|For immediate release|
The Federal Reserve Board today announced its approval of the application of Chinatrust Commercial Bank, Ltd., Taipei, Taiwan, to establish a state-licensed branch in New York, New York.
Attached is the Board's Order relating to this action.
Chinatrust Commercial Bank, Ltd.
Chinatrust Commercial Bank, Ltd. ("Bank"), Taipei, Taiwan, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 7(d) of the IBA (12 U.S.C. § 3105(d)) to establish a state-licensed branch in New York, New York. The Foreign Bank Supervision Enhancement Act of 1991 ("FBSEA"), which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a branch 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 (New York Times, November 12, 1997). The time for filing comments has expired, and all comments have been considered.
Bank, with assets equivalent to approximately $16.9 billion, is the ninth largest bank in Taiwan.1 Bank's shares are publicly traded and widely held, with no single shareholder directly owning more than 2 percent. Bank operates more than 30 branches in Taiwan and also has branches in Hong Kong, India, and Paraguay. In addition, Bank operates an offshore banking unit in Taiwan and commercial bank subsidiaries in the Philippines and Indonesia.
Bank's primary purpose for establishing the proposed branch is to provide banking services to the U.S. subsidiaries of Bank's existing customers in Taiwan, and to facilitate international trade between the United States and Asia. Bank does not engage directly or indirectly in any nonbanking activities in the United States, and, after establishing the proposed branch, would be a qualifying foreign banking organization within the meaning of Regulation K (12 C.F.R. 211.23(b)).
Bank has received approval to establish the proposed branch from the Taiwan authorities. The New York State Banking Department also has approved Bank's application to establish the proposed branch.
In order to approve an application by a foreign bank to establish a branch in the United States, the IBA and Regulation K require the Board to determine that the foreign bank applicant 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 must determine that the foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24)). The Board also may take into account additional standards as set forth in the IBA and Regulation K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)).
As noted above, Bank engages directly in the business of banking outside the United States. Bank also has provided the Board with the information necessary to assess the application through submissions that address the relevant issues.
Regulation K provides that a foreign bank will be considered to be subject to comprehensive supervision or regulation on a consolidated basis if the Board determines that the bank is supervised and regulated in such a manner that its home country supervisor receives sufficient information on the foreign bank's worldwide operations, including the relationship of the foreign bank to any affiliate, to assess the overall financial condition of the foreign bank and its compliance with law and regulation (12 C.F.R. 211.24(c)(1)). 2
With respect to the issue of supervision by home country authorities, the Board has considered the following information. Bank is supervised and regulated by the Ministry of Finance ("Ministry") and the Taiwan Central Bank ("Central Bank"), which share responsibility for the supervision of banks in Taiwan. The Banking Law of Taiwan grants the Ministry overall authority for the regulation and supervision of banks in Taiwan, including Bank.3 The Ministry has delegated the authority to the Central Bank to act as the primary examiner of banks in Taiwan, in which capacity the Central Bank conducts mandatory annual examinations.
The Board previously has determined, in connection with applications involving other banks in Taiwan, that these banks were subject to home country supervision on a consolidated basis.4 Bank is supervised by the Ministry and the Central Bank on substantially the same terms and conditions as such other banks. Based on all the facts of record, the Board has determined that Bank is subject to comprehensive supervision and regulation on a consolidated basis by its home country supervisors.
The Board also has taken into account the additional standards set forth in section 7 of the IBA (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). As noted above, Bank has received the consent of its home country authorities to establish the proposed state-licensed branch.
Bank must comply with the minimum capital standards of the Basle Accord, as implemented by Taiwan. Bank's capital exceeds these minimum standards and can be considered equivalent to capital that would be required of a U.S. banking organization. Managerial and other financial resources of Bank are also considered consistent with approval, and Bank appears to have the experience and capacity to support the proposed branch. Bank has established controls and procedures for the proposed branch in order to ensure compliance with U.S. law, as well as controls and procedures for its worldwide operations generally.
The Board has reviewed the restrictions on disclosure in relevant jurisdictions in which Bank operates and has communicated with relevant authorities about access to information. Bank has committed that it will make available to the Board such information on the operations of Bank and any affiliate of Bank 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 is prohibited or impeded by law, Bank has committed to cooperate with the Board to obtain any consents or waivers that might be required from third parties in connection with disclosure of such information. In addition, subject to certain conditions, the Ministry and the Central Bank may share information on Bank's operations with other supervisors, including the Board. 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, and the terms and conditions set forth in this order, the Board has determined that Bank's application to establish a state-licensed branch should be, and hereby is, approved. Should any restrictions on access to information on the operations or activities of Bank or any of its affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce compliance by Bank or its affiliates with applicable federal statutes, the Board may require termination of any of Bank's direct or indirect activities in the United States. Approval of the application also is specifically conditioned on compliance by Bank with the commitments made in connection with this application, and with the conditions in this order.5 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 or 12 U.S.C. § 1847 against Bank, its offices, and its affiliates.
By order of the Board of Governors,6 effective October 5, 1998 .
(signed) Robert deV. Frierson
Robert deV. Frierson
1 All data are as of December 31, 1997, unless otherwise noted.
2 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; (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.
3 This authority permits the Ministry, among other things, to issue licenses, limit activities and expansion, conduct examinations, set minimum capital and liquidity ratios, limit credit extensions, restrict director interlocks, define qualifications for management, and take enforcement actions.
4 See Taipei Bank, 79 Federal Reserve Bulletin 143 (1993); United World Chinese Commercial Bank, 79 Federal Reserve Bulletin 146 (1993); Bank of Taiwan, 79 Federal Reserve Bulletin 541 (1993); Chiao Tung Bank, 79 Federal Reserve Bulletin 543 (1993); The Farmers Bank of China, 81 Federal Reserve Bulletin 620 (1995); Taiwan Business Bank, 81 Federal Reserve Bulletin 746 (1995); Land Bank of Taiwan, 83 Federal Reserve Bulletin 336 (1997); Bank SinoPac, 83 Federal Reserve Bulletin 669 (1997).
5 The Board's authority to approve the establishment of the proposed office parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's approval of the application does not supplant the authority of the State of New York and the New York State Banking Department ("Department") to license the proposed office of Bank in accordance with any terms or conditions that the Department may impose.
6 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich.
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1998 Orders on banking applications