[Federal Register Volume 60, Number 134 (Thursday, July 13, 1995)]
[Proposed Rules]
[Pages 36074-36078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17140]



 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 60, No. 134 / Thursday, July 13, 1995 / 
Proposed Rules  


[[Page 36074]]


FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 346

RIN 3064-AB62


Foreign Banks

AGENCY: Federal Deposit Insurance Corporation (FDIC or Corporation).

ACTION: Notice of proposed rulemaking.

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SUMMARY: Section 107 of the Riegle-Neal Interstate Banking and 
Branching Efficiency Act of 1994 (Riegle-Neal Act) amended section 6 of 
the International Banking Act of 1978 (IBA) to provide that the FDIC 
shall amend its regulation concerning domestic retail deposit 
activities by state-licensed branches of foreign banks. The proposal 
would amend the FDIC's regulations to restrict the amount and types of 
initial deposits of less than $100,000 which could be accepted by an 
uninsured state-licensed branch of a foreign bank. The proposal is 
intended to afford equal competitive opportunity to foreign and 
domestic banks.

DATES: Comments must be received by September 11, 1995.

ADDRESSES: Send comments to Jerry L. Langley, Executive Secretary, 
Federal Deposit Insurance Corporation, 550 17th Street, N.W., 
Washington, D.C. 20429. Comments may be hand-delivered to room 400, 
1776 F Street, N.W., Washington, D.C. 20429, on business days between 
8:30 a.m. and 5:00 p.m. [FAX number: (202) 898-3838; Internet address: 
[email protected]]

FOR FURTHER INFORMATION CONTACT: Charles V. Collier, Assistant 
Director, Division of Supervision, (202) 898-6850; Jeffrey M. Kopchik, 
Counsel, Legal Division, (202) 898-3872, Federal Deposit Insurance 
Corporation, 550 17th Street, N.W., Washington, D.C., 20429.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    No collection of information pursuant to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) is contained in the 
proposed rule. Consequently, no information was submitted to the Office 
of Management and Budget for review.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub. 
L. 96-354, 5 U.S.C. 601 et seq.), it is certified that the proposed 
rule will not have a significant impact on a substantial number of 
small entities.

Background

    Section 107 of the Riegle-Neal Act (Pub. L. 103-328, 108 Stat. 
2358) amended section 6 of the IBA (12 U.S.C. 3104) to provide that the 
FDIC shall amend its regulation concerning domestic retail deposit 
activity by state-licensed branches of foreign banks (state-licensed 
branches).1 Section 6 of the IBA, 12 U.S.C. 3104, concerns the 
insurance of deposits maintained at domestic branches and subsidiaries 
of foreign banks. Generally, section 6 provides that United States 
branches of foreign banks may not accept domestic retail deposits 
unless the branch is insured by the FDIC. Section 6 goes on to state 
that, after December 19, 1991, foreign banks may not establish any de 
novo insured branches in the United States. Section 107 of the Riegle-
Neal Act added a new subsection (a) to section 6 of the IBA. This new 
subsection provides that:

    \1\ The Riegle-Neal Act requires the FDIC to consult with the 
Office of the Comptroller of the Currency (OCC) in the process of 
making these amendments in order to assure uniformity. The FDIC has 
worked in close consultation with the OCC in order to achieve 
substantive uniformity.
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    In implementing this section, the Comptroller and the Federal 
Deposit Insurance Corporation shall each, by affording equal 
competitive opportunities to foreign and United States banking 
organizations in their United States operations, ensure that foreign 
banking organizations do not receive an unfair competitive advantage 
over United States banking organizations.

12 U.S.C. 3104(a).
    In revising section 6 of the IBA, Congress made it clear that 
foreign banks operating in the United States should not have an unfair 
competitive advantage over domestically chartered banks. Thus, Congress 
directed the FDIC and the OCC to revise their respective regulations 
implementing IBA section 6 to ensure that foreign banks do not receive 
an unfair competitive advantage over United States banks by affording 
equal competitive opportunities to both.

The Current Regulatory Scheme

    Section 346.4 of the FDIC's regulations (12 CFR 346.4) requires 
that any state-licensed branch which is engaged in ``domestic retail 
deposit activity'' shall be an insured branch. Section 346.6 provides 
that a state-licensed branch will not be deemed to be engaged in 
domestic retail deposit activity which requires the branch to be 
insured if initial deposits of less than $100,000 are derived solely 
from certain enumerated sources. The acceptance of initial deposits of 
$100,000 or more is not considered to be retail deposit activity and, 
thus, deposit insurance is not required for a state-licensed branch 
which accepts only these types of initial deposits.
    Section 346.6 delineates five categories of depositors from which a 
state-licensed branch may accept initial deposits of less than $100,000 
without triggering the insurance requirement. The five categories of 
depositors are:
    (1) Any business entity, including any corporation, partnership, 
sole proprietorship, association or trust, which engages in commercial 
activity for profit;
    (2) Any governmental unit, including the United States government, 
any state government, any foreign government and any political 
subdivision or agency of the foregoing;
    (3) Any international organization which is comprised of two or 
more nations;
    (4) Funds received in connection with any draft, check, or similar 
instrument issued by the branch for the transmission of funds; and
    (5) Any depositor who is not a citizen of the United States and who 
is not a resident of the United States at the time of the initial 
deposit.

This section of the regulation also includes a general exception 
(commonly referred to as the ``de minimis exception'') which provides 
that an uninsured state-licensed branch may accept initial deposits of 
less than $100,000 from any depositor if the amount of such deposits 
does not exceed on an average daily basis five percent of the average 
of the branch's deposits for the last 30 days of the most recent 
calendar quarter. 

[[Page 36075]]


The Riegle-Neal Act

    In directing the FDIC to amend its regulation to ensure that 
foreign banking organizations do not have an unfair competitive 
advantage over United States banking organizations, Congress directed 
the FDIC to ``consider whether to permit'' an uninsured state-licensed 
branch of a foreign bank to accept initial deposits of less than 
$100,000 from a smaller class of depositors than is currently 
delineated in Sec. 346.6. This suggested smaller class is limited to:
    (1) Individuals who are not citizens or residents of the United 
States at the time of the initial deposit;
    (2) Individuals who:
    (i) Are not citizens of the United States;
    (ii) Are residents of the United States; and
    (iii) Are employed by a foreign bank, foreign business, foreign 
government, or recognized international organization;
    (3) Persons to whom the branch or foreign bank has extended credit 
or provided other nondeposit banking services;
    (4) Foreign businesses and large United States businesses;
    (5) Foreign governmental units and recognized international 
organizations; and
    (6) Persons who are depositing funds in connection with the 
issuance of a financial instrument by the branch for the transmission 
of funds.

Moreover, section 107(b)(3) of the Riegle-Neal Act provides that any de 
minimis exception shall not exceed one percent of the average deposits 
at the branch, as opposed to the current five percent. The FDIC may 
establish a reasonable transition rule to facilitate any termination of 
deposit taking activities. See section 107(b)(5)(B) of the Riegle-Neal 
act.
    If these new statutory criteria were adopted verbatim in the FDIC's 
proposed regulation, they would eliminate an uninsured state-licensed 
branch's current ability to accept initial deposits of less than 
$100,000 from any domestic business entity engaged in a commercial 
activity for profit regardless of size, i.e., only foreign businesses 
and large United States businesses would be subject to the exception. A 
verbatim adoption of the new statutory criteria would also remove the 
current exception for domestic federal or state governmental units. 
However, uninsured state-licensed branches would still be able to 
accept initial deposits of less than $100,000 from foreign governmental 
units.
    If Congress had intended the FDIC to adopt these suggested criteria 
verbatim, it could have so required. However, the statute explicitly 
provides that the FDIC ``shall consider whether to permit'' an 
uninsured state-licensed branch to accept initial deposits of less than 
$100,000 from the enumerated sources. By requiring only that the FDIC 
consider the statutory criteria, Congress explicitly recognized that 
the ultimate decision should be made by the FDIC, consistent with the 
statutory objective set forth in IBA section 6(a), in the exercise of 
its regulatory discretion and expertise.

Deposit Taking Activities of Uninsured Foreign Branches

    The objective set forth by Congress in section 6(a) of the IBA is 
to afford equal competitive opportunities to foreign and United States 
banking organizations by ensuring that foreign banks do not receive an 
unfair competitive advantage. In order to accomplish this task, the 
FDIC reviewed data compiled by the staff of the Board of Governors of 
the Federal Reserve System concerning the deposit taking activities of 
uninsured U.S. branches and agencies of foreign banks. This information 
is significant in assessing the ability of uninsured branches and 
agencies to compete with United States banking organizations. As of 
year-end 1994, uninsured branches and agencies of foreign banks held 
$386 billion of total deposits. Of that total, approximately 78 percent 
were accepted from other banks or non-U.S. entities. Of the 
approximately 22 percent of total deposits accepted from U.S. entities, 
virtually all were accepted in initial amounts in excess of $100,000. 
Thus, this data indicates that as a group, uninsured U.S. branches of 
foreign banks do not compete with United States banking organizations 
for retail deposits. See also ``Banking in a Global Economy: Economic 
Benefits to the United States from the Activities of International 
Banks'', Institute of International Bankers, September, 1993, p. 27 
(IIB Study). Generally, foreign banks have established operations in 
the United States in order to provide services to the international 
operations of their home country customers. Id. at 10.
    In addition, the FDIC reviewed a 1994 study conducted by the OCC 
entitled ``Are Foreign Banks Out-Competing U.S. Banks in the U.S. 
Market?'' The study found that although the United States market share 
of subsidiaries, branches and agencies of foreign banks increased 
during the 1980's and early 1990's, foreign banks operating in the 
United States consistently performed less well than domestic banks in 
terms of profitability, efficiency and credit quality. Thus, the OCC 
study supports the conclusion that United States banking organizations 
are competing quite well with their foreign counterparts operating in 
the United States.
    Section 107(b)(4) of the Riegle-Neal Act requires that the FDIC 
consider the importance of maintaining and improving the availability 
of credit to all sectors of the United States economy, including the 
international trade finance sector, in affording equal competitive 
opportunities to foreign and United States banking organizations. 
United States branches and agencies of foreign banks play a substantial 
role in financing the export of U.S. goods and services to their home 
countries. See IIB Study, p. 35 (citing 1993 Federal Reserve Bank of 
New York statistics). Thus, the FDIC must be careful not to 
disadvantage state-licensed branches in order not to constrict the 
exportation of U.S. produced goods and services.
The Proposal

    The FDIC has given careful consideration to Congress' directive 
that foreign banking organizations not receive an unfair competitive 
advantage over United States banking organizations. The FDIC has also 
considered the importance of maintaining and improving the availability 
of credit to all sectors of the United States economy, including the 
international trade finance sector. To that end, the Corporation has 
examined in detail the available data and the suggested criteria 
contained in section 107(b) of the Riegle-Neal Act in comparison to the 
criteria currently delineated in Sec. 346.6(a) of the FDIC's 
regulations. In general, the FDIC has concluded that uninsured state-
licensed branches of foreign banks do not have an overall unfair 
competitive advantage over domestic banking organizations. Therefore, 
the proposal provides that uninsured state-licensed branches of foreign 
banks may accept initial deposits of less than $100,000 from the six 
categories of depositors specified in sections 107(b)(2) (A) through 
(F) of the Riegle-Neal Act. In addition, the proposal expands and adds 
certain exceptions which are discussed in the following paragraphs. 
These additional exceptions are consistent with Congress' concern that 
the FDIC not adversely affect international trade finance.
    Section 346.6(a)(3) of the proposed regulation adopts the criterion 
suggested in section 107(b)(2)(C) of the Riegle-Neal Act that uninsured 
state-licensed branches should be able to accept initial deposits of 
less than $100,000 from persons to whom the branch or foreign bank has 
extended credit or provided 

[[Page 36076]]
other nondeposit banking services. However, the proposal refines this 
exception somewhat by specifying that the extension of credit or 
provision of other nondeposit banking services had to have occurred 
during the past twelve months. The proposal expands the statutory 
language to include persons with whom the branch or foreign bank has 
entered into a written agreement to extend credit or provide other 
nondeposit banking services within the next twelve months. The 
Corporation is of the opinion that this addition may be a logical 
extension of the statutory criterion which would not provide foreign 
banking organizations with any unfair competitive advantage.
    Section 346.6(a)(4) of the proposal adopts the exception contained 
in section 107(b)(2)(D) of the Riegle-Neal Act concerning foreign 
businesses and adds thereto ``persons from whom an Edge Corporation may 
accept deposits under Sec. 211.4(e)(1) of Regulation K of the Board of 
Governors of the Federal Reserve System''. Generally, this would 
include foreign governments, their agencies and instrumentalities, 
foreign persons, organizations engaged in international business 
activities, other Edge corporations, foreign banks, other depository 
institutions, etc. Once again, the FDIC is of the opinion that the 
addition of this class of depositors is a natural outgrowth of section 
107(b)(2)(D) of the Riegle-Neal Act and would not result in an unfair 
competitive advantage being given to foreign banking organizations.
    Section 107(b)(2)(F) of the Riegle-Neal Act refers to ``persons who 
are depositing funds in connection with the issuance of a financial 
instrument by the branch for the transmission of funds''. This language 
is substantially similar to the exception contained in Sec. 346.6(a)(4) 
of the existing regulation, except that the current regulation's 
reference to ``draft, check or similar instrument'' has been replaced 
by the use of the term ``financial instrument''. Section 346.6(a)(6) of 
the Proposal includes the exception for funds deposited in connection 
with the issuance of a financial instrument by the branch for the 
transmission of funds, but also includes an exception for funds 
deposited in connection with the transmission of such funds by any 
electronic means. The addition of this language in the proposal 
concerning funds deposited in connection with electronic transfers is 
intended to reflect the FDIC's established interpretation of 
Sec. 346.6(a)(4) of the current regulation.
    Section 107(b)(2) of the Riegle-Neal Act does not contain an 
exception for deposits from the federal or state governments. 
Currently, initial deposits of less than $100,000 may be accepted from 
any state or federal governmental unit. The FDIC has given this matter 
considerable thought and we are not aware of any evidence which would 
indicate that the ability to accept initial deposits of less than 
$100,000 from state or federal governmental units confers any unfair 
competitive advantage on an uninsured state-licensed branch in 
comparison to insured domestic banking organizations. The statistics 
indicate that uninsured foreign branches and agencies accept virtually 
no deposits from domestic government entities.\2\ Thus, it appears to 
the FDIC that the inclusion of this exception would not provide foreign 
banking organizations with an unfair competitive advantage over United 
States banking organizations. The FDIC is proposing a retention of the 
existing exception for domestic governmental units. Proposed 
Sec. 346.6(a)(5).

    \2\ More specifically, the statistics indicate that uninsured 
branches and agencies receive only 2.3% of their total deposits from 
``Other Deposits'', the category which would include domestic 
governmental units. It is fair to assume that domestic governmental 
units most likely comprise less than the entire 2.3%. The figures do 
not indicate what percentage of the 2.3% are initial deposits of 
less than $100,000, but once again it is reasonable to assume that 
it is less than the total.
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    The proposal also amends Sec. 346.6(b), ``Application for an 
Exemption''. This section has been revised to provide that any request 
by an uninsured state-licensed branch to be permitted to accept initial 
deposits of less than $100,000 from a depositor not included in 
proposed Sec. 346.6(a) shall include information addressing how the 
acceptance of such deposits will maintain or improve the availability 
of credit to all sectors of the United States economy, including the 
international trade finance sector, and how it will not give the 
foreign bank an unfair competitive advantage over domestic banks. 
Proposed Sec. 345.6(b)(3). The proposal also provides that the FDIC 
Board of Directors must consider these factors in making its 
determination. Proposed Sec. 346.6(b)(1).
    Commenters are encouraged to provide their views as to whether the 
exceptions incorporated into the proposed regulation are appropriate in 
light of the statutory objective set forth in section 6(a) of the IBA. 
The FDIC also encourages comment on whether additional exceptions 
should be added, including a discussion of how the proposed exception 
would satisfy the statutory objective set forth in IBA section 6(a).

Definitions

    The proposal would expand Sec. 346.1 to include definitions of the 
terms ``foreign business'', ``large United States business'', and 
``person''. Proposed Secs. 346.1 (s) through (u). In addition, the 
existing definitions of ``foreign bank'', ``initial deposit'' and 
``affiliate'' contained in Secs. 346.1 (a), (k) and (o) would be 
amended. Proposed Secs. 346.1 (a), (k) and (o). The FDIC is of the 
opinion that the addition of these definitions would assist the 
industry in interpreting the regulation in a clear and consistent 
manner.
    The proposal would define ``large United States business'' as any 
entity, including but not limited to a corporation, partnership, sole 
proprietorship, association, foundation or trust, which is organized 
under the laws of the United States or any state thereof and: (1) Whose 
securities are registered on a national securities exchange or quoted 
on the National Association of Securities Dealers Automated Quotation 
System; or (2) Has annual gross revenues in excess of $1,000,000 for 
the fiscal year immediately preceding the initial deposit. The FDIC 
believes that this definition would meet Congress' concern expressed in 
IBA section 6(a) without having a negative impact on the availability 
of credit to all sectors of the United States economy.
    The proposed definition of ``foreign business'' would include 
businesses organized under the laws of a foreign country, their United 
States subsidiaries and businesses owned or controlled by foreign 
nationals. This definition would encompass the ``plain meaning'' 
definition of foreign business as well as accommodating businesses 
organized under United States law, but owned or controlled by foreign 
entities or foreign nationals. These businesses may prefer to do 
business with a branch of a foreign bank from their home country 
regardless of whether the branch is FDIC insured.
    The FDIC requests comment on the proposed definitions. We also 
request comment on whether certain of the proposed definitions are 
unnecessary or whether others should be added.

De Minimis Exception and Transition Rule

    Section 107(b)(5) of the Riegle-Neal Act permits the FDIC to 
establish ``reasonable transition rules to facilitate any termination 
of any deposit-taking activities that were permissible under 
regulations that were in effect before the date of [its enactment]''. 
The proposal would provide for a five year transition period, beginning 
on the effective date 

[[Page 36077]]
of the final regulation. Proposed Sec. 346.6(c). Under this transition 
proposal, uninsured state-licensed branches would have five years to 
reclassify initial deposits received prior to the effective date of the 
final regulation into one of the new exceptions contained in proposed 
Secs. 346.6(a) (1) through (6) or the new one percent de minimis 
exception contained in proposed Sec. 346.6(a)(7). In the case of a time 
deposit, the branch would have until the first maturity date to 
reclassify the deposit. In the event that the existing deposit does not 
qualify under any of the new exceptions and cannot be included in the 
new one percent de minimis category, the branch would be required to 
close the account and divest the deposit.
    Initial deposits received on or after the effective date of the 
final regulation would be required to qualify under one of the new 
exceptions or may be accepted under the new one percent de minimis 
exception. The FDIC wishes to make it clear that the new one percent de 
minimis exception would apply prospectively and would overlap with the 
existing five percent de minimis exception during the five year 
transition period.

Other Issues

    The FDIC is considering including several other exceptions which 
have not been included in the proposed regulation. Proposed 
Sec. 346.6(a)(3) delineates the exception for persons to whom the 
branch or foreign bank has or has agreed to extend credit or provide 
other nondeposit banking services. The FDIC is considering expanding 
this exception to include affiliates of the depositor as well as any 
financial institution affiliate of the branch or foreign bank. The FDIC 
requests comment on whether this exception would be desirable and 
consistent with the Congressional objective set forth in IBA section 
6(a). Detailed comments concerning the phrasing of such an exception, 
including the definition of the term ``financial institution 
affiliate'' are requested.
    The FDIC is also considering adding a new exception that would 
permit a state-licensed uninsured branch to accept initial deposits of 
less than $100,000 from immediate family members of individuals that 
qualify for an exception pursuant to proposed Secs. 346.6(a) (1) 
through (6). Once again, commenters are requested to address the effect 
of such an exception of the competitive opportunities between United 
States and foreign banking organizations as well as credit availability 
to all sectors of the United States economy.

List of Subjects in 12 CFR Part 346

    Bank deposit insurance, Foreign banking, Reporting and 
recordkeeping requirements.

    For the reasons set out in the Preamble, the FDIC Board of 
Directors hereby proposes to amend 12 CFR part 346 as follows:

PART 346--[AMENDED]

    1. The authority citation for part 346 continues to read as 
follows:

    Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820, 3103, 3104, 
3105, 3108.

    2. Section 346.1 is amended by adding a sentence to the end of 
paragraph (a), revising the first sentence of paragraph (k), revising 
paragraph (o), and adding paragraphs (s) through (u) to read as 
follows:


Sec. 346.1  Definitions.

* * * * *
    (a) * * * For purposes of Sec. 346.6, the term foreign bank does 
not include any bank organized under the laws of any territory of the 
United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands 
the deposits of which are insured by the Corporation pursuant to the 
Act.
* * * * *
    (k) Initial deposit means the first deposit transaction between a 
depositor and the branch on or after [the effective date of the final 
regulation]. * * *
* * * * *
    (o) Affiliate means any entity that controls, is controlled by, or 
is under common control with another entity. An entity shall be deemed 
to ``control'' another entity if the entity directly or indirectly 
owns, controls, or has the power to vote 25 percent or more of any 
class of voting securities of the other entity or controls in any 
manner the election of a majority of the directors or trustees of the 
other entity.
* * * * *
    (s) Foreign business means any entity, including but not limited to 
a corporation, partnership, sole proprietorship, association, 
foundation or trust, which is organized under the laws of a country 
other than the United States or any United States entity which is owned 
or controlled by an entity which is organized under the laws of a 
country other than the United States or a foreign national.
    (t) Large United States business means any entity including but not 
limited to a corporation, partnership, sole proprietorship, 
association, foundation or trust which is organized under the laws of 
the United States or any state thereof, and:
     (1) Whose securities are registered on a national securities 
exchange or quoted on the National Association of Securities Dealers 
Automated Quotation System; or
     (2) Has annual gross revenues in excess of $1,000,000, for the 
fiscal year immediately preceding the initial deposit.
    (u) Person means an individual, bank, corporation, partnership, 
trust, association, foundation, joint venture, pool, syndicate, sole 
proprietorship, unincorporated organization, or any other form of 
entity.
    3. Section 346.6 is revised to read as follows:


Sec. 346.6  Exemptions from the insurance requirement.

    (a) Deposit activities not requiring insurance. A state branch will 
not be deemed to be engaged in a domestic retail deposit activity which 
requires the branch to be an insured branch under Sec. 346.4 if initial 
deposits in an amount of less than $100,000 are derived solely from the 
following:
     (1) Individuals who are not citizens or residents of the United 
States at the time of the initial deposit;
     (2) Individuals who:
    (i) Are not citizens of the United States;
    (ii) Are residents of the United States; and
    (iii) Are employed by a foreign bank, foreign business, foreign 
government, or recognized international organization;
    (3) Persons to whom the branch or foreign bank has extended credit 
or provided other nondeposit banking services within the past twelve 
months or has entered into a written agreement to provide such services 
within the next twelve months;
    (4) Foreign businesses, large United States businesses, and persons 
from whom an Edge Corporation may accept deposits under 
Sec. 211.4(e)(1) of Regulation K of the Board of Governors of the 
Federal Reserve System, 12 CFR 211.4(e)(1);
    (5) Any governmental unit, including the United States government, 
any state government, any foreign government and any political 
subdivision or agency of any of the foregoing, and recognized 
international organizations;
    (6) Persons who are depositing funds in connection with the 
issuance of a financial instrument by the branch for the transmission 
of funds or the transmission of such funds by any electronic means; and
    (7) Any other depositor but only if the amount of deposits under 
this paragraph 

[[Page 36078]]
(a)(7) does not exceed on an average daily basis one percent of the 
average of the branch's deposits for the last 30 days of the most 
recent calendar quarter, excluding deposits in the branch of other 
offices, branches, agencies or wholly owned subsidiaries of the bank 
and the branch does not solicit deposits from the general public by 
advertising, display of signs, or similar activity designed to attract 
the attention of the general public. A foreign bank which has more than 
one state branch in the same state may aggregate deposits in such 
branches (excluding deposits of other branches, agencies or wholly 
owned subsidiaries of the bank) for the purpose of this paragraph 
(a)(7). The average shall be computed by using the sum of the close of 
business figures for the last 30 calendar days ending with and 
including the last day of the calendar quarter divided by 30. For days 
on which the branch is closed, balances from the last previous business 
day are to be used.
    (b) Application for an exemption. (1) Whenever a foreign bank 
proposes to accept at a state branch initial deposits of less than 
$100,000 and such deposits are not otherwise excepted under paragraph 
(a) of this section, the foreign bank may apply to the FDIC for consent 
to operate the branch as a noninsured branch. The Board of Directors 
may exempt the branch from the insurance requirement if the branch is 
not engaged in domestic retail deposit activities requiring insurance 
protection. The Board of Directors will consider the size and nature of 
depositors and deposit accounts, the importance of maintaining and 
improving the availability of credit to all sectors of the United 
States economy, including the international trade finance sector of the 
United State economy, whether the exemption would give the foreign bank 
an unfair competitive advantage over United States banking 
organizations, and any other relevant factors in making this 
determination.
    (2) Any request for an exemption under this paragraph (b) should be 
in writing and authorized by the board of directors of the foreign 
bank. The request should be filed with the Regional Director of the 
Division of Supervision for the region where the state branch is 
located.
    (3) The request should detail the kinds of deposit activities in 
which the branch proposes to engage, the expected source of deposits, 
the manner in which deposits will be solicited, how this activity will 
maintain or improve the availability of credit to all sectors of the 
United States economy, including the international trade finance 
sector, that the activity will not give the foreign bank an unfair 
competitive advantage over United States banking organizations and any 
other relevant information.
    (c) Transition period. An uninsured state branch may maintain a 
deposit lawfully accepted prior to [effective date of final 
regulation]:
    (1) If the deposit qualifies pursuant to paragraph (a) or (b) of 
this section; or
    (2) No later than until:
    (i) Five years from [effective date of final regulation]; or
    (ii) In the case of a time deposit, the first maturity date of the 
time deposit.

    By order of the Board of Directors, dated at Washington, D.C., 
this 27th day of June, 1995.

Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
[FR Doc. 95-17140 Filed 7-12-95; 8:45 am]
BILLING CODE 6714-01-P