[Federal Register Volume 67, Number 118 (Wednesday, June 19, 2002)]
[Rules and Regulations]
[Pages 41619-41621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15429]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 28

[Docket No. 02-10]
RIN 1557-AC05


International Banking Activities: Capital Equivalency Deposits

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.

ACTION: Final rule.

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SUMMARY: The OCC is amending its regulation regarding the capital 
equivalency deposits (CED) that foreign banks with Federal branches or 
agencies must establish and maintain. The OCC is revising certain 
requirements regarding CED deposit arrangements to increase flexibility 
for, and reduce burden on, certain Federal branches and agencies, based 
on a supervisory assessment of the risks presented by the particular 
institution.

EFFECTIVE DATE: This rule is effective on June 19, 2002.

FOR FURTHER INFORMATION CONTACT: Martha Clarke, Acting Assistant 
Director, Legislative and Regulatory Activities Division, 202-874-5090; 
or Carlos Hernandez, Senior International Advisor, International 
Banking and Finance Division, 202-874-4730.

SUPPLEMENTARY INFORMATION: On January 30, 2002, the OCC requested 
comment on an interim rule amending part 28. 67 FR 4325. The interim 
rule revised certain requirements regarding CED deposit arrangements to 
increase flexibility and reduce burden by permitting the OCC to impose 
deposit requirements based on the same supervision by risk approach 
that it uses in its supervision of national banks. The interim rule 
revised 12 CFR 28.15(d) to clarify that the OCC may vary the terms of a 
CED Agreement (Agreement) based on the circumstances and supervisory 
risks present at a particular branch or agency. For example, an 
Agreement may permit a foreign bank to withdraw assets from its CED 
account, thereby reducing the net value of the assets held in the 
account without OCC approval, as long as the withdrawal does not reduce 
the value below the minimum CED level required for that institution. 
Moreover, it may not be necessary in all cases for a foreign bank to 
pledge its CED assets to the OCC or for the depository bank to be a 
signatory to the Agreement unless required by the OCC. The OCC stated 
that it will make these determinations on a case-by-case basis,

[[Page 41620]]

consistent with its supervisory assessment of the risks presented by 
the particular institution.
    The interim rule became effective immediately, but the OCC invited 
public comment on any aspect of the interim rule.

Description of Comments Received and Final Rule

    The OCC received two comments. One comment strongly supported the 
revisions reflected in the interim rule. The commenter stated that the 
interim rule should alleviate the administrative burden associated with 
calculating, monitoring, and managing the CED requirement. The 
commenter also supported the incorporation of the risk-based approaches 
to regulation and supervision of international banking institutions 
into the CED requirement.
    The second commenter stated that to some readers the rule could 
raise a question of whether the rule means that some foreign 
institutions would not be required to maintain a CED in the statutory 
minimum amount of five percent of liabilities. The proposed rule stated 
that the CED ``[m]ay not be reduced in value below the minimum required 
for that branch or agency without the prior approval of the OCC.'' The 
final rule clarifies that in no event could the OCC approve a reduction 
that is less than the statutory minimum for the particular Federal 
branch or agency.
    For these reasons, the OCC is adopting the interim rule in final 
form without change, except for this clarification.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b), the OCC certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The rule will affect few small entities. The principal effect of the 
rule is to remove several requirements with respect to deposit 
arrangements for the CED and reduce burden on qualifying foreign banks 
with Federal branches and agencies.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (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 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. The OCC has determined that 
the rule will not result in expenditures by State, local, or tribal 
governments or by the private sector of $100 million or more. 
Accordingly, the OCC has not prepared a budgetary impact statement or 
specifically addressed the regulatory alternatives considered.

Executive Order 12866

    The OCC has determined that this rule does not constitute a 
``significant regulatory action'' for the purposes of Executive Order 
12866.

Immediate Effective Date

    The final rule is effective immediately. Pursuant to 5 U.S.C. 553, 
agencies may issue a rule without public notice and comment when the 
agency, for good cause, finds that such notice and public comment are 
impracticable, unnecessary, or contrary to the public interest. Section 
553 also permits agencies to issue a rule without delaying its 
effectiveness if the agency finds good cause for the immediate 
effective date.
    The OCC finds good cause to issue this rule without a delayed 
effective date. Like the interim rule, the final rule will enable the 
OCC to make determinations on a case-by-case basis, consistent with its 
supervisory assessment of the risks presented by a particular 
institution. These determinations will relate to whether a foreign bank 
should continue to be required to pledge its CED assets to the OCC or 
to obtain the OCC's approval to reduce the aggregate value of the CED 
assets by withdrawal. These requirements may not be necessary for 
safety and soundness reasons for most highly rated foreign banks, and 
they, therefore, may impose unnecessary cost and burden. Elimination of 
needless resulting cost and burden warrants making this rule effective 
immediately so that qualifying foreign banks that do not pose safety or 
soundness issues may take advantage of its benefits immediately.
    Subject to certain exceptions, 12 U.S.C. 4802(b)(1) provides that 
new regulations and amendments to regulations prescribed by a Federal 
banking agency that impose additional reporting, disclosure, or other 
new requirements on an insured depository institution must take effect 
on the first day of a calendar quarter that begins on or after the date 
on which the regulations are published in final form. Like the interim 
rule, the final rule imposes no additional reporting, disclosure, or 
other new requirements on insured depository institutions. Instead it 
removes restrictions for qualifying foreign banks with Federal branches 
and agencies. For this reason, section 4802(b)(1) does not apply to 
this rulemaking.

Paperwork Reduction Act

    The OCC may not conduct or sponsor, and a respondent is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
The information collection requirements contained in 12 CFR part 28 
have been approved under OMB control number 1557-0102.
    The information collection requirements contained in this rule are 
contained in section 28.15(d). Under this section as amended, capital 
equivalency deposits may not be reduced in value below the minimum 
required for that branch or agency without prior OCC approval, and 
Federal branches and agencies are required to maintain records.
    Estimated number of respondents: 35.
    Estimated number of responses: 35.
    Estimated burden hours per response: 1 hour.
    Estimated number of recordkeepers: 35.
    Estimated number of recordkeeping burden hours: 35.
    Estimated total burden hours: 35.

List of Subjects in 12 CFR Part 28

    Foreign banking, National banks, Reporting and recordkeeping 
requirements.

Authority and Issuance

    For the reasons set forth in the preamble, the OCC amends part 28 
of chapter I of title 12 of the Code of Federal Regulations as follows:

PART 28--INTERNATIONAL BANKING ACTIVITIES

    1. The authority citation for part 28 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 24(Seventh), 93a, 161, 602, 
1818, 3101 et seq., and 3901 et seq.

    2. In Sec. 28.15, paragraphs (d)(1) and (d)(2) are revised to read 
as follows:


Sec. 28.15  Capital equivalency deposits.

* * * * *
    (d) * * *
    (1) May not be reduced in value below the minimum required for that 
branch or agency without the prior approval of the OCC, but in no event 
below the statutory minimum;

[[Page 41621]]

    (2) Must be maintained pursuant to an agreement prescribed by the 
OCC that shall be a written agreement entered into with the OCC for 
purposes of section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 
1818; and
* * * * *

    Dated: June 12, 2002.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 02-15429 Filed 6-18-02; 8:45 am]
BILLING CODE 4810-33-P