U.S. and International Banking Operations

Please also see the separate page on  U.S. and International Banking Supervision and Regulation  and   International Directory of Bank Websites

  Selected Interest Rates, Federal Reserve

  Cost of Funds Report, Office of Thrift Supervision

  ECB Current & Historical Rates

  Euribor Current & Historical Rates

  Historic LIBOR Rates, British Banker's Association

  Bank Rate, Monetary Policy Committee, Bank of England

  HIBOR / Hong Kong Interbank Offered Rate, Hong Kong Association of Banks

  Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks, Federal Reserve

  Survey of Terms of Business Lending, Federal Reserve

  Senior Loan Officer Opinion Survey on Bank Lending Practices, Federal Reserve

  October's Figures for the Main High Street Banks, British Bankers Association

  CFTC Bank Participation in the Futures and Options Market (Weekly)

Types of Banks

Commercial Banks: Federally chartered banks, foreign bank branch office and bank holding companies.

Largest commercial banks domestically chartered in the United States (measured by Consolidated Assets September 30, 2008, in US$ Millions):

1. JP Morgan Chase Bank N.A. (1,768,657)

2. Bank of America N.A. (1,359,071)

3. Citibank N.A. (1,207,007)

4. Wachovia Bank N.A. (664,223)

5. Wells Fargo Bank N.A. (514,853)

6. State Street Bank (276,291)

7. US Bank N.A. (242,597)

8. Bank of New York Mellon (218,699)

9. HSBC Bank USA N.A. (181,587)

10. Suntrust Bank (170,007)

11. FIA Card Service N.A. (160,210)

12. National City Bank (141,501)

13. Regions Bank (139,556)

14. PNC Bank NA (134,780)

15. Branch Banking & Trust Co. (133,166)

16. RBS Citizens N.A. (132,609)

17. Capital One NA (110,627)

18. TD Bank NA (98,613)

Source: Federal Reserve System

Largest bank holding companies in the United States (measured by Assets September 30, 2008, in US$ Thousands):

1. JP Morgan Chase & Co. (2,251,469,000)

2. Citigroup, Inc. (2,050,131,000)

3. Bank of America Corp. (1,836,452,425)

4. Wachovia Corp. (760,558,000)

5. Wells Fargo & Co. (622,361,000)

6. Tanus Corporation (613,058,000)

7. HSBC North America Holdings (467,739,691)

8. State Street Bancorp (286,712,268)

9. Bank of New York Mellon Corp. (267,636,000)

10. US Bancorp (247,055,000)

11. Suntrust Banks, Inc. (174,776,760)

12. Citizens Financial Group, Inc. (163,772,212)

13. Capital One Corp. (154,803,113)

14. PNC Financial Services Group (145,644,536)

15. Regions Financial corp. (144,294,958)

Source: Federal Reserve System

Largest branch networks in the United States (measured by domestic branches, June 30, 2008):

1. Bank of America N.A. (5,758)

2. Wachovia Bank N.A. (3,334)

3. Wells Fargo Bank N.A. (3,313)

4. JP Morgan Chase Bank N.A. (3,166)

5. US Bank N.A. (2,589)

6. Regions Bank (1,910)

7. Suntrust Bank (1,725)

8. National City Bank (1,524)

9. Branch Banking & Trust Co. (1,487)

10. RBS Citizens N.A. (1,217)

Source: Federal Reserve System

Largest commercial banks in Western Europe (measured by Assets, July 31, 2008, in US$ Millions):

1. Royal Bank of Scotland, United Kingdom (3,782,880)

2. Deutsche Bank AG, Germany (2,953,727)

3. BNP Paribas, France (2,477,272)

4. Barclays Bank, United Kingdom (2,442,996)

5. Group Credit Agricole, France (2,067,577)

6. UBS AG, Switzerland (2,007,224)

7. Société Générale, France (1,566,904)

8. ABN AMRO Bank, Netherlands (1,498,849)

9. UniCredit SpA, Italy (1,493,799)

10. ING Bank NV, Netherlands (1,453,382)

11. Banco Santander Central Hispano, Spain (1,334,671)

12. Credit Suisse, Switzerland (1,201,802)

13. Fortis Bank SA, Belgium (1,121,656)

14. Bank of Scotland, United Kingdom (890,936)

15. HSBC, United Kingdom (862,713)

Source: The Bankers Almanac

Largest commercial banks in Western Europe (measured by Tier 1 Capital, 2007, in US$ Millions):

1. HSBC, United Kingdom (114,928)

2. Royal Bank of Scotland, United Kingdom (78,730)

3. ING Bank NV, Netherlands (78,088)

4. Group Credit Agricole, France (77,462)

5. BNP Paribas, France (67,378)

6. Banco Santander Central Hispano, Spain (62,072)

7. Barclays Bank, United Kingdom (53,050)

8. UniCredit SpA, Italy (50,726)

9. Deutsche Bank AG, Germany (44,142)

10. UBS AG, Switzerland (40,703)

Source: The Banker Magazine

Largest commercial banks in Japan (measured by Assets, 2008, in US$ Millions):

1.Mitsubishi UFJ Financial Group (1,579,390)

2. Mizuho Financial Group (1,235,443)

3. Sumitomo Mitsui Financial Group (826,599)

4. Norinchukin Bank (511,703)

5. Resona Holdings (330,639)

6. Shinkin Central Bank (220,399)

7. Sumitomo Trust & Banking Co. (178,522)

8. Aozora Bank (55,241)

9. Chuo Mitsui Trust Holdings (113,699)

10. Shoko Chukin Bank (92827)

Source: The Banker Magazine

Foreign banks operating in the United States

1. Subsidiaries: independently capitalized and legally a local bank in the U.S., able to carry out banking activities as any other regulated bank but may not own certain subsidiaries such as a travel agency.

2. Branches (Federal/state): covered under the parent's capital structure thus a direct liability; acts as a full service bank in taking deposits and make loans.

3. Agencies: allowed to make loans but not except deposits in the United States.

4. Representative offices: nor allowed to take deposits or make loans. It acts as an intelligence gathering operation and stirs business to the banks in its home country.

International Banking Facilities (IBFs): euro-banks in the U.S. (on/off shore) post 1981; may be a U.S. bank (commercial or savings) but must maintain a separate book to record eligible assets and liabilities; allowed to deal with parent or other IBFs; can take deposits from outside the U.S.; no reserve requirements, credit regulation or state and local taxation; no negotiable CDs; no U.S. corp. deposits.

Securities houses (investment banks/merchant banks); retail brokerage; trading; investment banking; comprehensive: engaged in the underwriting of debt and equity (Sovereign and private), asset management, retail/secondary market debt and equity, money market accounts and cash management for corps. and individuals.

Money-center banks: very large banks located in financial hubs such as New York City, Chicago or San Francisco, with operations that are geared to national and international capital markets (commercial banks).

Regional banks: operate in localized markets particularly to with consumer branch networks. The "super-regional" banks operate in a multi-state territory (commercial banks).

Local banks: local savings and loan, mutual savings banks, community banks, thrift institutions (and credit unions) offering banking services

Mortgage banks: do not accept deposits and are residential mortgage lenders. These banks usually operate by obtaining a "warehouse" credit facility from another, larger financial institution, which they then utilize to originate and fund the mortgage and then sell the mortgage to the larger institution, any institution or investor or to FNMA / FHLMC.

Banker's Banks (provide services to other banks in the United States):
Alabama Bankers' Bank
Arkansas Bankers' Bank (ABB)
Atlantic Central Bankers Bank (ACBB)
Bankers Bank
Bankers' Bank Northeast (BBN)
Bankers’ Bank of Kansas
Bankers' Bank of the West
Community Bankers Bank
First National Banker's Bank
Great Lakes Bankers Bank
Independent Bankers’ Bank
Independent Bankers’ Bank of Florida
Midwest Independent Bank
Mississippi National Bankers Bank
Nebraska Bankers' Bank
Silverton Bank (FDIC receivership on April 24, 2009)
The Bankers Bank
The Bankers’ Bank of Kentucky
TIB / The Independent Bankers Bank
United Bankers' Bank

Consolidation of commercial banks, savings banks, specialty insurance, investment banking / brokerage, finance company and asset management is still taking place on an annual basis in North America, Europe and Asia, with the resultant surviving companies known as Financial Services providers (both consumer and commercial capability).

Non-bank / Non-depository financial services include Check Cashiers, Check Cashier Lenders / Payday loans, Credit Service Organizations, Domestic Money Transmitters, Foreign Money Transmitters, Draft and Money Order, Insurance Premium Finance Companies, Motor Vehicle Sales Finance Companies, Sales Finance Companies and Mortgage Brokers.

Banking Function

Banks carry out the function of "intermediation."

1. Denomination intermediation: by accepting small amounts of savings from individuals, and by pooling those funds to make large loans, extended principally to corporations and governments that have frequent and large dollar amount funding requirements.

 

2. Default risk intermediation: banks issue safe and liquid securities, in the form of deposits to individual borrowers, and in turn make loans to riskier borrowers with the funds it has attracted, and the bank absorbs any problems with the loans while depositors continue to receive safe, uninterrupted monthly interest payments.

 

3. Maturity intermediation: means borrowing comparatively short-term funds from savers, who often cannot commit their funds over long periods, and making long-term loans to borrowers (corps., governments, real estate mortgages) who require long-term committed funds.

 

4. Liquidity intermediation: checking and saving accounts are highly liquid in such that they are convertible to cash with little risk of loss and low transaction costs for savers yet, the bank accepts illiquid direct claims from borrowers which may entail considerable risk and high transaction expenses.

 

5. Information intermediation: financial institutions use their skills in gathering and processing information from the financial marketplace compared to an individual borrower who may not have the expertise nor the time to determine the credit suitability of a borrower or investment.. Savers delegate the task of professional management to ascertain and monitor borrowers to the financial intermediary however, conversely, they give up yield in exchange for the service.

 

6. Risk pooling/diversification intermediation: the intermediary invests in a wide variety of loans and assets with a corresponding wide variety of risk and return characteristics and maturities, and through diversity obtains stability of earnings. Small investors have limited funds and cannot diversify their investments thus it relies on the intermediary to pool the funds, thus lowering risk for all savers. As the size of the bank and its operation increases, the intermediary also lower costs for all savers.

Bank Consumer Products

Checking Account: personal and money market (interest-bearing) (FDIC insured).

Demand Deposit Account (DDA): is a non-interest bearing checking account (FDIC insured).

Deposit Account: is an interest bearing savings account into which cash and checks are deposited; also sometimes referred to as a Statement Savings Account or Passbook Savings Account (FDIC insured).

Money Market Deposit Account (MMDA): deposit account (FDIC insured)

Certificate of Deposit (CD): restricted deposit account that earns a specific rae of interest for a fixed maturity. A CD may be terminated (fully or partially) prior to maturity, however the owner of the CD will have to pay a penalty for early withdrawal (FDIC insured).

Mutual Funds   (not FDIC insured)

Annuities   (not FDIC insured)

Bank Lending Products

Direct fixed term maturity, fixed or floating rate of interest, scheduled principal payoff or amortization.

Revolving Line of Credit: Agreement that grants a specific maximum amount of money that can be borrowed over a specified period of time. It differs from a direct loan in that as the borrower pays off the original loan, an amount equal to the repayment can be borrowed again. Revolving lines of credit allow for better matching of cash-flow demands, as well as ensuring cash flow flexibility.

Accounts Receivable financing: (Please see Asset-based Lending below) is characterized as a revolving line of credit collateralized by the receivables generated by the company in its course of business operation. The receivables remain on the balance sheet of the company, however they are commited and secured by the loan. As the receivables are paid by the customer the cash flows to the lender to pay off the outstanding balance of the facility. The loan amount is usually less than the value of the pledged receivalbes in order to provide some credit enhancement / over-collateralization. The amount available is dtermined by deducting ineligible receivables (in arrears, foreign customers, special terms or customers who account for more than 10% of total receivables) from the total amount of account receivables. An Advance Rate is then determined by multiplying the total amount of Accounts Receivable by a percentage, anywhere from 50% to 85%. Thus, for example, a bank may "Advance" and amount to the customer not to exceed 65% of Eligible Receivables.

When the company draws down the line of credit secured by the receivables, it must issue reports to the lender on the status of the pledged receivables. If the financial position of the company changes or the performance of the receivables changes or the profile of the customers changes, then the lender may request weekly reports (compared to monthly reports). In addition, the lender to increase or decrease the amount of cash it makes available to the borrower.

Payments by the borrower's customers are then sent to a separate postal box different from the borrower's general address,which is also known as a lock box. The bank or designated third party collects the proceeds from the lock box, which is applied to pay down the borrower's outstanding amount under the facility. Each dollar paid on the outstanding balance frees up a dollar the borrower can draw again as long as there are sufficient receivables to collateralize an advance.

An Accounts Receivable facility may also be expanded to include a portion of inventory and a percentage Advance rate against the eligible inventory.

Asset-based Lending

Asset-based lending offered by banks (and by non-bank financial institutions). If a company cannot quality for an unsecured line of credit (based on the cash flow of the company) then it still may qualify for an asset-based loan. A company that may not qualify for less expensive, unsecured loans may presently have high leverage, negative net worth, recent losses, or are experiencing high growth/expansion needs. Thus less emphasis is placed on the financial statements of the company and the analysis concentrates on the quality and value of the assets of the company.

Asset-based lending is based on (and loan amounts are determined by) offering a collateralized loan secured against inventory, equipment, accounts receivable, real estate and other assets. Asset-based facilities consist of revolving lines of credit and term loans secured by the discounted value of these assets. This is essentially a customized loan that accomodates and understands the borrower's industry and requirements. The value of the assets is established either through third-party appraisal and / or receivable aging, however there is no set criteria for establishing a discount level so advance rates may be something along the line of 50% to 80% of the value of the assets depending on the specific asset and the expertise and policies of the lender.

Bank Loan Syndication

An organization of financial institutions whose purpose is to undertake financing that is larger than the members can handle individually. Similar to participations, however a participant may purchase a position in the syndication in the secondary market.

Please see the section about the  Syndicated Loan Market.

Specialized Finance

Structured Finance

Project Finance

Leasing

FASIT

A FASIT is a tax structure established by US Legislation for the purpose of attracting investment business to the USA and away from offshore tax havens. As long as a FASIT has a particular capital structure and adheres to certain investment regulations, then the FASIT can accumulate and distribute its gross earnings without incurring USA taxation.

Community Reinvestment ACT (CRA)

In the United States, federal law enacted in 1977 and revised in 1995 (12 U.S.C. 2901 / Regulation BB 12 CFR 228) requires that a bank offer services to all members of the communities within which the branches are loacted in, including low- and moderate-income neighborhoods. Banks are required to complie a CRA report and provide a copy to the federal government. This report often takes on more importance when a bank attempts to merge with another out-of-town or regional bank, and the CRA report is an indication to those residing in the target bank's territory of how the acquirer has conducted itself in the past. A copy of an institution's CRA evaluation may be obtained directly from the institution or Reserve Bank.

Federal bank regulators use the following performance levels to rate an institution's performance under CRA:

O = Outstanding

S = Satisfactory

NI = Needs to improve

SN = Substantial noncompliance

Deposit Insurance

In the United States, banks and credit unions are required to carry deposit insurance on consumer, coroporate and trust checking and deposit accounts up to an amount of USD$250,000. The insurer is usually the FDIC (Federal Deposit Insurance Corporation). FDIC coverage is per Depositor's legal ownership not per account. Legal ownership is by individual, joint or testamentary account. Separate insurance is also available for funds held for retirement purposes (Individual Retirement Accounts, Keoghs, and pension or profit-sharing plans).

Single / Individual Accounts - These are deposit accounts owned by one person and titled in that person’s name only. All of a depositor's single accounts at the same insured bank are added together and the total is insured up to $100,000. For example, if a depositor has a checking account and a CD at the same insured bank, and both accounts are in the depositor's name only, the two accounts are added together and the total is insured up to $100,000.

Joint Accounts - These are deposit accounts owned by two or more people. If both owners have equal rights to withdraw money from a joint account, each person’s shares of all joint accounts at the same insured bank are added together and the total is insured up to $100,000. If a couple has a joint checking account and a joint savings account at the same insured bank, each co-owner's shares of the two accounts are added together and insured up to $100,000, providing up to $200,000 in coverage for the couple's joint accounts.

FDIC   www.fdic.gov/deposit/index.html

Within the European Union there is no pan-European FDIC-like organization. The EU 1994 Directive indicates that banks domiciled within an EU member nation must maintain a minimum €20,000 per account. However, individual nations may also design and operate co-insuance programs at their own discretion.

Australia and New Zealand do not have any national deposit insurance programs.

Federal Home Loan Bank System

In addition to the Federal Reserve system in the United States, there is also the Federal Home Loan Bank (FHLB) System. Although the FHLB system was chartered by an act of Congress in 1932 as a Government Sponsored Enterprise (GSE), it is private system with each district bank capitalized by its shareholders, which are the financial institutions (community banks, savings & loan, commercial banks, credit unions and insurance companies) located within each respective district. There are 12 district banks within the FHLB system, located in Atlanta, Boston, Chicago, Cincinnati (Ohio), Dallas, Des Moines (Iowa), Indianapolis, New York, Pittsburgh, San Francisco, Seattle (Washington) and Topeka (Kansas). The function of the FHLB is to provide support, correspondent banking services and credit to local financial institutions engaged in primary, single-family residential mortgage lending. Oversight of the FHLB system is conducted by the Federal Housing Finance Board (FHFB).

The main function of the FHLB system is as a wholesale financing source to local financial institutions engaged in the primary single-family residential, multi-family and commercial mortgage lending market. No financing is offered directly to consumers. Financing, grants and qualitative support is also extended to promote community economic development. In addition, FHLB banks provide non-credit portfolio and interest rate management technical assistance and advisement and also correspondent banking services (ACH, settlement services, deposit accounts) to its members.

The FHLB system obtains financing in the private sector and then provides low-cost wholesale funds to its respective member banks. Consolidated Obligations (CO) are debt securities (bonds and discount notes) issued by the Federal Home Loan Banking System (FHLB), Office of Finance (central issuer for all 12 district banks in the FHLB system).

The FHLB is a Government Sponsored Enterprise (GSE): rated Aaa / P-1 by Moody's and AAA/ A1+ by Standard and Poor's (Each District Bank of the FHLB system also has their own individual respective rating); There is no guarantee of FHLB issued debt by the U.S. Federal Government.

Standard & Poor's Ratings for FHLB Banks:

Federal Home Loan Bank of Atlanta   AAA/Negative/A-1+

Federal Home Loan Bank of Boston   AAA/Stable/A-1+

Federal Home Loan Bank of Chicago   AAA/Negative/A-1+

Federal Home Loan Bank of Cincinnati   AAA/Stable/A-1+

Federal Home Loan Bank of Dallas   AAA/Stable/A-1+

Federal Home Loan Bank of Des Moines   AAA/Stable/A-1+

Federal Home Loan Bank of Indianapolis   AAA/Negative/A-1+

Federal Home Loan Bank of New York   AA+/Stable/A-1+

Federal Home Loan Bank of Pittsburgh   AAA/Negative/A-1+

Federal Home Loan Bank of San Francisco   AAA/Stable/A-1+

Federal Home Loan Bank of Seattle   AAA/Negative/A-1+

Federal Home Loan Bank of Topeka   AAA/Stable/A-1+

The FHLB System is one of the largest debt issuers in the world and is the second largest GSE borrower.

Interest paid on FHLB debt securities are exempt from state and local income tax.

FHLB debt securities are eligible for collateral for certain public deposits and eligible for investment by national banks and thrifts.

Loans made by FHLB District Banks to member institutions (advances) are generally short-term, and are over-collateralized with residential mortgages. FHLB maintains its own collateral delivery system with its members.

All FHLB, Office of Finance issued CO debt is the joint and several liability among all of the 12 FHLB District Banks.

The primary source of income for each of the 12 district banks in the FHLB system is the spread between the interest it pays to borrow funds and the interest it earns on funds lent to members. Federal Home Loan Banks are not subject to federal income tax, however they do contribute 20% of their net earnings to fund a portion of the interest on the Resolution Funding Corporation (REFCorp) debt, which was issued for the resolution of insolvent savings and loans. In addition, the Federal Home Loan Banks contribute the greater of 10% of their net income or $100 million toward the Affordable Housing Program, which awards grants and rate-subsidized loans for housing serving very low- to moderate-income families and individuals.

The extension of credit to a member Borrower is secured by collateral, which is a security interest in pledged fully disbursed, first position conventional mortgages on qualifying residential (one-to-four unit single-family dwellings, including condominiums, PUDs, townhouses and mobile homes affixed to the land) and commercial real estate (maximum LTV 85%), HELOC / second position mortgages (one-to-four unit single-family dwellings, including condominiums, PUDs, townhouses and mobile homes affixed to the land), government and agency debt securities. Advances (for financial institutions with primary regulator composite CAMELS rating of 1 or 2) are based on a percentage of the value of the underlying mortgage collateral (each FHLB bank accepts the same type of collateral, however each bank has its often percentage of advance guideline). Acceptable collateral is Residential 1st Mortgage (Fixed / Adj.), Multi-family Residential (min. 5 units), Commercial Mortgages, HELOC / Second Mortgages, Government / Agency Securities and private issued MBS securities, FHLB Deposit Collateral / Cash.

Loan proceeds may be utilized by a member Borrower to purchase or fund:

Loans secured by residential real property

Mortgage-backed securities

Participations in loans secured by residential real property

Loans or investments financed by advances made pursuant to a Community Investment Cash Advance Program

Loans secured by manufactured housing (regardless of whether such housing qualifies as residential real property)

FHLB banks also offer off-balance sheet over-the-counter interest rate swaps, and interest rate caps and floors.

The FHLB system acts as an alternative to the existing secondary market for originated mortgages by purchasing 15- and 30-year conventional and FHA fixed-rate loans, within the conforming loan limits. The FHLB can also provide liquidity by funding loans in the member Borrower's portfolio until they are sold into the traditional secondary market (FNMA and FHLMC) and funds are received from the investor.

Federal Farm Credit Banks

Please also see a  National Directory of Farm Credit System Bank Websites

The Federal Farm Credit Banks (“FFCB”) are a government sponsored enterprise (GSE, created 1916) and is a nationwide network of lending institutions and affiliated services and other entities. Through its non-deposit taking Banks and related associations, the System lends money and provides related credit and other services to farmers, ranchers, producers and harvesters of aquatic products, rural homeowners, certain farm-related businesses, agricultural and aquatic cooperatives (or to other entities for the benefit of such cooperatives), rural utilities, and to certain foreign or domestic entities in connection with international agricultural credit transactions. The Banks and related associations are not commonly owned or controlled. They are cooperatively owned, directly or indirectly, by their respective borrowers. System institutions are federally chartered under the Act and are subject to supervision, examination and regulation by an independent Federal agency, the Farm Credit Administration (FCA).

The Farm Credit System is composed of four regional Farm Credit Banks (FCB), one regional Agricultural Credit Bank (ACB) and numerous associations (approximately 99 related Production Credit Associations / PCAs, Federal Land Credit Associations / FCLAs and Agricultural Credit Associations /ACAs. The PCAs, FLCAs, and ACAs are collectively referred to as Associations) across the nation. The System Banks and Associations are cooperatively owned, directly or indirectly, by their borrowers, which are the smaller, local banks that lend directly to the agricultural sector in all 50 states of the United states and in Puerto Rico. These entities have specific lending authorities within their chartered territories.

As none of the banks within the system are deposit taking institutions, funds are raised through the issuance of Farm Credit Debt Securities in the U.S. domestic and global capital markets by the Federal Farm Credit Banks Funding Corporation (FFCBFC).

AgriBank, FCB

Serves Arkansas, Illinois, Iowa, Indiana, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Wisconsin and Wyoming.

CoBank, ACB (Agricultural Credit Bank)

Agricultural Credit Bank with a national charter to finance agricultural cooperatives and rural utility systems, CoBank has 11 regional banking centers. Its regional office in the Northeast lends to Farm Credit associations in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. International banking services are provided through its headquarters in Denver.

Farm Credit Bank of Texas

Providing short-term financing to New Mexico, Northwest Louisiana and Texas. Long-term financing to Alabama, Louisiana, Mississippi and Texas.

AgFirst, FCB

U.S. AgBank, FCB

U.S. AgBank, FCB serves Farm Credit Associations in Arizona, California, Hawaii, Nevada, Utah, Idaho, Kansas, Colorado, Oklahoma, and New Mexico.

The Federal Farm Credit Bank Funding corporation (“FFCBFC”) is the fiscal agent for the banks of the Federal Farm Credit system and is authorized to sell:

Federal Farm Credit Banks Consolidated Systemwide Bonds

Federal Farm Credit Banks Consolidated Systemwide Discount Notes

Federal Farm Credit Banks Consolidated Systemwide Master Notes

Federal Farm Credit Banks Global Securities

Federal Farm Credit Banks Consolidated Systemwide Medium-Term Notes

Offshore Financial Centers

Offshore financial centers are banking operations located in countries outside the European Union, the United States and Canada, and Asia. While their existence and function has been (and still is) controversial due to the tax and regulatory incentives that they offer to non-resident investors they also offer some legitimate banking services.

For corporations, the draw is the ability to establish and incorporate a subsidiary within a tax advantaged jurisdiction (IBC / International Business Company) where the corporate tax rates are lower than the home country's rates. The draw for wealthy individuals is asset management / protection and estate planning, and tax planning, again the opportunity to be either not taxed at all on certain income or at lower tax rates than those levied by one's home country.

The concern to governments is the use of these jurisdictions with their strong banking secrecy legislation for tax evaision, money laundering, criminal activity and terrorism. A growing issue related to offshore financial centers is the growth of unregulated on-line casino gambling. The United States has sought to prohibit its citizens from accessing cross-border internet gambling web sites. However, the nation of Antigua and Barbuda submitted a case to the World Trade Organization on the behalf of on-line gambling companies that operate on the islands indicating that U.S. regulation and prohibition is a violation of free trade policies. The WTO ruled in favor of Antigua and Barbuda in March 2004 indicating that U.S. ploicies violate international trade law. In the United States, gambling is regulated by individual state governments, thus what may be legal in one state is not legal in another hence the prohibition against offering on-line gambling across state lines. Secondly, established casino operators in the United States are careful not to engage in activity that would jeapordize their licensing and core operations within a state, thus there is no incentive on their behalf to promote an on-line expansion. The United States has appealed this decision, however other nations may seek similar rulings by the WTO on their behalf.

Offshore Financial Centers include (but are not limited to) :

 

Alderney (Same banking, insurance and investment laws as the Bailiwick of Guernsey)

Andorra

Anguilla

Anjouan (Comoros Islands)

Antigua

Aruba

Bahamas (Removed from the FATF money laundering blacklist September 2001)

Bahrain

Barbados

Belize

Bermuda

British Virgin Islands (British Overseas Territory status; No capital gains or estate taxes)

Cayman Islands (Removed from the FATF money laundering blacklist September 2001)

Cook Islands (Presently on the FATF money laundering blacklist)

Costa Rica

Cyprus

Dominica (Removed from the FATF money laundering blacklist October 2002)

Gibraltar (British Overseas Territory status)

Grenada (Removed from the FATF money laundering blacklist February 2003)

Guernsey (United Kingdom crown dependency; No capital gains tax)

Hong Kong

Ireland (Dublin)

Isle of Man (United Kingdom crown dependency)

Jersey (United Kingdom crown dependency)

Labuan Island (Malaysia)

Lebanon

Liechtenstein (Removed from the FATF money laundering blacklist September 2001)

Luxembourg

Macau

Madeira

Malta

Marshall Islands (Removed from the FATF money laundering blacklist October 2002)

Mauritius

Monaco

Nauru (Presently on the FATF money laundering blacklist)

Netherlands Antilles

Niue (Removed from the FATF money laundering blacklist October 2002)

Panama (Removed from the FATF money laundering blacklist September 2001)

Russian Federation

Samoa

Seychelles

Singapore

St. Kitts and Nevis (Removed from the FATF money laundering blacklist June 2002)

St. Lucia (Information exchange agreement with the United States)

St. Vincent and the Grenadines (Removed from the FATF money laundering blacklist June 2003)

Switzerland (In May, 2004, Switzerland entered into a treaty that brought the nation into compliance with the European Union Savings Tax Directive. The nation will impose a withholding tax on EU citizens, starting at 15% in 2004 increasing to 35% by 2010. Switzerland was allowed to retain its bank secrecy laws, thus the withholding tax will be transferred to the various EU member nations in annual lump sum payments on the behalf of the account holder and his respective domicile without identifying them by name.)

Turks & Caicos

Vanuatu (No corporate, trust or individual income taxes, withholding taxes, exchange controls, capital gains taxes, gift, death, estate or succession duties; No reciprocal tax treaties with other countries; the main languages are English and French; legal system is based on English common and civil law)

Offshore Financial Services Chart (U.S. Dept. of State)

(1)  A = Asia/Pacific Group; C = Caribbean Financial Action Task Force; CE = Council of Europe Select Committee on Money Laundering; E = Eastern and Southern Africa Anti-Money Laundering Group; F = Financial Action Task Force; I = Offshore Group of Insurance Supervisors (OGIS); I* = Observer to the OGIS; O = Offshore Group of Banking Supervisors; OC = OAS/Inter-American Drug Abuse Control Commission; S = International Organization of Security Commissioners.

(2) There is no distinction drawn between onshore and offshore banks in Jersey.

(3) Liechtenstein, Luxembourg and Switzerland are unique. Residents are able to avail themselves of many OFC services and products normally reserved for nonresidents.

The Forty Recommendations established by the FATF (Financial Action Task Force) is a set of recommendations designed to bring some transparency to the offshore banking sector and countermeasures for money laundering.

OECD's Committee on Fiscal Affairs (2003) recommended that a "standard of access" be drafted so the revenue taxation authorities would be able to gain necessary information

The Patriot Act extends to banks, credit unions, brokerages, mutual funds, insurance companies and hedge funds doing business in the United States. These institutions are required to fully verify customer account application information (minimum of Name, Social Security Number, Age and Address), cross check names with a national terroist name database, and report transactions in excess of certain dollar amounts (USD$10,000 or more on banking activities and USD$5,000 or more on securities transactions) or a suspicious level of activity. In addition, the Act also increases the authority and coercive power of the U.S. Treasury Department to obtain offshore bank account information such that the penalty for non-cooperating banks may mean the inability to maintain a correspondent bank account relationship with a U.S. domiciled bank or branch.

Section 312 of the Patriot Act requires enhanced due diligence / anti-money laundering measures for private banking accounts for non-U.S. persons

Countries that have KYC (Know-Your-Customer) rules that have been approved by the IRS include:

• Andorra (Rev.January 2007)
• Anguilla
  
• Antigua
  
• Argentina
  
• Aruba
  
• Australia
  
• Austria
  Austria (Rev. January 2004)
  
• Bahamas
  
• Bahrain
  
• Barbados
  Barbados (Rev. January 2004)
  
• Belgium
  
• Bermuda
  
• British Virgin Islands
  
• Brunei
  
• Canada (Revised August 2007)
• Cayman Islands
  
• Chile
  
  • Chilean Stock Brokers
    
• Colombia
  
• Cyprus
  
• Czech Republic
  
• Denmark
• Estonia
  
• Finland
  
• France
  France (Rev. January 2004)
  
• Germany
  Germany (Rev. January 2004)
• Gibraltar
  
• Greece
  
• Guernsey
  
• Hong Kong
  
• Iceland
  
• Ireland (Rev. November 2002)
  
• Isle of Man
  
• Israel
  
  • Israeli Bank
    
  • Israeli Brokers and Broker-dealers
• Italy
  
• Japan
  
  • Japanese Trust Banks (Rev. December 2004)
  • Japanese Securities Dealers (Rev. November 2002)
  • Japanese Investment Trust Management Companies
• Jersey
  
• Korea
  
• Luxembourg
  
• Liechtenstein (Rev. August 2002)
  
• Malta
  
• Monaco
  
• Netherlands
  
• Netherlands Antilles (Rev. November 2002)
  
• Norway
  
• Panama
  
• Poland
  
• Portugal (Rev. April 2007)
  
• Saint Vincent and The Grenadines
  
• Saudi Arabia
  
• Singapore
  
• Slovenia
  
• Spain
  
• St.Lucia
  
• Sweden (Rev. December 2002)
  
• Switzerland (Rev. November 2002)
• The Republic of China (Taiwan)
  
• Turks and Caicos Islands
  
• United Arab Emirates     
        o United Arab Emirates - Non-IFSC
        o Dubai - IFSC
  
• United Kingdom
  
• Uruguay
  • Uruguay Banks
  • Uruguayan Stock Brokers

Jurisdictions Awaiting Approval of Know-Your-Customer Rules

• Hungary
• Lebanon

Alternative Banking Services

In the United States there is an alternative or parallel system to traditional banking services. These types of services are known as check cashing, payday lending, automobile title lending and pawn shops. These types of operations usually provide alternative financial services to low- to moderate-income persons. Some of these establishments also offer prepaid payment cards, money orders, money transfers, utility bill payment

The typical customers of these banking services alternative operation:

Do not have either a bank of credit union checking or savings account

Rent there home and do not have real estate collateral

Do not have extensive savings that would cover a financial emergency (less then 2 months of living expenses)

Do not have a credit card, have been denied credit or exceeded credit limits

Tend to be single parent households

Do not have a government issued identification such as a driver's license

Reside in neighborhoods without a local bank branch and/or retail establishments do not accept crediit cards or checks

The check cashing industry is comprised of small individually owned establishments and national chains (Ace Cash Express, Advance America, Check 'n Go, Nix Check Cashing). These establishments will normally cash government issued checks and the checks issued by employers to the employee for a service fee (ranges from 2% to 4% of the dollar amount of the check).

A payday loan is a cash advance collateralized by a pending employer issued pay check (which is turned over to the check cashing establishment when issued) or against a postdated personal check. In 2006, the U.S. Congress banned the extension of payday loans to active duty military personnel. The payday loan service has also been heavily regulated in a number of states (North Carolina closed all payday operations within the state in 2006).

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