Chapter 1119: FOREIGN BANKS

1119.01 Foreign bank definitions.

As used in this chapter, unless the context otherwise requires:

(A) "Foreign bank" means any company, or any subsidiary or affiliate of a company, organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, that engages in the business of banking. "Foreign bank" includes, without limitation, a foreign commercial bank, foreign merchant bank, or other foreign institution that engages in banking activities usually conducted in connection with the business of banking in the country that granted its charter or countries where the foreign institution is operating.

(B) "Executive officer" has the same meaning as in section 1109.23 of the Revised Code.

Effective Date: 01-01-1997

1119.02 Foreign bank license.

(A) No foreign bank shall conduct any operations in this state connected to its banking business, unless it has a license issued by the superintendent of financial institutions under this chapter or by the office of the comptroller of the currency. Any license issued by the superintendent under this chapter is effective until surrendered by the foreign bank or revoked by the superintendent.

(B) Except as provided in section 1117.05 of the Revised Code, no person shall conduct any operations in this state connected to a foreign bank's banking business as a representative or as an agent of a foreign bank, unless the foreign bank is licensed to conduct those operations either by the superintendent under this chapter or by the office of the comptroller of the currency.

(C) If any person conducts operations in this state as a representative or agent of a foreign bank, the foreign bank is deemed to be conducting those operations.

Effective Date: 01-01-1997

1119.03, 1119.04 [Repealed].

Effective Date: 01-01-1997

1119.05 Applying for preliminary approval of representative office.

(A)

(1) For each representative office a foreign bank proposes to operate, the foreign bank shall first submit to the superintendent of financial institutions an application for preliminary approval of the representative office. The superintendent shall approve or disapprove the application within sixty days after accepting the application.

(2) In determining whether to approve or disapprove the foreign bank's application, the superintendent shall consider all of the following:

(a) Whether the foreign bank is subject to comprehensive supervision and regulation on a consolidated basis by the appropriate authorities in the country that granted its banking charter;

(b) Whether the management of the foreign bank and the proposed management of the representative office are adequate;

(c) Whether any controlling person of the foreign bank, each director and executive officer of the foreign bank, and each director and executive officer of any controlling person of the foreign bank is competent and of good character and sound financial standing;

(d) Whether the capital and financial resources of the foreign bank are adequate;

(e) Whether the foreign bank is currently operating in compliance with applicable laws, regulations, and orders;

(f) Whether it is reasonable to believe the foreign bank will operate the representative office in compliance with applicable laws, regulations, and orders;

(g) Any other reasonable criteria the superintendent may prescribe.

(B) The superintendent shall issue a license to a foreign bank to operate the representative office if all of the following have occurred:

(1) The superintendent has approved the foreign bank's application for preliminary approval to operate the representative office under division (A) of this section.

(2) The foreign bank has met all conditions of the superintendent's preliminary approval.

(3) The foreign bank has delivered to the superintendent an appointment of an agent for service of process, the agent's acknowledgment of the appointment, and the foreign bank's agreement to service of process upon the superintendent if reasonable efforts to serve the foreign bank's agent or place of business in this state are unsuccessful.

Effective Date: 01-01-1997

1119.06 Prohibited and authorized activities.

(A) A foreign bank licensed to operate a representative office shall not conduct any banking business through the licensed representative office, including any of the following activities:

(1) Soliciting, receiving, or accepting deposits, either directly or as agent for subsequent deposit at another office of the foreign bank;

(2) Approving any application for, disbursing any funds from, or otherwise providing credit in this state;

(3) Carrying credit balances;

(4) Exercising fiduciary powers.

(B) At or through a licensed representative office, a foreign bank may conduct activities that are connected to the foreign bank's banking business, including the following:

(1) A representative office may contact local persons to solicit business for the foreign bank, but may not solicit, receive, or accept deposits, either directly or as agent, for subsequent deposit at another office of the foreign bank.

(2) A representative office may accept and process applications for the extension of credit, but may not approve any application.

(3) A representative office may prepare documentation and execute documents for transactions previously approved outside this state, but may not disburse any funds or otherwise provide credit in this state.

(4) A representative office may conduct credit investigations and analyses requested by persons authorized to extend credit.

(5) A representative office may provide information on local economic and business conditions.

Effective Date: 01-01-1997

1119.08 Applying for preliminary approval of agency or branch.

(A)

(1) For each agency or branch a foreign bank proposes to operate, the foreign bank shall first submit to the superintendent of financial institutions an application for preliminary approval of the agency or branch. The superintendent shall determine whether to approve or disapprove the application within sixty days after accepting the application.

(2) In determining whether to approve or disapprove the foreign bank's application, the superintendent shall consider all of the following:

(a) Whether the foreign bank is subject to comprehensive supervision and regulation on a consolidated basis by the appropriate authorities in the country that granted its banking charter;

(b) Whether the management of the foreign bank and the proposed management of the agency or branch are adequate;

(c) Whether any controlling person of the foreign bank, each director and executive officer of the foreign bank, and each director and executive officer of any controlling person of the foreign bank is competent and of good character and sound financial standing;

(d) Whether the capital and financial resources of the foreign bank are adequate;

(e) Whether the foreign bank is currently operating in a safe and sound manner, and is in compliance with applicable laws, regulations, and orders;

(f) Whether it is reasonable to believe the foreign bank will operate the agency or branch in a safe and sound manner, and in compliance with applicable laws, regulations, and orders;

(g) Any other reasonable criteria the superintendent may prescribe.

(B) The superintendent shall issue a license to a foreign bank to operate the agency or branch if the following have occurred:

(1) The superintendent has approved the foreign bank's application for preliminary approval to operate the agency or branch under division (A) of this section.

(2) The foreign bank has met all conditions of the superintendent's preliminary approval.

(3) The foreign bank has delivered to the superintendent an appointment of an agent for service of process, the agent's acknowledgment of the appointment, and the foreign bank's agreement to service of process upon the superintendent if reasonable efforts to serve the foreign bank's agent or place of business in this state are unsuccessful.

(4) The foreign bank has pledged assets as required under section 1119.09 of the Revised Code and maintains assets in this state as required by section 1119.10 of the Revised Code.

Effective Date: 01-01-1997

1119.09 Pledging assets.

(A) To be licensed to operate an agency or branch in this state, a foreign bank shall pledge assets to the superintendent of financial institutions, of the kinds, in an amount, and in the manner prescribed by the superintendent, by placing the assets with a qualified custodian for safekeeping. The assets pledged are for the benefit of the agency's or branch's unaffiliated creditors.

(B)

(1) The value of the assets pledged in accordance with this section shall be computed based on the lesser of their principal amount or market value.

(2) In determining the amount of assets a foreign bank is required to pledge for each agency or branch, the superintendent shall consider both of the following:

(a) The amounts necessary or desirable to maintain a sound financial condition and to protect depositors, creditors, and the public interest;

(b) The concentration of risk to any one borrower or group of related borrowers and the concentration of transfer risk to any one country, including the country in which the foreign bank is domiciled.

(C) A foreign bank that has pledged assets as required by this section may receive any income paid on those assets while the foreign bank continues to conduct business in the ordinary course in this state and the superintendent has not issued a notice prohibiting the foreign bank's receipt of income paid on the assets the foreign bank has pledged.

(D) A foreign bank that has pledged assets as required by this section shall maintain its pledge with the custodian after the foreign bank ceases to be licensed to operate the agency or branch, until the superintendent determines that the assets are no longer necessary for the protection of depositors, creditors, and the public interest.

(E) To qualify to hold assets pledged as required by this section, a custodian must be one of the following:

(1) A federal reserve bank located in this state or any branch of a federal reserve bank located in this state without regard to where the branch is located;

(2) A bank that maintains a banking office in this state, if approved by the superintendent;

(3) A trust company that maintains a trust service office in this state, if approved by the superintendent.

(F) A custodian of assets pledged as required by this section shall do all of the following:

(1) Hold the assets separate from all other assets of the pledging foreign bank and the custodian;

(2) Segregate the assets pledged on the custodian's books and clearly identify them as pledged in accordance with this section;

(3) Release the assets pledged only upon the order of the superintendent or the superintendent's designee.

Effective Date: 01-01-1997

1119.10 Complying with asset maintenance requirement.

(A) Subject to conditions and requirements the superintendent of financial institutions may prescribe, to be licensed to operate an agency or branch in this state, a foreign bank shall maintain assets in this state of the kinds and in the amount prescribed by the superintendent as necessary or desirable for the maintenance of a sound financial condition and for the protection of depositors, creditors, and the public interest.

(B) In determining compliance with the asset maintenance requirement of division (A) of this section, the superintendent shall include all of the following:

(1) Assets the foreign bank has pledged as required by section 1119.09 of the Revised Code;

(2) Reserves the foreign bank is required to maintain with the federal reserve with respect to the foreign bank's agencies and branches in this state;

(3) Assets pledged and surety bonds payable to the federal deposit insurance corporation with respect to the foreign bank's agencies and branches in this state.

Effective Date: 01-01-1997

1119.11 Permitted activities.

(A) When a foreign bank engages in an activity or undertakes an action through an agency or branch licensed under this chapter, the foreign bank is subject to the same limitations on and requirements of engaging in the activity or taking the action that apply to a bank doing business under authority granted by the superintendent of financial institutions.

(B)

(1) A foreign bank licensed to operate an agency shall not accept deposits from citizens or residents of the United States or exercise fiduciary powers. An account that carries a credit balance in connection with the distribution of loan proceeds is not a deposit for purposes of this section.

(2) A foreign bank licensed to operate an agency may, in addition to conducting all of the permissible activities of a representative office set forth in division (B) of section 1119.06 of the Revised Code, conduct limited banking activities at or through a licensed agency, including all of the following:

(a) Lending money;

(b) Maintaining credit balances that are incidental to or arise out of the distribution of loan proceeds;

(c) Receiving funds as agent to be forwarded for deposit to an existing account at another office authorized to accept deposits.

(C) A foreign bank licensed to operate a branch may, in addition to conducting all of the permissible activities of a representative office set forth in division (B) of section 1119.06 of the Revised Code and all of the permissible activities of an agency set forth in division (B)(2) of this section, conduct the following activities at or through a licensed branch:

(1) Accepting deposits, the acceptance of which does not constitute engaging in domestic retail deposit activities;

(2) If qualified under Chapter 1111. of the Revised Code, exercising fiduciary powers;

(3) Other activities authorized for banks doing business under authority granted by the superintendent.

(D) Each foreign bank licensed to operate an agency or branch shall, in the manner the superintendent prescribes, give notice to the agency's or branch's customers that deposits with that agency or branch are not insured by the federal deposit insurance corporation or otherwise.

Effective Date: 01-01-1997

1119.13 Branch defined.

No foreign bank licensed under this chapter to operate a representative office or an agency shall use the term "branch" to identify that representative office or agency. A foreign bank may use the term "branch" in a description of a representative office or agency that the foreign bank has clearly identified as licensed as a representative office or agency, as the case may be, under this chapter.

Effective Date: 01-01-1997

1119.14 Transferring or assigning license.

(A) No license issued to a foreign bank under this chapter is transferable or assignable.

(B) When a foreign bank licensed under this chapter is to be a constituent in a reorganization in which the foreign bank will not be the resulting corporation, or is to sell a representative office, agency, or branch the foreign bank is licensed to operate in this state, prior to the reorganization or sale, both of the following must be done, whether or not the resulting or acquiring corporation will continue to conduct business at any location where the foreign bank being acquired or selling the representative office, agency, or branch is conducting business:

(1) The corporation that is to be the resulting corporation in the reorganization or the acquiring corporation shall do either of the following:

(a) Obtain an appropriate license to conduct the activities it proposes to conduct in this state and make all changes to conform the business being acquired to the requirements and limitations of the license obtained;

(b) Obtain the approval of the superintendent of financial institutions to consolidate the representative office, agency, or branch being acquired with another representative office, agency, or branch appropriately licensed, whether under this chapter or otherwise, to conduct the business of the representative office being acquired.

(2) The foreign bank licensed to operate the representative office, agency, or branch shall voluntarily surrender the license to operate the representative office, agency, or branch in accordance with section 1119.26 of the Revised Code.

Effective Date: 01-01-1997

1119.16 Licensee's duties.

(A)

(1) Except as provided in division (A)(2) of this section, each foreign bank licensed to operate a representative office, agency, or branch in this state shall do all of the following:

(a) Maintain in this state all of each licensed representative office's, agency's, or branch's records.

(b) Segregate each licensed representative office's, agency's, or branch's records from all of the foreign bank's and its affiliates' other records;

(c) Maintain each licensed representative office's, agency's, or branch's assets separate and apart from the foreign bank's other assets.

(2) A foreign bank that operates more than one licensed representative office, agency, or branch in this state may, as permitted by the superintendent of financial institutions, do both of the following:

(a) Combine the records of those licensed representative offices, agencies, and branches and maintain the records at one location in this state;

(b) Collectively maintain the assets of those licensed representative offices, agencies, and branches.

(B) All deposits of money, or its equivalent, in any agency or branch licensed under this chapter shall be entered on the agency's or branch's books in terms of money of the United States.

(C) The superintendent may prescribe the manner and form of keeping the books and records of representative offices, agencies, and branches licensed under this chapter.

(D) The superintendent may retain, at the expense of the foreign bank, any advisors necessary to assist in the review or examination of the records and affairs of any representative office, agency, or branch of a foreign bank licensed under this chapter.

Effective Date: 01-01-1997

1119.17 Reporting income and condition.

(A) Each foreign bank licensed under this chapter shall file with the superintendent of financial institutions any reports the superintendent may prescribe in the form and manner and containing the information the superintendent prescribes.

(B) When the superintendent requires banks and trust companies to report their income and condition in accordance with division (A) of section 1121.21 of the Revised Code, the superintendent shall require each foreign bank licensed under this chapter to report the income and condition of its representative offices, agencies, and branches in this state.

Effective Date: 01-01-1997

1119.18 Approving or taking action.

When the laws of this state require an action by or regarding a foreign bank or a representative office, agency, or branch of a foreign bank licensed under this chapter to be approved or taken by the board of directors, the action may be approved or taken by either of the following:

(A) The governing body of the foreign bank having authority, under the laws of the country where the foreign bank is chartered, that is comparable to the authority of the board of directors of a bank doing business under authority granted by the superintendent of financial institutions;

(B) Any person or group of persons, such as a committee, to whom the authority to approve or take the action has been properly delegated in accordance with the laws of the country where the foreign bank is chartered.

Effective Date: 01-01-1997

1119.21 Regulatory powers.

(A) In addition to the specific powers, remedies, and sanctions provided in this chapter, any foreign bank licensed to operate a representative office, agency, or branch in this state and any foreign bank conducting operations in this state connected to its banking business without being licensed under this chapter or by the office of the comptroller of the currency is subject to all powers, remedies, and sanctions provided to the superintendent of financial institutions and the division of financial institutions in Chapters 1101. to 1127. of the Revised Code.

(B)

(1) With regard to any foreign bank licensed under this chapter to operate a representative office, agency, or branch in this state or conducting operations in this state connected to its banking business without being licensed under this chapter or by the office of the comptroller of the currency, "regulated person" means a director, officer, employee, controlling shareholder, or agent of the foreign bank or a person who participates in the management of the foreign bank, whether or not the person is assigned to an office of the foreign bank licensed under this chapter.

(2) An order to cease and desist issued under section 1121.32 of the Revised Code, a removal or prohibition order issued under section 1121.33 of the Revised Code, or a suspension order issued under section 1121.34 of the Revised Code against a regulated person, who is a regulated person because of that person's relationship with a foreign bank doing business in this state, does not affect the relationship between the regulated person and the foreign bank except as it relates to the conduct of operations in this state connected to the foreign bank's banking business.

Effective Date: 01-01-1997

1119.22 Revoking or suspending license.

(A)

(1) If the superintendent of financial institutions determines, after notice and an opportunity for hearing in accordance with sections 1121.37 and 1121.38 of the Revised Code, any of the following conditions exists, the superintendent may revoke any license the foreign bank has to operate a representative office, agency, or branch in this state:

(a) The existence of the foreign bank or its authority to transact business has been terminated or suspended by the appropriate authorities in the country that granted the foreign bank's banking charter.

(b) The foreign bank or any representative office, agency, or branch of the foreign bank is violating, has violated, or, the superintendent has reasonable cause to believe, is about to violate, any of the following:

(i) A law or rule;

(ii) A condition imposed in writing by the superintendent in connection with granting an application or other request by the foreign bank or the representative office, agency, or branch;

(iii) A written agreement the foreign bank or any representative office, agency, or branch of the foreign bank has entered into with the superintendent.

(c) The foreign bank or any representative office, agency, or branch of the foreign bank is engaging, has engaged, or, the superintendent has reasonable cause to believe, is about to engage, in any unsafe or unsound practice in conducting the business of the foreign bank or the representative office, agency, or branch.

(d) The foreign bank is insolvent.

(e) The foreign bank has suspended payment of its obligations, made an assignment for the benefit of its creditors, or admitted in writing its inability to pay its debts as they become due.

(f) The foreign bank is subject to or has applied for an adjudication in bankruptcy, reorganization, or other relief under any bankruptcy, reorganization, insolvency, or moratorium law.

(g) A receiver, liquidator, or conservator has been appointed for the foreign bank, or any representative office, agency, or branch of the foreign bank in any jurisdiction, or any proceeding for the appointment of a receiver, liquidator, or conservator, or any similar proceeding, has been initiated in the country that granted the foreign bank's charter.

(h) The representative office, agency, or branch has been closed or has otherwise ceased to conduct business.

(2) The foreign bank's opportunity for a hearing lapses if the foreign bank does not, within fifteen days after receipt of the superintendent's notice, request a hearing in writing.

(B)

(1) If the superintendent has reasonable cause to believe any of the conditions set forth in division (A) of this section exists, and the superintendent determines it is necessary to protect the interests of the foreign bank's creditors, the general public, or, where applicable, the depositors of the foreign bank's agency or branch, the superintendent may issue an order immediately suspending the foreign bank's license to operate the representative office, agency, or branch in this state.

(2) Within ten days after being served an order suspending a foreign bank's license to operate a representative office, agency, or branch in this state, the foreign bank may apply to the court of common pleas of any county in this state in which the foreign bank is doing business, or the court of common pleas of Franklin county, for an injunction setting aside, limiting, or suspending enforcement of the suspension order pending an opportunity for a hearing before the superintendent on whether the foreign bank's license to operate a representative office, agency, or branch in this state should be revoked, and the court has jurisdiction to issue the injunction.

Effective Date: 01-01-1997

1119.23 Liquidation.

(A) If the superintendent of financial institutions determines, in accordance with division (A) of section 1119.22 of the Revised Code, any of the conditions set forth in that division exists, the superintendent, in addition to having the authority to revoke the foreign bank's license to operate a representative office, agency, or branch in accordance with section 1119.22 of the Revised Code, also may take possession of the foreign bank's business and property in this state and appoint a receiver for the liquidation of the foreign bank's business and property in this state.

(B) The superintendent's taking possession of and appointing a receiver for a foreign bank's business and property in this state pursuant to division (A) of this section, and the liquidation of the foreign bank's business and property in this state, shall, except as provided in divisions (B)(1) and (2) of this section, be conducted in accordance with the procedures and is subject to the rights, powers, duties, requirements, and limitations provided in Chapter 1125. of the Revised Code for taking possession of the business and property and liquidation of a bank.

(1) After payment of the expenses of the liquidation and claims against the foreign bank arising from its doing business in this state in accordance with section 1125.24 of the Revised Code, any remaining funds from the liquidation of the foreign bank's business and property in this state shall be distributed in the following manner:

(a) If the foreign bank's business and property is being liquidated in another state of the United States, the receiver shall distribute any remaining funds from the liquidation of the foreign bank's business and property in this state to the receiver in the other state for the payment of expenses of liquidation and claims against the foreign bank's business and property in the other state.

(b) If the foreign bank's business and property is being liquidated in more than one other state of the United States, the receiver shall equitably distribute any remaining funds from the liquidation of the foreign bank's business and property in this state among the receivers in the other states for the payment of the expenses of liquidation and claims against the foreign bank's business and property in the other states.

(c) If there is no liquidation of the business and property of the foreign bank occurring in any other state of the United States, the receiver shall pay any remaining funds from the liquidation of the business and property of the foreign bank in this state to the domiciliary receiver of the foreign bank or, if there is no domiciliary receiver, to the foreign bank.

(2)

(a) When the receiver has completed the liquidation of the foreign bank's business and property in this state, the receiver shall, with notice to the superintendent, file a petition with the court for an order declaring that the foreign bank's business in this state is properly wound up in the manner provided in section 1125.29 of the Revised Code. Upon the filing of a petition as provided in this division, the court shall proceed as provided in section 1125.29 of the Revised Code.

(b) An order issued by the court pursuant to a petition filed in accordance with division (B)(2)(a) of this section shall do all things required by section 1125.29 of the Revised Code, but shall only declare that the foreign bank's business in this state has been properly wound up and shall not declare that the foreign bank is dissolved. The court may make whatever additional orders and grant whatever additional relief the court determines proper upon the evidence submitted.

(c) Once the court issues the order declaring that the foreign bank's business in this state is properly wound up, the foreign bank shall cease doing business in this state except for any further winding up.

(d) Once the court issues the order declaring the foreign bank's business in this state is properly wound up, the receiver shall promptly file a copy of the order, certified by the clerk of the court, with both the secretary of state and the superintendent.

Effective Date: 01-01-1997

1119.24 Priority of Ohio creditors.

The creditors of a foreign bank's licensed agencies or branches in this state shall be entitled to priority over other creditors of the foreign bank with respect to any claims against the assets of the foreign bank's business in this state.

Effective Date: 01-01-1997

1119.26 Voluntary liquidation and surrender of license.

(A) A foreign bank may voluntarily liquidate and surrender its license to operate a representative office, agency, or branch licensed under this chapter only with the consent of the superintendent of financial institutions.

(B) Prior to beginning any liquidation process, the foreign bank must file an application to voluntarily liquidate and surrender its license with the superintendent. The application shall include a plan of liquidation that includes all of the provisions required of a plan for voluntary liquidation of a bank under division (C) of section 1125.03 of the Revised Code, except that the plan of liquidation shall be limited in scope to the particular representative office, agency, or branch to be liquidated.

(C) After conducting an examination, the superintendent may approve or deny a foreign bank's application to voluntarily liquidate and surrender its license based on the superintendent's evaluation of whether or not the interests of the representative office's, agency's, or branch's creditors or, where applicable, depositors, will suffer by the surrender. The superintendent's approval is subject to any condition the superintendent may determine appropriate under the circumstances.

(D) If the superintendent approves the application to voluntarily liquidate and surrender a license, the foreign bank shall comply with the requirements of divisions (A)(1) and (2) of section 1125.04 of the Revised Code.

(E) During the implementation of the plan of liquidation pursuant to this section, the superintendent retains the authority to supervise the representative office, agency, or branch and may conduct any examination relating to either the representative office, agency, or branch or the plan of liquidation the superintendent considers necessary or appropriate.

(F) If the superintendent has reason to conclude the implementation of the plan of liquidation is not being safely or expeditiously conducted, the superintendent may do either of the following:

(1) Begin revocation proceedings under section 1119.22 of the Revised Code;

(2) Take possession of the business and property of the representative office, agency, or branch in the same manner, with the same effect, and subject to the same rights accorded the foreign bank under section 1119.23 of the Revised Code.

(G) The superintendent shall cancel the foreign bank's license to operate a representative office, agency, or branch under this chapter if the superintendent has approved the voluntary liquidation and surrender of the license and both of the following conditions have been met:

(1) The plan of liquidation has been completed.

(2) The notifications required by division (D) of this section were properly given.

Effective Date: 01-01-1997