[Federal Register Volume 63, Number 167 (Friday, August 28, 1998)]
[Rules and Regulations]
[Pages 46118-46122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23077]



[[Page 46117]]

_______________________________________________________________________

Part V

Department of the Treasury
Office of the Comptroller of the Currency



12 CFR Part 4

Federal Reserve System



12 CFR Part 211

Federal Deposit Insurance Corporation



12 CFR Part 347



_______________________________________________________________________



Extended Examination Cycle for U.S. Branches and Agencies of Foreign 
Banks; Final Rule

  Federal Register / Vol. 63, No. 167 / Friday, August 28, 1998 / Rules 
and Regulations  

[[Page 46118]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 4

[Docket No. 98-11]
RIN 1557-AB60


FEDERAL RESERVE SYSTEM

12 CFR Part 211

[Regulation K; Docket No. R-1012]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 347

RIN 3064-AC15

Extended Examination Cycle for U.S. Branches and Agencies of 
Foreign Banks

AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of 
Governors of the Federal Reserve System; and the Federal Deposit 
Insurance Corporation.

ACTION: Interim rule with request for comment.

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SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board 
of Governors of the Federal Reserve System (Board), and the Federal 
Deposit Insurance Corporation (FDIC) (collectively, the Agencies) are 
issuing this joint interim rule with request for comment to implement 
the provisions related to an extended examination cycle for U.S. 
branches and agencies of foreign banks set out in section 2214 of the 
Economic Growth and Regulatory Paperwork Reduction Act of 1996 
(EGRPRA). United States branches and agencies of foreign banks with 
total assets of $250 million or less are eligible to be considered for 
the 18-month examination cycle if they meet the qualifying criteria set 
out in this interim rule. The interim rule reduces the regulatory 
burden associated with more frequent on-site examinations for certain 
small U.S. branches and agencies of foreign banks.

DATES: This interim rule is effective August 28, 1998. Comments must be 
received by October 27, 1998.

ADDRESSES: Comments should be directed to: OCC: Communications 
Division, Office of the Comptroller of the Currency, 250 E Street SW., 
Washington, DC 20219, Attention: Docket No. 98-11. Comments will be 
available for public inspection and photocopying at the same location. 
Comments may also be sent by facsimile transmission to (202) 874-5274 
or by electronic mail to [email protected].
    Board: Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551, and refer to Docket No. R-1012. Comments 
addressed to Ms. Johnson may also be delivered to the Board's mail room 
between 8:45 a.m. and 5:15 p.m., and to the security control room 
outside of those hours. Both the mail room and the security control 
room are accessible from the courtyard entrance on 20th Street between 
Constitution Avenue and C Street, NW. Comments may be inspected in room 
MP-500 between 9:00 a.m. and 5:00 p.m., except as provided in Section 
261.14 of the Board's Rules Regarding the Availability of Information.
    FDIC: Robert E. Feldman, Executive Secretary, Attention: Comments/
OES, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429. Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m. (Fax number 
(202) 898-3838; Internet address: [email protected]) Comments may be 
inspected and photocopied in the FDIC Public Information Center, Room 
100, 801 17th Street, NW., Washington, DC between 9:00 a.m. and 4:30 
p.m. on business days.

FOR FURTHER INFORMATION CONTACT:
    OCC: Martha Clarke, Senior Attorney, International Activities (202/
874-0680); or Howard Blacker, Senior International Advisor, 
International Banking & Finance (202/874-4730).
    Board: Norah M. Barger, Assistant Director (202/452-2402), or 
Joseph J. Sciortino, Supervisory Financial Analyst (202/452-2294), 
Division of Banking Supervision and Regulation; or Sandra Richardson, 
Managing Senior Counsel (202/452-6406) or Jonathan D. Stoloff, Senior 
Attorney (202/452-3269), Legal Division.
    FDIC: Karen Walter, Chief, International, Division of Supervision 
(202/898-3540); or Mark Mellon, Counsel, Regulation and Legislation 
Section, Legal Division (202/898-3854).

SUPPLEMENTARY INFORMATION:

Background

    The International Banking Act of 1978 (the IBA),1 as 
amended by the Foreign Bank Supervision Enhancement Act of 
1991,2 subjected U.S. branches and agencies of foreign banks 
to a 12-month examination cycle. Section 2214 of the Economic Growth 
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) 3 
amended the IBA to provide that U.S. branches and agencies of foreign 
banks shall be subject to on-site examination as frequently as a 
national or state bank would be by its appropriate federal banking 
agency.
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    \1\ Pub. L. 95-369, 92 Stat. 607.
    \2\ Pub. L. 102-242, 105 Stat. 2286.
    \3\ Pub. L. 104-208, 110 Stat. 3009 (section 2214 is codified at 
12 U.S.C. 3105(c)(1)).
---------------------------------------------------------------------------

    In general, national and state banks must be examined every 12 
months. However, section 111 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 4 authorized an 18-month 
examination cycle for certain national and state banks with a composite 
rating of 1 under the Uniform Financial Institutions Rating System 
(UFIRS) and total assets of $100 million or less. Section 306 of the 
Riegle Community Development and Regulatory Improvement Act of 1994 
5 expanded the availability of the 18-month examination 
cycle to certain national and state banks with a composite rating of 1 
under UFIRS and total assets of $250 million or less, as well as to 
certain national and state banks with a composite rating of 2 under 
UFIRS and total assets of $100 million or less. Section 2221 of EGRPRA 
6 provided that anytime after September 23, 1996, U.S. bank 
supervisory agencies could extend the 18-month examination frequency 
cycle to certain national and state banks with a composite rating of 2 
and total assets of $250 million or less. Effective April 2, 1998, the 
Agencies issued a final rule that extended the examination cycle to 18 
months for certain national and state banks that satisfy the 
requirements of section 2221 of EGRPRA.7 To be eligible for 
the extended cycle, the national or state bank must:
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    \4\ Pub. L. 102-242, 105 Stat. 2236 (section 111 is codified at 
12 U.S.C. 1820(d)).
    \5\ Pub. L. 103-325, 108 Stat. 2160.
    \6\ Section 2221 is codified at 12 U.S.C. 1820(d)(10).
    \7\ 63 FR 16377 (April 2, 1998).
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    (a) Have total assets of $250 million or less;
    (b) Be rated a composite 2 or better under the UFIRS;
    (c) Be well capitalized;
    (d) Be well managed;
    (e) Not be subject to a formal enforcement action; and
    (f) Not have experienced a change of control during the preceding 
12-month period in which a full-scope, on-site examination would have 
been required but for the extended cycle.

[[Page 46119]]

    In view of the changes to the examination frequency of national and 
state banks, the Agencies are issuing an interim rule that similarly 
extends the examination cycle for certain U.S. branches and agencies of 
foreign banks. Accordingly, U.S. branches and agencies of foreign banks 
with total assets of $250 million or less may be considered for an 18-
month examination cycle provided that they meet the eligibility 
criteria described in this interim rule. The Agencies are seeking 
comment on any aspect of this rule.
    The Agencies believe that an extended examination cycle for 
eligible U.S. offices of foreign banks will permit the Agencies to 
focus their resources on those offices that present the most immediate 
supervisory concern, while concomitantly reducing the regulatory burden 
on smaller offices that do not pose a similar level of supervisory 
concern. The Agencies will continue to use off-site supervision 
techniques, including the submission of regulatory reports, to monitor 
the condition and any changes in the risk profile of offices scheduled 
to be examined on the extended 18-month cycle. Each agency retains 
authority to examine the offices of a foreign bank as frequently as the 
agency deems necessary.

Description of the Interim Rule

    Under this interim rule, a U.S. branch or agency of a foreign bank 
is eligible to be considered for an 18-month examination cycle if the 
office meets the criteria listed below and if there are no other 
factors that cause the appropriate federal banking agency to examine 
the branch or agency more frequently. To qualify for an 18-month 
examination cycle, the U.S. branch or agency of a foreign bank must:
    (a) Have total assets of $250 million or less;
    (b) Have received a composite ROCA supervisory rating of 1 or 2 at 
its most recent examination; 8
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    \8\ The supervisory rating system for U.S. branches and agencies 
of foreign banks is referred to as ROCA. The four components of ROCA 
are: risk management, operational controls, compliance, and asset 
quality.
---------------------------------------------------------------------------

    (c) Satisfy the requirements of either the following paragraph (1) 
or (2):
    (1) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, Tier 1 and risk-based 
capital ratios of at least 6 percent and 10 percent, respectively, on a 
consolidated basis; or
    (2) The branch or agency has maintained on a daily basis over the 
past three quarters, eligible assets (determined consistent with 
applicable federal and state law) in an amount not less than 108 
percent of the preceding quarter's average third party liabilities and 
sufficient liquidity is currently available to meet its obligations to 
third parties;
    (d) Not be subject to a formal enforcement action or order by the 
Board, FDIC or OCC; and
    (e) Not have experienced a change in control during the preceding 
12-month period in which a full-scope, on-site examination would have 
been required but for the extended cycle.
    Each agency retains the authority to examine a U.S. branch or 
agency of a foreign bank as frequently as the agency deems necessary. 
Factors that the Agencies will consider when deciding whether more 
frequent examinations are necessary include, but are not limited to, 
whether: (a) Any of the individual components of the ROCA rating of the 
U.S. office is rated 3 or worse; (b) the results of any off-site 
supervision indicate a deterioration in the condition of the office; 
(c) the size, relative importance, and role of a particular office when 
reviewed in the context of the foreign bank's entire U.S. operations 
otherwise necessitates an annual examination (including, for example, 
whether the office generates a significant level of assets that are 
booked elsewhere); and (d) the condition of the foreign bank itself 
gives rise to such a need. In general, the Agencies will make their 
determination whether to apply the 18-month examination cycle to a 
particular U.S. branch or agency based on the overall risk assessment 
for that office, as well as the factors noted herein.
    Section 2214 of EGRPRA directs that the U.S. branches and agencies 
of foreign banks should be subject to on-site examinations as often as 
U.S. banks. The criteria for determining eligibility of U.S. offices of 
a foreign bank for an expanded examination cycle differ in certain 
respects from the criteria applicable to U.S. banks for this purpose. 
These differences are necessary to adjust for the obvious structural 
differences that exist between U.S. banks and U.S. offices of foreign 
banks (e.g., the U.S. offices of foreign banks often constitute only a 
small part of foreign banks' worldwide operations and the role of the 
Agencies with regard to the U.S. offices is limited to that of host 
country supervisor), as well as the supervisory implications that flow 
from these basic structural differences.
    The Agencies will use a number of criteria as a proxy for the well-
managed criterion applicable to U.S. banks, including the ROCA 
component and composite ratings, the existence of any formal 
enforcement action or order issued by an agency, and the other 
discretionary standards described above. With regard to the well-
capitalized criterion applicable to U.S. banks for these purposes, the 
Agencies will take into account the foreign bank's capital adequacy 
ratios, as well as, in appropriate circumstances, whether the U.S. 
offices of the foreign bank have sufficient eligible assets and 
liquidity to meet their obligations to third parties. The Agencies 
believe that evaluating the U.S. branches and agencies of foreign banks 
on the basis of the criteria described above for purposes of 
determining eligibility for an expanded examination cycle is consistent 
with the requirements of section 2214 of EGRPRA.

Effective Date of Interim Rule

    The Agencies find good cause for issuing this interim rule without 
prior notice and the opportunity for comment, as well as for dispensing 
with the 30-day delayed effective date ordinarily prescribed by the 
Administrative Procedure Act (APA), 5 U.S.C. 551 et seq. The interim 
rule confers a benefit on certain small U.S. branches and agencies of 
foreign banks by reducing the regulatory burden associated with more 
frequent on-site examinations. Conversely, this interim rule does not 
increase the frequency of examinations or otherwise increase the 
regulatory burden for any U.S. branch or agency of a foreign bank. Such 
institutions, therefore, are not adversely affected by the interim 
rule. Under these circumstances, the Agencies conclude that prior 
notice and comment procedures are unnecessary and would be contrary to 
the public interest. 5 U.S.C. 553(b)(B).
    In addition, the Agencies have determined that this interim rule 
relates to examination schedules, which are a matter of internal agency 
procedure rather than a rule of substantive effect on bank activities 
and authority. See Donovan v. Wollaston Alloys, Inc., 695 F.2d 1, 9 
(1st Cir. 1982). Determining when a regulated institution is to be 
examined is based, in part, on examiner availability, the Agencies' 
need to plan examiner time in advance, and other issues relevant to the 
internal operations of the Agencies. Therefore, this interim rule is 
exempt from the APA's public notice requirement. 5 U.S.C. 553(b)(3)(A).

Regulatory Flexibility Act

    An initial regulatory flexibility analysis under the Regulatory 
Flexibility Act is only required whenever an agency is required to

[[Page 46120]]

publish a general notice of proposed rulemaking for any proposed rule. 
5 U.S.C. 603. As noted previously, the Agencies have determined that 
this proposed rulemaking is exempt from the requirements of the APA. 
Accordingly, an initial regulatory flexibility analysis is not 
required.
    Even if the Act were to apply, the interim rule will not have a 
significant economic impact on a substantial number of small entities. 
The interim rule will reduce regulatory burden on eligible U.S. 
branches and agencies of foreign banks with assets of $250 million or 
less. In addition, those entities that are not eligible for the 
exemption from the statutorily prescribed 12-month examination cycle 
will not be adversely affected by the interim rule.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506), the Agencies have determined that no collections of information 
pursuant to the Paperwork Reduction Act are contained in this interim 
rule.

OCC Executive Order 12866 Statement

    The OCC has determined that this interim rule is not a significant 
regulatory action under Executive Order 12866.

OCC Unfunded Mandates Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4, 109 Stat. 48 (March 22, 1995) (Unfunded Mandates Act), requires 
that an agency prepare a budgetary impact statement before promulgating 
a rule that includes a federal mandate that may result in the 
expenditure by state, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year. If a 
budgetary impact statement is required, section 205 of the Unfunded 
Mandates Act also requires an agency to identify and consider a 
reasonable number of regulatory alternatives before promulgating a 
rule. Because the OCC has determined that this interim rule will not 
result in expenditures by state, local, and tribal governments, in the 
aggregate, or by the private sector, of more than $100 million in any 
one year, the OCC has not prepared a budgetary impact statement or 
specifically addressed the regulatory alternatives considered. As 
discussed in the preamble, this interim rule will have the effect of 
reducing regulatory burden on certain institutions.

List of Subjects

12 CFR Part 4

    Banks, banking, Freedom of information, Organization and functions 
(Government agencies), Reporting and recordkeeping requirements.

12 CFR Part 211

    Exports, Federal Reserve System, Foreign banking, Holding 
companies, Investments, Reporting and recordkeeping requirements.

12 CFR Part 347

    Banks, banking, Bank deposit insurance, Bank mergers, Credit, 
Foreign banking, Foreign branches, Foreign investments, Insured 
branches, International lending, International operations, Investments, 
Reporting and recordkeeping requirements.

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set forth in the joint preamble, part 4 of chapter 
I of title 12 of the Code of Federal Regulations is amended as follows:

PART 4--ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF 
INFORMATION, CONTRACTING OUTREACH PROGRAM

    1. The authority citation for part 4 is revised to read as follows:

    Authority: 12 U.S.C. 93a. Subpart A also issued under 5 U.S.C. 
552; 12 U.S.C. 481, 1820(d), and 3105(c)(1). Subpart B also issued 
under 5 U.S.C. 552; E.O. 12600 (3 CFR, 1987 Comp., p. 235). Subpart 
C also issued under 5 U.S.C. 301, 552; 12 U.S.C. 481, 482, 1821(o), 
1821(t); 18 U.S.C. 641, 1905, 1906; 31 U.S.C. 9701. Subpart D also 
issued under 12 U.S.C. 1833e.

    2. In Subpart A, the heading of Sec. 4.6 is revised to read as 
follows:


Sec. 4.6  Frequency of examination of national banks.

    3. In Subpart A, a new Sec. 4.7 is added to read as follows:


Sec. 4.7  Frequency of examination of Federal agencies and branches.

    (a) General. The OCC examines Federal agencies and Federal branches 
(as these entities are defined in Sec. 28.11 (h) and (i), respectively, 
of this chapter) pursuant to the authority conferred by 12 U.S.C. 
3105(c)(1)(C). Except as noted in paragraph (b) of this section, the 
OCC will conduct a full-scope, on-site examination of every Federal 
branch and agency at least once during each 12-month period.
    (b) 18-month rule for certain small institutions--(1) Mandatory 
standards. The OCC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as provided in paragraph (a) of this section, if the Federal 
branch or AGENCY:
    (i) Has total assets of $250 million or less;
    (ii) Has received a composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance, and asset quality) 
of 1 or 2 at its most recent examination;
    (iii) Satisfies the requirements of either the following paragraph 
(b)(1)(iii) (A) or (B):
    (A) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, Tier 1 and total risk-based 
capital ratios of at least 6 percent and 10 percent, respectively, on a 
consolidated basis; or
    (B) The branch or agency has maintained on a daily basis, over the 
past three quarters, eligible assets (determined consistent with 
applicable federal and state law) in an amount not less than 108 
percent of the preceding quarter's average third party liabilities and 
sufficient liquidity is currently available to meet obligations to 
third parties;
    (iv) Is not subject to a formal enforcement action or order by the 
Federal Reserve Board, the Federal Deposit Insurance Corporation, or 
the OCC; and
    (v) Has not experienced a change in control during the preceding 
12-month period in which a full-scope, on-site examination would have 
been required but for this section.
    (2) Discretionary standards. In determining whether a Federal 
branch or agency is eligible for an 18-month examination cycle pursuant 
to this paragraph (b), the OCC may consider additional factors, 
including, but not limited to, whether:
    (i) Any of the individual components of the ROCA rating of the 
Federal branch or agency is rated ``3'' or worse;
    (ii) The results of any off-site supervision indicate a 
deterioration in the condition of the Federal branch or agency;
    (iii) The size, relative importance, and role of a particular 
office when reviewed in the context of the foreign bank's entire U.S. 
operations otherwise necessitate an annual examination; and
    (iv) The condition of the foreign bank gives rise to such a need.
    (c) Authority to conduct more frequent examinations. Nothing in 
paragraph (a) or (b) of this section limits the authority of the OCC to 
examine any

[[Page 46121]]

Federal branch or agency as frequently as the OCC deems necessary.

    Dated: August 12, 1998.
Julie L. Williams,
Acting Comptroller of the Currency.

Authority and Issuance

    For reasons set forth in the joint preamble, the Board amends 12 
CFR Part 211 as set forth below:

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)

    1. The authority citation for part 211 continues to read as 
follows:

    Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 
3101 et seq., and 3901 et seq.

Subpart B--Foreign Banking Organizations

    2. In Subpart B, Sec. 211.26 is amended by revising paragraph (c) 
to read as follows:


Sec. 211.26  Examination of offices and affiliates of foreign banks.

* * * * *
    (c) Frequency of on-site examination--(1) General. Each branch or 
agency of a foreign bank shall be examined on-site at least once during 
each 12-month period (beginning on the date the most recent examination 
of the office ended) by:
    (i) The Board;
    (ii) The FDIC, if the branch of the foreign bank accepts or 
maintains insured deposits;
    (iii) The Comptroller, if the branch or agency of the foreign bank 
is licensed by the Comptroller; or
    (iv) The state supervisor, if the office of the foreign bank is 
licensed or chartered by the state.
    (2) 18-month cycle for certain small institutions--(i) Mandatory 
standards. The Board may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as required in paragraph (c)(1) of this section, if the branch 
or Agency:
    (A) Has total assets of $250 million or less;
    (B) Has received a composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance, and asset quality) 
of 1 or 2 at its most recent examination;
    (C) Satisfies the requirement of either the following paragraph 
(c)(2)(i)(C) (1) or (2):
    (1) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, Tier 1 and total risk-based 
capital ratios of at least 6 percent and 10 percent, respectively, on a 
consolidated basis; or
    (2) The branch or agency has maintained on a daily basis, over the 
past three quarters, eligible assets (determined consistent with 
applicable federal and state law) in an amount not less than 108 
percent of the preceding quarter's average third party liabilities and 
sufficient liquidity is currently available to meet its obligations to 
third parties;
    (D) Is not subject to a formal enforcement action or order by the 
Board, FDIC, or OCC; and
    (E) Has not experienced a change in control during the preceding 
12-month period in which a full-scope, on-site examination would have 
been required but for this section.
    (ii) Discretionary standards. In determining whether a branch or 
agency of a foreign bank is eligible for an 18-month examination cycle 
pursuant to this paragraph (c)(2), the Board may consider additional 
factors, including, but not limited to whether:
    (A) Any of the individual components of the ROCA supervisory rating 
of a branch or agency of a foreign bank is rated ``3'' or worse;
    (B) The results of any off-site surveillance indicate a 
deterioration in the condition of the office;
    (C) The size, relative importance, and role of a particular office 
when reviewed in the context of the foreign bank's entire U.S. 
operations otherwise necessitate an annual examination; and
    (D) The condition of the foreign bank gives rise to such a need.
    (3) Authority to conduct more frequent examinations. Nothing in 
paragraphs (c) (1) and (2) of this section limits the authority of the 
Board to examine any U.S. branch or agency of a foreign bank as 
frequently as it deems necessary.

    By order of the Board of Governors of the Federal Reserve 
System, August 24, 1998.
Jennifer J. Johnson,
Secretary of the Board.

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board of 
Directors of the FDIC amends part 347 of chapter III of title 12 of the 
Code of Federal Regulations as follows:

PART 347--INTERNATIONAL BANKING

    1. The authority citation for part 347 continues to read as 
follows:

    Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820, 1828, 3103, 
3104, 3105, 3108; Title IX, Pub. L. 98-181, 97 Stat. 1153.

    2. Section 347.214 is added to subpart B to read as follows:


Sec. 347.214  Examination of branches of foreign banks.

    (a) Frequency of on-site examination. Each branch or agency of a 
foreign bank shall be examined on-site at least once during each 12-
month period (beginning on the date the most recent examination of the 
office ended) by:
    (1) The Board of Governors of the Federal Reserve System (Board);
    (2) The FDIC, if the branch of the foreign bank accepts or 
maintains insured deposits;
    (3) The Office of the Comptroller of the Currency (OCC), if the 
branch or agency of the foreign bank is licensed by the Comptroller; or
    (4) The state supervisor, if the office of the foreign bank is 
licensed or chartered by the state.
    (b) 18-month cycle for certain small institutions--(1) Mandatory 
standards. The FDIC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as provided in paragraph (a) of this section, if the branch or 
Agency:
    (i) Has total assets of $250 million or less;
    (ii) Has received a composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance, and asset quality) 
of 1 or 2 at its most recent examination;
    (iii) Satisfies the requirement of either the following paragraph 
(b)(1)(iii) (A) or (B):
    (A) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, Tier 1 and total risk-based 
capital ratios of at least 6 percent and 10 percent, respectively, on a 
consolidated basis; or
    (B) The branch or agency has maintained on a daily basis, over the 
past three quarters, eligible assets (determined consistent with 
applicable federal and state law) in an amount not less than 108 
percent of the preceding quarter's average third party liabilities and 
sufficient liquidity is currently available to meet its obligations to 
third parties;
    (iv) Is not subject to a formal enforcement action or order by the 
Board, FDIC, or the OCC; and
    (v) Has not experienced a change in control during the preceding 
12-month period in which a full-scope, on-site examination would have 
been required but for this section.
    (2) Discretionary standards. In determining whether a branch of a 
foreign bank is eligible for an 18-month examination cycle pursuant to 
this

[[Page 46122]]

paragraph (b), the FDIC may consider additional factors, including, but 
not limited to, whether:
    (i) Any of the individual components of the ROCA supervisory rating 
of a branch of a foreign bank is rated ``3'' or worse;
    (ii) The results of any off-site monitoring indicate a 
deterioration in the condition of the branch;
    (iii) The size, relative importance, and role of a particular 
branch when reviewed in the context of the foreign bank's entire U.S. 
operations otherwise necessitate an annual examination; and
    (iv) The condition of the parent foreign bank gives rise to such a 
need.
    (c) Authority to conduct more frequent examinations. Nothing in 
paragraphs (a) and (b) of this section limits the authority of the FDIC 
to examine any U.S. branch or agency of a foreign bank as frequently as 
it deems necessary.

    By order of the Board of Directors.

    Dated at Washington, DC, this 7th day of July, 1998.

Federal Deposit Insurance Corporation.
James D. LaPierre,
Deputy Executive Secretary.
[FR Doc. 98-23077 Filed 8-27-98; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P