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Any material change in those facts or representations could affect the approval and
should be communicated promptly to Board staff.

Very truly yours,
(signed) Margaret McCloskey Snanig roa

Margaret McCloskey Shanks
Deputy Secretary of the Board

ce: Mr. Alejandro A. Latorre
Federal Reserve Bank of New York


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result from the Board’s determination not to grant the exemption request, Regulation YY
contemplated that, although the capital requirements for IHCs could increase costs and
reduce flexibility of a foreign banking organization that primarily manages its capital on
a centralized basis, the capital requirements increase the resiliency of the U.S. operations
of a foreign banking organization, the ability of the U.S. operations to respond to stresses
in the United States, and the stability of the U.S. financial system. Regulation YY also
provided for a transition period to help foreign banking organizations manage such costs.
Moreover, the Board stated in the preamble to Regulation YY that it did not expect to
permit an alternative structure where the purpose or primary effect of the alternative
structure is to reduce the impact of the Board’s regulatory capital rules.© Allowing the
minority interest to be held outside of the IHC would overstate the amount of available
regulatory capital, which would fail to reflect Credit Suisse’s U.S. footprint and
undermine the goal of increasing the resiliency of Credit Suisse’s entire U.S. operations.

For the reasons stated above, the Board has granted Credit Suisse’s request
for an exemption from Regulation YY’s requirement to transfer its ownership interest in
the U.S. Real Estate SPVs to its IHC and has denied Credit Suisse’s request to retain a
minority interest in Stanton and Mehetia outside its IHC.

The action to approve the request for an exemption for the U.S. Real Estate
SPVs is based on all the facts of record and on all the representations and commitments
made by Credit Suisse in the submissions to the Board in connection with the request,
including the commitment set forth in Attachment A. These representations and
commitments constitute conditions imposed in writing in connection with the findings
and decisions herein and, as such, may be enforced in proceedings under applicable law.

5 79 Fed. Reg. 17240, 17266 (March 27, 2014).

6 79 Fed. Reg. 17240, 17275 (March 27, 2014). Credit Suisse has presented its request
relating principally to the significant hat could result from a contribution of
100 percent of Stanton and Mehetia to the THC. At the same time, Credit Suisse has also
referred to these potential alternatives:



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Attachment A

Commitment by Credit Suisse AG
to the Board of Governors of the Federal Reserve System

In connection with the request, dated March 30, 2015, to the Board of Governors of the
Federal Reserve System (the “Board”) for the Board’s approval under section 252.153(c)
of the Board’s Regulation YY for an exemption from Regulation YY’s requirement that
Credit Suisse AG (“Credit Suisse”), Ziirich, Switzerland, transfer its ownership interest in
the real estate special purpose vehicles described in the request to an intermediate holding
company established by Credit Suisse for purposes of compliance with Regulation YY,
Credit Suisse makes the following commitment to the Board:

1. Credit Suisse has not offered and will not offer interests in the Swiss real
estate funds described in the request or in any similar real estate funds
established in the future in the United States or to U.S. citizens.

Credit Suisse agrees that the foregoing commitment is deemed to be a condition imposed
in writing by the Board in connection with its findings and decisions on Credit Suisse’s
request and, as such, may be enforced in proceedings under applicable law.


BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, DC 20551

FEB i & 2016

Mr. Robert S. Shafir

Chief Executive Officer — Americas Region
Credit Suisse Group AG

One Madison Avenue

New York, New York 10010

Mr. Timothy P. O’Hara

President and Chief Executive Officer
Credit Suisse Holdings (USA), Inc.
One Madison Avenue

New York, New York 10010

Dear Messrs. Shafir and O’ Hara:

This letter is in response to the requests, dated March 30 and July 13, 2015,
that the Board permit Credit Suisse AG (“Credit Suisse”), Ziirich, Switzerland, to hold its
ownership interest in certain U.S. subsidiaries outside of the intermediate holding
company (“IHC”) established by Credit Suisse for purposes of compliance with
Regulation YY. These subsidiaries include special purpose vehicles through which
Credit Suisse holds U.S. real estate (“U.S. Real Estate SPVs”) in a fiduciary capacity for
non-U.S. investors, as well as subsidiaries that are
structures.!

Regulation YY requires a foreign banking organization with $50 billion or
more in total U.S. non-branch assets to establish an IHC and to transfer its ownership
interest in its U.S. subsidiaries to the IHC.? Under Regulation YY, the Board may permit
the foreign banking organization to hold its ownership interest in a U.S. subsidiary

1 Credit Suisse has requested permission to transfer only iipercent of its ownership
interest in the parents of these subsidiaries to the IHC.

2 12 CFR 252.152. U.S. non-branch assets are measured as an average of the amount
reported for the four most recent consecutive quarters, as reported to the Board on the
FR Y-7Q.

www.federalreserve.gov


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outside of its IHC if circumstances warrant an exception based on the foreign banking
organization’s activities, scope of operations, structure, or similar considerations. Credit
Suisse is a foreign banking organization with EE in total U.S. non-branch
assets as of June 30, 2015. Accordingly, Credit Suisse is required to establish an IHC
under Regulation YY.

Credit Suisse engages in asset management activities in Switzerland
through its wholly owned subsidiary, Credit Suisse Funds AG. As a part of its asset
management business, Credit Suisse Funds AG manages two Swiss real estate funds
(“Swiss Real Estate Funds”) that hold U.S. real estate assets through U.S. Real Estate
SPVs. The U.S. Real Estate SPVs, which hold << assets as of
December 31, 2014, are passive vehicles, and their only function is to hold title to U.S.
real estate assets in a fiduciary capacity on behalf of foreign investors. The Swiss Real
Estate Funds are marketed solely to foreign investors.

The Swiss Real Estate Funds are structured as “contractually based
investment funds” under Swiss law and are governed by a collective investment
agreement, under which Credit Suisse administers the assets for the benefit of investors
but holds the assets in its own name. Under Swiss law, a contractually based investment
fund does not have a separate legal existence. The U.S. Real Estate SPVs are not
consolidated on the financial statements of Credit Suisse. Because the Swiss Real Estate
Funds hold the underlying U.S. real estate assets through the U.S. Real Estate SPVs,
Swiss law requires the Swiss Real Estate Funds to directly or indirectly hold a portion of
the equity interest in the U.S. Real Estate SPVs and requires Credit Suisse Funds AG to
exert a dominant influence over the U.S. Real Estate SPVs. Currently, Credit Suisse
Funds AG owns, in the aggregate, 100 percent of all outstanding ownership interests in
the U.S. Real Estate SPVs, for the benefit of the investors in the Swiss Real Estate Funds.
As asset manager, Credit Suisse receives fee income from the structure and does not
provide leverage to finance the acquisition of the properties. The Swiss Real Estate
Funds are bankruptcy-remote from Credit Suisse and its U.S. operations.

Credit Suisse also requests an exemption from the requirement to transfer
its entire ownership interest in two U.S. subsidiaries, Stanton Equity Trading Delaware
LLC and Mehetia Inc., and each of their respective U.S. subsidiaries (collectively,
“Stanton and Mehetia”) to its IHC. Stanton and Mehetia are indirectly held by Credit
Suisse through its Cayman Islands branch and engage in alternative energy investments

and similar financings. Stanton and Mehetia previously executed certain intra-group
enon A rs

operations of Credit Suisse. Credit Suisse requests that it be permitted to transfer only
HB percent of its ownership interest in the parent of Stanton and Mehetia to the IHC,
while maintaining a ercent minority interest in the parent of Stanton and Mehetia


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outside the IHC. The request would allow Credit Suisse to attribute the remaining
percent minority interest in Stanton and Mehetia’s negative equity outside of its
THC. Credit Suisse represents that, absent an exemption.

According to the request, if Credit Suisse transfers its entire
ownership interest in Stanton and Mehetia to its IHC, as required by Regulation YY, the
pro forma common equity tier 1 capital of the IHC could be up tof million lower
than if Credit Suisse were permitted to maintain alfpercent minority interest in
Stanton and Mehetia outside of the IHC.

After consideration of all relevant facts, including Credit Suisse’s activities,
scope of operations, structure, and similar considerations, the Board has granted Credit
Suisse’s request to maintain its ownership interest in the U.S. Real Estate SPVs currently
owned, as well as any ownership interest in similar U.S. Real Estate SPVs established in
the future, outside of the IHC, subject to the condition that the Swiss Real Estate Funds
and similar real estate funds established in the future not be offered in the United States
or to U.S. investors. However, the Board has denied Credit Suisse’s request to maintain a
minority interest in Stanton and Mehetia outside of its IHC.

With respect to the U.S. Real Estate SPVs, Regulation YY provides that, in
considering an exemption request, the Board may consider whether applicable law would
prohibit the foreign banking organization from owning or controlling one or more of its
US. subsidiaries through a single IHC.4 Applicable Swiss law would likely prohibit
Credit Suisse from transferring the U.S. Real Estate SPVs to the IHC. Absent an
exemption, Credit Suisse would likely unwind the U.S. Real Estate SPVs and would be
precluded from offering the foreign investors the opportunity to invest in U.S. real estate
through the Swiss Real Estate Funds. Further, the U.S. operations of Credit Suisse have
limited exposure to the U.S. Real Estate SPVs, as the assets are owned for the benefit of
third-party non-U.S. investors, and the U.S. Real Estate SPVs are structured to be
bankruptcy remote from Credit Suisse and its U.S. operations. The U.S. Real Estate
SPVs would not appear to present U.S. systemic risk concerns, and Credit Suisse has
entered into the commitment set forth in Attachment A that it has not offered and will not
offer interests in the Swiss Real Estate Funds or in similar real estate funds established in
the future in the United States or to U.S. citizens.

With respect to Stanton and Mehetia, however, granting the request and
permitting Credit Suisse to maintain a minority interest in its U.S. subsidiaries outside of
the IHC would significantly overstate the amount of regulatory capital available in the
United States for the U.S. operations of Credit Suisse, in a manner inconsistent with the
intent of Regulation YY to enhance the resiliency of Credit Suisse’s entire U.S.
operations. Although Credit Suisse has identified IM that would

4 12 CFR 252.153(c)(2).