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2000 - Rules and Regulations


PART 347—INTERNATIONAL BANKING

Subpart A—Foreign Banking and Investment by Insured State Nonmember Banks

Sec.

347.101 Authority, purpose, and scope.
347.102 Definitions.
347.103 Effect of state law on actions taken under this subpart.
347.104 Insured state nonmember bank investment in foreign organizations.
347.105 Permissible financial activities outside the United States.
347.106 Going Concerns.
347.107 Joint ventures.
347.108 Portfolio investments.
347.109 Limitations on indirect investments in nonfinancial foreign organizations.
347.110 Affiliate holdings.
347.111 Underwriting and dealing limits applicable to foreign organizations held by insured state nonmember banks.
347.112 Restrictions applicable to foreign organizations that act as futures commission merchants.
347.113 Restrictions applicable to activities by a foreign organization in the United States.
347.114 Extensions of credit to foreign organizations held by insured state nonmember banks; shares of foreign organizations held in connection with debts previously contracted.
347.115 Permissible activities for a foreign branch of an insured state nonmember bank.
347.116 Recordkeeping and supervision of the foreign activities of insured state nonmember banks.
347.117 General consent.
347.118 Expedited processing.
347.119 Specific consent.
347.120 Computation of investment amounts.
347.121 Requirements for insured state nonmember bank to close a foreign branch.
347.122 Limitations applicable to the authority provided in this subpart.

Subpart B—Foreign Banks

347.201 Authority, purpose, and scope.
347.202 Definitions.
347.203 Deposit insurance required for all branches of foreign banks engaged in domestic retail deposit activity in the same state.
347.204 Commitment to be examined and provide information.
347.205 Record maintenance.
347.206 Domestic retail deposit activity requiring deposit insurance by U.S. branch of a foreign bank.
347.207 Disclosure of supervisory information to foreign supervisors.
347.208 Assessment base deductions by insured branch.
347.209 Pledge of assets.
347.210 Asset maintenance.
347.211 Examination of branches of foreign banks.
347.212 FDIC approval to conduct activities that are not permissible for federal branches.
347.213 Establishment or operation of noninsured foreign branch.
347.214 Branch established under section 5 of the International Banking Act.
347.215 Exemptions from deposit insurance requirement.
347.216 Depositor notification.

Subpart C—International Lending

Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820, 1828, 3103, 3104, 3105, 3108, 3109; Title IX, Pub. L. 98--181, 97 Stat. 1153.

SOURCE: The provisions of this Part 347 appear at 70 Fed. Reg. 17560 April 6, 2005, effective July 1, 2005, and 70 Fed. Reg. 20705, April 21, 2005, effective July 1, 2005 except as otherwise noted.

§ 347.101  Authority, purpose, and scope.

(a)  This subpart is issued pursuant to section 18(d) and (l) of the Federal Deposit Insurance Act (12 U.S.C. 1828(d), 1828(l).

(b)  The rules in subpart A address the FDIC's requirements for insured state nonmember bank investments in foreign organizations, permissible foreign financial activities, loans or extensions of credit to or for the account of foreign organizations, and the FDIC's recordkeeping, supervision, and approval requirements. The rules also address the permissible activities for foreign branches of insured state nonmember banks, as well as the FDIC's requirements for establishing, operating, relocating and closing of branches in foreign countries.

[Codified to 12 C.F.R. § 347.101]

§ 347.102

For the purpose of this subpart:

(a)  An affiliate of an insured state nonmember bank means:

(1)  Any entity of which the insured state nonmember bank is a direct or indirect subsidiary or which otherwise controls the insured state nonmember bank;

(2)  Any organization which is a direct or indirect subsidiary of such entity or which is otherwise controlled by such entity; or

(3)  Any other organization that is a direct or indirect subsidiary of the insured state nonmember bank or is otherwise controlled by the insured state nonmember bank.

(b)  Control means the ability to control in any manner the election of a majority of an organization's directors or trustees; or the ability to exercise a controlling influence over the management and policies of an organization. An insured state nonmember bank is deemed to control an organization of which it is a general partner or its affiliate is a general partner.

(c)  Domestic means United States.

(d)  Eligible insured state nonmember bank means an eligible depository institution as defined in § 303.2(r) of this chapter.

(e)  Equity interest means any ownership interest or rights in an organization, whether through an equity security, contribution to capital, general or limited partnership interest, debt or warrants convertible into ownership interests or rights, loans providing profit participation, binding commitments to acquire any such items, or some other form of business transaction.

(f)  Equity security means voting or nonvoting shares, stock, investment contracts, or other interests representing ownership or participation in a company or similar enterprise, as well as any instrument convertible to any such interest at the option of the holder without payment of substantial additional consideration.

(g)  FRB means the Board of Governors of the Federal Reserve System.

(h)  Foreign bank means an organization that is organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands that:

(1)  Is recognized as a bank by the bank supervisory or monetary authority of the country of its organization or the country in which its principal banking operations are located;

(2)  Receives deposits to a substantial extent in the regular course of its business; and

(3)  Has the power to accept demand deposits.

(i)  Foreign banking organization means a foreign organization that is formed for the sole purpose of either holding shares of a foreign bank or performing nominee, fiduciary, or other banking services incidental to the activities of a foreign branch or foreign bank affiliate of the insured state nonmember bank.

(j)  Foreign branch means an office or place of business located outside the United States, its territories, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, or the Virgin Islands, at which banking operations are conducted, but does not include a representative office.

(k)  Foreign country means any country other than the United States and includes any territory, dependency, or possession of any such country or of the United States.

(l)  Foreign organization means an organization that is organized under the laws of a foreign country.

(m)  Insured state nonmember bank or bank means a state bank, as defined by § 3(a)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(2)), whose deposits are insured by the FDIC and that is not a member of the Federal Reserve System.

(n)  Indirectly means investments held or activities conducted by a subsidiary of an organization.

(o)  Investment grade means a security that is rated in one of the four highest categories by:

(1)  Two or more NRSROs; or

(2)  One NRSRO if the security is rated by only one NRSRO.

(p)  Loan or extension of credit means all direct and indirect advances of funds to a person, government, or entity made on the basis of any obligation of that person, government, or entity to repay funds.

(q)  Organization or entity means a corporation, partnership, association, bank, or other similar entity.

(r)  NRSRO means a nationally recognized statistical rating organization as designated by the Securities and Exchange Commission.

(s)  Representative office means an office that engages solely in representative functions such as soliciting new business for its home office or acting as liaison between the home office and local customers, but which has no authority to make business or contracting decisions other than those relating to the personnel and premises of the representative office.

(t)  Subsidiary means any organization more than 50 percent of the voting equity interests of which are directly or indirectly held by another organization.

(u)  Tier 1 capital means Tier 1 capital as defined in § 325.2 of this chapter or in § 324.2 of this chapter, as applicable.

(v)  Well capitalized means well capitalized as defined in § 325.103 of this chapter or § 324.403 of this chapter, as applicable.

[Codified to 12 C.F.R. § 347.102]

[Section 347.102 amended at 78 Fed. Reg. 55595, September 10, 2013, effective January 1, 2014. Mandatory compliance date January 1, 2014 for advanced approaches FDIC-supervised institutions, January 1, 2015 for all other FDIC-supervised institutions]

§ 347.103  Effect of state law on actions taken under this subpart.

A bank may acquire and retain equity interests in a foreign organization or establish a foreign branch, subject to the requirements of this subpart, if it is authorized to do so by the law of the state in which the bank is chartered.

[Codified to 12 C.F.R. § 347.103]

§ 347.104  Insured state nonmember bank investments in foreign organizations.

(a)  Investment in foreign banks or foreign banking organizations. A bank may directly or indirectly acquire and retain equity interests in a foreign bank or foreign banking organization.

(b)  Investment in other foreign organizations. A bank may only: (1) acquire and retain equity interests in foreign organizations, other than foreign banks or foreign banking organizations in amounts of 50 percent or less of the foreign organization's voting equity interests, if the equity interest is held through a domestic or foreign subsidiary; and

(2)  The bank meets its minimum capital requirements.

[Codified to 12 C.F.R. § 347.104]

§ 347.105  Permissible financial activities outside the United States.

(a)  Limitation on authorized activities. A bank may not directly or indirectly acquire or hold equity interests in a foreign organization that will result in the bank and its affiliates:

(1)  Holding more than 50 percent, in the aggregate, of the voting equity interest in such foreign organization; or

(2)  Controlling such foreign organization, unless the activities of a foreign organization are limited to those authorized under paragraph (b) of this section.

(b)  Authorized activities. The following financial activities are authorized outside the United States:

(1)  Commercial and other banking activities.

(2)  Financing, including commercial financing, consumer financing, mortgage banking, and factoring, subject to compliance with any attendant restrictions contained in 12 CFR 225.28(b).

(3)  Leasing real or personal property, acting as agent, broker or advisor in leasing real or personal property, subject to compliance with any attendant restrictions in 12 CFR 225.28(b).

(4)  Acting as a fiduciary, subject to compliance with any attendant restrictions in 12 CFR 225.28(b).

(5)  Underwriting credit life, credit accident and credit health insurance.

(6)  Performing services for other direct or indirect operations of a domestic banking organization, including representative functions, sale of long-term debt, name saving, liquidating assets acquired to prevent loss on a debt previously contracted in good faith, and other activities that are permissible for a bank holding company under sections 4(a)(2)(A) and 4(c)(1)(C) of the Bank Holding Company Act.

(7)  Holding the premises of a branch of an Edge corporation or insured state nonmember bank or the premises of a direct or indirect subsidiary, or holding or leasing the residence of an officer or employee of a branch or a subsidiary.

(8)  Providing investment, financial, or economic services, subject to compliance with any attendant restrictions in 12 CFR 225.28(b).

(9)  General insurance agency and brokerage.

(10)  Data processing.

(11)  Organizing, sponsoring, and managing a mutual fund if the fund's shares are not sold or distributed in the United States or to U.S. residents and the fund does not exercise management control over the firms in which it invests.

(12)  Performing management consulting services, provided that such services when rendered with respect to the domestic market must be restricted to the initial entry.

(13)  Underwriting, distributing, and dealing in debt securities outside the United States.

(14)  With the prior approval of the FDIC under section 347.119(d), underwriting, distributing, and dealing in equity securities outside the United States.

(15)  Operating a travel agency in connection with financial services offered outside the United States by the bank or others.

(16)  Providing futures commission merchant services, subject to compliance with any attendant restrictions in 12 CFR 225.28(b).

(17)  Engaging in activities that the FRB has determined in Regulation Y (12 CFR 225.28(b)) are closely related to banking under section 4(c)(8) of the Bank Holding Company Act.

(18)  Engaging in other activities with the prior approval of the FDIC.

(c)  Limitation on activities authorized under Regulation Y. If a bank relies solely on the cross-reference to Regulation Y contained in paragraph (b)(17) of this section as authority to engage in an activity, compliance with any attendant restrictions on the activity that are contained in 12 CFR 225.28(b) is required.

(d)  Approval of other activities. Activities that are not specifically authorized by this section, but that are authorized by 12 CFR 211.10 or FRB interpretations of activities authorized by that section, may be authorized by specific consent of the FDIC on an individual basis and upon such terms and conditions as the FDIC may consider appropriate. Activities that will be engaged in as principal (defined by reference to section 362.1(b) of this chapter), and that are not authorized by 12 CFR 211.10 or FRB interpretations of activities authorized under that section, must satisfy the requirements of part 362 of this chapter and be approved by the FDIC under this part as well as part 362 of this chapter.

[Codified to 12 C.F.R. § 347.105]

§ 347.106  Going concerns.

Going concerns. If a bank acquires an equity interest in a foreign organization that is a going concern, no more than 5 percent of either the consolidated assets or revenues of the foreign organization may be attributable to activities that are not permissible under § 347.105(b).

[Codified to 12 C.F.R. § 347.106]

§ 347.107  Joint ventures.

(a)  Joint ventures. If a bank, directly or indirectly, acquires or holds an equity interest in a foreign organization that is a joint venture, and the bank or its affiliates do not control the foreign organization, no more than 10 percent of either the consolidated assets or revenues of the foreign organization may be attributable to activities that are not permissible under § 347.105(b).

(b)  Joint venture defined. For purposes of this section, the term "joint venture" means any organization in which 20 percent or more but not in excess of 50 percent of the voting equity interests, in the aggregate, are directly or indirectly held by a bank or its affiliates.

[Codified to 12 C.F.R. § 347.107]

§ 347.108  Portfolio investments.

(a)  Portfolio investments. If a bank, directly or indirectly, acquires or holds an equity interest in a foreign organization as a portfolio investment and the foreign organization is not controlled, directly or indirectly, by the bank or its affiliates:

(1)  No more than 10 percent of either the consolidated assets or revenues of the foreign organization may be attributable to activities that are not permissible under § 347.105(b); and

(2)  Any loans or extensions of credit made by the bank and its affiliates to the foreign organization must be on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions between the bank or its affiliates and nonaffiliated organizations.

(b)  Portfolio investment defined. For purposes of this section, the term "portfolio investment" means an investment in an organization in which less than 20 percent of the voting equity interests, in the aggregate, are directly or indirectly held by a bank or its affiliates.

[Codified to 12 C.F.R. § 347.108]

§ 347.109  Limitations on indirect investments in nonfinancial foreign organizations.

(a)  A bank may, through a subsidiary authorized by §§ 347.105 or 347.106, or an Edge corporation if also authorized by the FRB, acquire and hold equity interests in foreign organizations that are not foreign banks or foreign banking organizations and that engage generally in activities beyond those listed in § 347.105(b), subject to the following:

(1)  The amount of the investment does not exceed 15 percent of the bank's Tier 1 capital:

(2)  The aggregate holding of voting equity interests of one foreign organization by the bank and its affiliates must be less than:

(i)  20 percent of the foreign organization's voting equity interests; and

(ii)  40 percent of the foreign organization's voting and nonvoting equity interests;

(3)  The bank or its affiliates must not otherwise control the foreign organization; and

(4)  Loans or extensions of credit made by the bank and its affiliates to the foreign organization must be on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions between the bank or its affiliates and nonaffiliated organizations.

(b)  Reserved.

[Codified to 12 C.F.R. § 347.109]

§ 347.110  Affiliate holdings.

References in §§ 347.107, 347.108, and 347.109 to equity interests of foreign organizations held by an affiliate of a bank include equity interests held in connection with an underwriting or for distribution or dealing by an affiliate permitted to do so by §§ 362.8 or 362.18 of this chapter or section 4(c)(8) of the Bank Holding Company Act (12 U.S.C. 1843(c)(8)).

[Codified to 12 C.F.R. § 346.110]

§ 347.111  Underwriting and dealing limits applicable to foreign organizations held by insured state nonmember banks.

A bank that holds an equity interest in one or more foreign organizations which underwrite, deal, or distribute equity securities outside the United States as authorized by § 347.105(b)(14) is subject to the following limitations:

(a)  Underwriting commitment limits.

(1)  The aggregate underwriting commitments by the foreign organizations for the equity securities of a single entity, taken together with underwriting commitments by any affiliate of the bank under the authority of 12 CFR 211.10(b), may not exceed the lesser of $60 million or 25 percent of the bank's Tier 1 capital, except as otherwise provided in this paragraph.

(2)  Underwriting commitments in excess of this limit must be either:

(i)  Covered by binding commitments from subunderwriters or purchasers; or

(ii)  Deducted from the capital of the bank, with at least 50 percent of the deduction being taken from Tier 1 capital, with the bank remaining well capitalized after this deduction.

(b)  Distribution and dealing limits. The equity securities of any single entity held for distribution or dealing by the foreign organizations, taken together with equity securities held for distribution or dealing by any affiliate of the bank under the authority of 12 CFR 211.10:

(1)  May not exceed the lesser of $30 million or 5 percent of the bank's Tier 1 capital, subject to the following:

(i)  Any equity securities acquired pursuant to any underwriting commitment extending up to 90 days after the payment date for the underwriting may be excluded from this limit;

(ii)  Any equity securities of the entity held under the authority of §§ 347.105 through 347.109 or 12 CFR 211.10 for purposes other than distribution or dealing must be included in this limit; and

(iii)  Up to 75 percent of the position in an equity security may be reduced by netting long and short positions in the same security, or offsetting cash positions against derivative instruments referenced to the same security so long as the derivatives are part of a prudent hedging strategy; and

(2)  Must be included in calculating the general consent limits under § 347.117(b)(3) if the bank relies on the general consent provisions as authority to acquire equity interests of the same foreign entity for investment or trading.

(c)  Additional distribution and dealing limits. With the exception of equity securities acquired pursuant to any underwriting commitment extending up to 90 days after the payment date for the underwriting, equity securities of a single entity held for distribution or dealing by all affiliates of the bank (this includes shares held in connection with an underwriting or for distribution or dealing by an affiliate permitted to do so by §§ 362.8 or 362.18 of this chapter or section 4(c)(8) of the Bank Holding Company Act), combined with any equity interests held for investment or trading purposes by all affiliates of the bank, must conform to the limits of §§ 347.105 through 347.109.

(d)  Combined limits. The aggregate of the following may not exceed 25 percent of the bank's Tier 1 capital:

(1)  All equity interests of foreign organizations held for investment or trading under § 347.109 or by an affiliate of the bank under the corresponding paragraph of 12 CFR 211.10.

(2)  All underwriting commitments under paragraph (a) of this section, taken together with all underwriting commitments by any affiliate of the bank under the authority of 12 CFR 211.10, after excluding the amount of any underwriting commitment:

(i)  Covered by binding commitments from subunderwriters or purchasers under paragraph (a)(1) of this section or the comparable provision of 12 CFR 211.10; or

(ii)  Already deducted from the bank's capital under paragraph (a)(2) of this section, or the appropriate affiliate's capital, under the comparable provisions of 12 CFR 211.10; and

(3)  All equity securities held for distribution or dealing under paragraph (b) of this section, taken together with all equity securities held for distribution or dealing by any affiliate of the bank under the authority of 12 CFR 211.10, after reducing by up to 75 percent the position in any equity security by netting and offset, as permitted by paragraph (b)(1)(iii) of this section or the comparable provision of 12 CFR 211.10.

[Codified to 12 C.F.R. § 347.111]

§ 347.112  Restrictions applicable to foreign organizations that act as futures commission merchants.

(a)  If a bank acquires or retains an equity interest in a foreign organization that acts as a futures commission merchant pursuant to § 347.105(b)(16), the foreign organization may not be a member of an exchange or clearing association that requires members to guarantee or otherwise contract to cover losses suffered by other members unless the:

(1)  Foreign organization's liability does not exceed two percent of the bank's Tier 1 capital, or

(2)  Bank has obtained the prior approval of the FDIC under § 347.120(d).

(b)  Reserved.

[Codified to 12 C.F.R. § 347.112]

§ 347.113  Restrictions applicable to activities by a foreign organization in the United States.

(a)  A bank, acting under the authority provided in this subpart, may not directly or indirectly hold:

(1)  Equity interests of any foreign organization that engages in the general business of buying or selling goods, wares, merchandise, or commodities in the United States; or

(2)  More than 5 percent of the equity interests of any foreign organization that engages in activities in the United States unless any activities in which the foreign organization engages in the United States are incidental to its international or foreign business.

(b)  For purposes of this section:

(1)  A foreign organization is not engaged in any business or activities in the United States unless it maintains an office in the United States other than a representative office.

(2)  The following activities are incidental to international or foreign business:

(i)  Activities that are permissible for an Edge corporation in the United States under 12 CFR 211.6; or

(ii)  Other activities approved by the FDIC.

[Codified to 12 C.F.R. § 347.113]

§ 347.114  Extensions of credit to foreign organizations held by insured state nonmember banks; shares of foreign organizations held in connection with debts previously contracted.

(a)  Loans or extensions of credit. A bank that directly or indirectly holds equity interests in a foreign organization pursuant to the authority of this subpart may make loans or extensions of credit to or for the accounts of the organization without regard to the provisions of section 18(j) of the FDI Act (12 U.S.C. 1828(j)).

(b)  Debts previously contracted. Equity interests acquired to prevent a loss upon a debt previously contracted in good faith are not subject to the limitations or procedures of this subpart; however, they must be disposed of promptly but in no event later than two years after their acquisition, unless the FDIC authorizes retention for a longer period.

[Codified to 12 C.F.R. § 347.114]

§ 347.115  Permissible activities for a foreign branch of an insured state nonmember bank.

In addition to its general banking powers and if permitted by the law of the state in which the bank is chartered, a foreign branch of a bank may conduct the following activities to the extent that they are consistent with banking practices in a foreign country where the bank maintains a branch:

(a)  Guarantees. Guarantee debts, or otherwise agree to make payments on the occurrence of readily ascertainable events including, without limitation, nonpayment of taxes, rentals, customs duties, or costs of transport and loss or nonconformance of shipping documents, if:

(1)  The guarantee or agreement specifies a maximum monetary liability; and

(2)  To the extent the guarantee or agreement is not subject to a separate amount limit under state or federal law, the amount of the guarantee or agreement is combined with loans and other obligations for purposes of applying any legal lending limits.

(b)  Government obligations. Engages in the following types of transactions with respect to the obligations of foreign countries, so long as aggregate investments, securities held in connection with distribution and dealing, and underwriting commitments do not exceed ten percent of the bank's Tier 1 capital:

(1)  Underwrite, distribute and deal, invest in, or trade obligations of:

(i)  The national government of the country in which the branch is located or its political subdivisions; and

(ii)  An agency or instrumentality of such national government if supported by the taxing authority, guarantee, or full faith and credit of the national government.

(2)  Underwrite, distribute and deal, invest in or trade obligations1 rated as investment grade of:

(i)  The national government of any foreign country or its political subdivisions, to the extent permissible under the law of the issuing foreign country; and

(ii)  An agency or instrumentality of the national government of any foreign country to the extent permissible under the law of the issuing foreign country, if supported by the taxing authority, guarantee, or full faith and credit of the national government.

(c)  Local investments. (1) Acquire and hold local investments in:

(i)  Equity securities of the central bank, clearinghouses, governmental entities, and government sponsored development banks of the country in which the branch is located;

(ii)  Other debt securities eligible to meet local reserve or similar requirements; and

(iii)  Shares of automated electronic payment networks professional societies, schools, and similar entities necessary to the business of the branch.

(2)  Aggregate local investments (other than those required by the law of the foreign country or permissible under section 5136 of the Revised Statutes (12 U.S.C. 24 (Seventh) by all the bank's branches in a single foreign country must not exceed 1 percent of the total deposits in all the bank's branches in that country as reported in the preceding year-end Report of Income and Condition (Call Report).2

(d)  Insurance. Act as an insurance agent or broker.

(c)  Employee benefits program. Pay to an employee of a branch, as part of an employee benefits program, a greater rate of interest than that paid to other depositors of the branch.

(f)  Repurchase agreements. Engage in repurchase agreements involving securities and commodities that are the functional equivalents of extensions of credit.

(g)  Other activities. Engage in other activities, with the prior approval of the FDIC.

(h)  Approval of other activities. Activities that are not specifically authorized by this section, but that are authorized by 12 CFR 211.4 or FRB interpretations of activities authorized by that section, may be authorized by specific consent of the FDIC on an individual basis and upon such terms and conditions as the FDIC may consider appropriate. Activities that will be engaged in as principal (defined by reference to section 362.1(b) of this chapter), and that are not authorized by 12 CFR 211.4 or FRB interpretations of activities authorized under this section, must satisfy the requirements of part 362 of this chapter and be approved by the FDIC under this part as well as part 362 of this chapter.

[Codified to 12 C.F.R. § 347.115]

§ 347.116  Recordkeeping and supervision of foreign activities of insured state nonmember banks.

(a)  Records, controls and reports. A bank with any foreign branch, any investment in a foreign organization of 20 percent or more of the organization's voting equity interests, or control of a foreign organization must maintain a system of records, controls and reports that, at minimum, provide for the following:

(1)  Risk assets. To permit assessment of exposure to loss, information furnished or available to the main office should be sufficient to permit periodic and systematic appraisals of the quality of risk assets, including loans and other extensions of credit. Coverage should extend to a substantial proportion of the risk assets in the branch or foreign organization, and include the statues of all large credit lines and of credits to customers also borrowing from other offices or affiliates of the bank. Appropriate information on risk assets may include:

(i)  A recent financial statement of the borrower or obligee and current information on the borrower's or obligee's financial condition;

(ii)  Terms, conditions, and collateral;

(iii)  Data on any guarantors;

(iv)  Payment history; and

(v)  Status of corrective measures employed.

(2)  Liquidity. To enable assessment of local management's ability to meet its obligations from available resources, reports should identify the general sources and character of the deposits, borrowing, and other funding sources employed in the branch or foreign organization with special reference to their terms and volatility. Information should be available on sources of liquidity--cash, balances with banks, marketable securities, and repayment flows--such as will reveal their accessibility in time and any risk elements involved.

(3)  Contingencies. Data on the volume and nature of contingent items such as loan commitments and guarantees or their equivalents that permit analysis of potential risk exposure and liquidity requirements.

(4)  Controls. Reports on the internal and external audits of the branch or foreign organization in sufficient detail to permit determination of conformance to auditing guidelines. Appropriate audit reports may include coverage of:

(i)  Verification and identification of entries on financial statements;

(ii)  Income and expense accounts, including descriptions of significant chargeoffs and recoveries;

(iii)  Operations and dual-control procedures and other internal controls;

(iv)  Conformance to head office guidelines on loans, deposits, foreign exchange activities, accounting procedures in compliance with applicable accounting standards, and discretionary authority of local management;

(v)  Compliance with local laws and regulations; and

(vi)  Compliance with applicable U.S. laws and regulations.

(b)  Availability of information to examiners; reports. (1) Information about foreign branches or foreign organizations must be made available to the FDIC by the bank for examination and other supervisory purposes.

(2)  The FDIC may from time to time require a bank to make and submit such reports and information as may be necessary to implement and enforce the provisions of this subpart, and the bank shall submit an annual report of condition for each foreign branch pursuant to instructions provided by the FDIC.

[Codified to 12 C.F.R. § 347.116]

§ 347.117  General consent.

(a)  General consent to establish or relocate a foreign branch. General consent of the FDIC is granted, subject to the written notification requirement contained in section 303.182(a) and consistent with the requirements of this subpart, for an:

(1)  Eligible bank to establish a foreign branch conducting activities authorized by section 347.115 of this section in any foreign country in which:

(i)  The bank already operates one or more foreign branches or foreign bank subsidiaries;

(ii)  The bank's holding company operates a foreign bank, subsidiary; or

(iii)  An affiliated bank or Edge or Agreement corporation operates one or more foreign branches or foreign bank subsidiaries.

(2)  Insured state nonmember bank to relocate an existing foreign branch within a foreign country.

(b)  General consent to invest in a foreign organization. General consent of the FDIC is granted, subject to the written notification requirement contained in section 303.183(a) (unless no notification is required because the investment is acquired for trading purposes) and consistent with the requirements of this subpart, for an eligible bank to make investments in foreign organizations, directly or indirectly, if:

(1)  The bank operates at least one foreign bank subsidiary or foreign branch, an affiliated bank or Edge or Agreement corporation operates at least one foreign bank subsidiary or foreign branch, or the bank's holding company operates at least one foreign bank subsidiary in the country where the foreign organization will be located;

(2)  In any instance where the bank and its affiliates will hold 20 percent or more of the foreign organization's voting equity interests or control the foreign organization, at least one state nonmember bank has a foreign bank subsidiary or foreign branch (other than a shell branch) in the country where the foreign organization will be located;3 and

(3)  The investment is within one of the following limits:

(i)  The investment is acquired at net asset value from an affiliate;

(ii)  the investment is a reinvestment of cash dividends received from the same foreign organization during the preceding 12 months; or

(iii)  The total investment, directly or indirectly, in a single foreign organization in any transaction or series of transactions during a twelve-month period does not exceed 2 percent of the bank's Tier 1 capital and such investments in all foreign organizations in the aggregate do not exceed:

(A)  5 percent of the bank's Tier 1 capital during a 12-month period; and

(B)  Up to an additional 5 percent of the bank's Tier 1 capital if the investments are acquired for trading purposes.

[Codified to 12 C.F.R. § 347.117]

§ 347.118  Expedited processing.

(a)  Expedited processing of branch applications. An eligible bank may establish a foreign branch conducting activities authorized by § 347.115 in an additional foreign country, after complying with the expedited processing requirements contained in § 303.182(b) and (c)(1), if any of the following are located in two or more foreign countries:

(1)  Foreign branches or foreign bank subsidiaries of the eligible bank;

(2)  Foreign branches or foreign bank subsidiaries of banks and Edge or Agreement corporations affiliated with the eligible bank; and

(3)  Foreign bank subsidiaries of the eligible bank's holding company.

(b)  Expedited processing of applications for investment in foreign organizations. An investment that does not qualify for general consent but is otherwise in conformity with the limits and requirements of this subpart may be made 45 days after an eligible bank files a substantially complete application with the FDIC in compliance with the expedited processing requirements contained in § 303.183(b) and (c)(1), or within such earlier time as authorized by the FDIC.

[Codified to 12 C.F.R. § 347.118]

§347.119  Specific consent.

General consent and expedited processing under this subpart do not apply in the following circumstances:

(a)  Limitation on access to supervisory information in foreign country.

(1)  Applicable law or practice in the foreign country where the foreign organization or foreign branch would be located would limit the FDIC's access to information for supervisory purposes; and

(i)  A bank would hold 20 percent or more of the voting equity interests of a foreign organization or control such organization as a result of a foreign investment; or

(ii)  A bank would be establishing a foreign branch.

(b)  World Heritage site. A foreign branch of a bank would be located on a site on the World Heritage List or on the foreign country's equivalent of the National Register of Historic Places, in accordance with section 403 of the National Historic Preservation Act Amendments of 1980 (16 U.S.C. 470a--2).

(c)  Modification or suspension of general consent or expedited processing. The FDIC at any time notifies the bank that the FDIC is modifying or suspending its general consent or expedited processing procedure.

(d)  Specific consent. Direct or indirect investments in or activities of foreign organizations by banks, the establishment of foreign branches or issues regarding the types or amounts of activity that can be engaged in by foreign branches, which are not authorized under §§ 347.117 or 347.118 require prior review and specific consent of the FDIC.

[Codified to 12 C.F.R. § 347.119]

§ 347.120  Computation of investment amounts.

In computing the amount that may be invested in any foreign organization under §§ 347.117 through 347.119, any investments held by an affiliate of a bank must be included.

[Codified to 12 C.F.R. § 347.120]

§ 347.121  Requirements for insured state nonmember bank to close a foreign branch.

A bank must comply with the written notification requirement contained in § 303.182(d) when it closes a foreign branch.

[Codified to 12 C.F.R. § 347.121]

§ 347.122  Limitations applicable to the authority provided in this subpart.

The FDIC may impose such conditions on authority granted in this subpart as it considers appropriate. If a bank is unable or fails to comply with the requirements of this subpart or any conditions imposed by the FDIC regarding transactions under this subpart, the FDIC may require termination of any activities or divestiture of investments permitted under this subpart after giving the bank notice and a reasonable opportunity to be heard on the matter.

[Codified to 12 C.F.R. § 347.122]

1 If the obligation is an equity interest, it must be held through a subsidiary of the foreign branch and the insured state nonmember bank must meet its minimum capital requirements. Go back to Text

2 If a branch has recently been acquired by the bank and the branch was not previously required to file a Call Report, branch deposits as of the acquisition date must be used. Go back to Text

3 A list of these countries can be obtained from the FDIC's Internet Web Site at http://www.fdic.gov. Go back to Text


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Last updated February 28, 2014 regs@fdic.gov