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FDIC qualifies spot and other short-term foreign exchange agreements and repurchase agreements as “qualified financial contracts” under FDI Act
The Federal Deposit Insurance Corporation (FDIC) has issued a final rule to include spot and other short-term foreign exchange agreements and repurchase agreements on qualified government securities within the definition of “qualified financial contracts” under the Federal Deposit Insurance (FDI) Act. Sections 11(e)(8) through (10) of the FDI Act [12 U.S.C. 1821(e)(8) through (10)] provide special rules for the treatment of qualified financial contracts in the event the FDIC is appointed receiver or conservator for an insured depository institution. For example, the FDI protects parties to qualified financial contracts by permitting the liquidation, termination, and netting of their agreements. The FDIC has determined that such agreements are similar to SWAP agreements (which are included with the qualified financial contract provisions of the FDI Act).
The rule makes clear that short-dated foreign exchange transactions such as spots, tomorrow/next day and same day/tomorrow transactions are similar to those agreements identified within the statute as SWAP agreements. It also expands the definition of “qualified financial contract” to include repurchase agreements on securities issued or guaranteed by the central governments of countries that are either full OECD members or have concluded special lending arrangements with the IMF.
The effective date of the rule was December 27, 1995.
Citation: 60 Federal Register 66863-01 (December 27, 1995).
Filed in: 1996 International Law Update, Issue 2
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U.S. Federal Reserve issues rules on international operations of U.S. banking organizations
Regulation K of the Board of Governors of the U.S. Federal Reserve System contains the rules for foreign activities of U.S. banking organizations, including procedures for investing in foreign banking and non-banking organizations. Under Section 211.5(c), U.S. banks must make all such investments according to the general consent, prior notice, or specific consent procedures. Certain investments require no prior consent.
The Board has issued a final rule regarding the international operations of U.S. banking organizations that are strongly capitalized and well managed. The rule amends Subpart A of Regulation K to provide expanded general consent authority for investments in foreign companies by U.S. banking organizations. This expanded authority is designed to permit qualified U.S. banks to make larger investments without the need for prior approval or review. An investor who takes advantage of this rule must provide the Board with certain post-investment information.
The effective date of the rule was December 21, 1995.
Citation: 60 Federal Register 67050-01 (December 28, 1995).
Filed in: 1996 International Law Update, Issue 2
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European Community publishes draft communication on services for the general good under the Second Banking Directive
The EC Commission has published a communication on the Second Banking Directive (89/646/EEC), explaining its view on the freedom of services for banks operating in the EU. In this draft communication, the Commission interprets, for example: The nature of the services covered under the Directive, rules governing advertising, required notification to supervisory authorities, host-country rules adopted in the interest of the general good.
Interested parties may submit their comments by 4 March 1996 to the Directorate XV, Unit C-1, of the EC Commission.
Citation: Draft Commission Communication, Freedom to provide services and the interest of the general good in the Second Banking Directive, 1995 Official Journal of the European Communities (C 291) 7, 4 November 1995.
Filed in: 1996 International Law Update, Issue 1
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Japan and United States enter into agreements involving improved access by U.S. firms to Japanese markets in financial services
In the area of financial services, U.S. banks have long desired to operate on a more level playing field vis-à-vis Japanese financial institutions. In an exchange of letters done on February 13, 1995, the two financial giants negotiated a series of agreements designed to bring about more openness and less regulation in this area in Japan.
In general, they embody a qualified commitment to national and MFN treatment in the financial markets of the two countries. The U.S. also sets new conditions for the continued operation of Japanese financial institutions in the U.S. based on selected requirements of a comparable degree of reciprocity by Japan.
Citation: Japan-United States: Measures Regarding Financial Services, 34 I.L.M. 617-660 (1995).
Filed in: 1995 International Law Update, Issue 3
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