Content provided in partnership with

Financial Services Industry

Orders issued under International Banking Act

Federal Reserve Bulletin, Winter, 2004 by Robert DeV. Frierson

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.

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

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.S.C. [section] 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)-(3)). The FSA has no objection to the establishment of the proposed branch.

The United Kingdom's risk-based capital standards 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 branch. In addition, Bank has established controls and procedures for the proposed branch to ensure compliance with U.S. law, as well as controls and procedures for its worldwide operations generally.

The United Kingdom is a member of the Financial Action Task Force and subscribes to its recommendations on measures to combat money laundering. In accordance with these recommendations, the United Kingdom has enacted laws and created legislative and regulatory standards to deter money laundering. Money laundering is a criminal offense in the United Kingdom, and financial institutions are required to establish internal policies, procedures, and systems for the detection and prevention of money laundering throughout their worldwide operations. Bank has policies and procedures to comply with these laws and regulations. Bank's compliance with applicable laws and regulations is monitored by Bank's internal auditors and the FSA.

Financial Services Industry

Orders issued under International Banking Act

Federal Reserve Bulletin, Winter, 2004 by Robert DeV. Frierson

Find Research Guides for:

Find Featured Titles for: Technology

Most Popular Articles in Business

Most Popular Publications in Business