action on the day it receives a transfer item or request. Taking proper action within a reasonably longer time may be seasonable but the Reserve Bank has the burden of so establishing. No Reserve Bank shall represent that it will complete a transfer of funds on the day requested.

(c) Transfers after closing hour. A Reserve Bank is not required to act on the day it receives an item or request if it receives the item or request after the time shown in its schedule. In emergency or other unusual circumstances, a Reserve Bank may handle a transfer item or request after the time shown in its schedule. The completion of an interoffice transaction in these circumstances is also discretionary with the transferee's Reserve Bank.

(d) As of adjustments. If a Reserve Bank fails to credit to the transferee's account on the day requested the amount of a transfer item or request received by the Reserve Bank before the time shown in its schedule, the Reserve Bank shall, unless otherwise instructed, complete the transfer on its next banking day and make adjustments for reserve accounting purposes as of the day the transfer was to have been made.

transferee to return the funds. In an interoffice transaction, the Reserve Bank may ask the transferee's Reserve Bank to ask the transferee to return the funds.

(b) Erroneous transfer. In an erroneous or irregular transfer of funds, a Reserve Bank may, on its own initiative or at the request of another Reserve Bank, ask the transferee to return funds previously transferred.

§ 210.36 Final payment; use of funds.

(a) Final payment. A transfer item is finally paid when the transferee's Reserve Bank sends the transfer item or sends or telephones the advice of credit for the item to the transferee, whichever occurs first.

(b) Right to use funds. Credit given by a Reserve Bank for a transfer of funds becomes available for use when the transfer item is finally paid, subject to the Reserve Bank's right to apply the transferred funds to an obligation owed to it by the transferee.

§ 210.38 Reserve Bank liability.

(a) Limitations on liability. A Reserve Bank shall not have or assume any responsibility to a transferee, beneficiary, or other party, except its immediate transferor. A Reserve Bank shall not be liable for the insolvency, neglect, misconduct, mistake, or default of another bank or person, including a transferor, except as provided in this section. A Reserve Bank shall not have or assume any liability except for its own or another Reserve Bank's lack of good faith or failure to exercise ordinary care.

(b) Damages. A Reserve Bank is liable to its immediate transferor for damages proximately caused by a failure to credit the amount of a transfer

item or request to the transferee's account caused by a Reserve Bank's failure to exercise ordinary care or to act in good faith. Whether damages are proximately caused by a Reserve Bank's failure to exercise ordinary care or to act in good faith is a question of fact to be determined in each case.

(c) Right to indemnity. The transferee's Reserve Bank shall indemnify the transferor's Reserve Bank for any loss or expense sustained (including attorneys' fees and expenses of litigation) as a result of the failure of the transferee's Reserve Bank to exercise ordinary care or to act in good faith in an interoffice transaction.

Subpart B-Foreign Banking Organizations

211.21 Authority, purpose and scope. 211.22 Interstate banking operations of foreign banking organizations.

211.23 Nonbanking activities of foreign

banking organizations.

211.601 Status of certain offices for purposes of the International Banking Act restrictions on interstate banking operations.

211.602 Investments by United States banking organizations in foreign companies that transact business in the United States.

AUTHORITY: Federal Reserve Act (12 U.S.C. 221 et seq.); The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.); and the International Banking Act of 1978 (Pub. L. 95-369; 92 Stat. 607; 12 U.S.C. 3101).

Subpart A-International Operations

of United States Banking Organizations

SOURCE: 44 FR 36007, June 20, 1979, unless otherwise noted.

§ 211.1 Authority, purpose, and scope.

(a) Authority. This Part is issued by the Board of Governors of the Federal Reserve System ("Board") under the authority of the Federal Reserve Act (12 U.S.C. 221 et seq.) ("FRA"); the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) ("BHCA"); and the International Banking Act of 1978 (92 Stat. 607) (“IBA”).

(b) Purpose and scope. This Part is in furtherance of the purposes of the FRA, the BHCA, and the IBA. It applies to corporations organized under section 25(a) of the FRA (12 U.S.C. 611-631), "Edge Corporations"; to corporations having an agreement or undertaking with the Board under section 25 of the FRA (12 U.S.C. 601604(a)), “Agreement Corporations"; to member banks with respect to their foreign branches and investments in foreign banks under section 25 of the FRA (12 U.S.C. 601-604(a));1 and to bank holding companies with respect to the exemption from the nonbanking prohibitions of the BHCA afforded by section 4(c)(13) of the BHCA (12 U.S.C. 1843(c)(13)).

For the purposes of this part:

(a) An "affiliate" of an organization means any company of which the organization is a direct or indirect subsidiary, any other direct or indirect subsidiary of that company, and any direct or indirect subsidiary of the organization.

(b) "Capital and surplus" means paid-in and unimpaired capital and surplus, and includes undivided profits but does not include the proceeds of capital notes or debentures.

(c) "Directly or indirectly" when used in reference to activities or investments of an organization means activities or investments of the organization or of any subsidiary of the organization.

(d) An Edge Corporation is "engaged in banking" if it is ordinarily engaged

'Section 25 of the FRA, which refers to national banking associations, also applies to State member banks of the Federal Reserve System by virtue of section 9 of the FRA (12 U.S.C. 321).

in the business of accepting deposits in the United States from nonaffiliated persons.

(e) "Engaged in business in the United States" means maintaining and operating an office (other than a representative office) or subsidiary in the United States.

(f) "Foreign" or "foreign country" refers to one or more foreign nations, and includes the overseas territories, dependencies, and insular possessions of those nations and of the United States, and the Commonwealth of Puerto Rico.

(g) "Foreign bank" means an organization that: is organized under the laws of a foreign country; engages in the business of banking; is recognized as a bank by the bank supervisory or monetary authority of the country of its organization or principal banking operations; receives deposits to a substantial extent in the regular course of its business; and has the power to accept demand deposits.

(h) "Foreign branch" means an office of an institution which is located outside the country under the laws of which the institution is organized, at which a banking or financing business is conducted.

(i) "Investment" means the ownership or control of shares, including binding commitments to acquire shares, and other contributions to the capital accounts of an organization, including the holding of an organization's subordinated debt when shares of stock of the organization are also held directly or indirectly by an investor.

(j) "Investor” means an Edge Corporation, Agreement Corporation, bank holding company, or member bank.

(k) "Joint venture" is an organization 20 percent or more of the voting stock of which is held directly or indirectly by an investor or by an affiliate of the investor, but which is not a subsidiary of the investor.

(1) "Listed activities" means the activities specified in § 211.5(d).

(m) "Organization" means a corporation, government, partnership, association, or any other legal or commercial entity.

(n) "Person" means an individual or an organization.

(a) Establishment of foreign branches. A member bank may establish a foreign branch with prior approval of the Board. Unless otherwise advised by the Board: (1) A member bank that has branches in two or more foreign countries may establish initial branches in additional foreign countries after 60 days' notice to the Board; and (2) without prior approval or prior notice, a member bank may establish additional branches in any foreign country in which it operates one or more branches. Authority to establish branches through prior approval or prior notice shall expire one year from the earliest date on which it could have been exercised, unless extended by the Board. A member bank shall inform the Board within 30 days of the opening, closing or relocation of a branch and the address of a new or relocated foreign branch.

(b) Further powers of foreign branches. In addition to its general banking powers, and to the extent consistent with its charter, a foreign branch of a member bank may engage in the following activities so far as usual in connection with the business of banking in the country where it transacts business:

(1) Guarantee customers' debts or otherwise agree for their benefit to make payments on the occurrence of readily ascertainable events,2 if the guarantee or agreement specifies a maximum monetary liability; but, except to the extent that the member bank is fully secured, it may not have

2"Readily ascertainable events" include, but are not limited to, events such as nonpayment of taxes, rentals, customs duties, or costs of transport and loss or nonconformance of shipping documents.

liabilities outstanding for any person on account of such guarantees or agreements which when aggregated with other obligations of the same person exceed the limit contained in section 5200 of the Revised Statutes (12 U.S.C. 84);

(2) Accept drafts or bills of exchange drawn upon it; however, such acceptances that are of the type described in paragraph 7 of section 13 of the FRA (12 U.S.C. 372) shall be subject to the amount limitations provided therein and such acceptances that are of the type described in paragraph 12 of section 13 of the FRA shall be subject to the amount limitations provided therein;

(3) Invest in (i) the securities of the central bank, clearing houses, governmental entities, and government-sponsored development banks of the country in which the foreign branch is located, (ii) other debt securities eligible to meet local reserve or similar requirements, and (iii) shares of professional societies, schools, and the like necessary to the business of the branch; however, the branch's total investments under this provision (exclusive of securities held as required by the law of that country or as authorized under section 5136 of the Revised Statutes (12 U.S.C. 24)) shall not exceed one per cent of its total deposits on the preceding year-end call report date (or on the date of acquisition in the case of a newly established branch that has not so reported);

(4) Underwrite, distribute, buy, and sell obligations of the national government of the country in which the branch is located, obligations of an agency or instrumentality of the national government, and obligations of a municipality or other local or regional governmental entity of the country; however, no member bank may hold, or be under commitment with respect to, obligations of the government or governmental entities of a country as a result of underwriting, dealing, or purchasing for the bank's own account an aggregate amount exceeding 10 per cent of the member bank's capital and surplus;

(5) Take liens or other encumbrances on foreign real estate in connection with its extensions of credit,

whether or not of first priority and whether or not the real estate is improved or has been appraised, and without regard to maturity or amount limitations or amortization requirements of section 24 of the FRA (12 U.S.C. 371);

(6) Extend credit up to $100,000 or its equivalent to an officer of the bank residing in the country in which the foreign branch is located to finance the acquisition or construction of living quarters to be used as the officer's residence abroad, provided any such credit extension is reported promptly to the branch's home office; however, when necessary to meet local housing costs, such amount may be exceeded with the specific prior approval of the member bank's board of directors;

(7) Act as insurance agent or broker; (8) Pay to an employee of the branch, as part of an employee benefit program, a greater rate of interest than that paid to other depositors of the branch; and

(9) Engage in repurchase arrangements involving commodities and securities that are the functional equivalent of extensions of credit.

(c) Other permissible activities. A member bank that is of the opinion that activities other than those specified in this section are usual in connection with the transaction of the business of banking in the places where its branches transact business may apply to the Board for permission to engage in such activities.

(d) Reserves. Reserves shall be maintained against foreign branch deposits when required by Part 204 of this chapter (Regulation D).

[44 FR 36007, June 20, 1979, as amended at 46 FR 18016, Mar. 23, 1981]

§ 211.4 Edge and agreement corporations.

(a) Organization. (1) A proposed Edge Corporation shall become a body corporate when the Board issues a preliminary permit approving its proposed name, articles of association, and organization certificate. The name shall include "international," "foreign," "overseas," or some similar word, but may not resemble the name of another organization to an extent

that might mislead or deceive the public. The factors that will be considered by the Board in acting on a proposal to organize an Edge Corporation include:

(i) The financial condition and history of the applicant;

(ii) The general character of its management;

(iii) The convenience and needs of the community to be served with respect to international banking and financing services; and

(iv) The effects of the proposal on competition.

The Board will publish in the FEDERAL REGISTER notice of any such proposal and will give interested persons an opportunity to express their views on the proposal.

(2) After the Board issues a preliminary permit, the Edge Corporation may elect officers and otherwise complete its organization, invest in obligations of the United States Government, and maintain deposits with banks, but it may not exercise any other powers until the Board has issued a final permit to commence business. No amendment to the articles of association shall become effective until approved by the Board.

(b) Nature and ownership of shares. (1) Shares of stock in an Edge corporation may not include no-par value shares and shall be issued and transferred only on its books and in compliance with section 25(a) of the FRA. The share certificates of an Edge Corporation shall (i) name and describe each class of shares indicating their character and any unusual attributes such as preferred status or lack of voting rights; and (ii) conspicuously set forth the substance of (A) limitations upon the rights of ownership and transfer of shares imposed by section 25(a) of the FRA, and (B) rules that the Edge Corporation shall prescribe in its by-laws to ensure compliance with this paragraph. Any change in status of a shareholder that causes a violation of section 25(a) of the FRA shall be reported to the Board as soon as possible, and the Edge Corporation shall take such action as the Board may direct.

(2) One or more foreign or domestic institutions referred to in section 3(f)

of the IBA may apply for the Board's prior approval to acquire a majority of the shares of the capital stock of an Edge Corporation. In acting on an application by a foreign institution that is not subject to the IBA or the BHCA, the Board will impose any conditions that are necessary to prevent undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices in the United States. The aggregate amount invested in Edge Corporations by a foreign institution shall not exceed 10 percent of the foreign institution's capital and surplus.

(c) Branches. (1) With prior Board approval, an Edge Corporation may establish branches in the United States. In acting on a proposal to establish a branch in the United States, the Board will consider the same factors enumerated in § 211.4(a)(1). The Board will publish in the FEDERAL REGISTER notice of any proposal to establish a branch in the United States and will give interested persons an opportunity to express their views on the proposal.

(2) An Edge Corporation may establish branches abroad in accordance with the procedures in § 211.3(a).

(d) Reserve requirements and interest rate limitations. The deposits of an Edge Corporation are subject to the reserve requirements of Part 204 (Regulation D) and the interest rate limitations of Part 217 (Regulation Q) in the same manner and to the same extent as if the Edge Corporation were a member bank, except as may be otherwise provided by the Board.

(e) Permissible activities in the United States. An Edge Corporation may engage in activities in the United States that are permitted by the sixth paragraph of section 25(a) of the FRA and in such other activities as the Board determines are incidental to international or foreign business. The following activities will ordinarily be considered incidental to an Edge Corporation's international or foreign business:

(1) Deposits from foreign governments and persons. An Edge Corporation may receive in the United States demand, savings, and time deposits (including negotiable certificates of de