Bank Supervision

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Bank Supervision
Division of Supervision and Consumer Protection
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Foreign Activities of U.S. Banks

• Investment in Foreign Organizations
• Establish or Relocate Foreign Branch

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Investment in Foreign Organizations

• Specific Consent Required When
• Foreign Investment Results in the Following
• Bank Obtains a Voting Interest 20 or Bank
  Controls the Organization and
• Organization is Located in a Foreign Country
  where Law and Practice Limits FDIC Access to
  Information.

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Investment in Foreign Organizations

• Application Must Address the Following Items
• Transaction Terms, Amount of Investment and
  Ownership.
• Information on the Organization (e.g. financial
  statements).
• Listing of Shareholders Owning 10 of Stock.
• Description of the Organizations Business Plan.
• Activities that the Organization will Conduct in
  the U.S.
• Description of the Foreign Organizations
  Activities.
• Plans and Procedures to Address Risks in
  Underwriting or Dealing Activities, if Applicable.

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Foreign Branch Applications

• Specific Consent Required When
• Bank is Establishing a Foreign Branch and
• Branch is Located in a Foreign Country where Law
  and Practice Limits FDIC Access to Information.
• Branch Location is Listed on the World Heritage
  List.

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Foreign Branch Applications

• Application Must Address the Following Items
• Exact Location of the Proposed Foreign Branch.
• Details of any Involvement by an Insider of the
  Applicant.
• Description of the Foreign Branch Business Plan.
• Description of the Activities Conducted at the
  Branch.

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Foreign Ownership of U.S. Banks

• Notices of Change in Bank Control
• Applications for Deposit Insurance

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Notices of Change in Bank Control
Transactions that require prior notice include

• Acquisition of Control
• Acquisition of 25 or more of any class of voting
  shares of an insured bank or parent company.

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Notices of Change in Bank Control
Transactions that require prior notice include

• Rebuttable Presumption of Control
• Acquisition of 10 or more of any class of voting
  shares of an insured bank or parent company if
• Acquiring entity has registered shares, or
• No other entity will control a larger percentage
  of voting shares.

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Notices of Change in Bank Control
Transactions that require prior notice include

• Acquisitions of Loans in Default
• Acquisition of a loan in default that is secured
  by voting shares of a bank or parent company.

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Notices of Change in Bank Control
Foreign Controlling Ownership

• Agreement to Appoint a Designated Agent in U.S.
• Receive service of process on behalf of
  controlling entity.
• Consent to the jurisdiction of the U.S. Courts
  and Federal banking agencies.

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Notices of Change in Bank Control
The six statutory factors considered in
evaluating notices of change in bank control
include

• whether the proposal would result in a monopoly
• whether the effect the proposal in any section of
  the country may be to substantially lessen
  competition, tend to create a monopoly, or would
  in any other manner be in restraint of trade
• the financial condition of the acquiring party
  and its potential impact on the bank or
  depositors
• the competence, experience or integrity of any
  acquiring person or proposed management
• whether any acquiring party neglects, fails, or
  refuses to furnish information required by the
  FDIC and
• the effect on the Deposit Insurance Fund.

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Applications for Deposit Insurance

• A new financial institution is chartered by
• the Office of the Comptroller of the Currency,
• the Office of Thrift Supervision, or
• a State Banking Authority.
• The FDIC solely grants deposit insurance.
• Coordination between agencies is critical.

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Applications for Deposit Insurance
Foreign Ownership of Proposed Bank

• Voting Shares equal 25 or More
• Contact foreign supervisory authorities.
• Complete review of foreign ownership structure.
• Agreement to Appoint a Designated Agent in U.S.
• Receive service of process on behalf of
  controlling entity.
• Consent to the jurisdiction of the U.S. Courts
  and Federal banking agencies.

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Applications for Deposit Insurance

• Seven Statutory Factors Must be Considered
• Financial History and Condition
• Adequacy of Capital Structure
• Future Earnings Prospects
• General Character of Management
• Risk to Deposit Insurance Funds
• Convenience and Needs of Community
• Corporate Powers Consistent with Purposes of FDI
  Act

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Financial History and Condition

• Organizers ability to support the bank, if
  needed.
• Contemplated insider transactions.

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Adequacy of Capital Structure

• Leverage Ratio (capital/assets) of 8 percent for
  first three years of operations.
• Adequate loan loss reserve.
• Minimum Capital of 2 million.

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Future Earnings Prospects

• Projections must show profitability in three
  years.
• Projections must be reasonable and supportable.

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General Character of Management

• Management quality should equate to a 2
  (satisfactory) rating, as if the bank were
  operating.
• A minimum five member board is needed.
• Insider arrangements are critically evaluated to
  ensure that no preferential terms are present.

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Risk to Deposit Insurance Funds

• Broadly applied to consider risk posed, or any
  other special or unique feature of proposal.

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Convenience and Needs of Community

• Deposit and credit needs.
• The nature and extent of the opportunity.
• The willingness and ability of the applicant to
  serve those financial needs.

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Corporate Powers Consistent with Purposes of FDI
Act

• Federal Charter - Corporate powers presumed
  consistent with purposes of FDI Act
• State Charter Activities as principal limited
  to those of national bank unless otherwise
  authorized by FDIC
• Exercise of trust powers by State nonmember
  requires prior FDIC consent

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Bank Supervision
Questions
For more detailed information, visit www.fdic.gov.