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4000 - Advisory Opinions


Reporting Requirements of Foreign Banks under FIRIRCA

FDIC-81-9

April 2, 1981

Barbara Gersten, Attorney

This will respond to your letter of February 24, 1981, which requests confirmation that foreign banks are excluded from the reporting requirements of Titles VIII and IX of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 ("FIRIRCA"), 12 U.S.C. § 1972(2)(G), 12 U.S.C. § 1817(k)(1). A foreign bank is not covered by the reporting requirements under Titles VIII and IX; however, the reporting requirements in general do apply to: (1) a nonbank or individual principal shareholder controlling a foreign bank that has an insured state nonmember bank subsidiary; (2) an executive officer of a foreign bank who is also an executive officer of the insured state nonmember bank subsidiary; and (3) an executive officer of the insured state nonmember bank subsidiary.

Title VIII

Title VIII, in pertinent part, requires executive officers and principal shareholders of an "insured bank"1 to report annually to their bank's board of directors on their indebtedness (and indebtedness of their related interests) to the bank's correspondents.

The statutory reporting requirements are implemented as to "insured State nonmember banks"2 by FDIC regulations. 12 C.F.R. Part 349. Form FFIEC 004 is recommended for the reports.

A. Foreign Bank Having an Insured State Nonmember Bank Subsidiary

Where the foreign bank is itself a principal shareholder of an insured state nonmember bank, the foreign bank need not report on its indebtedness to correspondents of the insured state nonmember bank. Foreign banks, as defined in 12 U.S.C. § 3101(7), 3 have been specifically exempted by regulation from the reporting requirements of Title VIII. As 12 C.F.R. § 349.2(e) indicates, the applicable definition for the term "principal shareholder'' is found in subpart A of Federal Reserve Regulation O, 12 C.F.R. § 215.10(a)(2).4 Since foreign banks and their U.S. bank subsidiaries deal with many of the same correspondent banks, the inclusion of the foreign bank as a principal shareholder would restrict, and in some cases prohibit, normal transactions between the foreign bank and its own correspondent banks. As such a result does not appear to have been intended by Congress, foreign banks have been exempted.

A nonbank or individual principal shareholder controlling a foreign bank that has an insured state nonmember bank subsidiary would be required to report to the subsidiary bank's board of directors on indebtedness (including indebtedness of related interests)5 to correspondents of the insured state nonmember bank subsidiary. The applicable definition of the term "principal shareholder", 12 C.F.R. § 215.10(a)(2) (set forth in footnote 4), specifically includes a person that "controls'' a principal shareholder (e.g., a person that controls a bank holding company). As 12 C.F.R. § 349.2(b) indicates, the applicable definition of the term "control'' is found in 12 C.F.R. § 215.2(b), and in general, the term means that a person (1) directly or indirectly owns, controls or has the power to vote 25% of the voting stock of a bank; or (2) controls in any manner the election of the directors of the bank; or (3) has the power to exercise a controlling influence over the management or policies of the bank. In addition, certain rebuttable presumptions of control are set forth. Thus, a nonbank or individual principal shareholder that controls the foreign bank would be required to report under Title VIII. This result obtains, even though the regulations implementing the reporting requirements, 12 C.F.R. § 349.3(a), are somewhat unclear, in that they provide for the filing of reports by principal shareholders of an insured state nonmember bank.

Executive officers of a foreign bank that has an insured state nonmember bank subsidiary would not be required to report on their indebtedness (and that of their related interests) to correspondents of the subsidiary, unless the executive officers are also executive officers of the subsidiary bank.6 Executive officers of the subsidiary bank must report on correspondent indebtedness under 12 C.F.R. § 349.3. As 12 C.F.R. § 349.2(b) indicates, the term "executive officer'' is defined in 12 C.F.R. § 215.2(d). An executive officer is a person who participates or has authority to participate in major policymaking functions of the bank. As provided by the regulation, certain persons are presumed to be executive officers unless excluded from participation in policymaking functions.

B. Foreign Bank Maintaining a United States Branch7

In general, where a foreign bank maintains a branch in the United States, whether or not deposits in the branch are insured in accordance with the Federal Deposit Insurance Act, reports under Title VIII would not be required. Neither the foreign bank nor its branch and personnel are considered to be covered by the reporting requirements.8

Title IX

Title IX requires insured banks to annually provide the appropriate Federal bank supervisory agency with a list of the bank's principal shareholders and a report on indebtedness of the principal shareholders and executive officers (and their related interests) to the bank. The statutory reporting requirements are implemented as to insured state nonmember banks by regulations promulgated by the FDIC. 12 C.F.R. § 304.4. Form FFIEC 003 is required for such reports. In addition, excerpts of information required to be reported under Title VIII (Form FFIEC 004) and filed with the bank must be reported by the bank on Form FFIEC 003.

A. Foreign Bank Having an Insured State Nonmember Bank Subsidiary

Where the foreign bank is itself a principal shareholder of an insured state nonmember bank, the subsidiary bank need not report on indebtedness of the foreign bank to the subsidiary bank. As 12 C.F.R. § 304.4(b)(2) indicates, the applicable definition of the term "principal shareholder'' is found in Regulation 0, 12 C.F.R. § 215.10(a). A foreign bank is specifically excluded from being a principal shareholder.

Under Title IX, an insured state nonmember bank subsidiary of a foreign bank would be required to provide to the FDIC a list of nonbank or individual principal shareholders that control the foreign bank, and to report on indebtedness of such entities or persons (and their related interests) to the subsidiary. Where a person is an executive officer of the foreign bank and an executive officer of the subsidiary, the subsidiary would be required to report on the indebtedness of the executive officer (and related interests) to it.9 Where a person is an executive officer of the subsidiary, the subsidiary would be required to report on indebtedness of such person to it. In this respect, the reporting requirements under Title IX correlate with those under Title VIII, for the reason that both 12 C.F.R. Part 349 and 12 C.F.R. § 304.4 rely upon the same definitions (set forth above) of key terms, such as "principal shareholder", "executive officer", "related interest", and "control", found in Regulation O.

B. Foreign Bank Maintaining a United States Branch

In general, where a foreign bank maintains a branch in the United States, whether or not deposits in the branch are insured in accordance with the Federal Deposit Insurance Act, reports under Title IX would not be required. Neither the foreign bank, nor its branch and personnel would be covered by the reporting requirements.10

Should you have any questions regarding the substance of this opinion, please do not hesitate to contact me.

1 The Federal Deposit Insurance Act defines the term "insured bank" to mean "any bank (including a foreign bank having an insured branch) the deposits of which are insured in accordance with the provisions of [the Federal Deposit Insurance] Act . . ." 12 U.S.C. § 1813(h). Go back to Text

2 The term "State bank" is defined by the Federal Deposit Insurance Act, in pertinent part, to mean "any bank . . . which is engaged in the business of receiving deposits other than trust funds . . . and which is incorporated under the laws of any State, any Territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, or which is operating under the Code of Law for the District of Columbia, any Territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands." 12 U.S.C. § 1813(a). Go back to Text

3 "[F]oreign bank' means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, which engages in the business of banking, or any subsidiary or affiliate, organized under such laws, of any such company. For the purposes of this chapter the term "foreign bank' includes, without limitation, foreign commercial banks, foreign merchant banks and other foreign institutions that engage in banking activities usual in connection with the business of banking in the countries where such foreign institutions are organized or operating . . ." 12 U.S.C. § 3101(7). Go back to Text

4 "Principal shareholder' . . . means any person (other than an insured bank, or a foreign bank as defined in 12 U.S.C. § 3101(7) that, directly or indirectly, owns, controls, or has power to vote more than 10 percent of any class of voting securities of the . . . bank. The term includes a person that controls a principal shareholder (e.g., a person that controls a bank holding company). Shares of a bank (including a foreign bank), bank holding company, or other company owned or controlled by a member of an individual's immediate family are presumed to be owned or controlled by the individual for the purposes of determining principal shareholder status." 12 C.F.R. § 215.10(a)(2). Go back to Text

5 As 12 C.F.R. § 349.2(e) indicates, the applicable definition of the term "related interest'' is found in 12 C.F.R. § 215.10(a)(3), which provides: "Related interest' means any company controlled by a person and any political or campaign committee, the funds or services of which will benefit a person or that is controlled by a person. . . . a related interest does not include a bank or a foreign bank (as defined in 12 U.S.C. § 3101(7)).'' Go back to Text

6 Footnote 2 accompanying 12 C.F.R. § 349.2(b) ("executive officer'') provides that for the purposes of Part 349, executive officers of an insured State nonmember bank do not include an executive officer of a bank holding company of which such bank is a subsidiary, or of any other subsidiary of the bank holding company, unless the person is also an executive officer of the insured State nonmember bank. This applies with regard to a foreign or domestic bank holding company. Go back to Text

7 The Federal Deposit Insurance Act defines the term "insured branch" as ". . . a branch of a foreign bank any deposits in which are insured in accordance with the provisions of [the Federal Deposit Insurance Act]." 12 U.S.C. § 1813(s), 12 C.F.R. § 346.1. The International Banking Act of 1978 and FDIC regulations provide that only branches of foreign banks may obtain insurance. 12 U.S.C. § 3104, 12 C.F.R. § 346.4. Deposits in an agency of a foreign bank maintained in the United States would not qualify for insured status under the Federal Deposit Insurance Act. The foreignbank, as well as the agency and its personnel, would not be covered by the reporting requirements of either Title VIII or Title IX. Go back to Text

8 Where a foreign bank (1) is organized under the laws of a United States Territory, Puerto Rico, Guam, American Samoa or the Virgin Islands, and (2) has a branch the deposits of which are insured in accordance with the Federal Deposit Insurance Act, the reporting requirements of Title VIII (and Title IX) apply to the following: a nonbank or individual principal shareholder controlling the foreign bank, an executive officer of the foreign bank (whether or not the person is also an executive officer of the insured branch), and an executive officer of the insured branch. Footnote 2 of the preamble to the reporting regulations implementing Titles VIII and IX as published in the Code of Federal Regulations, (12 C.F.R. § 304.4, 12 C.F.R. Part 349) erroneously indicates that the regulations are not to be so applied. Go back to Text

9 Footnote 7 accompanying 12 C.F.R § 215.10(a)(1) correlates with footnote 2 accompanying 12 C.F.R. § 349.2(b) ("executive officer'') and similarly exempts from the reporting requirements of § 304.4 an executive officer of a bank holding company where the person is not also an executive officer of an insured state nonmember bank subsidiary. Go back to Text

10 The discussion set forth in footnote 8 above with respect to reporting under Title VIII applies equally with respect to reporting under Title IX. Go back to Text


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