OTS Authorizes Federal Savings Bank To Establish A Subsidiary Bank In China January 2008

On December 6, 2007, the Office of Thrift Supervision (OTS) approved the application of GE Money Bank, a federal savings bank headquartered in Salt Lake City, Utah, to establish an operating subsidiary in the People's Republic of China that will initially engage in corporate lending, small business lending, and trade finance activities, and will subsequently become a full-service Chinese bank.

GE Money Bank is an indirect subsidiary of General Electric Capital Corporation (GE Capital), which in turn is a subsidiary of General Electric Company. The proposed operating subsidiary is currently a wholly owned dormant finance company subsidiary of GE Capital, organized under Chinese law and headquartered in Shanghai. In the proposed transaction, GE Money Bank will acquire all of the interests of the operating subsidiary, with the result that the operating subsidiary will become a wholly owned subsidiary of GE Money Bank. The operating subsidiary will change its name to "GE Capital Bank China."

It is anticipated that GE Capital Bank China will obtain necessary approvals from the Chinese government to become a full service Chinese bank, and will be permitted to engage in a full range of commercial and retail banking transactions in foreign and Chinese currency. The China Bank Regulatory Commission (CBRC) will supervise and examine GE Capital Bank as a Chinese bank. The CBRC and the OTS have established a structure to share supervisory information obtained from CBRC's examinations and monitoring of the new bank.

The OTS's approval was granted pursuant to the standard operating subsidiary application procedures set forth in 12 C.F.R. 559.11. The OTS concluded that the activities of the operating subsidiary are permissible for federal savings banks. In its approval, the OTS cited a November 2000 Opinion of Chief Counsel establishing that federal savings banks may engage in foreign activities when those activities are otherwise permissible for a federal savings bank, can be conducted in a safe and sound manner, and are incidental to the clearly permissible activities of a federal savings bank. The OTS referred to further authority supporting the conclusion that the new bank's activities will be "incidental" to the parent U.S. savings bank's domestic operations because they will represent less than 5% of the U.S. savings bank's assets and revenues.

This approval is significant as a precedent for authorizing a U.S. federal savings bank to establish and...