[Federal Register Volume 68, Number 78 (Wednesday, April 23, 2003)]
[Proposed Rules]
[Pages 19949-19958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9733]


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 Proposed Rules
                                                 Federal Register
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 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. 68, No. 78 / Wednesday, April 23, 2003 / 
Proposed Rules  

[[Page 19949]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 5 and 28

[Docket No. 03-07]
RIN 1557-AC04


Rules, Policies, and Procedures for Corporate Activities; 
International Banking Activities

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) proposes 
to amend its regulations pertaining to the foreign operations of 
national banks, and of Federal branches and agencies of foreign banks 
operating in the United States, in both cases generally to make 
regulatory requirements more streamlined and risk-based. The proposed 
rule would clarify certain regulatory definitions and simplify approval 
procedures for foreign banks seeking to establish Federal branches and 
agencies in the United States. These proposed changes will further 
conform the treatment of Federal branches and agencies of foreign banks 
to that of their domestic national bank counterparts consistent with 
the national treatment principles of the International Banking Act.

DATES: Comments must be received by June 23, 2003.

ADDRESSES: Please direct your comments to: Office of the Comptroller of 
the Currency, 250 E Street, SW., Public Information Room, Mailstop 1-5, 
Washington, DC 20219, Attention: Docket No. 03-07; fax number (202) 
874-4448; or Internet address: [email protected]. Due to 
delays in paper mail delivery in the Washington area, we encourage the 
submission of comments by fax or e-mail whenever possible. Comments may 
be inspected and photocopied at the OCC's Public Reference Room, 250 E 
Street, SW., Washington, DC. You may make an appointment to inspect 
comments by calling (202) 874-5043.

FOR FURTHER INFORMATION CONTACT: Lee Walzer, Counsel, Legislative & 
Regulatory Activities Division, (202) 874-5090; Carlos Hernandez, 
Senior International Advisor, International Banking & Finance, (202) 
874-4741; or R. Julie Olson, Director, Licensing Policy & Systems, 
(202) 874-5060.

SUPPLEMENTARY INFORMATION:

Background

    The OCC is committed to continually reevaluating our rules to 
reduce unnecessary regulatory burden and simplify compliance, 
consistent with the safe and sound operation of the institutions we 
supervise. We have recently undertaken such a review of part 28 of our 
regulations, which governs the foreign operations of national banks and 
the U.S. operations of Federal branches and agencies of foreign banks. 
As a result, we are proposing to revise part 28 to incorporate changes 
that clarify, streamline, and simplify compliance with a number of its 
requirements. The most significant revisions to part 28 include: (1) 
Streamlining procedures for national banks' foreign operations through 
branches; (2) eliminating the requirement to file an application with 
the OCC in certain circumstances when a foreign bank downgrades its 
U.S. operations; (3) requiring approval, but not a new license, for 
additional Federal branches or agencies opened after the establishment 
of the initial branch office; and (4) clarifying that a foreign bank 
with Federal branches and agencies in more than one state may 
consolidate its capital equivalency deposits (CEDs) in one deposit 
account in a depository bank that satisfies certain criteria.
    The proposal also makes conforming changes to the procedural 
provisions in part 5 of our regulations, and amends part 5 to permit a 
Federal branch to make certain non-controlling equity investments on 
the same terms as national banks. The proposed changes further conform 
the treatment of foreign banks to that of their domestic national bank 
counterparts and are, therefore, in keeping with the national treatment 
requirements of the International Banking Act (IBA).
    Certain fundamental provisions of part 28 remain unchanged. For 
example, none of the proposed changes affects any legal requirements 
that are imposed by the Board of Governors of the Federal Reserve 
System (FRB) in the FRB's Regulation K \1\ or by any other applicable 
law with respect to national banks' foreign activities or the 
operations of foreign banks in the United States. Moreover, operations 
of a Federal branch or agency continue to be subject to the ``same 
rights and privileges and subject to the same duties, restrictions, 
penalties, liabilities, conditions, and limitations that would apply if 
the Federal branch or agency were a national bank operating at the same 
location.'' 12 CFR 28.13(a)(1). Accordingly, U.S. domestic laws apply 
to a Federal branch or agency to the same extent that they would apply 
to a national bank operating at the same location.
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    \1\ 12 CFR part 211.
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Section-by-Section Description of the Proposal

A. Changes to 12 CFR Part 5

1. Definitions (revised Sec.  5.3)
    The proposal amends Sec.  5.3 to update references to the OCC units 
that should receive certain applications. In paragraph (c)(1), the term 
``Licensing Department'' replaces the current ``Bank Organization and 
Structure,'' reflecting a nomenclature change. Likewise, in paragraph 
(c)(4), ``Northeastern District Office'' would be substituted for 
``International Banking and Finance Department,'' to take into account 
changes in where Federal branches and agencies submit applications.
2. Permissible Equity Investments (revised Sec.  5.36)
    Section 5.36 of the OCC's rules permits a well-capitalized, well-
managed national bank to make certain non-controlling investments in an 
enterprise, directly or through its operating subsidiary, by filing a 
written notice with the appropriate OCC district office no later than 
10 days after making the investment.
    The proposed rule adds a new paragraph (g) to Sec.  5.36 to permit 
a well-capitalized and well-managed Federal branch to make non-
controlling investments and use the after-the-fact notice procedure set 
forth in Sec.  5.36 in

[[Page 19950]]

the same manner as a national bank. To do so, the Federal branch would 
be required to meet the qualifications set forth in 12 CFR 
4.7(b)(1)(iii), which describes capital adequacy standards that the 
Federal branch must satisfy to be examined on an 18-month schedule, and 
the managerial standards in 12 CFR 5.34(d)(3)(ii), which are applicable 
to a Federal branch that wishes to acquire, establish, or maintain an 
operating subsidiary.
    Extending Sec.  5.36 to Federal branches is consistent with 
national treatment principles, which provide that Federal branches of 
foreign banks are generally subject to the same rights and privileges, 
and subject to the same duties, conditions, and limitations, as 
domestic national banks.
3. Federal Branches and Agencies (revised Sec.  5.70)
    The proposal amends Sec.  5.70, which describes filing requirements 
for corporate activities and transactions involving Federal branches 
and agencies, to ensure consistency with proposed changes to 12 CFR 
part 28 described elsewhere in this proposal. In particular, the 
proposal deletes the definition of ``change the status of an office'' 
while the definition of ``establish'' a Federal branch or agency is 
revised to comport with proposed changes to those definitions in part 
28, which are described below.

B. Changes to 12 CFR Part 28: Foreign Operations of a National Bank

1. Filing Requirements for Foreign Operations of a National Bank 
(revised Sec.  28.3)
    Currently, Sec.  28.3 requires national banks to notify the OCC 
upon opening, closing, or relocating a foreign branch, whether or not a 
filing to the FRB is required under the FRB's rules governing the 
foreign operations of member banks and other U.S. banking 
organizations.\2\ The proposed rule amends Sec.  28.3 to provide that 
no notice to the OCC is required if a national bank closes or relocates 
a foreign branch.
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    \2\ See 12 CFR part 211, subpart A (FRB rules pertaining to 
foreign operations of domestic banking organizations).
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2. Filing of Notice (revised Sec.  28.5)
    Currently, Sec.  28.5 requires national banks to file notices with 
the International Banking & Finance Division at OCC headquarters. The 
proposed rule amends Sec.  28.5 to provide that notices should be filed 
with ``the appropriate supervisory office.''

C. Changes to 12 CFR Part 28: Operations of Federal Branches and 
Agencies of Foreign Banks

1. Definitions (revised Sec.  28.11)
    The IBA, which governs the operations of foreign banks in the 
United States through branches and agencies and other offices, sets 
standards for licensing the offices of foreign banks and requires the 
OCC to approve the ``establishment'' of Federal branches and agencies 
of foreign banks. Part 28 currently defines the term ``establish'' to 
mean initial entry of a foreign bank into the United States via a 
Federal branch or agency; the opening of additional branches and 
agencies, whether through intrastate or interstate branching; mergers 
and other consolidations; and ``changes in status.'' The term ``changes 
in status'' means both expansions (from a Federal agency to a Federal 
branch) and contractions in activities (from a Federal branch into a 
Federal agency).\3\
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    \3\ The definitions of ``establish'' and ``changes in status'' 
are similar to those adopted by the Board of Governors of the 
Federal Reserve System (FRB) in its Regulation K. See 12 CFR 
211.21(f) (changes in status) and 211.21(l) (establish).
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    As revised, the definition of ``establish a Federal branch or 
agency'' includes the opening of a Federal branch or agency established 
by a foreign bank, whether directly, through interstate or intrastate 
branching, through a merger or acquisition, through a conversion from a 
state office to a Federal office, through an upgrade from a Federal 
agency to a Federal branch, or through a relocation. In addition, the 
revised definition includes some activities formerly covered by the 
definition of ``changes in status,'' including conversions from a state 
branch or agency, or commercial lending company, into a Federal branch, 
limited Federal branch, or Federal agency. The separate definition of 
``changes in status'' is therefore removed as unnecessary. The proposed 
definition, however, excludes contractions in activities, e.g., 
conversion from a Federal branch to a Federal agency, that do not 
present the need for the same scope of regulatory review that 
expansions necessitate. The effect of these changes would be to 
eliminate the requirement for a filing with the OCC when a foreign bank 
contracts its activities. In addition, for eligible foreign banks, 
certain activities, including the opening of an additional Federal 
branch or agency on either an intrastate or interstate basis, 
conversions or mergers, would be subject to expedited regulatory 
processes discussed elsewhere in the regulation.
2. Approval and Licensing Requirements for a Federal Branch or Agency 
(revised Sec.  28.12(a))
    The proposed rule substantially revises current Sec.  28.12, which 
governs approvals for the establishment of a Federal branch or agency. 
The OCC would continue to require an application and prior approval for 
foreign banks seeking to establish a Federal branch, Federal agency, or 
limited Federal branch in the United States. The licensing procedures 
would cover the initial branch or agency of a foreign bank. Subsequent 
offices resulting from acquisitions or interstate branching, for 
example, would require regulatory approval, but no additional license 
would be granted for those subsequent establishments unless the 
additional office would be an expansion of activities (i.e., the 
additional office would be a full-service branch but the foreign bank's 
only license is for a limited Federal branch or agency).
    The proposed rule also streamlines the licensing procedures. 
Currently, foreign banks must receive a license to open and operate any 
initial or additional Federal branch or agency. The proposed rule in 
Sec.  28.12(a)(2) provides that a foreign bank must continue to receive 
a license to open and operate its initial Federal office in the United 
States. After that, however, a new license would be necessary for 
additional branches or agencies only if the foreign bank is proposing 
to upgrade its activities from those authorized in its current license; 
for example, if the foreign bank currently has a license for a limited 
Federal branch and wants to open a new office as a full-service Federal 
branch or operate its limited Federal branch as a full service branch. 
This change in the licensing procedures would not affect the substance 
of the OCC's regulatory and supervisory responsibilities. The OCC would 
continue to review and approve applications for additional offices in 
accordance with applicable law (see 12 U.S.C. 3102(h), 3103(a)(1) (OCC 
prior approval required for intrastate and interstate additional 
Federal branches and agencies)) and would continue to supervise these 
additional offices in the same manner as it does the initial branch or 
agency. This streamlining of the licensing requirements will enable the 
OCC to require less extensive information from a foreign bank for an 
additional establishment than for an initial Federal office.
    This proposed change better promotes national treatment of foreign 
bank operations in the United States. Federal law and OCC regulations 
impose

[[Page 19951]]

requirements for the de novo chartering of a national bank that differ 
from those applicable to that bank's subsequent establishment of 
additional branches or offices. With respect to licensing procedures, 
the proposal treats the opening of additional Federal offices by 
foreign banks in a manner similar to the procedures followed by 
national banks when opening additional branches.
    Moreover, OCC regulations already distinguish between initial and 
additional Federal branches or agencies of foreign banks. For example, 
part 28 requires that a ``foreign bank shall designate one Federal 
branch or agency office in the United States to maintain consolidated 
information so that the OCC can monitor compliance.'' See 12 CFR 
28.14(c). It also requires that a ``foreign bank with more than one 
Federal branch or agency in a state shall designate one of those 
offices to maintain consolidated asset, liability, and capital 
equivalency accounts for all Federal branches or agencies in that 
state.'' 12 CFR 28.18(c)(2). Requiring a license for the initial 
Federal branch or agency and treating subsequent establishments as 
expansions is consistent with these regulations, which already employ a 
``lead'' Federal branch or agency approach to the supervision of 
foreign banks' U.S. operations. Finally, we note that the IBA has 
separate provisions in the law dealing with the initial establishment 
of a Federal branch or agency by a foreign bank, and subsequent 
establishments. See 12 U.S.C. 3102(a)(1) and (h).
    The OCC invites comment on the proposed treatment of regulatory 
applications by foreign banks.
3. CCS Requirements (revised Sec.  28.12(b)(5))
    Under current Sec.  28.12(b)(5), the OCC considers whether a 
foreign bank is subject to comprehensive supervision or regulation on a 
consolidated basis by its home country supervisor (CCS) in reviewing 
any application to establish a Federal branch or agency, including 
state-to-Federal conversions, upgrades, downgrades, and relocations, as 
well as establishing or acquiring a branch. In addition, the IBA 
requires the FRB to determine that a foreign bank seeking to establish 
a U.S. branch or agency is subject to CCS or that its home country 
supervisor is actively working to establish arrangements for CCS. 12 
U.S.C. 3105(d). This proposal would reduce regulatory burden and 
conform to the OCC's risk-based practice by providing that the OCC 
generally will consider CCS only in certain cases and may, in its 
discretion, consider it in other cases as deemed appropriate.
    As required by statute, the OCC will apply the standards of CCS 
when acting on applications for interstate establishments. See 12 
U.S.C. 3103(a)(3)(A). In connection with other applications to 
establish a Federal branch or agency, the OCC may consider CCS if 
necessary based on the circumstances of a particular case. This change 
in the OCC's rule would have no effect on the FRB's statutory 
requirement to make a CCS determination in connection with any 
application by a foreign bank to establish a U.S. office, as that 
requirement is interpreted by the FRB.
    The OCC believes that revising the circumstances under which the 
OCC will consider CCS is consistent with the supervision by risk 
approach. It may be appropriate to consider CCS when evaluating an 
application to establish an initial Federal branch or agency, in the 
same manner as an initial application to charter a national bank 
triggers a comprehensive regulatory review, but not when evaluating an 
application to open an additional Federal branch or agency. With 
respect to supervision of existing Federal branches and agencies, the 
OCC through the ongoing supervisory process, including information 
sharing with the FRB and foreign supervisors, monitors developments 
relating to a parent foreign bank and its home country. A CCS review 
involves these same types of determinations. Thus, absent specific 
supervisory concerns, in most cases we already would have the 
information about the quality of home country supervision to make a 
decision on the application. Moreover, in most cases, the FRB is 
required by statute to make a CCS determination and it may be unduly 
burdensome on the foreign bank for the OCC to be undertaking a 
duplicative CCS review, except in unusual circumstances or as expressly 
required by statute.
    The proposed rule would not foreclose the OCC from considering CCS 
and undertaking a CCS review in any circumstance that it deems 
appropriate. The OCC invites comment on the proposed changes in the CCS 
requirement. In particular, are there certain transactions for which 
the OCC should regularly consider and conduct a CCS review other than 
for interstate branching applications as required by statute, e.g., in 
the case of an application to establish an initial Federal branch or 
agency?
4. Expedited Approval Procedures (new Sec.  28.12(e)(2) and (e)(3), 
revised Sec.  28.12(e)(4), and new Sec.  28.12(i))
    Currently, part 28 requires that an application to establish a 
Federal branch or agency interstate is subject to the same review 
process that a foreign bank would undergo when it establishes its first 
Federal branch or agency in the United States. However, the rule 
provides that, for eligible foreign banks, an application to change the 
status of an office will be deemed approved on the 45th day after 
filing with the OCC. 12 CFR 28.12(e)(2). Under the current rule, a 
change in status includes contractions in operations as well as 
expansions. Id. See also 12 CFR 28.11(g) and 28.12(a).
    The proposed rule provides for expedited review of additional types 
of applications to establish a Federal branch or agency. Under proposed 
new Sec.  28.12(e)(2), a foreign bank may establish a new intrastate 
Federal branch or agency after providing written notice to the OCC 45 
days in advance of the proposed establishment. The OCC would retain 
flexibility to waive the 45-day period in certain circumstances, as 
well as suspend the notice period or require an application if the 
notice raises significant policy or supervisory issues. Permitting the 
establishment of an intrastate Federal branch or agency through a 
notice procedure generally is consistent with procedures for domestic 
national banks (see 12 CFR 5.30(f)(5)) and the practices of other 
regulators (see 12 CFR 211.24(a)(2)).
    In addition, under the proposed new Sec.  28.12(e)(3), an eligible 
foreign bank's application to establish a Federal branch or agency 
interstate is conditionally approved as of the 45th day after the OCC 
receives the completed application, unless the OCC notifies the bank 
that the filing is not eligible for expedited review.
    Under proposed Sec.  28.12(e)(4), an application by an eligible 
foreign bank to convert state offices to Federal offices, or expand 
activities by converting a Federal agency or limited Federal branch to 
a Federal branch, would be deemed approved as of the 30th day after 
filing with the OCC, unless the OCC notifies the bank that the 
application was not eligible for expedited review.
    As we have explained, the proposal deletes the current ``change in 
status'' definition in Sec.  28.11(d). It also excludes contractions in 
activities conducted under a Federal license from the list of 
transactions that trigger the establishment of a Federal branch or 
agency. For contractions, new Sec.  28.12(i) would provide that a 
foreign bank only

[[Page 19952]]

would be required to provide written notice to the OCC within 10 days 
after converting a full-service Federal branch into a limited Federal 
branch or Federal agency. Also, as discussed in connection with 
proposed Sec.  28.12(a)(2), such a downgrade in operations would not 
require the foreign bank to obtain a new license.
5. Eligible Foreign Bank (revised Sec.  28.12(f))
    Under current part 28, foreign banks with Federal branches and 
agencies that all are rated ``1'' or ``2'' under the applicable 
interagency rating system are eligible for expedited processing for 
their applications and other filings. 12 CFR 28.12(e) and (f). The 
proposed rule would revise Sec.  28.12(f) to provide that a foreign 
bank that has no Federal branches or agencies also is eligible if it is 
engaging in a state-to-Federal conversion and its state offices satisfy 
the eligibility criteria. This change would codify procedures that the 
OCC already has adopted in its Licensing Manual.
6. After-the-fact Notice for Certain Acquisitions (new Sec.  28.12(h))
    Under current part 28, if foreign bank A, which has a Federal 
branch, merges with foreign bank B, which does not have a Federal 
office, an application to establish the Federal branch would have to be 
submitted to the OCC if B were the surviving institution. Under current 
Sec.  28.12(g), the two foreign banks may proceed with their merger 
without approval of B's establishment of the branch if B provides 
reasonable advance notice of the transaction to the OCC. Prior to the 
merger, B must also apply to the OCC or commit to abide by the OCC's 
decision on the application.
    New Sec.  28.12(h) would provide an expedited procedure for foreign 
bank B if B already has banking offices in the United States. The 
proposed rule would further decrease the regulatory burden on foreign 
banks, while maintaining safety and soundness standards. The OCC would 
retain the discretion to require prior approval to establish the 
Federal branch or agency if necessary for prudential reasons.
7. Exceptions to Usual Filing Procedures (revised Sec.  28.12(j))
    For national banks, Sec.  5.2(b) of the OCC's rules permits the OCC 
to use filing procedures other than those prescribed by part 5 in 
``exceptional circumstances,'' including ``unusual transactions.'' The 
proposed rule revises Sec.  28.12(j) (as redesignated in this proposal) 
to clarify that the OCC also reserves the right to adopt different 
procedures with respect to a part 28 filing or class of filings.
8. Other Applications Accepted (new Sec.  28.12(l))
    The OCC's Licensing Manual currently states that the OCC will 
accept copies of applications to other Federal agencies if they contain 
the information that we require for a particular OCC approval 
requirement. The proposed rule revises Sec.  28.12(l) to codify this 
practice and provide that the OCC will accept copies of applications or 
notices to other regulators. The OCC may, however, request additional 
information from an applicant as deemed necessary should the 
application or notice contain less information than the OCC needs to 
reach a decision.
9. Capital Equivalency Deposits (revised Sec.  28.15(a)(1) and new 
Sec.  28.15(a)(3))
    The IBA requires Federal branches and agencies to establish and 
maintain a CED. 12 U.S.C. 3102(g). On June 19, 2002, the OCC issued a 
final rule 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 institutions.\4\ The additional 
changes contained in this proposal would further reduce unnecessary 
burden and simplify compliance with the CED requirements.
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    \4\ 67 FR 41619 (June 19, 2002).
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    The proposed rule amends Sec.  28.15(a)(1) to clarify the types of 
assets eligible to be deposited in a CED. Currently, a CED must consist 
of bank-eligible securities; dollar deposits payable in the United 
States; certificates of deposit payable in the United States; and other 
assets permitted by the OCC. Under the proposed rule, the requirement 
that dollar deposits be payable in the United States would be amended 
to include dollar deposits payable in any G-10 country. It further adds 
repurchase agreements to the list of permissible CED assets. Finally, 
the proposal revises this paragraph to clarify that the OCC's authority 
to permit other assets to qualify for the CED is limited to other 
assets that are similar to those expressly included in the statute.
    The proposed rule adds a new Sec.  28.15(a)(3) that would clarify 
that the OCC excludes liabilities of an international banking facility 
to third parties, and of a Federal branch to an international banking 
facility, when calculating the required amount of a CED. This is 
consistent with the OCC's current policy. Also, the proposed rule 
permits the OCC to exclude liabilities from repurchase agreements on a 
case-by-case basis. These provisions are consistent with the practice 
of some other regulators. See 3 NYCRR 322.1(a)(1) and (c) (exclusion of 
liabilities from repurchase agreements for purposes of calculating CED 
under New York state regulations).
10. CED Deposit Accounts (new Sec.  28.15(e))
    The statutory CED requirement specifies that ``a foreign bank * * * 
shall keep on deposit, in accordance with such rules and regulations as 
the Comptroller may prescribe, with a member bank designated by such 
foreign bank, dollar deposits or investment securities of the type that 
may be held by national banks for their own accounts pursuant to 
paragraph ``Seventh'' of section 24 of this title, in an amount as 
hereinafter set forth. Such depository bank shall be located in the 
State where such branch or agency is located and shall be approved by 
the Comptroller if it is a national bank and by the Board of Governors 
of the Federal Reserve System if it is a State bank.'' 12 U.S.C. 
3102(g)(1).
    The IBA does not expressly address whether the CEDs of several 
Federal branches may be combined or whether a foreign bank with Federal 
branches and agencies in more than one state may keep CEDs in one 
account in a depository bank. Moreover, the IBA does not define the 
term ``located'' for purposes of determining where a depository bank is 
located or where the Federal branch or agency is located for purposes 
of the CED requirement. The proposed rule clarifies that a foreign bank 
with interstate offices has the discretion to consolidate all or some 
of its CEDs into one account. It further clarifies that, for purposes 
of the CED account, a foreign bank must deposit the CEDs in a 
depository bank that is located, i.e., has its main office or a branch, 
in the parent foreign bank's home state \5\ or in the state in which 
the Federal branch or agency is licensed.\6\

[[Page 19953]]

These revisions will reduce regulatory burden by providing foreign 
banks with greater flexibility in complying with the CED requirements.
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    \5\ See 12 CFR 28.11(o)(definition of ``home state'').
    \6\ As described in the text, the IBA provides that a CED shall 
be ``in accordance with such limitations and conditions as the 
Comptroller may prescribe. * * * '' 12 U.S.C. 3102(g)(1). Moreover, 
the OCC has discretion in structuring the form and terms of the CED 
agreement. The IBA provides that ``[t]he deposit shall be maintained 
with any such member bank pursuant to a deposit agreement in such 
form and containing such limitations and conditions as the 
Comptroller may prescribe.'' 12 U.S.C. 3102(g)(3). More generally, 
the OCC has the authority to issue appropriate rules, regulations, 
and orders for the establishment and administration of Federal 
branches. See 12 U.S.C. 3102(b) and 3108(a).
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    While the location of a national bank varies from statute to 
statute and may be different for different purposes, 12 U.S.C. 81 
provides that the general business of each national banking association 
shall be transacted at its main office and its branch or branches. 
Under the proposal, the term ``located'' in the statutory language 
describing a CED depository bank is construed, consistently with Sec.  
81, to mean the state in which the depository bank has its main office 
or a branch. However, because a Federal branch or agency is not a 
separate corporate entity, it does not have a main office or branches. 
As a result and by analogy to 12 U.S.C. 81 and consistent with national 
treatment, the proposal provides that a Federal branch or agency is 
located in the state in which it is licensed and in the parent foreign 
bank's home state for purposes of maintaining a CED account.
    If the change in the licensing procedures described above is 
adopted, all Federal branches and agencies of a foreign bank may, under 
certain conditions, be licensed in only one state, which may be 
different from the foreign bank's home state. In such a situation, the 
proposal would provide foreign banks with more flexibility in 
determining where to deposit the consolidated CED if the foreign bank 
elects to consolidate some or all of these deposits.
    In providing for a consolidated CED account, the proposal is 
consistent with existing provisions of part 28. For example, Sec.  
28.15(a)(2) already permits a foreign bank to combine the CEDs of its 
federally licensed offices in the same state into one account at the 
depository bank. Part 28 further requires that a ``foreign bank with 
more than one Federal branch or agency in a state shall designate one 
of those offices to maintain consolidated asset, liability, and capital 
equivalency accounts for all Federal branches or agencies in that 
state.'' 12 CFR 28.18(c)(2). This proposal is also consistent with the 
national treatment purpose of the IBA and serves to reduce regulatory 
burden. Permitting a foreign bank to consolidate its CED accounts 
should provide foreign banks with more flexibility in structuring their 
U.S. operations and would reduce unnecessary costs in maintaining 
multiple accounts.
    The aggregate amount of the CED for all of the foreign bank's 
Federal branches and agencies would not change under the proposal and, 
thus, there would be no diminution in the foreign bank's combined 
amount of CED assets that it is required by law to maintain. Moreover, 
the OCC's authority to require an increase in the CED for a particular 
Federal branch or agency would not be affected.
    To ensure that creditors are protected,\7\ a corresponding change 
would be made to Sec.  28.18 (described below) to require that a 
foreign bank that consolidates its CEDs in accordance with this new 
paragraph Sec.  28.12(d)(2) must designate a Federal branch or agency 
to maintain consolidated asset, liability, and capital equivalency 
account information for all of the Federal branches and agencies that 
are covered by the consolidated deposit. This is similar to the 
requirement in Sec.  28.18(c)(2) that applies to consolidated CED 
accounts in one state. This approach also is consistent with other 
provisions in part 28 requiring a foreign bank to ``designate one 
Federal branch or agency office in the United States to maintain 
consolidated information so that the OCC can monitor compliance.'' See 
12 CFR 28.14(c).
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    \7\ The legislative history of the IBA does not expressly 
explain the CED requirement, but it indicates that one reason for 
including such a provision was a concern about the availability of 
assets for local creditors in the event that a foreign bank became 
insolvent. See International Banking Act of 1978, Hearings on HR 
10899 Before the Subcommittee on Financial Institutions Supervision 
of the Committee on Banking, Housing and Urban Affairs, 95th Cong., 
1st Sess. 118-19 (1977) (statement of Hon. Stephen S. Garner, Vice 
Chairman, Board of Governors of the Federal Reserve System and 
Proposed Amendments to H.R. 7325, the International Banking Act of 
1977).
---------------------------------------------------------------------------

    The OCC invites comment on the CED proposals and specifically seeks 
comments on possible ways for ensuring that a consolidated CED account 
contains sufficient assets to cover the operations of all participating 
Federal branches and agencies. Should the account contain segregated 
assets to cover specific offices, or would it be sufficient for the 
account to contain a consolidated amount large enough to cover the 
operations of all the individual offices?
    The OCC invites comments on other ways in which the CED requirement 
could be modified to further reduce regulatory burden consistent with 
maintaining the safe and sound operations of Federal branches and 
agencies in the United States.
11. Deposit-taking by an Uninsured Federal Branch (revised Sec.  
28.16(b)(8))
    The proposed rule makes a technical correction to paragraph (b)(8) 
to correct the citation to the FRB's Regulation K.
12. Maintenance of Accounts, Books, and Records (new Sec.  28.18(c)(3))
    As described above, the proposed new Sec.  28.18(c)(3) requires a 
foreign bank that has interstate Federal branches or agencies and 
combines its CEDs into one account to designate one of its Federal 
offices to maintain consolidated information about the Federal branches 
and agencies covered by the CEDs.
13. Maintenance of Assets (revised Sec.  28.20(a)(2))
    The OCC may impose asset maintenance requirements on a foreign bank 
to hold certain assets in the state in which its Federal branch or 
agency is located if necessary for prudential, supervisory, or 
enforcement reasons. 12 CFR 28.20(a)(1). These requirements are in 
addition to the CED requirements but, in determining compliance with 
any asset maintenance requirements imposed by the OCC, the OCC must 
give credit to the amount of assets held in the CED and other reserves 
or assets required under the IBA. 12 U.S.C. 3102(g)(4).
    The proposed revision of Sec.  28.20(a)(2) deletes the requirement 
that, if the OCC requires asset maintenance, the amount of assets held 
by the foreign bank cannot be less than 105% of the aggregate amount of 
liabilities of the Federal branch or agency, payable at or through the 
Federal branch or agency. Under the proposed rule, the amount of assets 
would be prescribed by the OCC and there would be no set minimum. This 
change would give the OCC more discretion to apply its asset 
maintenance authority on a risk-based basis to ensure the safe and 
sound operations of Federal branches and agencies.
14. Voluntary Liquidation (revised Sec.  28.22(a) and (b))
    The voluntary liquidation provisions of part 28 currently cross-
reference part 5 and the Comptroller's Licensing Manual and impose 
certain specific requirements. The proposed revisions to Sec.  28.22 
retain the current procedures and cross references (with specific 
reference to the Licensing Manual's qualifications and procedures for a 
voluntary expedited liquidation of an insured Federal branch) for 
voluntary liquidations if the Federal branches and agencies being 
liquidated are the foreign bank's only Federal branches and agencies in 
the United States. The proposal eliminates the additional unnecessary 
requirements currently in the regulation but retains the requirement 
that a foreign bank publish notice of the impending closure. The

[[Page 19954]]

proposal, however, replaces the current requirement for 30-days' notice 
with a requirement for 2 months' daily notice in order to conform with 
the statutory notice requirement that applies to national banks that 
are voluntarily closing.\8\
---------------------------------------------------------------------------

    \8\ 12 U.S.C. 182.
---------------------------------------------------------------------------

15. Procedures for Closing Some U.S. Offices (new Sec.  28.23)
    If a foreign bank operates more than one Federal branch or agency 
in the United States and is closing some but not all of its Federal 
offices, the proposed rule, at new Sec.  28.23, treats the closing like 
the closing of a domestic national bank branch. Domestic national banks 
must satisfy the requirements of 12 U.S.C. 1831r-1 (90 days notice to 
the OCC and customers). This change would be consistent with the IBA's 
national treatment standard and safety and soundness.
16. After-the-fact Notice of Change in Control (new Sec.  28.25)
    Currently, part 28 is silent on what requirements exist and what 
filings are required for changes in control in a foreign bank that 
operates a Federal branch or agency. The OCC's Licensing Manual, 
however, requires the foreign bank to submit a copy of the change in 
control notice it files with the FRB to the OCC.
    The proposed rule adds a new Sec.  28.24. This new section applies 
to changes in control in which no other filing is required under part 
28 and requires a foreign bank to submit a written notice to the OCC of 
a change in control of the foreign bank within 14 days after the 
foreign bank becomes aware of the change. The OCC reserves the right to 
require additional information. A foreign bank may provide its 
supervisory office with the copy of a notice submitted to another 
Federal regulator to satisfy the requirements of this section. See 12 
CFR 28.3(b).
17. Loan Production Offices (new Sec.  28.26)
    Part 28 is also silent on the issue of whether a foreign bank may 
operate a loan production office (LPO) or other administrative office 
or regional administrative office as part of its license to operate a 
Federal branch in the United States. Consistent with the OCC's 
precedents on this issue and national treatment, the proposed rule 
specifically states that, like a national bank, a Federal branch may 
operate an LPO, or an administrative office or a regional 
administrative office that conducts other types of representational 
activities, as part of a branch license. These activities would be 
subject to the same rights, privileges, requirements, and limitations 
that apply to LPOs and other administrative offices of national banks. 
Since national banks may conduct these activities and exercise these 
functions at non-branch locations as part of the business of banking, a 
Federal branch may also do so since, as a general rule, it operates 
with the same rights and duties of a national bank. 12 U.S.C. 3102(b). 
The OCC believes that these activities and functions are illustrative--
and not exhaustive--of the types of non-branch offices that Federal 
branches may operate.

Request for Comments

    The OCC invites comment on all aspects of the proposed regulation.

Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec. 
722, 113 Stat. 1338, 1471 (November 12, 1999), requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. We invite your comments on how to make 
this proposal easier to understand. For example:
    [sbull] Have we organized the material to suit your needs? If not, 
how could this material be better organized?
    [sbull] Are the requirements in the proposed regulation clearly 
stated? If not, how could the regulation be more clearly stated?
    [sbull] Does the proposed regulation contain language or jargon 
that is not clear? If so, which language requires clarification?
    [sbull] Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
    [sbull] What else could we do to make the regulation easier to 
understand?

Community Bank Comment Request

    In addition, we invite your comments on the impact of this proposal 
on community banks. The OCC recognizes that community banks operate 
with more limited resources than larger institutions and may present a 
different risk profile. Thus, the OCC specifically requests comments on 
the impact of this proposal on community banks' current resources and 
available personnel with the requisite expertise, and whether the goals 
of the proposed regulation could be achieved, for community banks, 
through an alternative approach.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b) (RFA), the regulatory flexibility analysis otherwise 
required under section 604 of the RFA is not required if the agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities and publishes its certification 
and a short, explanatory statement in the Federal Register along with 
its rule.
    Pursuant to section 605(b) of the RFA, the OCC hereby certifies 
that this proposal will not have a significant economic impact on a 
substantial number of small entities. Specifically the proposed rule 
will reduce burden by: (1) Streamlining procedures for national banks' 
foreign operations through branches; (2) eliminating the requirement to 
file an application with the OCC in certain circumstances when a 
foreign bank downgrades its U.S. operations; (3) requiring approval, 
but not a new license, for additional Federal branches or agencies 
opened after the establishment of the initial branch office; and (4) 
clarifying that a foreign bank with Federal branches and agencies in 
more than one state may consolidate its capital equivalency deposits in 
one deposit account in a depository bank that satisfies certain 
criteria. These revisions will result in cost reductions for national 
banks and for the U.S. operations of Federal branches and agencies of 
foreign banks. Accordingly, a regulatory flexibility analysis is not 
needed.

Executive Order 12866

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

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency 
prepare a budgetary impact statement before promulgating any rule 
likely to result in 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. The OCC has determined that the proposed rule will not result in 
expenditures by State, local, and tribal governments, or by the

[[Page 19955]]

private sector, of $100 million or more in any one year. Accordingly, 
this rulemaking is not subject to section 202 of the Unfunded Mandates 
Act.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, 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 this notice of 
proposed rulemaking have been submitted to OMB for review and approval 
under OMB Control Number 1557-0014 (Comptroller's Licensing Manual) and 
OMB Control Number 1557-0102 (International Regulation--12 CFR 28).
    The information collection requirements contained in this notice of 
proposed rulemaking that are covered under the Comptroller's Licensing 
Manual (Manual) information collection are found in 12 CFR 5.36, 28.12, 
28.22, and 28.25.
    The Manual embodies all required procedures, forms, and regulations 
regarding OCC corporate approvals. The Manual is needed to standardize 
OCC processing of corporate filings, to ensure consistency in the 
recordkeeping and decision making processes, and provide information to 
banks on corporate application filing procedures and regulatory 
requirements affecting corporate changes. The Manual is the primary 
procedural guide for OCC personnel.
    The information collection requirements contained in this notice of 
proposed rulemaking that are covered under the information collection 
titled, ``International Banking Regulation--12 CFR 28'' are found in 12 
CFR 28.3.
    The information collection requirements are necessary to comply 
with the requirements of the International Banking Act of 1978, the 
Foreign Bank Supervision Enhancement Act of 1991, and to maintain the 
safety and soundness of national bank operations in the United States 
and abroad.
    The information collection requirements are as follows:
    12 CFR 5.36 permits a well-capitalized, well-managed national bank 
to make certain non-controlling investments in an enterprise, directly 
or through its operating subsidiary, by filing a written notice to the 
OCC. The proposed rule adds a new paragraph to permit a well-
capitalized and well-managed Federal branch to make non-controlling 
investments by filing a after-the-fact notice, in the same manner as a 
national bank.
    The likely respondents are national banks.
    Estimated number of respondents: 17.
    Estimated number of responses: 17.
    Average hours per response: 1 hour.
    Estimated total burden hours: 17 hours.
    12 CFR 28.3(a) requires a national bank to notify the OCC upon 
opening, closing, or relocating a foreign branch, whether or not a 
filing to the Board of Governors of the Federal Reserve System (FRB) is 
required under the FRB's rules governing the foreign operations of 
member banks and other U.S. banking organizations. The proposed rule 
amends Sec.  28.3(a) to provide that no notice to the OCC is required 
if a national bank closes or relocates a foreign branch.
    The likely respondents are national banks.
    Estimated number of respondents: 45.
    Estimated number of responses: 45.
    Average hours per response: .5 hour.
    Estimated total burden hours: 22.5 hours.
    12 CFR 28.12(a)(1) requires a foreign bank to submit an application 
to, and obtain approval from, the OCC before it establishes a Federal 
branch or agency, or exercises fiduciary powers at a Federal branch.
    The likely respondents are foreign banks.
    Estimated number of respondents: 4.
    Estimated number of responses: 4.
    Average hours per response: 41 hours.
    Estimated total burden hours: 164 hours.
    New Sec.  28.12(e)(2) requires a foreign bank to provide written 
notice to the OCC in cases where a foreign bank seeks to establish 
intrastate an additional Federal branch or agency.
    The likely respondents are foreign banks.
    Estimated number of respondents: 1.
    Estimated number of responses: 1.
    Average hours per response: 1 hour.
    Estimated total burden hours: 1 hour.
    Comments are invited on:
    (a) Whether the collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information has practical utility;
    (b) The accuracy of the agency's estimate of the burden of the 
collection of information;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the collection on respondents, 
including through the use of automated collection techniques or other 
forms of information technology; and
    (e) Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments should be sent to:
    Jessie Dunaway, Clearance Officer, Office of the Comptroller of the 
Currency, Legislative and Regulatory Activities Division, Attention: 
1557-0014 & 1557-0102, 250 E Street, SW., Mailstop 8-4, Washington, DC 
20219. Comments may also be sent by fax to (202) 874-4889 or by e-mail 
to [email protected].
    Joseph F. Lackey, Jr., Desk Officer, Office of Information and 
Regulatory Affairs, Attention: 1557-0014 & 1557-0102, Office of 
Management and Budget, Room 10235, Washington, DC 20503. Comments may 
also be sent by e-mail to [email protected].

Executive Order 13132

    Executive Order 13132 requires Federal agencies, including the OCC, 
to certify their compliance with that Order when they transmit to the 
Office of Management and Budget any draft final regulation that has 
Federalism implications. Under the Order, a regulation has Federalism 
implications if it has ``substantial direct effects on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government.'' In the case of a regulation that has Federalism 
implications and that preempts state law, the Order imposes certain 
consultation requirements with state and local officials; requires 
publication in the preamble of a Federalism summary impact statement; 
and requires the OCC to make available to the Director of the Office of 
Management and Budget any written communications submitted by state and 
local officials. By the terms of the Order, these requirements apply to 
the extent that they are practicable and permitted by law and, to that 
extent, must be satisfied before the OCC promulgates a final 
regulation.
    The OCC does not believe that the proposed rule has such Federalism 
implications.

List of Subjects

12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Securities.

12 CFR Part 28

    Foreign banking, National banks, Reporting and recordkeeping 
requirements.

[[Page 19956]]

Authority and Issuance

    For the reasons set forth in the preamble, parts 5 and 28 of 
chapter I of title 12 of the Code of Federal Regulations are proposed 
to be amended as follows:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

    1. The authority citation for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 24a, 24(Seventh), 93a, and 3101 
et seq.;

    2. In Sec.  5.3, paragraphs (c)(1) and (c)(4) are revised:


Sec.  5.3  Definitions.

* * * * *
    (c) * * *
    (1) The Licensing Department for all national bank subsidiaries of 
certain holding companies assigned to the Washington, DC, licensing 
unit;
    (2) * * *
    (3) * * *
    (4) The licensing unit in the Northeastern District Office for 
Federal branches and agencies of foreign banks.
* * * * *
    3. In Sec.  5.36, a new paragraph (g) is added to read as follows:


Sec.  5.36  Other equity investments.

* * * * *
    (g) Non-controlling investments by Federal branches. A Federal 
branch that satisfies the well capitalized and well managed standards 
in Sec.  4.7(b)(1)(iii) and Sec.  5.34(d)(3)(ii) may make a non-
controlling investment in accordance with paragraph (e) of this section 
in the same manner, and subject to the same conditions and requirements 
as a national bank.\9\
---------------------------------------------------------------------------

    \9\ Federal branches also may be subject to requirements 
containted in the Board of Governors of the Federal Reserve System's 
Regulation K, 12 CFR part 211.
---------------------------------------------------------------------------

    4. In Sec.  5.70:
    a. Paragraph (c)(1) is removed;
    b. Paragraphs (c)(2)(i) through (v) are redesignated as paragraphs 
(c)(1)(i) through (v);
    c. Newly redesignated paragraphs (c)(1)(i), (iv), and (v) are 
revised;
    d. New paragraph (c)(1)(vi) is added; and
    e. New paragraph (c)(2) is added to read as follows:


Sec.  5.70  Federal branches and agencies.

* * * * *
    (c) * * *
    (1) * * *
    (i) Open and conduct business through an initial or additional 
Federal branch or agency;
    (ii) * * *
    (iii) * * *
    (iv) Convert a state branch or state agency operated by a foreign 
bank, or a commercial lending company controlled by a foreign bank, 
into a Federal branch or Federal agency;
    (v) Relocate a Federal branch or agency within a state or from one 
state to another; or
    (vi) Convert a Federal agency or a limited Federal branch into a 
Federal branch.
    (2) Any reference to a Federal branch includes a limited Federal 
branch unless provided otherwise.
* * * * *

PART 28--INTERNATIONAL BANKING ACTIVITIES

    5. 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.

    6. In Sec.  28.3, paragraphs (a)(1)(i) and (a)(2) are revised to 
read as follows:


Sec.  28.3  Filing requirements for foreign operations of a national 
bank:

    (a) * * *
    (1) * * *
    (i) Establish or open a foreign branch;
    (ii) * * *
    (2) Opens a foreign branch, and no application or notice is 
required by the FRB for such transaction.
* * * * *
    1. In Sec.  28.5, paragraphs (a) and (b) are revised as follows:


Sec.  28.5  Filing of notice.

    (a) Where to file. A national bank shall file any notice or 
submission required under this subpart with the appropriate supervisory 
office of the OCC.
    (b) Availability of forms. Individual forms and instructions for 
filings are available from the appropriate supervisory office of the 
OCC.
    8. In Sec.  28.11:
    a. Paragraph (d) is removed;
    b. Paragraphs (e)-(z) are redesignated as paragraphs (d)-(y);
    c. Newly redesignated paragraphs (f)(1), (4), and (5) are revised;
    d. New paragraph (f)(6) is added; and
    e. Newly redesignated paragraph (h) is revised to add a new 
sentence at the end to read as follows:


Sec.  28.11  Definitions.

* * * * *
    (f) Establish a Federal branch or agency means to:
    (1) Open and conduct business through an initial or additional 
Federal branch or agency;
    (2) * * *
    (3) * * *
    (4) Convert a state branch or state agency operated by a foreign 
bank, or a commercial lending company controlled by a foreign bank, 
into a Federal branch or agency;
    (5) Relocate a Federal branch or agency within a state or from one 
state to another; or
    (6) Convert a Federal agency or a limited Federal branch into a 
Federal branch.
* * * * *
    (h) * * * Unless otherwise provided, the references in this subpart 
B of part 28 to a Federal branch include a limited Federal branch.
* * * * *
    9. In Sec.  28.12:
    a. Paragraphs (a) and (b)(5) are revised;
    b. Paragraphs (e)(2) through (4) are redesignated as paragraphs 
(e)(4) through (6);
    c. New paragraphs (e)(2) and (3) is added;
    d. Newly redesignated paragraph (e)(4) is revised;
    e. Paragraph (f) introductory text is revised;
    f. Paragraphs (h) through (i) are redesignated as paragraphs (j) 
through (k);
    g. New paragraphs (h) and (i) is added;
    h. Newly redesignated paragraph (j) is revised; and
    i. New paragraph (l) is added to read as follows:


Sec.  28.12  Approval of a Federal branch or agency.

    (a) Approval and licensing requirements--(1) General. Except as 
otherwise provided in this section, a foreign bank shall submit an 
application to, and obtain prior approval from, the OCC before it:
    (i) Establishes a Federal branch or agency; or
    (ii) Exercises fiduciary powers at a Federal branch. (A foreign 
bank may submit an application to exercise fiduciary powers at the time 
of filing an application for a Federal branch or at any subsequent 
date.)
    (2) Licensing. A foreign bank must receive a license from the OCC 
to open and operate its initial Federal office in the United States. A 
foreign bank that has a license to operate and is operating a full-
service Federal branch will not be required to obtain a new license for 
any additional Federal offices, or to upgrade or downgrade its 
operations in an existing Federal office. A foreign bank that only has 
a license to operate and is operating a limited Federal branch or

[[Page 19957]]

Federal agency will not be required to obtain a new license for any 
additional limited branches or agencies, or to convert a limited branch 
into an agency or an agency into a limited branch.
    (b) * * *
    (5) With respect to an application to establish an interstate 
branch or agency under 12 CFR 28.11(f)(1), whether the foreign bank is 
subject to comprehensive supervision or regulation on a consolidated 
basis by its home country supervisor. The OCC, in its discretion, also 
may consider whether the foreign bank is subject to comprehensive 
supervision or regulation on a consolidated basis by its home country 
supervisor in the case of any other application to establish a branch 
or agency.
* * * * *
    (e) * * *
    (1) * * *
    (2) Written notice for additional intrastate branches or agencies. 
(i) In cases where a foreign bank seeks to establish intrastate an 
additional Federal branch or agency, the foreign bank shall provide 
written notice 45 days in advance of the establishment of the 
intrastate branch or agency.
    (ii) The OCC may waive the 45-day period if immediate action is 
required by the circumstances of the intrastate branching. The OCC also 
may suspend the notice period or require an application if the 
notification raises significant policy or supervisory concerns.
    (3) Expedited approval procedures for interstate branches or 
agencies. An application submitted by an eligible foreign bank to 
establish and operate a de novo Federal branch or agency in any state 
outside the home state of the foreign bank is deemed conditionally 
approved by the OCC as of the 45th day after the OCC receives the 
filing, unless the OCC notifies the bank prior to that date that the 
filing is not eligible for expedited review. In the event that the FRB 
has approved the application prior to the expiration of the period, 
then the OCC's approval shall be deemed a final approval.
    (4) Conversions. An application submitted by an eligible foreign 
bank under 12 CFR 28.11(f)(4) or (f)(6) is deemed approved by the OCC 
as of the 30th day after the OCC receives the filing, unless the OCC 
notifies the bank prior to that date that the filing is not eligible 
for expedited review.
* * * * *
    (f) Eligible foreign bank. For purposes of this section, a foreign 
bank is an eligible foreign bank if each Federal branch or agency of 
the foreign bank or, if the foreign bank has no Federal branches or 
agencies and is engaging in a conversion under 12 CFR 28.11(f)(4), each 
state branch or agency:
* * * * *
    (h) After-the-fact notice for eligible foreign banks: Unless 
otherwise provided by the OCC, a foreign bank proposing to establish a 
Federal branch or agency through the acquisition of, or merger or 
consolidation with, a foreign bank that has an existing bank 
subsidiary, branch, or agency, may proceed with the transaction and 
provide after-the-fact notice to the OCC within 14 days of the 
transaction if:
    (1) the resulting bank is an ``eligible foreign bank'' within the 
meaning of Sec.  28.12(f); and
    (2) no Federal branch established by the transaction is insured.
    (i) Contraction of operations. A foreign bank shall provide written 
notice to the OCC within 10 days after converting a Federal branch into 
a limited Federal branch or Federal agency.
    (j) Procedures for approval. A foreign bank shall file an 
application for approval pursuant to this section in accordance with 12 
CFR part 5 and the Manual. The OCC reserves the right to adopt 
materially different procedures for a particular filing, or class of 
filings, pursuant to 12 CFR 5.2(b).
* * * * *
    (k) * * *
    (l) Other applications accepted. As provided in Sec.  5.4(c), the 
OCC may accept an application or other filing submitted to another 
Federal agency that covers the proposed activity or transaction and 
contains substantially the same information as required by the OCC.
    10. In Sec.  28.15:
    a. Paragraph (a)(1)(ii) is revised;
    b. Paragraph (a)(1)(iv) is redesignated as (a)(1)(v);
    c. New paragraph (a)(1)(iv) is added;
    d. Newly redesignated (a)(1)(v) is revised;
    e. New paragraph (a)(3) is added;
    f. Paragraph (e) is redesignated as (f);
    g. New paragraph (e) is added to read as follows:


Sec.  28.15  Capital equivalency deposits.

    (a) * * *
    (1) * * *
    (i) * * *
    (ii) United States dollar deposits payable in the United States or 
payable in any other G-10 country;
    (iii) * * *
    (iv) Repurchase agreements; or
    (v) Other similar assets permitted by the OCC to qualify for the 
CED.
    (2) * * *
    (3) Exceptions. In determining the amount of the CED, the OCC 
excludes liabilities of an international banking facility (IBF) to 
third parties and of a branch of a foreign bank to an IBF. The OCC may 
exclude liabilities from repurchase agreements on a case-by-case basis.
* * * * *
    (e) Deposit and Consolidation of CED accounts. A foreign bank with 
a Federal branch or agency shall deposit its CED into an account in a 
depository bank that is located, i.e., has its main office or a branch, 
in the state in which the Federal branch or agency is licensed or in 
the state that is the parent bank's home state. A foreign bank with 
Federal branches or agencies in more than one state may consolidate 
some or all of its CEDs into one such account.
* * * * *
    11. In Sec.  28.16, paragraph (b)(8) is revised to read as follows:


Sec.  28.16  Deposit-taking by an uninsured Federal branch.

* * * * *
    (b) * * *
    (8) Persons who may deposit funds with an Edge corporation as 
provided in the FRB's Regulation K, 12 CFR 211.6, including persons 
engaged in certain international business activities; and
* * * * *
    12. In Sec.  28.18, a new paragraph (c)(3) is added to read as 
follows:


Sec.  28.18  Recordkeeping and reporting.

* * * * *
    (c) * * *
    (3) A foreign bank with a Federal branch or agency in more than one 
state that combines its CEDs into one account in accordance with 12 CFR 
28.15(e) shall designate a participating Federal branch or agency to 
maintain consolidated asset, liability, and capital equivalency account 
information for all Federal branches and agencies covered by the 
consolidated deposit.
    13. In Sec.  28.20, the first sentence of paragraph (a)(2) is 
revised to read as follows:


Sec.  28.20  Maintenance of assets.

    (a) * * *
    (1) * * *
    (2) If the OCC requires asset maintenance, the amount of assets 
held by a foreign bank shall be prescribed by the OCC after 
consideration of the aggregate amount of liabilities of the Federal 
branch or agency, payable at or through the Federal branch or agency. * 
* *
* * * * *

[[Page 19958]]

    14. In Sec.  28.22, paragraphs (a) and (b) are revised:


Sec.  28.22  Voluntary liquidation.

    (a) Procedures to close all Federal branches and agencies. Unless 
otherwise provided, in cases in which a foreign bank proposes to close 
all of its Federal branches or agencies, the foreign bank shall comply 
with applicable requirements in 12 CFR 5.48 and the Manual, including 
requirements that apply to an expedited liquidation of an insured 
Federal branch.
    (b) Notice to customers and creditors. A foreign bank shall publish 
notice of the impending closure of each Federal branch or agency for a 
period of two months in every issue of a local newspaper where the 
Federal branch or agency is located. If only weekly publication is 
available, the notice must be published for nine consecutive weeks.
* * * * *
    15. Section 28.23 is redesignated as Sec.  28.24 and a new Sec.  
28.23 is added to read as follows:


Sec.  28.23  Procedures for closing of some U.S. offices.

    In cases where Sec.  28.22 does not apply, and a foreign bank is 
closing one or more, but not all, of its Federal branches and/or 
agencies, it shall follow the procedures set forth in 12 U.S.C. 1831r-
1(a) and (b) (branch closings).
* * * * *
    16. A new Sec.  28.25 is added to read as follows:


Sec.  28.25  Change in control.

    (a) After-the-fact notice. In cases in which no other filing is 
required under subpart B of part 28, a foreign bank that operates a 
Federal branch or agency shall inform the OCC in writing of the direct 
or indirect acquisition of control of the foreign bank by any person or 
entity, or group of persons or entities acting in concert, within 14 
calendar days after the foreign bank becomes aware of a change in 
control.
    (b) Additional information. The foreign bank shall furnish the OCC 
with any additional information the OCC may require in connection with 
the acquisition of control.
    17. A new Sec.  28.26 is added to read as follows:


Sec.  28.26  Loan production offices.

    As an integral part of its license to operate a Federal branch, a 
foreign bank may establish lending offices, make credit decisions, and 
engage in other representational activity at a place other than its 
branch office, subject to the same rights, privileges, requirements and 
limitations as apply to national banks under 12 CFR 7.1003-1005.

    Dated: April 11, 2003.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 03-9733 Filed 4-22-03; 8:45 am]
BILLING CODE 4810-33-P