deposit of less
than $100,000.
{{4-28-06 p.2857}}
(f) Federal branch means a branch of a foreign bank
established and operating under the provisions of section 4 of the
International Banking Act of 1978 (12
U.S.C. 3102).
(g) Foreign bank means any company organized under the
laws of a foreign country, any territory of the United States, Puerto
Rico, Guam, American Samoa, the Northern Mariana Islands, or the Virgin
Islands, which engages in the business of banking. The term includes
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 and operating. Except as otherwise
specifically provided by the Federal Deposit Insurance Corporation,
banks organized under the laws of a foreign country, any territory of
the United States, Puerto Rico, Guam, American Samoa, the Northern
Mariana Islands, or the Virgin Islands which are insured banks other
than by reason of having an insured branch are not considered to be
foreign banks for purposes of §§ 347.204, 347.205, 347.209, and
347.210.
(h) Foreign business means any entity including, but not
limited to, a corporation, partnership, sole proprietorship,
association, foundation or trust, which is organized under the laws of
a foreign country or any United States entity which is owned or
controlled by an entity which is organized under the laws of a foreign
country or a foreign national.
(i) Foreign country means any country other than the
United States and includes any colony, dependency or possession of any
such country.
(j) FRB means the Board of Governors of the Federal
Reserve System.
(k) Home state of a foreign bank means the state so
determined by the election of the foreign bank, or in default of such
election, by the Board of Governors of the Federal Reserve System.
(l) Immediate family member of a natural person means
the spouse, father, mother, brother, sister, son or daughter of that
natural person.
(m) Initial deposit means the first deposit transaction
between a depositor and the branch where there is no existing deposit
relationship. The initial deposit may be placed into different deposit
accounts or into different kinds of deposit accounts, such as demand,
savings or time. Deposit accounts that are held by a depositor in the
same right and capacity may be added together for the purposes of
determining the dollar amount of the initial deposit.
(n) Insured bank means any bank, including a foreign
bank with an insured branch, the deposits of which are insured in
accordance with the provisions of the Federal Deposit Insurance Act.
(o) Insured branch means a branch of a foreign bank any
deposits of which branch are insured in accordance with the provisions
of the Federal Deposit Insurance Act.
(p) Large United States business means any entity
including, but not limited to, a corporation, partnership, sole
proprietorship, association, foundation or trust which is organized
under the laws of the United States or any state thereof, and:
(1) Whose securities are registered on a national securities
exchange or quoted on the National Association of Securities Dealers
Automated Quotation System; or
(2) Has annual gross revenues in excess of $1,000,000 for the
fiscal year immediately preceding the initial deposit.
(q) A majority owned subsidiary means a company the
voting stock of which is more than 50 percent owned or controlled by
another company.
(r) Noninsured branch means a branch of a foreign bank
deposits of which branch are not insured in accordance with the
provisions of the Federal Deposit Insurance Act.
(s) OCC means the Office of the Comptroller of the
Currency.
(t) Person means an individual, bank, corporation,
partnership, trust, association, foundation, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, or any
other form of entity.
(u) Significant risk to the deposit insurance fund shall
be understood to be present whenever there is a high probability that
the Deposit Insurance Fund administered by the FDIC may suffer a loss.
(v) State means any state of the United States or the
District of Columbia.
{{4-28-06 p.2858}}
(w) State branch means a branch of a foreign bank
established and operating under the laws of any state.
(x) Wholly owned subsidiary means a company the voting
stock of which is 100 percent owned or controlled by another company
except for a nominal number of directors' shares.
[Codified to 12 C.F.R. § 347.202]
[Section 347.202 amended at 71 Fed. Reg. 20527, April 21,
2006
§ 347.203 Deposit insurance required for all branches of
foreign banks engaged in domestic retail deposit activity in the same
State.
The FDIC will not insure deposits in any branch of a foreign bank
unless the foreign bank agrees that every branch established or
operated by the foreign bank in the same state that engages in domestic
retail deposit activity will be an insured branch.
[Codified to 12 C.F.R.
§ 347.203]
§ 347.204 Commitment to be examined and provide information.
(a) In connection with an application for deposit insurance for a
U.S. branch or depository institution subsidiary of a foreign bank that
has been determined to be subject to comprehensive consolidated
supervision by the appropriate Federal banking agency, as defined in
section 3(q) of the FDI Act (12 U.S.C.
1813(q)), the foreign bank shall provide binding written
commitments (including a consent to U.S. jurisdiction and designation
of agent for service, acceptable to the FDIC) to the following terms:
(1) The FDIC will be provided with any information about the
foreign bank and its affiliates located outside of the United States
that the FDIC requests to determine:
(i) The relationship between the U.S. branch or depository
institution subsidiary and its affiliates; and
(ii) The effect of such relationship on such U.S. branch or
depository institution subsidiary;
(2) The FDIC will be allowed to examine the affairs of any
office, agency, branch or affiliate of the foreign bank located in the
United States and will be provided any information requested to
determine:
(i) The relationship between the U.S. branch or depository
institution subsidiary and such offices, agencies, branches or
affiliates; and
(ii) The effect of such relationship on such U.S. branch or
depository institution subsidiary.
(3) The FDIC will not process a deposit insurance application for
any U.S. branch or depository institution subsidiary of a foreign bank
if the foreign bank fails to provide the written commitments, consent
to U.S. jurisdiction, and designation of agent for service required by
this section.
(b) The FDIC will consider the existence and extent of any
prohibition or restrictions, if any, on its ability to utilize the
commitments, consent to U.S. jurisdiction, and designation of agent for
service required by this section, in determining whether to grant or
deny a deposit insurance application for the U.S. branch or depository
institution subsidiary of the foreign bank. In addition, the FDIC may
consider any additional assurances or commitments provided by the
foreign bank, including that it will cooperate and assist the FDIC,
without limitation, by seeking to obtain waivers and exemptions from
applicable confidentiality or secrecy restrictions or requirements to
enable the foreign bank or its affiliates to make information about the
foreign bank and its affiliates located outside of the United States
available to the FDIC for review.
(c) The foreign bank's commitments, consent to U.S. jurisdiction,
and designation of agent for service shall be signed by an officer of
the foreign bank who has been so authorized by the foreign bank's
board of directors and in all instances will be executed in a manner
acceptable to the FDIC and shall be included with the branch or
depository
{{4-28-06 p.2859}}institution application for
insurance. Any documents that are not in English shall be accompanied
by an English translation.
[Codified to 12 C.F.R.
§ 347.204]
§ 347.205 Record maintenance.
The records of each insured branch shall be kept as though it were a
separate entity, with its assets and liabilities separate from the
other operations of the head office, other branches or agencies of the
foreign bank and its subsidiaries or affiliates. Each insured branch
must keep a set of accounts and records in the words and figures of the
English language that accurately reflects the business transactions of
the insured branch on a daily basis. A foreign bank that has more than
one insured branch in a state may treat such insured branches as one
entity for record-keeping purposes and may designate one branch to
maintain records for all the branches in the state.
[Codified to 12 C.F.R.
§ 347.205]
§ 347.206 Domestic retail deposit activity, requiring deposit
insurance by U.S. branch of a foreign bank.
(a) Domestic retail deposit activity. To initiate or
conduct domestic retail deposit activity requiring deposit insurance
protection in any state after December 19, 1991, a foreign bank must
establish one or more insured U.S. bank subsidiaries for that purpose.
(b) Exception. Paragraph (a) of this section does not
apply to any bank organized under the laws of any territory of the
United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands
the deposits of which are insured by the FDIC pursuant to the Federal
Deposit Insurance Act.
(c) Grandfathered insured branches. Domestic retail
deposit accounts with balances of less than $100,000 that require
deposit insurance protection may be accepted or maintained in an
insured branch of a foreign bank only if such branch was an insured
branch on December 19, 1991.
(d) Change in ownership of grandfathered insured branch.
The grandfathered status of an insured branch may not be
transferred, except in certain merger and acquisition transactions that
the FDIC determines are not designed, or motivated by the desire, to
avoid compliance with section 6(d)(1) of the International Banking Act
(12 U.S.C. 3104(d)(1)).
[Codified to 12 C.F.R.
§ 347.206]
§ 347.207 Disclosure of supervisory information to foreign
supervisors.
(a) Disclosure by the FDIC. The FDIC may disclose
information obtained in the course of exercising its supervisory
examination authority to a foreign bank regulatory or supervisory
authority, if the FDIC determines that disclosure is appropriate for
bank supervisory or regulatory purposes and will not prejudice the
interests of the United States.
(b) Confidentiality. Before making any disclosure of
information pursuant to paragraph (a) of this section, the FDIC will
obtain, to the extent necessary, the agreement of the foreign bank
regulatory or supervisory authority to maintain the confidentiality of
such information to the extent possible under applicable law. The
disclosure or transfer of information to a foreign bank regulatory or
supervisory authority under this section will not waive any privilege
applicable to the information that is disclosed or transferred.
[Codified to 12 C.F.R.
§ 347.207]
§ 347.208 Assessment base deductions by insured branch.
Deposits in an insured branch to the credit of the foreign bank or
any of its offices, branches, agencies, or wholly owned subsidiaries
may be deducted from the assessment base of the insured branch.
[Codified to 12 C.F.R. § 347.208]
{{4-28-06 p.2860}}
§ 347.209 Pledge of assets.
(a) Purpose. A foreign bank that has an insured branch
must pledge assets for the benefit of the FDIC or its designee(s).
Whenever the FDIC is obligated under section 11(f) of the Federal
Deposit Insurance Act (12 U.S.C.
1821(f)) to pay the insured deposits of an insured branch, the
assets pledged under this section must become the property of the FDIC
and be used to the extent necessary to protect the Deposit Insurance
Fund.
(b) Amount of assets to be pledged. (1) For a newly
insured branch, a foreign bank must pledge assets equal to at least 5
percent of the liabilities of the branch, based on the branch's
projection of its liabilities at the end of each of the first three
years of operations. For all other insured branches, a foreign bank
must pledge assets equal to the appropriate percentage applicable to
the insured branch, as determined by reference to the risk-based
assessment schedule contained in this paragraph, of the insured
branch's average liabilities for the last 30 days of the most recent
calendar quarter. 4
(2) Risk-based assessment schedule. The risk-based
asset pledge required by paragraph (b)(1) will be determined by
utilizing the following risk-based assessment
schedule:
Asset
maintenance level | Supervisory risk subgroup
|
A
(%) |
B (%) |
C (%) |
Equal to or greater than
108% |
2 |
3 |
4 |
Equal to or
greater than 106% |
4 |
5 |
6 |
Less
than 106% |
6 |
7 |
8 |
| |
---|
|
The appropriate asset pledge percentage will be determined based on
the supervisory risk subgroup and asset maintenance level applicable to
the insured branch.
(3) Supervisory risk factors. For purposes of this section,
within each asset maintenance group, each institution will be assigned
to one of three subgroups based on consideration by the FDIC of
supervisory evaluations provided by the primary federal regulator for
the insured branch. The supervisory evaluations include the results of
examination findings by the primary federal regulator, as well as other
information the primary federal regulator determines to be relevant. In
addition, the FDIC will take into consideration such other information
(such as state examination findings, if appropriate) as it determines
to be relevant to the financial condition and the risk posed to the
Deposit Insurance Fund. The three supervisory subgroups are:
(i) Subgroup "A". This subgroup consists of financially
sound institutions with only a few minor weaknesses;
(ii) Subgroup "B". This subgroup consists of institutions
that demonstrate weaknesses which, if not corrected, could result in
significant deterioration of the institution and increased risk of loss
to the Deposit Insurance Fund; and
(iii) Subgroup "C". This subgroup consists of institutions
that pose a substantial probability of loss to the Deposit Insurance
Fund.
(4) The FDIC may require a foreign bank to pledge additional
assets or to compute its pledge on a daily basis whenever the FDIC
determines that the condition of the foreign bank or the insured branch
is such that the assets pledge under this section will not adequately
protect the deposit insurance fund. In requiring a foreign bank to
pledge additional assets, the FDIC will consult with the primary
regulator for the insured branch. Among the factors to be considered in
imposing these requirements are the concentration of
{{4-29-05 p.2861}}risk to any one borrower or
group of related borrowers, the concentration of transfer risk related
to any one country, including the country in which the foreign bank's
head office is located or any other factor the FDIC determines is
relevant.
(5) Each insured branch must separately comply with the
requirements of this section. A foreign bank which has more than one
insured branch in a state may, however, treat all of its insured
branches in the same state as one entity and will designate one insured
branch to be responsible for compliance with this section.
(c) Depository. A foreign bank must place pledged assets
for safekeeping at any depository which is located in any state.
However, a depository may not be an affiliate of the foreign bank whose
insured branch is seeking to use the depository. A foreign bank must
obtain the FDIC's prior written approval of the depository selected,
and such approval may be revoked and dismissal of the depository
required whenever the depository does not fulfill any one of its
obligations under the pledge agreement. A foreign bank shall appoint
and constitute the depository as its attorney in fact for the sole
purpose of transferring title to pledged assets to the FDIC as may be
required to effectuate the provisions of paragraph (a) of this section.
(d) Assets that may be pledged. Subject to the right of
the FDIC to require substitution, a foreign bank may pledge any of the
kinds of assets listed in this paragraph (d); such assets must be
denominated in United States dollars. A foreign bank shall be deemed to
have pledged any such assets for the benefit of the FDIC or its
designee at such time as any such asset is placed with the depository,
as follows:
(1)(i) Negotiable certificates of deposit that are payable in the
United States and that are issued by any state bank, national bank,
state or federal savings association, or branch of a foreign bank which
has executed a valid waiver of offset agreement or similar debt
instruments that are payable in the Untied States and that are issued
by any agency of a foreign bank which has executed a valid waiver of
offset agreement; provided, that the maturity of any certificate or
issuance is not greater than one year; and provided further, that the
issuing branch or agency of a foreign bank is not an affiliate of the
pledging bank or from the same country as the pledging bank's
domicile;
(ii) Non-negotiable certificates of deposit, subject to the terms
specified in paragraph (d)(1)(i) of this section other than the
requirement of negotiability, that were pledged as collateral to the
FDIC on March 18, 2005, until maturity according to the original terms
of the existing deposit agreement.
(2) Treasury bills, interest bearing bonds, notes, debentures, or
other direct obligations of or obligations fully guaranteed as to
principal and interest by the United States or any agency or
instrumentality thereof;
(3) Commercial paper that is rated P--1 or P--2, or their
equivalent by a nationally recognized rating service; provided, that
any conflict in a rating shall be resolved in favor of the lower
rating;
(4) Banker's acceptances that are payable in the United States
and that are issued by any state bank, national bank, state or federal
savings association, or branch or agency of a foreign bank; provided,
that the maturity of any acceptance is not greater than 180 days; and
provided further, that the branch or agency issuing the acceptance is
not an affiliate of the pledging bank or from the same country as the
pledging bank's domicile;
(5) General obligations of any state of the United States, or any
county or municipality of any state of the United States, or any
agency, instrumentality, or political subdivision of the foregoing or
any obligation guaranteed by a state of the Untied States or any
country or municipality of any state of the United States; provided,
that such obligations have a credit rating within the top two rating
bands of a nationally recognized rating service (with any conflict in a
rating resolved in favor of the lower rating);
(6) Obligations of the African Development Bank, Asian
Development Bank, Inter-American Development Bank, and the
International Bank for Reconstruction and Development;
(7) Notes issued by bank and thrift holding companies, banks, or
savings associations organized under the laws of the United States or
any state thereof or notes issued by United States branches or agencies
of foreign banks, provided, that the notes have a credit rating within
the top two rating bands of a nationally recognized rating service
(with any conflict in a rating resolved in favor of the lower rating)
and that they are payable in the
{{4-29-05 p.2862}}United States, and provided
further, that the issuer is not an affiliate of the foreign bank
pledging the note; or
(8) Any other asset determined by the FDIC to be acceptable.
(e) Pledge agreement. A foreign bank shall not pledge
any assets unless a pledge agreement in form and substance satisfactory
to the FDIC has been executed by the foreign bank and the depository.
The agreement, in addition to other terms not inconsistent with this
paragraph (e), shall give effect to the following terms:
(1) Original pledge. The foreign bank shall place with
the depository assets of the kind described in paragraph (d) of this
section, having an aggregate value in the amount as required pursuant
to paragraph (b) of this section.
(2) Additional assets required to be pledged. Whenever
the foreign bank is required to pledge additional assets for the
benefit of the FDIC or its designees pursuant to paragraph (b)(4) of
this section, it shall deliver (within two business days after the last
day of the most recent calendar quarter, unless otherwise ordered)
additional assets of the kind described in paragraph (d) of this
section, having an aggregate value in the amount required by the FDIC.
(3) Substitution of assets. The foreign bank, at any
time, may substitute any assets for pledged assets, and, upon such
substitution, the depository shall promptly release any such assets to
the foreign bank; provided, that:
(i) The foreign bank pledges assets of the kind described in
paragraph (d) of this section having an aggregate value not less than
the value of the pledged assets for which they are substituted and
certified as such by the foreign bank; and
(ii) The FDIC has not by written notification to the foreign
bank, a copy of which shall be provided to the depository, suspended or
terminated the foreign bank's right of substitution.
(4) Delivery of other documents. Concurrently with the
pledge of any assets, the foreign bank will deliver to the depository
all documents and instruments necessary or advisable to effectuate the
transfer of title to any such assets and thereafter, from time to time,
at the request of the FDIC, deliver to the depository any such
additional documents or instruments. The foreign bank shall provide
copies of all such documents described in this paragraph (e)(4) to the
appropriate regional director concurrently with their delivery to the
depository.
(5) Acceptance and safekeeping responsibilities of the
depository. (i) The depository will accept and hold any assets
pledged by the foreign bank pursuant to the pledge agreement for
safekeeping free and clear of any lien, charge, right of offset,
credit, or preference in connection with any claim the depository may
assert against the foreign bank and shall designate any such assets as
a special pledge for the benefit of the FDIC or its designee. The
depository shall not accept the pledge of any such assets unless,
concurrently with such pledge, the foreign bank delivers to the
depository the documents and instruments necessary for the transfer of
title thereto as provided in this part.
(ii) The depository shall hold any such assets separate from all
other assets of the foreign bank or the depository. Such assets may be
held in book-entry form but must at all times be segregated on the
records of the depository and clearly identified as assets subject to
the pledge agreement.
(6) Reporting requirements of the insured branch and the
depository. (i) Initial reports. Upon the original
pledge of assets as provided in paragraph (e)(1) of this section:
(A) The depository shall provide to the foreign bank and to the
appropriate FDIC regional director a written report in the form of a
receipt identifying each asset pledged and specifying in reasonable
detail with respect to each such asset the complete title, interest
rate, series, serial number (if any), principal amount (par value),
maturity date and call date; and
(B) The foreign bank shall provide to the appropriate regional
director a written report certified as correct by the foreign bank
which sets forth the value of each pledged asset and the aggregate
value of all such assets, and which states that the aggregate value of
all such assets is at least equal to the amount required pursuant to
paragraph (b) of this section and that all such assets are of the kind
described in paragraph (d) of this section.
(ii) Quarterly reports. Within ten calendar days after
the end of the most recent calendar quarter:
(A) The depository shall provide to the appropriate regional
director a written
{{4-28-06 p.2863}}report specifying in
reasonable detail with respect to each asset currently pledged
(including any asset pledged to satisfy the requirements of paragraph
(b)(4) of this section and identified as such), as of two business days
after the end of the most recent calendar quarter, the complete title,
interest rate, series, serial number (if any), principal amount (par
value), maturity date, and call date, provided, that if no substitution
of any asset has occurred during the reporting period, the reporting
need only specify that no substitution of assets has occurred; and
(B) The foreign bank shall provide as of two business
days after the end of the most recent calendar quarter to the
appropriate regional director a written report certified as correct by
the foreign bank which sets forth the value of each pledged asset and
the aggregate value of all such assets, which states that the aggregate
value of all such assets is at least equal to the amount required
pursuant to paragraph (b) of this section and that all such assets are
of the kind described in paragraph (d) of this section, and which
states the average of the liabilities of each insured branch of the
foreign bank computed in the manner and for the period prescribed in
paragraph (b) of this section.
(iii) Additional reports. The foreign bank
shall, from time to time, as may be required, provide to the
appropriate regional director a written report in the form specified
containing the information requested with respect to any asset then
currently pledged.
(7) Access to assets. With respect to any
asset pledged pursuant to the pledge agreement, the depository will
provide representatives of the FDIC or the foreign bank with access
(during regular business hours of the depository and at the location
where any such asset is held, without other limitation or
qualification) to all original instruments, documents, books, and
records evidencing or pertaining to any such asset.
(8) Release upon the order of the FDIC. The
depository shall release to the foreign bank any pledged assets, as
specified in a written notification of the appropriate regional
director, upon the terms and conditions provided in such notification,
including without limitation the waiver of any requirement that any
assets be pledged by the foreign bank in substitution of any released
assets.
(9) Release to the FDIC. Whenever the FDIC is
obligated under section 11(f) of the Federal Deposit Insurance Act to
pay insured deposits of an insured branch, the FDIC by written
certification shall so inform the depository; and the depository, upon
receipt of such certification, shall thereupon promptly release and
transfer title to any pledged assets to the FDIC or release such assets
to the foreign bank, as specified in the certification. Upon release
and transfer of title to all pledged assets specified in the
certification, the depository shall be discharged from any further
obligation under the pledge agreement.
(10) Interest earned on assets. The foreign
bank may retain any interest earned with respect to the assets
currently pledged unless the FDIC by written notice prohibits retention
of interest by the foreign bank, in which case the notice shall specify
the disposition of any such interest.
(11) Expenses of agreement. The FDIC shall
not be required to pay any fees, costs, or expenses for services
provided by the depository to the foreign bank pursuant to, or in
connection with, the pledge agreement.
(12) Substitution of depository. The
depository may resign, or the foreign bank may discharge the
depository, from its duties and obligations under the pledge agreement
by giving at least 60 days' written notice thereof to the other party
and to the appropriate regional director. The FDIC, upon 30 days'
written notice to the foreign bank and the depository, may require the
foreign bank to dismiss the depository if the FDIC in its discretion
determines that the depository is in breach of the pledge agreement.
The depository shall continue to function as such until the appointment
of a successor depository becomes effective and the depository has
released to the successor depository the pledged assets and documents
and instruments to effectuate transfer of title in accordance with the
written instructions of the foreign bank as approved by the FDIC. The
appointment by the foreign bank of a successor depository shall not be
effective until:
(i) The FDIC has approved in writing the successor
depository; and
(ii) A pledge agreement in form and substance
satisfactory to the FDIC has been executed.
(13) Waiver of terms. The FDIC may by
written order waive compliance by the foreign bank or the depository
with any term or condition of the pledge agreement.
[Codified to 12 C.F.R. § 347.209]
[Section 347.209 amended at 71 Fed. Reg. 20527, April 21,
2006]
{{4-28-06 p.2864}}
§ 347.210 Asset maintenance.
(a) An insured branch of a foreign bank shall maintain on a daily
basis eligible assets in an amount not less than 106 percent of the
preceding quarter's average book value of the insured branch's
liabilities or, in the case of a newly-established insured branch, the
estimated book value of its liabilities at the end of the first full
quarter of operation, exclusive of liabilities due to the foreign
bank's head office, other branches, agencies, offices, or wholly owned
subsidiaries. The Director of the Division of Supervision and Consumer
Protection or his designee may impose a computation of total
liabilities on a daily basis in those instances where it is found
necessary for supervisory purposes. The FDIC Board of Directors, after
consulting with the insured branch's primary regulator, may require
that a higher ratio of eligible assets be maintained if the financial
condition of the insured branch warrants such action. Among the factors
which will be considered in requiring a higher ratio of eligible assets
are the concentration of risk to any one borrower or group of related
borrowers, the concentration of transfer risk to any one country,
including the country in which the foreign bank's head office is
located or any other factor the FDIC determines is relevant. Eligible
assets shall be payable in United States dollars.
(b) In determining eligible assets for the purposes of compliance
with paragraph (a) of this section, the insured branch shall exclude
the following:
(1) Any asset due from the foreign bank's head office, or its
other branches, agencies, offices or affiliates;
(2) Any asset classified "Value Impaired," to the extent of
the required Allocated Transfer Risk Reserves or equivalent write down,
or "Loss" in the most recent state or federal examination report;
(3) Any deposit of the insured branch in a bank unless the bank
has executed a valid waiver of offset agreement;
(4) Any asset not supported by sufficient credit information to
allow a review of the asset's credit quality, as determined at the
most recent state or federal examination, as follows:
(i) Whether an asset has sufficient credit information will be a
function of the size of the borrower and the location within the
foreign bank of the responsibility for authorizing and monitoring
extensions of credit to the borrower. For large, well known companies,
when credit responsibility is located in an office of the foreign bank
outside the insured branch, the insured branch must have adequate
documentation to show that the asset is of good quality and is being
supervised adequately by the foreign bank. In such cases, copies of
periodic memoranda that include an analysis of the borrower's recent
financial statements and a report on recent developments in the
borrower's operations and borrowing relationships with the foreign
bank generally would constitute sufficient information. For other
borrowers, periodic memoranda must be supplemented by information such
as copies of recent financial statements, recent correspondence
concerning the borrower's financial condition and repayment history,
credit terms and collateral, data on any guarantors, and where
necessary, the status of any corrective measures being employed;
(ii) Subsequent to the determination that an asset lacks
sufficient credit information, an insured branch may not include the
amount of that asset among eligible assets until the FDIC determines
that sufficient documentation exists. Such a determination may be made
either at the next federal examination, or upon request of the insured
branch, by the appropriate regional director;
(5) Any asset not in the insured branch's actual possession
unless the insured branch holds title to such asset and the insured
branch maintains records sufficient to enable independent verification
of the insured branch's ownership of the asset, as determined at the
most recent state or federal examination;
(6) Any intangible asset;
(7) Any other asset not considered bankable by the FDIC.
(c) A foreign bank which has more than one insured branch in a
state may treat all of its insured branches in the same state as one
entity for purposes of compliance with paragraph (a) of this section
and shall designate one insured branch to be responsible for
maintaining the records of the insured branches' compliance with this
section.
(d) The average book value of the insured branch's liabilities for
a quarter shall be, at the insured branch's option, either an average
of the balances as of the close of business for each day of the quarter
or an average of the balances as of the close of business on
each
{{10-31-07 p.2864.01}}Wednesday during the quarter.
Quarters end on March 31, June 30, September 30, and December 31 of any
given year. For days on which the insured branch is closed, balances
from the previous business day are to be used. Calculations of the
average book value of the insured branch's liabilities for a quarter
shall be retained by the insured branch until the next federal
examination.
[Codified to 12 C.F.R.
§ 347.210]
§ 347.211 Examination of branches of foreign banks.
(a) Frequency of on-site examination. Each branch or
agency of a foreign bank shall be examined on-site at least once during
each 12-month period (beginning on the date the most recent examination
of the office ended) by:
(1) The FRB;
(2) The FDIC, if an insured branch;
(3) The OCC, if the branch or agency of the foreign bank is
licensed by the OCC; or
(4) The state supervisor, if the office of the foreign bank is
licensed or chartered by the state.
(b) 18-month cycle for certain small institutions. (1)
Mandatory standards. The FDIC may conduct a full-scope,
on-site examination at least once during each 18-month period, rather
than each 12-month period as provided in paragraph (a) of this section,
if the insured branch:
(i) Has total assets of less than $500 million;
(ii) Has received a composite ROCA supervisory rating (which
rates risk management, operational controls, compliance, and asset
quality) of 1 or 2 at its most recent examination;
(iii) Satisfies the requirement of either the following paragraph
(b)(iii)(A) or (B):
(A) The foreign bank's most recently reported capital adequacy
position consists of, or is equivalent to, Tier 1 and total risk-based
capital ratios of at least 6 percent and 10 percent, respectively, on a
consolidated basis; or
(B) The insured branch has maintained on a daily basis, over the
past three quarters, eligible assets in an amount not less than 108
percent of the preceding quarter's average third party liabilities
(determined consistent with applicable federal and state law) and
sufficient liquidity is currently available to meet its obligations to
third parties;
(iv) Is not subject to a formal enforcement action or order by
the FRB, FDIC, or the OCC; and
(v) Has not experienced a change in control during the preceding
12-month period in which a full-scope, on-site examination would have
been required but for this section.
(2) Discretionary standards. In determining whether an
insured branch that meets the standards of paragraph (b)(1) of this
section should not be eligible for an 18-month examination cycle
pursuant to this paragraph (b), the FDIC may consider additional
factors, including whether:
(i) Any of the individual components of the ROCA supervisory
rating of an insured branch is rated "3" or worse;
(ii) The results of any off-site monitoring indicate a
deterioration in the condition of the insured branch;
(iii) The size, relative importance, and role of a particular
insured branch when reviewed in the context of the foreign bank's
entire U.S. operations otherwise necessitate an annual examination; and
(iv) The condition of the parent foreign bank gives rise to such
a need.
(c) Authority to conduct more frequent examinations.
Nothing in paragraphs (a) and (b) of this section limits the authority
of the FDIC to examine any insured branch as frequently as it deems
necessary.
[Codified to 12 C.F.R. § 347.211]
[Section 347.211 amended at 72 Fed. Reg. 17803, April 10, 2007; 72
Fed. Reg. 54349, September 25, 2007]
§ 347.212 FDIC approval to conduct activities that are not
permissible for federal branches.
(a) Scope. A foreign bank operating an insured state
branch which desires to engage in or continue to engage in any type of
activity that is not permissible for a federal branch,
{{10-31-07 p.2864.02}}pursuant to the National Bank
Act (12 U.S.C. 21 et seq.) or any other federal statute,
regulation, official bulletin or circular, written order or
interpretation, or decision of a court of competent jurisdiction, must
file a written application for permission to conduct such activity with
the FDIC.
(b) Exceptions. If the FDIC has already determined,
pursuant to part 362 of this
chapter, "Activities and Investment of Insured State Banks," that
an activity does not present a significant risk to the Deposit
Insurance Fund, no application is required under paragraph (a) of this
section for a foreign bank operating an insured branch to engage or
continue to engage in the same activity.
(c) Agency activities. A foreign bank operating an
insured state branch is not required to submit an application pursuant
to paragraph (a) of this section to engage in or continue engaging in
an activity conducted as agent if the activity is:
(1) permissible agency activity for a state-chartered bank
located in the state which the state-licensed insured branch of the
foreign bank is located;
(2) permissible agency activity for a state-licensed branch of a
foreign bank located in that state; and
(3) permissible pursuant to any other applicable federal law or
regulation.
(d) Conditions of approval. (1) Approval of such an
application required by paragraph (a) of this section may be
conditioned on the agreement by the foreign bank and its insured state
branch to conduct the activity subject to specific limitations, which
may include pledging of assets in excess of the asset pledge and asset
maintenance requirements contained in §§ 347.209 and 347.210.
(2) In the case of an application to initially engage in an
activity, as opposed to an application to continue to conduct an
activity, the insured state branch shall not commence the activity
until it has been approved in writing by the FDIC pursuant to this part
and the FRB, and any and all conditions imposed in such approvals have
been satisfied.
(e) Divestiture or cessation. (1) If an application for
permission to continue to conduct an activity is not approved by the
FDIC or the FRB, the applicant shall submit a plan of divestiture or
cessation of the activity to the appropriate regional director.
(2) A foreign bank operating an insured state branch which elects
not to apply to the FDIC for permission to continue to conduct an
activity which is rendered impermissible by any change in statute,
regulation, official bulletin or circular, written order or
interpretation, or decision of a court of competent jurisdiction shall
submit a plan of divestiture or cessation to the appropriate regional
director.
(3) All plans of divestitures or cessation required by this
paragraph must be completed within one year from the date of the
disapproval, or within such shorter period as the FDIC may direct.
(f) Procedures. Procedures for applications under this
section are set out in section 303.187.
[Codified to 12 C.F.R. § 347.212]
[Section 347.212 amended at 71 Fed. Reg. 20527, April 21,
2006]
§ 347.213 Establishment or operation of noninsured foreign
branch.
(a) A foreign bank may establish or operate a state branch, as
provided by state law, without federal deposit insurance whenever:
(1) The branch only accepts initial deposits in an amount of
$100,000 or greater; or
(2) The branch meets the criteria set forth in §§ 347.214 or
347.215.
(b) [Reserved]
[Codified to 12 C.F.R.
§ 347.213]
§ 347.214 Branch established under section 5 of the
International Banking Act.
A foreign bank may operate any state branch as a noninsured branch
whenever the foreign bank has entered into an agreement with the FRB to
accept at that branch only those deposits as would be permissible for a
corporation organized under section 25(a) of the Federal Reserve Act
(12 U.S.C. 611 et seq.)
and implementing rules and regulations administered by the FRB
(12 CFR 211).
[Codified to 12 C.F.R. § 347.214]
{{4-29-05 p.2864.03}}
§ 347.215 Exemptions from deposit insurance requirement.
(a) Deposit activities not requiring insurance. A state
branch will not be considered to be engaged in domestic retail deposit
activity that requires the foreign bank parent to establish an insured
U.S. bank subsidiary if the state branch accepts initial deposits only
in an amount of less than $100,000 that are derived solely from the
following:
(1) Individuals who are not citizens or residents of the United
States at the time of the initial deposit;
(2) Individuals who:
(i) Are not citizens of the United States;
(ii) Are residents of the United States; and
(iii) Are employed by a foreign bank, foreign business, foreign
government, or recognized international organization;
(3) Persons (including immediate family members of natural
persons) to whom the branch or foreign bank (including any affiliate
thereof) has extended credit or provided other nondeposit banking
services within the past twelve months or has entered into a written
agreement to provide such services within the next twelve months;
(4) Foreign businesses, large United States businesses, and
persons from whom an Edge or agreement corporation may accept deposits
under 12 CFR 211.6(a)(1);
(5) Any governmental unit, including the United States
government, any state government, any foreign government and any
political subdivision or agency of any of the foregoing, and recognized
international organizations;
(6) Persons who are depositing funds in connection with the
issuance of a financial instrument by the branch for the transmission
of funds or the transmission of such funds by any electronic means; and
(7) Any other depositor, but only if:
(i) The branch's average deposits under this paragraph (a)(7) do
not exceed one percent of the branch's average total deposits, as
calculated under paragraph (a)(7)(ii) if this section (de minimis
exception).
(ii) For purposes of calculating this exception:
(A) The branch's average deposits under this paragraph and the
average total deposits must be computed by summing the close of
business figures for each of the last 30 calendar days, ending with and
including the last day of the calendar quarter, and dividing the
resulting sum by 30;
(B) For days on which the branch is closed, balances from the
last previous business day are to be used;
(C) The branch may exclude deposits in the branch of other
offices, branches, agencies or wholly owned subsidiaries of the bank to
determine its average deposits;
(D) The branch must not solicit deposits from the general public
by advertising, display of signs, or similar activity designed to
attract the attention of the general public; and
(E) A foreign bank that has more than one state branch in the
same state may aggregate deposits in such branches (excluding deposits
of other branches, agencies or wholly owned subsidiaries of the bank)
for the purpose of this paragraph (a)(7).
(b) Application for an exemption. (1) Whenever a foreign bank
proposes to accept at a state branch initial deposits of less than
$100,000 and such deposits are not otherwise exempted under paragraph
(a) of this section, the foreign bank may apply to the FDIC for consent
to operate the branch as a noninsured branch. The Board of Directors
may exempt the branch from the insurance requirement if the branch is
not engaged in domestic retail deposit activities requiring insurance
protection. The Board of Directors will consider the size and nature of
depositors and deposit accounts, the importance of maintaining and
improving the availability of credit to all sectors of the United
States economy, including the international trade finance sector of the
United States economy, whether the exemption would give the foreign
bank an unfair competitive advantage over United States banking
organizations, and any other relevant factors in making this
determination.
{{4-29-05 p.2864.04}}
(2) Procedures for applications under this section are set out in
§ 303.186.
(c) Transition period. A noninsured state branch may
maintain a retail deposit lawfully accepted prior to April 1, 1996
pursuant to regulations in effect prior to July 1, 1998:
(1) If the deposit qualifies pursuant to paragraph (a) or (b) of
this section; or
(2) If the deposit does not qualify pursuant to paragraph (a) or
(b) of this section, in the case of a time deposit, no later than the
first maturity date of the time deposit after April 1, 1996.
[Codified to 12 C.F.R.
§ 347.215]
§ 347.216 Depositor notification.
Any state branch that is exempt from the insurance requirement
pursuant to § 347.215 shall:
(a) Display conspicuously at each window or place where deposits
are usually accepted a sign stating that deposits are not insured by
the FDIC; and
(b) Include in bold face conspicuous type on each signature card,
passbook, and instrument evidencing a deposit the statement "This
deposit is not insured by the FDIC"; or require each depositor to
execute a statement which acknowledges that the initial deposit and all
future deposits at the branch are not insured by the FDIC. This
acknowledgement shall be retained by the branch so long as the
depositor maintains any deposit with the branch. This provision applies
to any negotiable certificates of deposit made in a branch on or after
July 6, 1989, as well as to any renewals of such deposits which become
effective on or after July 6, 1989.
[Codified to 12 C.F.R. § 347.216]
4 The average must be computed by using the sum of the close of
business figures for the 30 calendar days of the most recent calendar
quarter, ending with and including the last day of the calendar
quarter, divided by 30. For days on which the branch is closed,
however, balances from the previous business day are to be used in
determining its average liabilities. In determining its average
liabilities, the insured branch may exclude liabilities to other
offices, agencies, branches, and wholly owned subsidiaries of the
foreign bank. The value of the pledged assets must be computed based on
the lesser of the principal amount (par value) or market value of such
assets at the time of the original pledge and thereafter as of the last
day of the most recent calendar quarter. Go Back to Text
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