Service by Federal Officials on the Board of Directors of the

Bank for International Settlements

18 U .S.C. § 208(a) does not prohibit the Chairm an o f the Federal Reserve Board and the President 

o f the Federal Reserve Bank of New Y ork from serving in their official capacities on the Board 

o f D irectors o f the Bank for International Settlements

May 6, 1997

M e m o r a n d u m O p in io n f o r t h e G e n e r a l C o u n s e l

Fe d e r a l R e s e r v e B o a r d

You have asked whether, absent a waiver, 18 U.S.C. § 208(a) would forbid the 

Chairman of the Federal Reserve Board and the President of the Federal Reserve 

Bank of New York from serving in their official capacities on the Board of Directors of the Bank for International Settlements (“ BIS” ). We believe that the statute 

would not forbid this service.

The BIS was formed in 1930 “ for the main purpose of collecting and transferring German reparations.” Charles J. Woelfel, Encyclopedia o f Banking and

Finance 95 (10th ed. 1994). It is now “ the major forum for consultation, cooperation, and information exchange among central banks, including member central 

banks of thirty-two countries of which eight are on the BIS Board.” Letter for 

Hon. Donald W. Riegle, Jr., Chairman, Committee on Banking, Housing and 

Urban Affairs, United States Senate, from Alan Greenspan, Chairman, Federal 

Reserve Board at 1 (June 20, 1994). Central banks own about 85 percent of the 

BIS’s stock, with the remaining 15 percent in the hands of private shareholders. 

Encyclopedia o f Banking and Finance at 96. Although the BIS is a profit-making 

institution and declares an annual dividend, “ [t]he right of representation and 

voting, in proportion to the number of shares subscribed by each country, may 

be exercised by the central bank of that country, or by its nominee, or in cases 

where the central bank does not nominate an institution, the BIS may designate 

a financial institution not objected to by the central bank of the country in question.” Federal Reserve Board Staff, Background Note on the Federal Reserve’s

Relationship with the Bank fo r International Settlements at 11 (June 1994).

The BIS reserves two seats on its Board for the central bank of the United 

States, but the Federal Reserve Board did not take up these seats until 1994. At 

that time, the Chairman assumed one seat and the President of the Federal Reserve 

Bank of New York assumed the other.

Under 18 U.S.C. § 208(a) (1994), an officer or employee of the executive branch 

may not participate personally or substantially in any particular matter in which 

he or she has a financial interest. The statute also imputes certain other financial 

interests to the officer and employee. These interests include those of any 

“ organization in which [the officer or employee] is serving as . . . director.”

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Service by Federal Officials on the Board o f Directors o f the Bank fo r International Settlements

An opinion of our office, issued November 19, 1996, concluded that 18 U.S.C. 

§ 208(a) “ would prevent a government employee from serving on the board of 

directors of an outside organization in his or her official capacity, in the absence 

of: (1) statutory authority or a release of fiduciary obligations by the organization 

that might eliminate the conflict of interest, or (2) a waiver of the requirements 

of § 208(a), pursuant to 18 U.S.C. § 208(b).” Service on the Board of Directors

o f Non-Federal Entities by Federal Bureau o f Investigation Personnel in Their

Official Capacities, 20 Op. O.L.C. 379, 379 (1996). We reasoned that an 

‘ ‘employee performs official duties for [his or her agency] in serving on the board 

of the outside organization” and that, therefore, “ §208 would apply to any action 

the employee takes as a director that affects the financial interests of the outside 

organization.” Id. at 380. However, where Congress has authorized the service 

by statute, the official “ serves . . . in an ex officio rather than personal capacity,” 

owes a duty only to the United States, and does not violate § 208. See Applicability

o f 18 U.S.C. §208 to Proposed Appointment o f Government Official to the Board

o f Connie Lee, 18 Op. O.L.C. 136, 138 (1994).

' On the particular facts here, we believe that the Chairman of the Federal Reserve 

Board and the President of the Federal Reserve Bank of New York have statutory 

authority to serve on BIS’s Board and that §208 thus does not preclude or affect 

that service. The Federal Reserve Board has broad statutory authority over negotiations between elements of the central banking system in the United States and 

foreign banks:

The Board of Governors of the Federal Reserve System shall exercise special supervision over all relationships and transactions of

any kind entered into by any Federal reserve bank with any foreign 

bank or banker, or with any group of foreign banks or bankers, 

and all such relationships and transactions shall be subject to such 

regulations, conditions, and limitations as the Board may prescribe.

No officer or other representative of any Federal reserve bank shall 

conduct negotiations of any kind with the officers or representatives 

of any foreign bank or banker without first obtaining the permission 

of the Board of Governors of the Federal Reserve System. The

Board o f Governors o f the Federal Reserve System shall have the

right, in its discretion, to be represented in any conference or negotiations by such representative or representatives as the Board may

designate.

12 U.S.C. §348a (1994) (emphasis added). The “ special supervision” provided 

for by §348a extends not only to transactions but also to “ relationships,” which 

are subject to conditions prescribed by the Board of Governors. Relationships with 

groups of foreign banks are specifically covered. The Board of Governors, more89
Opinions o f the Office o f Legal Counsel in Volume 21

over, possesses not only the power to regulate the specified international activities 

of the member banks but also the right to take part in such international activities 

in its own behalf.

To be sure, we ordinarily might well find that a provision of this nature would 

not amount to such statutory authority for service on an outside board as would 

overcome 18 U.S.C. § 208(a). The specific focus of the provision is the Board 

of Governors’ control over Federal reserve banks, rather than its own authority 

to enter into “ relationships” with foreign banking organizations. Furthermore, the 

provision does not expressly refer to directorships.

Nevertheless, there is an additional consideration that weighs in favor of reading 

§348a as authority for the Chairman and the President of the Federal Reserve 

Bank of New York to serve on B IS’s Board. That service is a means by which 

the United States negotiates with foreign governments, through their central banks. 

As President Bush suggested in a signing statement dealing with a provision that 

would have required Federal banking agencies to hold certain discussions with 

the BIS, the President has the power to control such communications because 

they are an exercise of his “ constitutional authority to conduct the international 

relations of the United States.” Statement on Signing the Federal Deposit Insurance Corporation Improvement Act o f 1991, 2 Pub. Papers of George Bush 1649, 

1650(1991).

In this area, the President has broad latitude. See, e.g.. Department o f Navy

v. Egan, 484 U.S. 518, 529 (1988) (the Supreme Court has “ recognized ‘the generally accepted view that foreign policy was the province and responsibility of 

the Executive’ ” ) (quoting Haig v. Agee, 453 U.S. 280, 293-94 (1981)); Alfred

Dunhill o f London, Inc. v. Republic o f Cuba, 425 U.S. 682, 705-06 n.18 (1976) 

( “ [T]he conduct of [foreign policy] is committed primarily to the Executive 

Branch . . . .” ); United States v. Louisiana, 363 U.S. 1, 35 (1960) (the President 

is “ the constitutional representative of the United States in its dealings with foreign nations” ). See also Earth Island Inst. v. Christopher, 6 F.3d 648, 652-54 

(9th Cir. 1993); Ward v. Skinner, 943 F.2d 157, 160 (1st Cir. 1991) (Breyer, 

J.) (“ [T]he Constitution makes the Executive Branch . . . primarily responsible” 

for the exercise of “ the foreign affairs power.” ), cert, denied, 503 U.S. 959 

(1992); Sanchez-Espinoza v. Reagan, 770 F.2d 202, 210 (D.C. Cir. 1985) (Scalia, 

J ) (“ [B]road leeway” is “ traditionally accorded the Executive in matters of foreign affairs.” ). For example, statutory qualifications for officials who negotiate 

for the United States are suspect. See Constitutionality of Statute Governing

Appointment o f United States Trade Representative, 20 Op. O.L.C. 279 (1996). 

Although we do not doubt that Congress may impose conflict of interest restrictions on those who engage in such negotiations, the breadth of the President’s 

power counsels a broad reading of congressional authorization for particular 

means by which the power may be exercised. See United States v. Curtiss-Wright

Export Corp., 299 U.S. 304, 320-22 (1936).

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Service by Federal Officials on the Board o f Directors o f the Bank fo r International Settlements

Here, Secretary of State Christopher expressed the view “ that active participation of the Federal Reserve on the BIS Board will serve U.S. foreign policy 

interests” and declared that “ Federal Reserve membership on the BIS Board has 

the full support of the Department of State.” Letter for Alan Greenspan, Chairman, Board of Governors, Federal Reserve System, from Warren Christopher, Secretary of State (June 15, 1994). The directorships in question, like the United 

States’ membership in other international bodies, is a mode of conducting our 

foreign relations. Given this setting, we believe that 12 U.S.C. § 348a constitutes 

statutory authority for holding the directorships, notwithstanding 18 U.S.C. 

§ 208(a).

RICHARD L. SHIFFRIN 

Deputy Assistant Attorney General

Office of Legal Counsel

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