Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM

WASHINGTON, D. C.  20551

DIVISION OF BANKING
SUPERVISION AND REGULATION


SR 91-31 (IB)
December 19, 1991

TO THE OFFICER IN CHARGE OF SUPERVISION
          AT EACH FEDERAL RESERVE BANK


SUBJECT: Guidance to Foreign Banks in Complying with New Deposit-Taking Restrictions

                        The Federal Deposit Insurance Corporation Improvement Act of 1991 was recently adopted by the Congress and was enacted into law today.  Section 214(a) of the Act restricts the deposit-taking ability of foreign banks operating in the United States.

                        The attached joint statement was issued today by the Board and the Office of the Comptroller of the Currency in order to provide guidance to foreign banks with respect to section 214(a) until the agencies adopt implementing rules or clarifying interpretations.

                        To ensure that foreign banks are provided with this guidance in a timely manner, please arrange for immediate distribution of this statement to all foreign banks operating in your District.

                        If you have questions concerning this statement, please call Ricki Tigert (x3428) or Kathleen O'Day (x3786) of the Board's Legal Division.

Richard Spillenkothen
Director

ATTACHMENT TRANSMITTED ELECTRONICALLY BELOW


STATEMENT BY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
OFFICE OF THE COMPTROLLER OF THE CURRENCY

                        The Federal Deposit Insurance Corporation Improvement Act of 1991 ("Act") was adopted by the Congress on November 27, 1991, and was enacted into law today.  Section 214(a) of the Act places limits on the ability of foreign banks in the United States to take certain types of deposits.  This statement is intended to provide guidance to foreign banks in complying with this provision pending adoption of implementing rules or clarifying interpretations.

                        Section 214(a) of the Act amends section 6 of the International Banking Act of 1978 ("IBA") (12 U.S.C. 3104), which deals with the circumstances in which a foreign bank is required to obtain federal deposit insurance for its deposit-taking activities.  Section 214(a) adds a new subsection (c) to section 6, entitled "Retail Deposit-Taking by Foreign Banks." The new subsection (c) provides that, after the date of enactment of subsection(c), a foreign bank may accept or maintain deposit accounts having balances of less than $100,000 only through an insured U.S. subsidiary bank.  A grandfather provision permits insured branches of foreign banks in existence of the date of enactment to continue their operations.

                        During Congressional consideration of the Act, new subsection (c) was described as ensuring that foreign banks that wish to accept or maintain insured deposit accounts do so only in insured subsidiary banks incorporated in the United States. Therefore, in accordance with the terms and intent of section 214(a), foreign banks may not establish new insured branches after the date of enactment.

                        There are, however, a number of other questions raised concerning the scope of new subsection (c), which are currently being reviewed by the Federal banking agencies.  For example, questions have been raised as to the manner in which the provision affects certain types of deposits currently permissible for uninsured branches and agencies.  Until the banking agencies adopt rules or interpretations to resolve these questions, the agencies will not consider a foreign bank to be in violation of section 6 of the IBA so long as it abides by the rules and regulations that have been insured thereunder.1 As noted above, a foreign bank must comply with the requirement that deposits requiring insurance under sections 6(a) and (b) of the IBA and the implementing rules and regulations be accepted only in an insured subsidiary bank or in a grandfathered insured branch.

December 19, 1991


Footnotes

1.  12 CFR 28.8; and 12 CFR 346.6.  Return to text


SR letters | 1991