(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 business; 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;
(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.
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(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 section 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.
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(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 (a)(2)
of this section and could meet the requirements in (a)(1) of this
section but for the requirement in (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
(c)(1) of this section shall be eligible for the exemptions available
to a qualifying foreign banking organization except for those provided
in section 211.23(f)(5)(iii).
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(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 paragraph (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 paragraph (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 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.
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(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.
(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.
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(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);
(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).
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(g) Exemptions under section 4(c)(9) of the BHC
Act. A foreign 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 the appropriate Federal Reserve Bank a letter
setting forth the basis for that opinion.
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(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.
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(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.
