For immediate release

The Federal Reserve Board announced today its approval of the application of The Cyprus Popular Bank, Nicosia, Cyprus, to establish a state-licensed branch in New York, New York. Attached is the Board's Order relating to this action.

The Cyprus Popular Bank, Ltd. Nicosia, Cyprus Order Approving Establishment of a Representative Office

The Cyprus Popular Bank, Ltd. ("Bank"), Nicosia, Cyprus, 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 submit comments, has been published in a newspaper of general circulation in New York, New York (The Wall Street Journal, July 13, 1992). The time for filing comments has expired, and the Board has considered the application and all comments received. Bank, with $5 billion in consolidated assets,1 is a commercial bank chartered in Cyprus. The Hongkong and Shanghai Banking Corporation ("HSBC"), a commercial banking organization, and Lanitis EC Estates Ltd., a Cypriot property development company, each own more than 10 percent but less than 25 percent of the shares of Bank. Bank's remaining shares are widely held. Bank is principally engaged in commercial and retail lending, trade finance, foreign exchange, and money market transactions. Bank operates approximately 140 branches in Cyprus, six branches in the United Kingdom, five representative offices in Australia, and representative offices in Canada and South Africa.2 Bank does not engage, directly or indirectly, in any activities in the United States. The proposed representative office would provide market research, advisory, solicitation, and customer relations services on behalf of Bank. 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, has furnished to the Board the information it needs to assess adequately the application, is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor, and has provided adequate assurances of access to information on the operations of the bank and its affiliates to determine compliance with U.S. laws. (12 U.S.C. § 3107(a); 12 C.F.R. 211.24(d)). The Board also may 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.3 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.4 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. With respect to home country supervision of Bank, the Board has considered the following information. Bank is subject to the supervisory authority of the Central Bank of Cyprus ("Central Bank"). The Central Bank is the supervisory authority for all banks licensed in Cyprus, including Bank. The Central Bank obtains information on Bank's financial condition and compliance with law through direct on-site examinations, which generally are conducted every one to two years. The examiners assess Bank's operations through the review of management, lending procedures, asset quality, liquidity management, capital adequacy, profitability, internal controls, and compliance with regulations and guidelines. Examination findings are reviewed with Bank management. The Central Bank also meets with representatives of Bank and its external auditors each year to discuss any significant supervisory issues that may have arisen during examinations. In addition to oversight through direct examinations, the Central Bank receives periodic financial reports from Bank. These include weekly liquidity returns as well as monthly balance sheets. Foreign exchange position reports are submitted quarterly, and income statements, capital adequacy reports, credit card operations reports, and reports on credit facilities to customers and directors are submitted semi-annually. The Central Bank uses these reports to identify problems and to verify regulatory compliance. Bank's financial statements are audited annually by an independent external auditor. The Central Bank requires Bank to establish a system of internal monitoring and control that permits Bank to properly administer its operations. Bank monitors its domestic and overseas operations through periodic reports and on-site reviews by its internal audit staff. The proposed representative office would submit periodic reports to Bank's head office. Bank's internal auditors would conduct on-site examinations of the proposed representative office at least biannually, and senior Bank officers would visit the office periodically to ensure that the office is complying with applicable laws and regulations and with Bank policies and procedures. Based on all the facts of record, the Board has determined that factors relating to the supervision of Bank by its home country supervisors 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 Cyprus. 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 Central Bank does not object to Bank's establishing the proposed representative office. The Board also has determined that the financial and managerial factors are consistent with approval of the proposed representative office. Bank appears to have the experience and capacity to support the proposed 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 about Bank's operations, the Board has reviewed the applicable provisions of law in relevant jurisdictions, 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 certain information. In light of these commitments 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 and 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 this application is also specifically conditioned on Bank's compliance with the commitments made in connection with this 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 October 27, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 Data are as of December 31, 1996. 2 Bank also holds a 57 percent ownership interest in European Popular Bank S.A., a commercial bank in Greece established as a joint venture among Bank, HSBC and other Cypriot corporations and individuals. In addition, Bank has six wholly owned nonbanking subsidiaries, all of which are registered in Cyprus, engaged in installment finance, insurance, investment banking, factoring, and property development. 3 See 58 Federal Register 6348, 6351 (1993). 4 See Citizens National Bank, 79 Federal Reserve Bulletin 805 (1993). 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, to license the proposed representative office of Bank in accordance with any terms or conditions that the New York State Banking Department may impose. 6 Voting for this action: Chairman Greenspan, Vice-Chair Rivlin, and Governors Kelley and Meyer. Absent and not voting: Governor Phillips.

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1997 Orders on banking applications