[Federal Register Volume 61, Number 95 (Wednesday, May 15, 1996)]
[Rules and Regulations]
[Pages 24439-24440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12134]



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FEDERAL RESERVE SYSTEM

12 CFR Part 211

[Regulation K; Docket No. R-0911]


International Banking Operations

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: This final rule amends the provisions of Regulation K 
regarding interstate banking operations of foreign banking 
organizations. The Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (Interstate Act) removed geographic restrictions 
on interstate banking by foreign banks effective September 29, 1995, 
and requires certain foreign banks without U.S. deposit-taking offices 
to select a home state for the first time. The final rule requires 
these foreign banks to select a home state by June 30, 1996, and 
removes outdated restrictions on certain mergers by U.S. bank 
subsidiaries of foreign banks outside the home state of the foreign 
bank. Obsolete and superseded provisions of Regulation K concerning 
home state selection also are deleted.

EFFECTIVE DATE: May 9, 1996.

FOR FURTHER INFORMATION CONTACT: Ann E. Misback, Managing Senior 
Counsel (202/452-3788), Douglas M. Ely, Senior Attorney (202/452-5289), 
Andres L. Navarrete, Attorney (202/452-2300), Legal Division; Michael 
G. Martinson, Assistant Director (202/452-3640), Division of Banking 
Supervision and Regulation, Board of Governors of the Federal Reserve 
System. For users of Telecommunication Device for the Deaf [TDD] only, 
please contact Dorothea Thompson (202/452-3544), Board of Governors of 
the Federal Reserve System, 20th and C Streets NW., Washington, D.C. 
20551.

SUPPLEMENTARY INFORMATION:
    The Interstate Act amended section 5 of the International Banking 
Act of 1978 (IBA), which governs interstate banking and branching 
operations of foreign banks. The Interstate Act also amended the Bank 
Holding Company Act of 1956 (BHC Act), the Federal Deposit Insurance 
Act and several other statutes regarding interstate banking operations 
of bank holding companies, national banks and state banks. In order to 
implement certain of these changes, the final rule amends the 
provisions of Regulation K regarding interstate banking operations of 
foreign banking organizations (12 CFR 211.22).
    On December 26, 1995, the Board of Governors of the Federal Reserve

[[Page 24440]]

System (the Board) requested public comment on a proposed rule (the 
Proposed Rule) that would require foreign banks with only agencies and 
subsidiary commercial lending companies in the United States to select 
a home state, or have a home state designated by the Board. 60 FR 
67100. The Proposed Rule also would remove a restriction on the ability 
of foreign banks to effect major bank mergers through U.S. subsidiary 
banks located outside the foreign banks' home states, and would delete 
certain outdated rules governing home state selection.
    The comment period ended on February 5, 1996. The Board received a 
single public comment on the Proposed Rule from a trade association. 
The Board has considered the comment and has made changes to address it 
in the final rule. Except as discussed below, the Board's final rule 
remains unchanged from the Proposed Rule. In addition, the Board 
requested and received comments on other aspects of the Interstate Act 
as it applies to foreign banks. The Board will consider these comments 
in connection with future review of the provisions of Regulation K 
concerning the interstate operation of foreign banks.
    The commenter generally supported the provisions of the Proposed 
Rule, including its provisions requiring certain foreign banks to 
select a home state as contemplated by the Interstate Act. The 
commenter suggested, however, that the deadline for home state 
selection by these banks be 60 days from the publication of the final 
rule, rather than March 31, 1996, as proposed in the Proposed Rule. The 
commenter requested this extension in order to give these banks 
adequate time to assess the consequences of their decision.
    Although the Interstate Act removed the geographic restrictions of 
the IBA on the interstate acquisition of banks by foreign banks, the 
home state of a foreign bank continues to affect its options for 
establishing additional branches in the United States under the IBA. In 
particular, the location of a foreign bank's home state is a factor 
determining the ability of the foreign bank to establish further 
interstate branches pursuant to section 5 (a)(1) and 5 (a)(2) of the 
IBA, as amended by the Interstate Act. 12 U.S.C. Sec. 3103 (a)(1), 
(a)(2).
    Accordingly, the final rule allows additional time for home state 
selection by establishing June 30, 1996, as the deadline for such 
selection. This extension affords foreign banks affected by the rule 
ample time in which to make an informed home state selection.
    The proposed rule provided that, in the event a foreign bank 
required to select a home state fails to do so, the Board would 
exercise its authority to determine a foreign bank's home state. In 
such cases, the Board generally will designate as a foreign bank's home 
state the state in which the total assets of all its offices, net of 
claims on affiliates or other offices of the foreign bank, is the 
largest, as reflected in the foreign bank's most recent report of 
condition, unless other circumstances warrant designation of a 
different home state.

Paperwork Reduction Act

    In accordance with section 3506 of the Paperwork Reduction Act of 
1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board reviewed 
the rule under the authority delegated to the Board by the Office of 
Management and Budget. No collections of information pursuant to the 
Paperwork Reduction Act are contained in the rule.

Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub. 
L. 96-354, 5 U.S.C. 601 et seq.), the Board certifies that the final 
rule would not have a significant economic impact on a substantial 
number of small entities that are subject to its regulation.

List of Subjects in 12 CFR Part 211

    Exports, Federal Reserve System, Foreign banking, Holding 
companies, Investments, Reporting and recordkeeping requirements.

    For the reasons set out in the preamble, the Board amends 12 CFR 
Part 211 as set forth below:

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)

    1. The authority citation for Part 211 continues to read as 
follows:

    Authority: 12 U.S.C. 221 et seq., 1818, 1841 et seq., 3101 et 
seq., 3901 et seq.

    2. In Sec. 211.22, paragraph (a) is revised; paragraph (c) is 
removed; and paragraph (d) is redesignated as paragraph (c) to read as 
follows:


Sec. 211.22   Interstate banking operations of foreign banking 
organizations.

    (a) Determination of home state. (1) A foreign bank (except a 
foreign bank to which paragraph (a)(2) of this section applies) that 
has any combination of domestic agencies or subsidiary commercial 
lending companies that were established before September 29, 1994, in 
more than one state and have been continuously operated shall select 
its home state from those states in which such offices or subsidiaries 
are located. A foreign bank shall do so by filing with the Board a 
declaration of home state by June 30, 1996. In the absence of such 
selection, the Board shall designate the home state for such foreign 
banks.
    (2) A foreign bank that, as of September 29, 1994, had declared a 
home state or had a home state determined pursuant to the law and 
regulations in effect prior to that date shall have that state as its 
home state.
    (3) A foreign bank that has any branches, agencies, subsidiary 
commercial lending companies, or subsidiary banks in one state, and has 
no such offices or subsidiaries in any other states, shall have as its 
home state the state in which such offices or subsidiaries are located.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, May 9, 1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-12134 Filed 5-14-96; 8:45 am]
BILLING CODE 6210-01-P