FRK1_201412_omb

Supporting Statement for the International Applications and
Prior Notifications under Subparts A and C of Regulation K
(FR K-1; OMB No. 7100-0107)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget, proposes to extend for three years, without revision, the
International Applications and Prior Notifications under Subparts A and C of Regulation K
(FR K-1; OMB No. 7100-0107). Subpart A of Regulation K governs the foreign investments
and activities of member banks, Edge and agreement corporations 1, bank holding companies
(BHCs), and certain investments by foreign organizations. Subpart C of Regulation K governs
investments in export trading companies. The FR K-1 information collection contains the
following eleven attachments for the application and notification requirements embodied in
Subparts A and C of Regulation K:
• Attachment A:

• Attachment B:
• Attachment C:

• Attachment D:
• Attachment E:
• Attachment F:
• Attachment G:
• Attachment H:

• Attachment I:
• Attachment J:
• Attachment K:

Notification to Establish Initial Foreign Branches of Member Banks, Edge
Corporations, or Foreign Subsidiaries or Application for Branches to
Engage in New Activities
Notification to Establish Additional Foreign Branches of Member Banks,
Edge Corporations, or Foreign Subsidiaries
Application to Establish, Acquire, or Change Control of an Edge
Corporation, or for an Edge Corporation to Engage in Certain Domestic
Activities
Model Articles of Association for an Edge Corporation
Model Organization Certificate for an Edge Corporation
Notification to Establish a Domestic Branch of an Edge Corporation
Application to Amend Articles of Association of an Edge Corporation
Application to Invest in Other Foreign Organizations or to Engage in New
Foreign Activities for Member Banks, Edge or Agreement Corporations,
and BHCs
Notification to Invest in Other Foreign Organizations for Member Banks,
Edge or Agreement Corporations, and BHCs
Application to Invest in Excess of Ten Percent of Capital and Surplus in
Edge Corporations
Notification to Establish an Export Trading Company

The Federal Reserve requires these applications for regulatory and supervisory purposes
and to allow the Federal Reserve to fulfill its statutory obligations under the Federal Reserve Act
and the Bank Holding Company Act of 1956. The applications are event-generated and provide

1

References to Edge corporations are inclusive of agreement corporations. An agreement corporation is a
corporation that has entered into an agreement with the Board that it will not exercise any power that is
impermissible for an Edge corporation.

the Federal Reserve with information necessary to evaluate each of the proposed transactions.
The total annual reporting burden is estimated to be 1,013 hours.
Background and Justification
Sections 25 and 25A of the Federal Reserve Act (FRA) and sections 4(c)(13) and
4(c)(14) of the Bank Holding Company Act (BHCA) govern the formation of Edge corporations
and the international and foreign activities of U.S. banking organizations, including those of
national banks, state member banks, Edge corporations, and BHCs. Section 25 of the FRA
authorizes the establishment of foreign branches and investments in foreign banks in accordance
with regulations prescribed by the Federal Reserve. Section 25A of the FRA authorizes the
establishment of Edge corporations and empowers these corporations to engage in activities both
in the United States and abroad. Section 4(c)(13) of the BHCA authorizes BHCs to invest in
companies that do business abroad. Section 4(c)(14) of the BHCA authorizes BHCs to invest in
export trading companies.
Pursuant to these statutory provisions, the Federal Reserve adopted various regulatory
provisions, all of which were consolidated in the Federal Reserve's Regulation K, setting forth
the procedures for making investments and engaging in activities under these statutes. These
procedures include (1) a specific consent procedure, under which the banking organization may
make the proposed investment or engage in the proposed activity only after receiving the Federal
Reserve Board's prior approval, (2) a notification procedure, under which the banking organization may make an investment after having given appropriate notice to the Federal Reserve Board,
and (3) a general consent procedure, under which the banking organization may make certain
investments that may be subsequently reviewed during the examination process.
The various attachments to the FR K-1 instructions specify the information that must be
submitted to the Federal Reserve to enable it to act on the Regulation K applications and prior
notifications. The information required in the instructions pertains only to the specific investment or activity proposed. The Federal Reserve supplements the information required in the
FR K-1 with information on the banking organization obtained through examinations and other
reporting requirements. The information reported on the FR K-1 is not available from any other
source.
Description of Information Collection
A general description of each attachment is provided below. No changes to the form are
proposed.
Foreign Branches (Attachments A and B)
The Notification to Establish Initial Foreign Branches of Member Banks, Edge
Corporations, or Foreign Subsidiaries or Application for Branches to Engage in New Activities
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(Attachment A) requires information needed to assess the purpose of the branch, its location, its
proposed activities, projected growth, management, country exposure and capitalization.
The Notification to Establish Additional Foreign Branches of Member Banks, Edge
Corporations, or Foreign Subsidiaries (Attachment B) is used if the applicant has branches in two
or more countries and wishes to establish a branch in an additional country. The notification
only calls for a description of the activities of the proposed branch and the branch's projected
asset size at the end of the third year of operation.
Edge Corporations (Attachments C, D, E, F, and G)
The Application to Establish, Acquire, or Change Control of an Edge Corporation or for
an Edge Corporation to Engage in Certain Domestic Activities (Attachment C) requires slightly
different information for each type of transaction. The application requires information on the
proposed activities, proposed management, ability to serve the convenience and needs of the
community, any related requests for investment authority, and projected balance sheets and
income statements.
The application for Edge Corporations to Engage in Domestic Activities not Listed in
Regulation K requires information on the proposed activities, any related requests for investment
authority, the ability to serve the convenience and needs of the community, and projected
balance sheets and income statements. Foreign organizations that are seeking to either establish
or acquire control of an existing Edge corporation also must furnish information relating to the
home country supervision and regulation of the foreign organization, as well as information to
determine whether the Federal Reserve will have adequate access to information. The
notification for change in control of an Edge corporation requires much of the same information
that is needed in an application to establish an Edge corporation.
The application to establish an Edge corporation requires submission of the Model
Articles of Association for an Edge Corporation (Attachment D) and the executed Model
Organization Certificate for an Edge Corporation (Attachment E), as prescribed by section 25A
of the FRA.
The Notification to Establish a Domestic Branch of an Edge Corporation (Attachment F)
requires minimal data to assess the purpose of the branch, its location and ability to serve the
convenience and needs of the community, any amended articles of association, and the projected
asset size of the branch at the end of the third year of operations.
The Application to Amend Articles of Association of an Edge Corporation (Attachment
G) requires the Edge corporation to submit an executed and dated certificate of amendment to
the existing articles of association and a statement describing the reasons for the requested
changes.
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Investments in Other Foreign Organizations (Attachments H and I)
The Application to Invest in Other Foreign Organizations or to Engage in New Foreign
Activities for Member Banks, Edge or Agreement Corporations, and BHCs (Attachment H)
requires slightly different information for each type of transaction. For applications to invest in
other foreign organizations, a description of the proposed investment, financial information,
country exposure information, and information on compliance with foreign requirements must be
included. Additional information is required for investments in joint ventures.
For applications to engage in foreign activities not previously determined to be
permissible, required information includes a full description of the proposed activities, financial
information, and information on compliance with foreign requirements. Additional information
is required for investments in joint ventures. Applicants seeking to engage in any activity that
the Board has not previously determined to be of a banking or financial nature must discuss the
extent to which such activity is usual in connection with the transaction of banking or other
financial operations in the country in which the activity is to be conducted, supported by
examples.
Investments that do not meet the criteria either for specific consent or for general consent,
as detailed in section 211.9 of Regulation K (12 CFR 211.9), require prior notification. The
Notification to Invest in Other Foreign Organizations for Member Banks, Edge or Agreement
Corporations, and BHCs (Attachment I) requires information on the name and location of the
investment, the amount of investment and percentage of ownership as a result of the investment,
a description of proposed activities, abbreviated financial statements and, for joint ventures, the
ownership structure and managerial support provided by the investor.
Invest in Excess of Ten Percent of Capital and Surplus in Edge Corporations
(Attachment J)
The Application to Invest in Excess of Ten Percent of Capital and Surplus in Edge
Corporations (Attachment J) requires the information set forth in section 211.5 of Regulation K.
As a result of the enactment of The Economic Growth and Regulatory Paperwork Reduction Act
of 1996, which amended the FRA, member banks may invest over 10 percent and up to
20 percent of their capital and surplus in Edge corporation subsidiaries, provided the Board
determines that such investments are not unsafe and unsound.
Investment in Export Trading Companies (Attachment K)
The Notification to Establish an Export Trading Company (Attachment K) is essentially a
modified version of Attachment H. It requires a more brief description of the proposed investment, financial information, and additional information for investments in joint ventures.

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Time Schedule for Information Collection
The FR K-1 information collections are submitted by the applying or notifying
organization, in accordance with the requirements embodied in Regulation K, to the Federal
Reserve Bank designated as responsible for that banking organization. Reserve Bank staff
notifies the organization of receipt of an application or notification and the official processing
period (sixty days for applications and thirty or twelve days for notifications) begins. The Bank
staff also sends the application or notification to the Board for review. An applying organization
is notified by letter of the Board's decision regarding its application. In the case of a notification,
the regulation indicates that the organization may make its investment at the end of the
notification period unless the Federal Reserve notifies it otherwise. Information from the FR K1 is not published.
The Board follows the retention requirements for reports set forth by an agreement with
the National Archives and Records Administration on March 28, 2001. Accordingly, Reserve
Bank staff should not destroy these applications and notifications.
Legal Status
The Board's Legal Division has determined that this collection of information is
mandatory pursuant to sections 25 and 25A of the Federal Reserve Act (12 U.S.C. §§ 601604(a), 611-631), and sections 4(c)(13), 4(c)(14), and 5(c) of the Bank Holding Company Act
(12 U.S.C. §§ 1843(c)(13), 1843(c)(14), 1844(c)). The information submitted in the FR K-1 is
considered to be public unless an institution requests confidential treatment for portions of the
particular application or notification. Applicants may rely on any Freedom of Information Act
(FOIA) exemption, but such requests for confidentiality must contain detailed justifications
corresponding to the claimed FOIA exemption. Requests for confidentiality must be evaluated
on a case-by-case basis.
Consultation Outside the Agency
On September 24, 2014, the Federal Reserve published a notice in the Federal Register
(79 FR 57101) requesting public comment for 60 days on the extension, without revision, of the
International Applications and Prior Notifications under Subparts A and C of Regulation K. The
comment period for this notice expired on November 24, 2014. The Federal Reserve did not
receive any comments. On December 15, 2014, the Federal Reserve published a final notice in
the Federal Register (79 FR 74088).
Estimate of Respondent Burden
The annual reporting burden for the Regulation K requirements is estimated to be 1,013
hours. The burden estimate, shown in the following table, is based on the average number of
applications and notifications filed during a typical year. The reporting requirement of these

applications and notifications represents less than 1 percent of total Federal Reserve System
paperwork burden for all reports.

Attachments

Number of
respondents

Estimated
annual
frequency

Estimated
average hours
per response

A,B
5
2
11.5
C,D,E,F,G
15
2
10
H,I
12
3
15.5
J
2
1
10
K
1
1
20
Total
35
The total annual cost to the public for these reports is estimated to be $51,562. 2

Estimated
annual
burden hours
115
300
558
20
20
1,013

Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The information submitted in the FR K-1 applications and notifications is not automated.
The cost to the Federal Reserve System of printing and mailing instructions is negligible.

2

Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $18, 45% Financial Managers at
$61, 15% Lawyers at $63, and 10% Chief Executives at $86). Hourly rate for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
2013, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using the BLS Occupational
Classification System, www.bls.gov/soc/

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