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U.S. Code as of:
01/19/04
Section 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.
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