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Risk Management Manual of Examination Policies

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Section 17.1 - International Report Pages and Workpapers

Parallel-Owned Banking Organization (PBO)
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DISCLAIMER: This information is provided for illustrative purposes of a complex PBO. It does not correspond to the ownership/control information provided in the Bank of Anytown.

List the following information for the bank(s) and/or bank holding company(s) in the PBO.

 

U.S. Name: Demo International Bank1
City, Country: Miami, FL
Number of Outstanding Shares: 1,000,000

Foreign Name: Demo International, C.A.
City, Country: Caracas, Venezuela
Number of Outstanding Shares: 50,000

Foreign Name: Demo Bank Venezuela2
City, Country: Caracas, Venezuela

Foreign Name: Demo Bank Brazil3
City, Country: Rio de Janeiro, Brazil

Foreign Name: Demo Bank Mexico
City, Country: Mexico City, Mexico
Number of Outstanding Shares: 100,000

 

 

1 Of the ten entities that comprise the PBO, only the three foreign banks and the foreign bank holding company that actively engage in transactions with Demo International Bank, Miami, Florida are detailed above. The remaining five entities within the PBO structure include: JMM Holdings, Caracas, Venezuela which wholly-owns Demo Bank International, Panama City, Panama; Mendosa Finance Company, Caracas, Venezuela which wholly-owns Demo Bank International, Cartegena, Colombia and Demo Bank International, Bogota, Colombia .

2 Wholly-Owned subsidiary of Demo International, C.A., Caracus, Venezuela.

3 Wholly-Owned subsidiary of Demo Bank Venezuela, Caracas, Venezuela.


Detail the stock owned by the beneficial owner(s) whose direct/indirect control forms the nexus of the PBO.

U.S. Name: Demo International Bank

Number of Shares

Percent Owned

Type of Control

Beneficial Owner: Mendosa Family Trust (Jose Mendosa controls 100%)

750,000

75.00%

Direct

Beneficial Owner: Rivera Family Trust (Juan Rivera controls 100%)

250,000

25.00%

Direct

Foreign Name: Demo International, C.A.

Number of Shares

Percent Owned

Type of Control1

Beneficial Owner: Jose M. Mendosa

5,000

10.00%

Direct

Beneficial Owner: Carlita S. Mendosa

12,500

25.00%

Direct

Beneficial Owner: Paco M. Mendosa

7,500

15.00%

Direct

Beneficial Owner: Juan H. Rivera

12,500

25.00%

Direct

Beneficial Owner: Mendosa Family Members

12,500

25.00%

Direct

1 Mr. Jose M. Mendosa has indirect control of the shares owned by his wife, Ms. Carlita S. Mendosa.

Foreign Name: Demo Bank Mexico

Number of Shares

Percent Owned

Type of Control1

Beneficial Owner: Jose M. Mendosa

50,000

50.00%

Direct

Beneficial Owner: Carlita S. Mendosa

25,000

25.00%

Direct

1 Mr. Jose M. Mendosa has indirect control of the shares owned by his wife, Ms. Carlita S. Mendosa.

Discuss the factor(s) or combination of the attributes (besides or in addition to common stock ownership) that was considered in determining that sufficient control is exercised to conclude that a PBO relationship exists, including whether the individual, family or group of persons acting in concert:

  1. Constitutes a quorum or a significant presence on the Board of Directors of both the U.S. depository institution and the foreign bank or the foreign bank holding company.

    The members of the Mendosa family listed above serve as the chairman, vice chairman or director for the five foreign entities except that none of them are on the Board of Demo Bank Guatemala. Their membership does not constitute a quorum on any of the three foreign or the U.S. banks’ Board, but does constitute a quorum on the Board of the foreign bank holding company, Demo International, C.A.

  2. Controls, in any manner, the election of a majority of the directors of the U.S. depository institution and the foreign bank or the foreign bank holding company.

    The minutes of the shareholder meeting for the election of the directorate for Demo Bank Venezuela were not available for review. However, it is believed that Mr. Jose Mendosa and his family members controlled the election through their ability to vote a majority of the holding company’s stock. Mr. Jose Mendosa’s ability to vote the majority of Demo International Bank’s stock indicates that he controlled the election of its directorate.

  3. Constitutes a quorum or a significant portion of the executive management of both the U.S. depository institution and the foreign bank or the foreign bank holding company.

    The members of the Mendosa family listed above serve as the president, vice president or cashier of Demo International Bank, Demo International, C.A. and at the four foreign banks except Demo Bank Guatemala. Their positions constitute a quorum of the executive management at Demo International, C.A., but not at the three foreign banks or at the U.S. bank. However, they occupy critical positions on those teams.

  4. Exercises a controlling influence over the management and/or policies of both organizations.

    Mr. Jose Mendosa’s position as chairman of Demo International Bank and as president of Demo Bank Venezuela enables him to exert a controlling influence over the management and policies of both organizations.

  5. Engages in an unusually high level of reciprocal correspondent banking and/or other transactions or facilities between the U.S. depository institution and the foreign bank.

    The institutions primarily engage in correspondent bank services, dollar clearings, letters of credit, and trade related transactions. Fee income from transactions with the three foreign banks accounts for slightly over 40 percent of the total fee income generated by Demo International Bank, Miami, Florida in 2003. The U.S. bank also extended a $5 million line of credit secured by a $5 million certificate of deposit to Demo Bank Venezuela, Caracus, Venezuela.

  6. Obtains financing to purchase the stock of either the U.S. depository institution or the foreign bank or the foreign bank holding company from, or arranged by, the foreign bank, especially if the shares of the U.S. depository institution are collateral for the stock-purchase loan.

    None noted.

  7. Requires the U.S. depository institution to adopt particular/unique policies or strategies similar to those of the foreign bank, such as common or joint marketing strategies, cross-selling of products, sharing of customer information, or linked web sites.

    The Demo International Bank’s web site is linked to Demo Bank Venezuela’s web site. Both offer similar loan and deposit products and banking services.

  8. Names the U.S. depository institution in a similar fashion to that of the foreign bank.

    The titles of the banking organizations use similar naming conventions.

  9. Presents any other factor(s) or attribute(s) that impacted the conclusion.

    None known.

Summarize the Examination’s Findings, including any concerns and criticisms relative to the PBO.
The review determined that a PBO relationship exists between Demo International Bank and three foreign banks and a foreign bank holding company through the common control of the Mendosa family, primarily through Mr. Jose Mendosa’s ownership/control of the Demo International Bank in Miami, Florida, Demo International, C.A. (foreign bank holding company), and Demo Bank Mexico in Mexico City, Mexico.

Bank management acknowledges that the institutions are under common control. Management actively monitors all transactions with affiliated entities. No adverse trends were noted except that management was encouraged to devote additional time to review the banks’ heightened wire activity. Refer to the Related Organizations page and the Risk Management Assessment page for additional information.

If a PBO relationship exists, then the field supervisor or case manager should forward this document under a cover letter to the Associate Director of the International and Large Bank Branch.


Last Updated 02/02/2005 supervision@fdic.gov