§ 3106. — Nonbanking activities of foreign banks.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC3106]
TITLE 12--BANKS AND BANKING
CHAPTER 32--FOREIGN BANK PARTICIPATION IN DOMESTIC MARKETS
Sec. 3106. Nonbanking activities of foreign banks
(a) Applicability of Bank Holding Company Acts
Except as otherwise provided in this section (1) any foreign bank
that maintains a branch or agency in a State, (2) any foreign bank or
foreign company controlling a foreign bank that controls a commercial
lending company organized under State law, and (3) any company of which
any foreign bank or company referred to in (1) and (2) is a subsidiary
shall be subject to the provisions of the Bank Holding Company Act of
1956 [12 U.S.C. 1841 et seq.], and to section 1850 of this title and
chapter 22 of this title in the same manner and to the same extent that
bank holding companies are subject to such provisions.
(b) Ownership or control of shares of nonbanking companies for certain
period
Until December 31, 1985, a foreign bank or other company to which
subsection (a) of this section applies on September 17, 1978, may retain
direct or indirect ownership or control of any voting shares of any
nonbanking company in the United States that it owned, controlled, or
held with power to vote on September 17, 1978, or engage in any
nonbanking activities in the United States in which it was engaged on
such date.
(c) Engagement in nonbanking activities after certain period
(1) After December 31, 1985, a foreign bank or other company to
which subsection (a) of this section applies on September 17, 1978, or
on the date of the establishment of a branch in a State an application
for which was filed on or before July 26, 1978, may continue to engage
in nonbanking activities in the United States in which directly or
through an affiliate it was lawfully engaged on July 26, 1978 (or on a
date subsequent to July 26, 1978, in the case of activities carried on
as the result of the direct or indirect acquisition, pursuant to a
binding written contract entered into on or before July 26, 1978, of
another company engaged in such activities at the time of acquisition),
and may engage directly or through an affiliate in nonbanking activities
in the United States which are covered by an application to engage in
such activities which was filed on or before July 26, 1978; except that
the Board by order, after opportunity for hearing, may terminate the
authority conferred by this subsection on any such foreign bank or
company to engage directly or through an affiliate in any activity
otherwise permitted by this subsection if it determines having due
regard to the purposes of this chapter and the Bank Holding Company Act
of 1956 [12 U.S.C. 1841 et seq.], that such action is necessary to
prevent undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices in the
United States. Notwithstanding subsection (a) of this section, a foreign
bank or company referred to in this subsection may retain ownership or
control of any voting shares (or, where necessary to prevent dilution of
its voting interest, acquire additional voting shares) of any
domestically-controlled affiliate covered in 1978 which since July 26,
1978, has engaged in the business of underwriting, distributing, or
otherwise buying or selling stocks, bonds, and other securities in the
United States, notwithstanding that such affiliate acquired after July
26, 1978, an interest in, or any or all of the assets of, a going
concern, or commences to engage in any new activity or activities.
Except in the case of affiliates described in the preceding sentence,
nothing in this subsection shall be construed to authorize any foreign
bank or company referred to in this subsection, or any affiliate
thereof, to engage in activities authorized by this subsection through
the acquisition, pursuant to a contract entered into after July 26,
1978, of any interest in or the assets of a going concern engaged in
such activities. Any foreign bank or company that is authorized to
engage in any activity pursuant to this subsection but, as a result of
action of the Board, is required to terminate such activity may retain
the ownership of control of shares in any company carrying on such
activity for a period of two years from the date on which its authority
was so terminated by the Board. As used in this subsection, the term
``affiliate'' shall mean any company more than 5 per centum of whose
voting shares is directly or indirectly owned or controlled or held with
power to vote by the specified foreign bank or company, and the term
``domestically-controlled affiliate covered in 1978'' shall mean an
affiliate organized under the laws of the United States or any State
thereof if (i) no foreign bank or group of foreign banks acting in
concert owns or controls, directly or indirectly, 45 per centum or more
of its voting shares, and (ii) no more than 20 per centum of the number
of directors as established from time to time to constitute the whole
board of directors and 20 per centum of the executive officers of such
affiliate are persons affiliated with any such foreign bank. For the
purpose of the preceding sentence, the term ``persons affiliated with
any such foreign bank'' shall mean (A) any person who is or was an
employee, officer, agent, or director of such foreign bank or who
otherwise has or had such a relationship with such foreign bank that
would lead such person to represent the interests of such foreign bank,
and (B) in the case of any director of such domestically controlled
affiliate covered in 1978, any person in favor of whose election as a
director votes were cast by less than two-thirds of all shares voting in
connection with such election other than shares owned or controlled,
directly or indirectly, by any such foreign bank.
(2) The authority conferred by this subsection on a foreign bank or
other company shall terminate 2 years after the date on which such
foreign bank or other company becomes a ``bank holding company'' as
defined in section 2(a) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(a)); except that the Board may, upon application of such
foreign bank or other company, extend the 2-year period for not more
than one year at a time, if, in its judgment, such an extension would
not be detrimental to the public interest, but no such extensions shall
exceed 3 years in the aggregate.
(3) Termination of grandfathered rights.--
(A) In general.--If any foreign bank or foreign company files a
declaration under section 4(l)(1)(C) of the Bank Holding Company Act
of 1956 [12 U.S.C. 1843(l)(1)(C)], any authority conferred by this
subsection on any foreign bank or company to engage in any activity
that the Board has determined to be permissible for financial
holding companies under section 4(k) of such Act [12 U.S.C. 1843(k)]
shall terminate immediately.
(B) Restrictions and requirements authorized.--If a foreign bank
or company that engages, directly or through an affiliate pursuant
to paragraph (1), in an activity that the Board has determined to be
permissible for financial holding companies under section 4(k) of
the Bank Holding Company Act of 1956 [12 U.S.C. 1843(k)] has not
filed a declaration with the Board of its status as a financial
holding company under such section by the end of the 2-year period
beginning on November 12, 1999, the Board, giving due regard to the
principle of national treatment and equality of competitive
opportunity, may impose such restrictions and requirements on the
conduct of such activities by such foreign bank or company as are
comparable to those imposed on a financial holding company organized
under the laws of the United States, including a requirement to
conduct such activities in compliance with any prudential safeguards
established under section 1828a of this title.
(d) Construction of terms
Nothing in this section shall be construed to define a branch or
agency of a foreign bank or a commercial lending company controlled by a
foreign bank or foreign company that controls a foreign bank as a
``bank'' for the purposes of any provisions of the Bank Holding Company
Act of 1956 [12 U.S.C. 1841 et seq.], or section 1850 of this title,
except that any such branch, agency or commercial lending company
subsidiary shall be deemed a ``bank'' or ``banking subsidiary'', as the
case may be, for the purposes of applying the prohibitions of chapter 22
of this title and the exemptions provided in sections 4(c)(1), 4(c)(2),
4(c)(3), and 4(c)(4) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843(c)(1), (2), (3), and (4)) to any foreign bank or other company to
which subsection (a) of this section applies.
(Pub. L. 95-369, Sec. 8(a)-(d), Sept. 17, 1978, 92 Stat. 622, 623; Pub.
L. 97-320, title VII, Secs. 704, 705, Oct. 15, 1982, 96 Stat. 1539; Pub.
L. 100-86, title II, Sec. 204, Aug. 10, 1987, 101 Stat. 584; Pub. L.
102-242, title II, Sec. 207, Dec. 19, 1991, 105 Stat. 2295; Pub. L. 106-
102, title I, Sec. 141, Nov. 12, 1999, 113 Stat. 1383.)
References in Text
The Bank Holding Company Act of 1956, referred to in subsecs. (a),
(c), and (d), is act May 9, 1956, ch. 240, 70 Stat. 133, as amended,
which is classified principally to chapter 17 (Sec. 1841 et seq.) of
this title. For complete classification of this Act to the Code, see
Short Title note set out under section 1841 of this title and Tables.
For definition of ``this chapter'', referred to in subsec. (c), see
References in Text note set out under section 3101 of this title.
Amendments
1999--Subsec. (c)(3). Pub. L. 106-102 added par. (3).
1991--Subsec. (a). Pub. L. 102-242 substituted ``to such
provisions'' for ``thereto, except that any such foreign bank or company
shall not by reason of this subsection be deemed a bank holding company
for purposes of section 3 of the Bank Holding Company Act of 1956''.
1987--Subsec. (c). Pub. L. 100-86 designated existing provisions as
par. (1) and added par. (2).
1982--Subsec. (c). Pub. L. 97-320, Sec. 704, inserted ``or on the
date of the establishment of a branch in a State an application for
which was filed on or before July 26, 1978'' after ``September 17,
1978,''.
Pub. L. 97-320, Sec. 705(a), substituted provision that the term
``domestically-controlled affiliate covered in 1978'' shall mean an
affiliate organized under the laws of the United States or any State
thereof if no foreign bank or group of foreign banks acting in concert
owns or controls, directly or indirectly, 45 per centum or more of its
voting shares, and no more than 20 per centum of the number of directors
as established from time to time to constitute the whole board of
directors and 20 per centum of the executive officers of such affiliate
are persons affiliated with any such foreign bank, for provision that it
meant any affiliate the majority of whose voting shares was owned by a
company or group of companies organized under the laws of the United
States or any State thereof, if it had been under continuous domestic
majority-controlling ownership since July 26, 1978, and if a foreign
bank or group of foreign banks did not own or control, directly or
indirectly, 25 per centum or more of its voting shares, and defined
``persons affiliated with any such foreign bank''.
Pub. L. 97-320, Sec. 705(b), substituted ``since July 26, 1978, has
engaged'' for ``engages'' before ``in the business of underwriting'',
and inserted ``, notwithstanding that such affiliate acquired after July
26, 1978, an interest in, or any or all of the assets of, a going
concern, or commences to engage in any new activity or activities''
after ``and other securities in the United States''.
Effective Date of 1999 Amendment
Amendment by Pub. L. 106-102 effective 120 days after Nov. 12, 1999,
see section 161 of Pub. L. 106-102, set out as a note under section 24
of this title.
Section Referred to in Other Sections
This section is referred to in section 1818 of this title; title 15
section 78q.
