91-1

April 8, 1991

Dear Mr. ________:

This is to follow up on our telephone conversation of April 4, 1991.

Enclosed is a copy of State Banking Department Policy Memorandum 84-7, dated July 10, 1984. The Policy Memorandum sets forth some typical activities of a representative office of a foreign bank as well as some typical activities of a place of business of a California state bank.

As we discussed, both a representative office of a foreign bank and a place of business of a California state bank may function as a loan production office. It should be noted that the details on permissible operations for loan production offices vary from jurisdiction to jurisdiction. For example, although some jurisdictions permit loan production offices to accept loan payments, we do not.

To avoid any misunderstanding, I should point out that, while a representative office of a foreign bank and a place of business of a California state bank may each perform the functions of a loan production office, it does not follow that a representative office of a foreign bank and a place of business of a California state bank may otherwise each engage in the same activities. The activities of a representative office of a foreign bank are limited to representational functions under Financial Code Section 1728 and are effectively precluded by Section 1750(a) from engaging in activities that would amount to transacting business. It might be said, therefore, that while a representative office may perform activities that are preparatory or preliminary to transacting business, a representative office may not engage in activities that amount to transacting business.

The situation may be different for a place of business of a California state bank. In recent years, the Department has tended to apply the definition of “branch office” set forth in Section 10.114(a) of the Banking Regulations to interpret the term as used in the Banking Law. The definition in the Banking Regulations is similar in some respects to the definition in the McFadden Act. If the Department pursues this approach, it might eventually conclude that a California state bank may conduct at a place of business any activities other than those described in the definition of “branch office” in the Banking Regulations. Cf. Clarke v. Securities Industry Association (1987), 479 U.S. 388, CCH Fed. Bkg. Law Rptr. 1985-87 Decisions par. 86, 778.

If you wish to discuss these matters in further detail, please feel free to contact me.

Very truly yours,

JAMES E. GILLERAN
Superintendent of Banks

By

JAMES F. CARRIG
Chief Counsel

JFC:lca
Enclosure