Legal Developments: Fourth Quarter, 2008
Orders Issued under International Banking Act
Corpbanca
Santiago, Chile
Order Approving Establishment of a Branch
Corpbanca ("Bank"), Santiago, Chile, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 7(d) of the IBA1 to establish a federal branch 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 branch 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, New York (New York Post, July 11, 2007). The time for filing comments has expired, and all comments received have been considered.
Bank, with total consolidated assets of approximately $9.7 billion, is the fifth largest bank in Chile.2 Corp Group Banking S.A., Santiago, owns approximately 49.6 percent of Bank's shares.3 Two other entities, Compaña Inmobiliaria y de Inversiones Saga S.A. ("Saga") and Inversiones Mineras del Cantabrico S.A., directly own approximately 9.2 percent and 6.6 percent of Bank's shares, respectively. The remaining shares of Bank are held by the public. No other shareholder owns more than 5 percent of Bank's shares.
Bank provides a variety of banking services to retail and corporate customers. Bank's subsidiaries engage in insurance brokerage, securities brokerage, mutual fund management, financial advisory services, and legal advisory services. Bank, Silverstar, and the Personal Holding Companies would be qualifying foreign banking organizations under Regulation K.4
The proposed New York branch would be Bank's only office outside Chile. It would engage in a wholesale banking business, with a focus on trade finance, lending, and banking services for high-net-worth individuals.
Under the IBA and Regulation K, in acting on an application by a foreign bank to establish a branch, the Board must consider whether the foreign bank (1) engages directly in the business of banking outside of the United States; (2) has furnished to the Board the information it needs to assess the application adequately; and (3) is subject to comprehensive supervision on a consolidated basis by its home-country supervisor.5 The Board also considers additional standards set forth in the IBA and Regulation K.6 As noted above, Bank engages directly in the business of banking outside the United States. Bank also has provided the Board with information necessary to assess the application through submissions that address the relevant issues.
With respect to supervision by home-country authorities, the Board previously has determined, in connection with applications involving other banks in Chile, that those banks were subject to comprehensive supervision on a consolidated basis by the Superintendencia de Bancos e Instituciones Financieras ("SBIF"), Bank's primary home-country supervisor.7 Bank is supervised by the SBIF on substantially the same terms and conditions as those other banks. Based on all the facts of record, it has been determined that Bank is subject to comprehensive supervision on a consolidated basis by its home-country supervisor.8
The additional standards set forth in section 7 of the IBA and Regulation K also have been taken into account.9 The SBIF has no objection to the establishment of the proposed branch.
Chile's risk-based capital standards are consistent with those established by the Basel Capital Accord. Bank's capital is in excess of the minimum levels that would be required by the Basel Capital Accord and is considered equivalent to capital that would be required of a U.S. banking organization. Managerial and other financial resources of Bank are consistent with approval, and Bank appears to have the experience and capacity to support the proposed branch. In addition, Bank has established controls and procedures for the proposed branch to ensure compliance with U.S. law, as well as controls and procedures for its worldwide operations generally.
Chile is a member of GAFISUD (Financial Action Task Force of South America), which is an associate member of the Financial Action Task Force. Chile has enacted laws and created legislative and regulatory standards to deter money laundering. Money laundering is a criminal offense in Chile, and financial institutions are required to establish internal policies, procedures, and systems for the detection and prevention of money laundering throughout their worldwide operations. Bank has policies and procedures to comply with these laws and regulations. Bank's compliance with applicable laws and regulations is monitored by the SBIF and Bank's internal and external auditors.
With respect to access to information about Bank's operations, the restrictions on disclosure in relevant jurisdictions in which Bank operates have been reviewed and relevant government authorities have been communicated with regarding access to information. Bank, Silverstar, and the Personal Holding Companies have 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, and other applicable federal law. To the extent that the provision of such information to the Board may be prohibited by law or otherwise, Bank, Silverstar, and the Personal Holding Companies have committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties for disclosure of such information. In addition, subject to certain conditions, the SBIF may share information on Bank's operations with other supervisors, including the Board. In light of these commitments and other facts of record, and subject to the condition described below, it has been determined that Bank has provided adequate assurances of access to any necessary information that the Board may request.
Based on the foregoing and all the facts of record, Bank's application to establish the proposed branch is hereby approved.10 Should any restrictions on access to information on the operations or activities of Bank and its affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce 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, or in the case of any such operation licensed by the Office of the Comptroller of the Currency ("OCC"), recommend termination of such operation. Approval of this application also is specifically conditioned on compliance by Bank, Silverstar, and the Personal Holding Companies with the commitments made to the Board in connection with this application and with the conditions in this order.11 These commitments and conditions are deemed to be conditions imposed in writing by the Board in connection with this decision and, as such, may be enforced in proceedings under applicable law against Bank and its affiliates.
By order, approved pursuant to authority delegated by the Board, effective October 22, 2008.
Robert deV. Frierson
Deputy Secretary of the Board
1. 12 U.S.C. § 3105(d). Return to text
2. Asset and ranking data are as of June 30, 2008. Return to text
3. Silver Star Securities Ltd. ("Silverstar"), Tortola, British Virgin
Islands, indirectly controls all the shares of Corp Group Banking S.A.
through two levels of intermediate holding companies. Mr. Alvaro
Saieh Bendeck, a citizen of Chile, and his family indirectly own all the
shares of Silverstar. Mr. Saieh Bendeck, his wife, and their five
children each hold their Silverstar shares through a personal holding
company (collectively, "Personal Holding Companies"). Return to text
4. 12 CFR 211.23(a). Return to text
5. 12 U.S.C. § 3105(d)(2); 12 CFR 211.24. In assessing this standard, the Board considers, among other indicia of comprehensive,
consolidated supervision, the extent to which the home-country supervisors (i) ensure that the bank has adequate procedures for monitoring
and controlling its activities worldwide; (ii) obtain information on the
condition of the bank and its subsidiaries and offices through regular
examination reports, audit reports, or otherwise; (iii) obtain information on the dealings with and relationship between the bank and its
affiliates, both foreign and domestic; (iv) receive from the bank
financial reports that are consolidated on a worldwide basis or
comparable information that permits analysis of the bank's financial
condition on a worldwide consolidated basis; and (v) evaluate prudential standards, such as capital adequacy and risk asset exposure, on a
worldwide basis. No single factor is essential, and other elements may
inform the Board's determination. Return to text
6. 12 U.S.C. § 3105(d)(3)-(4); 12 CFR 211.24(c)(2)-(3). Return to text
7. See Banco del Estado de Chile, 91 Federal Reserve Bulletin 442
(2005); Banco de Chile, 90 Federal Reserve Bulletin 550 (2004); and
Banco de Credito e Inversiones S.A., 85 Federal Reserve Bulletin 446
(1999). See also, Banco de Chile, 80 Federal Reserve Bulletin 179
Return to text
8. In reaching this conclusion, the oversight of Bank's parent
holding companies has been considered. Bank's parent holding companies are required to provide financial and other relevant information
to the SBIF on a regular basis. The SBIF has authority to limit
transactions by Bank with its affiliates and can exercise direct supervision over all the subsidiaries of Bank. In addition, the Chilean General
Banking Law and the Chilean Corporations Law contain restrictions
on transactions with related parties. All the companies controlled by
Mr. Saieh Bendeck are considered to be related parties of Bank. Return to text
9. See 12 U.S.C. § 3105(d)(3)-(4); 12 CFR 211.24(c)(2)-(3). These
standards include (1) whether the bank's home-country supervisor has
consented to the establishment of the office; the financial and managerial resources of the bank; (2) whether the bank has procedures to
combat money laundering, whether there is a legal regime in place in
the home country to address money laundering, and whether the home
country is participating in multilateral efforts to combat money
laundering; (3) whether the appropriate supervisors in the home
country may share information on the bank's operations with the
Board; and (4) whether the bank and its U.S. affiliates are in
compliance with U.S. law; the needs of the community; and the bank's
record of operation. Return to text
10. Approved by the Director of the Division of Banking Supervision and Regulation, with the concurrence of the General Counsel,
pursuant to authority delegated by the Board. See 12 CFR 265.7(d)(12). Return to text
11. The Board's authority to approve the establishment of the
proposed branch parallels the continuing authority of the OCC to
license offices of a foreign bank. The Board's approval of this
application does not supplant the authority of the OCC to license the
proposed office of Bank in accordance with any terms or conditions
that it may impose. Return to text
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