March 24, 1997

Re: Issuance of Guarantee by ________, San Fancisco
International Branch, in favor of ________, N.V. Subsidiaries

Dear Mr. ________:

This is in response to your letter of December 2, 1996.

Your letter asks whether the ________ Branch (the “San Francisco Branch”) of _________, N.V. may issue guarantees in favor of subsidiaries of ___________, N.V. You described the guarantee program as follows:

The San Francisco Branch wants to issue guarantees in connection with credit facilities extended to its customers with worldwide borrowing needs (“Global Customers”). The credit facility offered to the Global Customers by the San Francisco Branch is an “umbrella facility” which establishes the maximum amount of credit available to a Global Customer at ________ (“Bank”), any branch of Bank and any subsidiaries of Bank. A Global Customer may receive funds from its umbrella facility via either direct borrowings or lines of credit. For each of its Global Customers, the San Francisco Branch maintains the primary credit relationship, processes and obtains the necessary credit approval and is the primary party on the loan documents which set forth the reimbursement obligations of the Global Customer. The San Francisco Branch would then issue the guarantees (“Global Guarantees”) in favor of the subsidiaries making loans under the umbrella facility, thereby assuming the credit risk for the entire umbrella facility.

As a California branch of a foreign (other nation) bank, the San Francisco Branch is subject to Division 1 (commencing with Section 99) of the California Financial Code (“Division 1”). Nothing in Division 1 prohibits the branch of a foreign (other nation) bank from guaranteeing loans made to its customers by subsidiaries of the bank. Accordingly, we do not object to the proposal set forth in your letter, per se.

However, Global Guarantees would be subject to scrutiny under principles of safety and soundness. Generally, whether an activity is considered safe and sound is considered in the context of all relevant circumstances on a case-by-case basis. Also, a Global Guarantee of the debt of any Global Customer would be aggregated with other obligations of the Global Customer to the San Francisco Branch for lending limit purposes. See California Financial Code Sections 1220, et seq., and 1756(b).

The Superintendent’s regulatory jurisdiction with respect to the San Francisco Branch derives from Division 1. Therefore, this response relates exclusively to Division 1. We offer no opinion regarding any other law, state or federal, that may apply to Global Guarantees. Furthermore, this response is based on the facts and circumstances stated above. Should those facts change, our opinion might be different.

If you have any questions, please feel free to contact me at (415) 263-8512.

Very truly yours,

Superintendent of Banks


Senior Counsel


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