Skip Header
U.S. flag

An official website of the United States government

FDIC Law, Regulations, Related Acts

[Table of Contents] [Previous Page] [Next Page] [Search]

4000 - Advisory Opinions

Application of CRA Definition of "Small Bank" to U.S. Banking Subsidiary of Foreign Bank with Worldwide Assets of Over $1 Billion


July 17, 1995

Ann Hume Loikow, Counsel

In your letter, you asked for the staff's opinion on how the definition of "small bank" in the newly adopted Community Investment Act ("CRA") regulations published on May 4, 1995 (60 FR 22156) applied to a U.S. banking subsidiary, with banking and thrift assets of less than $250 million, of a foreign bank with worldwide assets of over $1 billion.

As we discussed on the telephone, section 345.12(t) (12 C.F.R. § 345.12(t)) of the new CRA regulations of the Federal Deposit Insurance Corporation ("FDIC'') defines a small bank for CRA purposes as:

"a bank, that as of December 31 of either of the prior two calendar years, had total assets of less than $250 million and was independent or an affiliate of a holding company that, as of December 31 of either of the prior two calendar years, had total banking and thrift assets of less than $1 billion."

The bank about which you inquired clearly meets the first part of the test in that it has less than $250 million in assets.

The question is whether the bank is excluded from the definition of small bank because it is an affiliate of a foreign holding company with total assets of over $1 billion. In order to determine this, one must decide what the phrase "total banking and thrift assets" means. To answer this, one must determine (1) whether the holding company's worldwide banking and thrift assets, or just its domestic U.S. assets, are to be considered, and (2), if the assets to be considered are just the domestic U.S. assets, whether the phrase "banking and thrift assets" refers just to the assets of FDIC-insured financial institutions or whether it includes the assets of uninsured branches or agencies.

The agencies have long recognized that in applying CRA they should consider only a foreign bank's U.S. operations (see 12 C.F.R. § 345.102 of the old CRA regulations which expired July 1, 1995). As a result, the scope of the new regulations, as described in section 345.11(c), incorporates the operative provisions of section 345.102. Section 345.11(c) says the new CRA regulations apply to all insured State nonmember banks, including insured State branches. Insured State branches are branches of a foreign bank established and operating under the laws of any State, the deposits of which are insured in accordance with the Federal Deposit Insurance Act. Section 345.11(c) also states that an insured State branch's "assessment area" is the community or communities located within the United States served by the branch. Similarly, the new regulations's use of the term "main office" of an insured State branch means the bank's principal branch within the United Sates and the term "branch" or "branches" as used in the new regulation refers only to insured State branches located within the United States. Section 345.11 (c) also says that the new regulations apply to any uninsured State branch that results from an acquisition described in section 5(a)(8) of the International Banking Act of 1978 (12 U.S.C. 3103(a)(8)). The new CRA regulations issued by Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System contain similar provisions covering the foreign banks they each regulate. See 12 C.F.R. § § 25.11(c) and 228.11(c).

In light of the regulatory provisions discussed above, staff believes that the asset size of a holding company for purposes of meeting the small bank definition should be calculated on the basis of the total assets of the holding company's bank and thrift subsidiaries that are subject to the CRA. This basis would apply equally for a foreign or domestic parent holding company. In the case of a foreign bank, this calculation would include not only the assets of the holding company's FDIC-insured bank and thrift subsidiaries, but also the assets of any FDIC-insured branch of the foreign bank and the assets of any uninsured Federal or State branch (other than a limited branch or a Federal agency) of the foreign bank that results from an acquisition described in section 5(a)(8) of the International Banking Act of 1978.

I trust this letter answers your questions. It should be noted that this is the opinion of the FDIC's legal staff, not of the FDIC itself. The FDIC issues formal interpretations of its rules, but only pursuant to rulemaking proceedings. It does not issue formal interpretations in the form of letters or rulings on specific cases.

[Table of Contents] [Previous Page] [Next Page] [Search]