Sec. 204.122 Secondary market activities of
international banking facilities.
(a) Questions have been raised concerning the extent to which international
banking facilities may purchase (or sell) IBF-eligible assets such as loans
(including loan participations), securities, CDs, and bankers' acceptances
from (or to) third parties. Under the Board's regulations, as specified
in Sec. 204.8 of Regulation D, IBFs are limited, with respect to making
loans and accepting deposits, to dealing only with certain customers, such
as other IBFs and foreign offices of other organizations, and with the
entity establishing the IBF. In addition, an IBF may extend credit to a
nonbank customer only to finance the borrower's non-U.S. operations and
may accept deposits from a nonbank customer that are used only to support
the depositor's non-U.S. business.
(b) Consistent with the Board's intent, IBFs may purchase IBF- eligible
assets 1 from, or sell such assets to,
any domestic or foreign customer provided that the transactions are at
arm's length without recourse. However, an IBF of a U.S. depository institution
may not purchase assets from, or sell such assets to, any U.S. affiliate
of the institution establishing the IBF; an IBF of an Edge or Agreement
corporation may not purchase assets from, or sell assets to, any U.S. affiliate
of the Edge or Agreement corporation or to U.S. branches of the Edge or
Agreement corporation or to U.S. branches of the Edge or Agreement corporation
other than the branch2 establishing
the IBF; and an IBF of a U.S. branch or agency of a foreign bank may not
purchase assets from, or sell assets to any U.S. affiliates of the foreign
bank or to any other U.S. branch or agency of the same foreign bank.2
(This would not prevent an IBF from purchasing (or selling) assets directly
from (or to) any IBF, including an IBF of an affiliate, or to the institution
establishing the IBF; such purchases from the institution establishing
the IBF would continue to be subject to Eurocurrency reserve requirements
except during the initial four-week transition period.) Since repurchase
agreements are regarded as loans, transactions involving repurchase agreements
are permitted only with customers who are otherwise eligible to deal with
IBFs, as specified in Regulation D.
(c) In the case of purchases of assets, in order to determine that
the Board's use-of-proceeds requirement has been met, it is necessary for
the IBF (1) to ascertain that the applicable IBF notices and acknowledgments
have been provided, or (2) in the case of loans or securities, to review
the documentation underlying the loan or security, or accompanying the
security (e.g., the prospectus or offering statement), to determine that
the proceeds are being used only to finance the obligor's operations outside
the U.S., or (3) in the case of loans, to obtain a statement from either
the seller or borrower that the proceeds are being used only to finance
operations outside the U.S., or in the case of securities, to obtain such
a statement from the obligor, or (4) in the case of bankers' acceptances,
to review the underlying documentation to determine that the proceeds are
being used only to finance the parties' operations outside the United States.
(d) Under the Board's regulations, IBFs are not permitted to issue
negotiable Euro-CDs, bankers' acceptances, or similar instruments. Accordingly,
consistent with the Board's intent in this area, IBFs may sell such instruments
issued by third parties that qualify as IBF- eligible assets provided that
the IBF, its establishing institution and any affiliate of the institution
establishing the IBF do not endorse, accept, or otherwise guarantee the
instrument.
1 In order for an asset to
be eligible to be held by an IBF, the obligor or issuer of the instrument,
or in the case of bankers' acceptances, the customer and any endorser or
acceptor, must be an IBF- eligible customer.
2 Branches of Edge or Agreement
corporations and agencies and branches of foreign banks that file a consolidated
report for reserve requirements purposes (FR 2900) are considered to be
the establishing entity of an IBF.
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