PART 28—INTERNATIONAL BANKING ACTIVITIES Authority: 12 U.S.C. 1 et seq., et seq., et seq. Source: 61 FR 19532, May 2, 1996, unless otherwise noted. Subpart A—Foreign Operations of National Banks § 28.1 Authority, purpose, and scope. (a) Authority. et seq., (b) Purpose. (c) Scope. § 28.2 Definitions. For purposes of this subpart: (a) Agreement corporation (b) Edge corporation (c) Foreign bank (1) Is organized under the laws of a foreign country; (2) Engages in the business of banking; (3) Is recognized as a bank by the bank supervisory or monetary authority of the country of its organization or principal banking operations; (4) Receives deposits to a substantial extent in the regular course of its business; and (5) Has the power to accept demand deposits. (d) Foreign branch (e) Foreign country [61 FR 19532, May 2, 1996, as amended at 61 FR 60387, Nov. 27, 1996] § 28.3 Filing requirements for foreign operations of a national bank. (a) Notice requirement. (1) Files an application, notice, or report with the FRB to: (i) Establish or open a foreign branch; (ii) Acquire or divest of an interest in, or close, an Edge corporation, Agreement corporation, foreign bank, or other foreign organization; or (2) Opens a foreign branch, and no application or notice is required by the FRB for such transaction. (b) Other applications and notices accepted. (c) Additional information. [61 FR 19532, May 2, 1996, as amended at 68 FR 70699, Dec. 19, 2003] § 28.4 Permissible activities. (a) General. (1) Permissible for a national bank in the United States; and (2) Usual in connection with the business of banking in the country where it transacts business. (b) Additional activities. (c) Foreign operations guarantees. § 28.5 Filing of notice. (a) Where to file. (b) Availability of forms. [61 FR 19532, May 2, 1996, as amended at 68 FR 70699, Dec. 19, 2003] Subpart B—Federal Branches and Agencies of Foreign Banks § 28.10 Authority, purpose, and scope. (a) Authority. et seq., (b) Purpose—Purpose and scope. (c) Scope. [61 FR 19532, May 2, 1996, as amended at 61 FR 60387, Nov. 27, 1996; 68 FR 70699, Dec. 19, 2003] § 28.11 Definitions. For purposes of this subpart: (a) Affiliate (b) Agreement corporation (c) Capital equivalency deposit (d) Control. (e) Edge corporation (f) Establish a Federal branch or agency (1) Open and conduct business through an initial or additional Federal branch or agency; (2) Acquire directly or indirectly through merger, consolidation, or similar transaction with another foreign bank, the operations of a Federal branch or agency that is open and conducting business; (3) Acquire a Federal branch or agency through the acquisition of a foreign bank subsidiary that will cease to operate in the same corporate form following the acquisition; (4) Convert a state branch or 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. (g) Federal agency (1) Incidental to, or arise out of the exercise of, other lawful banking powers; (2) To serve a specific purpose; (3) Not solicited from the general public; (4) Not used to pay routine operating expenses in the United States such as salaries, rent, or taxes; (5) Withdrawn within a reasonable period of time after the specific purpose for which they were placed has been accomplished; and (6) Drawn upon in a manner reasonable in relation to the size and nature of the account. (h) Federal branch (i) Foreign bank (j) Foreign business (k) Foreign country (l) Home country (m) Home country supervisor (n) Home state (o) Immediate family member of an individual (p) Initial deposit First deposit (q) International banking facility (r) Large United States business (1) Securities registered on a national securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System; or (2) More than $1 million in annual gross revenues for the fiscal year immediately preceding the year of the initial deposit. (s) Limited Federal branch (t) Managed or controlled (u) Manual (v) Parent foreign bank senior management (w) Person (x) State (y) United States bank [61 FR 19532, May 2, 1996, as amended at 61 FR 60387, Nov. 27, 1996; 68 FR 70699, Dec. 19, 2003; 73 FR 22251, Apr. 24, 2008] § 28.12 Approval of a Federal branch or agency. (a) Approval and licensing requirements General. (i) Establishes a Federal branch or agency; or (ii) Exercises fiduciary powers at a Federal branch. (2) Licensing. (b) Standards for approval. (1) The financial and managerial resources and future prospects of the applicant foreign bank and the Federal branch or agency; (2) Whether the foreign bank has furnished to the OCC the information the OCC requires to assess the application adequately, and provided the OCC with adequate assurances that information will be made available to the OCC on the operations or activities of the foreign bank or any of its affiliates that the OCC deems necessary to determine and enforce compliance with the IBA and other applicable Federal banking statutes; (3) Whether the foreign bank and its United States affiliates are in compliance with applicable United States law; (4) The convenience and needs of the community to be served and the effects of the proposal on competition in the domestic and foreign commerce of the United States; (5) With respect to an application to establish a Federal branch or agency outside of the foreign bank's home state, 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 when reviewing any other type of application to establish a Federal branch or agency; and (6) Whether the home country supervisor has consented to the proposed establishment of the Federal branch or agency. (c) Comprehensive supervision or regulation on a consolidated basis. (d) Conditions on approval. (e) Expedited review. (1) Intrastate relocations. (2) Written notice for an additional intrastate Federal branch or agency. (ii) The OCC may waive the 30-day period required under paragraph (e)(2)(i) of this section if immediate action is required. 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 an interstate Federal branch or agency. (4) Conversions. (5) Fiduciary powers. (6) Other filings. (f) Eligible foreign bank. (1) Has a composite rating of 1 or 2 under the interagency rating system for United States branches and agencies of foreign banks; (2) Is not subject to a cease and desist order, consent order, formal written agreement, Prompt Corrective Action directive ( see (3) Has, if applicable, a Community Reinvestment Act (CRA), 12 U.S.C. 2906, rating of “Outstanding” or “Satisfactory”. (g) After-the-fact approval. (1) Gives the OCC reasonable advance notice of the proposed acquisition, merger, or consolidation; (2) Prior to consummation of the acquisition, merger, or consolidation, commits in writing to comply with the OCC application procedures within a reasonable period of time, or has already submitted an application; and (3) Commits in writing to abide by the OCC's decision on the application, including a decision to terminate activities of the Federal branch or agency. (h) After-the-fact notice for an eligible foreign bank. (1) The resulting bank is an “eligible foreign bank” under paragraph (f) of this section; and (2) No Federal branch established by the transaction accepts deposits that are insured by the FDIC pursuant to the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq. (i) Contraction of operations. (j) Procedures for approval. (k) Other applications accepted. [61 FR 19532, May 2, 1996, as amended at 68 FR 70699, Dec. 19, 2003; 73 FR 22251, Apr. 24, 2008] § 28.13 Permissible activities. (a) Applicability of laws General. (2) Parent foreign bank senior management approval. (b) Management of shell branches Federal branches and agencies. (2) Activities managed in foreign branches or subsidiaries of United States banks. (c) Additional guidance regarding permissible activities. § 28.14 Limitations based upon capital of a foreign bank. (a) General. (b) Calculation. (c) Aggregation. [61 FR 19532, May 2, 1996, as amended at 79 FR 11312, Feb. 28, 2014] § 28.15 Capital equivalency deposits. (a) Capital equivalency deposits General. (i) Investment securities eligible for investment by national banks; (ii) United States dollar deposits payable in the United States or payable in any other Group of Ten country; (iii) Certificates of deposit, payable in the United States, and banker's acceptances, provided that, in either case, the issuer has an adequate capacity to meet financial commitments for the projected life of the asset or exposure. An issuer has an adequate capacity to meet financial commitments if the risk of default by the obligor is low and the full and timely repayment of principal and interest is expected; (iv) Repurchase agreements; or (v) Other similar assets permitted by the OCC to qualify to be included in the CED. (2) Legal requirements. (3) Exceptions. (b) Increase in capital equivalency deposits. (c) Value of assets. (d) Deposit arrangements. (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; (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 (3) Must be free from any lien, charge, right of setoff, credit, or preference in connection with any claim of the depository bank against the foreign bank. (e)(1) Deposit and Consolidation. (2) Calculation. (f) Maintenance of capital equivalency ledger account. [61 FR 60363, Nov. 27, 1996, as amended at 66 FR 49098, Sept. 26, 2001; 67 FR 4326, Jan. 30, 2002; 67 FR 41620, June 19, 2002; 68 FR 70700, Dec. 19, 2003; 77 FR 35258, June 13, 2012] § 28.16 Deposit-taking by an uninsured Federal branch. (a) Policy. (b) General. (1) Individuals who are not citizens or residents of the United States at the time of the initial deposit; (2) Individuals who are not citizens of the United States, but are residents of the United States, and are employed by a foreign bank, foreign business, foreign government, or recognized international organization; (3) Persons (including immediate family members of an individual) to whom the branch or foreign bank (including any affiliate thereof) has extended credit or provided other nondeposit banking services within the past 12 months, or with whom the branch or foreign bank has a written agreement to extend credit or provide such services within 12 months after the date of the initial deposit; (4) Foreign businesses and large United States businesses; (5) Foreign governmental units, including political subdivisions, and recognized international organizations; (6) Federal and state governmental units, including political subdivisions and agencies thereof; (7) Persons who are depositing funds in connection with the issuance of a financial instrument by the branch for transmission of funds, or transmission of funds by any electronic means; (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 (9) Any other depositor if: (i) The aggregate amount of deposits received from those depositors does not exceed, on an average daily basis, 1 percent of the average of the branch's deposits for the last 30 days of the most recent calendar quarter, excluding deposits of other offices, branches, agencies, or wholly owned subsidiaries of the foreign bank; and (ii) The branch does not solicit deposits from the general public by advertising, display of signs, or similar activity designed to attract the attention of the general public. (c) Application for an exemption. (1) The types, sources, and estimated amounts of such deposits and explain why the OCC should grant an exemption; and (2) How the exemption maintains and furthers the policies described in paragraph (a) of this section. (d) Aggregation of deposits. (e) Notification to depositors. (f) Transition period. (2) If a deposit lawfully accepted under the exemption existing prior to July 1, 1996 would not qualify for an exemption under paragraph (b) or (c) of this section, the uninsured Federal branch must terminate the deposit no later than: (i) In the case of time deposits, the maturity of a time deposit or October 1, 1996, whichever is longer; or (ii) In the case of all other deposits, five years after July 1, 1996. (g) Insured banks in United States territories. et seq. [61 FR 19532, May 2, 1996, as amended at 68 FR 70131, Dec. 17, 2003; 68 FR 70700, Dec. 19, 2003; 76 FR 43569, July 21, 2011] § 28.17 Notice of change in activity or operations. Notice. (a) It changes its corporate title; (b) It changes its mailing address; (c) It converts to a state branch, state agency, or representative office; or (d) The parent foreign bank changes the designation of its home state. § 28.18 Recordkeeping and reporting. (a) General. (b) Regulatory reports filed with other agencies. (c) Maintenance of accounts, books, and records. (2) 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. (3) A foreign bank with a Federal branch or agency in more than one state that consolidates its CEDs into one account in accordance with § 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. A foreign bank with a consolidated CED shall maintain a book entry accounting of assets designated under the consolidated CED for each office of that foreign bank. [61 FR 19532, May 2, 1996, as amended at 68 FR 70700, Dec. 19, 2003] § 28.19 Enforcement. As provided by section 13 of the IBA, 12 U.S.C. 3108(b), the OCC may enforce compliance with the requirements of the IBA, other applicable banking laws, and OCC regulations or orders under section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 1818. This enforcement authority is in addition to any other remedies otherwise provided by the IBA or any other law. § 28.20 Maintenance of assets. (a) General rule. (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. To determine the aggregate amount of liabilities for purposes of this section, the foreign bank shall include bankers' acceptances, but exclude liabilities to the head office and any other branches, offices, agencies, subsidiaries, and affiliates of the foreign bank. (b) Valuation. (c) Credits. (1) Capital equivalency deposits maintained pursuant to § 28.15; (2) Reserves required to be maintained by the Federal branch or agency pursuant to the FRB's authority under 12 U.S.C. 3105(a); and (3) Assets pledged, and surety bonds payable, to the FDIC to secure the payment of domestic deposits. (d) Exclusions. (1) Any amount due from the head office or any other branch, office, agency, subsidiary, or affiliate of the foreign bank; (2) Any classified asset; (3) Any asset that, in the determination of the OCC, is not supported by sufficient credit information; (4) Any deposit with a bank in the United States, unless that bank has executed a valid waiver of offset agreement; (5) Any asset not in the Federal branch's actual possession unless the branch holds title to the asset and maintains records sufficient to enable independent verification of the branch's ownership of the asset, as determined at the most recent examination; and (6) Any other particular asset or class of assets as provided by the OCC, based on a case-by-case assessment of the risks associated with the asset. (e) International banking facility. [61 FR 19532, May 2, 1996, as amended at 68 FR 70700, Dec. 19, 2003] § 28.21 Service of process. A foreign bank operating at any Federal branch or agency is subject to service of process at the location of the Federal branch or agency. § 28.22 Voluntary liquidation. (a) Procedures to close all Federal branches and agencies. (b) Notice to customers and creditors. (c) Report of condition. (d) Return of certificate. (e) Reports of examination. [61 FR 19532, May 2, 1996, as amended at 68 FR 70700, Dec. 19, 2003] § 28.23 Procedures for closing of some of a foreign bank's Federal branches and/or agencies. In cases where § 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). [68 FR 70700, Dec. 19, 2003] § 28.24 Termination of a Federal branch or agency. (a) Grounds for termination. (1) The OCC determines that there is reasonable cause to believe that the foreign bank has violated or failed to comply with any of the provisions of the IBA, other applicable Federal laws or regulations, or orders of the OCC; (2) A conservator is appointed for the foreign bank, or a similar proceeding is initiated in the foreign bank's home country; (3) One or more grounds for receivership, including insolvency, as specified in 12 U.S.C. 3102(j), exists; (4) One or more grounds for termination, including unsafe and unsound practices, insufficiency or dissipation of assets, concealment of books and records, a money laundering conviction, or other grounds as specified in 12 U.S.C. 191, exists; or (5) The OCC receives a recommendation from the FRB, pursuant to 12 U.S.C. 3105(e)(5), that the license of a Federal branch or agency be terminated. (b) Procedures Notice and hearing. (2) Procedures for hearing. (3) Expedited procedure. (i) Provide the Federal branch or agency with notice of the intended termination order; (ii) Grant the Federal branch or agency an opportunity to present a written submission opposing issuance of the order; or (iii) Take any other action designed to provide the Federal branch or agency with notice and an opportunity to present its views concerning the termination order. [61 FR 19532, May 2, 1996. Redesignated at 68 FR 70700, Dec. 19, 2003] § 28.25 Change in control. (a) After-the-fact notice. (b) Additional information. [68 FR 70701, Dec. 19, 2003] § 28.26 Loan production offices. A Federal branch may establish lending offices, make credit decisions, and engage in other representational activities at a site other than a Federal branch office, subject to the same rights, privileges, requirements and limitations that apply to national banks under 12 CFR 7.1003, 7.1004, and 7.1005. [68 FR 70701, Dec. 19, 2003] Subpart C—International Lending Supervision § 28.50 Authority, purpose, and scope. (a) Authority. et seq., et seq. (b) Purpose. et seq. (c) Scope. [61 FR 19532, May 2, 1996, as amended at 73 FR 22251, Apr. 24, 2008] § 28.51 Definitions. For the purposes of this subpart: (a) Banking institution (b) Federal banking agencies (c) International assets Country Exposure Report (d) International loan Report of Condition and Income (e) Restructured international loan (1) The borrower is unable to service the existing loan according to its terms and is a resident of a foreign country in which there is a generalized inability of public and private sector obligors to meet their external debt obligations on a timely basis because of a lack of, or restraints on the availability of, needed foreign exchange in the country; and (2) The terms of the existing loan are amended to reduce stated interest or extend the schedule of payments; or (3) A new loan is made to, or for the benefit of, the borrower, enabling the borrower to service or refinance the existing debt. (f) Transfer risk [61 FR 19532, May 2, 1996, as amended at 63 FR 57048, Oct. 26, 1998; 73 FR 22251, Apr. 24, 2008] § 28.52 Allocated transfer risk reserve. (a) Establishment of allocated transfer risk reserve. (b) Procedures and standards Joint agency determination. (i) Which international assets subject to transfer risk warrant establishment of an ATRR; (ii) The amount of the ATRR for the specified assets; and (iii) Whether an ATRR established for specified assets may be reduced. (2) Standards for requiring ATRR Evaluation of assets. (A) Whether the quality of a banking institution's assets has been impaired by a protracted inability of public or private obligors in a foreign country to make payments on their external indebtedness as indicated by such factors, among others, as whether: ( 1 ( 2 ( 3 (B) Whether no definite prospects exist for the orderly restoration of debt service. (ii) Determination of amount of ATRR. ( 1 ( 2 ( 3 ( 4 (B) The initial year's provision for the ATRR shall be 10 percent of the principal amount of each specified international asset, or such greater or lesser percentage determined by the Federal banking agencies. Additional provision, if any, for the ATRR in subsequent years shall be 15 percent of the principal amount of each specified international asset, or such greater or lesser percentage determined by the Federal banking agencies. (3) Notification. (i) Of the amount of the ATRR to be established by the institution for specified international assets; and (ii) That an ATRR to be established for specified assets may be reduced. (c) Accounting treatment of ATRR Charge to current income. (2) Separate accounting. (3) Consolidation. Consolidated Reports of Condition and Income (4) Alternative accounting treatment. (5) Reduction of ATRR. § 28.53 Accounting for fees on international loans. (a) Restrictions on fees for restructured international loans. (b) Accounting treatment. [63 FR 57048, Oct. 26, 1998] § 28.54 Reporting and disclosure of international assets. (a) Requirements. (2) Pursuant to section 907(b) of ILSA (12 U.S.C. 3906), a banking institution shall submit to the OCC information regarding concentrations in its holdings of international assets that are material in relation to total assets and to capital of the institution, such information to be made publicly available by the OCC on request. (b) Procedures. de minimis (c) Reservation of authority.