General Industry Letters
Mortgage Banking Letters
Foreign Banking Corporations Letter
June 10, 1998
To the Foreign Banking Corporation Addressed:
As recent events have demonstrated, the corporate structures currently being used to facilitate mergers and other consolidations among foreign banking corporations vary widely, depending upon the nature of the transaction. In some cases, a new legal entity is formed to assume the banking operations of one or more foreign banking corporations which maintain a licensed branch or agency in New York. In this letter, the Banking Department is taking the opportunity herein to clarify the circumstances under which a branch or agency license application under section 200 of the New York Banking Law, or a representative office license application under section 221-a of the New York Banking Law, is required to be filed and approved before the "successor" corporation may continue the banking operations of a "disappearing" foreign banking corporation which held such a license.
Section 200 of the New York Banking Law requires that a license be obtained by a foreign banking corporation in order to establish and maintain a branch or agency in New York. The issuance of such license is approved by the Banking Board. Section 221-a of the New York Banking Law requires that a license be obtained by a foreign banking corporation in order to establish and maintain a representative office in New York. The issuance of this form of license is approved by the Superintendent of Banks ("Superintendent"). For each type of office, additional locations of the type already licensed may be established upon notice to the Superintendent. See New York Banking Law, § 200 (for branches and agencies) and § 221-a ( for representative offices).
In addition, a foreign banking corporation which already is licensed to operate a branch, agency or representative office in New York shall file a notice with the Superintendent no later than fourteen days after such foreign banking corporation either becomes aware of any acquisition of control of such organization, or merges with another foreign banking corporation. See New York Banking Law, § 201-c (for branches and agencies) and § 221-i (for representative offices).
If the legal entity holding the current license issued to the foreign banking corporation by the Banking Department will continue to operate the office after the closure of the merger or change of control transaction, then in the absence of
unusual circumstances, a notice to the Superintendent pursuant to sections 201-c or 221-i would be sufficient. Such notice should describe in detail the transaction, effective dates and any changes in business plans for the State-licensed New York offices of the foreign banking corporation as a result of the transaction.
In the situation where a merger transaction is to take place among two (or more) foreign banking corporations that each maintain State-licensed branches, agencies or representative offices in New York, then a notice pursuant to section 201-c or 221-i, as the case may be, would be required from each of the foreign banking corporations maintaining a State-licensed office. If applicable, it would be expected that the notice filed by the surviving foreign banking corporation would include a notice of intent to maintain the offices of the merged foreign banking corporations as offices of the surviving foreign banking corporation.
If, however, the result of a corporate consolidation among foreign banks is the assumption of the operations of a State-licensed New York office by a successor foreign banking corporation that is not authorized to operate such an office in New York, then the successor foreign banking corporation must file a branch, agency or representative office application, as the case may be, and receive approval, prior to the closure of the transaction and the assumption of the operations of that office. The result is the same whether the successor foreign banking corporation already is in existence or a new foreign banking corporation is created to facilitate the merger. If no such approval has been obtained, then the successor foreign banking corporation will be considered to be operating unlawfully and subject to substantial penalties.
It must be emphasized that each foreign banking corporation operating in New York, even a new one created to succeed to the business of two foreign banking corporations otherwise authorized to operate in New York, must have its own license to operate the particular office that is established; otherwise such foreign banking corporation is deemed to be operating in violation of section 200 and/or section 221-a of the New York Banking Law.
The Banking Department urges each of its foreign banking corporation licensees to keep the Department aware of major events affecting the foreign banking corporation. Even if only an after-the-fact notice ultimately is required, in order to assure itself that an application is not required pursuant to section 200 or 221-a of the Banking Law, it is strongly recommended that the management of a foreign banking corporation contact the Banking Department as soon as it is aware of a pending transaction so that the Banking Department and the foreign banking corporation may determine the appropriate notices and/or applications that will need to be filed.
This letter is intended only as general advice and is not intended to cover every variety of merger, consolidation or change of control transaction that may occur. Foreign banking corporations, or their counsel, should contact the following staff if there are any questions or comments: in the Foreign Commercial Banks Division: Deputy Superintendent of Banks Robert H. McCormick, 212-618-6486 (phone), 212-618-6926 (fax); or in the Legal Division: Deputy Superintendent and Counsel Edmund P. Rogers III, First Assistant Counsel Arthur Gelman or Assistant Counsel Kathleen A. Scott, all at 212-618-6591 (phone) or 212-618-6912 (fax).
Edmund P. Rogers III
Deputy Superintendent and Counsel