January 17, 1989

Re: Foreign Currency Deposits

Dear Mr. ________:

This responds to your letter of October 31, 1988, and your subsequent telephone call of December 9, 1988.

As I understand your inquiry, your wholesale branch of ________ would like to know if there are any limitations on your office accepting foreign currency deposits; specifically, foreign currency deposits from a California corporation (“Depositor”) which is a wholly owned subsidiary of a foreign corporation.

As a general rule, there is nothing in the Banking Law which specifically prohibits your office from accepting foreign currency deposits. There are, however, the accounting entry problems to be considered which you previously discussed with Mr. James E. Brodie, an Assistant Deputy Superintendent with this Department. From a legal perspective, we suggest that you focus on Depositor, rather than the monetary form of the deposit. The question is whether your office may accept a deposit from Depositor under your wholesale branch office license. For purposes of this discussion, it will be assumed that Depositor is a domestic corporation which has no ties to a foreign nation other than being owned by a foreign corporation.

Financial Code Section 1755(a)(4) restricts the deposits a wholesale branch office may accept to the following: (1) Deposits of a foreign nation, an agency or instrumentality of a foreign nation, or a person which resides, is domiciled, and maintains its principal place of business in a foreign nation; (2) deposits of $100,000 or more; and (3) deposits the acceptance of which the Superintendent determines by regulation or order do not constitute engaging in domestic retail deposit activities requiring deposit insurance protection. As we understand your inquiry, Depositor is not one of the persons described in (1). Whether you may rely upon (2) depends, of course, as to whether the corporation will deposit $100,000 or more, or its equivalent in foreign currency. If Depositor will not make such deposits, the next inquiry is whether (3) will allow your office to accept funds from Depositor.

Section 10.15627 of the Banking Regulations (10 California Code of Regulations, commencing at Section 1.1), promulgated under Section 1755(a)(4)(C), reads in pertinent part as follows:

“The following deposits are determined to be deposits the acceptance of which by a subject institution at its subject offices does not constitute engaging in domestic retail deposit activities requiring deposit insurance protection:

(a) Deposits of any business entity which engages in economic activity for profit, except:

(1) Any sole proprietorship; and

(2) Any business entity:

(A) Which is organized under the laws of the United States or of any state of the United States;

(B) Which is majority-owned by citizens or residents of the United States; and

(C) The total assets of which according to the statement for its most recent fiscal year as of the time of its first deposit at the subject offices of the subject institutions were less than $1,500,000. (For purposes of this Subparagraph (C), the total assets of a business entity shall be deemed to include the assets of its majority-owned subsidiaries and, in case such business entity is controlled by another person, the assets of such other person and of the majority-owned subsidiaries of such other person.)”

Since Depositor is a wholly owned subsidiary of a foreign corporation, it is not a corporation which is majority owned by United States citizens or its residents. Therefore, under the terms of Section 10.15627(a), your office may accept the funds of Depositor for deposit, regardless of the amount of deposits.

For convenience, I have enclosed copies of Section 1755 and Section 10.15627. I trust that this letter has responded to your needs.

Very truly yours,

Superintendent of Banks





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