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FIL-7-96 Attachment

[Federal Register: February 14, 1996 (Volume 61, Number 31)]

[Rules and Regulations]

[Page 5671-5675]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]



 

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Rules and Regulations

Federal Register

________________________________________________________________________


 

This section of the FEDERAL REGISTER contains regulatory documents

having general applicability and legal effect, most of which are keyed

to and codified in the Code of Federal Regulations, which is published

under 50 titles pursuant to 44 U.S.C. 1510.


 

The Code of Federal Regulations is sold by the Superintendent of Documents.

Prices of new books are listed in the first FEDERAL REGISTER issue of each

week.


 

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[[Page 5671]]



 

FEDERAL DEPOSIT INSURANCE CORPORATION


 

12 CFR Part 346


 

RIN 3064-AB62


 

 

Foreign Banks


 

AGENCY: Federal Deposit Insurance Corporation (FDIC or Corporation).


 

ACTION: Final rule.


 

-----------------------------------------------------------------------


 

SUMMARY: Section 107 of the Riegle-Neal Interstate Banking and

Branching Efficiency Act of 1994 (Riegle-Neal Act) amended section 6 of

the International Banking Act of 1978 (IBA) to provide that the FDIC

shall amend its regulation concerning domestic retail deposit

activities by state-licensed branches of foreign banks. The final rule

amends the FDIC's regulations to restrict the amount and types of

initial deposits of less than $100,000 which can be accepted by an

uninsured state-licensed branch of a foreign bank. The final rule is

intended to afford equal competitive opportunities to foreign and

domestic banks.


 

EFFECTIVE DATE: The final rule is effective on April 1, 1996.


 

FOR FURTHER INFORMATION CONTACT: Charles V. Collier, Assistant

Director, Division of Supervision, (202) 898-6850; Jeffrey M. Kopchik,

Counsel, Legal Division, (202) 898-3872, Federal Deposit Insurance

Corporation, 550 17th Street, N.W., Washington, D.C., 20429.


 

SUPPLEMENTARY INFORMATION:


 

Background


 

Section 107 of the Riegle-Neal Act (Pub. L. 103-328, 108 Stat.

2358) amended section 6 of the IBA (12 U.S.C. 3104) to provide that the

FDIC shall amend its regulation concerning domestic retail deposit

activity by state-licensed branches of foreign banks (state-licensed

branches).1 Section 6 of the IBA, 12 U.S.C. 3104, concerns the

insurance of deposits maintained at domestic branches and subsidiaries

of foreign banks. Generally, section 6 provides that United States

branches of foreign banks may not accept domestic retail deposits

unless the branch is insured by the FDIC. Section 6 goes on to state

that, after December 19, 1991, foreign banks may not establish any de

novo insured branches in the United States. Section 107 of the Riegle-

Neal Act added a new subsection (a) to section 6 of the IBA. This new

subsection provides that:


 

\1\ The Riegle-Neal Act requires the FDIC to consult with the

Office of the Comptroller of the Currency (OCC) in the process of

making these amendments in order to assure uniformity. The FDIC has

worked in close consultation with the OCC in order to achieve

substantive uniformity.

---------------------------------------------------------------------------


 

In implementing this section, the Comptroller and the Federal

Deposit Insurance Corporation shall each, by affording equal

competitive opportunities to foreign and United States banking

organizations in their United States operations, ensure that foreign

banking organizations do not receive an unfair competitive advantage

over United States banking organizations.


 

12 U.S.C. 3104(a).

In revising section 6 of the IBA, Congress made it clear that

foreign banks operating in the United States should not have an unfair

competitive advantage over domestically chartered banks. Thus, Congress

directed the FDIC and the OCC to revise their respective regulations

implementing IBA section 6 to ensure that foreign banks do not receive

an unfair competitive advantage over United States banks by affording

equal competitive opportunities to both.


 

The Current Regulatory Scheme


 

Section 346.4 of the FDIC's regulations (12 CFR 346.4) requires

that any state-licensed branch which is engaged in ``domestic retail

deposit activity'' shall be an insured branch. Section 346.6 provides

that a state-licensed branch will not be deemed to be engaged in

domestic retail deposit activity which requires the branch to be

insured if initial deposits of less than $100,000 are derived solely

from certain enumerated sources. The acceptance of initial deposits of

$100,000 or more is not considered to be retail deposit activity and,

thus, deposit insurance is not required for a state-licensed branch

which accepts only these types of initial deposits.

Section 346.6 delineates five categories of depositors from which a

state-licensed branch may accept initial deposits of less than $100,000

without triggering the insurance requirement. The five categories of

depositors are:

(1) Any business entity, including any corporation, partnership,

sole proprietorship, association or trust, which engages in commercial

activity for profit;

(2) Any governmental unit, including the United States government,

any state government, any foreign government and any political

subdivision or agency of the foregoing;

(3) Any international organization which is comprised of two or

more nations;

(4) Funds received in connection with any draft, check, or similar

instrument issued by the branch for the transmission of funds; and

(5) Any depositor who is not a citizen of the United States and who

is not a resident of the United States at the time of the initial

deposit.

This section of the regulation also includes a general exception

(commonly referred to as the ``de minimis exception'') which provides

that an uninsured state-licensed branch may accept initial deposits of

less than $100,000 from any depositor if the amount of such deposits

does not exceed on an average daily basis five percent of the average

of the branch's deposits for the last 30 days of the most recent

calendar quarter.


 

The Riegle-Neal Act


 

In directing the FDIC to amend its regulation to ensure that

foreign banking organizations do not have an unfair competitive

advantage over United States banking organizations, Congress directed

the FDIC to ``consider whether to permit'' an uninsured state-licensed

branch of a foreign bank to accept initial deposits of less than

$100,000 from a smaller class of depositors than is currently

delineated in Sec. 346.6. This suggested smaller class is limited to:

(1) Individuals who are not citizens or residents of the United

States at the time of the initial deposit;

(2) Individuals who:

(i) Are not citizens of the United States;

(ii) Are residents of the United States; and

 

[[Page 5672]]


 

(iii) Are employed by a foreign bank, foreign business, foreign

government, or recognized international organization;

(3) Persons to whom the branch or foreign bank has extended credit

or provided other nondeposit banking services;

(4) Foreign businesses and large United States businesses;

(5) Foreign governmental units and recognized international

organizations; and

(6) Persons who are depositing funds in connection with the

issuance of a financial instrument by the branch for the transmission

of funds.

Moreover, section 107(b)(3) of the Riegle-Neal Act provides that

any de minimis exception shall not exceed one percent of the average

deposits at the branch, as opposed to the current five percent. The

FDIC may establish a reasonable transition rule to facilitate any

termination of deposit taking activities. See section 107(b)(5)(B) of

the Riegle-Neal Act.

As pointed out in the preamble to the proposed regulation, if

Congress had intended the FDIC to adopt these suggested criteria

verbatim, it could have so required. See 60 FR 36075. However, the

statute explicitly provides that the FDIC ``shall consider whether to

permit'' an uninsured state-licensed branch to accept initial deposits

of less than $100,000 from the enumerated sources. By requiring only

that the FDIC consider the statutory criteria, Congress explicitly

recognized that the ultimate decision should be made by the FDIC,

consistent with the statutory objective set forth in IBA section 6(a),

in the exercise of its regulatory discretion and expertise.


 

The Proposal


 

On July 13, 1995, the FDIC published for public comment a notice of

proposed rulemaking seeking to implement section 107 of the Riegle-Neal

Act. 60 FR 36074 (July 13, 1995).2 The proposal provided that

uninsured state-licensed branches of foreign banks would be permitted

to accept initial deposits of less than $100,000 from the six

categories of depositors specified in sections 107(b)(2) (A) through

(F) of the Riegle-Neal Act. In addition, the proposal expanded and

added certain exceptions, consistent with Congressional intent. The

comment period closed on September 11, 1995. In response to the notice,

the FDIC received a total of four comment letters, three from industry

trade associations and one from an association representing state bank

regulators. One commenter fully supported the FDIC's proposal with no

suggested revisions. The remaining three commenters supported the

proposal, but suggested certain revisions. Of the three commenters who

suggested revisions, two urged the FDIC to expand the Sec. 346.6

exceptions to permit uninsured state-licensed branches to accept more

types of initial deposits of less than $100,000. Conversely, one

commenter urged the FDIC to restrict one of the proposed exceptions in

order to lessen the number of initial deposits of less than $100,000

that may be accepted by an uninsured branch. The commenters' specific

suggestions and the FDIC's responses thereto are discussed in detail

below.


 

\2\ The OCC's notice of proposed rulemaking was published at 60

FR 34907 (July 5, 1995).

---------------------------------------------------------------------------


 

Deposit Taking Activities of Uninsured Foreign Branches


 

The objective set forth by Congress in section 6(a) of the IBA is

to afford equal competitive opportunities to foreign and United States

banking organizations by ensuring that foreign banks do not receive an

unfair competitive advantage. The preamble to the proposed regulation

set forth in great detail the information and data which the FDIC

reviewed in considering this question. 60 FR 36075. The FDIC concluded

that ``uninsured state-licensed branches of foreign banks do not have

an overall unfair competitive advantage over domestic banking

organizations.'' Id. All of the comment letters agreed with this

conclusion.


 

The Comments and Final Rule


 

Two commenters suggested that the proposed Sec. 346.6(a)(3)

exception, the so-called ``nondeposit banking services exception'', be

expanded to include affiliates of the person to whom the branch or

foreign bank has extended credit or provided some other nondeposit

banking service as well as persons who have received such services from

an affiliate of the branch or foreign bank. The commenters urged this

change by pointing out that, in today's complex business world,

depositors often operate through affiliates. Similarly, foreign banks

which operate uninsured branches in the United States often offer

certain financial services through affiliates of the bank. The

commenters urged the FDIC to recognize this characteristic of the

contemporary business environment in the final regulation.

Significantly, one commenter pointed out that since the definition of

``foreign bank'' in the IBA, 12 U.S.C. 3101(7), explicitly includes any

affiliate of the foreign bank, Sec. 346.6(a)(3) of the final regulation

should include these affiliates as well.

The FDIC has carefully considered this comment and agrees that the

Sec. 346.6(a)(3) exception should be expanded to include persons who

have received a loan or other nondeposit banking service from an

affiliate of the branch or foreign bank. This revision recognizes that

the IBA definition of ``foreign bank'' includes affiliates. However,

this exception does not include a person who has dealt with any

affiliate of a foreign bank in any capacity. In crafting this

regulation, the FDIC is required to interpret and harmonize section 107

of the Riegle-Neal Act, the IBA and the Federal Deposit Insurance Act

(FDI Act). Despite the fact that the IBA definition of ``foreign bank''

includes any subsidiary or affiliate, the Sec. 346.1(a) definition of

``foreign bank'' includes only the bank itself. This difference

recognizes that Sec. 346 of the FDIC's rules regulates the deposit

taking activities of foreign banks operating branches in the United

States. It is not intended to regulate or somehow sanction the

activities of affiliates or subsidiaries of the foreign bank which may

desire to operate in this country. Section 107(b)(2)(C) of the Riegle-

Neal Act is limited to ``persons to whom the branch or foreign bank has

extended credit or provided other nondeposit banking services.''

[Emphasis added]. It does not cover persons who have dealt with any

affiliate of the foreign bank in any capacity. The FDIC interprets this

qualifying phrase to indicate Congress' intent that, despite the broad

definition of ``foreign bank'' contained in the IBA, the only

affiliates of a foreign bank which should be included in the

Sec. 346.6(a)(3) exception are those which are capable of extending

credit or providing some other nondeposit banking service to a

prospective depositor. For example, if a depositor desiring to make an

initial deposit of less than $100,000 in an uninsured branch has leased

a safe deposit box from an affiliate of the foreign bank within the

past twelve months, that deposit would qualify under the

Sec. 346.6(a)(3) exception since the prospective depositor would be the

recipient of a nondeposit banking service. Any state-licensed branch

that is unsure whether a deposit of less than $100,000 could be

accepted pursuant to the Sec. 346.6(a)(3) exception should contact the

FDIC for guidance.

With regard to affiliates of the depositor, the arguments are not

as compelling. First, and most persuasively, the IBA does not define

the term ``depositor'', ``customer'' or


 

[[Page 5673]]

``person''. Thus, there is no indication that Congress intended to

include affiliates of persons to whom the branch or foreign bank has

extended credit or provided some other nondeposit banking service.

Second, while depositors may operate through affiliates in a fashion

similar to the foreign branch or bank, the inclusion of affiliates in

this context may very well conflict with the section 107(b)(2)(D)

exception which limits retail deposit taking to ``large United States

businesses''. That is, the inclusion of affiliates of a depositor who

has received some nondeposit banking service could very well include

small subsidiaries of the depositor. Thus, the FDIC has decided not to

expand this exception to include affiliates of the depositor.

It was also suggested that the proposed Sec. 346.6(a)(3) nondeposit

banking service exception be expanded to apply to situations where the

affiliate has provided depository services to the customer or its

affiliate. The FDIC is of the opinion that this further expansion of

the exception is unwarranted. The key to section 107(b)(2)(C) of the

Riegle-Neal Act is its limitation to ``nondeposit'' banking services.

It would be inappropriate for the FDIC to disregard this limitation

even while recognizing that, except for the mandatory change to the de

minimis rule, Congress provided the Corporation with only suggested

parameters for the types of deposits of less than $100,000 that

uninsured state-licensed branches should be permitted to accept.

One commenter recommended that the FDIC modify the proposal to

permit uninsured state-licensed branches to accept initial deposits of

less than $100,000 from all businesses, including foundations and other

entities which are not engaged in commercial activity for profit.

Section 346.6(a)(1) of the current regulation exempts initial deposits

of less than $100,000 from ``any business entity * * * engaged in

commercial activity for profit''. It is the FDIC's understanding that,

after the de minimis exception, this exception is the one most often

utilized by state-licensed branches. The commenter argued that adopting

this suggestion would make the regulation less burdensome and easier to

administer, as well as promote international trade finance.

The FDIC remains unconvinced that the final regulation should

permit uninsured branches to accept deposits of less than $100,000 from

any business entity, including those not engaged in a commercial

activity for profit, such as foundations. Section 107 of the Riegle-

Neal Act expresses Congress' expectation that the overall scope of

Sec. 346.6 would be reduced. While the ultimate decision concerning

what exceptions should be included in the final regulation is to be

made by the FDIC in the exercise of its regulatory discretion and

expertise, the FDIC cannot ignore Congressional intent.

In the alternative, the commenter who suggested an exception for

all business deposits also suggested that the proposed Sec. 346.6(a)(4)

exception for large United States' businesses should be expanded by

revising the definition of ``large United States business'' that

appears in Sec. 346.1(t) of the proposal. The commenter proposed that

alternate criteria be added to the definition so that any business with

total assets of more than $1 million or 50 or more employees would also

be considered a ``large United States business''. However, the

commenter did not include any support for its use of the $1 million of

assets or 50 or more employees criteria. Another commenter expressed

the opposite concern, that the FDIC's suggested $1 million in gross

revenue figure should be increased to $25 million or possibly $100

million, in order to narrow the exception. In view of these

contradictory suggestions and the absence of data supporting them, the

FDIC has decided not to make any changes to the definition of ``large

United States business'' as set forth in the proposed regulation.

One comment letter requested clarification of the application of

the proposed transition rule which is set forth in Sec. 346.6(c) of the

proposed regulation. That commenter pointed out that, with regard to

time deposits, the proposal could require state-licensed branches to

reclassify or divest some time deposits very shortly after the

effective date of the final regulation if the deposit matures during

this period. This commenter suggested that the proposal be modified to

give state-licensed branches a reasonable period of time to reclassify

or divest time deposits that mature very shortly after the final

regulation's effective date. The FDIC agrees with this suggestion and

has amended Sec. 346.6(c)(2) of the proposal to provide that state-

licensed branches will have at least 90 days after the effective date

of the final regulation to reclassify or divest such time deposits.

This comment letter also recommended that branches should be

required to reclassify or divest only those deposits which were

accepted under the five percent de minimis exception, as opposed to

deposits accepted pursuant to any of the Sec. 346.6(a) exceptions. The

FDIC considered this option at great length, but in order to achieve

the uniformity required by the statute, the agency is adhering to the

transition rule as described in the proposal which requires the

reclassification or divestiture of all deposit accounts which were

originally accepted pursuant to any of the Sec. 346.6(a) exceptions.

This same comment letter expressed some confusion concerning other

aspects of how the FDIC will apply the transition rule. In an effort to

avoid confusion, the FDIC would like to clarify that a deposit

(including a time deposit) may be reclassified at any time during the

transition period. If a time deposit matures prior to the end of the

five year transition period, it must be reclassified or divested at

that time. However, no time deposit need be reclassified or divested

sooner than 90 days after the effective date of the final regulation.

In the preamble to the proposed regulation, 60 FR 36077, the FDIC

noted that it was considering adding a new exception that would permit

an uninsured state-licensed branch to accept initial deposits of less

than $100,000 from immediate family members of individuals who qualify

for any of the exceptions listed in proposed Secs. 346.6(a) (1) through

(6). The one commenter who mentioned this issue supported the idea of

including such an additional exception in the final rule and stated

that such an exception would not create any unfair competitive

advantage for foreign banks. The FDIC has considered this issue at

length and has concluded that such an exception would be overly broad

and inconsistent with Congressional intent. However, the FDIC has

decided to revise Sec. 346.6(a)(3) of the proposal to include 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 within the

next twelve months.

With regard to Sec. 346.6(b), ``Application for an exemption'', it

was suggested that the FDIC should permit the request to be submitted

by the bank's senior management rather than requiring authorization by

the foreign bank's board of directors. The FDIC agrees that this change

would make the regulation less burdensome. Moreover, in a somewhat

different context, Sec. 346.101(d) of the FDIC's regulations permits an

application evidencing approval by senior management if a board

resolution is not required by the foreign bank's organizational


 

[[Page 5674]]

documents. Thus, the FDIC has decided to amend Sec. 346.6(b) in the

same fashion.

One commenter requested confirmation of its interpretation of the

preamble to the proposed rule that existing deposits which were not

originally subject to the Sec. 346.6 exceptions, because the initial

deposit establishing the account was $100,000 or more, would not be

subject to the revised regulation even if the first deposit in the

account after the effective date of final regulation is less than

$100,000. This interpretation is correct. The only deposits which must

be reclassified or divested after this final rule becomes effective are

those which were established with less than $100,000 pursuant to one of

the exceptions set forth in current Secs. 346.6(a) (1) through (6).


 

Calculation of the De Minimis


 

One commenter expressed some confusion concerning how the de

minimis amount should be calculated and whether this amendment changes

the calculation method currently being used under the existing

regulation. This final amendment to Sec. 346 is not intended to change

how the de minimis amount is calculated. The de minimis amount is

computed as a fraction, the numerator of which consists of the total

amount of deposits which have been accepted pursuant to the de minimis

exception. The FDIC wishes to make it clear that the numerator is

comprised of the total amount of deposits accepted under the de minimis

exception, not just the amount of the initial deposits of less than

$100,000 which were accepted to open the accounts. The denominator of

the fraction consists of the average amount of third party deposits

maintained by the branch during the last thirty calendar days of the

most recent calendar quarter. See 44 FR 40057, 40061 (July 9, 1979);

FDIC Legal Division Staff Advisory Opinion (unpublished) dated December

16, 1985 from Katharine H. Haygood, Esq.


 

Effective Date


 

Section 302(b) of the Riegle Community Development and Regulatory

Improvement Act of 1994 (Pub. L. 103-325, September 29, 1994) provides

that new regulations and amendments to regulations prescribed by the

federal banking agencies shall take effect on the first day of a

calendar quarter which begins on or after the date on which the

regulation is published in final form, unless the agency determines for

good cause that the regulation should become effective at an earlier

date or the regulation is required to become effective at some other

date determined by law. The Administrative Procedure Act (5 U.S.C. 551

et seq.) provides that regulations shall become effective thirty days

after their publication in the Federal Register. 5 U.S.C. 553. Thus,

this amendment to Part 346 of its regulations shall become effective on

April 1, 1996.


 

List of Subjects in 12 CFR Part 346


 

Bank deposit insurance, Foreign banking, Reporting and

recordkeeping requirements.


 

For the reasons set out in the preamble, the FDIC Board of

Directors hereby amends 12 CFR part 346 to read as follows:


 

PART 346--FOREIGN BANKS


 

1. The authority citation for part 346 continues to read as

follows:


 

Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820, 3103, 3104,

3105, 3108.


 

2. Section 346.1 is amended by adding a sentence to the end of

paragraph (a), revising paragraph (o), and adding paragraphs (s)

through (v) to read as follows:



 

Sec. 346.1 Definitions.


 

(a) * * * For purposes of Sec. 346.6, the term foreign bank does

not include any bank organized under the laws of any territory of the

United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands

the deposits of which are insured by the Corporation pursuant to the

Federal Deposit Insurance Act.

* * * * *

(o) Affiliate means any entity that controls, is controlled by, or

is under common control with another entity. An entity shall be deemed

to ``control'' another entity if the entity directly or indirectly

owns, controls, or has the power to vote 25 percent or more of any

class of voting securities of the other entity or controls in any

manner the election of a majority of the directors or trustees of the

other entity.

* * * * *

(s) Foreign business means any entity, including but not limited to

a corporation, partnership, sole proprietorship, association,

foundation or trust, which is organized under the laws of a country

other than the United States or any United States entity which is owned

or controlled by an entity which is organized under the laws of a

country other than the United States or a foreign national.

(t) Large United States business means any entity including but not

limited to a corporation, partnership, sole proprietorship,

association, foundation or trust which is organized under the laws of

the United States or any state thereof, and:

(1) Whose securities are registered on a national securities

exchange or quoted on the National Association of Securities Dealers

Automated Quotation System; or

(2) Has annual gross revenues in excess of $1,000,000 for the

fiscal year immediately preceding the initial deposit.

(u) Person means an individual, bank, corporation, partnership,

trust, association, foundation, joint venture, pool, syndicate, sole

proprietorship, unincorporated organization, or any other form of

entity.

(v) Immediate family member of a natural person means the spouse,

father, mother, brother, sister, son or daughter of that natural

person.

3. Section 346.6 is revised to read as follows:



 

Sec. 346.6 Exemptions from the insurance requirement.


 

(a) Deposit activities not requiring insurance. A state branch will

not be deemed to be engaged in a domestic retail deposit activity which

requires the branch to be an insured branch under Sec. 346.4 if initial

deposits in an amount of less than $100,000 are derived solely from the

following:

(1) Individuals who are not citizens or residents of the United

States at the time of the initial deposit;

(2) Individuals who:

(i) Are not citizens of the United States;

(ii) Are residents of the United States; and

(iii) Are employed by a foreign bank, foreign business, foreign

government, or recognized international organization;

(3) 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 within the next twelve months;

(4) Foreign businesses, large United States businesses, and persons

from whom an Edge Corporation may accept deposits under

Sec. 211.4(e)(1) of Regulation K of the Board of Governors of the

Federal Reserve System, 12 CFR 211.4(e)(1);

(5) Any governmental unit, including the United States government,

any state government, any foreign government and any political

subdivision or agency of any of the foregoing, and recognized

international organizations;

(6) Persons who are depositing funds in connection with the

issuance of a


 

[[Page 5675]]

financial instrument by the branch for the transmission of funds or the

transmission of such funds by any electronic means; and

(7) Any other depositor but only if the amount of deposits under

this paragraph (a)(7) does not exceed on an average daily basis one

percent of the average of the branch's deposits for the last 30 days of

the most recent calendar quarter, excluding deposits in the branch of

other offices, branches, agencies or wholly owned subsidiaries of the

bank and the branch does not solicit deposits from the general public

by advertising, display of signs, or similar activity designed to

attract the attention of the general public. A foreign bank which has

more than one state branch in the same state may aggregate deposits in

such branches (excluding deposits of other branches, agencies or wholly

owned subsidiaries of the bank) for the purpose of this paragraph

(a)(7). The average shall be computed by using the sum of the close of

business figures for the last 30 calendar days ending with and

including the last day of the calendar quarter divided by 30. For days

on which the branch is closed, balances from the last previous business

day are to be used.

(b) Application for an exemption. (1) Whenever a foreign bank

proposes to accept at a state branch initial deposits of less than

$100,000 and such deposits are not otherwise excepted under paragraph

(a) of this section, the foreign bank may apply to the FDIC for consent

to operate the branch as a noninsured branch. The Board of Directors

may exempt the branch from the insurance requirement if the branch is

not engaged in domestic retail deposit activities requiring insurance

protection. The Board of Directors will consider the size and nature of

depositors and deposit accounts, the importance of maintaining and

improving the availability of credit to all sectors of the United

States economy, including the international trade finance sector of the

United State economy, whether the exemption would give the foreign bank

an unfair competitive advantage over United States banking

organizations, and any other relevant factors in making this

determination.

(2) Any request for an exemption under this paragraph should be in

writing and authorized by the board of directors of the foreign bank.

If a resolution is not required pursuant to the applicant's

organizational documents, the request shall include evidence of

approval by the bank's senior management. The request should be filed

with the Regional Director of the Division of Supervision for the

region where the state branch is located.

(3) The request should detail the kinds of deposit activities in

which the branch proposes to engage, the expected source of deposits,

the manner in which deposits will be solicited, how this activity will

maintain or improve the availability of credit to all sectors of the

United States economy, including the international trade finance

sector, that the activity will not give the foreign bank an unfair

competitive advantage over United States banking organizations and any

other relevant information.

(c) Transition period. An uninsured state branch may maintain a

retail deposit lawfully accepted pursuant to this section prior to

April 1, 1996:

(1) If the deposit qualifies pursuant to paragraph (a) or (b) of

this section; or

(2) If the deposit does not qualify pursuant to paragraph (a) or

(b) of this section, no later than:

(i) In the case of a non-time deposit, five years from April 1,

1996; or

(ii) In the case of a time deposit, the first maturity date of the

time deposit after April 1, 1996 or the date that is 90 days after

April 1, 1996, whichever is later.


 

By order of the Board of Directors, dated at Washington, D.C.,

this 6th day of February, 1996.


 

Federal Deposit Insurance Corporation.

Jerry L. Langley,

Executive Secretary.

[FR Doc. 96-3274 Filed 2-13-96; 8:45 am]

BILLING CODE 6714-01-P

Last Updated: March 24, 2024