Orders issued under International Banking Act - Legal Developments - New York, New York branch of Hamburgische Landesbank Girozentrale planned

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

Hamburgische Landesbank Girozentrale Hamburg, Germany

Order Approving Establishment of a Representative Office

Hamburgische Landesbank Girozentrale ("Bank"), Hamburg, Germany, 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 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 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 New York, New York (The New York Post, December 4, 2001). The time for filing comments has expired, and all comments have been considered.

Bank, with total consolidated assets of approximately $81.7 billion, (1) is a public law institution and operates as a central bank for regional banks and as a full-service commercial bank. Bank operates branches in Hong Kong, China; London, United Kingdom; and Singapore; and representative offices in Hanoi, Vietnam and Shanghai, China.

Bank is owned by Landesbank Schleswig-Holstein Girozentrale ("Landesbank Schleswig-Holstein"), Kiel, Germany, and the City of Hamburg. (2) Landesbank SchleswigHolstein, the 15th largest bank in Germany, is a public law institution and operates as a central bank for the savings banks of the State of Schleswig-Holstein and as a commercial and investment bank both domestically and internationally.

The proposed representative office would solicit loans and other banking business, conduct research, and act as a liaison with customers of Bank.

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) 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)).

As noted above, Bank and Landesbank SchleswigHolstein engage 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 German banks, including Landesbank Schleswig-Holstein by separate order also issued today, that those banks were subject to home country supervision on a consolidated basis. (4) Bank is supervised by the German Federal Financial Supervisory Agency on substantially the same terms and conditions as the other banks. (5) Based on all the facts of record, it has been determined that Bank is subject to comprehensive supervision and regulation 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)) have also been taken into account. The German Federal Financial Supervisory Agency has no objection to the establishment of the proposed representative office.

With respect to the financial and managerial resources of Bank, taking into consideration Bank's record of operations in its home country, its overall financial resources, and its standing with its home country supervisor, financial and managerial factors are consistent with approval of the proposed representative office. Bank appears to have the experience and capacity to support the proposed representative office and has established controls and procedures for the proposed representative office to ensure compliance with U.S. law.

Germany is a member of the Financial Action Task Force and subscribes to its recommendations regarding measures to combat money laundering. In accordance with these recommendations, Germany has enacted laws and created legislative and regulatory standards to deter money laundering. Money laundering is a criminal offense in Germany and credit institutions are required to establish internal policies and procedures for the detection and prevention of money laundering.

With respect to access to information on Bank's operations, the restrictions on disclosure in relevant jurisdictions in which Bank operates have been reviewed and relevant government authorities have been communicated with regarding access to information. Bank and its parents have committed to make available to the Board such information on the operations of Bank and any of their affiliates that the Board deems necessary to determine and enforce