Orders issued under International Banking Act. (Legal Developments).

Caja de Ahorros y Monte de Piedad de Madrid Madrid, Spain 

Order Approving Establishment of an Agency

Caja de Ahorros y Monte de Piedad de Madrid ("Bank"), Madrid, Spain, 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 an agency in Miami, Florida. 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 an agency in the United States.

Notice of the application, affording interested persons an opportunity to comment, has been published in a newspaper of general circulation in Miami, Florida (Miami Herald, June 18, 2001). The time for filing comments has expired, and all comments have been considered.

Bank, with consolidated assets of approximately $56 billion, (1) is the second largest savings bank (2) and parent of the fourth largest banking group in Spain. Bank is a not-for-profit organization, offering retail and commercial banking services throughout Spain. (3) The control commission is composed of 13 members elected by the general assembly. Bank also engages in securities, insurance, asset management, real estate development, information management, mining, and health care activities through a number of domestic subsidiaries. Outside Spain, Bank operates branches in Portugal and Ireland. It also has a representative office and an interest in a finance company in Cuba. Bank currently does not have any operations in the United States.

The proposed agency would offer deposits, loans, guarantees, personal banking, and investment management services to existing and potential customers, including Spanish and multinational corporations, financial institutions, and governments. It also would seek to develop business in Latin America.

In order to approve an application by a foreign bank to establish an agency 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). (4)

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 Spain, that those banks were subject to home country supervision on a consolidated basis. (5) Bank is supervised by the Bank of Spain on substantially the same terms and conditions as those other banks.

Spain has enacted laws, and the Bank of Spain has promulgated implementing regulations, aimed at preventing money laundering. The laws and regulations require financial institutions, including savings banks, to establish and implement policies, procedures, and controls for the purpose of preventing and detecting money laundering, and to report certain cash transactions, as well as suspicious transactions, to appropriate authorities. An institution's compliance with applicable laws and regulations is monitored by the Bank of Spain and the institution's external auditors. Bank has policies and procedures to comply with these laws and regulations.

Based on all the facts of record, including the above information, it has been determined that Bank is subject to comprehensive supervision 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)-(3)) have also been taken into account. The Bank of Spain has no objection to the establishment of the proposed agency.

Spain's risk-based capital standards conform to the European Union capital standards, which are consistent with those established by the Basel Capital Accord. Bank's capital is in excess of the minimum levels that would be required by the Basel Capital Accord and is considered equivalent to capital that would be required of a U.S. banking organization. Managerial and other financial resources of Bank also are considered consistent with approval, and Bank appears to have the experience and capacity to support the proposed agency. In addition, Bank has established controls and procedures for the proposed agency to ensure compliance with U.S. law, as well as controls and procedures for its worldwide operations generally.

With respect to access to information about Bank's operations, the restrictions on disclosure in relevant jurisdictions in which Bank operates have been reviewed and the relevant government authorities have been communicated with regarding access to information. Bank has committed to make available to the Board such information on the operations of Bank and any of its affiliates that the Board deems necessary to determine and enforce compliance with the IBA, the Bank Holding Company Act, and other applicable federal law. To the extent that the provision of such information to the Board may be prohibited by law or otherwise, Bank has committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties for disclosure of such information. In addition, subject to certain conditions, the Bank of Spain may share information on Bank's operations with other supervisors, including the Board. In light of these commitments and other facts of record, and subject to the condition described below, it has been determined that Bank has provided adequate assurances of access to any necessary information that the Board may request.

On the basis of all the facts of record, and subject to the commitments made by Bank, as well as the terms and conditions set forth in this order, Bank's application to establish an agency is hereby approved. (6) Should any restrictions on access to information on the operations or activities of Bank and its affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce compliance by Bank or its affiliates with applicable federal statutes, the Board may require or recommend termination of any of Bank's direct or indirect activities in the United States. Approval of this application also is specifically conditioned on compliance by Bank with the commitments made in connection with this application and with the conditions in this order. (7) The commitments and conditions referred to above are conditions imposed in writing by the Board in connection with this decision and may be enforced in proceedings under 12 U.S.C. [section] 1818 against Bank and its affiliates.

By order, approved pursuant to authority delegated by the Board, effective October 31, 2001.

ROBERT DEV. FRIERSON Associate Secretary of the Board

(1.) Asset data are as of June 30, 2001.

(2.) As a savings bank, Bank is required to channel part of its annual profits to social and cultural projects in the communities in which it operates. There is no minimum legal requirement for such contributions.

(3.) Bank does not have shareholders. Its operations are controlled and governed by three bodies: a general assembly, a board of directors, and a control commission. The 320-member general assembly includes representatives of the municipalities in which Bank operates (40 percent), Bank's depositors (35 percent), the parliament of the Community of Madrid (15 percent), and Bank's employees (10 percent). Bank's board of directors is composed of 22 members, proportionally representing the groups comprising the general assembly.

(4.) In assessing this standard, the Board considers, among other factors, the extent to which the home country supervisors:

(i) Ensure that the bank has adequate procedures for monitoring and controlling its activities worldwide;

(ii) Obtain information on the condition of the bank and its subsidiaries and offices through regular examination reports, audit reports, or otherwise;

(iii) Obtain information on the dealings with and relationship between the bank and its affiliates, both foreign and domestic;

(iv) Receive from the bank financial reports that are consolidated on a worldwide basis or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis;

(v) Evaluate prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis.

These are indicia of comprehensive, consolidated supervision. No single factor is essential, and other elements may inform the Board's determination. 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)).

(5.) See Banco Pastor, S.A., 87 Federal Reserve Bulletin 555 (2001); Caja de Ahorros de Valencia, Castellon v Alicante, 84 Federal Reserve Bulletin 231 (1998); Banco Exterior de Espana S.A.. 81 Federal Reserve Bulletin 616 (1995); Corporacion Bancaria de Espana, 81 Federal Reserve Bulletin 598 (1995); Banco Santander S.A., 79 Federal Reserve Bulletin 622 (1993); Banco de Sabadell S.A., 79 Federal Reserve Bulletin 366 (1993).

(6.) Approved by the Director of the Division of Banking Supervision and Regulation, with the concurrence of the General Counsel, pursuant to authority delegated by the Board.

(7.) The authority to approve the establishment of the proposed agency parallels the continuing authority of the State of Florida to license offices of a foreign bank. The approval of this application does hot supplant the authority of the State of Florida, or its agent, the Florida Department of Banking and Finance ("Department"), to license the proposed office of Bank in accordance with any terms or conditions that the Department may impose.

Kookmin Bank Seoul, Korea

Order Approving Establishment of Branches

Kookmin Bank ("New Bank"), a de novo Korean bank to be established by Kookmin Bank ("Kookmin") and Housing & Commercial Bank ("H&CB"), both of Seoul, Korea, and both foreign banks 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 branches 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 branches in the United States.

Notice of the application, affording interested persons an opportunity to comment, has been published in a newspaper of general circulation in New York, New York (The New York Times, August 31, 2001). The time for filing comments has expired, and all comments have been considered.

Kookmin, with total consolidated assets of approximately $76 billion, is the largest commercial bank in Korea. (1) Kookmin is primarily engaged in providing banking services to retail customers and small and medium-sized enterprises. Kookmin operates an extensive network of branches and subsidiaries in Korea, as well as branches in Argentina, Japan, New Zealand, and New York. Kookmin is a qualifying foreign banking organization within the meaning of Regulation K (12 C.F.R. 211.23(b)).

H&CB, with consolidated assets of $53 billion, is the third largest bank in Korea. H&CB is principally engaged in mortgage lending and retail banking services. H&CB operates an extensive domestic branch network in Korea as well as branches in Japan and New York. H&CB is a qualifying foreign banking organization within the meaning of Regulation K (12 C.F.R. 211.23(b)).

Kookmin and H&CB intend to merge into New Bank in November 2001. On completion of the merger, it is expected that New Bank would be the largest bank in Korea. New Bank would continue to conduct retail banking business in Korea as well as focus on selected areas, such as corporate banking, international finance, and capital markets activities. Kookmin and H&CB, on behalf of New Bank, have requested authority for New Bank to retain and operate the Kookmin and H&CB branches in New York through this application.

In acting on an application by a foreign bank to establish branches 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) In addition, the Board may 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)).

The IBA includes a limited exception to the general requirement relating to comprehensive, consolidated supervision (12 U.S.C. [section] 3105(d)(6)). This exception provides that, if the Board is unable to find that a foreign bank seeking to establish a branch, agency, or commercial lending company is subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country, an application by such foreign bank may nevertheless be approved if:

(i) The appropriate authorities in the home country of the foreign bank are actively working to establish arrangements for the consolidated supervision of such bank; and

(ii) All other factors are consistent with approval (12 U.S.C. [section] 3105(d)(6)(A)). In deciding whether to approve an application under authority of this exception, the Board shall also consider whether the foreign bank has adopted and implements procedures to combat money laundering (12 U.S.C. [section] 3105(d)(6)(B)). The Board also may take into account whether the home country of the foreign bank is developing a legal regime to address money laundering or is participating in multilateral efforts to combat money laundering (12 U.S.C. [section] 3105(d)(6)(B)).

As noted above, New Bank will engage directly in the business of banking outside the United States. Kookmin and H&CB, on behalf of New Bank, have provided the Board with information necessary to assess the application through submissions that address the relevant issues.

With respect to supervision by New Bank's home country authorities, the Board previously has determined, in connection with applications involving Kookmin and H&CB, that the banks' home country authorities were actively working to establish arrangements for the consolidated supervision of those banks. (3) New Bank will be supervised by the Financial Supervisory Service (the "FSS") on substantially the same terms and conditions as its predecessor banks. Based on all the facts of record, it has been determined that New Bank's home country authorities are actively working to establish arrangements for the consolidated supervision of New Bank, and that considerations relating to the steps taken by its home country, and the steps Kookmin and H&CB have taken, and New Bank will take, to combat money laundering are consistent with approval under this standard.

The 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)) have also been taken into account. The FSS has no objection to the establishment of the proposed branches.

Bank must comply with the minimum capital standards of the Basel Capital Accord ("Accord"), as implemented by Korea. New Bank's capital will be in excess of the minimum levels that would be required by the Accord and is considered equivalent to the capital that would be required of a U.S. banking organization. Managerial and other financial resources of New Bank are also considered consistent with approval, and New Bank appears to have the experience and capacity to support the proposed branches. New Bank has established controls and procedures for the proposed branches to ensure compliance with U.S. law, as well as controls and procedures for its worldwide operations generally.

With respect to access to information about New Bank's operations, the restrictions on disclosure in relevant jurisdictions in which New Bank will operate have been reviewed and relevant government authorities have been communicated with regarding access to information. Kookmin and H&CB, on behalf of New Bank, have committed to make available to the Board such information on the operations of New Bank and any of its affiliates that the Board deems necessary to determine and enforce compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable federal law. To the extent that the provision of such information to the Board may be prohibited by law, Kookmin and H&CB, on behalf of New Bank, have committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties for disclosure of such information. In addition, subject to certain conditions, the FSS may share information on New Bank's operations with other supervisors, including the Board. In light of these commitments and other facts of record, and subject to the condition described below, it has been determined that New Bank has provided adequate assurances of access to any necessary information that the Board may request.

On the basis of all the facts of record, and subject to the commitments made by Kookmin and H&CB on behalf of New Bank, as well as the terms and conditions set forth in this order, New Bank's application to establish branches is approved. (4) Should any restrictions on access to information on the operations or activities of New Bank and its affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce compliance by New Bank or its affiliates with applicable federal statutes, the Board may require termination of any of New Bank's direct or indirect activities in the United States. Approval of this application also is specifically conditioned on compliance by New Bank with the commitments made in connection with this application and with the conditions in this order. (5) The commitments and conditions referred to above are conditions imposed in writing by the Board in connection with its decision and may be enforced in proceedings under 12 U.S.C. [section] 1818 against New Bank and its affiliates.

By order, approved pursuant to authority delegated by the Board, effective October 31, 2001.

ROBERT DEV. FRIERSON Deputy Secretary of the Board

(1.) All data are as of June 30, 2001.

(2.) In assessing this standard, the Board considers, among other factors, the extent to which the home country supervisors:

(i) Ensure that the bank has adequate procedures for monitoring and controlling its activities worldwide;

(ii) Obtain information on the condition of the bank and its subsidiaries and offices through regular examination reports, audit reports, or otherwise;

(iii) Obtain information on the dealings with and relationship between the bank and its affiliates, both foreign and domestic;

(iv) Receive from the bank financial reports that are consolidated on a worldwide basis or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis;

(v) Evaluate prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis.

These are indicia of comprehensive, consolidated supervision. No single factor is essential, and other elements may inform the Board's determination.

(3.) See Kookmin Bank, 86 Federal Reserve Bulletin 291 (2000); Housing & Commercial Bank, 83 Federal Reserve Bulletin 935 (1997).

(4.) Approved by the Director of the Division of Banking Supervision and Regulation, with the concurrence of the General Counsel, pursuant to authority delegated by the Board.

(5.) The Board's authority to approve the establishment of the proposed branches parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York and the New York State Banking Department ("Department") to license the proposed offices of Bank in accordance with any terms or conditions that the Department may impose.