Orders Issued under International Banking Act

By Frierson, Robert DeV. | Federal Reserve Bulletin, June 2003 | Go to article overview

Orders Issued under International Banking Act


Frierson, Robert DeV., Federal Reserve Bulletin


Union Bank of Israel Ltd. Tel Aviv, Israel

Order Approving Establishment of a Representative Office

Union Bank of Israel Ltd. ("Bank"), Tel Aviv, Israel, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of the IBA (12 U.S.C. [section] 3107(a)) to establish a representative office in New York, New York. The Foreign Bank Supervision Enhancement Act of 1991, which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a representative office in the United States.

Notice of the application, affording interested persons an opportunity to submit comments, has been published in a newspaper of general circulation in New York, New York (The New York Post, August 2, 2002). The time for filing comments has expired, and all comments have been considered.

Bank, with total consolidated assets of approximately $4.6 billion, (1) is primarily engaged in capital market activities, foreign currency services, and financing the diamond industry. (2) Bank operates branches throughout Israel and one branch in the Cayman Islands. Bank also has several subsidiaries that engage in investment banking, portfolio and fund management, insurance, and mortgage lending.

The proposed representative office is intended to promote Bank's services to existing and potential customers in the United States. It would conduct research, act as a liaison with customers of Bank, solicit loans, execute loan documents, and solicit purchasers of loans and loan servicing contracts. All decisions on credit extended by Bank would be made at the head office.

In acting on an application to establish a representative office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank engages directly in the business of banking outside of the United States and has furnished to the Board the information it needs to assess the application adequately. The Board also shall take into account whether the foreign bank and any foreign bank parent is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor (12 U.S.C. [section] 3107(a)(2)). (3) In the case of an application to establish a representative office, the standard with respect to home country supervision would be met if the applicant bank is subject to a supervisory framework that is consistent with the activities of the proposed office, taking into account the nature of the activities and the operating record of the applicant. (12 C.F.R. 211.24(d)(2)). The Board may take into account additional standards set forth in the IBA and Regulation K (12 U.S.C. [section] 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)).

As noted above, Bank engages directly in the business of banking outside the United States. Bank also has provided the Board with information necessary to assess the application through submissions that address the relevant issues.

With respect to supervision by home country authorities, the Board previously has determined, in connection with an application involving another Israeli bank, that such bank was subject to home country supervision on a consolidated basis. (4) Bank is supervised by the Bank of Israel on substantially the same terms and conditions as the other bank. Based on all the facts of record, it has been determined that Bank is subject to comprehensive supervision and regulation on a consolidated basis by its home country supervisor.

The additional standards set forth in section 7 of the IBA and Regulation K (see 12 U.S.C. [section] 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)) have also been taken into account. The Bank of Israel has no objection to the establishment of the proposed representative office.

With respect to the financial and managerial resources of Bank, taking into consideration Bank's record of operations in its home country, its overall financial resources, and its standing with its home country supervisor, financial and managerial factors are consistent with approval of the proposed representative office.

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