Orders issued under International Banking Act - Legal Developments

Federal Reserve Bulletin, Jan, 2002 by Robert DeV. Frierson

Jamaica National Building Society Kingston, Jamaica

Order Approving Establishment of a Representative Office

Jamaica National Building Society ("Bank"), Kingston, Jamaica, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of the IBA (12 U.S.C. [section] 3107(a)) to establish a representative office in Fort Lauderdale, 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 a representative office in the United States.

Notice of the application, affording interested persons an opportunity to submit comments, has been published in a newspaper of general circulation in Fort Lauderdale (Sun-Sentinel, June 26, 1998). The time for filing comments has expired, and all comments have been considered.

Bank, with total consolidated assets of approximately $527 million, (1) is the fourth largest deposit-taking institution and the largest building society in Jamaica. (2) Bank primarily engages in residential mortgage lending and retail banking activities through 18 domestic offices. Bank also engages in real estate development, investment management, leasing, data processing, mortgage lending, and insurance and stock brokerage activities through a number of domestic subsidiaries. Outside Jamaica, Bank maintains representative offices in London, United Kingdom, and Toronto, Canada, and offers money transmission and mortgage lending services, primarily to Jamaicans living abroad, through subsidiaries operating in London, Toronto, New York, and Fort Lauderdale.

The proposed representative office would provide information on Bank, Bank's services in Jamaica, the Jamaican economy, and opportunities in Jamaica to Bank's members residing in Florida and to the wider population of Jamaicans living in Florida. The proposed office would assist borrowers in completing mortgage application forms, transmit completed loan application documents to the head office in Jamaica for review and approval, and promote Bank's mortgage services generally.

In acting on an application to establish a representative office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank 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] 3107(a)(2), 12 C.F.R. 211.24(d)(2)). (3) The Board will consider that this standard regarding supervision has been met where it determines that the applicant bank is subject to a supervisory framework that is consistent with the activities of the proposed representative office, taking into account the nature of such activities and the operating record of the applicant. (4) In addition, the Board may take into account 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)).

In connection with this application, Bank has provided certain commitments that limit the activities of the representative office. It has committed that the representative office would not make credit decisions on behalf of the parent building society, solicit deposits on behalf of the home office (other than from institutional investors), or engage in activities related to trading or money transmission. The representative office also would not share office space or premises with Bank's U.S. money transmitter subsidiary.

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.

Bank has provided the following information regarding home country supervision. Bank's primary home country supervisor is the Bank of Jamaica ("BOJ"), Jamaica's central bank. (5) The BOJ supervises and regulates Bank through a combination of regular on-site reviews and offsite monitoring. On-site examinations include a review of Bank's head office and branch operations, but not a review of Bank's foreign offices or foreign or domestic subsidiaries. Off-site monitoring consists of a review of periodic reports, most of which contain bank-only data. (6) The reports address, among other prudential matters, Bank's compliance with restrictions on transactions with affiliates. (7)

Bank is required to have its annual financial statements audited by an independent public accountant. External auditors are required to report to the BOJ on significant issues revealed, and the BOJ reviews the results of the external audit. In addition, Bank is required to establish and has established internal controls, policies, and procedures consistent with standards adopted by the BOJ. The BOJ reviews the Bank's internal audit function during on-site examinations.