This threshold was reduced to 1 percent of deposits by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. This includes a new foreign branch and agency rating system, known as "ROC-A", ( 5Risk management, Operations (including audit and internal controls), Compliance (with state and federal law and regulation, regulatory reporting and supervisory actions), and Asset quality) a new report format using this rating system and a detailed examination manual.

The Department was the first supervisory agency to promote passage of IBF legislation. The regulators" goal is to insure consistent supervision of foreign bank activities throughout the country. However, investment companies may maintain credit balances in the same manner as foreign bank agencies. 0000003334 00000 n These obligations may be evidenced by a promissory note, a certificate of deposit, a statement, or a book entry. In 1981, the Banking Board reduced the coverage to 105 percent and, in 1983, it further lowered the requirement to zero percent, with the allowance for a Superintendent's action to impose asset maintenance where appropriate. For many years, Banking Department policy, in general, had been that foreign banks were allowed to establish investment companies only if there were no other practicable means of entering the New York market. Laws incorporating agencies of foreign banks were introduced in 1910 and full branches were authorized in 1961. The dual banking system for foreign banks was established with the passage of the IBA in 1978. 0000003651 00000 n Technological change and other innovations tied international economies more closely together. The report focused on local, national and international issues facing the banking community and its regulators. The Basle Concordat stresses the importance of close cooperation between host and parent country banking authorities.

When your interdiction software or account holder checking service shows a potential match, OFAC recommends that you do an initial analysis prior to contacting OFAC. It includes an historical perspective, a description of the current banking environment, a review of the forms of corporate organization that are available, and a discussion of regulation and supervision. Several banks with New York branches, agencies or banking subsidiaries also maintain a representative office. Foreign banks which operate through multiple offices throughout the country will also have a rating assigned to their combined U.S. operations. The requirement may be fulfilled by examinations conducted by the licensing authority (the states or the OCC), the Federal Reserve, or in the case of insured branches, the FDIC. Many New York branches participate in the interbank and foreign exchange markets. Prior to passage of the Act, authorization for foreign banks to conduct business in the United States and the subsequent responsibility for their supervision was vested solely in the state regulatory agencies. Non-insured branches and agencies (Agencies were made subject to the asset pledge requirement early in 1994) are required to pledge assets with a depository approved by the Superintendent of Banks in an amount equal to the higher of: (i) five percent of third party liabilities (i.e., exclusive of amounts due to head office, other branches, subsidiaries or affiliates), excluding the branch or agency's International Banking Facility ("IBF"); (ii) one percent of total third party liabilities including the IBF; or (iii) $1 million. During the fall of 1991, the New York Superintendent of Banks convened the Advisory Committee on Transnational Banking Institutions (the "Committee"), composed of representatives of the banking industry, the legal and accounting professions, law enforcement and academia. The application process for a representative office license includes, among other factors, a review of the applicant's financial condition and its home country supervision. Since there is no interest of the blocked person (e.g., the Government of Iran, and Iranian financial institution, or an SDN), there is no blockable interest in the funds. C bm(f`c2d^vh7{`H27 :r=:\6j`8z'1#f!w:v2:8 As of December 31, 1995, only 15 state-licensed branches of foreign banks, with less than two percent of the aggregate resources of all foreign branches, carried FDIC insurance. This is a prohibited service. 0000008499 00000 n The Department will continue its efforts to encourage a hospitable environment and a stable regulatory climate for those foreign banks electing to do business here. By creating a unit devoted solely to the supervision of foreign banks, the Department was able to develop expertise in this area, enhancing its ability to administer its regulatory responsibilities. Source for all data other than for NYS chartered or licensed entities was the Federal Reserve During the early periods of this century, however, the foreign banking presence in New York was not a significant factor in the financial markets. Computer software may flag some transactions that are not actually associated with OFAC targets. 0000002637 00000 n However, each depositor must be notified that accounts are not insured by the FDIC. Foreign bank branches and agencies are authorized under Article V of the Banking Law. With the passage of FBSEA, however, Congress mandated that all branches and agencies be examined every 12 months. The following examples may help illustrate which transactions should be blocked and which should be rejected. The Department of Financial Services supervises many different types of institutions. limited interstate deposit-taking activities; imposed reserve requirements for monetary policy purposes; required federal deposit insurance for branches engaging in retail deposit-taking; and. The report format used in the examination of branches and agencies of foreign banks was developed jointly with federal bank regulatory agencies. Supervisory Policy FB 2 deals with the permissible activities of and licensing policy for representative offices. 0000009333 00000 n In 1960, the foreign bank presence in New York was essentially limited to 36 agencies with total assets of $3.1 billion, eight foreign-owned banks and trust companies, and two investment companies with combined assets of $133 million. However, the U.S. financial institution cannot process the transaction because that would constitute a prohibited export of services to Iran pursuant to the Iranian Transactions and Sanctions Regulations (ITSR), unless authorized by OFAC or exempt from regulation. While only central banks and other national authorities are members of the Basle Supervisors Committee, the New York State Banking Department, because of its location in a preeminent banking center, is kept informed of the Committee proceedings. The combined total assets of these entities were $256 billion at December 31, 1995. In 1993, the Banking Law was amended to improve the process of liquidating a branch or agency and to clarify which obligations must be paid as part of the liquidation process. A U.S. financial institution interdicts a commercial payment destined for the account of XYZ Import-Export Co. at the Bank of XYZ in Iran. 0000002134 00000 n In general, this means that credit extensions are limited to 15 percent of parent bank capital, plus an additional 10 percent, if secured.

OFAC regulations are tailored to further the requirements and purposes of specific Executive Orders or statutes which provide the basic outline of each program. 0000003268 00000 n QZ:`"sD7 lN|&CK= ;P hLCJ#:%.qB\!s*TJR,KR 7(kf*80g1]; F[. *Does not include multiple New York Branches of the same banks. The Banking Law in New York mandates annual examinations for all banks and trust companies, and for those investment companies which have received permission to conduct an out-of-state deposit business. The individual program web pages outline the restrictions for each program. However, the institution or its affiliates should pay careful attention to ensure the person trying to open the account is the same person as the one named on OFACs SDN List or is otherwise subject to blocking. The rapidly evolving American banking marketplace attracted increasing numbers of foreign institutions.

This provision of the Banking Law and General Regulations of the Banking Board require that an institution maintain eligible assets in excess of third party liabilities as a means of protecting creditors, and for the benefit of the public. 0000003015 00000 n The reasons for opening a New York office are extremely diverse. A major benefit of this policy is that it allows open entry into the U.S. market and permits a free and efficient flow of capital. Once it has been determined that funds need to be blocked, they must be placed into an interest-bearing account on your books from which only OFAC-authorized debits may be made. "R8%EQQtv(wv,d "v"A" c#j?/6 s CHAPTER11InternationalBankingandMoneyMarket, LDCLendersShouldHaveListenedtoDavidHume. %PDF-1.2 % TOTAL BANKING PRESENCE IN NYS (INCLUDES BRANCHES, AGENCIES, SUBSIDIARY BANKS, EDGES & ARTICLE XII's), This page is available in other languages. 76 0 obj << /Linearized 1 /O 78 /H [ 1385 266 ] /L 72745 /E 12026 /N 18 /T 71107 >> endobj xref 76 47 0000000016 00000 n These visits are performed by representatives of the Banking Department's Foreign Commercial Banks Division who are responsible for maintaining the relationship with the individual institutions.

The total assets of these offices aggregated $46 billion at December 31, 1995. The 34 largest Japanese banks and 45 of the largest 50 maintain offices in New York. 0000011220 00000 n New York State accounts for 64 percent of total foreign bank assets held in the United States. The regulation and supervision of foreign-owned banks and trust companies are identical to their domestic counterparts, except that under FBSEA, in addition to the chartering entity, the Federal Reserve has supervisory authority over subsidiaries of foreign banks, even if they are not Fed members and no domestic bank holding company is involved. In many cases, an institution may identify a false positive, where the name is similar to a sanctioned persons name, but the rest of the information provided by the applicant does not match the descriptor information on OFACs SDN List. Laws providing for the establishment of investment companies date from 1890. This act was passed as a direct reaction to the well- publicized improprieties of two foreign banks namely the Bank of Credit and Commerce International ("BCCI"), a Middle Eastern bank chartered in Luxembourg, and Banca Nazionale Del Lavoro ("BNL"), an Italian bank. Internationalbankscanassisttheirclientsinhedgingexchangeraterisk. Larger institutions needed only to register with the Banking Department. Once established in New York, foreign institutions are subject to the examination and supervision process of the Banking Department. Before 1992, only banks with worldwide assets of less than $500 million had to be licensed. Branches that had FDIC insurance prior to FBSEA may continue to accept retail deposits, but no new insured branches may be established. Japan has the largest country representation in New York with 52 branches and agencies and 19 banking subsidiaries. OFAC regulations require that funds earn interest at a commercially reasonable rate, i.e., at a rate currently offered to other depositors on deposits or instruments of comparable size and maturity. Some have decided to focus on trading and capital markets activities, as opposed to more traditional banking activities. During the late 1970s and very early 1980s, there was some preference for federal licensure due to New York State's reciprocity and asset maintenance rules. Eighteen banks and trust companies, with aggregate assets of $20.9 billion at December 31, 1995, are subsidiaries of Japanese banks. The IBA allowed a foreign bank wishing to open a U.S. office to choose between a federal (Federal branches are licensed and supervised by the Office of the Comptroller of the Currency (OCC), an arm of the Treasury Department) or state licensed facility. Generally yes. Assets are in millions of $. Between December 31, 1987 and December 31, 1995, the number of state licensees has risen from 171 to 196, while federal licensees have fallen from 56 to 48. At December 31, 1995 the total assets of these facilities were $311 billion. The dual purpose of the IBF proposal was to reestablish New York as the premier international financial center and stimulate the local economy. The Banking Law also permits a foreign agency to accept deposits from non-U.S. citizens who are non-residents. The IBA also gave the Federal Reserve System a residual role, behind the state or federal licensing entity, in regulating the activities of foreign bank branches and agencies. Office of Foreign Assets Control - Sanctions Programs and Information, Specially Designated Nationals And Blocked Persons List (SDN), Civil Penalties and Enforcement Information, OFAC's non-Specially Designated Nationals sanctions lists, Specially Designated Nationals (SDN) list, Special Inspector General, Troubled Asset Relief Program (SIGTARP), Administrative Resource Center (ARC)- Bureau of the Fiscal Service. Under the IBA, foreign bank branches that have selected New York as their home state enjoy a full range of deposit-taking powers equal to those of domestic banks. Although the Committee "found the banking laws and the Banking Department's policies on transnational banks to be in generally good order," (Letter to Superintendent of Banks Derrick D. Cephas dated March 20, 1992, page ix of the Report of the Superintendent's Advisory Committee on Transnational Banking Institutions) it made numerous recommendations for improvements. Merchantbankscanengageininvestmentbankingactivities. At December 31, 1995, the aggregate total assets of the foreign-owned investment companies were $1.0 billion.

By 1980, New York State-licensed branches and agencies numbered 145, more than triple that of 1970. The same is true for other banking transactions. This meant that a foreign bank could be licensed to maintain a deposit-taking branch in New York only if, under the laws of its home country, a New York bank could be authorized to maintain a branch or to own a bank.