PRIA, Government Policy, Made Personal

Summary

Foreign banks may open and run federal or state branches or agencies in states outside their chosen "home State" if they get written approval first. For federal offices the Federal Reserve Board and the Comptroller of the Currency must approve. For state offices the Board and the state bank supervisor must approve. The approval only allows what a similar U.S. bank could do. Regulators must check that the foreign bank meets the same rules used for opening foreign bank offices, confirm its capital and financial strength match the U.S. standards, consult the Treasury about capital equivalence, and apply the same conditions used for interstate bank mergers. As a rule, foreign banks cannot open branches outside their home State except under these rules. Regulators can require the foreign bank to set up a U.S. bank subsidiary if needed to verify capital rules. With approval, a foreign bank can also open or upgrade certain agencies or branches if the state permits and the branch only takes the kinds of deposits allowed for Edge Act firms. If a foreign bank buys a bank or branch in a state where it had no branch, the Community Reinvestment Act keeps applying to those acquired branches unless the branch only takes Edge Act–permitted deposits. A foreign bank can keep branches or agencies that began lawfully by July 27, 1978, and can keep ones it operated on September 29, 1994, so long as they continue lawful activity. The foreign bank names its home State if it has offices in more than one State; if it does not choose, the Board picks. If a foreign bank controls a U.S. bank, that control does not change either bank’s ability to open branches under these rules.

Title 12, §3103

Banks and Banking, Source: USLM XML via OLRC

(a)Interstate branching and agency operations

(1)Federal branch or agency

Subject to the provisions of this chapter and with the prior written approval by the Board and the Comptroller of the Currency of an application, a foreign bank may establish and operate a Federal branch or agency in any State outside the home State of such foreign bank to the extent that the establishment and operation of such branch would be permitted under section 36(g) of this title or section 1831u of this title if the foreign bank were a national bank whose home State is the same State as the home State of the foreign bank.

(2)State branch or agency

Subject to the provisions of this chapter and with the prior written approval by the Board and the appropriate State bank supervisor of an application, a foreign bank may establish and operate a State branch or agency in any State outside the home State of such foreign bank to the extent that such establishment and operation would be permitted under section 1828(d)(4) or 1831u of this title if the foreign bank were a State bank whose home State is the same State as the home State of the foreign bank.

(3)Criteria for determination

In approving an application under paragraph (1) or (2), the Board and (in the case of an application under paragraph (1)) the Comptroller of the Currency—

(A)shall apply the standards applicable to the establishment of a foreign bank office in the United States under section 3105(d) of this title;

(B)may not approve an application unless the Board and (in the case of an application under paragraph (1)) the Comptroller of the Currency—

(i)determine that the foreign bank’s financial resources, including the capital level of the bank, are equivalent to those required for a domestic bank to be approved for branching under section 36 of this title and section 1831u of this title; and

(ii)consult with the Secretary of the Treasury regarding capital equivalency; and

(C)shall apply the same requirements and conditions to which an application for an interstate merger transaction is subject under paragraphs (1), (3), and (4) of section 1831u(b) of this title.

(4)Operation

Subsections (c) and (d)(2) of section 1831u of this title shall apply with respect to each branch and agency of a foreign bank which is established and operated pursuant to an application approved under this subsection in the same manner and to the same extent such provisions of such section apply to a domestic branch of a national or State bank (as such terms are defined in section 1813 of this title) which resulted from a merger transaction under such section 1831u of this title.

(5)Exclusive authority for additional branches

Except as provided in this section, a foreign bank may not, directly or indirectly, acquire, establish, or operate a branch or agency in any State other than the home State of such bank.

(6)Requirement for a separate subsidiary

If the Board or the Comptroller of the Currency, taking into account differing regulatory or accounting standards, finds that adherence by a foreign bank to capital requirements equivalent to those imposed under section 36 of this title and section 1831u of this title could be verified only if the banking activities of such bank in the United States are carried out in a domestic banking subsidiary within the United States, the Board and (in the case of an application under paragraph (1)) the Comptroller of the Currency may approve an application under paragraph (1) or (2) subject to a requirement that the foreign bank or company controlling the foreign bank establish a domestic banking subsidiary in the United States.

(7)Additional authority for interstate branches and agencies of foreign banks, upgrades of certain foreign bank agencies and branches

Notwithstanding paragraphs (1) and (2), a foreign bank may—

(A)with the approval of the Board and the Comptroller of the Currency, establish and operate a Federal branch or Federal agency or, with the approval of the Board and the appropriate State bank supervisor, a State branch or State agency in any State outside the foreign bank’s home State if—

(i)the establishment and operation of such branch or agency is permitted by the State in which the branch or agency is to be established; and

(ii)in the case of a Federal or State branch, the branch receives only such deposits as would be permitted for a corporation organized under section 25A of the Federal Reserve Act [12 U.S.C. 611 et seq.]; or

(B)with the approval of the Board and the relevant licensing authority (the Comptroller in the case of a Federal branch or the appropriate State supervisor in the case of a State branch), upgrade an agency, or a branch of the type referred to in subparagraph (A)(ii), located in a State outside the foreign bank’s home State, into a Federal or State branch if—

(i)the establishment and operation of such branch is permitted by such State; and

(ii)such agency or branch—

(I)was in operation in such State on the day before September 29, 1994; or

(II)has been in operation in such State for a period of time that meets the State’s minimum age requirement permitted under section 1831u(a)(5) of this title.

(8)Continuing requirement for meeting community credit needs after initial interstate entry by acquisition

(A)In general

If a foreign bank acquires a bank or a branch of a bank, in a State in which the foreign bank does not maintain a branch, and such acquired bank is, or is part of, a regulated financial institution (as defined in section 803 of the Community Reinvestment Act of 1977 [12 U.S.C. 2902]), the Community Reinvestment Act of 1977 [12 U.S.C. 2901 et seq.] shall continue to apply to each branch of the foreign bank which results from the acquisition as if such branch were a regulated financial institution.

(B)Exception for branch that receives only deposits permissible for an Edge Act corporation

Paragraph (1) shall not apply to any branch that receives only such deposits as are permissible for a corporation organized under section 25A of the Federal Reserve Act [12 U.S.C. 611 et seq.] to receive.

(9)Home State of domestic bank defined

For purposes of this subsection, the term “home State” means—

(A)with respect to a national bank, the State in which the main office of the bank is located; and

(B)with respect to a State bank, the State by which the bank is chartered.

(b)Continuance of lawful interstate banking operations previously commenced

Unless its authority to do so is lawfully revoked otherwise than pursuant to this section, a foreign bank, notwithstanding any restriction or limitation imposed under subsection (a) of this section, may establish and operate, outside its home State, any State branch, State agency, or bank or commercial lending company subsidiary which commenced lawful operation or for which an application to commence business had been lawfully filed with the appropriate State or Federal authority, as the case may be, on or before July 27, 1978. Notwithstanding subsection (a), a foreign bank may continue to operate, after September 29, 1994, any Federal branch, State branch, Federal agency, State agency, or commercial lending company subsidiary which such bank was operating on the day before September 29, 1994, to the extent the branch, agency, or subsidiary continues, after September 29, 1994, to engage in operations which were lawful under the laws in effect on the day before September 29, 1994.

(c)Determination of home State of foreign bank

For the purposes of this section

(1)

(2)in the case of a foreign bank that does not have a branch, agency, subsidiary commercial lending company, or subsidiary bank in more than 1 State, the home State of the foreign bank is the State in which the foreign bank has a branch, agency, subsidiary commercial lending company, or subsidiary bank.

(d)Clarification of branching rules in case of foreign bank with domestic bank subsidiary

In the case of a foreign bank that has a domestic bank subsidiary within the United States—

(1)the fact that such bank controls a domestic bank shall not affect the authority of the foreign bank to establish Federal and State branches or agencies to the extent permitted under subsection (a); and

(2)the fact that the domestic bank is controlled by a foreign bank which has Federal or State branches or agencies in States other than the home State of such domestic bank shall not affect the authority of the domestic bank to establish branches outside the home State of the domestic bank to the extent permitted under section 36(g) of this title or section 1828(d)(4) or 1831u of this title, as the case may be.

Notes & Related Subsidiaries

Editorial Notes

References in Text

For definition of “this chapter”, referred to in subsec. (a)(1), (2), see

References in Text

note set out under section 3101 of this title. The Community Reinvestment Act of 1977, referred to in subsec. (a)(8)(A), is title VIII of Pub. L. 95–128, Oct. 12, 1977, 91 Stat. 1147, which is classified generally to chapter 30 (§ 2901 et seq.) of this title. For complete classification of this Act to the Code, see

Short Title

note set out under section 2901 of this title and Tables. section 25A of the Federal Reserve Act, referred to in subsec. (a)(7)(A)(ii), (8)(B), popularly known as the Edge Act, is classified to subchapter II (§ 611 et seq.) of chapter 6 of this title. For complete classification of this Act to the Code, see

Short Title

note set out under section 611 of this title and Tables.

Amendments

1999—Subsec. (a)(7). Pub. L. 106–102 amended heading and text of par. (7) generally. Prior to amendment, text read as follows: “Notwithstanding paragraphs (1) and (2), a foreign bank may, with the approval of the Board and the Comptroller of the Currency, establish and operate a Federal branch or Federal agency or, with the approval of the Board and the appropriate State bank supervisor, a State branch or State agency in any State outside the foreign bank’s home State if— “(A) the establishment and operation of a branch or agency is expressly permitted by the State in which the branch or agency is to be established; and “(B) in the case of a Federal or State branch, the branch receives only such deposits as would be permissible for a corporation organized under section 25A of the Federal Reserve Act.” 1994—Subsec. (a). Pub. L. 103–328, §§ 104(a), 107(f), inserted heading and substituted provisions consisting of pars. (1) to (9) for former provisions relating to limitations on interstate banking by foreign banks. Subsec. (b). Pub. L. 103–328, § 104(b), inserted at end “Notwithstanding subsection (a), a foreign bank may continue to operate, after

September 29, 1994, any Federal branch, State branch, Federal agency, State agency, or commercial lending company subsidiary which such bank was operating on the day before

September 29, 1994, to the extent the branch, agency, or subsidiary continues, after

September 29, 1994, to engage in operations which were lawful under the laws in effect on the day before

September 29, 1994.” Subsec. (c). Pub. L. 103–328, § 104(d), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “For the purposes of this section, the home State of a foreign bank that has branches, agencies, subsidiary commercial lending companies, or subsidiary banks, or any combination thereof, in more than one State, is whichever of such States is so determined by election of the foreign bank, or, in default of such election, by the Board.” Subsec. (d). Pub. L. 103–328, § 104(c), added subsec. (d).

§3103 Interstate Banking by Foreign Banks

Summary

Title 12, §3103

Notes & Related Subsidiaries

Editorial Notes

References in Text

References in Text

Short Title

Short Title

Amendments

Citations & Metadata