[Federal Register Volume 61, Number 31 (Wednesday, February 14, 1996)]
[Rules and Regulations]
[Pages 5671-5675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3274]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 31 / Wednesday, February 14, 1996 / 
Rules and Regulations  

[[Page 5671]]


FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 346

RIN 3064-AB62


Foreign Banks

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

ACTION: Final rule.

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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 final rule 
amends the FDIC's regulations to restrict the amount and types of 
initial deposits of less than $100,000 which can be accepted by an 
uninsured state-licensed branch of a foreign bank. The final rule is 
intended to afford equal competitive opportunities to foreign and 
domestic banks.

EFFECTIVE DATE: The final rule is effective on April 1, 1996.

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:

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.

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 
    
[[Page 5672]]

    (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.
    As pointed out in the preamble to the proposed regulation, if 
Congress had intended the FDIC to adopt these suggested criteria 
verbatim, it could have so required. See 60 FR 36075. 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.

The Proposal

    On July 13, 1995, the FDIC published for public comment a notice of 
proposed rulemaking seeking to implement section 107 of the Riegle-Neal 
Act. 60 FR 36074 (July 13, 1995).2 The proposal provided that 
uninsured state-licensed branches of foreign banks would be permitted 
to 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 expanded and 
added certain exceptions, consistent with Congressional intent. The 
comment period closed on September 11, 1995. In response to the notice, 
the FDIC received a total of four comment letters, three from industry 
trade associations and one from an association representing state bank 
regulators. One commenter fully supported the FDIC's proposal with no 
suggested revisions. The remaining three commenters supported the 
proposal, but suggested certain revisions. Of the three commenters who 
suggested revisions, two urged the FDIC to expand the Sec. 346.6 
exceptions to permit uninsured state-licensed branches to accept more 
types of initial deposits of less than $100,000. Conversely, one 
commenter urged the FDIC to restrict one of the proposed exceptions in 
order to lessen the number of initial deposits of less than $100,000 
that may be accepted by an uninsured branch. The commenters' specific 
suggestions and the FDIC's responses thereto are discussed in detail 
below.

    \2\  The OCC's notice of proposed rulemaking was published at 60 
FR 34907 (July 5, 1995).
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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. The preamble to the proposed regulation 
set forth in great detail the information and data which the FDIC 
reviewed in considering this question. 60 FR 36075. The FDIC concluded 
that ``uninsured state-licensed branches of foreign banks do not have 
an overall unfair competitive advantage over domestic banking 
organizations.'' Id. All of the comment letters agreed with this 
conclusion.

The Comments and Final Rule

    Two commenters suggested that the proposed Sec. 346.6(a)(3) 
exception, the so-called ``nondeposit banking services exception'', be 
expanded to include affiliates of the person to whom the branch or 
foreign bank has extended credit or provided some other nondeposit 
banking service as well as persons who have received such services from 
an affiliate of the branch or foreign bank. The commenters urged this 
change by pointing out that, in today's complex business world, 
depositors often operate through affiliates. Similarly, foreign banks 
which operate uninsured branches in the United States often offer 
certain financial services through affiliates of the bank. The 
commenters urged the FDIC to recognize this characteristic of the 
contemporary business environment in the final regulation. 
Significantly, one commenter pointed out that since the definition of 
``foreign bank'' in the IBA, 12 U.S.C. 3101(7), explicitly includes any 
affiliate of the foreign bank, Sec. 346.6(a)(3) of the final regulation 
should include these affiliates as well.
    The FDIC has carefully considered this comment and agrees that the 
Sec. 346.6(a)(3) exception should be expanded to include persons who 
have received a loan or other nondeposit banking service from an 
affiliate of the branch or foreign bank. This revision recognizes that 
the IBA definition of ``foreign bank'' includes affiliates. However, 
this exception does not include a person who has dealt with any 
affiliate of a foreign bank in any capacity. In crafting this 
regulation, the FDIC is required to interpret and harmonize section 107 
of the Riegle-Neal Act, the IBA and the Federal Deposit Insurance Act 
(FDI Act). Despite the fact that the IBA definition of ``foreign bank'' 
includes any subsidiary or affiliate, the Sec. 346.1(a) definition of 
``foreign bank'' includes only the bank itself. This difference 
recognizes that Sec. 346 of the FDIC's rules regulates the deposit 
taking activities of foreign banks operating branches in the United 
States. It is not intended to regulate or somehow sanction the 
activities of affiliates or subsidiaries of the foreign bank which may 
desire to operate in this country. Section 107(b)(2)(C) of the Riegle-
Neal Act is limited to ``persons to whom the branch or foreign bank has 
extended credit or provided other nondeposit banking services.'' 
[Emphasis added]. It does not cover persons who have dealt with any 
affiliate of the foreign bank in any capacity. The FDIC interprets this 
qualifying phrase to indicate Congress' intent that, despite the broad 
definition of ``foreign bank'' contained in the IBA, the only 
affiliates of a foreign bank which should be included in the 
Sec. 346.6(a)(3) exception are those which are capable of extending 
credit or providing some other nondeposit banking service to a 
prospective depositor. For example, if a depositor desiring to make an 
initial deposit of less than $100,000 in an uninsured branch has leased 
a safe deposit box from an affiliate of the foreign bank within the 
past twelve months, that deposit would qualify under the 
Sec. 346.6(a)(3) exception since the prospective depositor would be the 
recipient of a nondeposit banking service. Any state-licensed branch 
that is unsure whether a deposit of less than $100,000 could be 
accepted pursuant to the Sec. 346.6(a)(3) exception should contact the 
FDIC for guidance.
    With regard to affiliates of the depositor, the arguments are not 
as compelling. First, and most persuasively, the IBA does not define 
the term ``depositor'', ``customer'' or 

[[Page 5673]]
``person''. Thus, there is no indication that Congress intended to 
include affiliates of persons to whom the branch or foreign bank has 
extended credit or provided some other nondeposit banking service. 
Second, while depositors may operate through affiliates in a fashion 
similar to the foreign branch or bank, the inclusion of affiliates in 
this context may very well conflict with the section 107(b)(2)(D) 
exception which limits retail deposit taking to ``large United States 
businesses''. That is, the inclusion of affiliates of a depositor who 
has received some nondeposit banking service could very well include 
small subsidiaries of the depositor. Thus, the FDIC has decided not to 
expand this exception to include affiliates of the depositor.
    It was also suggested that the proposed Sec. 346.6(a)(3) nondeposit 
banking service exception be expanded to apply to situations where the 
affiliate has provided depository services to the customer or its 
affiliate. The FDIC is of the opinion that this further expansion of 
the exception is unwarranted. The key to section 107(b)(2)(C) of the 
Riegle-Neal Act is its limitation to ``nondeposit'' banking services. 
It would be inappropriate for the FDIC to disregard this limitation 
even while recognizing that, except for the mandatory change to the de 
minimis rule, Congress provided the Corporation with only suggested 
parameters for the types of deposits of less than $100,000 that 
uninsured state-licensed branches should be permitted to accept.
    One commenter recommended that the FDIC modify the proposal to 
permit uninsured state-licensed branches to accept initial deposits of 
less than $100,000 from all businesses, including foundations and other 
entities which are not engaged in commercial activity for profit. 
Section 346.6(a)(1) of the current regulation exempts initial deposits 
of less than $100,000 from ``any business entity * * * engaged in 
commercial activity for profit''. It is the FDIC's understanding that, 
after the de minimis exception, this exception is the one most often 
utilized by state-licensed branches. The commenter argued that adopting 
this suggestion would make the regulation less burdensome and easier to 
administer, as well as promote international trade finance.
    The FDIC remains unconvinced that the final regulation should 
permit uninsured branches to accept deposits of less than $100,000 from 
any business entity, including those not engaged in a commercial 
activity for profit, such as foundations. Section 107 of the Riegle-
Neal Act expresses Congress' expectation that the overall scope of 
Sec. 346.6 would be reduced. While the ultimate decision concerning 
what exceptions should be included in the final regulation is to be 
made by the FDIC in the exercise of its regulatory discretion and 
expertise, the FDIC cannot ignore Congressional intent.
    In the alternative, the commenter who suggested an exception for 
all business deposits also suggested that the proposed Sec. 346.6(a)(4) 
exception for large United States' businesses should be expanded by 
revising the definition of ``large United States business'' that 
appears in Sec. 346.1(t) of the proposal. The commenter proposed that 
alternate criteria be added to the definition so that any business with 
total assets of more than $1 million or 50 or more employees would also 
be considered a ``large United States business''. However, the 
commenter did not include any support for its use of the $1 million of 
assets or 50 or more employees criteria. Another commenter expressed 
the opposite concern, that the FDIC's suggested $1 million in gross 
revenue figure should be increased to $25 million or possibly $100 
million, in order to narrow the exception. In view of these 
contradictory suggestions and the absence of data supporting them, the 
FDIC has decided not to make any changes to the definition of ``large 
United States business'' as set forth in the proposed regulation.
    One comment letter requested clarification of the application of 
the proposed transition rule which is set forth in Sec. 346.6(c) of the 
proposed regulation. That commenter pointed out that, with regard to 
time deposits, the proposal could require state-licensed branches to 
reclassify or divest some time deposits very shortly after the 
effective date of the final regulation if the deposit matures during 
this period. This commenter suggested that the proposal be modified to 
give state-licensed branches a reasonable period of time to reclassify 
or divest time deposits that mature very shortly after the final 
regulation's effective date. The FDIC agrees with this suggestion and 
has amended Sec. 346.6(c)(2) of the proposal to provide that state-
licensed branches will have at least 90 days after the effective date 
of the final regulation to reclassify or divest such time deposits.
    This comment letter also recommended that branches should be 
required to reclassify or divest only those deposits which were 
accepted under the five percent de minimis exception, as opposed to 
deposits accepted pursuant to any of the Sec. 346.6(a) exceptions. The 
FDIC considered this option at great length, but in order to achieve 
the uniformity required by the statute, the agency is adhering to the 
transition rule as described in the proposal which requires the 
reclassification or divestiture of all deposit accounts which were 
originally accepted pursuant to any of the Sec. 346.6(a) exceptions.
    This same comment letter expressed some confusion concerning other 
aspects of how the FDIC will apply the transition rule. In an effort to 
avoid confusion, the FDIC would like to clarify that a deposit 
(including a time deposit) may be reclassified at any time during the 
transition period. If a time deposit matures prior to the end of the 
five year transition period, it must be reclassified or divested at 
that time. However, no time deposit need be reclassified or divested 
sooner than 90 days after the effective date of the final regulation.
    In the preamble to the proposed regulation, 60 FR 36077, the FDIC 
noted that it was considering adding a new exception that would permit 
an uninsured state-licensed branch to accept initial deposits of less 
than $100,000 from immediate family members of individuals who qualify 
for any of the exceptions listed in proposed Secs. 346.6(a) (1) through 
(6). The one commenter who mentioned this issue supported the idea of 
including such an additional exception in the final rule and stated 
that such an exception would not create any unfair competitive 
advantage for foreign banks. The FDIC has considered this issue at 
length and has concluded that such an exception would be overly broad 
and inconsistent with Congressional intent. However, the FDIC has 
decided to revise Sec. 346.6(a)(3) of the proposal to include immediate 
family members of natural persons to whom the branch or foreign bank 
(including any affiliate thereof) 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.
    With regard to Sec. 346.6(b), ``Application for an exemption'', it 
was suggested that the FDIC should permit the request to be submitted 
by the bank's senior management rather than requiring authorization by 
the foreign bank's board of directors. The FDIC agrees that this change 
would make the regulation less burdensome. Moreover, in a somewhat 
different context, Sec. 346.101(d) of the FDIC's regulations permits an 
application evidencing approval by senior management if a board 
resolution is not required by the foreign bank's organizational 

[[Page 5674]]
documents. Thus, the FDIC has decided to amend Sec. 346.6(b) in the 
same fashion.
    One commenter requested confirmation of its interpretation of the 
preamble to the proposed rule that existing deposits which were not 
originally subject to the Sec. 346.6 exceptions, because the initial 
deposit establishing the account was $100,000 or more, would not be 
subject to the revised regulation even if the first deposit in the 
account after the effective date of final regulation is less than 
$100,000. This interpretation is correct. The only deposits which must 
be reclassified or divested after this final rule becomes effective are 
those which were established with less than $100,000 pursuant to one of 
the exceptions set forth in current Secs. 346.6(a) (1) through (6).

Calculation of the De Minimis

    One commenter expressed some confusion concerning how the de 
minimis amount should be calculated and whether this amendment changes 
the calculation method currently being used under the existing 
regulation. This final amendment to Sec. 346 is not intended to change 
how the de minimis amount is calculated. The de minimis amount is 
computed as a fraction, the numerator of which consists of the total 
amount of deposits which have been accepted pursuant to the de minimis 
exception. The FDIC wishes to make it clear that the numerator is 
comprised of the total amount of deposits accepted under the de minimis 
exception, not just the amount of the initial deposits of less than 
$100,000 which were accepted to open the accounts. The denominator of 
the fraction consists of the average amount of third party deposits 
maintained by the branch during the last thirty calendar days of the 
most recent calendar quarter. See 44 FR 40057, 40061 (July 9, 1979); 
FDIC Legal Division Staff Advisory Opinion (unpublished) dated December 
16, 1985 from Katharine H. Haygood, Esq.

Effective Date

    Section 302(b) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Pub. L. 103-325, September 29, 1994) provides 
that new regulations and amendments to regulations prescribed by the 
federal banking agencies shall take effect on the first day of a 
calendar quarter which begins on or after the date on which the 
regulation is published in final form, unless the agency determines for 
good cause that the regulation should become effective at an earlier 
date or the regulation is required to become effective at some other 
date determined by law. The Administrative Procedure Act (5 U.S.C. 551 
et seq.) provides that regulations shall become effective thirty days 
after their publication in the Federal Register. 5 U.S.C. 553. Thus, 
this amendment to Part 346 of its regulations shall become effective on 
April 1, 1996.

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 amends 12 CFR part 346 to read as follows:

PART 346--FOREIGN BANKS

    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 paragraph (o), and adding paragraphs (s) 
through (v) 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 
Federal Deposit Insurance Act.
* * * * *
    (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.
    (v) Immediate family member of a natural person means the spouse, 
father, mother, brother, sister, son or daughter of that natural 
person.
    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 (including immediate family members of natural persons) 
to whom the branch or foreign bank (including any affiliate thereof) 
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 

[[Page 5675]]
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 (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 should be in 
writing and authorized by the board of directors of the foreign bank. 
If a resolution is not required pursuant to the applicant's 
organizational documents, the request shall include evidence of 
approval by the bank's senior management. 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 
retail deposit lawfully accepted pursuant to this section prior to 
April 1, 1996:
    (1) If the deposit qualifies pursuant to paragraph (a) or (b) of 
this section; or
    (2) If the deposit does not qualify pursuant to paragraph (a) or 
(b) of this section, no later than:
    (i) In the case of a non-time deposit, five years from April 1, 
1996; or
    (ii) In the case of a time deposit, the first maturity date of the 
time deposit after April 1, 1996 or the date that is 90 days after 
April 1, 1996, whichever is later.

    By order of the Board of Directors, dated at Washington, D.C., 
this 6th day of February, 1996.

Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
[FR Doc. 96-3274 Filed 2-13-96; 8:45 am]
BILLING CODE 6714-01-P