(a)
General policy. Activities abroad, whether conducted directly or indirectly, shall
be confined to activities of a banking or financial nature and those
that are necessary to carry on such activities. In doing so, investors
4 shall at all
times act in accordance with high standards of banking or financial
prudence, having due regard for diversification of risks, suitable
liquidity, and adequacy of capital. Subject to these considerations
and the other provisions of this section, it is the Board’s policy
to allow activities abroad to be organized and operated as best meets
corporate policies.
(b) Direct investments
by member banks. A member bank’s direct investments under section
25 of the FRA (12 U.S.C. 601 et seq.) shall be limited to—
(1) foreign banks;
(2) domestic or foreign organizations formed
for the sole purpose of holding shares of a foreign bank;
(3) foreign organizations formed for the
sole purpose of performing nominee, fiduciary, or other banking services
incidental to the activities of a foreign branch or foreign bank affiliate
of the member bank; and
(4) subsidiaries
established pursuant to section 211.4(a)(8) of this part.
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(c) Eligible investments. Subject to the limitations
set out in paragraphs (b) and (d) of this section, an investor may,
directly or indirectly—
(1) Investment in subsidiary. Invest
in a subsidiary that engages solely in activities listed in section
211.10 of this part, or in such other activities as the Board has
determined in the circumstances of a particular case are permissible;
provided that, in the case of an acquisition of a going concern, existing
activities that are not otherwise permissible for a subsidiary may
account for not more than 5 percent of either the consolidated
assets or consolidated revenues of the acquired organization;
(2) Investment
in joint venture. Invest in a joint venture; provided that, unless
otherwise permitted by the Board, not more than 10 percent of the
joint venture’s consolidated assets or consolidated revenues are attributable
to activities not listed in section 211.10 of this part; and
(3) Portfolio
investments. Make portfolio investments in an organization, provided
that—
(i) Individual investment limits. The total
direct and indirect portfolio investments by the investor and its
affiliates in an organization engaged in activities that are not permissible
for joint ventures, when combined with all other shares in the organization
held under any other authority, do not exceed—
(A) 40 percent of the total equity of the
organization; or
(B) 19.9 percent of
the organization’s voting shares.
(ii) Aggregate
investment limit. Portfolio investments made under authority
of this subpart shall be subject to the aggregate equity limit of
211.10(a)(15)(iii).
(iii) Loans and extensions of credit. Any loans
and extensions of credit made by an investor or its affiliates to
the organization are on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions between the investor or its affiliates and nonaffiliated
persons; and
(iv) Protecting shareholder rights. Nothing
in this paragraph (c)(3) shall prohibit an investor from otherwise
exercising rights it may have as shareholder to protect the value
of its investment, so long as the exercise of such rights does not
result in the investor’s direct or indirect control of the organization.
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(d) Investment limit. In calculating the amount that may be invested in any organization
under this section and sections 211.9 and 211.10 of this part, there
shall be included any unpaid amount for which the investor is liable
and any investments in the same organization held by affiliates under
any authority.
(e) Divestiture. An investor shall dispose of an investment promptly (unless the
Board authorizes retention) if—
(1) the organization invested in—
(i) engages in impermissible activities
to an extent not permitted under paragraph (c) of this section; or
(ii) engages directly or indirectly
in other business in the United States that is not permitted to an
Edge corporation in the United States; provided that an investor may—
(A) retain portfolio investments
in companies that derive no more than 10 percent of their total revenue
from activities in the United States; and
(B) hold up to 5 percent of the shares of a foreign company that
engages directly or indirectly in business in the United States that
is not permitted to an Edge corporation; or
(2) after notice and opportunity for
hearing, the investor is advised by the Board that such investment
is inappropriate under the FRA, the BHC Act, or this subpart.
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(f) Debts previously contracted. Shares or
other ownership interests acquired to prevent a loss upon a debt previously
contracted in good faith are not subject to the limitations or procedures
of this section; provided that such interests shall be disposed of
promptly but in no event later than two years after their acquisition,
unless the Board authorizes retention for a longer period.
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(g) Investments made through debt-for-equity conversions.
(1) Permissible investments. A bank holding
company may make investments through the conversion of sovereign-
or private-debt obligations of an eligible country, either through
direct exchange of the debt obligations for the investment, or by
a payment for the debt in local currency, the proceeds of which, including an
additional cash investment not exceeding in the aggregate more than
10 percent of the fair value of the debt obligations being converted
as part of such investment, are used to purchase the following investments:
(i) Public-sector companies. A bank holding
company may acquire up to and including 100 percent of the shares
of (or other ownership interests in) any foreign company located in
an eligible country, if the shares are acquired from the government
of the eligible country or from its agencies or instrumentalities.
(ii) Private-sector companies. A bank holding company may acquire
up to and including 40 percent of the shares, including voting shares,
of (or other ownership interests in) any other foreign company located
in an eligible country subject to the following conditions:
(A) a bank holding company may acquire
more than 25 percent of the voting shares of the foreign company only
if another shareholder or group of shareholders unaffiliated with
the bank holding company holds a larger block of voting shares of
the company;
(B) the bank holding company
and its affiliates may not lend or otherwise extend credit to the
foreign company in amounts greater than 50 percent of the total loans
and extensions of credit to the foreign company; and
(C) the bank holding company’s representation
on the board of directors or on management committees of the foreign
company may be no more than proportional to its shareholding in the
foreign company.
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(2) Investments by bank subsidiary of bank
holding company. Upon application, the Board may permit an indirect
investment to be made pursuant to this paragraph (g) through an insured
bank subsidiary of the bank holding company, where the bank holding
company demonstrates that such ownership is consistent with the purposes
of the FRA. In granting its consent, the Board may impose such conditions
as it deems necessary or appropriate to prevent adverse effects, including
prohibiting loans from the bank to the company in which the investment
is made.
(3) Divestiture.
(i) Time limits for divestiture. A
bank holding company shall divest the shares of, or other ownership
interests in, any company acquired pursuant to this paragraph (g)
within the longer of—
(A) ten years from the date of acquisition of the investment, except
that the Board may extend such period if, in the Board’s judgment,
such an extension would not be detrimental to the public interest;
or
(B) two years from the date on which
the bank holding company is permitted to repatriate in full the investment
in the foreign company.
(ii) Maximum
retention period. Notwithstanding the provisions of paragraph
(g)(3)(i) of this section—
(A) divestiture shall occur within 15 years of the date of acquisition
of the shares of, or other ownership interests in, any company acquired
pursuant to this paragraph (g); and
(B) a bank holding company may retain such shares or ownership interests
if such retention is otherwise permissible at the time required for
divestiture.
(iii) Report to Board. The bank holding company
shall report to the Board on its plans for divesting an investment
made under this paragraph (g) two years prior to the final date for
divestiture, in a manner to be prescribed by the Board.
(iv) Other
conditions requiring divestiture. All investments made pursuant
to this paragraph (g) are subject to paragraph (e) of this section
requiring prompt divestiture (unless the Board upon application authorizes
retention), if the company invested in engages in impermissible business
in the United States that exceeds in the aggregate 10 percent of the
company’s consolidated assets or revenues calculated on an annual
basis; provided that such company may not engage in activities in the
United States that consist of banking or financial operations (as
defined in section 211.23(f)(5)(iii)(B)) of this part, 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)), except under regulations of
the Board or with the prior approval of the Board.
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(4) Investment
procedures.
(i) General consent. Subject to the
other limitations of this paragraph (g), the Board grants its general
consent for investments made under this paragraph (g) if the total
amount invested does not exceed the greater of $25 million or 1 percent
of the tier 1 capital of the investor.
(ii) All other investments shall be
made in accordance with the procedures of section 211.9(f) and (g)
of this part, requiring prior notice or specific consent.
(5) Conditions.
(i) Name. Any company acquired pursuant to
this paragraph (g) shall not bear a name similar to the name of the
acquiring bank holding company or any of its affiliates.
(ii) Confidentiality. Neither the bank holding company nor its affiliates shall provide
to any company acquired pursuant to this paragraph (g) any confidential
business information or other information concerning customers that
are engaged in the same or related lines of business as the company.
