TO:
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CHIEF EXECUTIVE OFFICER
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SUBJECT:
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FDIC Adopts Final Regulation to
Consolidate and Update
Rules for Foreign Banking Activities
(Part 347 of the FDIC's Rules and Regulations)
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The FDIC Board of Directors has adopted a new
regulation that consolidates, updates and streamlines rules that apply to
foreign banking operations. The FDIC's international rules, which had been on
the books since 1979 without significant revision, were divided into three
separate parts. Those rules will be consolidated into one regulation, Part 347.
Under the new Part 347, state nonmember banks will be able to compete more
effectively abroad.
The new regulation, which is attached, will take effect on July 1, 1998.
Banks may elect to voluntarily comply with it on May 8, 1998.
The new Part 347 reduces filing requirements for most banks
wishing to open a foreign branch or make a foreign investment.
Well-run, well-capitalized institutions with no enforcement
actions pending against them that meet certain other criteria
may utilize the FDIC's "general consent" when
initiating new activities abroad. This means an eligible
institution can presume to have the FDIC's approval to engage in
certain activities. The institution is required to notify the
FDIC after new operations begin. Alternatively, well-run,
well-capitalized institutions ineligible to proceed under the
presumption of general consent can now take advantage of
expedited processing for their applications.
The Board has defined permissible activities that bank
branches, foreign joint ventures and subsidiaries may
engage in, within specific dollar limits. The new
regulation reflects statutory requirements that a
foreign banking organization's retail deposit-taking
activities in the United States be conducted through an
insured bank subsidiary, not an insured branch. Under
the new Part 347, quarterly, not semiannual,
calculations and reporting are required for pledged
assets that apply to the deposit activities of insured
branches.
Other key aspects of Part 347 follow. The new
regulation:
- Eliminates a general limit on
foreign investment of 25 percent
of capital. New investment
limitations are associated with
specific types of activities.
The regulation also includes
procedures for requesting
modifications to the limits.
- Permits a bank's foreign branch
to underwrite, distribute and
deal, invest in and trade
obligations of any foreign
government, rather than just the
obligations of the country in
which it is located. Banks may
also invest directly in foreign
organizations that are not
banks.
- Simplifies accounting for fees
on international loans. Instead
of requiring specific accounting
procedures, the new rule directs
banks to follow generally
accepted accounting principles
(GAAP).
- Requires banks to either
establish
reserves to account for transfer
risk in international assets or
use an alternative method
consistent with GAAP.
For further information, please
contact the following in the
Division of Supervision:
Christopher Spoth, Assistant
Director, at (202)
898-6611, Karen Walter,
Chief, at (202) 898-3540, or
Suzanne Williams, Senior
Financial Analyst, at (202)
898-6788; or in the Legal
Division, Jamey Basham,
Counsel, at (202) 898-7265,
or Wendy Sneff, Counsel, at
(202) 898-6865.
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Nicholas
J.
Ketcha
Jr.
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Director
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Attachment:
April 8
Federal
Register,
pages
17056-17090
Distribution:
FDIC-Supervised
Banks
(Commercial
and
Savings)
NOTE:
Paper
copies
of
FDIC
financial
institution
letters
may
be
obtained
through
the
FDIC's
Public
Information
Center,
801
17th
Street,
N.W.,
Room
100,
Washington,
D.C.
20434
(800-276-6003
or
(703)
562-2200).
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