Regulation K International Banking Operations
July 31, 1996
Circular No. 10863

Amendment Regarding the Management of Offshore Offices

To All Depository Institutions, Branches and Agencies of Foreign Banks, and Bank Holding Companies in the Second Federal Reserve District, and Others Concerned:

Following is the text of a statement issued by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board today announced a final rule amending Regulation K (International Banking Operations) regarding the management of offshore offices by U.S. branches and agencies of foreign banks.

The final rule is effective August 28, 1996.

The rule implements a provision of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 that amended the International Banking Act of 1978 by adding a new provision regarding the management of shell branches of foreign banks by such bank's U.S. offices.

The provision prohibits foreign banks from using their U.S. branches or agencies to manage types of activities through offshore offices that could not be managed by a U.S. bank at its foreign branches or subsidiaries. This prohibition applies with respect to those offshore offices that are "managed or controlled" by a foreign bank's U.S. branches or agencies.

The text of the amendment to Regulation K, as published in the Federal Register of July 26.

Questions on this matter may be directed to your respective portfolio manager in Bank Supervision or to Maureen LeBlanc, Bank Supervision Officer (Tel. No. 212-720-6712).