Academic journal article Federal Reserve Bulletin

Orders Issued under International Banking Act

Academic journal article Federal Reserve Bulletin

Orders Issued under International Banking Act

Article excerpt

HBOS Treasury Services plc London, United Kingdom

Order Approving Establishment of a Branch

HBOS Treasury Services plc ("Bank"), London, United Kingdom, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 7(d) of the IBA (12 U.S.C. [section] 3105(d)) to establish a branch 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 branch in the United States.

Notice of the application, affording interested persons an opportunity to comment, has been published in newspapers of general circulation in New York, New York (New York Post, July 10, 2003). The time for filing comments has expired, and all comments have been considered.

Bank, with total assets of $272 billion, is a wholly owned subsidiary of The Governor and Company of the Bank of Scotland ("Bank of Scotland"), Edinburgh, United Kingdom. Bank of Scotland, in turn, is a wholly owned subsidiary of HBOS plc ("HBOS"), also in Edinburgh, which is the top tier holding company for the HBOS group. HBOS, with consolidated assets of $631 billion, is the third largest banking organization in the United Kingdom. (1) The shares of HBOS plc are publicly traded, and no person holds more than 5 percent of its voting shares. Bank provides global treasury services and serves as the main funding source for HBOS. HBOS is primarily engaged in banking, insurance, and investment and has operations throughout the world. HBOS, Bank of Scotland, and Bank are qualifying foreign banking organizations pursuant to Regulation K.

Bank currently has no operations in the United States. Its parent, Bank of Scotland, operates a branch in New York and representative offices in Chicago, Houston, Los Angeles, Minneapolis, Seattle, and Boston and engages through nonbank subsidiaries in a range of financial activities. Bank's proposed New York branch would assume the treasury functions of Bank of Scotland's New York branch, which include deposit taking, issuance of high-denomination certificates of deposit, purchases of medium-term notes, and interbank lending and borrowing.

In order to approve an application by a foreign bank to establish a branch in the United States, the IBA and Regulation K require the Board to determine that the foreign bank applicant 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] 3105(d)(2); 12 C.F.R. 211.24). (2) The Board may also take into account additional standards as 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)-(3)).

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 applications involving other banks in the United Kingdom, including Bank of Scotland, that those banks were subject to home country supervision on a consolidated basis. (3) Bank is, and Bank of Scotland remains, supervised by the Financial Services Authority ("FSA") on substantially the same terms and conditions as those other banks. Based on all the facts of record, it has been determined that Bank and Bank of Scotland are subject to comprehensive supervision on a consolidated basis by their home country supervisor.

The Board has also taken into account the additional standards set forth in section 7 of the IBA and Regulation K (see 12 U. …

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