Institute
of International Bankers
May 3, 2004
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: Robert E. Feldman,
Executive Secretary
Re: Proposed Rule: Transactions with Affiliates (RIN 3064-AC78)
Ladies and Gentlemen:
We are submitting
this letter in response to the request of the Federal Deposit
Insurance Corporation (the "FDIC")
for comment on the FDIC's proposed rule regarding the application
of Sections 23A and 23B of the Federal Reserve Act1 and
the Federal Reserve Board's Regulation W2 to
insured state nonmember banks (the "Proposed Rule").3 The Institute of International Bankers represents internationally
headquartered financial institutions
from over 40 countries, and our members include international
banks that operate FDIC-insured state-licensed branches ("insured
State branches") in the United States.
The preamble
to the Proposed Rule states that it is the FDIC's view that "insured
State branches, agencies, and commercial lending companies
of foreign banks are subject to the substantive
provisions of Regulation W and this part.4 The FDIC requests
comment on whether the Proposed Rule is clear in this respect
and whether the FDIC's view is justified.
We
understand that the FDIC's stated position is intended only to
confirm
that
insured State branches, like other U.S. branches
of international banks, are subject to those provisions of Regulation
W that specifically apply to U.S. branches of international banks
with respect to transactions with certain affiliates engaged
in activities under authority of the Gramm- Leach-Bliley Act
(the "GLBA") i.e., Subpart G of Regulation W). The
applicability of those provisions to insured State branches is
clear under Subpart G of Regulation W, which implements the Federal
Reserve Board's statutory authority under the GLBA to impose
such restrictions on U.S. branches, agencies and commercial lending
companies of international banks.5 Thus, we understand that the
FDIC's position is not intended to suggest that insured State
branches are generally subject to Sections 23A and 23B of the
Federal Reserve Act as implemented in Regulation W (other than
Subpart G).
On the basis of our understanding of the FDIC's intent, we do
not believe that the Proposed Rule requires additional clarification
or justification of this point. If the FDIC were to determine
that a clarification is appropriate, the FDIC's new Part 303
could provide simply that insured State branches are subject
to Subpart G of Regulation W in the same manner and to the same
extent as other branches of international banks.
We note that if the FDIC were to change its position regarding
the general applicability of Sections 23A and 23B and Regulation
W to insured State branches, we would respectfully submit that
such a change would require a detailed proposal and opportunity
for further comment, as the application of affiliate transaction
limits to branch offices of international banks raises complex
issues stemming from the unique nature of cross-border branch
operations.
Please do not hesitate to contact the Institute if we can be
of further assistance.
Sincerely,
Lawrence R. Uhlick
Executive Director and General Counsel
__________________
1 12 U.S.C. §§ 371c,
371c-1 ("Sections 23A and 23B").
2
12 C.F.R. Part 223 ("Regulation
W").
3
69 Fed. Reg. 12571 (March 17, 2004).
4 69 Fed. Reg.
at 12577. We understand that the reference to agencies and commercial
lending companies in this context was inadvertent, as agencies
and commercial lending companies are not authorized to accept FDIC-insured
deposits and are not treated as "insured banks" under
the Federal Deposit Insurance Act (the "FDIA") or as
member banks under Sections 23A or 23B.
The Institute's mission is to help resolve the many special legislative, regulatory
and tax issues confronting internationally headquartered financial institutions
that engage in banking, securities and/or insurance activities in the United
States.
5 See
GLBA § 114(b)(4),
codified at 12 U.S.C. § 1828a(b)(4) ("The [Federal Reserve]
Board may, by regulation or order, impose restrictions or requirements
on relationships or transactions between a branch, agency, or commercial
lending company of a foreign bank in the United States and any
affiliate in the United States of such foreign bank" if the
Federal Reserve Board makes certain findings.).
|
