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4000 - Advisory Opinions
Whether certain types of services qualify as nondeposit banking
services
FDIC--97--11
November 25, 1997
Jamey Basham, Counsel
I am writing to respond to your letter dated October 14,
1997. It was a pleasure to speak to you on the phone subsequently. You
have asked me to clarify whether four types of services your bank
provides customers are "other nondeposit banking services" within
the meaning of paragraph 346.6(a)(3) of the FDIC's Rules and
Regulations, 12 C.F.R. § 346.6. My opinion is that these services
would not qualify as other nondeposit banking services.
Section 346.6 specifies what deposits in an initial amount of less
than $100,000 may be accepted by an uninsured branch of a foreign bank
without the foreign bank being deemed to be engaged in domestic retail
deposit-taking activity. Paragraph 346.6(a)(3) authorizes the branch to
accept deposits from persons (including immediate family members of
natural persons) to whom the branch or foreign bank (including any
affiliate thereof) has extended credit or provided other nondeposit
banking services within the past twelve months or has entered into a
written agreement to provide such services in the next twelve months.
The rule does not require the nondeposit banking service to exceed any
minimum threshold or be in some way proportional to the size of the
deposit relationship in question. In fact, as
{{2-29-00 p.4984.28}}an example of a nondeposit banking
service which would qualify under paragraph 346.6(a)(3), the FDIC's
preamble to the final rule mentioned the leasing of a safe deposit box.
61 Fed. Reg. 5671, 5672 (February 14, 1996).
However, the four services you list in your letter cannot be
characterized as "nondeposit banking services" for purposes of
paragraph 346.6(a)(3), because each of them involves the receipt of
funds in a manner which is itself specified as a permissible deposit
which may be accepted by an uninsured foreign branch under other
paragraphs of section 346.6:
Effecting remittances on behalf of customers within and
outside the U.S.A.: This is authorized by paragraph 346.6(a)(6),
permitting a foreign branch to accept funds deposited in connection
with the issuance of a financial instrument by the branch for the
transmission of funds or the transmission of such funds by any
electronic means.
Sale of demand drafts, treasurers checks, and other such
instruments: This is also authorized by paragraph 346.6(a)(6).
Opening of commercial letters of credit and negotiation of
export documents, which in our telephone conversation you indicated
would be in connection with international import-export
transactions: This is authorized by paragraph 346.6(a)(4), permitting
a foreign branch to accept funds from persons from whom an Edge
Corporation may accept deposits under paragraph 211.4(e)(1) of
Regulation K, 12 C.F.R.
§ 211.4(e)(1). Paragraph 211.4(e)(1)(ii)(C) permits an Edge
Corporation to accept deposits from any person in the U.S. if the funds
are the proceeds of collections abroad to be used to pay for imported
or exported goods or for other costs of exporting or importing.
Handling of documentary and clean collection business,
which in our telephone conversation you indicated would also be in
connection with international import-export transactions: this is also
authorized by paragraph 346.6(a)(4) through paragraph
211.4(e)(1)(ii)(C) of Reg K.
Since the receipt of funds in any of these ways is treated as
a permissible deposit taking activity under section 346.6(a), it is not
possible to characterize them as nondeposit services under paragraph
346.6(a)(3).
I hope this clarifies your concerns in this matter. If I can be of
further assistance, please do not hesitate to contact me at (202)
898-7265.
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