Decisions on Bank Applications
Toyota Financial Savings Bank
In Re: Toyota Financial Savings Bank Henderson, Nevada
Application for Federal Deposit Insurance (Bank Insurance Fund)
The Board of Directors of the Federal Deposit Insurance Corporation has fully considered all available facts and information relevant to the factors of Section 6 of the Federal Deposit Insurance Act relating to the application for Federal deposit insurance for Toyota Financial Savings Bank (the "Bank"), a proposed new institution to be located in Henderson, Nevada.
Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement, that the application for Federal deposit insurance be approved, subject to the following conditions
1. Beginning paid-in capital funds shall not be less than $10,000,000.
2. The Bank's Tier 1 capital to assets leverage ratio (as defined in the appropriate capital regulation and guidance from the Bank's primary federal regulator) shall be maintained at not less than eight percent (8%) throughout the first three years of operation and an adequate allowance for loan and lease losses will be provided.
3. Any changes in proposed management or the proposed ownership of ten percent (10%) or more of stock, including new acquisitions of or subscriptions to ten percent (10%) or more of stock, shall be approved by the FDIC prior to opening.
4. An accrual accounting system shall be adopted for maintaining the financial records of the Bank.
5. Federal deposit insurance shall not become effective until the Bank is authorized to operate as a State Bank by the appropriate State authority.
6. The Bank shall submit any proposed contracts, leases, or agreements relating to rental of permanent quarters to the San Francisco Regional Director for review and comment.
7. Where applicable, full disclosure has been made to all proposed directors and stockholders of the facts concerning the interest of any insider in any transactions being effected or then contemplated, including the identity of the parties to the transaction and the terms and costs involved. An insider is one who is or is proposed to be a director, officer, or incorporator of the Bank; a shareholder who directly or indirectly controls 10 or more percent of any class of the Bank's outstanding voting stock; or the associates or interests of any such person.
8. Prior to the effective date of Federal deposit insurance, the Bank shall obtain surety bond coverage in a sufficient amount to conform to generally accepted banking practices.
9. The Bank shall obtain an audit of its financial statements by an independent public accountant annually for at least the first three years after deposit insurance is effective and shall submit to the San Francisco Regional Director (i) a copy of the audited annual financial statements and the independent public auditor's report thereon within 90 days after the end of the Bank's fiscal year, (ii) a copy of any other reports by the independent auditor (including any management letters) within 15 days after their receipt by the Bank, and (iii) written notification within 15 days when a change in the Bank's independent auditor occurs.
10. The Bank shall operate within the parameters of the business plan submitted as part of the application for deposit insurance. During the first three years of operation, the Bank shall notify the San Francisco Regional Director of any proposed major deviation or material change from the submitted plan 60 days before consummating the change.
11 Prior to receiving deposit insurance, the Bank's ultimate parent, the Toyota Motor Corporation, shall establish a designated agent in the United States for service of process and enter into and maintain a written agreement with the FDIC whereby Toyota Motor Corporation agrees to be subject to United States Court jurisdiction on domestic banking issues.
12. The Bank shall not engage in any transactions with non-U.S. financial affiliates without the prior written approval of the San Francisco Regional Director. At the discretion of the San Francisco Regional Director, such approval may be specific to individual transactions, or such approval may be applied to a series of transactions or types of transactions, subject to appropriate limitations of Sections 22(g), 22(h), 23A, and 23B of the Federal Reserve Act, as made applicable to insured state nonmember banks by Section 18(j) of the FDI Act, or other applicable Federal or State restrictions or limitations.
13. Prior and subsequent to entering into any transaction with a non-U.S. financial affiliate, the Bank will obtain and maintain current financial information on that affiliate and make this information available for examiner review at the Bank's main office in the United States. At a minimum, such financial information shall include an annual income statement and balance sheet, no more than 18 months old expressed in U.S. dollars and in English, and audited by a reputable accounting firm.
If deposit insurance has not become effective within twelve months from the date of this ORDER, the consent granted herein shall expire, unless the FDIC approves a request for an extension of the deadline prior to the expiration.
Until the Bank is established, the FDIC shall have the right to alter, suspend, or withdraw the said commitment should any interim development warrant such action.
By Order of the Board of Directors of the Federal Deposit Insurance Corporation. Dated at Washington, D.C. this Both day of January, 2004.
FEDERAL DEPOSIT INSURANCE CORPORATION
Robert E. Feldman Executive Secretary
In Re: Toyota Financial Savings Bank (Proposed) Henderson, Clark County, Nevada
Application for Federal Deposit Insurance (Bank Insurance Fund)
Pursuant to the provisions of Section 5 of the Federal Deposit Insurance Act (12 U.S.C. 1815), an application for Federal deposit insurance has been filed for Toyota Financial Savings Bank (the "Bank's"), a proposed Nevada thrift company, to be located at 2285 Corporate Circle, Suite 150, Henderson, Clark County, Nevada.
The Bank's ultimate parent will be Toyota Motor Corporation, Nagoya, Japan ("TMC"). TMC is the maker of Toyota and Lexus automobiles and is the world's third largest automaker. The company's stock is publicly traded in Japan and elsewhere, including the U.S. Among its numerous business ventures, TMC owns banking institutions in Brazil, Germany, and Poland. TMC is not subject to the Bank Holding Company Act, and its simultaneous ownership of the Bank and the foreign banks results in a structure that qualifies as a parallel-owned banking organization.
Toyota Financial Services Americas Corp., Torrance, California ("TFSA"), the Bank's immediate parent and sole shareholder, controls all domestic financing operations of TMC. TFSA is also the holding company for Toyota Motor Credit Corporation, Torrance, California, the fifteenth largest finance company in the country. The Bank will rely on its parent organization and affiliated entities for financial and other support.
TMC will initially capitalize the Bank with $10 million, and the Bank projects total assets of $115 million at the end of the third year of operation. The Bank will provide banking products to Toyota and Lexus automobile dealers, initially targeting dealers in California and Nevada before expanding to dealers nationwide. The Bank will eventually market its banking products to owners of Toyota and Lexus automobiles throughout the country.
The proposed ownership structure has the potential to present supervisory concerns similar to those posed by chain banking organizations. In chain banks, the proposed structure could lead to a concentration of banking resources susceptible to common risks without centralized supervision and regulation over the organization. In these types of organizations, there is a concern that low-quality assets and other funds may be shifted between banks to avoid detection by regulators and auditors. Our concerns also include risks that result because part of the "chain" is in another country and not subject to U.S. supervision. This type of structure may make it difficult to obtain information necessary to monitor the foreign affiliates. The parent company is not considered a foreign banking organization1 for purposes of the International Banking Act ("IBA") and may not be subject to comprehensive consolidated supervision. The concept of effective comprehensive consolidated supervision has been embraced by the FDIC through its involvement in international bank supervisory bodies such as the Basel Committee on Banking Supervision.
Our concerns about the proposed structure are significantly mitigated in this case by the parent's status as a publicly traded company. Moreover, the foreign bank affiliates are located in countries which appear to have adequate supervisory regimes, as they relate to the foreign bank affiliates of the applicant. The FDIC will be able to monitor the parent company's consolidated financial condition and its impact on the domestic Bank by reviewing publicly available financial information. The FDIC, by imposing certain non-standard conditions, provides further safeguards. The FDIC is imposing a condition that there will be no transactions with non-U.S. financial affiliates without prior written approval by the Regional Director of the FDIC. Such approval does not exempt the applicant from the applicable limitations of Sections 22(g), 22(h), 23A, and 23B of the Federal Reserve Act. Moreover, prior to entering into any transaction with a non-U.S. financial affiliate, the Bank will obtain and maintain current financial information on that affiliate and make this information available for examiner review at the proposed institution's main office, including an annual income statement and balance sheet, expressed in U.S. dollars and in English, and audited by a reputable accounting firm. The proponents have indicated that there are no intentions at this time to engage in transactions with foreign bank affiliates.
In addition, due to TMC's status as a non-U.S. corporation, the FDIC is imposing a condition whereby TMC maintains an agreement with the FDIC to stipulate to U.S. jurisdiction for banking law issues and identify its designated agent for service of process in such cases. This will place TMC on the same footing as a U.S.-domiciled ultimate parent of an industrial loan company, for such purposes. Under the Bank's charter as a Nevada thrift company, it may conduct banking activities similar to those of industrial loan companies in certain other states.
For the purposes of this proposal, capital is adequate, future earnings prospects are favorable, management is considered satisfactory, and the investment in fixed assets is reasonable.
Corporate powers to be exercised are consistent with the purpose of the Federal Deposit Insurance Act. No undue risk to the Bank Insurance Fund is apparent.
Accordingly, based upon careful evaluation of all available facts and information, the Board of Directors of the Federal Deposit Insurance Corporation has concluded that approval of the application is warranted.
BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION
 The term "foreign banking organization" as defined by section 211.21(o) of Regulation K of the Board of Governors of the Federal Reserve System, 12 C.F.R. 211.21(o), means:
"(1) A foreign bank, as defined in section 1(b)(7) of the IBA (12 U.S.C. 3101(7)), that:
(i) Operates a branch, agency, or commercial lending company subsidiary in the United States;
(ii) Controls a bank in the United States; or
(iii) Controls an Edge corporation acquired after March 5, 1987; and
(2) Any company of which the foreign bank is a subsidiary."
The term "foreign bank" as defined in section 1(b)(7) of the International Banking Act of 1978, 12 U.S.C. 3101(7), means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, which engages in the business of banking, or any subsidiary or affiliate, organized under such law, of any such company.... [T]he term "foreign bank" includes, without limitation, foreign commercial banks, foreign merchant banks and other foreign institutions that engage in banking activities usual in connection with the business of banking in the countries where such foreign institutions are organized or operating."