Academic journal article Federal Reserve Bulletin

The Bank of East Asia, Limited Hong Kong SAR, People's Republic of China

Academic journal article Federal Reserve Bulletin

The Bank of East Asia, Limited Hong Kong SAR, People's Republic of China

Article excerpt

Order Approving Establishment of a Branch

FRB Order No. 2017-25 (September 28, 2017)

The Bank of East Asia, Limited ("BEA"), Hong Kong SAR ("Hong Kong"), People's Republic of China ("China"), a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 7(d) of the IBA (1) to upgrade its existing limited federal branch in Los Angeles, California, to a full-service branch. (2) 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. (3)

Notice of the application, affording interested persons an opportunity to comment, has been published in a newspaper of general circulation in Los Angeles, California (The Los Angeles Daily News,July 2, 2012). The time for filing comments has expired, and the Board has considered all comments received.

BEA, with total consolidated assets of approximately $101.0 billion, is the sixth largest bank in Hong Kong. (4) Sumitomo Mitsui Financial Group ("SMFG"), through its subsidiary, Sumitomo Mitsui Banking Corporation, both of Tokyo, Japan, owns approximately 19 percent of the voting shares of BEA. (5) Fundacion Bancaria Caixa d'Estalvis i Pensions de Barcelona, "la Caixa" ("la Caixa"), through its subsidiary, Criteria Caixa, S.A., both of Barcelona, Spain, owns approximately 17.3 percent of the voting shares of BEA. (6) Guoco Management Company Limited ("Guoco"), Hong Kong, China, owns approximately 14.2 percent of the voting shares of BEA. (7) In addition, Elliot Capital Advisors, L.P.

("Elliot"), Wilmington, Delaware, owns approximately 7.0 percent of the voting shares of BEA. (8) No other shareholder owns 5 percent or more of BEA's shares. (9)

BEA engages primarily in retail and commercial banking, wealth management, and insurance services. Outside of Hong Kong, BEA operates a bank subsidiary and branches in China and branches in Macau, Taiwan, the United Kingdom, Singapore, and Malaysia. In the United States, BEA operates three branches (10) and controls Industrial and Commercial Bank of China, National Association ("ICBC-USA"), New York City. (11) BEA is a qualifying foreign banking organization under Regulation K. (12)

BEA's home state is New York. BEA proposes to establish this branch outside of its home state by upgrading its Los Angeles limited branch to a full-service branch pursuant to section 5(a)(7)(B) of the IBA. (13)

Under the IBA and Regulation K, in acting on an application by a foreign bank to establish a branch, the Board must consider whether (1) the foreign bank has furnished to the Board the information it needs to assess the application adequately, (2) the foreign bank and any foreign bank parent engage directly in the business of banking outside of the United States, and (3) the foreign bank and any foreign bank parent are subject to comprehensive supervision on a consolidated basis by their home country supervisor. (14) The Board also considers additional standards as set forth in the IBA and Regulation K. (15)

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

The Board previously has determined, in connection with applications involving BEA and other banks in Hong Kong, that those banks were subject to comprehensive supervision on a consolidated basis by their home jurisdiction supervisor, the Hong Kong Monetary Authority ("HKMA"). (16) BEA continues to be supervised by the HKMA on substantially the same terms and conditions. Based on all the facts of record, BEA continues to be subject to comprehensive supervision on a consolidated basis by its home jurisdiction supervisor.

The financial and managerial and other applicable factors in the case have also been taken into account. …

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