[Federal Register: December 19, 2003 (Volume 68, Number 244)]
[Rules and Regulations]
[Page 70691-70701]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19de03-2]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 5 and 28
[Docket No. 03-26]
RIN 1557-AC04
Rules, Policies, and Procedures for Corporate Activities;
International Banking Activities
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
finalizing the proposed rule published on April 23, 2003 amending our
regulations pertaining to the foreign operations of national banks, and
Federal branches and agencies of foreign banks operating in the United
States. The final rule generally makes regulatory requirements more
streamlined and risk-focused. It clarifies certain regulatory
definitions and simplifies approval procedures for foreign banks
seeking to establish Federal branches and agencies in the United
States. These changes will further conform the treatment of Federal
branches and agencies of foreign banks to that of their domestic
national bank counterparts consistent with the national treatment
principles of the International Banking Act of 1978.
EFFECTIVE DATE: This rule is effective on January 20, 2004.
FOR FURTHER INFORMATION CONTACT: Lee Walzer, Counsel, Legislative &
Regulatory Activities Division, (202) 874-5090; Carlos Hernandez,
Senior International Advisor, International Banking & Finance, (202)
874-4730; or Crystal Maddox, Senior Licensing Analyst, Licensing Policy
& Systems, (202) 874-5060.
SUPPLEMENTARY INFORMATION:
I. Introduction and Overview of Comments Received
As part of our ongoing effort to streamline regulatory requirements
to reduce unnecessary regulatory burdens, the OCC published a notice of
proposed rulemaking (NPRM) to amend 12 CFR parts 5 and 28 in the
Federal Register on April 23, 2003 (68 FR 19949). In the NPRM, we
proposed streamlining certain application processes for Federal
branches and agencies and updating the types of activities in which
they may engage in light of developments in Federal banking law and in
furtherance of the principle of national treatment. The proposal was
also designed to reduce regulatory burden on national banks conducting
foreign activities and on Federal branches and agencies supervised by
the OCC by eliminating outdated requirements and replacing them with
more streamlined procedures.
The OCC received eight comments on the NPRM. The commenters
included several Members of Congress, Federal and state banking
agencies, a bank trade association, and an association of state banking
officials. Four of the commenters generally supported the OCC's efforts
to streamline our regulatory processes and reduce regulatory burden,
but offered suggestions to modify various portions of the proposal. Two
commenters did not favor the proposal, asserting that the NPRM exceeds
the OCC's statutory authority and is inconsistent with congressional
intent. These commenters requested that the OCC withdraw the proposal
until Congress provides the necessary authority. One of the commenters
focused exclusively on a narrow legal question involving interstate
branching. Another commenter focused only on the impact on pending
legislation if the OCC were to apply certain definitions used in the
NPRM to define those same terms in pending legislation if it were to be
enacted by the U.S. Congress.
As we explain in the discussion that follows, the OCC has concluded
that there is ample authority supporting the revisions to our
regulations that we proposed. We also explain why the concerns raised
by certain commenters are not, in fact, raised by this proposal.
Accordingly, we decline to withdraw the proposal. However, the final
rule includes modifications to the proposal intended to address certain
of the
[[Page 70692]]
suggestions made by the commenters and clarify points about which there
may have been misunderstandings. The following discussion highlights
those modifications.
II. Discussion
A. Changes to 12 CFR Part 5
1. Definitions (Revised Sec. 5.3)
The proposal revised Sec. 5.3 to update references to the OCC
units that should receive certain applications. The OCC received no
comments on this technical amendment and adopts it as proposed.
2. Permissible Non-Controlling Equity Investments (Revised Sec. 5.36)
The proposal stated that a well-capitalized, well-managed Federal
branch may make non-controlling investments and use the after-the-fact
notice procedure set forth in 12 CFR 5.36 in the same manner as a
national bank.
Three commenters addressed this amendment. One commenter supported
the proposed change, stating that it is consistent with national
treatment principles. The second was also supportive, indicating that
it would have no objection to the proposed regulatory change as long as
any investment made by the branch is a permissible investment under the
Bank Holding Company Act and the foreign bank obtains any necessary
authorizations from the Board of Governors of the Federal Reserve
System (FRB). The commenter requested that OCC clarify that these
conditions apply to these investments. As discussed below, to address
this point, we are adding language to the final regulation in 12 CFR
28.10(c) clarifying that nothing in the OCC's rules relieves a foreign
bank from complying with requirements imposed by the FRB in accordance
with applicable law.
A third commenter opposed allowing Federal branches to make non-
controlling equity investments, stating that there is ``no statutory
authorization [in the International Banking Act of 1978] for the
investments referred to [in] the new proposed section, which relies
solely on the principle of national treatment.'' This commenter
disagreed with the OCC's interpretation of national treatment under the
International Banking Act of 1978 (IBA), asserting that the IBA's
national treatment scheme does not treat Federal branches as national
banks but rather treats Federal branches as branches of national banks.
The OCC disagrees. The commenter's interpretation is not supported
by the plain language of the statute or its legislative history, court
cases that have interpreted the statute, or the Congressional intent of
the IBA.
The plain language of section 4(b) of the IBA \1\ states:
\1\ 12 U.S.C. 3102(b).
Except as otherwise specifically provided in this Act or in
rules, regulations, or orders adopted by the Comptroller under this
section, operations of a foreign bank at a Federal branch or agency
shall be conducted with the same rights and privileges as a national
bank at the same location and shall be subject to all the same
duties, restrictions, penalties, liabilities, conditions, and
limitations that would apply under the National Bank Act to a
national bank doing business at the same location. * * * (emphasis
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added).
After carefully examining legislative history and Congressional
intent, a U.S. Court of Appeals interpreted the national treatment
language in the IBA and concluded that the IBA is intended to ``treat
federally-chartered foreign and domestic banks as similarly as possible
under the [IBA] (emphasis added).'' \2\ The court expressly addressed
the issue of whether establishing a Federally chartered office of a
foreign bank parallels the opening of a national bank's principal
office or the opening of a branch of a national bank. The court
addressed this issue in the context of upholding the OCC's authority to
license a foreign bank's Federal interstate branch or agency in a state
that permits foreign banks to establish state-chartered interstate
branches or agencies. The court concluded that, subject to the
requirements of the IBA, Congress intended that the opening of a
foreign bank's initial Federal home-state office is analogous to the
opening of a domestic national bank's principal office, and the opening
of additional intrastate and interstate Federal offices by the foreign
bank under the IBA would be comparable to the opening of branches of a
national bank.\3\ Thus, the court found that a Federal branch can be
treated as a national bank or branch thereof depending on the context.
The OCC's regulations and this final rule are consistent with this
interpretation.
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\2\ CSBS v. Conover, 715 F.2d 604, 616 (D.C. Cir. 1983), cert
denied, 466 U.S. 927 (1984).
\3\ Id. at 616-617. See also 12 U.S.C. 3103(a) (providing that a
foreign bank may establish an Federal branch or agency outside of
its home state if such establishment would be permitted for a
national bank establishing an interstate branch office and subject
to certain other criteria (enacted in 1994 in the Riegle-Neal
Interstate Banking and Branching Efficiency Act)).
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The legislative history of the IBA indicates that the national
treatment language in the IBA was not intended to be an inflexible
standard for applying national bank laws to Federal branches and
agencies. Congress recognized that, because Federal branches and
agencies are offices of foreign banks and not separately incorporated
entities, certain adjustments in the strict application of the national
bank laws may be necessary in order to observe this legal and
operational reality. Congress charged the OCC with the primary
responsibility to administer this comprehensive framework for Federal
offices of foreign banks.\4\
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\4\ See S. Rep. No. 95-1073, 95th Cong., 2d Sess. 7 (1978),
reprinted in 1978 U.S.C.C.A.N. at 1427.
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The commenter further argues that the IBA does not give Federal
branches and agencies the authority to engage in activities permitted
for national banks under the National Bank Act (NBA) unless the
authority is also found in the IBA. This interpretation also is not
consistent with the plain language of the statute or its legislative
history.
The legislative history of the IBA describes the language in
section 4(b) quoted above to provide that, ``[w]ith certain exceptions,
statutory or regulatory, the activities of a Federal branch or agency
shall be conducted in the same manner as a national bank (emphasis
added).'' \5\ Moreover, a court found that, in light of the overriding
national treatment objective of the IBA, the IBA should be construed in
such a way as to minimize the extent to which a Federal branch or
agency is treated differently from a national bank.\6\ As a result, a
Federal branch operating in a state has the same rights and privileges
as, and is subject to the same restrictions, penalties, and conditions
that apply to, a national bank operating in that same state unless the
IBA or the Comptroller provides otherwise. While the IBa does not
specifically mention the NBA as the source of authority for a Federal
branch's ``rights and privileges'' to engage in activities, it
incorporates all of the laws that provide authority to national banks,
including the NBA, subject to any applicable statutory or regulatory
exceptions.
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\5\ Id. at 21, reprinted in 1978 U.S.C.C.A.N. at 1441.
\6\ See CSBS v. Conover, 715 F.2d at 617.
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For all of these reasons, the OCC adopts Sec. 5.36 as proposed.
3. Federal Branches and Agencies (Revised Sec. 5.70)
The proposal amended Sec. 5.70, which describes filing
requirements for corporate activities and transactions involving
Federal branches and agencies, to ensure consistency with proposed
changes to 12 CFR part 28 described elsewhere in this proposal. The
proposal deleted the definition of
[[Page 70693]]
``change the status of an office'' while the definition of
``establish'' a Federal branch or agency was revised to comport with
other proposed changes to those definitions in part 28. No comments
were received on this provision and, thus, the OCC is adopting it as
proposed with only a minor, technical change.
B. Changes to 12 CFR Part 28: Foreign Operations of a National Bank
1. Filing Requirements for Foreign Operations of a National Bank
(Revised Sec. 28.3)
The proposed rule amended Sec. 28.3 to provide that no notice to
the OCC is required if a national bank closes or relocates a foreign
branch. No comments were received on this proposed change and we are
adopting it as proposed.
2. Filing of Notice (Revised Sec. 28.5)
The proposed rule made a technical change to Sec. 28.5 with
respect to identifying the appropriate OCC office to receive certain
notices. We did not receive any comments on this change and we, thus,
are adopting it as proposed.
C. Changes in 12 CFR Part 28: Operations of Federal Branches and
Agencies of Foreign Banks
1. Authority, Purpose, and Scope (Revised Sec. 28.10(b) and New Sec.
28.10(c))
The proposal did not include revisions to Sec. 28.10, which sets
out the authority, purpose, and scope for subpart B of part 28, which
pertains to Federal branches and agencies of foreign banks. One
commenter thought that we should clarify that other legal requirements,
in addition to those contained in the OCC's rules, may apply to certain
transactions involving Federal branches and agencies. This
clarification is simply an express statement of current law and 12 CFR
28.12(i) already has a limited statement of this principle with respect
to the approval requirements for a Federal branch or agency.\7\
However, we agree that it is helpful to include a broader statement in
the regulatory text. Accordingly, we have added a sentence, at Sec.
28.10(c), saying that nothing in any of the OCC's rules relieves a
foreign bank of requirements that may be imposed under other provisions
of applicable law. We also made a conforming technical amendment to the
heading in Sec. 28.10(b) and deleted current Sec. 28.12(i).
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\7\ Prior to the changes made by this final rule, 12 CFR
28.12(i) provided that nothing in Sec. 28.12 relieved a foreign
bank from the requirement to obtain any approval that may be
necessary under the FRB's Regulation K, 12 CFR part 211.
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These changes clarify that none of the revisions adopted in the
final rule supersedes any legal requirements that are imposed by the
FRB in the FRB's Regulation K \8\ or are imposed under any other
applicable law. For example, Federal law provides that, subject to
certain exceptions, the operations of a Federal branch or agency are
subject to the ``same duties, restrictions, penalties, liabilities,
conditions, and limitations that would apply if the Federal branch or
agency were a national bank operating at the same location.'' 12 CFR
28.13(a)(1). Accordingly, U.S. domestic laws also may apply to a
Federal branch or agency to the same extent that they would apply to a
national bank operating at the same location.
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\8\ 12 CFR part 211.
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2. Definitions (Revised Sec. 28.11)
The IBA, which governs the operations of foreign banks in the
United States through branches and agencies and other offices, sets
standards for establishing the offices of foreign banks and requires
the OCC to approve the ``establishment'' of Federal branches and
agencies of foreign banks. Part 28 currently defines the term
``establish'' to mean initial entry of a foreign bank into the United
States via a Federal branch or agency; the opening of additional
branches and agencies, whether through intrastate or interstate
branching; mergers and other consolidations; and ``changes in status.''
The term ``changes in status'' means both expansions (e.g., from a
Federal agency to a Federal branch) and contractions in activities
(e.g. from a Federal branch into a Federal agency).
The NPRM deleted the separate definition of ``changes in status''
from part 28 and incorporated certain elements of that definition in a
revised definition of the term ``establish a Federal branch or
agency''. These amendments result in contractions in activities, e.g.,
conversion from a Federal branch to a Federal agency, being deleted
from the type of transactions that would require a filing with the OCC.
Most commenters generally supported the OCC's efforts to reduce
regulatory burden such as this change to Sec. 28.11 and one commenter
specifically supported eliminating the requirement that a foreign bank
must give prior notice to the OCC when contracting the level of its
U.S. activities by converting from a Federal branch to a Federal
agency. Accordingly, we are adopting this amendment as proposed.
In addition, we are making one clarifying and technical change to
the definitions in Sec. 28.11 that was not proposed in the NPRM. The
definition of ``manual'' in Sec. 28.11(u) (as redesignated herein)
means the Comptroller's Corporate Manual as defined in 12 CFR 5.2(c).
In an interim rule effective April 14, 2003 (68 FR 17890), the OCC
amended Sec. 5.2(c) to reflect that the Comptroller's Corporate Manual
has been replaced with the Comptroller's Licensing Manual. We are,
thus, making a conforming change to Sec. 28.11(u) to clarify that the
term ``manual'' has the same meaning as in Sec. 5.2(c).
3. Approval and Licensing Requirements for a Federal Branch or Agency
(Revised Sec. 28.12(a))
The proposed rule provided that, consistent with national
treatment, and analogous to the national bank chartering process, the
OCC would license a foreign bank's initial Federal branch or agency.
However, while subsequent offices would require regulatory approval in
accordance with applicable law, no additional license would be required
for those subsequent establishments unless the additional office
constitutes an expansion of activities in the U.S. (e.g., the foreign
bank's license is for a limited Federal branch or an agency and the
additional office would be a full-service branch).
One commenter praised this provision in the NPRM because it would
reduce the burdens associated with the licensing process when a foreign
bank is establishing additional Federal branches and agencies. Another
commenter, however, thought that ``[i]t may be possible to issue a
single license to a foreign bank with branches and agencies in multiple
states'' but opposed the change on the basis of the same national
treatment arguments as presented in connection with the change to 12
CFR 5.36. The commenter also was concerned about the OCC using the
single licensing procedure to change substantive legal requirements.
We disagree with the national treatment arguments raised for the
same reasons that we explained above when discussing the comments on
our proposed change to 12 CFR 5.36.
Most important, however, is that the substantive legal requirements
applicable to Federal branches and agencies are unaffected by
permitting those entities to operate under a single license. As
explained in the NPRM, ``[t]his change in licensing procedures would
not affect the substance of the OCC's regulatory and supervisory
responsibilities. The OCC would
[[Page 70694]]
continue to review and approve applications for additional offices in
accordance with applicable law * * * and would continue to supervise
these additional offices in the same manner as it [currently] does. * *
*'' 68 FR 19950 (April 23, 2003).
Therefore, the single licensing proposal is adopted without
substantive modification but with one technical change. The final rule
clarifies that the single license will be the method of licensing
Federal branches and agencies after the effective date of the final
rule. Foreign banks already operating in the United States with
multiple Federal branches or agencies will have the option of
converting to a single license or continuing to maintain multiple
licenses for their offices, however.
4. CCS Requirements (Revised Sec. 28.12(b)(5))
The proposal provided that the OCC generally would consider whether
a foreign bank applicant is subject to comprehensive supervision on a
consolidated basis by its home country supervisor (CCS) only in certain
cases and may, in its discretion, consider it in other cases as deemed
appropriate. Under the proposal, as required by statute, the OCC would
apply the standards of CCS when acting on applications for interstate
establishments. See 12 U.S.C. 3103(a)(3)(A). In connection with other
applications to establish a Federal branch or agency, the OCC may
consider CCS if necessary based on the circumstances of a particular
case. This change in the OCC's rule would have no effect on the
statutory requirement that the FRB make a CCS determination in
connection with any application by a foreign bank to establish a U.S.
office, as that requirement is interpreted by the FRB.
One commenter specifically supported this amendment to streamline
the OCC's application procedures. No commenter opposed the change.
Thus, the OCC is adopting this amendment as proposed.
5. Expedited Approval Procedures (New Sec. 28.12(e)(2) and (e)(3),
Revised Sec. 28.12(e)(4), and New Sec. 28.12(i))
The proposal provided for expedited review of additional types of
applications to establish a Federal branch or agency. Under proposed
new Sec. 28.12(e)(2), a foreign bank could establish a new intrastate
Federal branch or agency after providing written notice to the OCC 45
days in advance of the proposed establishment. The OCC may waive the
45-day period in certain circumstances, as well as suspend the notice
period or require an application if the notice raises significant
policy or supervisory issues.
In addition, under proposed new Sec. 28.12(e)(3), an eligible
foreign bank's \9\ application to establish a Federal branch or agency
interstate would be conditionally approved as of the 45th day after the
OCC receives the completed application, unless the OCC notified the
bank that the filing was not eligible for expedited review. The
proposal also revised Sec. 28.12(e)(4) to provide for expedited
approval of certain other applications submitted by an eligible foreign
bank. In addition, because a contraction in U.S. activities (i.e.,
converting an existing Federal branch into a limited Federal branch or
into a Federal agency) will no longer be considered as an
establishment, proposed new Sec. 28.12(i) would provide that such
contractions in operations would require only a written notice to the
OCC within 10 days after the conversion.
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\9\ The term ``eligible foreign bank'' is defined in Sec.
28.12(f) and generally includes a foreign bank that (1) has Federal
branches and agencies that have a composite rating of ``1'' or ``2''
under the interagency rating system for U.S. branches and agencies
of foreign banks, (2) is not subject to an enforcement action (but,
if subject to such an action, the OCC can waive this requirement),
and, (3) if applicable, has an ``outstanding'' or ``satisfactory''
rating under the Community Reinvestment Act. The NPRM amends this
definition in Sec. 28.12(f) to permit foreign banks that have no
Federal branches or agencies to be considered ``eligible foreign
banks'' when engaging in certain transactions. As described herein,
the OCC is adopting this amendment to Sec. 28.12(f) as proposed.
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One commenter supported the proposed streamlined approval
procedures and urged the OCC to shorten the period for processing
notices for intrastate expansions and de novo interstate branching
applications submitted by eligible foreign banks. Shortening the time
period to 30 days, the commenter said, would enable such notices to be
processed in the same timeframe as applications by foreign banks to
convert state offices to Federal offices. When processing applications
for such conversions, the OCC may have no prior experience with the
foreign bank parent. Thus, according to the commenter, the processing
period should not be longer for notices for intrastate and interstate
expansions than for state-to-Federal conversions because, in the case
of the expansions, the OCC already is familiar with the foreign bank
since it has an existing federally licensed office.
The OCC agrees with this commenter and has changed the final rule
to reduce the prior approval period from 45 days to 30 days in the case
of intrastate expansions by foreign banks and interstate expansions by
eligible foreign banks. The OCC believes that 30 days is sufficient
time for the OCC to review the notice or application and advise the
foreign bank that the proposed expansion is disapproved, or that
additional time is needed to evaluate the notice or application.
Another commenter argued that the OCC's proposed notice and
application procedures for certain foreign banks to expand through
intrastate and interstate offices does not satisfy the IBA's prior
approval requirements.
The OCC disagrees. It is crucial to recognize that the proposal did
not alter the statutory prior approval requirements. The proposal
established streamlined procedures permitting certain foreign banks to
seek approval through a notice or application procedure to be filed
prior to establishing an additional intrastate branch or agency or an
interstate branch or agency, respectively. In particular, under the
proposal, the OCC is deemed to have given its prior approval under
these streamlined procedures if we do not advise the foreign bank that
the proposed expansion is disapproved within a specified time period.
Our regulations contain similar procedures to provide for streamlined
and expedited review for qualifying national banks in other situations
where OCC approval is required by law. See, e.g., 12 CFR 5.39(i)
(approval to acquire or commence activities in a financial subsidiary),
12 CFR 5.30(f)(5) (approval for establishment or relocation of a
branch).
Five commenters argued that the OCC's interstate branching
procedures for eligible foreign banks may be interpreted as providing
substantive authority for foreign banks to branch interstate in
violation of law. Two comment letters sought clarification in the final
rule regarding whether a foreign bank may establish a de novo branch
within a state that does not permit de novo branching, contending that
the NPRM left the matter ambiguous. The commenter said that section 102
of the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, Pub. L. No. 103-328,\10\ authorizes interstate branching for
foreign banks with Federal branches and agencies to the same extent as
national banks. However, section 103 of that Act \11\ requires that, in
the case of an application by a national bank to establish a de novo
branch in a state that is not the bank's home state, the
[[Page 70695]]
Comptroller may approve an application if the host state has in effect
a non-discriminatory law that expressly permits all out-of-state banks
to establish de novo branches in the state. The commenters in those
letters said that Florida has not passed such authorizing legislation
and has, in fact, passed a statute prohibiting interstate de novo
branching. The commenters concluded by requesting that the OCC clarify
in the final rule that foreign banks will not be able to branch
interstate in a manner prohibited to domestic national banks.
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\10\ 12 U.S.C. 1831u.
\11\ 12 U.S.C. 36(g).
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The procedural changes we proposed do not permit this result. As we
said in the NPRM, none of the proposed changes affects any legal
requirements that are otherwise applicable under law with respect to a
national bank's foreign activities ``or the operations of foreign banks
in the United States.'' As a commenter pointed out, the IBA contains
provisions that expressly apply to branching by Federal branches and
agencies. See 12 U.S.C. 3102(h)(A), 3103. Section 3103(a)(1) generally
references domestic national banking law to determine the interstate
branching authority of Federal branches and agencies. It permits a
foreign bank to establish a Federal branch or agency outside of its
home state ``to the extent that the establishment and operation of such
branch would be permitted under section 5155(g) of the Revised Statutes
(12 U.S.C. 36(g)) or section 44 of the Federal Deposit Insurance Act
(12 U.S.C. 1831u) if the foreign bank were a national bank whose home
State is the same State as the home State of the foreign bank.'' 12
U.S.C. 3103(a)(1). Moreover, the statute directs the OCC to apply not
only the requirements of the IBA with respect to the establishment of a
Federal branch or agency but also capital and merger requirements under
domestic banking law. 12 U.S.C. 3103(a)(3). The legislative history
likewise states that ``a foreign bank would be permitted to establish
or acquire [F]ederal branches in states other than its home state to
the same extent that a national bank from the foreign bank's home state
may engage in interstate branching.'' H. Rep. 103-448, 103d Cong., 2d
Sess., 18 (1994).
The IBA, however, also authorizes branches and agencies of foreign
banks to branch interstate and to upgrade interstate offices under
circumstances that may be different from those permitted for domestic
banks. See 12 U.S.C. 3103(a)(7). Notwithstanding the domestic bank
parity provisions, a foreign bank may establish a branch or agency in a
state other than its home state if the host state permits the
establishment and operation of the branch or agency and any such branch
accepts only deposits permissible for Edge Act corporations.\12\ Also,
notwithstanding the domestic bank parity provisions, foreign banks may
upgrade interstate offices subject to certain conditions.
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\12\ See 12 CFR 211.6.
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We proposed to establish expedited procedures for eligible foreign
banks to obtain OCC approval of applications to open a Federal branch
or agency on an interstate basis. The proposal did not provide a new
source of authority for a foreign bank to establish such an interstate
office. Nor did it make any substantive changes in the legal
requirements for interstate branching under the IBA.
For these reasons, we have not changed the final rule in the manner
suggested by these commenters. In addition, we do not believe that it
is appropriate to include a provision in the regulation clarifying that
the OCC will not approve an application of a foreign bank to establish
a de novo branch in a state in which de novo banking is not permitted
for domestic institutions. As explained above, the statement is
unnecessary. The regulation provides only for expedited approval
procedures for such applications and does not address any of the
substantive legal requirements for interstate branching.
Thus, the changes discussed above to shorten the period for
processing notices for intrastate expansions by foreign banks and de
novo interstate branching applications submitted by eligible foreign
banks are the only changes that are made in the final rule that apply
to the expedited approval procedures proposed in the NPRM.
6. Eligible Foreign Bank (Revised Sec. 28.12(f))
Under current part 28, foreign banks with Federal branches and
agencies that all are rated ``1'' or ``2'' under the applicable
interagency rating system are eligible for expedited processing of
certain applications and other filings. 12 CFR 28.12(e) and (f). The
proposed rule would revise Sec. 28.12(f) to provide that a foreign
bank that has no Federal branches or agencies also is ``eligible'' if
it is engaging in a state-to-Federal conversion and its state offices
satisfy the eligibility criteria. This change would simply codify
procedures that we have already adopted in our Manual.
No comments were received on this proposal and the OCC is adopting
it as proposed.
7. After-the-Fact Notice for Certain Acquisitions (New Sec. 28.12(h))
Under current part 28, if foreign bank A, which has a Federal
branch, merges with foreign bank B, which does not have a Federal
branch or agency, an application to establish the Federal branch would
have to be submitted to the OCC if B were the surviving institution.
Under current Sec. 28.12(g), the two foreign banks may proceed with
their merger without approval of B's establishment of the branch if B
provides reasonable advance notice of the transaction to the OCC. Prior
to the merger, B must also apply to the OCC or commit to abide by the
OCC's decision on the application.
Proposed new Sec. 28.12(h) provided an expedited procedure for
foreign bank B if B already has banking offices in the United States.
However, we would retain the discretion to require prior approval to
establish the Federal branch or agency if necessary for prudential
reasons.
One commenter supported streamlining this procedure in the manner
proposed by the OCC. The OCC is, thus, adopting this provision without
change.
8. Exceptions to Usual Filing Procedures (Revised Sec. 28.12(j))
This technical change revised Sec. 28.12(j) (as redesignated in
this proposal) to clarify that the OCC also reserves the right to adopt
different procedures with respect to a part 28 filing or class of
filings.
No comments were received on this provision and we are adopting it
without change.
9. Other Applications Accepted (New Sec. 28.12(k) (Designated as Sec.
28.12(l) in the NPRM))
This technical amendment added Sec. 28.12(k) to codify the current
OCC practice of accepting applications or notices filed with other
Federal agencies that contain the necessary information required by the
OCC to approve an application or act on a particular request. Under the
proposal, we retained the discretion to request additional information
from an applicant as deemed necessary. This amendment is adopted
without change.
10. Capital Equivalency Deposits (Revised Sec. 28.15(a)(1) and New
Sec. 28.15(a)(3))
The IBA requires Federal branches and agencies to establish and
maintain a CED. 12 U.S.C. 3102(g). In 2002, the OCC issued a final rule
revising certain requirements regarding CED deposit arrangements based
on a supervisory
[[Page 70696]]
assessment of the risks presented by the particular institutions.\13\
The additional changes proposed in the NPRM further reduce unnecessary
burden and simplify compliance with the CED requirements.
---------------------------------------------------------------------------
\13\ 67 FR 41619 (June 19, 2002)
---------------------------------------------------------------------------
The proposal amended Sec. 28.15(a)(1) to clarify the types of
assets eligible to be deposited in a CED. Currently, a CED must consist
of bank-eligible securities, dollar deposits payable in the United
States, certificates of deposit payable in the United States, and other
assets permitted by the OCC. The proposal included dollar deposits
payable in any Group of Ten (G-10) country and added repurchase
agreements to the list of permissible CED assets. The proposal also
clarified that the OCC's authority to permit other assets to qualify
for the CED is limited to other assets that are ``similar'' to those
expressly included in the statute.
In addition, the proposal clarified the OCC's current policy to
exclude liabilities of an international banking facility to third
parties, and of a Federal branch to an international banking facility,
when calculating the required amount of a CED. Also, the proposed rule
permitted the OCC, like some other regulators, to exclude liabilities
from repurchase agreements on a case-by-case basis.
One commenter generally supported the OCC's efforts to alleviate
burden associated with the CED requirements and specifically supported
these changes to part 28. Consequently, the OCC is adopting this
amendment as proposed.
11. Capital Equivalency Deposits (Revised Sec. 28.15(e))
In the NPRM, we proposed to clarify the meaning of the term
``located'' in the context of the location of a depository bank that
holds a CED deposit, relative to a Federal branch or agency subject to
the CED requirement. Under the IBA, for purposes of the CED
requirement, a depository bank must be located in the state where the
branch or agency is located. 12 U.S.C. 3102(g)(1). The proposal
provided that a depository bank is ``located'' in the state where it
has its main office or a branch and a Federal branch or agency is
``located'' in the state in which it is licensed or in the state that
is its parent foreign bank's home state. The proposal further clarified
that a foreign bank with interstate offices has the discretion to
consolidate all or some of its CEDs into one depository bank. We
specifically requested comments on whether such a consolidated account
should provide for segregated assets for specific offices or whether it
would be sufficient for the account to contain a consolidated amount
large enough to cover the CEDs of all of the individual offices.
One commenter supported the proposed changes in the NPRM with
respect to CEDs, particularly the proposal to allow multiple Federal
branches and agencies to maintain a single consolidated CED at a U.S.
depository bank. The commenter expressed its view that it would not be
necessary for the consolidated CED account to contain segregated assets
to cover specific offices; instead, the commenter said that maintaining
a consolidated account large enough to cover the operations of all of
the individual offices would be sufficient.
Another commenter opposed the proposed changes, contending first
that the NPRM should have stated that a Federal branch or agency is
located in each state in which it maintains an office under the plain
meaning of the term ``located.'' Second, the commenter stated that the
legislative history of the CED requirement ``demonstrates Congressional
concern that assets be available to local creditors in the event that a
foreign bank becomes insolvent.'' The commenter added that segregated
accounts promote efficient liquidations by minimizing the need for
local creditors to pursue remedies in other states. Segregated
accounts, according to the commenter, would better protect local
creditors in situations where the foreign bank operated both Federal
and state branches or agencies.\14\
---------------------------------------------------------------------------
\14\ Three commenters criticized the proposed definition of
where a Federal branch or agency is ``located'' on the basis that
the proposed definition would be inconsistent with Congressional
intent and would ``administratively overturn'' language included in
pending legislation in the House of Representatives in the 108th
Congress--section 107 of H.R. 1375, the proposed ``Financial
Services Regulatory Relief Act of 2003.''
As explained above, our proposed definition of ``located'' is an
interpretation of current law for purposes of determining which
depository banks are eligible to hold a foreign bank's CED deposit
for its Federal branch or agency. It does not affect the amount of
the CED that is required, or the determination of where a branch or
agency is located, for purposes of any future standard that keys a
CED requirement to the requirements of the state in which a branch
or agency is ``located.''
---------------------------------------------------------------------------
The OCC agrees that in order to be eligible to hold a foreign
bank's CED for its Federal branches and agencies, a depository bank's
main office or a branch must be located in the state in which the
Federal branch or agency's foreign bank parent has its home office or
in any state in which a Federal branch or agency office is maintained.
In the latter case, the state may not necessarily be the state in which
the Federal branch or agency is licensed under the single-licensing
approach described above but may be any state in which the foreign bank
has a Federal branch or agency office.
This interpretation of the term ``located'' is reasonable and
consistent with national treatment and the intent of the IBA. As one
commenter agrees, the CED statute does not define the term ``located.''
Thus, by analogy to national banking law,\15\ the OCC has determined
that a U.S. depository bank holding a foreign bank's CED is located in
the state in which the depository bank has its main office or a branch
and the final rule clarifies this interpretation.
---------------------------------------------------------------------------
\15\ See 12 U.S.C. 81.
---------------------------------------------------------------------------
Under the IBA, the OCC has the authority to establish limitations
and conditions for the CED and its administration. 12 U.S.C.
3102(g)(1). Section 3102(g)(3) further extends this authority, stating
that ``[t]he deposit shall be maintained with any such member bank
pursuant to a deposit agreement in such form and containing such
limitations and conditions as the Comptroller may provide.'' This very
specific authority is enhanced by the IBA's general grant of authority
to the OCC to issue rules, regulations, and orders pertaining to the
establishment and administration of Federal branches. 12 U.S.C.
3102(b). Moreover, the legislative history of the IBA recognized that,
while the objective of Federal regulation under the IBA is to achieve
equal treatment between foreign and domestic banks, some discretion was
necessary to develop a regulatory framework that is appropriate to the
actual operations of foreign banking institutions.\16\
---------------------------------------------------------------------------
\16\ See supra note 4 (and accompanying text).
---------------------------------------------------------------------------
With regard to requiring foreign banks to segregate assets in a
consolidated CED account, we have considered the comments received and
have decided that foreign banks with multiple branches and/or agencies
that consolidate their CED deposits should maintain book entry
segregation of assets for each office. We are clarifying new Sec.
28.18(c)(3) to add such a requirement. This will help to promote
orderly liquidations and will help to ensure that local creditors of
each office of a foreign bank are protected. In addition, we are
revising new Sec. 28.15(e) to clarify that the total amount of the CED
will continue to be calculated on an office-by-office basis to ensure
that there are sufficient assets available for each individual office.
[[Page 70697]]
12. Deposit-Taking by an Uninsured Federal Branch (Revised Sec.
28.16(b)(8))
As proposed, the final rule makes a technical correction to Sec.
28.16(b)(8) to correct the citation to the FRB's Regulation K (12 CFR
211.6).
13. Maintenance of Accounts, Books, and Records (New Sec. 28.18(c)(3))
Proposed new Sec. 28.18(c)(3) required a foreign bank that has
interstate Federal branches or agencies and combines its CEDs into one
account to designate one of its Federal offices to maintain
consolidated information about the Federal branches and agencies
covered by the CEDs. The final rule includes this provision without
change. In addition, the final rule includes the provision described
above that will require consolidated CED deposits to reflect book entry
segregation of assets for each Federal branch or agency office.
14. Maintenance of Assets (Revised Sec. 28.20(a)(2))
Under current law, we may impose asset maintenance requirements on
a foreign bank to hold certain assets in the state in which its Federal
branch or agency is located if necessary for prudential, supervisory,
or enforcement reasons. 12 CFR 28.20(a)(1). These requirements are in
addition to the CED requirements but, in determining compliance with
any asset maintenance requirements imposed by the OCC, we must give
credit to the amount of assets held in the CED and other reserves or
assets required under the IBA. 12 U.S.C. 3102(g)(4).
The proposal revised Sec. 28.20(a)(2) to delete the requirement
that the amount of assets held by the foreign bank cannot be less than
105% of the aggregate amount of liabilities of the Federal branch or
agency, payable at or through the Federal branch or agency. Under the
proposal, we would prescribe the amount of assets on a case-by-case
basis and there would be no set minimum. This change is adopted in the
final rule.
15. Voluntary Liquidation (Revised Sec. 28.22(a) and (b))
The proposal made certain changes in the voluntary liquidation
procedures for Federal branches and agencies. We received no comments
on this provision and we are adopting it as proposed.
16. Procedures for Closing Some (But Not All) of a Foreign Bank's
Federal Branches and/or Agencies (New Sec. 28.23)
To be consistent with the IBA's national treatment standard, the
proposal treated a foreign bank that is closing some but not all of its
Federal branches and/or agencies like a national bank that is closing a
branch office. We received no comments on this change and we are
adopting it as proposed.
17. After-the-Fact Notice of Change in Control (New Sec. 28.25)
The proposal added a new section to part 28 to require a foreign
bank to submit a written notice to the OCC when there is a change in
control of the foreign bank. The notice would be submitted within 14
days after the foreign bank became aware of the change if no other
filing is required under part 28. A foreign bank could provide its
supervisory office with the copy of a notice submitted to another
Federal regulator to satisfy the requirements of this section. See 12
CFR 28.12(k).
No comments were received on this provision and it is adopted as
proposed.
18. Loan Production Offices (New Sec. 28.26)
In the NPRM, the OCC provided that a Federal branch may operate a
loan production office (LPO), an administrative office, or a regional
administrative office that conducts other types of representational
activities, as part of a branch license. The OCC noted that, since
national banks may operate such offices, allowing Federal branches to
do so is consistent with national treatment.
Two commenters addressed this proposal. One noted that it would
view loan production offices as representative offices and their
activities would be limited as such and noted that such offices would
need to be approved by the FRB in accordance with applicable law. The
commenter requested that the final rule refer to these requirements.
The second commenter stated that the IBA does not permit the
establishment of such offices and that, if Congress wished to authorize
them, it would have expressly done so. This commenter added that
offices that are not branches or agencies are treated under Regulation
K as representative offices. Since there is no basis for chartering
federal representative offices, the IBA does not permit the
establishment of loan production offices and other types of non-branch
offices, according to the commenter.
With respect to the first comment, as discussed above, we are
adding a statement to Sec. 28.10(c) to clarify that nothing in our
regulations relieves a foreign bank of any requirement that is imposed
by the FRB under applicable law.
We believe that the second commenter is wrong as a matter of law.
The fact that certain non-branch offices may be subject to other
regulatory requirements does not diminish the ability of the OCC to
permit Federal branches to establish such offices. The OCC's authority
to allow a Federal branch to establish LPOs or other administrative
offices or regional administrative offices as part of its Federal
branch license is derived from separate authority. See 12 U.S.C. 3102.
In addition, as discussed above, the OCC disagrees that the IBA does
not provide the authority for a Federal branch to engage in the same
activities as a national bank subject to certain statutory and
regulatory exemptions.
For these reasons, we have adopted Sec. 28.26 substantially as
proposed.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA),
5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required
under section 604 of the RFA is not required if the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities and publishes its certification
and a short, explanatory statement in the Federal Register along with
its rule.
Pursuant to section 605(b) of the RFA, the OCC hereby certifies
that this final rule will not have a significant economic impact on a
substantial number of small entities. Specifically the proposed rule
will reduce burden by: (1) Streamlining procedures for national banks'
foreign operations through branches; (2) eliminating the requirement to
file an application with the OCC in certain circumstances when a
foreign bank downgrades its U.S. operations; (3) requiring approval,
but not a new license, for additional Federal branches or agencies
opened after the establishment of the initial branch office; and (4)
clarifying that a foreign bank with Federal branches and agencies in
more than one state may consolidate its capital equivalency deposits in
one deposit account in a depository bank that satisfies certain
criteria. These revisions will result in cost reductions for national
banks and for the U.S. operations of Federal branches and agencies of
foreign banks. Accordingly, a regulatory flexibility analysis is not
needed.
Executive Order 12866
The OCC has determined that this final rule is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
[[Page 70698]]
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in a Federal mandate that may result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year. If a
budgetary impact statement is required, section 205 of the Unfunded
Mandates Act also requires an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a
rule. The OCC has determined that the final rule will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of $100 million or more in any one year. Accordingly, this
rulemaking is not subject to section 202 of the Unfunded Mandates Act.
Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.), the OCC may not conduct or sponsor,
and a respondent is not required to respond to, an information
collection unless it displays a currently valid Office of Management
and Budget (OMB)) control number.
The information collection requirements contained in the NPRM have
been reviewed and approved by OMB in accordance with the Paperwork
Reduction Act of 1995 under OMB control number 1557-0102.
However, the paperwork burden for these requirements likely will be
transferred to OMB control number 1557-0014. OMB control number 1557-
0014 covers the Comptroller's Licensing Manual (Manual). The Manual
explains the OCC's policies and procedures for the formation of a new
national bank, entry into the national banking system by other
institutions, and corporate expansion and structural changes by
existing national banks. The Manual includes sample documents to assist
the respondent in understanding the types of information the OCC needs
to process a filing. The documents are samples only. An applicant may
use any format that provides sufficient information for the OCC to act
on a particular filing.
The NPRM and this final rule generally eased regulatory
requirements and reduced paperwork burden somewhat. The OMB approved
burden attributable to the NPRM and this final rule is as follows:
The burden for 12 CFR part 5 is as follows:
12 CFR 5.36:
17 respondents x 1 response per year = 17 responses
17 responses x 1 hour per response = 17 burden hours
The burden for 12 CFR part 28 is as follows:
12 CFR 28.3(a):
45 respondents x 1 response = 45 responses
45 responses x .5 hour per response = 23 burden hours
12 CFR 28.12(a):
4 respondents x 1 response per year = 4 responses
4 responses x 41 hours per response = 164 burden hours
12 CFR 28.12(e)(2):
1 respondent x 1 response per year = 1 response
1 response x 1 hour per response = 1 burden hour
12 CFR 28.12(h):
2 respondents x 1 response per year = 2 responses
2 responses x 1 hour per response = 2 burden hours.
12 CFR 28.12(i):
1 respondent x 1 response per year = 1 response
1 response x 1 hour per response = 1 burden hour.
Executive Order 13132
The Comptroller of the Currency has determined that this final rule
does not have any Federalism implications, as required by Executive
Order 13132.
List of Subjects
12 CFR Part 5
Administrative practice and procedure, National banks, Reporting
and recordkeeping requirements, Securities.
12 CFR Part 28
Foreign banking, National banks, Reporting and recordkeeping
requirements.
Authority and Issuance
0
For the reasons set forth in the preamble, parts 5 and 28 of chapter I
of title 12 of the Code of Federal Regulations are revised to read as
follows:
PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES
0
1. The authority citation for part 5 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 24a, 24(Seventh), 93a, and 3101
et seq.
0
2. In Sec. 5.3, revise paragraphs (c)(1) and (c)(4) to read as
follows:
Sec. 5.3 Definitions.
* * * * *
(c) * * *
(1) The Licensing Department for all national bank subsidiaries of
those holding companies assigned to the Washington, DC, licensing unit;
* * * * *
(4) The licensing unit in the Northeastern District Office for
Federal branches and agencies of foreign banks.
* * * * *
0
3. In Sec. 5.36, redesignate paragraph (f) as paragraph (g) and add a
new paragraph (f) to read as follows:
Sec. 5.36 Other equity investments.
* * * * *
(f) Non-controlling investments by Federal branches. A Federal
branch that satisfies the well capitalized and well managed standards
in 12 CFR 4.7(b)(1)(iii) and Sec. 5.34(d)(3)(ii) may make a non-
controlling investment in accordance with paragraph (e) of this section
in the same manner and subject to the same conditions and requirements
as a national bank, and subject to any additional requirements that may
apply under 12 CFR 28.10(c).
* * * * *
0
4. In Sec. 5.70:
0
a. remove paragraph (c)(1);
0
b. redesignate paragraphs (c)(2)(i) through (v) as paragraphs (c)(1)(i)
through (v);
0
c. revise newly redesignated paragraphs (c)(1)(i), (iv), and (v);
0
d. add a new paragraph (c)(1)(vi);
0
e. add a new paragraph (c)(2); and
0
f. revise paragraph (d)(2)(i) to read as follows:
Sec. 5.70 Federal branches and agencies.
* * * * *
(c) * * *
(1) * * *
(i) Open and conduct business through an initial or additional
Federal branch or agency;
* * * * *
(iv) Convert a state branch or state agency operated by a foreign
bank, or a commercial lending company controlled by a foreign bank,
into a Federal branch or agency;
(v) Relocate a Federal branch or agency within a state or from one
state to another; or
(vi) Convert a Federal agency or a limited Federal branch into a
Federal branch.
(2) Federal branch includes a limited Federal branch unless
otherwise provided.
(d) * * *
* * * * *
(2) * * *
[[Page 70699]]
(i) Establishes a Federal branch or agency; or
* * * * *
PART 28--INTERNATIONAL BANKING ACTIVITIES
0
5. The authority citation for part 28 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 24(Seventh), 93a, 161, 602,
1818, 3101 et seq., and 3901 et seq.
0
6. In Sec. 28.3, revise paragraphs (a)(1)(i) and (a)(2) to read as
follows:
Sec. 28.3 Filing requirements for foreign operations of a national
bank:
(a) * * *
(1) * * *
(i) Establish or open a foreign branch;
* * * * *
(2) Opens a foreign branch, and no application or notice is
required by the FRB for such transaction.
* * * * *
0
7. In Sec. 28.5, revise paragraphs (a) and (b) to read as follows:
Sec. 28.5 Filing of notice.
(a) Where to file. A national bank shall file any notice or
submission required under this subpart with the appropriate supervisory
office of the OCC.
(b) Availability of forms. Individual forms and instructions for
filings are available from the appropriate supervisory office of the
OCC.
0
8. In Sec. 28.10:
0
a. revise the heading in paragraph (b); and
0
b. add a new paragraph (c) to read as follows:
Sec. 28.10 Authority, purpose, and scope.
* * * * *
(b) Purpose. * * *
(c) Scope. This subpart applies to all Federal branches and
agencies of foreign banks. Nothing in the OCC's rules relieves a
Federal branch or agency from complying with requirements that are
imposed by the FRB under Regulation K (12 CFR part 211) or otherwise
imposed in accordance with applicable law.
0
9. In Sec. 28.11:
0
a. remove paragraph (d);
0
b. redesignate paragraphs (e) through (z) as paragraphs (d) through
(y);
0
c. revise newly redesignated paragraphs (f)(1), (4), and (5);
0
d. add a new paragraph (f)(6);
0
e. add a new sentence to the end of newly redesignated paragraph (h);
and
0
f. revise newly redesignated paragraph (u) to read as follows:
Sec. 28.11 Definitions.
* * * * *
(f) Establish a Federal branch or agency means to:
(1) Open and conduct business through an initial or additional
Federal branch or agency;
* * * * *
(4) Convert a state branch or agency operated by a foreign bank, or
a commercial lending company controlled by a foreign bank, into a
Federal branch or agency;
(5) Relocate a Federal branch or agency within a state or from one
state to another; or
(6) Convert a Federal agency or a limited Federal branch into a
Federal branch.
* * * * *
(h) *** Unless otherwise provided, the references in this subpart B
of part 28 to a Federal branch include a limited Federal branch.
* * * * *
(u) Manual has the same meaning as in 12 CFR 5.2(c).
* * * * *
0
10. In Sec. 28.12:
0
a. revise paragraphs (a) and (b)(5);
0
b. redesignate paragraphs (e)(2) through (4) as paragraphs (e)(4)
through (6);
0
c. add new paragraphs (e)(2) and (3);
0
d. revise newly redesignated paragraph (e)(4);
0
e. revise paragraph (f) in the introductory text;
0
f. redesignate paragraph (h) as paragraph (j);
0
g. add a new paragraph (h);
0
h. revise paragraph (i);
0
i. revise newly redesignated paragraph (j); and
0
j. add a new paragraph (k) to read as follows:
Sec. 28.12 Approval of a Federal branch or agency.
(a) Approval and licensing requirements--(1) General. Except as
otherwise provided in this section, a foreign bank shall submit an
application to, and obtain prior approval from, the OCC before it:
(i) Establishes a Federal branch or agency; or
(ii) Exercises fiduciary powers at a Federal branch.
(2) Licensing. A foreign bank must receive a license from the OCC
to open and operate its initial Federal branch or agency in the United
States. A foreign bank that has a license to operate and is operating a
full-service Federal branch need not obtain a new license for any
additional Federal branches or agencies, or to upgrade or downgrade its
operations in an existing Federal branch or agency. A foreign bank that
only has a license to operate and is operating a limited Federal branch
or Federal agency need not obtain a new license for any additional
limited Federal branches or Federal agencies, or to convert a limited
Federal branch into a Federal agency or a Federal agency into a limited
Federal branch.
(b) * * *
* * * * *
(5) With respect to an application to establish a Federal branch or
agency outside of the foreign bank's home state, whether the foreign
bank is subject to comprehensive supervision or regulation on a
consolidated basis by its home country supervisor. The OCC, in its
discretion, also may consider whether the foreign bank is subject to
comprehensive supervision or regulation on a consolidated basis by its
home country supervisor when reviewing any other type of application to
establish a Federal branch or agency; and
* * * * *
(e) * * *
* * * * *
(2) Written notice for an additional intrastate Federal branch or
agency. (i) In a case where a foreign bank seeks to establish
intrastate an additional Federal branch or agency, the foreign bank
shall provide written notice 30 days in advance of the establishment of
the intrastate Federal branch or agency.
(ii) The OCC may waive the 30-day period required under paragraph
(e)(2)(i) of this section if immediate action is required. The OCC also
may suspend the notice period or require an application if the
notification raises significant policy or supervisory concerns.
(3) Expedited approval procedures for an interstate Federal branch
or agency. An application submitted by an eligible foreign bank to
establish and operate a de novo Federal branch or agency in any state
outside the home state of the foreign bank is deemed conditionally
approved by the OCC as of the 30th day after the OCC receives the
filing, unless the OCC notifies the foreign bank prior to that date
that the filing is not eligible for expedited review. In the event that
the FRB has approved the application prior to the expiration of the
period, then the OCC's approval shall be deemed a final approval.
(4) Conversions. An application submitted by an eligible foreign
bank to establish a Federal branch or agency as defined in 12 CFR
28.11(f)(4) or (f)(6) is deemed approved by the OCC as of the 30th day
after the OCC receives the filing, unless the OCC notifies the foreign
bank prior to that date that the
[[Page 70700]]
filing is not eligible for expedited review.
* * * * *
(f) Eligible foreign bank. For purposes of this section, a foreign
bank is an eligible foreign bank if each Federal branch and agency of
the foreign bank or, if the foreign bank has no Federal branches or
agencies and is engaging in an establishment of a Federal branch or
agency as defined in 12 CFR 28.11(f)(4), each state branch and agency:
* * * * *
(h) After-the-fact notice for an eligible foreign bank. Unless
otherwise provided by the OCC, a foreign bank proposing to establish a
Federal branch or agency through the acquisition of, or merger or
consolidation with, a foreign bank that has an existing U.S. bank
subsidiary or a Federal or state branch or agency may proceed with the
transaction and provide after-the-fact notice to the OCC within 14 days
of the transaction, if:
(1) The resulting bank is an ``eligible foreign bank'' under
paragraph (f) of this section; and
(2) No Federal branch established by the transaction accepts
deposits that are insured by the FDIC pursuant to the Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.).
(i) Contraction of operations. A foreign bank shall provide written
notice to the OCC within 10 days after converting a Federal branch into
a limited Federal branch or Federal agency.
(j) Procedures for approval. A foreign bank shall file an
application for approval pursuant to this section in accordance with 12
CFR part 5 and the Manual. The OCC reserves the right to adopt
materially different procedures for a particular filing, or class of
filings, pursuant to 12 CFR 5.2(b).
(k) Other applications accepted. As provided in 12 CFR 5.4(c), the
OCC may accept an application or other filing submitted to another U.S.
Government agency that covers the proposed activity or transaction and
contains substantially the same information as required by the OCC.
0
11. In Sec. 28.15:
0
a. revise paragraph (a)(1)(ii);
0
b. redesignate paragraph (a)(1)(iv) as (a)(1)(v);
0
c. revise paragraph (a)(1)(iii) by removing the word ``or'' at the end;
0
d. add a new paragraph (a)(1)(iv);
0
e. revise newly redesignated paragraph (a)(1)(v);
0
f. add a new paragraph (a)(3);
0
g. redesignate paragraph (e) as (f); and
0
h. add a new paragraph (e) to read as follows:
Sec. 28.15 Capital equivalency deposits.
(a) * * *
(1) * * *
(i) * * *
(ii) United States dollar deposits payable in the United States or
payable in any other Group of Ten country;
(iii) Certificates of deposit, payable in the United States, and
banker's acceptances, provided that, in either case, the issuer or the
instrument is rated investment grade by an internationally recognized
rating organization, and neither the issuer nor the instrument is rated
lower than investment grade by any such rating organization that has
rated the issuer or the instrument;
(iv) Repurchase agreements; or
(v) Other similar assets permitted by the OCC to qualify to be
included in the CED.
* * * * *
(3) Exceptions. In determining the amount of the CED, the OCC
excludes liabilities of an international banking facility (IBF) to
third parties and of a Federal branch of a foreign bank to an IBF. The
OCC may exclude liabilities from repurchase agreements on a case-by-
case basis.
* * * * *
(e)(1) Deposit and Consolidation. As provided in 12 U.S.C. 3102(g),
a foreign bank with a Federal branch or agency shall deposit its CED
into an account in a bank that is located in the state in which the
Federal branch or agency is located. For this purpose, such depository
bank is considered to be located in those states in which it has its
main office or a branch. A foreign bank with Federal branches or
agencies in more than one state may consolidate some or all of its CEDs
into one such account.
(2) Calculation. The total amount of the consolidated CED shall
continue to be calculated on an office-by-office basis.
* * * * *
0
12. In Sec. 28.16, revise paragraph (b)(8) to read as follows:
Sec. 28.16 Deposit-taking by an uninsured Federal branch.
* * * * *
(b) * * *
(8) Persons who may deposit funds with an Edge corporation as
provided in the FRB's Regulation K, 12 CFR 211.6, including persons
engaged in certain international business activities; and
* * * * *
0
13. In Sec. 28.18, add a new paragraph (c)(3) to read as follows:
28.18 Recordkeeping and reporting.
* * * * *
(c) * * *
* * * * *
(3) A foreign bank with a Federal branch or agency in more than one
state that consolidates its CEDs into one account in accordance with
Sec. 28.15(e) shall designate a participating Federal branch or agency
to maintain consolidated asset, liability, and capital equivalency
account information for all Federal branches and agencies covered by
the consolidated deposit. A foreign bank with a consolidated CED shall
maintain a book entry accounting of assets designated under the
consolidated CED for each office of that foreign bank.
0
14. In Sec. 28.20, revise the first sentence of paragraph (a)(2) to
read as follows:
Sec. 28.20 Maintenance of assets.
(a) * * *
* * * * *
(2) If the OCC requires asset maintenance, the amount of assets
held by a foreign bank shall be prescribed by the OCC after
consideration of the aggregate amount of liabilities of the Federal
branch or agency, payable at or through the Federal branch or agency. *
* *
* * * * *
0
15. In Sec. 28.22, revise paragraphs (a) and (b) to read as follows:
Sec. 28.22 Voluntary liquidation.
(a) Procedures to close all Federal branches and agencies. Unless
otherwise provided, in cases in which a foreign bank proposes to close
all of its Federal branches or agencies, the foreign bank shall comply
with applicable requirements in 12 CFR 5.48 and the Manual, including
requirements that apply to an expedited liquidation of an insured
Federal branch.
(b) Notice to customers and creditors. A foreign bank shall publish
notice of the impending closure of each Federal branch or agency for a
period of two months in every issue of a local newspaper where the
Federal branch or agency is located. If only weekly publication is
available, the notice must be published for nine consecutive weeks.
* * * * *
0
16. Redesignate Sec. 28.23 as Sec. 28.24.
0
17. Add a new Sec. 28.23 to read as follows:
Sec. 28.23 Procedures for closing of some of a foreign bank's Federal
branches and/or agencies.
In cases where Sec. 28.22 does not apply, and a foreign bank is
closing one or more, but not all, of its Federal branches and/or
agencies, it shall follow the
[[Page 70701]]
procedures set forth in 12 U.S.C. 1831r-1(a) and (b) (branch closings).
0
18.Add new Sec. 28.25 to read as follows:
Sec. 28.25 Change in control.
(a) After-the-fact notice. In cases in which no other filing is
required under subpart B of this part, a foreign bank that operates a
Federal branch or agency shall inform the OCC in writing of the direct
or indirect acquisition of control of the foreign bank by any person or
entity, or group of persons or entities acting in concert, within 14
calendar days after the foreign bank becomes aware of a change in
control.
(b) Additional information. The foreign bank shall furnish the OCC
with any additional information the OCC may require in connection with
the acquisition of control.
0
19. Add a new Sec. 28.26 to read as follows:
Sec. 28.26 Loan production offices.
A Federal branch may establish lending offices, make credit
decisions, and engage in other representational activities at a site
other than a Federal branch office, subject to the same rights,
privileges, requirements and limitations that apply to national banks
under 12 CFR 7.1003, 7.1004, and 7.1005.
Dated: December 15, 2003.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 03-31342 Filed 12-18-03; 8:45 am]
BILLING CODE 4810-33-P