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International Banking Act of 1978

International Banking Act of 1978 (P.L. 95-369, 92 STAT. 607)

Summary:

Brought foreign banks within the federal regulatory framework. Recognized and deferred to state laws regarding branching. Required deposit insurance for branches of foreign banks engaged in retail deposit taking in the The International Banking Act of 1978 (P.L. 95‑369, 92 STAT. 607). Existing branches of foreign banks engaged in retail deposit taking in the were required to obtain federal deposit insurance.

Key Points:

  • Allows foreign banks to establish federal branches or agencies with the approval of the Board of Governors of the Federal Reserve System (the "Board") and the Office of the Comptroller of the Currency ("Comptroller") provided: (1) the bank does not have a state licensed branch or agency; and, (2) state law does not prohibit a foreign bank from operating in the state.
  • Foreign banks operating federal branches or agencies shall operate under the same rights and privileges as national banks, subject to certain restrictions.
  • With the approval of the Comptroller and the Board, a foreign bank with a branch or agency in one state (the home state) may establish and operate a federal branch or agency in another state (the host state) as allowed by host state law as permitted under Section 44 of the Federal Deposit Insurance Act.
  • With the approval of the appropriate state regulator and the Board, a foreign bank with a branch or agency in one state (the home state) may establish and operate a state licensed branch or agency in another state (the host state) as allowed by host state law as permitted under Section 44 of the Federal Deposit Insurance Act.
  • No federal or state licensed branch offices in the United States may recieve deposits of less than $100,000 unless the branch is an insured branch underSection 3(s) of the Federal Deposit Insurance Act.
  • Subject to certain limitations, the Comptroller has all powers over foreign banks with branches or agencies in a state that it has over national banks operating in that state.

Why is it still relevant?

The International Banking Act of 1978 is not designed to preempt state law with regard to the establishment of foreign bank branches and agencies. Rather, it is clearly a law that reflects the concept of the dual banking system: providing a national licensing alternative to state licensing provisions without overriding the individual state's laws, such as interstate branching.

Last modified at 7/23/2010 10:42 AM  by Rosemarie Shaheen