|For immediate release|
The Federal Reserve Board announced today its approval of the application of The Bank of East Asia Ltd., Hong Kong Special Administrative Region, People's Republic of China, to establish a representative office in Flushing, New York.
Attached is the Board's Order relating to this action.
The Bank of East Asia, Ltd.
The Bank of East Asia, Ltd. ("Bank"), Hong Kong Special Administrative Region, People's Republic of China, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a representative office in Flushing, New York. The Foreign Bank Supervision Enhancement Act of 1991, which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a representative office in the United States.
Notice of the application, affording interested persons an opportunity to submit comments, has been published in a newspaper of general circulation in New York, New York (The New York Times, October 31, 1997). The time for filing comments has expired, and the Board has considered the application and all comments received.
Bank, with assets of approximately $17.2 billion as of year-end 1997, was established in 1918. Bank has represented that no shareholder owns 10 percent or more of its issued share capital. Bank has approximately 100 branches in Hong Kong and provides a broad range of retail and wholesale banking services. Bank also owns domestic subsidiaries engaged in real estate, investment, insurance, leasing, corporate finance, and other activities. Outside Hong Kong, Bank has nonbanking subsidiaries and offices in several countries, including two branches in New York, New York, and one in Los Angeles, California.
The proposed representative office would serve as a marketing office for Bank's New York operations and solicit loans from customers in its proximity. The proposed office would not disburse loan proceeds or accept loan payments, nor would it be used to provide deposit services.
In acting on an application to establish a representative office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank engages directly in the business of banking outside of the United States and has furnished to the Board the information it needs to assess the application adequately. The Board also shall take into account whether the foreign bank and any foreign bank parent is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor (12 U.S.C. § 3107(a)(2); 12 CFR 211.24(d)(2)).1 The Board may take into account additional standards as set forth in the IBA (12 U.S.C. § 3105(d)(3) and (4)) and Regulation K (12 CFR 211.24(c)).
With respect to home country supervision of Bank, the Board has considered the following information. The Hong Kong Monetary Authority ("HKMA") is the principal supervisory authority of Bank. The Board previously determined, in connection with applications to establish U.S. offices by three other Hong Kong banks, that these banks were subject to comprehensive consolidated supervision by the HKMA.2 The Board has determined that Bank is supervised on substantially the same terms and conditions as these other banks.3 Based on all the facts of record, the Board concludes that the factors relating to the supervision of Bank by its home country supervisors are consistent with approval of the proposed representative office.
The Board also has found that, for purposes of the IBA and Regulation K, Bank engages directly in the business of banking outside of the United States through its banking operations in Hong Kong and elsewhere. Bank has provided the Board with the information necessary to assess the application through submissions that address the relevant issues.
The Board also has taken into account the additional standards set forth in the IBA (12 U.S.C. § 3105(d)(3) and (4)) and Regulation K (12 CFR 211.24(c)(2)). Bank has received the consent of the HKMA to establish the proposed representative office. The Board also has determined that the financial and managerial factors are consistent with approval of the proposed office. Bank appears to have the experience and capacity to support the proposed office and has established controls and procedures for the proposed office to ensure compliance with applicable U.S. law.
Finally, with respect to access to information on Bank's operations, the Board has reviewed applicable provisions of law and has communicated with appropriate government authorities regarding access to information. Bank has committed to make available to the Board such information on the operations of Bank and any of its affiliates that the Board deems necessary to determine and enforce compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable federal law. To the extent that the provision of such information to the Board may be prohibited or impeded by law or otherwise, Bank has committed to cooperate with the Board in obtaining any necessary consents or waivers that might be required from third parties in connection with the disclosure of certain information. In light of these commitments and other facts of record, and subject to the condition described below, the Board concludes that Bank has provided adequate assurances of access to any necessary information the Board may request.
On the basis of all the facts of record, and subject to the commitments made by Bank, as well as the terms and conditions set forth in this order, the Board has determined that Bank's application to establish a representative office should be, and hereby is, approved. Should any restrictions on access to information on the operations or activities of Bank or its affiliates subsequently interfere with the Board's ability to determine the compliance by Bank or its affiliates with applicable federal law, the Board may recommend termination of any of Bank's direct or indirect activities in the United States. Approval of the application is also specifically conditioned on compliance by Bank with the commitments made in connection with the application and with the conditions of this order.4 The commitments and conditions referred to above are conditions imposed in writing by the Board in connection with its decision, and may be enforced in proceedings under 12 U.S.C. § 1818 against Bank, its offices, and its affiliates.
By order of the Board of Governors,5 effective August 3, 1998.
(signed) Robert deV. Frierson
Robert deV. Frierson
1 In assessing this standard, the Board considers, among other factors, the extent to which the home country supervisors: (i) ensure that the bank has adequate procedures for monitoring and controlling its activities worldwide; (ii) obtain information on the condition of the bank and its subsidiaries and offices through regular examination reports, audit reports, or otherwise; (iii) obtain information on the dealings with and relationship between the bank and its affiliates, both foreign and domestic; (iv) receive from the bank financial reports that are consolidated on a worldwide basis, or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis; and (v) evaluate prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis. These are indicia of comprehensive consolidated supervision; no single factor is essential and other elements may inform the Board's determination.
2 See Hong Kong and Shanghai Banking Co., 81 Federal Reserve Bulletin 902 (1995); Liu Chong Hing Bank, Ltd., 81 Federal Reserve Bulletin 905 (1995); Dah Sing Bank, Ltd., 80 Federal Reserve Bulletin 182 (1994).
3 On July 1, 1997, Hong Kong became a Special Administrative Region of the People's Republic of China. The HKMA has confirmed that its supervision of Bank has not been materially affected by the change in sovereignty.
4 The Board's authority to approve the establishment of the proposed representative office parallels the authority of the State of New York to license offices of a foreign bank. In this case, Bank has received permission from the Office of the Comptroller of the Currency to establish and administer the proposed representative office as a unit of Bank's existing insured federal branch in New York, New York. The New York State Banking Department ("NYSBD") has confirmed that, in the circumstances of this case, the establishment of the proposed office as a unit of Bank's existing insured federal branch in New York would not contravene New York State law. Bank has confirmed that, in the event of the closure of Bank's insured New York branch, Bank would be required to obtain a representative office license from the NYSBD to operate the representative office as a stand-alone entity.
5 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, and Ferguson. Absent and not voting: Governor Gramlich.
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1998 Orders on banking applications