|
[Main Tabs]
[Table of Contents - 7500]
[Index]
[Previous Page]
[Next Page]
[Search]
7500 - FRB Regulations
{{10-31-01 p.7628.04}}
Subpart B—Foreign Banking
Organizations
§ 211.20 Authority, purpose, and scope.
(a) Authority. This subpart is issued by the Board of
Governors of the Federal Reserve System (Board) under the authority of
the Bank Holding Company Act of 1956 (BHC Act) (12 U.S.C. 1841 et
seq.) and the International Banking Act of 1978 (12 U.S.C. 3101
et seq.).
(b) Purpose and scope. This subpart is in furtherance
of the purposes of the BHC Act and the IBA. It applies to foreign banks
and foreign banking organizations with respect to:
(1) The limitations on interstate banking under section 5 of the
IBA (12 U.S.C. 3103);
(2) The exemptions from the nonbanking prohibitions of the BHC
Act and the IBA afforded by sections 2(h) and 4(c)(9) of the BHC Act
(12 U.S.C. 1841(h),
1843(c)(9));
(3) Board approval of the establishment of an office of a foreign
bank in the United States under sections 7(d) and 10(a) of the IBA
(12 U.S.C. 3105(d),
3107(a));
(4) The termination by the Board of a foreign bank's
representative office, state branch, state agency, or commercial
lending company subsidiary under sections 7(e) and 10(b) of the IBA (12
U.S.C. 3105(e), 3107(b)), and the transmission of a recommendation to
the Comptroller to terminate a federal branch or federal agency under
section 7(e)(5) of the IBA (12 U.S.C. 3105(e)(5));
(5) The examination of an office or affiliate of a foreign bank
in the United States as provided in sections 7(c) and 10(c) of the IBA
(12 U.S.C. 3105(c), 3107(c));
(6) The disclosure of supervisory information to a foreign
supervisor under section 15 of the IBA (12 U.S.C. 3109);
(7) The limitations on loans to one borrower by state branches
and state agencies of a foreign bank under section 7(h)(2) of the IBA
(12 U.S.C. 3105(h)(2));
(8) The limitation of a state branch and a state agency to
conducting only activities that are permissible for a federal branch
under section (7)(h)(1) of the IBA (12 U.S.C. 3105(h)(1)); and
(9) The deposit insurance requirement for retail deposit taking
by a foreign bank under section 6 of the IBA
(12 U.S.C. 3104).
(10) The management of shell branches (12 U.S.C. 3105(k)).
(c) Additional requirements. Compliance by a foreign
bank with the requirements of this subpart and the laws administered
and enforced by the Board does not relieve the foreign bank of
responsibility to comply with the laws and regulations administered by
the licensing authority.
[Codified to 12 C.F.R.
§ 211.20]
§ 211.21 Definitions.
The definitions contained in
§§ 211.1 and 211.2 apply to
this subpart, except as a term is otherwise defined in this section:
(a) Affiliate of a foreign bank or of a parent of a
foreign bank means any company that controls, is controlled by, or is
under common control with, the foreign bank or the parent of the
foreign bank.
(b) Agency means any place of business of a foreign
bank, located in any state, at which credit balances are maintained,
checks are paid, money is lent, or, to the extent not prohibited by
state or federal law, deposits are accepted from a person or entity
that is not a citizen or resident of the United States. Obligations
shall not be considered credit balances unless they are:
(1) Incidental to, or arise out of the exercise of, other lawful
banking powers;
(2) To serve a specific purpose;
(3) Not solicited from the general public;
(4) Not used to pay routine operating expenses in the United
States such as salaries, rent, or taxes;
(5) Withdrawn within a reasonable period of time after the
specific purpose for which they were placed has been accomplished;
and
{{10-31-01 p.7628.05}}
(6) Drawn upon in a manner reasonable in relation to the size and
nature of the account.
(c)(1) Appropriate Federal Reserve Bank means, unless
the Board designates a different Federal Reserve Bank:
(i) For a foreign banking organization, the Reserve Bank assigned
to the foreign banking organization in § 225.3(b)(2) of Regulation Y
(12 CFR 225.3(b)(2));
(ii) For a foreign bank that is not a foreign banking
organization and proposes to establish an office, an Edge corporation,
or an agreement corporation, the Reserve Bank of the Federal Reserve
District in which the foreign bank proposes to establish such office or
corporation; and
(iii) In all other cases, the Reserve Bank designated by the
Board.
(2) The appropriate Federal Reserve Bank need not be the Reserve
Bank of the Federal Reserve District in which the foreign bank's home
state is located.
(d) Banking subsidiary, with respect to a specified
foreign bank, means a bank that is a subsidiary as the terms bank
and subsidiary are defined in
section 2 of the BHC Act (12
U.S.C. 1841).
(e) Branch means any place of business of a foreign
bank, located in any state, at which deposits are received, and that is
not an agency, as that term is defined in paragraph (b) of this
section.
(f) Change the status of an office means convert a
representative office into a branch or agency, or an agency or limited
branch into a branch, but does not include renewal of the license of an
existing office.
(g) Commercial lending company means any organization,
other than a bank or an organization operating under section 25 of the
Federal Reserve Act (FRA) (12 U.S.C. 601--604a), organized under the
laws of any state, that maintains credit balances permissible for an
agency, and engages in the business of making commercial loans.
Commercial lending company includes any company chartered
under article XII of the banking law of the State of New York.
(h) Comptroller means the Office of the Comptroller of
the Currency.
(i) Control has the same meaning as in section 2(a) of
the BHC Act (12 U.S.C. 1841(a)), and the terms controlled
and controlling shall be construed consistently with
the term control.
(j) Domestic branch means any place of business of a
foreign bank, located in any state, that may accept domestic deposits
and deposits that are incidental to or for the purpose of carrying out
transactions in foreign countries.
(k) A foreign bank engages directly in the business of
banking outside the United States if the foreign bank engages
directly in banking activities usual in connection with the business of
banking in the countries where it is organized or operating.
(l) To establish means:
(1) To open and conduct business through an office;
(2) To acquire directly, through merger, consolidation, or
similar transaction with another foreign bank, the operations of an
office that is open and conducting business;
(3) To acquire an office through the acquisition of a foreign
bank subsidiary that will cease to operate in the same corporate form
following the acquisition;
(4) To change the status of an office; or
(5) To relocate an office from one state to another.
(m) Federal agency, federal branch, state agency, and
state branch have the same meanings as in section 1 of the
IBA (12 U.S.C. 3101).
(n) Foreign bank means an organization that is organized
under the laws of a foreign country and that engages directly in the
business of banking outside of the United States. The term
foreign bank does not include a central bank of a foreign
country that does not engage or seek to engage in a commercial banking
business in the United States through an office.
(o) Foreign banking organization means:
(1) A foreign bank, as defined in section 1(b)(7) of the IBA (12
U.S.C. 3101(7)), that:
{{10-31-01 p.7628.06}}
(i) Operates a branch, agency, or commercial lending company
subsidiary in the United States;
(ii) Controls a bank in the United States; or
(iii) Controls an Edge corporation acquired after March 5, 1987;
and
(2) Any company of which the foreign bank is a subsidiary.
(p) Home country, with respect to a foreign bank, means
the country in which the foreign bank is chartered or incorporated.
(q) Home country supervisor, with respect to a foreign
bank, means the governmental entity or entities in the foreign bank's
home country with responsibility for the supervision and regulation of
the foreign bank.
(r) Licensing authority means:
(1) The relevant state supervisor, with respect to an application
to establish a state branch, state agency, commercial lending company,
or representative office of a foreign bank; or
(2) The Comptroller, with respect to an application to establish
a federal branch or federal agency.
(s) Limited branch means a branch of a foreign bank that
receives only such deposits as would be permitted for a corporation
organized under section 25A of the Federal Reserve Act (12 U.S.C.
611--631).
(t) Office or office of a foreign bank means
any branch, agency, representative office, or commercial lending
company subsidiary of a foreign bank in the United States.
(u) A parent of a foreign bank means a company of which
the foreign bank is a subsidiary. An immediate parent of a
foreign bank is the company of which the foreign bank is a direct
subsidiary. An ultimate parent of a foreign bank is parent
of the foreign bank that is not the subsidiary of any other company.
(v) Regional administrative office means a
representative office that:
(1) Is established by a foreign bank that operates two or more
branches, agencies, commercial lending companies, or banks in the
United States;
(2) Is located in the same city as one or more of the foreign
bank's branches, agencies, commercial lending companies, or banks in
the United States;
(3) Manages, supervises, or coordinates the operations of the
foreign bank or its affiliates, if any, in a particular geographic area
that includes the United States or a region thereof, including by
exercising credit approval authority in that area pursuant to written
standards, credit policies, and procedures established by the foreign
bank; and
(4) Does not solicit business from actual or potential customers
of the foreign bank or its affiliates.
(w) Relevant state supervisor means the state entity
that is authorized to supervise and regulate a state branch, state
agency, commercial lending company, or representative office.
(x) Representative office means any office of a foreign
bank which is located in any state and is not a Federal branch, Federal
agency, State branch, State agency, or commercial lending company
subsidiary.
(y) State means any state of the United States or the
District of Columbia.
(z) Subsidiary means any organization that:
(1) Has 25 percent or more of its voting shares directly or
indirectly owned, controlled, or held with the power to vote by a
company, including a foreign bank or foreign banking organization; or
(2) Is otherwise controlled, or capable of being controlled, by a
foreign bank or foreign banking organization.
[Codified to 12 C.F.R. § 211.21]
§ 211.22 Interstate banking operations of foreign banking
organizations.
(a) Determination of home state. (1) A foreign bank
that, as of December 10, 1997, had declared a home state or had a home
state determined pursuant to the law and regulations in effect prior to
that date shall have that state as its home state.
{{12-31-07 p.7628.07}}
(2) A foreign bank that has any branches, agencies, commercial
lending company subsidiaries, or subsidiary banks in one state, and has
no such offices or subsidiaries in any other states, shall have as its
home state the state in which such offices or subsidiaries are located.
(b) Change of home state--(1) Prior notice. A
foreign bank may change its home state once, if it files 30 days'
prior notice of the proposed change with the Board.
(2) Application to change home state. (i) A foreign
bank, in addition to changing its home state by filing prior notice
under paragraph (b)(1) of this section, may apply to the Board to
change its home state, upon showing that a national bank or
state-chartered bank with the same home state as the foreign bank would
be permitted to change its home state to the new home state proposed by
the foreign bank.
(ii) A foreign bank may apply to the Board for such permission
one or more times.
(iii) In determining whether to grant the request of a foreign
bank to change its home state, the Board shall consider whether the
proposed change is consistent with competitive equity between foreign
and domestic banks.
(3) Effect of change in home state. The home state of
a foreign bank and any change in its home state by a foreign bank shall
not affect which Federal Reserve Bank or Reserve Banks supervise the
operations of the foreign bank, and shall not affect the obligation of
the foreign bank to file required reports and applications with the
appropriate Federal Reserve Bank.
(4) Conforming branches to new home state. Upon any
change in home state by a foreign bank under paragraph (b)(1) or (b)(2)
of this section, the domestic branches of the foreign bank established
in reliance on any previous home state of the foreign bank shall be
conformed to those which a foreign bank with the new home state could
permissibly establish or operate as of the date of such change.
(c) Prohibition against interstate deposit production
offices. A covered interstate branch of a foreign bank may not be
used as a deposit production office in accordance with the provisions
in § 208.7 of Regulation H (12 CFR 208.7).
[Codified to 12 C.F.R. § 211.22]
§ 211.23 Nonbanking activities of foreign banking
organizations.
(a) Qualifying foreign banking organizations. Unless
specifically made eligible for the exemptions by the Board, a foreign
banking organization shall qualify for the exemptions afforded by this
section only if, disregarding its United States banking, more than half
of its worldwide business is banking; and more than half of its banking
business is outside the United
States. 10
In order to qualify, a foreign banking organization shall:
(1) Meet at least two of the following requirements:
(i) Banking assets held outside the United States exceed total
worldwide nonbanking assets;
(ii) Revenues derived from the business of banking outside the
United States exceed total revenues derived from its worldwide
nonbanking business; or
(iii) Net income derived from the business of banking outside the
United States exceeds total net income derived from its worldwide
nonbanking businesses; and
(2) Meet at least two of the following requirements:
(i) Banking assets held outside the United States exceed banking
assets held in the United States;
(ii) Revenues derived from the business of banking outside the
United States exceed revenues derived from the business of banking in
the United States; or
(iii) Net income derived from the business of banking outside the
United States exceeds net income derived from the business of banking
in the United States.
{{12-31-07 p.7628.08}}
(b) Determining assets, revenues, and net income. (1)
(i) For purposes of paragraph (a) of this section, the total
assets, revenues, and net income of an organization may be determined
on a consolidated or combined basis.
(ii) The foreign banking organization shall include assets,
revenues, and net income of companies in which it owns 50 percent or
more of the voting shares when determining total assets, revenues, and
net income.
(iii) The foreign banking organization may include assets,
revenues, and net income of companies in which it owns 25 percent or
more of the voting shares, if all such companies within the
organization are included.
(2) Assets devoted to, or revenues or net income derived from,
activities listed in
§ 211.10(a) shall be
considered banking assets, or revenues or net income derived from the
banking business, when conducted within the foreign banking
organization by a foreign bank or its subsidiaries.
(c) Limited exemptions available to foreign banking
organizations in certain circumstances. The following shall apply
where a foreign bank meets the requirements of paragraph (a) of this
section but its ultimate parent does not:
(1) Such foreign bank shall be entitled to the exemptions
available to a qualifying foreign banking organization if its ultimate
parent meets the requirements set forth in paragraph (a)(2) of this
section and could meet the requirements in paragraph (a)(1) of this
section but for the requirement in paragraph (b)(2) of this section
that activities must be conducted by the foreign bank or its
subsidiaries in order to be considered derived from the banking
business;
(2) An ultimate parent as described in paragraph (c)(1) of this
section shall be eligible for the exemptions available to a qualifying
foreign banking organization except for those provided in
§ 211.23(f)(5)(iii).
(d) Loss of eligibility for exemptions--(1)
Failure to meet qualifying test. A foreign banking organization
that qualified under paragraph (a) or (c) of this section shall cease
to be eligible for the exemptions of this section if it fails to meet
the requirements of paragraphs (a) or (c) of this section for two
consecutive years, as reflected in its annual reports (FR Y--7) filed
with the Board.
(2) Continuing activities and investments. (i) A
foreign banking organization that ceases to be eligible for the
exemptions of this section may continue to engage in activities or
retain investments commenced or acquired prior to the end of the first
fiscal year for which its annual report reflects nonconformance with
paragraphs (a) or (c) of this section.
(ii) Termination or divestiture. Activities commenced
or investments made after that date shall be terminated or divested
within three months of the filing of the second annual report, or at
such time as the Board may determine upon request by the foreign
banking organization to extend the period, unless the Board grants
consent to continue the activity or retain the investment under
paragraph (e) of this section.
(3) Request for specific determination of eligibility.
(i) A foreign banking organization that ceases to qualify under
paragraph (a) or (c) of this section, or an affiliate of such foreign
banking organization, that requests a specific determination of
eligibility under paragraph (e) of this section may, prior to the
Board's determination on eligibility, continue to engage in activities
and make investments under the provisions of paragraphs (f)(1), (2),
(3), and (4) of this section.
(ii) The Board may grant consent for the foreign banking
organization or its affiliate to make investments under paragraph
(f)(5) of this section.
(e) Specific determination of eligibility for organizations
that do not qualify for the exemptions--(1) Application.
(i) A foreign organization that is not a foreign banking
organization or a foreign banking organization that does not qualify
under paragraph (a) or (c) of this section for some or all of the
exemptions afforded by this section, or that has lost its eligibility
for the exemptions under paragraph (d) of this section, may apply to
the Board for a specific determination of eligibility for some or all
of the exemptions.
(ii) A foreign banking organization may apply for a specific
determination prior to the time it ceases to be eligible for the
exemptions afforded by this section.
{{10-31-01 p.7628.09}}
(2) Factors considered by Board. In determining
whether eligibility for the exemptions would be consistent with the
purposes of the BHC Act and in the public interest, the Board shall
consider:
(i) The history and the financial and managerial resources of the
foreign organization or foreign banking organization;
(ii) The amount of its business in the United States;
(iii) The amount, type, and location of its nonbanking
activities, including whether such activities may be conducted by U.S.
banks or bank holding companies;
(iv) Whether eligibility of the foreign organization or foreign
banking organization would result in undue concentration of resources,
decreased or unfair competition, conflicts of interests, or unsound
banking practices; and
(v) The extent to which the foreign banking organization is
subject to comprehensive supervision or regulation on a consolidated
basis or the foreign organization is subject to oversight by regulatory
authorities in its home country.
(3) Conditions and limitations. The Board may impose
any conditions and limitations on a determination of eligibility,
including requirements to cease activities or dispose of investments.
(4) Eligibility not granted. Determinations of
eligibility generally would not be granted where a majority of the
business of the foreign organization or foreign banking organization
derives from commercial or industrial activities.
(f) Permissible activities and investments. A foreign
banking organization that qualifies under paragraph (a) of this section
may:
(1) Engage in activities of any kind outside the United States;
(2) Engage directly in activities in the United States that are
incidental to its activities outside the United States;
(3) Own or control voting shares of any company that is not
engaged, directly or indirectly, in any activities in the United
States, other than those that are incidental to the international or
foreign business of such company;
(4) Own or control voting shares of any company in a fiduciary
capacity under circumstances that would entitle such shareholding to an
exemption under section 4(c)(4) of the BHC Act
(12 U.S.C. 1843(c)(4)) if the
shares were held or acquired by a bank;
(5) Own or control voting shares of a foreign company that is
engaged directly or indirectly in business in the United States other
than that which is incidental to its international or foreign business,
subject to the following limitations:
(i) More than 50 percent of the foreign company's consolidated
assets shall be located, and consolidated revenues derived from,
outside the United States; provided that, if the foreign company fails
to meet the requirements of this paragraph (f)(5)(i) for two
consecutive years (as reflected in annual reports (FR Y--7) filed with
the Board by the foreign banking organization), the foreign company
shall be divested or its activities terminated within one year of the
filing of the second consecutive annual report that reflects
nonconformance with the requirements of this paragraph (f)(5)(i),
unless the Board grants consent to retain the investment under
paragraph (g) of this section;
(ii) The foreign company shall not directly underwrite, sell, or
distribute, nor own or control more than 10 percent of the voting
shares of a company that underwrites, sells, or distributes securities
in the United States, except to the extent permitted bank holding
companies;
(iii) If the foreign company is a subsidiary of the foreign
banking organization, the foreign company must be, or must control, an
operating company, and its direct or indirect activities in the United
States shall be subject to the following limitations:
(A) The foreign company's activities in the United States shall
be the same kind of activities, or related to the activities, engaged
in directly or indirectly by the foreign company abroad as measured by
the "establishment" categories of the Standard Industrial
Classification (SIC). An activity in the United States shall be
considered related to an activity outside the United States if it
consists of supply, distribution, or sales in furtherance of the
activity;
{{10-31-01 p.7628.10}}
(B) The foreign company may engage in activities in the United
States that consist of banking, securities, insurance, or other
financial operations, or types of activities permitted by regulation or
order under section 4(c)(8) of the BHC Act (12 U.S.C. 1843(c)(8)), only
under regulations of the Board or with the prior approval of the Board,
subject to the following;
(1) Activities within Division H (Finance, Insurance,
and Real Estate) of the SIC shall be considered banking or financial
operations for this purpose, with the exception of acting as operators
of nonresidential buildings (SIC 6512), operators of apartment
buildings (SIC 6513), operators of dwellings other than apartment
buildings (SIC 6514), and operators of residential mobile home sites
(SIC 6515); and operating title abstract offices (SIC 6541); and
(2) The following activities shall be considered
financial activities and may be engaged in only with the approval of
the Board under paragraph (g) of this section: credit reporting
services (SIC 7323); computer and data processing services (SIC 7371,
7372, 7373, 7374, 7375, 7376, 7377, 7378, and 7379); armored car
services (SIC 7381); management consulting (SIC 8732, 8741, 8742, and
8748); certain rental and leasing activities (SIC 4741, 7352, 7353,
7359, 7513, 7514, 7515, and 7519); accounting, auditing, and
bookkeeping services (SIC 8721); courier services (SIC 4215 and 4513);
and arrangement of passenger transportation (SIC 4724, 4725, and 4729).
(g) Exemptions under section 4(c)(9) of the BHC Act. A
foreign banking organization that is of the opinion that other
activities or investments may, in particular circumstances, meet the
conditions for an exemption under
section 4(c)(9) of the BHC Act
(12 U.S.C. 1843(c)(9)) may apply to the Board for such a determination
by submitting to the appropriate Federal Reserve Bank a letter setting
forth the basis for that opinion.
(h) Reports. The foreign banking organization shall
report in a manner prescribed by the Board any direct activities in the
United States by a foreign subsidiary of the foreign banking
organization and the acquisition of all shares of companies engaged,
directly or indirectly, in activities in the United States that were
acquired under the authority of this section.
(i) Availability of information. If any information
required under this section is unknown and not reasonably available to
the foreign banking organization (either because obtaining it would
involve unreasonable effort or expense, or because it rests exclusively
within the knowledge of a company that is not controlled by the
organization) the organization shall:
(1) Give such information on the subject as it possesses or can
reasonably acquire, together with the sources thereof; and
(2) Include a statement showing that unreasonable effort or
expense would be involved, or indicating that the company whose shares
were acquired is not controlled by the organization, and stating the
result of a request for information.
[Codified to 12 C.F.R.
§ 211.23]
§ 211.24 Approval of offices of foreign banks; procedures
for applications; standards for approval; representative office
activities and standards for approval; preservation of existing
authority.
(a) Board approval of offices of foreign
banks--(1) Prior Board approval of branches, agencies,
commercial lending companies, or representative offices of foreign
banks. (i) Except as otherwise provided in paragraph (a)(2) and
(a)(3) of this section, a foreign bank shall obtain the approval of the
Board before it:
(A) Establishes a branch, agency, commercial lending company
subsidiary, or representative office in the United States; or
(B) Acquires ownership or control of a commercial lending company
subsidiary.
(2) Prior notice for certain offices. (i) After
providing 45 days' prior written notice to the Board, a foreign bank
may establish:
{{10-31-01 p.7628.11}}
(A) An additional office (other than a domestic branch outside
the home state of the foreign bank established pursuant to section
5(a)(3) of the IBA (12 U.S.C.
3103(a)(3))), provided that the Board has previously determined
the foreign bank to be subject to comprehensive supervision or
regulation on a consolidated basis by its home country supervisor
(comprehensive consolidated supervision or CCS); or
(B) A representative office, if:
(1) The Board has not yet determined the foreign bank
to be subject to consolidated comprehensive supervision, but he foreign
bank is subject to the BHC Act, either directly or through section 8(a)
of the IBA (12 U.S.C. 3106(a)); or
(2) The Board previously has approved an application
by the foreign bank to establish a branch or agency pursuant to the
standard set forth in paragraph (c)(1)(iii) of this section; or
(3) The Board previously has approved an application
by the foreign bank to establish a representative office.
(ii) The Board may waive the 45-day notice period if it finds
that immediate action is required by the circumstances presented. The
notice period shall commence at the time the notice is received by the
appropriate Federal Reserve Bank. The Board may suspend the period or
require Board approval prior to the establishment of such office if the
notification raises significant policy or supervisory concerns.
(3) General consent for certain representative offices.
(i) The Board grants its general consent for a foreign bank that
is subject to the BHC Act, either directly or through section 8(a) of
the IBA (12 U.S.C. 3106(a)), to
establish:
(A) A representative office, but only if the Board has previously
determined that the foreign bank proposing to establish a
representative office is subject to consolidated comprehensive
supervision;
(B) A regional administrative office; or
(C) An office that solely engages in limited administrative
functions (such as separately maintaining back-office support systems)
that:
(1) Are clearly defined;
(2) Are preformed in connection with the U.S. banking
activities of the foreign bank; and
(3) Do not involve contact or liaison with customers
or potential customers, beyond incidental contact with existing
customers relating to administrative matters (such as verification or
correction of account information).
(4) Suspension of general consent or prior notice
procedures. The Board may, at any time, upon notice, modify or
suspend the prior notice and general consent procedures in paragraphs
(a)(2) and (3) of this section for any foreign bank with respect to the
establishment by such foreign bank of any U.S. office of such foreign
bank.
(5) Temporary offices. The Board may, in its
discretion, determine that a foreign bank has not established an office
if the foreign bank temporarily operates at one or more additional
locations in the same city of an existing branch or agency due to
renovations, an expansion of activities, a merger or consolidation of
the operations of affiliated foreign banks or companies, or other
similar circumstances. The foreign bank must provide reasonable advance
notice of its intent temporarily to utilize additional locations, and
the Board may impose such conditions in connection with its
determination as it deems necessary.
(6) After-the-fact Board approval. Where a foreign
bank proposes to establish an office in the United States through the
acquisition of, or merger or consolidation with, another foreign bank
with an office in the United States, the Board may, in its discretion,
allow the acquisition, merger, or consolidation to proceed before an
application to establish the office has been filed or acted upon under
this section if:
{{10-31-01 p.7628.12}}
(i) The foreign bank or banks resulting from the acquisition,
merger, or consolidation, will not directly or indirectly own or
control more than 5 percent of any class of the voting securities of,
or control, a U.S. bank;
(ii) The Board is given reasonable advance notice of the proposed
acquisition, merger, or consolidation; and
(iii) Prior to consummation of the acquisition, merger, or
consolidation, each foreign bank, as appropriate, commits in writing
either:
(A) To comply with the procedures for an application under this
section within a reasonable period of time; to engage in no new lines
of business, or otherwise to expand its U.S. activities until the
disposition of the application; and to abide by the Board's decision
on the application, including, if necessary, a decision to terminate
the activities of any such U.S. office, as the Board or the Comptroller
may require; or
(B) Promptly to wind-down and close any office, the establishment
of which would have required an application under this section; and to
engage in no new lines of business or otherwise to expand its U.S.
activities prior to the closure of such office.
(7) Notice of change in ownership or control or conversion
of existing office or establishment of representative office under
general-consent authority. A foreign bank with a U.S. office shall
notify the Board in writing within 10 days of the occurrence of any of
the following events:
(i) A change in the foreign bank's ownership or control, where
the foreign bank is acquired or controlled by another foreign bank or
company and the acquired foreign bank with a U.S. office continues to
operate in the same corporate form as prior to the change in ownership
or control;
(ii) The conversion of a branch to an agency or representative
office; an agency to a representative office; or a branch or agency
from a federal to a state license, or a state to a federal license; or
(iii) The establishment of a representative office under
general-consent authority.
(8) Transactions subject to approval under Regulation Y.
Subpart B of Regulation Y (12
CFR 225.11--225.17) governs the acquisition by a foreign
banking organization of direct or indirect ownership or control of any
voting securities of a bank or bank holding company in the United
States if the acquisition results in the foreign banking
organization's ownership or control of more than 5 percent of any
class of voting securities of a U.S. bank or bank holding company,
including through acquisition of a foreign bank or foreign banking
organization that owns or controls more than 5 percent of any class of
the voting securities of a U.S. bank or bank holding company.
(b) Procedures for application--(1) Filing
application. An application for the Board's approval pursuant to
this section shall be filed in the manner prescribed by the Board.
(2) Publication requirement--(i) Newspaper
notice. Except with respect to a proposed transaction where more
extensive notice is required by statute or as otherwise provided in
paragraphs (b)(2)(ii) and (iii) of this section, an applicant under
this section shall publish a notice in a newspaper of general
circulation in the community in which the applicant proposes to engage
in business.
(ii) Contents of notice. The newspaper notice shall:
(A) State that an application is being filed as of the date of
the newspaper notice; and
(B) Provide the name of the applicant, the subject matter of the
application, the place where comments should be sent, and the date by
which comments are due, pursuant to paragraph (b)(3) of this section.
(iii) Copy of notice with application. The applicant
shall furnish with its application to the Board a copy of the newspaper
notice, the date of its publication, and the name and address of the
newspaper in which it was published.
(iv) Exception. The Board may modify the publication
requirement of paragraphs (b)(2)(i) and (ii) of this section in
appropriate circumstances.
(v) Federal branch or federal agency. In the case of
an application to establish a federal branch or federal agency,
compliance with the publication procedures of the
{{10-31-01 p.7628.13}}Comptroller shall satisfy the
publication requirement of this section. Comments regarding the
application should be sent to the Board and the Comptroller.
(3) Written comments. (i) Within 30 days after
publication, as required in paragraph (b)(2) of this section, any
person may submit to the Board written comments and data on an
application.
(ii) The Board may extend the 30-day comment period if the Board
determines that additional relevant information is likely to be
provided by interested persons, or if other extenuating circumstances
exist.
(4) Board action on application. (i) Time
limits. (A) The Board shall act on an application from a foreign
bank to establish a branch, agency, or commercial lending company
subsidiary within 180 calendar days after the receipt of the
application.
(B) The Board may extend for an additional 180 calendar days the
period within which to take final action, after providing notice of and
reasons for the extension to the applicant and the licensing authority.
(C) The time periods set forth in this paragraph (b)(4)(i) may be
waived by the applicant.
(ii) Additional information. The Board may request any
information in addition to that supplied in the application when the
Board believes that the information is necessary for its decision, and
may deny an application if it does not receive the information
requested from the applicant or its home country supervisor in
sufficient time to permit adequate evaluation of the information within
the time periods set forth in paragraph (b)(4)(i) of this section.
(5) Coordination with other regulators. Upon receipt
of an application by a foreign bank under this section, the Board shall
promptly notify, consult with, and consider the views of the licensing
authority.
(c) Standards for approval of U.S. offices of foreign
banks--(1) Mandatory standards--(i) General.
As specified in section 7(d) of the IBA
(12 U.S.C. 3105(d)), the Board
may not approve an application to establish a branch or an agency, or
to establish or acquire ownership or control of a commercial lending
company, unless it determines that:
(A) Each of the foreign bank and any parent foreign bank engages
directly in the business of banking outside the United States and,
except as provided in paragraph (c)(1)(iii) of this section, is subject
to comprehensive supervision or regulation on a consolidated basis by
its home country supervisor; and
(B) The foreign bank has furnished to the Board the information
that the Board requires in order to assess the application adequately.
(ii) Basis for determining comprehensive consolidated
supervision. In determining whether a foreign bank and any parent
foreign bank is subject to comprehensive consolidated supervision, the
Board shall determine whether the foreign bank is supervised or
regulated in such a manner that its home country supervisor receives
sufficient information on the worldwide operations of the foreign bank
(including the relationships of the bank to any affiliate) to assess
the foreign bank's overall financial condition and compliance with law
and regulation. In making such a determination, the Board shall assess,
among other factors, the extent to which the home country supervisor:
(A) Ensures that the foreign bank has adequate procedures for
monitoring and controlling its activities worldwide;
(B) Obtains information on the condition of the foreign bank and
its subsidiaries and offices outside the home country through regular
reports of examination, audit reports, or otherwise;
(C) Obtains information on the dealings and relationships between
the foreign bank and its affiliates, both foreign and domestic;
(D) Receives from the foreign bank financial reports that are
consolidated on a worldwide basis, or comparable information that
permits analysis of the foreign bank's financial condition on a
worldwide, consolidated basis;
(E) Evaluates prudential standards, such as capital adequacy and
risk asset exposure, on a worldwide basis.
{{10-31-01 p.7628.14}}
(iii) Determination of comprehensive consolidated
supervision not required in certain circumstances. (A) If the
Board is unable to find, under paragraph (c)(1)(i) of this section,
that a foreign bank is subject to comprehensive consolidated
supervision, the Board may, nevertheless, approve an application by the
foreign bank if:
(1) The home country supervisor is actively working to
establish arrangements for the consolidated supervision of such bank;
and
(2) All other factors are consistent with approval.
(B) In deciding whether to use its discretion under this
paragraph (c)(1)(iii), the Board also shall consider whether the
foreign bank has adopted and implemented procedures to combat money
laundering. The Board also may take into account whether the home
country supervisor is developing a legal regime to address money
laundering or is participating in multilateral efforts to combat money
laundering. In approving an application under this paragraph
(c)(1)(iii), the Board, after requesting and taking into consideration
the views of the licensing authority, may impose any conditions or
restrictions relating to the activities or business operations of the
proposed branch, agency, or commercial lending company subsidiary,
including restrictions on sources of funding. The Board shall
coordinate with the licensing authority in the implementation of such
conditions or restrictions.
(2) Additional standards. In acting on any application
under this subpart, the Board may take into account:
(i) Consent of home country supervisor. Whether the
home country supervisor of the foreign bank has consented to the
proposed establishment of a branch, agency, or commercial lending
company subsidiary;
(ii) Financial resources. The financial resources of
the foreign bank (including the foreign bank's capital position,
projected capital position, profitability, level of indebtedness, and
future prospects) and the condition of any U.S. office of the foreign
bank;
(iii) Managerial resources. The managerial resources
of the foreign bank, including the competence, experience, and
integrity of the officers and directors; the integrity of its principal
shareholders; management's experience and capacity to engage in
international banking; and the record of the foreign bank and its
management of complying with laws and regulations, and of fulfilling
any commitments to, and any conditions imposed by, the Board in
connection with any prior application;
(iv) Sharing information with supervisors. Whether the
foreign bank's home country supervisor and the home country supervisor
of any parent of the foreign bank share material information regarding
the operations of the foreign bank with other supervisory authorities;
(v) Assurances to Board. (A) Whether the foreign bank
has provided the Board with adequate assurances that information will
be made available to the Board on the operations or activities of the
foreign bank and any of its affiliates that the Board deems necessary
to determine and enforce compliance with the IBA, the BHC Act, and
other applicable federal banking statutes.
(B) These assurances shall include a statement from the foreign
bank describing the laws that would restrict the foreign bank or any of
its parents from providing information to the Board;
(vi) Measures for prevention of money laundering.
Whether the foreign bank has adopted and implemented procedures to
combat money laundering, whether there is a legal regime in place in
the home country to address money laundering, and whether the home
country is participating in multilateral efforts to combat money
laundering;
(vii) Compliance with U.S. law. Whether the foreign
bank and its U.S. affiliates are in compliance with applicable U.S.
law, and whether the applicant has established adequate controls and
procedures in each of its offices to ensure continuing compliance with
U.S. law, including controls directed to detection of money laundering
and other unsafe or unsound banking practices; and
(viii) The needs of the community and the history of operation of
the foreign bank and its relative size in its home country, provided
that the size of the foreign bank is not the sole factor in determining
whether an office of a foreign bank should be approved.
{{4-28-06 p.7628.15}}
(3) Additional standards for certain interstate
applications. (i) As specified in section 5(a)(3) of the IBA
(12 U.S.C. 3103(a)(3)), the
Board may not approve an application by a foreign bank to establish a
branch, other than a limited branch, outside the home state of the
foreign bank under section 5(a)(1) or (2) of the IBA (12 U.S.C.
3103(a)(1), (2)) unless the Board:
(A) Determines that the foreign bank's financial resources,
including the capital level of the bank, are equivalent to those
required for a domestic bank to be approved for branching under section
5155 of the Revised Statutes (12 U.S.C. 36) and section 44 of the
Federal Deposit Insurance Act (FDIA)
(12 U.S.C. 1831u);
(B) Consults with the Department of the Treasury regarding
capital equivalency;
(C) Applies the standards specified in section 7(d) of the IBA
(12 U.S.C. 3105(d)) and this
paragraph (c); and
(D) Applies the same requirements and conditions to which an
application by a domestic bank for an interstate merger is subject
under section 44(b)(1), (3), and (4) of the FDIA (12 U.S.C.
1831u(b)(1), (3), (4)); and
(ii) As specified in section 5(a)(7) of the IBA (12 U.S.C.
3103(a)(7)), the Board may not approve an application to establish a
branch through a change in status of an agency or limited branch
outside the foreign bank's home state unless:
(A) The establishment and operation of such branch is permitted
by such state; and
(B) Such agency or branch has been in operation in such state for
a period of time that meets the state's minimum age requirement
permitted under section 44(a)(5) of the Federal Deposit Insurance Act
(12 U.S.C. 1831u(a)(5)).
(4) Board conditions on approval. The Board may impose
such conditions on its approval as it deems necessary, including a
condition which may permit future termination by the Board of any
activities or, in the case of a federal branch or a federal agency, by
the Comptroller, based on the inability of the foreign bank to provide
information on its activities or those of its affiliates that the Board
deems necessary to determine and enforce compliance with U.S. banking
laws.
(d) Representative offices--(1) Permissible
activities. A representative office may engage in:
(i) Representational and administrative functions.
Representational and administrative functions in connection with
the banking activities of the foreign bank, which may include
soliciting new business for the foreign bank; conducting research;
acting as liaison between the foreign bank's head office and customers
in the United States; performing preliminary and servicing steps in
connection with lending; 11
or performing back-office functions; but shall not include contracting
for any deposit or deposit-like liability, lending money, or engaging
in any other banking activity for the foreign bank;
(ii) Credit approvals under certain circumstances.
Making credit decisions if the foreign bank also operates one or
more branches or agencies in the United States, the loans approved at
the representative office are made by a U.S. office of the bank, and
the loan proceeds are not disbursed in the representative office; and
(iii) Other functions. Other functions for or on
behalf of the foreign bank or its affiliates, such as operating as a
regional administrative office of the foreign bank, but only to the
extent that these other functions are not banking activities and are
not prohibited by applicable federal or state law, or by ruling or
order of the Board.
(2) Standards for approval of representative offices.
As specified in section 10(a)(2) of the IBA
(12 U.S.C. 3107(a)(2)), in
acting on the application of a foreign bank to establish a
representative office, the Board shall take into account, to the extent
it deems appropriate, the standards for approval set out in paragraph
(c) of this section. The standard regarding supervision by the foreign
bank's home country supervisor (as set out in paragraph (c)(1)(i)(A)
of this section) will be met, in the case of a representative office
application, if the Board makes a finding that the applicant bank is
subject to a supervisory framework that is consistent with the
activities of the proposed representative office, taking into account
the nature of such activities and the operating record of the
applicant.
(3) Special-purpose foreign government-owned banks. A
foreign government-owned organization engaged in banking activities in
its home country that are not commercial in
{{4-28-06 p.7628.16}}nature may apply to the Board
for a determination that the organization is not a foreign bank for
purposes of this section. A written request setting forth the basis for
such a determination may be submitted to the Reserve Bank of the
District in which the foreign organization's representative office is
located in the United States, or to the Board, in the case of a
proposed establishment of a representative office. The Board shall
review and act upon each request on a case-by-case basis.
(4) Additional requirements. The Board may
impose any additional requirements that it determines to be necessary
to carry out the purposes of the IBA.
(e) Preservation of existing authority. Nothing
in this subpart shall be construed to relieve any foreign bank or
foreign banking organization from any otherwise applicable requirement
of federal or state law, including any applicable licensing
requirement.
(f) Reports of crimes and suspected crimes.
Except for a federal branch or a federal agency or a state branch
that is insured by the Federal Deposit Insurance Corporation (FDIC), a
branch, agency, or a representative office of a foreign bank operating
in the United States shall file a suspicious activity report in
accordance with the provisions of § 208.62 of Regulation H (12 CFR
208.62).
(g) Management of shell branches. (1) A
state-licensed branch or agency shall not manage, through an office of
the foreign bank which is located outside the United States and is
managed or controlled by such state-licensed branch or agency, any type
of activity that a bank organized under the laws of the United States
or any state is not permitted to manage at any branch or subsidiary of
such bank which is located outside the United States.
(2) For purposes of this paragraph (g), an office of a foreign
bank located outside the United States is "managed or controlled"
by a state-licensed branch or agency if a majority of the
responsibility for business decisions, including but not limited to
decisions with regard to lending or asset management or funding or
liability management, or the responsibility for recordkeeping in
respect of assets or liabilities for that non-U.S. office, resides at
the state-licensed branch or agency.
(3) The types of activities that a state-licensed branch
or agency may manage through an office located outside the United
States that it manages or controls include the types of activities
authorized to a U.S. bank by state or federal charters, regulations
issued by chartering or regulatory authorities, and other U.S. banking
laws, including the Federal Reserve Act, and the implementing
regulations, but U.S. procedural or quantitative requirements that may
be applicable to the conduct of such activities by U.S. banks shall not
apply.
(h) Government securities sales practices. An
uninsured state-licensed branch or agency of a foreign bank that is
required to give notice to the Board under section 15C of the
Securities Exchange Act of 1934 (15
U.S.C. 78o--5) and the Department of the Treasury rules under
section 15C (17 CFR 400.1(d)
and part 401) shall be subject to the provisions of 12 CFR 208.37 to
the same extent as a state member bank that is required to give such
notice.
(i) Protection of customer information and consumer
information. An uninsured state-licensed branch or agency of a
foreign bank shall comply with the Interagency Guidelines Establishing
Information Security Standards prescribed pursuant to sections 501 and
505 of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 and 6805) and, with
respect to the proper disposal of consumer information, section 216 of
the Fair and Accurate Credit transactions Act of 2003 (15 U.S.C.
1681w), set forth in appendix D--2 to part 208 of this chapter.
(j) Procedures for monitoring Bank Secrecy Act
compliance.
(1) Establishment of Compliance Program. Except for a
Federal branch or a Federal agency or a state branch that is insured by
the FDIC, a branch, agency, or representative office of a foreign bank
operating in the United States shall, in accordance with the provisions
of § 208.63 of the Board's Regulation H, 12 CFR 208.63, develop and
provide for the continued administration of a program reasonably
designed to assure and monitor compliance with the provisions of
subchapter II of chapter 53 of title 31, United States Code, the Bank
Secrecy Act, and the implementing regulations promulgated thereunder by
the Department of the Treasury at 31
CFR part 103. The compliance program shall be reduced to
writing, and either:
(i) Approved by the foreign bank's board of directors and noted
in the minutes, or
(ii) Approved by a delegee acting under the express authority of
the board of directors to approve the Bank Secrecy Act compliance
program.
{{4-28-06 p.7628.16-A}}
(2) Customer identification program. Except for a
federal branch or a federal agency or a state branch that is insured by
the FDIC, a branch, agency, or representative office of a foreign bank
operating in the United States is subject to the requirements of
31 U.S.C. 5318(l) and the
implementing regulation jointly promulgated by the Board and the
Department of the Treasury at 31
CFR 103.121, which require a customer identification program.
[Codified to 12 C.F.R. § 211.24]
[Section 211.14 amended at 68 Fed. Reg. 25112, May 9,
2003, effective June 9, 2003, compliance date October 1, 2003; 69 Fed.
Reg. 77618, December 28, 2004, effective July 1, 2005; 71 Fed. Reg.
13936, March 20, 2006, effective April 19, 2006]
{{4-30-07 p.7628.17}}
§ 211.25 Termination of offices of foreign banks.
(a) Grounds for termination--(1) General.
Under sections 7(e) and 10(b) of the IBA
(12 U.S.C. 3105(d),
3107(b)), the Board may order a
foreign bank to terminate the activities of its representative office,
state branch, state agency, or commercial lending company subsidiary if
the Board finds that:
(i) The foreign bank is not subject to comprehensive consolidated
supervision in accordance with § 211.24(c)(1), and the home country
supervisor is not making demonstrable progress in establishing
arrangements for the consolidated supervision of the foreign bank; or
(ii) Both of the following criteria are met:
(A) There is reasonable cause to believe that the foreign bank,
or any of its affiliates, has committed a violation of law or engaged
in an unsafe or unsound banking practice in the United States; and
(B) As a result of such violation or practice, the continued
operation of the foreign bank's representative office, state branch,
state agency, or commercial lending company subsidiary would not be
consistent with the public interest, or with the purposes of the IBA,
the BHC Act, or the FDIA.
(2) Additional ground. The Board may also enforce any
condition imposed in connection with an order issued under § 211.24.
(b) Factor. In making its findings under this section,
the Board may take into account the needs of the community, the history
of operation of the foreign bank, and its relative size in its home
country, provided that the size of the foreign bank shall not be the
sole determining factor in a decision to terminate an office.
(c) Consultation with relevant state supervisor. Except
in the case of termination pursuant to the expedited procedure in
paragraph (d)(3) of this section, the Board shall request and consider
the views of the relevant state supervisor before issuing an order
terminating the activities of a state branch, state agency,
representative office, or commercial lending company subsidiary under
this section.
(d) Termination procedures--(1) Notice and
hearing. Except as otherwise provided in paragraph (d)(3) of this
section, an order issued under paragraph (a)(1) of this section shall
be issued only after notice to the relevant state supervisor and the
foreign bank and after an opportunity for a hearing.
(2) Procedures for hearing. Hearings under this
section shall be conducted pursuant to the Board's Rules of Practice
for Hearings (12 CFR part 263).
(3) Expedited procedure. The Board may act without
providing an opportunity for a hearing, if it determines that
expeditious action is necessary in order to protect the public
interest. When the Board finds that it is necessary to act without
providing an opportunity for a hearing, the Board, solely in its
discretion, may:
(i) Provide the foreign bank that is the subject of the
termination order with notice of the intended termination order;
(ii) Grant the foreign bank an opportunity to present a written
submission opposing issuance of the order; or
(iii) Take any other action designed to provide the foreign bank
with notice and an opportunity to present its views concerning the
order.
(e) Termination of federal branch or federal agency. The
Board may transmit to the Comptroller a recommendation that the license
of a federal branch or federal agency be terminated if the Board has
reasonable cause to believe that the foreign bank or any affiliate of
the foreign bank has engaged in conduct for which the activities of a
state branch or state agency may be terminated pursuant to this
section.
(f) Voluntary termination. A foreign bank shall notify
the Board at least 30 days prior to terminating the activities of any
office. Notice pursuant to this paragraph (f) is in addition to, and
does not satisfy, any other federal or state requirements relating to
the termination of an office or the requirement for prior notice of the
closing of a branch pursuant to section 39 of the FDIA
(12 U.S.C. 1831p).
[Codified to 12 C.F.R. § 211.25]
{{4-30-07 p.7628.18}}
§ 211.26 Examination of offices and affiliates of foreign
banks.
(a) Conduct of examinations--(1) Examination of
branches, agencies, commercial lending companies, and affiliates.
The Board may examine:
(i) Any branch or agency of a foreign bank;
(ii) Any commercial lending company or bank controlled by one or
more foreign banks, or one or more foreign companies that control a
foreign bank; and
(iii) Any other office or affiliate of a foreign bank conducting
business in any state.
(2) Examination of representative offices. The Board
may examine any representative office in the manner and with the
frequency it deems appropriate.
(b) Coordination of examinations. To the extent
possible, the Board shall coordinate its examinations of the U.S.
offices and U.S. affiliates of a foreign bank with the licensing
authority and, in the case of an insured branch, the Federal Deposit
Insurance Corporation (FDIC), including through simultaneous
examinations of the U.S. offices and U.S. affiliates of a foreign bank.
(c) Frequency of on-site
examination--(1) General. 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--
(i) The Board;
(ii) The FDIC, if the branch of the foreign bank accepts or
maintains insured deposits;
(iii) The Comptroller, if the branch or agency of the foreign
bank is licensed by the Comptroller; or
(iv) The state supervisor, if the office of the foreign bank is
licensed or chartered by the state.
(2) 18-month cycle for certain small
institutions--(i) Mandatory standards. The Board may
conduct a full-scope, on-site examination at least once during each
18-month period, rather than each 12-month period as required in
paragraph (c)(1) of this section, if the branch or agency--
(A) Has total assets of less than $500 million;
(B) 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;
(C) Satisfies the requirement of either the following paragraph
(c)(2)(i)(C)(1) or (2):
(1) 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
(2) The branch or agency 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;
(D) Is not subject to a formal enforcement action or order by the
Board, FDIC, or OCC; and
(E) 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.
(ii) Discretionary standards. In determining whether a
branch or agency of a foreign bank that meets the standards of
paragraph (c)(2)(i) of this section should not be eligible for an
18-month examination cycle pursuant to this paragraph (c)(2), the Board
may consider additional factors, including whether--
(A) Any of the individual components of the ROCA supervisory
rating of a branch or agency of a foreign bank is rated "3" or
worse;
(B) The results of any off-site surveillance indicate a
deterioration in the condition of the office;
(C) The size, relative importance, and role of a particular
office when reviewed in the context of the foreign bank's entire U.S.
operations otherwise necessitate an annual examination; and
(D) The condition of the foreign bank gives rise to such a
need.
{{10-31-07 p.7628.19}}
(3) Authority to conduct more frequent examinations.
Nothing in paragraphs (c)(1) and (2) of this section limits the
authority of the Board to examine any U.S. branch or agency of a
foreign bank as frequently as it deems necessary.
[Codified to 12 C.F.R. § 211.26]
[Section 211.26 amended at 72 Fed. Reg. 17803, April 10, 2007; 72
Fed. Reg. 54349, September 25,
2007]
§ 211.27 Disclosure of supervisory information to foreign
supervisors.
(a) Disclosure by Board. The Board may disclose
information obtained in the course of exercising its supervisory or
examination authority to a foreign bank regulatory or supervisory
authority, if the Board 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 Board shall
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.
[Codified to 12 C.F.R.
§ 211.27]
§ 211.28 Provisions applicable to branches and agencies:
limitation on loans to one borrower.
(a) Limitation on loans to one borrower. Except as
provided in paragraph (b) of this section, the total loans and
extensions of credit by all state branches and state agencies of a
foreign bank outstanding to a single borrower at one time shall be
aggregated with the total loans and extensions of credit by all federal
branches and federal agencies of the same foreign bank outstanding to
such borrower at the time; and shall be subject to the limitations and
other provisions of section 5200 of the Revised Statutes (12 U.S.C.
84), and the regulations promulgated thereunder, in the same manner
that extensions of credit by a federal branch or federal agency are
subject to section 4(b) of the IBA (12
U.S.C. 3102(b)) as if such state branches and agencies were
federal branches and federal agencies.
(b) Preexisting loans and extensions of credit. Any
loans or extensions of credit to a single borrower that were originated
prior to December 19, 1991, by a state branch or state agency of the
same foreign bank and that, when aggregated with loans and extensions
of credit by all other branches and agencies of the foreign bank,
exceed the limits set forth in paragraph (a) of this section, may be
brought into compliance with such limitations through routine
repayment, provided that any new loans or extensions of credit
(including renewals of existing unfunded credit lines, or extensions of
the maturities of existing loans) to the same borrower shall comply
with the limits set forth in paragraph (a) of this section.
[Codified to 12 C.F.R.
§ 211.28]
§ 211.29 Applications by state branches and state agencies to
conduct activities not permissible for federal branches.
(a) Scope. A state branch or state agency shall file
with the Board a prior written application for permission to engage in
or continue to engage in any type of activity that:
(1) Is not permissible for a federal branch, pursuant to statute,
regulation, official bulletin or circular, or order or interpretation
issued in writing by the Office of the Comptroller; or
(2) Is rendered impermissible due to a subsequent change in
statute, regulation, official bulletin or circular, written order or
interpretation, or decision of a court of competent jurisdiction.
(b) Exceptions. No application shall be required by a
state branch or state agency to conduct any activity that is otherwise
permissible under applicable state and federal law or regulation and
that:
(1) Has been determined by the FDIC, pursuant to
12 CFR 362.4(c)(3)(i)
through (c)(3)(ii)(A), not to present a significant risk to the
affected deposit insurance fund;
(2) Is permissible for a federal branch, but the Comptroller
imposes a quantitative limitation on the conduct of such activity by
the federal branch;
{{10-31-07 p.7628.20}}
(3) Is conducted as agent rather than as principal, provided that
the activity is one that could be conducted by a state-chartered bank
headquartered in the same state in which the branch or agency is
licensed; or
(4) Any other activity that the Board has determined may be
conducted by any state branch or state agency of a foreign bank without
further application to the Board.
(c) Contents of application. An application submitted
pursuant to paragraph (a) of this section shall be in letter form and
shall contain the following information:
(1) A brief description of the activity, including the manner in
which it will be conducted, and an estimate of the expected dollar
volume associated with the activity;
(2) An analysis of the impact of the proposed activity on the
condition of the U.S. operations of the foreign bank in general, and of
the branch or agency in particular, including a copy, if available, of
any feasibility study, management plan, financial projections, business
plan, or similar document concerning the conduct of the activity;
(3) A resolution by the applicant's board of directors or, if a
resolution is not required pursuant to the applicant's organizational
documents, evidence of approval by senior management, authorizing the
conduct of such activity and the filing of this application;
(4) If the activity is to be conducted by a state insured branch
insured by the FDIC, statements by the applicant:
(i) Of whether or not it is in compliance with 12 CFR 346.19
(Pledge of Assets) and 12 CFR 346.20 (Asset Maintenance);
(ii) That it has complied with all requirements of the FDIC
concerning an application to conduct the activity and the status of the
application, including a copy of the FDIC's disposition of such
application, if available; and
(iii) Explaining why the activity will pose no significant risk
to the deposit insurance fund; and
(5) Any other information that the Reserve Bank deems
appropriate.
(d) Factors considered in determination. (1) The Board
shall consider the following factors in determining whether a proposed
activity is consistent with sound banking practice:
(i) The types of risks, if any, the activity poses to the U.S.
operations of the foreign banking organization in general, and the
branch or agency in particular;
(ii) If the activity poses any such risks, the magnitude of each
risk; and
(iii) If a risk is not de minimis, the actual or proposed
procedures to control and minimize the risk.
(2) Each of the factors set forth in paragraph (d)(1) of this
section shall be evaluated in light of the financial condition of the
foreign bank in general and the branch or agency in particular and the
volume of the activity.
(e) Application procedures. Applications pursuant to
this section shall be filed with the appropriate Federal Reserve Bank.
An application shall not be deemed complete until it contains all the
information requested by the Reserve Bank and has been accepted.
Approval of such an application may be conditioned on the applicant's
agreement to conduct the activity subject to specific conditions or
limitations.
(f) Divestiture or cessation. (1) If an application for
permission to continue to conduct an activity is not approved by the
Board or, if applicable, the FDIC, the applicant shall submit a
detailed written plan of divestiture or cessation of the activity to
the appropriate Federal Reserve Bank within 60 days of the disapproval.
(i) The divestiture or cessation plan shall describe in detail
the manner in which the applicant will divest itself of or cease the
activity, and shall include a projected timetable describing how long
the divestiture or cessation is expected to take.
(ii) Divestiture or cessation shall be complete within one year
from the date of the disapproval, or within such shorter period of time
as the Board shall direct.
(2) If a foreign bank operating a state branch or state agency
chooses not to apply to the Board for permission to continue to conduct
an activity that is not permissible for a federal branch, or which is
rendered impermissible due to a subsequent change in statute,
regulation, official bulletin or circular, written order or
interpretation, or decision of
{{10-31-01 p.7628.21}}
a court of competent jurisdiction, the foreign bank shall submit a
written plan of divestiture or cessation, in conformance with paragraph
(f)(1) of this section within 60 days of the effective date of this
part or of such change or decision.
[Codified to 12 C.F.R.
§ 211.29]
§ 211.30 Criteria for evaluating U.S. operations of foreign
banks not subject to consolidated supervision.
(a) Development and publication of criteria. Pursuant to
the Foreign Bank Supervision Enhancement Act, Pub. L. 102-242, 105
Stat. 2286 (1991), the Board shall develop and publish criteria to be
used in evaluating the operations of any foreign bank in the United
States that the Board has determined is not subject to comprehensive
consolidated supervision.
(b) Criteria considered by Board. Following a
determination by the Board that, having taken into account the
standards set forth in
§ 211.24(c)(1), a foreign
bank is not subject to CCS, the Board shall consider the following
criteria in determining whether the foreign bank's U.S. operations
should be permitted to continue and, if so, whether any supervisory
constraints should be placed upon the bank in connection with those
operations:
(1) The proportion of the foreign bank's total assets and total
liabilities that are located or booked in its home country, as well as
the distribution and location of its assets and liabilities that are
located or booked elsewhere;
(2) The extent to which the operations and assets of the foreign
bank and any affiliates are subject to supervision by its home country
supervisor;
(3) Whether the home country supervisor of such foreign bank is
actively working to establish arrangements for comprehensive
supervision of the bank, and whether demonstrable progress is being
made;
(4) Whether the foreign bank has effective and reliable systems
of internal controls and management information and reporting, which
enable its management properly to oversee its worldwide operations;
(5) Whether the foreign bank's home country supervisor has any
objection to the bank continuing to operate in the United States;
(6) Whether the foreign bank's home country supervisor and the
home country supervisor of any parent of the foreign bank share
material information regarding the operations of the foreign bank with
other supervisory authorities;
(7) The relationship of the U.S. operations to the other
operations of the foreign bank, including whether the foreign bank
maintains funds in its U.S. offices that are in excess of amounts due
to its U.S. offices from the foreign bank's non-U.S. offices;
(8) The soundness of the foreign bank's overall financial
condition;
(9) The managerial resources of the foreign bank, including the
competence, experience, and integrity of the officers and directors,
and the integrity of its principal shareholders;
(10) The scope and frequency of external audits of the foreign
bank;
(11) The operating record of the foreign bank generally and its
role in the banking system in its home country;
(12) The foreign bank's record of compliance with relevant laws,
as well as the adequacy of its anti-money-laundering controls and
procedures, in respect of its worldwide operations;
(13) The operating record of the U.S. offices of the foreign
bank;
(14) The views and recommendations of the Comptroller or the
relevant state supervisors in those states in which the foreign bank
has operations, as appropriate;
(15) Whether the foreign bank, if requested, has provided the
Board with adequate assurances that such information will be made
available on the operations or activities of the foreign bank and any
of its affiliates as the Board deems necessary to determine and enforce
compliance with the IBA, the BHC Act, and other U.S. banking statutes;
and
(16) Any other information relevant to the safety and soundness
of the U.S. operations of the foreign bank.
{{10-31-01 p.7628.22}}
(c) Restrictions on U.S. operations.--(1) Terms of
agreement. Any foreign bank that the Board determines is not
subject to CCS may be required to enter into an agreement to conduct
its U.S. operations subject to such restrictions as the Board, having
considered the criteria set forth in paragraph (b) of this section,
determines to be appropriate in order to ensure the safety and
soundness of its U.S. operations.
(2) Failure to enter into or comply with agreement. A
foreign bank that is required by the Board to enter into an agreement
pursuant to paragraph (c)(1) of this section and either fails to do so,
or fails to comply with the terms of such agreement, may be subject to:
(i) Enforcement action, in order to ensure safe and sound banking
operations, under 12 U.S.C.
1818; or
(ii) Termination or a recommendation for termination of its U.S.
operations, under § 211.25(a) and (e) and section (7)(e) of the IBA
(12 U.S.C. 3105(e)).
[Codified to 12 C.F.R. § 211.30]
10None of the assets, revenues, or net income, whether held or
derived directly or indirectly, of a subsidiary bank, branch, agency,
commercial lending company, or other company engaged in the business of
banking in the United States (including any territory of the United
States, Puerto Rico, Guam, American Samoa, or the Virgin Islands) shall
be considered held or derived from the business of banking "outside
the United States." Go Back to Text
11 See 12 CFR 250.141(h) for activities that
constitute preliminary and servicing steps. Go Back to Text
[Main Tabs]
[Table of Contents - 7500]
[Index]
[Previous Page]
[Next Page]
[Search]
|
