February 12, 2002
Re: Deposit Activities of State-Licensed Branches of Foreign Banks
Dear [ ]:
Your letter of October 2, 2001 addressed to Superintendent of Banks McCaul has been referred to me for reply.
In your letter you discuss a foreign bank which has branches in London and Amsterdam ("Bank") and which is issuing certificates of deposit denominated in euros ("Euro CDs") through a New York-based non-bank subsidiary of Bank ("Subsidiary"). In connection with this activity you ask whether employees of Subsidiary may negotiate and close Euro CD transactions on behalf of Bank?
Under Section 202-a of the New York Banking Law ("Banking Law"), a foreign bank which is licensed to maintain an agency or branch in New York is prohibited from marketing or selling deposits in denominations of less than $100,000 except to a corporation, partnership, trust, unincorporated association, joint-stock association or similar association. Part 323 of the Superintendent's Regulations further provides that a licensed agency of a foreign banking corporation may market or sell deposits in amounts of less than $100,000 to a non-United States citizen or resident. The sole exception to this prohibition against the marketing or selling of such deposits to United States citizens or residents is that those branches of foreign banks located in New York, which are insured by the Federal Deposit Insurance Corporation, may take deposits in any amount from such individuals. However, a foreign bank such as Bank, which does not maintain a physical presence in New York, is strictly prohibited from engaging in deposit taking activities in New York, either directly or indirectly.
In the instant case, Subsidiary's pro-active marketing and sale of Bank products on behalf of Bank, which, based on your description appears to include the taking of deposits from customers of the Bank who are U.S. citizens or residents, is clearly impermissible under the Banking Law.
Your letter also contained a second question which I interpreted to involve a foreign bank unrelated to the foreign bank discussed above. In particular, you ask whether a New York branch of a foreign bank which issues a "Yankee CD" in the amount of $100 million on Monday at 9:00 A.M. may buy back the same CD at 11:00 A.M?
I am assuming for the sake of my analysis that by a "Yankee CD" you are referring to a dollar denominated CD. There are no provisions in the Banking Law which regulate the period of time during which a CD must remain outstanding before it can be cashed in. The terms governing the issuance and cashing in of a dollar denominated CD would be a matter of agreement between the purchaser and the issuing bank.
I trust that the foregoing is responsive to your inquiry. Should you have any further questions, please feel free to contact me directly at [ ].