Code Section Group

Financial Code - FIN

DIVISION 1.1. BANKING [1000 - 1910]

  ( Division 1.1 added by Stats. 2011, Ch. 243, Sec. 3. )

CHAPTER 20. Foreign (Other Nation) Banks [1750 - 1835]

  ( Chapter 20 added by Stats. 2011, Ch. 243, Sec. 3. )

ARTICLE 3. Agencies and Branch Offices [1800 - 1813]
  ( Article 3 added by Stats. 2011, Ch. 243, Sec. 3. )

1800.
  

(a) No foreign (other nation) bank shall transact business in this state except at an agency or branch office that it is licensed to maintain and at which it is permitted by this chapter to transact the business transacted.

(b) Subdivision (a) shall not be deemed to prohibit:

(1) Any foreign (other nation) bank that maintains a federal agency or federal branch in this state from transacting at the federal agency or federal branch any business that it may be authorized to transact under applicable federal laws and regulations;

(2) Any foreign (other nation) bank from carrying on the activities described in subdivision (d) of Section 191 of the Corporations Code;

(3) Any foreign (other nation) bank that does not maintain an agency or branch office from making in this state loans secured by liens on real property located in this state; or

(4) Any foreign (other nation) bank that does not maintain an agency or branch office from transacting trust business as permitted under Section 1555.

(c) For purposes of subdivision (a), no foreign (other nation) bank shall be deemed to be transacting business in this state merely because a majority-owned subsidiary transacts business in this state.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1801.
  

No foreign (other nation) bank shall be licensed to maintain any agency or branch office unless it is qualified to transact intrastate business in this state under Chapter 21 (commencing with Section 2100) of Division 1 of Title 1 of the Corporations Code.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1802.
  

No foreign (other nation) bank shall be licensed to maintain a retail branch office unless the deposits in such office are insured by the Federal Deposit Insurance Corporation in accordance with the provisions of the Federal Deposit Insurance Act.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1803.
  

(a) (1) No foreign (other nation) bank shall establish or maintain an agency or branch office unless the commissioner shall have first approved the establishment of that office and issued a license authorizing the bank to maintain the office.

(2) Paragraph (1) shall not be deemed to prohibit a foreign (other nation) bank from establishing or maintaining a federal agency or federal branch in this state.

(b) If the commissioner finds the following with respect to an application by a foreign (other nation) bank for approval to establish an agency or branch office, the commissioner shall approve the application:

(1) That the bank, any controlling person of the bank, the directors and executive officers of the bank or of any controlling person of the bank, and the proposed management of the office are each of good character and sound financial standing.

(2) That the financial history and condition of the bank are satisfactory.

(3) That the management of the bank and the proposed management of the office are adequate.

(4) That it is reasonable to believe that, if licensed to maintain the office, the bank will operate the office in a safe and sound manner and in compliance with all applicable laws, regulations, and orders.

(5) That the bank’s plan to establish and to maintain the office affords reasonable promise of successful operation.

(6) That the bank’s establishment and maintenance of the office will promote the public convenience and advantage.

(7) In case the office is to be a branch office, that the foreign nation where the bank is domiciled permits banks organized under the laws of this state and national banks headquartered in this state to establish and maintain in those foreign nation offices substantially equivalent to agencies, offices substantially equivalent to branch offices, or wholly (except for directors’ qualifying shares) owned banks organized under the laws of the foreign nation.

If the commissioner finds otherwise, the commissioner shall deny the application.

(c) Whenever an application by a foreign (other nation) bank for approval to establish an agency or branch office has been approved and all conditions precedent to the issuance of a license authorizing the bank to maintain the office have been fulfilled, the commissioner shall issue the license.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1804.
  

(a) No foreign (other nation) bank which is licensed to maintain an agency or branch office shall relocate such office unless the commissioner shall have first approved such relocation and issued a license authorizing such bank to maintain the office at the new site.

(b) If the commissioner finds the following with respect to an application by a foreign (other nation) bank for approval to relocate any agency or branch office, the commissioner shall approve such application:

(1) In case the new site of the office is in the same vicinity as the old site:

(A) That it will not be unsafe or unsound for the bank to relocate the office; and

(B) That the relocation of the office will not be substantially detrimental to the public convenience and advantage, or that the relocation is necessary in the interests of the safety and soundness of the bank; or

(2) In case the new site of the office is not in the same vicinity as the old site:

(A) That the bank’s plan to relocate the office and to maintain the office at the new site affords reasonable promise of successful operation;

(B) That the relocation of the office from the old site will not be substantially detrimental to the public convenience and advantage in the area which is primarily served by the office at the old site, or that the relocation is necessary in the interests of the safety and soundness of the bank; and

(C) That the relocation of the office to the new site will promote the public convenience and advantage.

If the commissioner finds otherwise, the commissioner shall deny the application.

(c) Whenever an application by a foreign (other nation) bank for approval to relocate an agency or branch office has been approved and all conditions precedent to the issuance of a license authorizing such bank to maintain such office at the new site have been fulfilled, the commissioner shall issue such license.

(d) Promptly after a foreign (other nation) bank which is licensed to maintain an agency or branch office relocates such office, such bank shall surrender to the commissioner the license which authorized it to maintain such office at the old site.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1805.
  

(a) A foreign (other nation) bank that is licensed to maintain an agency or branch office may transact commercial banking business at the office, subject to the following:

(1) In case the office is a nondepositary agency, the bank shall not transact the business of accepting deposits.

(2) In case the office is a depositary agency, the bank shall not transact the business of accepting any deposits other than deposits of (A) a foreign nation, (B) an agency or instrumentality of a foreign nation, or (C) a person which resides, is domiciled, and maintains its principal place of business in a foreign nation. For purposes of this paragraph, “person” means any individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, limited liability company, or any other organization or any branch or division thereof.

(3) In case the office is a limited branch office, the bank shall not transact the business of accepting any deposits other than (A) deposits of the kind described in paragraph (2), or (B) deposits that a corporation organized under Section 25A of the Federal Reserve Act (12 U.S.C. Sec. 612 et seq.) is permitted to accept.

(4) In case the office is a wholesale branch office, the bank shall not transact the business of accepting any deposits other than (A) deposits of the kind described in paragraph (2), (B) deposits of two hundred fifty thousand dollars ($250,000) or more, or (C) deposits the acceptance of which the commissioner determines by regulation or order do not constitute engaging in domestic retail deposit activities requiring deposit insurance protection.

(5) In case the office is an agency, limited branch office, or wholesale branch office, the bank may, subject to any regulations that the commissioner may prescribe, maintain credit balances.

(6) In any case, the bank shall not transact any business that it is not authorized to transact or is prohibited from transacting under the law of its domicile or that commercial banks organized under the laws of this state are not authorized to transact or are prohibited from transacting.

(b) No foreign (other nation) bank that is licensed to maintain an agency or branch office shall transact any trust business at the office except as permitted under Section 1555.

(Amended by Stats. 2013, Ch. 334, Sec. 42. Effective January 1, 2014.)

1806.
  

(a) In addition to other provisions of this division and Division 1 (commencing with Section 99) that are otherwise applicable to or with respect to foreign (other nation) banks licensed to maintain nondepositary agencies, the following provisions of this division shall apply to or with respect to each foreign (other nation) bank licensed to maintain a nondepositary agency with respect to its business in this state as if the bank were a commercial bank organized under the laws of this state:

(1) Article 6 (commencing with Section 405) of Chapter 3 of Division 1.

(2) Chapter 6 (commencing with Section 550) of Division 1.

(3) Chapter 4.5 (commencing with Section 1090).

(4) Chapter 17 (commencing with Section 1620).

(5) Chapter 19 (commencing with Section 1670).

(b) In addition to other provisions of this division and Division 1 (commencing with Section 99) which are otherwise applicable to or with respect to foreign (other nation) banks licensed to maintain depositary agencies or branch offices, the following provisions of this division and Division 1 (commencing with Section 99) shall apply to or with respect to each foreign (other nation) bank licensed to maintain a depositary agency or branch office with respect to its business in this state as if the bank were a commercial bank organized under the laws of this state:

(1) Article 6 (commencing with Section 405) of Chapter 3 of Division 1.

(2) Chapter 6 (commencing with Section 550) of Division 1.

(3) Chapter 4.5 (commencing with Section 1090).

(4) Chapter 10 (commencing with Section 1320).

(5) Chapter 12 (commencing with Section 1400).

(6) Chapter 13 (commencing with Section 1450).

(7) Chapter 14 (commencing with Section 1460).

(8) Chapter 17 (commencing with Section 1620).

(9) Chapter 19 (commencing with Section 1670).

(10) Section 1864 and Article 2 (commencing with Section 1900), Article 3 (commencing with Section 1905), and Article 4 (commencing with Section 1910) of Chapter 21.

(c) Whenever any provision of this chapter or of any regulation or order issued under this chapter that is applicable to or with respect to foreign (other nation) banks licensed to transact business in this state is inconsistent with any provision of any other chapter of this division and Division 1 (commencing with Section 99) that is applicable to or with respect to foreign (other nation) banks licensed to transact business in this state, the former provision shall apply, and the latter provision shall not apply.

(d) (1) Whenever any provision of this division (other than the provisions of this chapter) and Division 1 (commencing with Section 99) is applicable to or with respect to foreign (other nation) banks licensed to transact business in this state, the provision shall be applied with any changes in points of detail as may be necessary or appropriate.

(2) Without limiting the provisions of paragraph (1), for purposes of any provision of this division (other than the provisions of this chapter) and Division 1 (commencing with Section 99) that is applicable to or with respect to a foreign (other nation) bank licensed to transact business in this state:

(A) “Approved by (or approval of) the board” means approved or ratified by the board of the bank, by a committee of the board authorized to exercise the powers of the board with respect to the particular matter, or by an officer of the bank who is assigned to the head office of the bank and who has authority over the bank’s business in this state, including authority to approve or ratify the particular matter.

(B) “Head office” means the primary office of the bank.

(C) “Shareholders’ equity” means the shareholders’ equity of the bank or, if the bank has no shareholders’ equity, the closest equivalent account or accounts.

(e) Whenever any provision of this division (other than the provisions of this chapter) and Division 1 (commencing with Section 99) that is applicable to or with respect to a foreign (other nation) bank licensed to transact business in this state limits the amount of any assets or liabilities of the bank (including, by way of example, the amount of borrowings of, obligations to, or investments of the bank), for purposes of calculating the amount of the assets or liabilities, only the assets or liabilities of the agencies or branch offices of the bank shall be included, and the assets and liabilities of offices of the bank outside this state shall be excluded.

(Amended by Stats. 2013, Ch. 334, Sec. 43. Effective January 1, 2014.)

1807.
  

(a) Whenever the commissioner calls for a report under Section 453 from commercial banks organized under the laws of this state, the commissioner shall call for a report from each foreign (other nation) bank that is licensed to transact business in this state.

(b) (1) A foreign (other nation) bank that is licensed to transact business in this state shall prominently display in the lobby of each agency and branch office, except an automated teller machine branch office (as defined in Section 1330), a notice that any person may obtain a financial report from the bank. The notice shall include the address and telephone number of the person or office to be contacted for a financial report. The bank shall, promptly after receiving a request for a financial report, mail or otherwise furnish the financial report to the requester. The first financial report shall be provided without charge.

(2) The financial report called for in this subdivision shall contain either (A) the information that the commissioner may require by regulation or (B) in the absence of a regulation, the last balance sheet and income statement, each without any schedules, that the bank filed with the commissioner pursuant to Section 453.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1808.
  

Each foreign (other nation) bank which is licensed to maintain a depositary agency, limited branch office, or wholesale branch office shall, in accordance with such regulations as the commissioner may prescribe, give notice that deposits in such office are not insured by the Federal Deposit Insurance Corporation.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1809.
  

(a) In case a foreign (other nation) bank is licensed to maintain a depositary agency or branch office and such office is not subject to the regulations of the Depository Institutions Deregulation Committee, Regulation Q of the Board of Governors of the Federal Reserve System, or Part 329 of the regulations of the Federal Deposit Insurance Corporation, such bank shall, with respect to deposits accepted at the office, comply with such regulations regarding maximum interest rates on deposits, prepayment of time deposits, and related matters as the commissioner may prescribe as being necessary and appropriate to maintain competitive equality between foreign (other nation) banks and banks organized under the laws of this state which are subject to the regulations of the Depository Institutions Deregulation Committee, Regulation Q of the Board of Governors of the Federal Reserve System, or Part 329 of the regulations of the Federal Deposit Insurance Corporation.

(b) For purposes of, and notwithstanding any contrary provisions of, Chapter 3.5 (commencing with Section 11340), Part 1 of Division 3 of Title 2 of the Government Code, whenever the commissioner adopts a regulation or order of repeal of a regulation under subdivision (a), the commissioner may, without describing specific facts showing the need for immediate action, find that adoption of such regulation or order of repeal is necessary for the immediate preservation of the public peace, health and safety, or general welfare, and such regulation or order of repeal shall be deemed to be necessary for the immediate preservation of the public peace, health and safety, or general welfare.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1810.
  

(a) Each foreign (other nation) bank which is licensed to transact business in this state shall keep the assets of such business separate and apart from the assets of its business outside this state.

(b) The creditors of the business in this state of a foreign (other nation) bank which is licensed to transact business in this state shall be entitled to priority over other creditors with respect to the assets of such bank’s business in this state.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1811.
  

(a) In this section:

(1) “Adjusted liabilities,” when used with respect to a foreign (other nation) bank, means the liabilities of such bank’s business in this state, excluding (A) accrued expenses, (B) any liability to an office (whether in or outside of this state) or majority-owned subsidiary of the bank, and (C) such other liabilities as the commissioner may by regulation or order exclude.

(2) “Applicable minimum,” when used with respect to eligible assets deposited or to be deposited with an approved depository by a foreign (other nation) bank, means such amount as the commissioner may from time to time by regulation or order determine to be necessary for the maintenance of sound financial condition, for the protection of the interests of creditors of the bank’s business in this state, or for the protection of the public interest. However, in the case of a foreign (other nation) bank which is licensed to maintain a branch office, the applicable minimum shall in no event be less than 1 percent of the adjusted liabilities of such bank.

(3) “Approved depository,” when used with respect to a foreign (other nation) bank, means a bank organized under the laws of this state or a national bank headquartered in this state which has been selected by such foreign (other nation) bank and approved by the commissioner for the purpose of acting as the approved depository of the foreign (other nation) bank and which has filed with the commissioner, in such form as the commissioner may by regulation or order prescribe, an agreement to comply with all applicable provisions of this section and of any regulation or order issued under this section.

(4) “Eligible assets” when used with respect to a foreign (other nation) bank, means any of the following:

(A) Cash.

(B) Any security of the type described in Section 1572.

(C) Any negotiable certificate of deposit which (i) has a maturity of not more than one year, (ii) is payable in the United States, and (iii) is issued by a bank organized under the laws of a state of the United States, by a national bank, or by a branch office of a foreign (other nation) bank which is located in the United States.

(D) Any commercial paper which is payable in the United States and which is rated P-1 or its equivalent by a nationally recognized rating service; provided, however, that any conflict in rating shall be resolved in favor of the lower rating.

(E) Any banker’s acceptance which is payable in the United States and which is eligible for discount with a Federal Reserve bank.

(F) Any other asset which the commissioner by regulation or order determines to be eligible.

Notwithstanding the foregoing provisions of this paragraph, “eligible asset,” when used with respect to a foreign (other nation) bank, does not include any instrument the issuer of which (i) is, or is affiliated with, such foreign (other nation) bank, (ii) is domiciled in, or controlled by a bank or other person domiciled in, the same foreign nation as the foreign (other nation) bank, or (iii) is, or is controlled by, such foreign nation. For purposes of the foregoing provision, to be “affiliated” means to control, to be controlled by, or to be under common control with; and to “control” has the meaning set forth in subdivision (b) of Section 1250.

(b) For purposes of this section:

(1) The amount of adjusted liabilities of a foreign (other nation) bank’s business in this state shall be computed for such period, in such manner, and on such basis as the commissioner may by regulation or order prescribe.

(2) Any eligible asset shall be valued at the lesser of market or par.

(c) (1) Before any foreign (other nation) bank is licensed to transact business in this state, such bank shall deposit, and each foreign (other nation) bank which is licensed to transact business in this state shall maintain on deposit, with an approved depository eligible assets having a value in an amount not less than the applicable minimum.

(2) Whenever a foreign (other nation) bank which is licensed to transact business in this state ceases to be so licensed, such bank shall thereafter maintain on deposit with an approved depository eligible assets having a value in an amount not less than the applicable minimum for such period of time as the commissioner may determine to be necessary for the protection of creditors of the bank’s business in this state or for the protection of the public interest.

(d) (1) No foreign (other nation) bank which maintains eligible assets on deposit with an approved depository pursuant to this section shall withdraw any such eligible assets except with the prior approval of the commissioner.

(2) No approved depository which holds eligible assets on deposit from a foreign (other nation) bank pursuant to this section shall release any such eligible assets except with the prior approval of the commissioner or as otherwise provided in subdivision (h).

(e) Any foreign (other nation) bank which maintains eligible assets on deposit with an approved depository pursuant to this section shall, unless the commissioner shall have suspended or revoked its license to transact business in this state or taken possession of its property and business in this state, be entitled to receive any income paid on such eligible assets.

(f) (1) Whenever a foreign (other nation) bank deposits eligible assets with, or withdraws eligible assets from, an approved depository pursuant to this section, such bank shall do so in accordance with such procedures and requirements as the commissioner may by regulation or order prescribe.

(2) Whenever an approved depository receives, holds, or releases eligible assets pursuant to this section, such approved depository shall do so in accordance with such procedures and requirements as the commissioner may by regulation or order prescribe and shall file with the commissioner such reports as and when the commissioner may by regulation or order require.

(g) Whenever a foreign (other nation) bank maintains eligible assets on deposit with an approved depository pursuant to this section:

(1) The eligible assets shall be deemed to be pledged to the commissioner for the benefit of the creditors of the bank’s business in this state; and, notwithstanding any provision of the Uniform Commercial Code to the contrary, the commissioner, for the benefit of such creditors, shall be deemed to have a security interest in such eligible assets.

(2) The eligible assets shall be free from any lien, charge, right of setoff, credit, or preference in connection with any claim of the approved depository against the bank.

(h) (1) In case the commissioner takes possession of the property and business of a foreign (other nation) bank which maintains eligible assets on deposit with an approved depository pursuant to this section, such approved depository shall, upon order of the commissioner, release such eligible assets to the commissioner, as liquidator of the property and business of such bank.

(2) In case a foreign (other nation) bank which maintains eligible assets on deposit with an approved depository pursuant to this section fails to pay any judgment creditor of its business in this state and the commissioner has not taken possession of the property and business of such bank, such approved depository shall release such eligible assets to the commissioner, and the commissioner shall make such disposition of the eligible assets, as a court of competent jurisdiction of this state or of the United States may order for the benefit of such judgment creditor. For purposes of this paragraph, “judgment creditor of its business in this state” means a person to whom the bank is required to pay money under a judgment which (A) arose out of the bank’s business in this state, (B) has been entered by a court of this state or of the United States, (C) has become final, in that all possibility of direct attack on such judgment by way of appeal, motion for new trial, motion to vacate, or petition for extraordinary writ has been exhausted, and (D) has remained unpaid for a period of not less than 60 days after becoming final.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1812.
  

(a) In this section:

(1) “Adjusted liabilities,” when used with respect to a foreign (other nation) bank which is licensed to maintain a branch office in this state, means the liabilities of such bank’s business in this state, excluding (A) accrued expenses, (B) any liability to an office (whether in or outside of this state) or majority-owned subsidiary of the bank, and (C) such other liabilities as the commissioner may by regulation or order exclude.

(2) “Eligible assets” means any asset which the commissioner by regulation or order determines to be eligible for purposes of this section. However, “eligible asset,” when used with respect to a foreign (other nation) bank which is licensed to maintain a branch office, includes (A) any asset which such bank maintains on deposit pursuant to Section 1811 and (B) any reserves which the bank maintains with respect to its business in this state in accordance with requirements prescribed by the Board of Governors of the Federal Reserve System.

(b) For purposes of this section, the amount of eligible assets and the amount of adjusted liabilities of a foreign (other nation) bank which is licensed to maintain a branch office in this state shall each be computed for such period, in such manner, and on such basis as the commissioner may by regulation or order prescribe.

(c) A foreign (other nation) bank licensed to maintain a branch office in this state shall hold at its branch offices in this state or at such other places as the commissioner may approve, eligible assets in such amount, if any, as the commissioner may from time to time by regulation or order determine to be necessary for the maintenance of sound financial condition, for the protection of the interests of creditors of the bank’s business in this state, or for the protection of the public interest. However, in no event shall such amount exceed 108 percent of the adjusted liabilities of the bank’s business in this state.

(d) If the commissioner finds, with respect to a foreign (other nation) bank licensed to maintain a branch office in this state, that such action is necessary for the maintenance of sound financial condition, for the protection of the interests of creditors of such bank’s business in this state, or for the protection of the public interest, the commissioner may order the bank to place all or part of the eligible assets which the bank is required to hold under subdivision (c) in the custody of such bank organized under the laws of this state or such national bank headquartered in this state as the commissioner may designate.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

1813.
  

(a) (1) No foreign (other nation) bank which is licensed to maintain an agency or branch office shall close such office unless the commissioner shall have first approved such closing.

(2) Paragraph (1) shall not be deemed to prohibit a foreign (other nation) bank which is licensed to maintain an agency or branch office from closing such office in accordance with Article 4 (commencing with Section 1825).

(b) If the commissioner finds the following with respect to an application by a foreign (other nation) bank for approval to close an agency or branch office, the commissioner shall approve such application:

(1) That it will not be unsafe or unsound for the bank to close the office; and

(2) That the closing of the office will not be substantially detrimental to the public convenience and advantage or that the closing of the office is necessary in the interests of the safety and soundness of the bank.

If the commissioner finds otherwise, the commissioner shall deny the application.

(c) Whenever an application by a foreign (other nation) bank for approval to close an agency or branch office has been approved and all conditions precedent to such closing have been fulfilled, such bank may close such office and shall promptly thereafter surrender to the commissioner the license which authorized it to maintain the office.

(Added by Stats. 2011, Ch. 243, Sec. 3. Effective January 1, 2012.)

FINFinancial Code - FIN3.