(a) Conduct of examinations -
(1) Examination of branches, agencies, commercial lending companies, and affiliates. The Board may examine:
(i) Any branch or agency of a foreign bank;
(ii) Any commercial lending company or bank controlled by one or more foreign banks, or one or more foreign companies that control a foreign bank; and
(iii) Any other office or affiliate of a foreign bank conducting business in any state.
(2) Examination of representative offices. The Board may examine any representative office in the manner and with the frequency it deems appropriate.
(b) Coordination of examinations. To the extent possible, the Board shall coordinate its examinations of the U.S. offices and U.S. affiliates of a foreign bank with the licensing authority and, in the case of an insured branch, the Federal Deposit Insurance Corporation (FDIC), including through simultaneous examinations of the U.S. offices and U.S. affiliates of a foreign bank.
(c) Frequency of on-site examination -
(1) General. Each branch or agency of a foreign bank shall be examined on-site at least once during each 12-month period (beginning on the date the most recent examination of the office ended) by -
(i) The Board;
(ii) The FDIC, if the branch of the foreign bank accepts or maintains insured deposits;
(iii) The Comptroller, if the branch or agency of the foreign bank is licensed by the Comptroller; or
(iv) The state supervisor, if the office of the foreign bank is licensed or chartered by the state.
(2) 18-month cycle for certain small institutions -
(i) Mandatory standards. The Board may conduct a full-scope, on-site examination at least once during each 18-month period, rather than each 12-month period as required in paragraph (c)(1) of this section, if the branch or agency -
(A) Has total assets of less than $3 billion;
(B) Has received a composite ROCA supervisory rating (which rates risk management, operational controls, compliance, and asset quality) of 1 or 2 at its most recent examination;
(C) Satisfies the requirement of either the following paragraph (c)(2)(i)(C)(1) or (2):
(1) The foreign bank's most recently reported capital adequacy position consists of, or is equivalent to, tier 1 and total risk-based capital ratios of at least 6 percent and 10 percent, respectively, on a consolidated basis; or
(2) The branch or agency has maintained on a daily basis, over the past three quarters, eligible assets in an amount not less than 108 percent of the preceding quarter's average third-party liabilities (determined consistent with applicable federal and state law) and sufficient liquidity is currently available to meet its obligations to third parties;
(D) Is not subject to a formal enforcement action or order by the Board, FDIC, or OCC; and
(E) Has not experienced a change in control during the preceding 12-month period in which a full-scope, on-site examination would have been required but for this section.
(ii) Discretionary standards. In determining whether a branch or agency of a foreign bank that meets the standards of paragraph (c)(2)(i) of this section should not be eligible for an 18-month examination cycle pursuant to this paragraph (c)(2), the Board may consider additional factors, including whether -
(A) Any of the individual components of the ROCA supervisory rating of a branch or agency of a foreign bank is rated “3” or worse;
(B) The results of any off-site surveillance indicate a deterioration in the condition of the office;
(C) The size, relative importance, and role of a particular office when reviewed in the context of the foreign bank's entire U.S. operations otherwise necessitate an annual examination; and
(D) The condition of the foreign bank gives rise to such a need.
(A) Except as provided in paragraph (c)(2)(iii)(B) of this section, from December 2, 2020 through December 31, 2021, for purposes of determining eligibility for the extended examination cycle described in paragraph (c)(2) of this section, the total assets of a branch or agency shall be determined based on the lesser of:
(1) The total assets of the branch or agency as of December 31, 2019; and
(2) The total assets of the branch or agency as of the end of the most recent calendar quarter.
(B) The relief provided under paragraph (c)(2)(iii)(A) of this section does not apply to a branch or agency if the Board determines that permitting the branch or agency to determine its assets in accordance with that paragraph would not be commensurate with the risk profile of the branch or agency. When making this determination, the Board will consider all relevant factors, including the extent of asset growth of the branch or agency since December 31, 2019; the causes of such growth, including whether growth occurred as a result of mergers or acquisitions; whether such growth is likely to be temporary or permanent; whether the branch or agency has become involved in any additional activities since December 31, 2019; the asset size of any parent companies; and the type of assets held by the branch or agency. In making a determination pursuant to this paragraph (c)(2)(iii)(B), the Board will apply notice and response procedures in the same manner and to the same extent as the notice and response procedures in 12 CFR 263.202.