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Release Date: September 17, 1997


For immediate release

The Federal Reserve Board announced today its approval of the application of Südwestdeutsche Landesbank Girozentrale, Stuttgart and Mannheim, Germany, to establish a branch office in New York, New York.

Attached is the Board's Order relating to this action.


Südwestdeutsche Landesbank Girozentrale
Stuttgart and Mannheim, Federal Republic of Germany

Order Approving Establishment of a Branch

Südwestdeutsche Landesbank Girozentrale ("Bank"), Stuttgart and Mannheim, Germany, 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 (The New York Times, October 28, 1996). The time for filing comments has expired, and all comments have been considered.

Bank, with assets equivalent to approximately $134 billion, is the 14th largest bank in Germany.1 The Savings Bank Association of Baden ("BSGV") and the Savings Bank Association of Württemberg ("WSGV") hold a 15 percent and 33 percent interest in Bank, respectively. The remaining interest in Bank is held by 82 German savings banks.

Bank operates three branches in Germany, two foreign branches (Singapore and London) and four representative offices (New York, Hong Kong, Beijing, and Hanoi). In addition, Bank owns a subsidiary bank in Luxembourg, and operates several nonbank subsidiaries in Germany engaged in various activities, including factoring, investment services, and real estate development and management activities.

Bank's primary purpose for establishing the proposed branch is to provide trade financing, treasury, and advisory services primarily to corporate clients based in the State of Baden-Württemberg with offices in the United States. In addition, the proposed branch would participate in syndicated loans and issue commercial paper and other debt instruments. 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)).

The Federal Banking Supervisory Office ("FBSO") and the Deutsche Bundesbank, Bank's primary home country supervisors, have indicated no objection to the establishment of Bank's 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 supervision by home country authorities, the Board has considered the following information. The FBSO and the Deutsche Bundesbank share responsibility as Bank's home country supervisors. Generally, the FBSO reviews periodic financial reports and information provided by external and internal auditors, has authority to carry out on-site audits, has enforcement powers with regard to bank regulation and supervision, and works closely with the Deutsche Bundesbank in supervising Bank.

The Board has determined, in connection with a previous application,3 that Bank is subject to comprehensive consolidated supervision. No material changes have occurred in the manner of Bank's supervision since that time that would alter the Board's previous determination.

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's home country authorities have no objection to establishment of the proposed state-licensed branch.

Germany is a signatory to the Basle risk-based capital standards, and German risk-based capital standards meet those established by the Basle Capital Accord ("Accord"). Bank's capital is in excess of the minimum levels that would be required by the Accord and can be considered equivalent to capital that would be required of a U.S. banking organization. Managerial and other financial resources of Bank also are 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 and WSGV have committed to 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 and WSGV have 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 FBSO and the Deutsche Bundesbank 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 WSGV, and the terms and conditions set forth in this order, the Board has determined that Bank's application to establish a 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 and WSGV with the commitments made in connection with this application, and with the conditions in 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 or 12 U.S.C. � 1847 against Bank, its offices, and its affiliates.

By order of the Board of Governors,5 effective September 17, 1997.

(signed) Jennifer J. Johnson

Jennifer J. Johnson

Deputy Secretary of the Board


Footnotes

1 All data are as of December 31, 1996, 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 West Merchant Bank Limited, 81 Federal Reserve Bulletin 519 (1995).

4 The Board's authority to approve the establishment of the proposed office parallels the continuing authority of the New York State Banking Department 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.

5 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley and Phillips. Absent and not voting: Governor Meyer.

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