(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
paragraphs (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, or 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—
(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 the 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.
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(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
performed 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 theforeign 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.
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(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—
(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.
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(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.
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(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 (b)(2)(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 Comptroller shall
satisfy the publication requirement of this section. Comments regarding
the application should be sent to the Board and the Comptroller.
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(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.
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(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
relationship 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.
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(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.
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(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
the 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.
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(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 any 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.
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(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
banks. A foreign government-owned organization engaged in banking
activities in its home country that are not commercial in 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 such 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.
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(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 representative office of
a foreign bank operating in the United States shall file a suspicious-activity
report in accordance with the provisions of section 208.62 of the
Board’s Regulation H (12 CFR 208.62).
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(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 subsection, 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 statelicensed 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.
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(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. An
uninsured state-licensed branch or agency of a foreign bank shall
comply with the Interagency Guidelines Establishing Standards for
Safeguarding Customer Information prescribed pursuant to sections
501 and 505 of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 and 6805),
set forth in appendix D-2 to part 208 of this chapter [at
3-1571].
(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 section 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 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.
(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.
*
