BOARD Of GOVERNORS 

OF THE

F E D E R A L R E S E R V E S Y S T E M

WASHINGTON, D.C.. 20551

MARK E. VAN DER WEIDE 

GENERAL COUNSEL

January 26, 2018

Hector Becil

Chief Legal Officer, U.S.

The Bank of Nova Scotia

250 Vesey Street

New York, New York 10281

Dear Mr. Becil:

This responds to the request by The Bank of Nova Scotia (“Scotiabank”), 

Toronto, Canada, regarding compliance with the U.S. risk committee requirements 

for foreign banking organizations under section 252.155 of Regulation YY.1

Fotne 1. 12 CFR 252.155. Endfote 1.

Regulation YY requires a foreign banicing organization with combined U.S. 

assets of greater than $50 billion but U.S. non-branch assets of less than 

$50 billion to comply with the requirement to maintain a U.S. risk committee 

either as a committee of the global board of directors, on a standalone basis, or as 

a joint committee with its enterprise-wide risk committee (“U.S. risk committee 

requirements”).2 Among other requirements, a foreign banking organization of 

this size must also include at least one independent member on its U.S. risk 

committee.3

Fotne 2. 12 CFR 252.155(a)(3)(ii)(A). Endfote 2.

Fotne 3. Specifically, the U.S. risk committee must include at least one member who is 

not an officer or employee of the foreign banking organization or its affiliates, and 

who is not a member of the immediate family of a person who is an executive 

officer of the foreign banking organization or its affiliates. Endfote 3.

Regulation YY does not prescribe the manner in which a foreign banking 

organization’s risk committee must oversee the risks of its combined U.S, 

operations, providing a foreign banking organization with some flexibility in 

structuring its oversight function in a way that is efficient and effective in light of 

its broader enterprise-wide risk-management structure.4 Regulation YY also

Fotne 4. See 79 FR 17284. Endfote 4.
requires a foreign banking organization to take appropriate measures to ensure that 

its combined U.S. operations implement the foreign banking organization’s riskmanagement policies and provide sufficient information to the foreign banking 

organization’s risk committee to carry out its responsibilities.5

Fotne 5. See 12 CFR 252.155(c). Endfote 5.

Scotiabank is a foreign banking organization that, as of July 1, 2015, had 

combined U.S. assets of greater than $50 billion, but less than $50 billion in U.S. 

non-branch assets. Accordingly, Scotiabank was required to comply with the U.S. 

risk committee requirements by July 1, 2016.

Scotiabank requested approval of a proposed approach to comply with the 

U.S. risk committee requirements under Regulation YY. Under the proposal, 

Scotiabank would establish a holding company that would be similar to the 

intermediate holding company structure required by Regulation YY for foreign 

banking organizations with $50 billion or more in total U.S. non-branch assets.6 

Scotiabank proposes to establish Scotia Holdings (US) Inc. (“Scotia Holdings”) as 

a holding company for Scotiabank’s U.S. non-bank subsidiaries and has requested 

approval to have the risk committee of the board of directors of Scotia Holdings 

serve as its U.S. risk committee for Scotiabank’s entire U.S. operations, rather 

than have a committee of the global board of directors, on a standalone basis, or as 

a joint committee with its enterprise-wide risk committee, for purposes of 

complying with the U.S. risk committee requirements under Regulation YY.

Fotne 6. A foreign banking organization subject to the requirement to establish an 

intermediate holding company and that has a branch or agency has the option of 

maintaining its U.S, risk committee at its global board of directors or at its 

intermediate holding company’s board of directors. 12 CFR 252.155(a)(3)(h). 

Because Scotiabank has less than $50 billion in U.S. non-branch assets, it was not 

required to establish an intermediate holding company. 12 CFR 252.152(c)(1). Endfote 6.

Scotiabank would consolidate its U.S. non-bank subsidiaries under Scotia 

Holdings and would establish the U.S. risk committee as a committee of the board 

of directors of Scotia Holdings. Scotia Holdings would have the authority to 

oversee Scotiabank’s U.S. branch and agency operations as well as its U.S. nonbank subsidiaries.7 The U.S. risk committee at Scotia Holdings would have at

Fotne 7. Although Scotiabank does not plan to move its Puerto Rico bank subsidiary, 

Scotiabank de Puerto Rico, under Scotia Holdings as a corporate matter due to tax 

and other reasons, Scotiabank intends that the U.S. risk committee will have 

oversight over Scotiabank de Puerto Rico, and to effectuate that, has drafted a 

board resolution that would grant the U.S. risk committee the authority to oversee 

Scotiabank de Puerto Rico. In addition, Scotiabank would not move Scotia 

Waterous (USA) Inc., a merger and acquisition advisory business, under Scotia 

Holdings because it expects to dissolve the entity in the first half of 2018. 

Scotiabank represents that Scotia Waterous (USA) Inc. cannot be dissolved 

immediately because of certain client contract and deferred compensation 

complexities but that the entity will be subject to oversight by the U.S. risk 

committee until its planned dissolution. Endfote 7.
least four members, three of which would be independent members, and one 

senior management member. Scotiabank further represents that, at all times, the 

U.S. risk committee at Scotia Holdings will include at least one member who 

concurrently serves on the global risk committee of Scotiabank. Scotiabank 

asserts that the inclusion of a member of the global risk committee on the U.S. risk 

committee would ensure that U.S. risk concerns are directly escalated to and 

reflected at the global board level.

To ensure that Scotiabank is overseeing the risks of its combined U.S. 

operations, Scotiabank has provided the Board with commitments that it will 

amend its U.S. risk committee charter to enable each of its members to have the 

right and authority to escalate any issue to Scotiabank’s global risk committee or 

global board of directors. In addition, Scotiabank has committed that it will not, 

without the prior approval of the Board, make any amendments or other alterations 

to the U.S. risk committee charter that would materially change or limit the U.S. 

risk committee’s ability to carry out its risk-management responsibilities for 

Scotiabank’s combined U.S. operations, including changing or limiting its ability 

to oversee Scotiabank de Puerto Rico.

Based on all the facts of record in this case, and specifically conditioned on 

compliance with all the representations and commitments made in connection with 

the request, staff of the Legal Division has determined that, in consultation with 

the Division of Supervision and Regulation, this approach is consistent with the 

U.S, risk committee requirements under section 252.155 of Regulation YY. The 

representations and commitments made by Scotiabank constitute conditions 

imposed in writing in connection with the findings and decisions herein and, as 

such, may be enforced in proceedings under applicable law.

This opinion is based on the specific facts and representations in your letter 

and in communications with Board staff. Any change in the facts or
representations should be communicated immediately to Board staff and could 

result in a different opinion.

If you have any questions about this matter, please contact Julie Anthony, 

Counsel (202-475-6682), Rachel Grundmeier, Senior Attorney (202-973-7426), or 

Asad Kudiya, Senior Attorney (202-475-6358), of my staff.

Sincerely,

Signed: MARK VAN DER WEIDE