Orders Issued Under International Banking Act

Federal Reserve Bulletin, March, 2000

E. Sun Commercial Bank, Limited Taipei, Taiwan

Order Approving Establishment of a Branch

E. Sun Commercial Bank, Limited ("Bank"), Taipei, Taiwan, 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. [sections] 3105(d)) to establish a state-licensed branch in Los Angeles, California. 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.

Notice of the application, affording interested persons an opportunity to comment, has been published in a newspaper of general circulation in Los Angeles, California (San Gabriel Valley Tribune, July 12, 1999). The time for filing comments has expired, and the Board has considered the application and all comments received.

Bank, with total consolidated assets of approximately $6.3 billion, is a full-service commercial bank.(1) Its shares are publicly traded and widely held. Bank operates 37 branches and an overseas banking unit in Taiwan, and representative offices in The Philippines and Hong Kong. Bank currently does not have any operations in the United States.

The purpose of the proposed branch is to allow Bank to better serve the needs of its customers that have business interests in the United States. In addition, the proposed office would seek to develop new customers among U.S. businesses and individuals who have business interests in Taiwan. The activities of the proposed branch office would include commercial lending, mortgage lending, syndicated and participation loans, purchasing and selling interbank funds, maintaining credit balances and deposit accounts, and letter of credit services. Bank would be a qualifying foreign business organization within the meaning of Regulation K (12 C.F.R. 211.23(b)).

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. [sections] 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. [sections] 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 Taiwan, that those banks were subject to home country supervision on a consolidated basis.(3) Bank is supervised by the Ministry of Finance ("Ministry") and the Taiwan central bank on substantially the same terms and conditions as those other banks. Based on all the facts of record, the Board has determined that Bank is subject to comprehensive supervision on a consolidated basis by its home country supervisors.

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

Bank must comply with the minimum capital standards of the Basel Capital Accord, as implemented by Taiwan. Bank's capital exceeds these minimum standards and can be considered equivalent to capital that would be required of a U.S. banking organization. Managerial and other financial resources of Bank are also considered consistent with approval, and Bank appears to have the experience and capacity to support the proposed branch. 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.

With respect to access to information about Bank's operations, the Board has reviewed the restrictions on disclosure in relevant jurisdictions in which Bank operates and has communicated with relevant government authorities 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 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, 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 Ministry 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, the Board concludes that Bank has provided adequate assurances of access to any necessary information that the Board may request.