Federal Regulator Greenlights Foreign Bank’s Plan to Establish U.S. Branch

Introduction

The Office of the Comptroller of the Currency (OCC) has approved a proposal by a foreign bank to establish a Federal branch or agency in the United States through an acquisition, merger, or consolidation with a U.S. bank subsidiary.

Operations and Regulations

Under the plan, the foreign bank would be allowed to operate its new U.S. branch as if it were a national bank, subject to the same laws and regulations that apply to domestic banks. The OCC has determined that the resulting bank would be considered an “eligible foreign bank” under federal law, meaning it would not accept deposits insured by the Federal Deposit Insurance Corporation (FDIC).

Notification and Approval

The foreign bank must provide written notice to the OCC within 10 days of converting a Federal branch into a limited Federal branch or Federal agency. The OCC reserves the right to adopt different procedures for approval in certain cases.

Rights and Privileges

The operations of a foreign bank at a Federal branch or agency shall be conducted with the same rights and privileges, and subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations as if it were a national bank operating at the same location.

Permissible Activities

In addition, the OCC has issued guidance on permissible activities for Federal branches, including:

• Management of shell branches
• Limits based on capital
• Aggregation of business transactions

The agency also clarified that any limitation or restriction based upon the capital of a national bank shall be deemed to refer, as applied to a Federal branch or agency, to the dollar equivalent of the capital of the foreign bank.

Conditions and Requirements

The OCC has approved the plan, subject to certain conditions and requirements, including:

• Establishment of capital equivalency deposits (CED) with a depository bank
• Aggregation of business transacted by all Federal branches and agencies with the business transacted by all state branches and state agencies controlled by the foreign bank in determining its compliance with limitations based on capital

Monitoring and Enforcement

The OCC will monitor compliance with the approved plan and may take enforcement action if necessary.