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FDIC Federal Register Citations

Conference of State Bank Supervisors

September 17, 2004

The Honorable Donald E. Powell
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429-9990


Attention: RIN number 3064-AC85
International Banking; Proposed Rule, 69 Fed. Reg. 43060 (2004)

Dear Mr. Chairman:

The Conference of State Bank Supervisors (CSBS) is pleased to submit comments on the International Banking Proposed Rule, which was published by the Federal Deposit Insurance Corporation (FDIC) at 69 Fed. Reg. 43060 (July 19, 2004). Specifically, CSBS submits the following comments on proposed revisions to FDIC regulations pertaining to operations of federal branches and agencies of foreign banks.

As you know, CSBS is the professional association of state officials responsible for chartering, regulating and supervising more than 6,000 of the nation’s state-chartered commercial and savings banks, and nearly 420 state-licensed foreign banking organizations nationwide. These state-licensed institutions account for 85% of the more than $1.3 trillion in assets held by foreign banking organizations in the United States, demonstrating that the state license is the overwhelmingly choice of the foreign bank community. Our states provide effective and efficient supervision to ensure the continued safe and sound operation of state-licensed institutions, while being receptive and responsive to their legitimate needs and concerns. In doing so, we work closely with the FDIC and value our partnership in achieving our mutual supervisory goals.

At the outset, we note that the provisions affecting branches of foreign banks cover a limited number of institutions1 that were “grandfathered” under the 1991 statutory amendments. That is, these institutions are allowed to continue to obtain FDIC insurance for their retail deposits. With this in mind, we offer the following comments.

We believe that asset pledge and asset maintenance requirements are extremely important and valuable supervisory tools. Indeed, where the purpose of these requirements is to protect creditors of uninsured branches, the role of state asset pledge and asset maintenance requirements is paramount. However, in the unique situation where retail deposits are insured by the FDIC, a major objective is the protection of depositors. Nothing in the proposed rule limits a state's prerogative to impose asset pledge and asset maintenance requirements. Where allowed by state law, certain states (e.g., New York and Illinois) have taken the initiative to avoid the imposition of double asset pledge requirements by exempting FDIC insured branches from state asset pledge requirements. Given the unique situation and lack of effect on state prerogatives, we have no objection to these provisions of the proposed rule.

The proposed rule requests comments on whether the FDIC should provide deposit insurance for wholesale U.S. branches of foreign banks. Our supervisors are not responsible for the operation and administration of the insurance fund, and so we defer to the FDIC for the analysis of the implications for the insurance fund. However, as a matter of principle we believe that federal statutes should be construed carefully to ensure that Congressional intent is implemented.. Accordingly, we concur in the FDIC’s legal conclusion that such “optional insurance” is not authorized specifically by statute.

Thank you for your consideration of our comments. Please contact Alan Cox or me at 202-296-2840 if you have any questions or we can be of service.

Best personal regards,

Neil Milner CAE
President & CEO
Conference of State Bank Supervisors
1155 Connecticut Avenue, N.W., Fifth Floor
Washington, D.C. 20036-4306


1 Currently there are 12 such institutions

Last Updated 09/17/2004

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