Conference of State Bank Supervisors v. Conover

• Decision Date: 09 August 1983
• Docket Number: No. 81-2256,81-2256
• Citation: 715 F.2d 604
• Parties: CONFERENCE OF STATE BANK SUPERVISORS, Robert Abrams, Attorney General of the State of New York, et al., Appellants, v. C.T. CONOVER, Comptroller of the Currency of the United States.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 604

715 F.2d 604

230 U.S.App.D.C. 130

CONFERENCE OF STATE BANK SUPERVISORS, Robert Abrams Attorney General of the State of New York, et al Appellants, v. C.T. CONOVER, Comptroller of the Currency of the United States.

No. 81-2256.

United States Court of Appeals District of Columbia Circuit.

Argued June 2, 1982.

Decided Aug. 9, 1983.

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 80-03284).

Arthur E. Wilmarth, Jr., Washington, D.C., with whom James F. Bell, Washington, D.C., for Conference of State Bank Supervisors, Corinne J. Gieseke, Sp. Asst. Atty. Gen., State of Ill., Chicago, Ill., for People of the State of Illinois ex rel. William C. Harris, Howard L. Zwickel, Asst. Atty. Gen., State of New York, for Robert Abrams, Atty. Gen. of the State of New York, New York City, and William L. Williams, Asst. Atty. Gen., State of Wash., Olympia, Wash., for State of Washington ex rel. Michael D. Edwards, were on brief for appellants.

R. Craig Lawrence, Asst. U.S. Atty., Washington, D.C., with whom Stanley S. Harris, U.S. Atty., Royce C. Lamberth and Whitney Adams, Asst. U.S. Attys., and Ronald R. Glancz, and L. Robert Griffin, Washington, D.C., were on brief for appellee.

Leonard J. Theberge for Chicago Ass'n of Commerce and Industry, Illinois Bankers Ass'n, Independent Community Banks in Illinois, and Mid-America Legal Foundation, Washington, D.C., were on brief for amici curiae, urging reversal.

Before TAMM, Circuit Judge, ROBB, Senior Circuit Judge, and FAIRCHILD, ^* Senior Circuit Judge, United States Court of Appeals for the Seventh Circuit.

Opinion for the Court filed by Senior Circuit Judge ROBB.

ROBB, Senior Circuit Judge:

The appellants ¹ are state officials responsible for regulation of state-licensed banking institutions. As plaintiffs in the District Court they sued for declaratory and injunctive relief, challenging regulations 12 C.F.R. §§ 28.2(b)-(d), 28.3, & 28.4 (1980) and a portion of an accompanying interpretative statement (44 Fed.Reg. 65381-87 (1979)) adopted by the Comptroller of the Currency pursuant to the International Banking Act of 1978 (IBA). 12 U.S.C. §§ 3101-3108 (Supp. V 1981). Appellants contended that the regulations and statement conflicted with the IBA because they permitted a foreign bank to establish and operate offices where prohibited by state law. In an unreported opinion the District Court granted summary judgment in favor of the Comptroller. Conference of State Bank Supervisors v. Heimann, No. 80-3284 (D.D.C. Sept. 30, 1981); Joint Appendix (J.A.) 96-109.

I

To engage in the banking business in the United States, a domestic bank may be chartered under state law, subject to the exclusive regulation of the state, or it can operate under a federal charter subject to federal law that in part defers to state law. ² Prior to the adoption of the IBA a bank organized under the laws of a foreign country could obtain a charter from a state authority only; the federal government did not charter foreign banks. H.R.Rep. No. 910, 95th Cong., 2d Sess. 5 (1978) [hereinafter cited as 1978 House Report ]. The absence of federal involvement caused treatment of foreign banks in the United States to differ from state to state. Commenting on this pre-IBA treatment of foreign banks, the Senate Committee on Banking, Housing and Urban Affairs, noted in 1978:

There is, at this time, no uniform national policy concerning foreign banking operations in this country. As a result, foreign banks enjoy many competitive advantages over our domestic banks. This bill establishes the principle of parity of treatment between foreign and domestic banks in like circumstances.

S.Rep. No. 1073, 95th Cong., 2d Sess. 2 (1978), reprinted in 1978 U.S.Code Cong. & Ad.News 1421, 1422 [hereinafter cited as 1978 Senate Report ].

The IBA sought to provide foreign banks with "national treatment" under which "foreign enterprises ... are treated as competitive equals with their domestic counterparts." 1978 Senate Report, supra, at 2. See also International Banking Act of 1978: Hearings on H.R. 10899 before the Subcomm. on Financial Institutions of the Senate Comm. on Banking, Housing, and Urban Affairs, 95th Cong., 2d Sess. 64 (1978); 1978 Senate Report, supra at 18; 1978 House Report, supra, at 5, 7, 8; 124 Cong.Rec. 26733 (1978) (remarks of Congressman Reuss). In other words, the IBA "establishes the principle of parity of treatment between foreign and domestic banks in like circumstances." 1978 Senate Report, supra, at 2. In general the IBA provides that "with the approval of the Comptroller" a foreign bank may establish a branch or agency in a state, 12 U.S.C. § 3102(a) (Supp. V 1981) and that

[e]xcept as otherwise specifically provided in this chapter or in rules, regulations, or orders adopted by the Comptroller under this section, operations of a foreign bank at a Federal branch or agency shall be conducted with the same rights and privileges as a national bank at the same location and shall be subject to all the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply under the National Bank Act to a national bank doing business at the same location....

IBA, § 4(b), 12 U.S.C. § 3102(b) (Supp. V 1981).

In this case the controversy centers on the Comptroller's interpretation of certain provisions of sections 4 and 5 of the IBA. Section 4(a), 12 U.S.C. § 3102(a) (Supp. V 1981), provides that the Comptroller may approve establishment of a foreign bank's federal branch or agency if "establishment of a branch or agency, as the case may be, by a foreign bank is not prohibited by State law." Section 4(d), 12 U.S.C. § 3102(d) (Supp. V 1981), reads: "Notwithstanding any other provision of this section, a foreign bank shall not receive deposits ... at any Federal agency." When a foreign bank opens a federally-chartered branch or agency outside of its home state, ³ section 5(a)(1), 12 U.S.C. § 3103(a)(1) (Supp. V 1981), provides that with certain exceptions "no foreign bank may directly or indirectly establish and operate a Federal branch outside of its home State unless (A) its operation is expressly permitted by the State in which it is to be operated ...." Section 5(a)(3), 12 U.S.C. § 3103(a)(3) (Supp. V 1981), likewise forbids a foreign bank to establish and operate a federal agency outside of its home state "unless its operation is expressly permitted by the State in which it is to be operated...."

Section 1(b) of the IBA sets out the definition of terms used in the statute. So far as pertinent here, they are:

(1) "agency" means any office or any place of business of a foreign bank located in any State of the United States at which credit balances are maintained incidental to or arising out of the exercise of banking powers, checks are paid, or money is lent but at which deposits may not be accepted from citizens or residents of the United States;

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(3) "branch" means any office or any place of business of a foreign bank located in any State of the United States at which deposits are received;

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(5) "Federal agency" means an agency of a foreign bank established and operating under section of this [Act];

(6) "Federal branch" means a branch of a foreign bank established and operating under section of this [Act]....

12 U.S.C. § 3101(1), (3), (5), (6) (Supp. V 1981).

The appellants complain that the Comptroller erred in interpreting these provisions of the IBA. They say that the Comptroller violated section 4(a) by approving the applications of five Australian banks to convert their state-licensed agencies in New York to home state federal branches although New York law prohibits such banks from opening branches. The appellants say that the Comptroller violated section 5(a) by approving the applications of two of the Australian banks to open interstate federal branches in Illinois in contravention of Illinois law. In the appellants' view, the Comptroller also violated section 5(a) by authorizing a British bank's interstate federal branch located in the State of Washington to conduct business operations that are not permitted to foreign bank branches under Washington law. Finally, the appellants aver that the Comptroller incorrectly interpreted sections 1(b)(5) and 4(d) in permitting federal agencies of foreign banks to accept deposits if the depositors are neither citizens nor residents of the United States.

II

In discussing the public comments regarding 12 C.F.R. pt. 28 (1980), promulgated pursuant to sections 4 and 13(a) of the IBA, 12 U.S.C. §§ 3102, 3108(a) (Supp. V 1981), the Comptroller noted "that in some states a foreign bank which applies for a state branch or agency must be able to demonstrate that the country under whose laws it was organized permits free or at least equivalent access to U.S. banks." 44 Fed.Reg. 65382 (1979). The Comptroller concluded however that "such a reciprocity approach" is not "binding upon the Comptroller's Office because it is incompatible with the national treatment theme of the IBA, and, further, it is in the nature of a condition or limitation rather than a prohibition on foreign entry." Id. The Comptroller bases this interpretation on his construction of the language of section 4(a) of the IBA, 12 U.S.C. § 3102(a) (Supp. V 1981), which provides:

Except as provided in section of this [Act], a foreign bank which engages directly in a banking business outside the United States may, with the approval of the Comptroller, establish one or more Federal branches or agencies in any State in which (1) it is not operating a branch or agency pursuant to State law and (2) the establishment of a branch or agency, as the case may be, by a foreign bank is not prohibited by State law.

The Comptroller reasons that the words "a foreign bank" in subsection (2) are synonymous with "any foreign bank" so that the Comptroller can license a foreign bank to operate a...