Opinion ID: 705221
Heading Depth: 2
Heading Rank: 3

Heading: The International Banking Act of 1978

Text: 15 The International Banking Act of 1978 (IBA), 12 U.S.C. Secs. 3101-3108 (1988), as it existed during the relevant time period of 1987 and 1988, and its legislative history provide further support for a narrow reading of Sec. 1344(b)(5). 9 The IBA, which is the principal federal law governing foreign bank operations, was enacted to eliminate various competitive advantages foreign banks operating in this country enjoyed over federally and state chartered domestic banks. S.Rep. 95-1073, 95th Cong., 1st Sess. 6 (1978), reprinted in 1978 U.S.C.C.A.N. 1421, 1422, 1426. Specifically, unlike their domestic counterparts, branches of foreign banks, because not subject to the strictures of the McFadden Act and Bank Holding Company Act, were permitted the unfair advantage of establishing full service banking facilities capable of accepting deposits in more than one state. Id. at 1427-28. 16 To establish competitive equality between foreign and domestic banks, the IBA limits the domestic deposit-taking activities of a foreign bank to its designated home state, 12 U.S.C. Sec. 3103(a) (1988), thus provid[ing] foreign banks with 'national treatment' under which 'foreign enterprises ... are treated as competitive equals with their domestic counterparts.'  Conference of State Bank Supervisors v. Conover, 715 F.2d 604, 606 (D.C.Cir.1983) (quoting 1978 U.S.C.C.A.N. 1421, 1422), cert. denied 466 U.S. 927, 104 S.Ct. 1708, 80 L.Ed.2d 181 (1984). Until the enactment of the IBA, foreign banks operating branches in the United States did so only under state authority. 1978 U.S.C.C.A.N. 1421, 1426. Under the IBA, a branch of a foreign bank must choose between state or federal treatment and can expect, thereafter, to be subject to the same restrictions as a similarly situated domestic bank. See 12 U.S.C. Sec. 3102(a) (1988) (subject to approval of the Comptroller of the Currency, a foreign bank may establish a federal branch in any state in which it is not operating a branch under state law, and in which the establishment of such branch is not prohibited by state law); see also 1978 U.S.C.C.A.N. 1421, 1426 (discussing State-Federal option). 17 Because HKSB elected an Oregon state charter for its Portland branch, that branch was a state branch, defined under the IBA as a branch of a foreign bank established and operating under the laws of any State. 12 U.S.C. Sec. 3101(12) (1988) (emphasis added). By contrast, the IBA defines a federal branch as one established and operating under section 3102. 12 U.S.C. Sec. 3101(6) (1988). Section 3102 provides, in turn, that a federal branch of a foreign bank is subject to such rules, regulations, and orders as the Comptroller [of the Currency] considers appropriate, and that such a branch will, with certain exceptions, receive the same rights and privileges as a national bank at the same location under the National Bank Act. 18 U.S.C. Sec. 3102(b) (1988). 18 The government recognizes that Sec. 3101(12) appears linguistically to exclude HKSB's Portland branch from the effect of Sec. 1344(b)(5)'s operating under the laws of the United States language. It contends, however, that the regulatory control exercised over state branches of foreign banks through the IBA is sufficient to bring the Portland branch within the bank fraud statute's purview. The government finds the regulatory authority of the Federal Reserve Board over such branches particularly persuasive, contending that the Federal Reserve exercises the same authority over state branches as it does over federally chartered branches. In actuality, the IBA's legislative history makes clear that the Federal Reserve's authority over a state branch of a foreign bank is secondary to the state's oversight. In sharp contrast, federal branches and federally insured state branches receive their principal oversight from federal sources--i.e., from the Comptroller of the Currency and the FDIC, respectively. As the legislative history of the IBA states: 19 In order to ensure adequate supervision of foreign bank operations within the present Federal-State regulatory framework, the bill provides that the Comptroller, the FDIC, and the States will have primary examining authority over such operations within their jurisdiction. The committee amended the House bill to provide the Federal Reserve Board with residual examining authority over all banking operations of foreign banks.... Thus, Federal branches and agencies will be subject to examination by the Comptroller, federally insured State branches will be examined by the State agencies and by the FDIC, and non-federally insured State branches ... will be examined by the appropriate State authorities or, if not so examined, by the Federal Reserve. 20 . . . . . 21 The legislation gives the Federal Reserve residual examination and supervisory authority over the domestic operations of foreign banks.... Branches ... of foreign banks principally fall within the regulatory purview of State authorities. 22 1978 U.S.C.C.A.N. 1421, 1433, 1445 (emphasis added). 23 We cannot agree with the district court's view that the federal regulations applicable through the IBA are significant, 838 F.Supp. at 477, enough to cause the Portland branch to fall within the bank fraud statute's definition of a federally chartered bank. The plain language of the IBA's text, which distinguishes between state and federal branches of foreign banks, and the IBA's legislative history, make clear that a state branch is organized and operating under the laws of a state even though it is subject to the Federal Reserve's secondary regulatory authority and other federal regulation under the IBA. 10 We hold that HKSB's Portland branch was not operating under the laws of the United States within the meaning of Sec. 1344(b)(5), and that the district court therefore erred in denying Lewis' motion to dismiss the bank fraud charges for lack of jurisdiction. 11 By extension, we hold also that the district court misstated an element of the crime of bank fraud when it erroneously instructed the jury that a bank is operating under the laws of the United States if it is subject to regulation, examination and supervision by the Federal Government including regulation by the Federal Reserve. 24 For the foregoing reasons, Lewis' conviction on the bank fraud counts is reversed.