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Meeting With Institute of International Bankers on Part 347 Revisions

On Tuesday, October 12, 2004 representatives of the FDIC met with the Institute of International Bankers (IIB). FDIC staff attending the meeting was: Chief of Staff Jodey Arrington, EGRPRA Project Manager Claude Rollin, Doug Jones, Marilyn Anderson, Rodney Ray (FDIC Legal), Miguel Brown, John Di Clemente, and Galo Cevallos (FDIC DSC). The IIB was represented by Executive Director Larry Uhlick and outside counsel Scott Anenberg. In addition, David Hertz (Bank Hapoalim), Ajit Lal (State Bank of India), Amjad Ali Shaikh (National Bank of Pakistan), and Bailin Zheng (Bank of China) were in attendence.

The IIB requested the meeting in a letter to Chairman Powell and Vice-Chairman Reich (a copy of which is attached). The purpose of the meeting was to discuss various issues raised in the IIB's September 17, 2004 comment letter concerning the FDIC's proposed revisions to Part 347.
Regarding the FDIC's asset pledge proposal, the IIB recognized and appreciated the FDIC's efforts in moving toward a risk-based pledge but urged that where the FDIC had fewer supervisory concerns about an institution that the FDIC consider an asset pledge amount that is less than the two percent. The IIB also felt that the FDIC proposal requiring only negotiable CDs for asset pledge requirements was going back to a requirement that increased the burden on its institutions. It observed that it is difficult to obtain waivers of offset because negotiable CDs are not always obtained from the issuer.

Concerning interstate moves of insured foreign branches, the proposed rule addresses intrastate moves but not interstate moves and the IIB felt that there was a need for clarity on the latter issue. It was recognized, however, that whether the foreign branch at issue had a federal or state license may be a consideration and FDIC staff indicated that the issue was being reviewed.

The IIB believed the FDIC's proposal to calculate asset maintenance on a daily basis is expensive because the new calculation method would involve computer system changes. It also observed that assets and liabilities can fluctuate daily and it was easier to target to a fixed liability number. It suggested that the FDIC consider leaving the existing calculation method in place but carve out areas where daily calculations are appropriate.

Regarding deposit insurance for U.S. branches of foreign banks, the JIB urged the FDIC to take a fresh look at the need for the subsidiary requirement and whether institutions that are subject to consolidated supervision should be able to have insured branches. It also observed that this issue should be thought of in the context of regulatory burden relief because it was less expensive to operate through branches than subsidiaries. In addition, the IIB felt that strong arguments could be made for insuring wholesale branches and that the FDIC should not foreclose consideration of that question. FDIC staff observed that the wholesale branch discussion in the preamble of the proposed rule was more of a viewpoint on the question, based on observations made in prior rulemakings. Rather than foreclose the question, it was intended to lay out the issues that need to be addressed.

On the issue of transferability of grandfathered branches, the JIB reiterated its position and suggested that the issue be viewed from the perspective of whether or not, if institutions desire to transfer insured branches, transferability is legally prohibited.

The FDIC's proposed revision of the examination and information commitment from foreign banks was also discussed. The JIB felt that the suggestion of examinations outside the United States was a significant step beyond what FDIC and other regulators have done and that it would present a problem with some home countries. FDIC staff felt that the examination requirement was fairly narrowly defined and that it may be possible for the FDIC to make arrangements with the home country to address this issue. It was also observed by FDIC staff that the Board of Directors could consider these issues, under the proposed rule, as part of its consideration of whether deposit insurance should be granted or denied.


299 PARK AVENUE, 17th FLOOR, NEW YORK, N.Y. 10171
TELEPHONE: (212) 421-1611 FACSIMILE: (212) 421-1119

August 25, 2004

The Honorable Donald E. Powell
The Honorable John M. Reich
Vice Chairman
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Re: Regulatory Relief for FDIC-Insured Branches of International Banks

Dear Chairman Powell and Vice Chairman Reich:

We are writing in the context of our earlier communications with FDIC staff concerning various proposals to reduce the regulatory burden and facilitate the continued operation of FDIC-insured U.S. branches of international banks, and, more generally, to improve the dialogue between the FDIC and the international banking community. In particular, our December 22, 2003 submission (a copy of which is enclosed) set forth the legal and policy justifications for four specific proposals: adoption of a risk-based asset pledge requirement, facilitating the relocation of grandfathered FDIC-insured branches, permitting transferability of grandfathered branches, and permitting "wholesale" branches of international banks to obtain "optional" FDIC insurance. Those proposals have been reflected, in part, in various aspects of the FDIC's recently proposed amendments to its international banking regulations (Part 347). 69 Fed. Reg. 43060 (July 19, 2004).

We are concerned, however, that the proposed amendments reflect an unnecessarily restrictive approach to the issues raised in our December 22 submission. Specifically, although the proposed amendments would facilitate the relocation of "grandfathered" branches, they:

• would move only part of the way toward a more risk-based approach to the asset pledge requirement by retaining a minimum pledge of two percent,
• would explicitly prohibit (subject to a limited exception) transferability of existing grandfathered FDIC-insured branches, and
• strongly indicate, through a lengthy discussion in the preamble, that the FDIC will not exercise its authority to permit "wholesale" branches of international banks to obtain "optional" FDIC insurance, despite requesting public comment on the issue.

In addition, rather than proposing additional ways to reduce the regulatory burdens on the 12 remaining FDIC-insured branches, the proposal actually returns to some of the FDIC's previously abandoned positions which actually would have the effect of increasing the burdens on those branches.
As explained in our December 22 submission, we believe this approach will further contribute to the perception of the FDIC as a "reluctant regulator" of international banks, and is fundamentally inconsistent with several broader policy considerations, including, in particular:

• the substantial changes in the U.S. and international regulatory and supervisory regimes applicable to international banks,
• the fact that no losses have been suffered by the FDIC (in the case of insured branches) or by U.S. creditors of any U.S. office of an international bank,
• the principle of "investor choice," which has been explicitly endorsed by the U.S. Treasury and Federal Reserve Board and which permits banking organizations to choose the most efficient organizational form (i.e, either branches or subsidiaries) for their U.S. banking operations,
• facilitating access to banking services by members of ethnic communities, and
• reducing regulatory burden pursuant to the Economic Growth and Regulatory Paperwork Reduction Act ("EGRPRA").

Although we plan to submit a more formal comment letter on the proposal, we would appreciate the opportunity to meet with you next month to discuss our concerns. We will be contacting your offices shortly to try to arrange such a meeting.

We look forward to continuing to work with the FDIC on these matters that are important to our membership and, we believe, to the FDIC's role in the international supervisory community.

Respectfully yours,
Lawrence R. Uhlick
Executive Director and General Counsel


cc: Scott A. Anenberg, Esq. (Shaw Pittman LLP)


TELEPHONE: (212) 421-1611 FACSIMILE: (212) 421-1119

December 22, 2003
By E-mail and Federal Express

Mr. Michael J. Zamorski
Director of Division of Supervision
Mr. John Di Clemente
International Section Chief
Federal Deposit Insurance Corporation
550 17th Street, N.W., Room MB-5034
Washington, D.C. 20429

Re: Regulatory Relief for FDIC-Insured Branches of International Banks

Dear Mike and John:

First of all, I would like again to thank you and your colleagues for meeting with us recently in New York. The meeting was very productive, and we particularly appreciated the constructive tone you set at the outset for the discussions that followed.

As we discussed, banking has become truly international in nature, and the over 200 international banks operating in the United States have a substantial positive impact on the U.S. economy through job creation, operating and capital expenditures, taxes and other contributions (see Tab 1 of the background materials being provided under separate cover). For example:

•International banks hold over $3 trillion of assets through their U.S. operations, including over $1 trillion in assets in nearly 300 U.S. branches and agencies.
• International banks employ over 120,000 people in the United States, 90 percent of whom are U.S. citizens.
• Direct expenditures by international banks in the United States total about $20 billion annually, and those expenditures in turn stimulate additional jobs in employee earnings and other industries.

Viewed in this context, it is especially appropriate that the FDIC maintain and expand its dialogue with the international banking community, and we are committed to doing our part to help in that effort.

With that goal in mind, we identified at our meeting several proposals that, if adopted, would facilitate the continued operation of FDIC-insured branches of international banks and, at the same time, help overcome a perception that the FDIC is a "reluctant regulator" of international banks. Significantly, each of the proposals also is fully consistent with the federal banking agencies' existing initiative, led by FDIC Vice-Chairman Reich, to identify and relieve regulatory burdens pursuant to the review mandated by the Economic Growth and Regulatory Paperwork Reduction Act ("EGRPRA").

As requested at our recent meeting, we have enclosed an outline summarizing those proposals as well as the FDIC's legal authority to implement them. As the FDIC reviews these proposals, we ask that you also take into account the following broader policy issues.

First, the statutory prohibition on the establishment of additional FDIC-insured branches of international banks -- which we believe has resulted in unnecessarily restrictive FDIC policies with respect to the remaining grandfathered FDIC-insured branches -- was adopted in 1991 without serious debate in an atmosphere dominated by the BCCI scandal.1 Much has changed since then, especially in the application, examination, and supervision standards applied to international banks both globally and in the United States. For example, the work of the Basel Committee on Banking Supervision, including its "Core Principles for Effective Banking Supervision," has contributed greatly to the improvement and harmonization of supervisory practices around the world. The degree of cooperation and information-sharing between U.S. and home country regulators also has increased substantially since 1991.

In the United States, an international bank seeking to establish an office must, since 1991, obtain approval from the Federal Reserve as well as the licensing authority, and must be found to be subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor. In addition, U.S. regulators now prepare and have access to a "strength of support assessment" ("SOSA") for each international bank with U.S. operations. That assessment takes into account factors including the financial condition of the institution, the system of home country supervision, the record of home country support, and the level of transfer risk.

These and other legal and policy changes, coupled with the fact that no U.S. creditors of U.S. offices of international banks have suffered any losses, have led to a situation in which federal and state banking regulators with substantial supervisory responsibility for the U.S. operations of international banks have become even more comfortable with their ability to supervise and regulate effectively the over $1 trillion in banking assets held at nearly 300 U.S. branches and agencies of international banks.

Second, taking a restrictive approach with respect to the operations of FDIC insured branches and prohibiting the establishment of additional insured branches are inconsistent with the now widely endorsed concept of "investor choice," which permits banking organizations to choose the most efficient organizational form for their operations. In fact, a December 21, 1992 joint study by the Federal Reserve and the Department of the Treasury -- which was mandated by the same 1991 law that prohibited the establishment of new FDIC-insured branches -- expressly opposed imposition of a requirement that foreign banks conduct U.S. operations only in subsidiary form (see Tab 2 of the supplementary materials provided under separate cover). The study concluded that operating in branch rather than subsidiary form is more efficient, allowing capital to be deployed more flexibly, a lower cost of funding, the ability to compete based on the institution's worldwide capital, freedom from operational restrictions on transactions with home office, and lower transactional costs. Notably, the study also specifically concluded that "considerations relating to deposit insurance" do not provide support for a subsidiary requirement.

Third, most foreign banks that operate FDIC-insured branches target specific ethnic or cultural markets. Providing more operational flexibility for, and permitting creation of additional, existing FDIC-insured branches would further facilitate access to banking services by those ethnic communities. Helping the underbanked members of ethnic communities enter the financial mainstream has been a major goal of Chairman Powell.

To summarize, each of the proposals in the enclosed outline falls clearly within the FDIC's existing legal authority, is consistent with the FDIC's existing EGRPRA initiative, is supported by strong policy considerations, and represents an opportunity for the FDIC to demonstrate its recognition of the positive contributions made by the U.S. operations of international banks.

Finally, although not addressed in the enclosed outline, we believe, for the same policy reasons discussed above, that serious consideration should be given to repealing the 1991 statutory prohibition on the establishment of new FDIC-insured retail branches by international banks.
We look forward to continuing our dialogue once you and your colleagues have had a chance to review the enclosed materials. In the meantime, please do not hesitate to contact me or Scott Anenberg of Shaw Pittman LLP (202-663-8218) if you have any questions or need any additional information.


Lawrence R. Uhlick
Executive Director and General Counsel


cc: (w/encls.)
Mr. Joseph Duffy
Mr. Rodney Ray
Mr. Gregory Wyka
Scott Anenberg, Esq.


December 22, 2003

Issues Concerning FDIC-Insured Branches of International Banks

1. Asset Pledge Requirement

A. Issue

I. FDIC regulations (12 C.F.R. § 347.210) require FDIC-insured branches of international banks to pledge assets for the benefit of the FDIC in an amount equal to 5 percent of their third party liabilities.

B. Recommendation

1. Eliminate the 5 percent requirement in favor of a risk-based approach that takes into account the specific circumstances of each branch.

C. Legal Authority

1. The FDIC has complete statutory discretion in setting the amount of the pledge. 12 U.S.C. § 1815(c)(2) provides that:

“[A foreign] bank shall maintain on deposit ... assets ... in such amounts ... as shall be determined from time to time in accordance with such regulations as the Board of Directors may prescribe.”

2. The FDIC has explicit authority to vary the amount of the pledge based on an individual branch's risk profile. 12 U.S.C. § 1815(c)(2) provides. that:

“Such regulations may impose differing requirements on the basis of any factors which in the judgment of the Board of Directors are reasonably related to the purpose set forth in paragraph (4).”

3. The purpose of the asset pledge is to protect the insurance fund against the "risks entailed in insuring the domestic deposits of a foreign bank whose activities, assets, and personnel are in large part outside the jurisdiction of the United States." 12 U.S.C. § 1815(c)(4). The development and global acceptance of Basel risk-based capital standards, recent advances in risk-based bank supervision, increased focus on enhancing the responsibilities of home country supervisors in the consolidated supervision of internationally active banks, and substantially increased coordination between home and host country supervisors have substantially mitigated the risks against which the asset pledge was intended to protect. Moreover, assets held by an insured branch pursuant to FDIC's asset maintenance requirement (12 C.F.R.. § 347.211) and subject to FDIC examination and supervision provide effective protection of depositors and the FDIC's insurance guaranty.

4. The FDIC is specifically obligated to try to avoid placing international banks at a competitive disadvantage vis-à-vis U.S. banks in setting the pledge. Asset pledge requirements do not apply to U.S. banks, and the asset pledge requirement imposed by the FDIC on insured branches adversely affects the earnings and liquidity of those branches by requiring them to maintain and pledge specific amounts of generally lower-yielding assets.

D. Other Considerations

l. Connecticut, Illinois, and New York have all recently taken similar actions, and the OCC has proposed legislation that would remove the existing statutory barrier to taking similar action.

2. Other countries that are major international banking centers (for example, France, Germany, Japan, Switzerland, the United Kingdom) do not impose asset pledge requirements on local branches of U.S. (or other non-domestic) banks.

II. Relocation of Grandfathered Insured Branches

A. Issue

1. FDIC regulations (12 C.F.R. § 303.41(b)) governing state nonmember insured banks provide that moving a branch outside its "immediate neighborhood" is considered the closure of an existing branch and the establishment of a new branch. Applying a similar rule to grand fathered insured branches of international banks would effectively preclude relocations because of the statutory prohibition (12 U.S.C. § 3104(d)(1)) against establishing new FDIC-insured retail branches.

B. Recommendation

1. Clarify that an international bank may, subject to FDIC approval, move an -insured branch without terminating its grandfathered status under section 3104(d)(2) and regardless of how the licensing authority classifies the relocation.

C. Legal Authority

1. 12 U.S.C. § 1828(d)(1) provides, in relevant part, that:

“... [N]o State nonmember insured bank (except a District bank) shall move its main office or any such branch from one location to another without [the prior written consent of the Corporation]. No foreign bank may move any insured branch from one location to another without such consent ....”

2. Plain meaning
Section 1828(d)(1) requires only that an international bank obtain FDIC approval before moving an insured branch. It does not limit the geographic area within which the insured branch may move, nor does it require that the FDIC treat the move as the closure of the existing branch and the establishment of a new branch.

3. FDIC regulations

a. Subpart C of part 303 implements the first sentence of section 1828(d)(1), which governs the establishment and relocation of domestic branches of state nonmember insured banks. For purposes of subpart C, section 303.41(b) defines "branch relocation" to mean:

“... a move within the same immediate neighborhood of the existing branch that does not substantially affect the nature of the business of the branch or the customers of the branch. Moving a branch to a location outside its immediate neighborhood is considered the closing of an existing branch and the establishment of a new branch. Closing of a branch is covered in the FDIC Statement of Policy Concerning Branch Closing Notices and Policies.”

b. However, Subpart C, including its definition of branch relocation, is explicitly made inapplicable to insured branches of international banks. Section 303.40(c) provides that:

“Applications regarding insured branches of foreign banks and foreign branches of domestic banks are processed in accordance with subpart J (International Banking) of this part.”

c. Section 303.184, contained in subpart J, implements the second sentence of section 1828(d)(1), which governs the relocation of an insured branch of an international bank. Section 303.184 does not contain any geographic limitation on the ability of an insured branch to move outside its immediate neighborhood.

Indeed, section 303.184(c) expressly contemplates that an insured branch may move from one community to another:

“The applicant shall publish a notice of its proposal to move from one location to another, as described in § 303.7(b), in a newspaper of general circulation in the community in which the insured branch is located prior to its being moved and in the community to which it is to be moved.”

d. Not only is subpart C's definition of "branch relocation" made inapplicable by the express terms of the regulation, its underlying purpose also appears inapplicable to insured branches of international banks. Section 303.41(b) was presumably intended to implement section 42 of the FDI Act (12 U.S.C. § 183lr-1), which provides procedures for branch closures. Significantly, the FDIC Statement of Policy Concerning Branch Closing Notices and Policies states that:

“Insured branches of foreign banks are not considered “branches” for purposes of section 42 because they are subject to separate liquidation procedures ....”
64 Fed. Reg. 34,844, 34,845 n.3 (June 29, 1999).

111. Transferability of Grandfathered Insured Branches

A. Issue

1. May a grandfathered insured branch be sold or otherwise transferred to another international bank without losing its status as an FDIC-insured branch?

B. Recommendation

1. Clarify that the grandfather rights of 12 U.S.C. § 3104(d)(2) survive the sale or transfer of an insured branch from one international bank to another international bank.

C. Legal Authority2
1. 12 U.S.C.. § 3104(d)(2) provides that:

“Domestic retail deposit accounts with balances of less than $100,000 that require deposit insurance protection may be accepted or maintained in a branch of a foreign bank only if such branch was an insured branch on December 19, 1991.”

2. Plain meaning

The statutory language conditions the availability of the grandfather exception on a single factor: that the branch was insured on December 19, 1991. It would be inconsistent with the plain meaning of the statutory language to read into section 3104(d)(2) a second factor: that the branch was not transferred after December 19, 1991.

a. This same analysis led a court to the same conclusion in a very similar case involving grandfathered gas station "retail outlets."
See Beach Robo, Inc. v. Crown Central Petroleum, Inc., 860 F.2d 606 (4th Cir. 1988).

3. Congressional intent

Unlike the insured branch grandfather provision contained in
section 214 of the Federal Deposit Insurance Corporation Improvement Act of 1991, other grandfather provisions in the same statute expressly state that those grandfather rights terminate upon a change in control. See, e.g., 12 U.S.C. §§ 1831a(f)(5), 1831 a(d)(2)(C)(ii). Under well-established rules of statutory construction, the lack of such a provision in the insured branch grandfather provision clearly indicates that Congress did not intend that an insured branch would lose its grandfather status upon its sale or transfer.

a. 'The FDIC itself used this analysis, among others, in determining that the grandfather rights in another provision of FDICIA would survive a change of control. See FDIC Advisory Opinion 94-36 (July 13, 1994).

D. Other Considerations

1. Permitting transfers of grandfathered insured branches would provide an option for other international banks that would like to establish FDIC-insured branches but are constrained from doing so by the 1991 prohibition.

2. Permitting transfers also would ensure that the depositors of an insured branch would not lose the protections of deposit insurance solely as a result of the transfer of the branch to another international bank.

IV. Optional Deposit Insurance for Wholesale Branches

A. Issue

1. Despite legal authority to do so, the FDIC has been unwilling to date to consider applications by "wholesale" branches of international banks (i.e., those branches that are not engaged in domestic retail deposit activities that require FDIC insurance) to obtain FDIC insurance.

B. Recommendation

1. The FDIC should no longer discourage international banks from applying for "optional" FDIC insurance and should exercise its existing authority to approve those applications when the statutory factors for approval have been met.

C. Legal Authority

1. 12 U.S.C. § 1815(b) provides:

“Subject to the provisions of this chapter and to such terms and conditions as the Board of Directors may impose, any branch of a foreign bank, upon application by the bank to the Corporation, and examination by the Corporation of the branch, and approval by the Board of Directors, may become an insured branch.”

2. Plain meaning

The statutory authority of a branch to apply for and obtain deposit insurance is not conditioned on that branch conducting deposit-taking activities for which deposit insurance is required. Section 1815(b) permits "any branch" to become an insured branch - including wholesale branches.

3. Former section 346.8 of the FDIC's regulations explicitly authorized wholesale branches to apply for optional insurance:

“A foreign bank may apply to the FDIC, for deposit insurance for any State branch that is not otherwise required to be insured under § 346.4 or, for any Federal branch that is not otherwise required to be insured under the rules and regulations of the Comptroller of the Currency.”

4. Although section 346.8 was repealed in 1998, the preambles to both the relevant proposed and final regulations expressly recognized that repeal of section 346.8 did not affect the statutory authorization for international banks to apply for optional FDIC insurance for their wholesale branches.

a. Preamble to proposed rule:

“Although the statutory mandate of FBSEA now requires a foreign bank that proposes to engage in domestic retail deposit activity to organize an insured bank subsidiary, noninsured branches are still authorized to operate in the U.S. because they are not engaged in domestic retail deposit activity .... Section 5(b) of the FDI Act is still, in theory, applicable to these U.S. branches of foreign banks. 12 U.S.C. 1815(b). Because of this statutory underpinning, rescinding the regulation does not really affect a foreign bank’s discretion to apply to the FDIC for insurance. Former § 346.8 added nothing substantive to the statutory authorization and, therefore, is redundant and unnecessary.”
62 Fed. Reg. 37,738, 37,756 (July 15, 1997).

b. Preamble to final rule:

“On their face, at least, FBSEA's amendments to section 6 of the IBA seem only to reach foreign banks conducting domestic retail deposit activity, and Congress has not repealed section 5(b) of the FDI Act, authorizing deposit insurance applications from foreign branches. Therefore, it may arguably be possible for a foreign branch which does not engage in domestic retail deposit activity to seek deposit insurance from the FDIC.... Moreover, the elimination of 346.8 does not affect a foreign bank's ability to argue that it may make an application under section 5(b) of the FDI Act. The Board would have to determine whether to actually accept and approve such an application, based upon its review of the facts and circumstances, in addition to the pertinent legal and policy considerations.”
63 Fed. Reg. 17056, 17066 (Apr. 8, 1998).

D. Other Considerations

1. The FDIC also indicated in the preamble to the proposed and final regulations repealing section 346.8 that:

“As a practical matter, however, the FDIC does not foresee many circumstances in which it could be appropriate for the FDIC Board of Directors to approve such an application.”
62 Fed. Reg. at 37,756. See also 63 Fed. Reg. at 17,066.

2. This reluctance to entertain applications for optional insurance was attributable primarily to the FDIC's view that enactment of the 1991 prohibition on the establishment of new FDIC-insured branches evidenced a broader Congressional intent to prohibit FDIC insurance for all branches of international banks.

a. However, as noted above, Congress expressly prohibited international banks from obtaining FDIC insurance only for branches "engaged in domestic retail deposit activities." Congress did not remove the statutory provisions authorizing international banks to apply for FDIC insurance for wholesale branches.

b. Moreover, from a policy standpoint, the FDIC's unnecessarily restrictive approach ignores the significant changes that have occurred since 1991, including changes in the regulatory and supervisory policies and practices with regard to international banks, broader acceptance of the principle of "investor choice," and rejection of a broader policy to force international banks to operate in the United States only through subsidiaries.

3. Wholesale depositors, particularly international customers from Latin America, often seek the benefits of FDIC insurance - even though the full amount of their deposits may not be insured. An international bank's ability to offer these benefits through its U.S. branches would provide a benefit to customers and increase an international bank's funding options.

a. Optional FDIC insurance for wholesale international bank branches is likely to be attractive primarily to international banks already operating FDIC-insured branches or subsidiaries in the United States and to a relatively small number of other international banks, particularly those seeking to serve particular ethnic markets. As a result, adopting a more liberal policy toward optional FDIC insurance for wholesale branches likely would have a minimal effect on the deposit insurance fund.

4. Permitting wholesale branches to obtain FDIC insurance is consistent with the business model that has been followed by some major U.S. banks (e.g., Bankers Trust, J.P. Morgan) that have retained FDIC insurance while focusing on the wholesale markets.

1It should be noted that, even in the case of BCCI, no U.S. creditors suffered any losses.

2 A more detailed discussion of the legal analysis supporting this recommendation is contained in the January 30, 2003 memorandum attached to this outline.

Last Updated 11/23/2004

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