[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR211.604]

[Page 391]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)--Table of Contents
 
              Subpart D--International Lending Supervision
 
Sec. 211.604  Data processing activities.

    (a) Introduction. As a result of a recent proposal by a bank holding 
company to engage in data processing activities abroad, the Board has 
considered the scope of permissible data processing activities under 
Regulation K (12 CFR part 211). This question has arisen as a result of 
the fact that Sec. 211.5(d)(10) of Regulation K does not specifically 
indicate the scope of data processing as a permissible activity abroad.
    (b) Scope of data processing activities. (1) Prior to 1979, the 
Board authorized specific banking organizations to engage in data 
processing activities abroad with the expectation that such activity 
would be primarily related to financial activities. When Regulation K 
was issued in 1979, data processing was included as a permissible 
activity abroad. Although the regulation did not provide specific 
guidance on the scope of this authority, the Board has considered such 
authority to be coextensive with the authority granted in specific cases 
prior to the issuance of Regulation K, which relied on the fact that 
most of the activity would relate to financial data. Regulation K does 
not address related activities such as the manufacture of hardware or 
the provision of software or related or incidental services.
    (2) In 1979, when the activity was included in Regulation K for the 
first time, the data processing authority in Regulation K was somewhat 
broader than that permissible in the United States under Regulation Y 
(12 CFR part 225) at that time, as the Regulation K authority permitted 
limited non-financial data processing. In 1979, Regulation Y authorized 
only financial data processing activities for third parties, with very 
limited exceptions. By 1997, however, the scope of data processing 
activities under Regulation Y was expanded such that bank holding 
companies are permitted to derive up to 30 percent of their data 
processing revenues from processing data that is not financial, banking, 
or economic. Moreover, in other respects, the Regulation Y provision is 
broader than the data processing provision in Regulation K.
    (3) In light of the fact that the permissible scope of data 
processing activities under Regulation Y is now equal to, and in some 
respects, broader than the activity originally authorized under 
Regulation K, the Board believes that Sec. 211.5(d)(10) should be read 
to encompass all of the activities permissible under Sec. 225.28(b)(14) 
of Regulation Y. In addition, the limitations of that section would also 
apply to Sec. 211.5(d)(10).
    (c) Applications. If a U.S. banking organization wishes to engage 
abroad in data processing or data transmission activities beyond those 
described in Regulation Y, it must apply for the Board's prior consent 
under Sec. 211.5(d)(20) of Regulation K. In addition, if any investor 
has commenced activities beyond those permitted under Sec. 225.28(b)(14) 
of Regulation Y in reliance on Regulation K, it should consult with 
staff of the Board to determine whether such activities have been 
properly authorized under Regulation K.

[Reg. K, 64 FR 58781, Nov. 1, 1999]