For immediate release

The Federal Reserve Board announced today its approval of the application of Agricultural Bank of China, Beijing, People's Republic of China, to establish a representative office in New York, New York. Attached is the Board's Order relating to this action.

Agricultural Bank of China Beijing, People's Republic of China Order Approving Establishment of a Representative Office

Agricultural Bank of China ("Bank"), Beijing, People's Republic of China ("China"), a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a representative office in New York, New York. The Foreign Bank Supervision Enhancement Act of 1991, which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a representative office in the United States. Notice of the application, affording interested persons an opportunity to comment, has been published in a newspaper of general circulation in New York (The New York Times, January 6, 1997). The time for filing comments has expired, and the Board has considered the application and all comments received. Bank is the second largest of the four specialized banks in China and is wholly owned by the Chinese government. As of December 31, 1996, Bank had total assets of approximately $177 billion. Bank operates numerous offices and owns two subsidiaries in China. Outside China, Bank operates branches in Singapore and Hong Kong and representative offices in London, England, and Tokyo, Japan. Until recently, one of Bank's primary activities was receiving funds from China's federal, regional, and local authorities and other sources and lending such funds to support the development of agricultural and rural industrial production and expand the circulation of commodities. In connection with ongoing efforts to modernize the financial system, however, Bank now engages in more traditional commercial banking activities. The activities of Bank's proposed representative office would include marketing, research, and liaison activities. In addition, the representative office would engage in certain loan solicitation and servicing activities. All decisions regarding loans would be made by Bank's head office and the representative office would not receive or handle any funds in connection with its loan servicing activities. In acting on an application to establish a representative office, the IBA and Regulation K provide that the Board shall take into account whether the foreign bank engages directly in the business of banking outside of the United States and has furnished to the Board the information it needs to assess the application adequately. The Board also shall take into account whether the foreign bank and any foreign bank parent is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor (12 U.S.C. § 3107(a)(2); 12 C.F.R. 211.24(d)). The Board may also take into account additional standards as set forth in the IBA (12 U.S.C. § 3105(d)(3)-(4)) and Regulation K (12 C.F.R. 211.24(c)). The Board previously has stated that the standards that apply to the establishment of a branch or agency need not in every case apply to the establishment of a representative office, because representative offices do not engage in a banking business and cannot take deposits or make loans.1 In evaluating an application to establish a representative office under the IBA and Regulation K, the Board will take into account the standards that apply to the establishment of branches and agencies, subject generally to the following considerations. With respect to supervision by home country authorities, a foreign bank that proposes to establish a representative office should be subject to a significant degree of supervision by its home country supervisor.2 A foreign bank's financial and managerial resources will be reviewed to determine whether its financial condition and performance demonstrate that it is capable of complying with applicable laws and has an operating record that would be consistent with the establishment of a representative office in the United States. Finally, all foreign banks, whether operating through branches, agencies or representative offices, will be required to provide adequate assurances of access to information on the operations of the bank and its affiliates necessary to determine compliance with U.S. laws. The Board has considered the following information with respect to home country supervision of Bank. The People's Bank of China (the "PBOC") is the licensing, regulatory, and supervisory authority for banks and all other financial institutions in China and, as such, is the home country supervisor of Bank. The PBOC, which has authorized Bank to establish the proposed representative office, supervises the foreign and domestic activities of Bank and its subsidiaries. The Board previously has determined, in connection with an application involving another bank from China, the Industrial and Commercial Bank of China ("ICBC"), that ICBC was subject to a significant degree of supervision by the PBOC.3 The Board has determined that Bank is supervised by the PBOC on substantially the same terms and conditions as ICBC. Based on all the facts of record, the Board concludes that factors relating to the supervision of Bank by its home country supervisor are consistent with approval of the proposed representative office. The Board also has determined that, for purposes of the IBA and Regulation K, Bank engages directly in the business of banking outside of the United States through its operations in China. Bank has provided the Board with the information necessary to assess the application through submissions that address relevant issues. The Board also has taken into account the additional standards set forth in section 7 of the IBA and Regulation K (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). As noted above, the PBOC has authorized Bank to establish the proposed representative office. Taking into consideration Bank's record of operations in its home country, its overall financial resources, and its standing with its home country supervisors, the Board also has determined that financial and managerial factors are consistent with approval of the proposed representative office.4 Bank appears to have the experience and capacity to support the proposed representative office and also has established controls and procedures for the proposed representative office to ensure compliance with U.S. law. Finally, with respect to access to information on Bank's operations, the Board has reviewed the relevant provisions of law in China and has communicated with appropriate government authorities regarding access to information. Bank has committed to make available to the Board such information on the operations of Bank and any of its affiliates that the Board deems necessary to determine and enforce compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable federal law. To the extent that the provision of such information to the Board may be prohibited or impeded by law, Bank has committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties in connection with disclosure of such information. In addition, subject to certain conditions, the PBOC may share information on Bank's operations with other supervisors, including the Board. In light of the commitments provided by Bank and other facts of record, and subject to the condition described below, the Board concludes that Bank has provided adequate assurances of access to any necessary information the Board may request. On the basis of all the facts of record, and subject to the commitments made by Bank, as well as the terms and conditions set forth in this order, the Board has determined that Bank's application to establish a representative office should be, and hereby is, approved. Should any restrictions on access to information on the operations or activities of Bank or any of its affiliates subsequently interfere with the Board's ability to determine the compliance by Bank or its affiliates with applicable federal statutes, the Board may require termination of any of Bank's direct or indirect activities in the United States. Approval of the application is also specifically conditioned on compliance by Bank with the commitments made in connection with the application and with the conditions in this order.5 The commitments and conditions referred to above are conditions imposed in writing by the Board in connection with its decision, and may be enforced in proceedings under 12 U.S.C. § 1818 against Bank and its affiliates.

By order of the Board of Governors,6 effective May 14, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 See 58 Federal Register 6348, 6351 (1993). 2 See Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). 3 See Industrial and Commercial Bank of China, 83 Federal Reserve Bulletin 212 (1997). 4 One comment was received from Delta Tanning Corporation, North Bergen, New Jersey. The Board has reviewed the information submitted, which involves a commercial dispute with Bank, and determined that the information does not warrant denial of the application. 5 The Board's authority to approve the establishment of the proposed representative office parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York and its agent, the New York State Banking Department (the "Department"), to license the proposed representative office of Bank in accordance with any terms or conditions that the Department may impose. 6 Voting for this action: Vice Chair Rivlin and Governors Kelley, Meyer, and Phillips. Absent and not voting: Chairman Greenspan.

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1997 Orders on banking applications