|For immediate release|
The Federal Reserve Board announced today its approval of the application of HSBC Equator Bank plc, London, England, to establish a representative office in Washington, D.C.
Attached is the Board's Order relating to this action.
HSBC Equator Bank plc
HSBC Equator Bank plc ("Bank"), London, England, 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 Washington, D.C. 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 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 Washington, D.C. (The Washington Post, June 1, 1997). The time for filing comments has expired, and the Board has considered the application and all comments received.
Bank, with approximately $202 million in assets,1 is incorporated in London, England, and provides commercial and merchant banking services to sub-Saharan Africa. Bank began its operations in 1996, as part of a reorganization of the holdings of its parent, Equator Holdings Limited ("EHL"). In the reorganization, Bank acquired the majority of the business and staff of its sister affiliate, Equator Bank Limited ("EBL"), a commercial bank incorporated in Nassau, the Bahamas, and formerly EHL's principal operating subsidiary. HSBC Holdings plc ("HSBC"), London, England, indirectly owns 60 percent of EHL's shares. NedEurope S.A., a Luxembourg subsidiary of a South African financial services group, and Equator Management Services, a Connecticut partnership consisting of members of the management of Bank's affiliates, each own 20 percent of EHL's shares.
Bank's international operations consist of six representative offices in various African countries, and several leasing company subsidiaries organized in Nassau, Bahamas, and the Turks and Caicos Islands. In the United States, Bank's immediate parent, EHL, operates an export trading company and several other nonbanking companies.2 In addition, Bank's sister bank, EBL, operates a representative office in Washington, D.C. Bank is proposing that the current EBL representative also would serve as Bank's representative.
The proposed representative office in Washington, D.C. would conduct market research, develop new business, prepare loan applications, and maintain contacts with Bank's customers and U.S. government and international development agencies with interests in Africa. The proposed representative office would report to Bank's head office in London and also would be monitored and supervised by Equator USA, Inc., EHL's Connecticut servicing subsidiary. No funds would be solicited, received, or disbursed at or through the representative office.
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 C.F.R. 211.24).3 The Board may also 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 information necessary to assess the application through submissions that address the relevant issues. With respect to supervision by home country authorities, the Board previously has determined, in connection with applications involving other banks in the United Kingdom, that those banks were subject to home country supervision on a consolidated basis.4 Bank is supervised by the Bank of England on substantially the same terms and conditions as those other banks.5 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 supervisor.
The Board also has taken into account the additional standards set forth in section 7 of the IBA and Regulation K (12 U.S.C. § 3105(d)(3),(4); 12 C.F.R. 211.24(c)(2)). The Bank of England has no objection to Bank's establishment of the proposed representative office.
With respect to the financial and managerial resources of Bank, taking into consideration Bank's record of operations in its home country, its overall financial resources, and its standing with its home country supervisors, the Board also has determined that financial and managerial factors are consistent with approval of the proposed representative office. Bank appears to have the experience and capacity to support the proposed representative office and has established controls and procedures for the proposed representative office to ensure compliance with U.S. law.
With respect to access to information about Bank's operations, the Board has reviewed the restrictions on disclosure in relevant jurisdictions in which Bank operates and has communicated with relevant government authorities regarding access to information. Bank and HSBC have 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 by law, Bank and HSBC have committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties for disclosure of such information. In addition, subject to certain conditions, the Bank of England may share information on the operations of Bank and the HSBC Group 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 HSBC, 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 and 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 or its affiliates' direct or indirect activities in the United States. Approval of this application is also specifically conditioned on compliance by Bank and HSBC with the commitments made in connection with this application, and with the conditions in this order.6 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 and its affiliates.
By order of the Board of Governors,7 effective May 4, 1998.
(signed) Jennifer J. Johnson
Jennifer J. Johnson
1 Asset data are as of December 31, 1997.
2 These companies engage in aircraft leasing, consulting, venture capital activities and the provision of services for a fee to affiliated companies within the Equator group, including Bank.
3 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.
4 See Coutts & Co. AG, 79 Federal Reserve Bulletin 636 (1993); Singer & Friedlander, 79 Federal Reserve Bulletin 809 (1993); West Merchant Bank Limited, 81 Federal Reserve Bulletin 519 (1995).
5 In addition, although HSBC, Bank's ultimate parent, is not itself an authorized institution in the United Kingdom, the Board has previously determined that HSBC and its various banking and nonbanking companies ("HSBC Group") are supervised on substantially the same terms and conditions as those United Kingdom banks. Wells Fargo & Co., HSBC Holdings, plc, HSBC Holdings BV, Marine Midland Banks, Inc., 81 Federal Reserve Bulletin 1037 (1995); see also Hongkong Bank of Canada, 83 Federal Reserve Bulletin 51 (1997). The Bank of England has confirmed that its consolidated supervision of the HSBC Group extends to Bank and that there have been no material changes in its supervision of the HSBC Group since the Board's previous determination.
6 The Board's authority to approve the establishment of the proposed office parallels the authority of the Washington, D.C. Office of Banking and Financial Institutions ("Office") to license or otherwise permit the establishment of offices of a foreign bank. The Board's approval of this application does not supplant the authority of Office to license or otherwise permit the proposed office of Bank in accordance with any terms or conditions that Office may impose.
7 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Phillips, Meyer, and Gramlich. Absent and not voting: Governors Kelley and Ferguson.
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1998 Orders on banking applications