Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429 Division of Supervision
Foreign Banking Activities
FIL-41-98
April 15, 1998
TO: CHIEF EXECUTIVE OFFICER
SUBJECT: FDIC Adopts Final Regulation to Consolidate and Update
Rules for Foreign Banking Activities
(Part 347 of the FDIC's Rules and Regulations)
The FDIC Board of Directors has adopted a new regulation that consolidates, updates and
streamlines rules that apply to foreign banking operations. The FDIC's international rules, which
had been on the books since 1979 without significant revision, were divided into three separate
parts. Those rules will be consolidated into one regulation, Part 347. Under the new Part 347,
state nonmember banks will be able to compete more effectively abroad.
The new regulation, which is attached, will take effect on July 1, 1998. Banks may elect to
voluntarily comply with it on May 8, 1998.
The new Part 347 reduces filing requirements for most banks wishing to open a foreign branch
or make a foreign investment. Well-run, well-capitalized institutions with no enforcement actions
pending against them that meet certain other criteria may utilize the FDIC's "general consent"
when initiating new activities abroad. This means an eligible institution can presume to have the
FDIC's approval to engage in certain activities. The institution is required to notify the FDIC after
new operations begin. Alternatively, well-run, well-capitalized institutions ineligible to proceed
under the presumption of general consent can now take advantage of expedited processing for
their applications.
The Board has defined permissible activities that bank branches, foreign joint ventures and
subsidiaries may engage in, within specific dollar limits. The new regulation reflects statutory
requirements that a foreign banking organization's retail deposit-taking activities in the United
States be conducted through an insured bank subsidiary, not an insured branch. Under the new
Part 347, quarterly, not semiannual, calculations and reporting are required for pledged assets
that apply to the deposit activities of insured branches.
Other key aspects of Part 347 follow. The new regulation:
Eliminates a general limit on foreign investment of 25 percent of capital. New investment
limitations are associated with specific types of activities. The regulation also includes
procedures for requesting modifications to the limits.
Permits a bank's foreign branch to underwrite, distribute and deal, invest in and trade
obligations of any foreign government, rather than just the obligations of the country in
which it is located. Banks may also invest directly in foreign organizations that are not
banks.Inactive
550 17th Street NW, Washington, DC 20429 Division of Supervision
Foreign Banking Activities
FIL-41-98
April 15, 1998
TO: CHIEF EXECUTIVE OFFICER
SUBJECT: FDIC Adopts Final Regulation to Consolidate and Update
Rules for Foreign Banking Activities
(Part 347 of the FDIC's Rules and Regulations)
The FDIC Board of Directors has adopted a new regulation that consolidates, updates and
streamlines rules that apply to foreign banking operations. The FDIC's international rules, which
had been on the books since 1979 without significant revision, were divided into three separate
parts. Those rules will be consolidated into one regulation, Part 347. Under the new Part 347,
state nonmember banks will be able to compete more effectively abroad.
The new regulation, which is attached, will take effect on July 1, 1998. Banks may elect to
voluntarily comply with it on May 8, 1998.
The new Part 347 reduces filing requirements for most banks wishing to open a foreign branch
or make a foreign investment. Well-run, well-capitalized institutions with no enforcement actions
pending against them that meet certain other criteria may utilize the FDIC's "general consent"
when initiating new activities abroad. This means an eligible institution can presume to have the
FDIC's approval to engage in certain activities. The institution is required to notify the FDIC after
new operations begin. Alternatively, well-run, well-capitalized institutions ineligible to proceed
under the presumption of general consent can now take advantage of expedited processing for
their applications.
The Board has defined permissible activities that bank branches, foreign joint ventures and
subsidiaries may engage in, within specific dollar limits. The new regulation reflects statutory
requirements that a foreign banking organization's retail deposit-taking activities in the United
States be conducted through an insured bank subsidiary, not an insured branch. Under the new
Part 347, quarterly, not semiannual, calculations and reporting are required for pledged assets
that apply to the deposit activities of insured branches.
Other key aspects of Part 347 follow. The new regulation:
Eliminates a general limit on foreign investment of 25 percent of capital. New investment
limitations are associated with specific types of activities. The regulation also includes
procedures for requesting modifications to the limits.
Permits a bank's foreign branch to underwrite, distribute and deal, invest in and trade
obligations of any foreign government, rather than just the obligations of the country in
which it is located. Banks may also invest directly in foreign organizations that are not
banks.Inactive
Simplifies accounting for fees on international loans. Instead of requiring specific
accounting procedures, the new rule directs banks to follow generally accepted
accounting principles (GAAP).
Requires banks to either establish reserves to account for transfer risk in international
assets or use an alternative method consistent with GAAP.
For further information, please contact the following in the Division of Supervision: Christopher
Spoth, Assistant Director, at (202) 898-6611, Karen Walter, Chief, at (202) 898-3540, or
Suzanne Williams, Senior Financial Analyst, at (202) 898-6788; or in the Legal Division, Jamey
Basham, Counsel, at (202) 898-7265, or Wendy Sneff, Counsel, at (202) 898-6865.
Nicholas J. Ketcha Jr.
Director
Attachment:
April 8 Federal Register, pages 17056-17090
Distribution: FDIC-Supervised Banks (Commercial and Savings)
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's
Public Information Center, 801 17th Street, N.W., Room 100, Washington, D.C. 20434 (800-
276-6003 or (703) 562-2200).Inactive
accounting procedures, the new rule directs banks to follow generally accepted
accounting principles (GAAP).
Requires banks to either establish reserves to account for transfer risk in international
assets or use an alternative method consistent with GAAP.
For further information, please contact the following in the Division of Supervision: Christopher
Spoth, Assistant Director, at (202) 898-6611, Karen Walter, Chief, at (202) 898-3540, or
Suzanne Williams, Senior Financial Analyst, at (202) 898-6788; or in the Legal Division, Jamey
Basham, Counsel, at (202) 898-7265, or Wendy Sneff, Counsel, at (202) 898-6865.
Nicholas J. Ketcha Jr.
Director
Attachment:
April 8 Federal Register, pages 17056-17090
Distribution: FDIC-Supervised Banks (Commercial and Savings)
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's
Public Information Center, 801 17th Street, N.W., Room 100, Washington, D.C. 20434 (800-
276-6003 or (703) 562-2200).Inactive