ally, ask for audited statements of the licensee's affairs and/or any other information that he may consider appropriate. The Inspectors of Banks and Trust Companies, also a Government Officer, helps the Administrator by constantly supervising all licensed banks and has powers to look into records and account books, etc.

10. Cartel Restrictions

No shares in a company or certificates of deposit or any other securities of such a licensee company can be transferred without the prior approval of the Administrator in Council.

11. Evenhandedness of Application of Regulation Overall

The authorities endeavor to deal with all banks evenhandedly. However, any decisions of the Administrator in Council affecting a bank's license, is subject to judicial scrutiny, by way of appeal within 21 days, by the Grand Court of the Cayman Islands. This ensures fair deal even further.

CHILE

An outline of the more detailed information needed follows: 1. Any deposit restrictions-re:

(a) Limits on deposits of resident nationals-domestic currency vs foreign currencies, all banks, domestic banks vs foreign banks

No limits in domestic currency.

(b) Limits on inflows of funds from abroad-all banks, foreign as opposed to domestic

Subject to regulations by the Central Bank.

(c) Foreign bank access to savings deposits: Not applicable at

present.

(d) Codes of fair competition-impact on foreign banks of agreements restricting solicitation of deposits of other banks

2. Reserve requirements-all banks, foreign vs domestic.

(a) Direct reserve requirements-all banks, foreign vs domesticrequirement that deposits be kept with central bank or government agencies

All banks must keep a legal reserve fund equivalent to 25 percent of paid in capital. Also, a deposit (encaje) in the Central Bank is needed.

(b) "Special deposits"

A deposit as guaranty of compliance of the General Banking Law is required.

(c) Secondary reserves

Reserves in excess of 50 percent of paid in capital are called "addi

tional reserve.

(d) Liquidity ratios

3. Priority investments-government securities, housing, development banks, long-term loans, etc.-all banks, foreign vs domestic

All banks have to purchase some shares of the Central Bank. Banks may invest in housing in order to comply with general housing legislation.

4. Credit ceilings either re domestic inflation or balance of payments: Yes.

prohibitions

5. Loan restrictions re classes of borrowers or uses of funds also structural restrictions (such as all banks, foreign vs domestic

against

underwriting)

There are limits (a percentage of capital and reserves) in the amount of the loans that may be granted to one individual, that varies according to the classes of borrowers.

6. Interest rate limits-all banks, foreign vs domestic Yes, according to regulations of the Central Bank.

7. Exchange controls-all banks, foreign vs domestic Yes, according to regulations of the Central Bank.

8.

cost-all banks, foreign vs

Central bank credit-access and domestic. If there is nominal access, is there nevertheless discrimination? According to General Banking Law, all banks have equal access. For present situation, see footnote 1.

9. Bank examination-all banks, foreign vs domestic. What is the interval and nature of examinations?

All banks are inspected by the Superintendency of Banks, even the "representation offices" of foreign banks. Examinations cover legality of the operations and financial matters. Financial reports must be issued four times a year and inspections may be made at any time.

10. Cartel restrictions against particular operations? Need for cooperation? Big vs little banks; foreign vs domestic

None applicable to present situation. See footnote 1.

11. Evenhandedness of application of regulation overall.

See footnote 1.

COLOMBIA

An outline of the more detailed information needed follows: 1. Any deposit restrictions-re:

(a) Limits on deposits of resident nationals-domestic currency vs foreign currencies, all banks, domestic banks vs foreign banks. Cannot request deposit from nationals.

(b) Limits on inflows of funds from abroad-all banks, foreign as opposed to domestic.

None.

1 The General Banking Law of Chile (decree-with-force-of-law 260, Mar. 30, 1960) accepts foreign banks operating in Chile as commercial banks; in fact, several foreign banks operated that way until 1971. From 1971 to September 1973, the Chilean Government, without repealing the law concerning private banks, purchased directly the majority of the shares of all domestic banks except one, and all the shares of the foreign commercial banks. Since then, all these banks have been administered by the board of directors appointed by government agencies and in some cases by the Superintendency of Banks itself. By decree-law 231 of December 24, 1973, it was established that from that date up until December 31, 1974, no new commercial bank could be establ,shed in Chile. It also stated that "since that date no branch or agency of foreign banks can be established with the exception of those which are state-owned in their country of origin." "The representations (representaciones) of foreign banks can effect the operations specifically or generically permitted by the Superintendency of Banks, according to article 35 of the General Banking Law, with the sole limitation that they are not allowed to receive deposits or give loans in national currency.' Through decree-law 600 of July 13, 1974, the Foreign Investment Statute, Chile liberalized its legislation concerning foreign investment, but this statue does not refer specifically to banking.

In 1975 the Chilean Government announced, as a matter of policy, that some state-owned commercial banks would again become private banks, in national hands. According to the information available, no new measures have been taken concerning foreign banks.

Chile is also a member of the Andean Pact (The Cartagena Agreement).

The answers contained in this questionnaire must be understood against this background.

(c) Foreign bank access to savings deposits. None.

on

foreign banks of agree

(d) Codes of fair competition-impact ments restricting solicitation of deposits of other banks. 2. Reserve requirements-all banks, foreign vs domestic.

All banks must have reserves. 20 percent on savings deposits; 10 percent on time deposits. (a) Direct reserve requirements-all banks, foreign vs domesticrequirement that deposits be kept with central bank or government agencies

Reserves to be kept with Banco de la República.

(b) "Special deposits"-Special reserve requirements are to be met when accepting savings deposits.

(c)

Secondary

reserves.

(d) Liquidity ratios-When savings deposits exceed 500,000 pesos, the reserve should be 75,000 and thereafter for each $25,000, 1 peso

for each 10 pesos.

3. Priority investments-government securities, housing, development banks, long-term loans, etc.-all banks, foreign vs domestic.

All banks are subject to priority investments as regulated by law (article 118, law 43 of 1923). Basically, they are mortgage bonds issued by the Central Mortgage Bank, agricultural bonds and bonds of the internal debt.

4. Credit ceilings-either re domestic inflation or balance of payments.

5. Loan restrictions reclasses of borrowers or uses of funds-also structural restrictions (such as prohibitions against underwriting)—all banks, foreign vs domestic.

Loans are classified in accordance with the destination to be given to the loaned money. They are subject either to a mortgage or a pledge. Loaned money must be invested in the economic sector referred to in the loan application. Foreign banks cannot grant loans to nationals.

6. Interest rate limits-all banks, foreign vs domestic.

All banks subject to the provisions of article 5 of law 16 of 1936. On

term 7. Exchange controls-all banks, foreign vs domestic.

deposits, the interest may go up to 23 percent.

All banks subject to the provisions of chapter II of decree-law 444

of Mar. 22, 1967.

8. Central bank credit-access and cost-all banks, foreign vs domestic. If there is nominal access, is there nevertheless discrimination? May cost between 12.25 percent to 22 percent difference between the rates paid and collected from one to four percent.

9. Bank examination-all banks, foreign vs domestic. What is the interval and nature of examinations?

All banks are to be examined by the Banking Superintendent at

least once a year.

10. Cartel restrictions against particular operations? Need for cooperation? Big vs little banks; foreign vs domestic.

11. Evenhandedness of application of regulation overall.

Foreign banks are subject to restrictions adopted by the Cartagena Agreement of 1969.

FEDERAL REPUBLIC OF GERMANY*

1. Deposit Restrictions

Banking involving depository functions is generally subject to official approval in the Federal Republic of Germany. Such approval may be refused not only because of insufficient funds or unreliability or incompetence of the managers-a provision which affects both foreign and domestic banks-but also because of the absence of any economic necessity. Section 53, paragraph 2, clause 5, of the Banking Law of July 10, 1961, as amended reads:

Each branch office of a foreign business enterprise must have a permit to undertake business operations. The permit may be refused when its granting is not justified upon consideration of overall economic needs.

The constitutionality of this provision has been stressed by German legal writers on the ground that the prohibition to examine economic necessity in the case of admission of new banking enterprises applies only to domestic credit institutions, but in no way to foreign ones. Furthermore, a too extensive opening of branches by foreign banks may disturb the general pattern of German banking. However, the requirement of economic necessity may be omitted by concluding an international treaty. This has been the case with respect to the States that are members of the European Economic Community.

In this connection it should be mentioned that foreign legal entities require a general permit to do business in the Federal Republic of Germany. To open a banking business branch in Germany, a special permit, which replaces the above-mentioned general permit, is required for foreign banking enterprises. Also the entire banking business of each German branch is subject to regulatory provisions of the above-mentioned Banking Law of 1961 (Gesetz über das Kreditwesen, official abbreviation KWG). Among them is the provision that at least one person domiciled in the area where the Basic Law of Germany has effect must be responsible for the internal management and representation of each branch, and upon him must fall the responsibilities of a representative under the Banking Law. Each branch office must keep separate books in accordance with the provisions of the Commercial Code on ledgers, which are subject to examination by German certified [public] accountants. Finally, for litigation relating to the business of a branch office, the statutory competence of the German local courts may not be excluded by agreement.

With respect to capital inflow and related matters, the International Monetary Fund's Twenty-Sixth Annual Report on Exchange

Restrictions 1975 on page 198 states:

Certain types of capital inflows are restricted. The prior approval of the Bundesbank is required for sales to nonresidents of all domestic money market paper and of fixed-interest securities of German issuers with less than four years remaining to maturity, as well as for en pension transactions with nonresidents involving fixed-interest securities of German issuers where such securities are eligible for delivery in less than four years; approval is not normally granted. Nonresidents' direct investment or personal use, and purchases of German or foreign equities do not require approval. Interest payable to nonresident holders of fixed-interest. securities of German issuers is subject to a withholding tax of 25 percent ("coupon tax').

*Prepared by Dr. Armins Rusis, Senior Legal Specialist, European Law Division, Law Library, Library of Congress, October 1975.

There are also investment restrictions for foreigners to be observed by banks both domestic and foreign banks. Nonresidents are required to obtain the prior approval of the German Federal Bank should they wish to purchase from a resident party domestic treasury bills, noninterest-bearing treasury bonds, and certain other instruments denominated in German marks. The same requirement applies if a nonresident wishes to acquire a claim against a resident party from another resident party, subject, however, to a basic allowance of DM 100,000 per calendar year. Furthermore, German banks are precluded from paying interest on bank accounts maintained by nonresidents, with the sole exception of saving accounts of individuals up to the amount of DM 50,000. These are the only restrictions on the importation or repatriation of capital. All earnings from German investments may be transferred abroad. However, the Federal Bank must be informed for statistical purposes, according to Juergen Killius in Business Operations in West Germany, A-1 to A-2 (1975).

The same survey of business operations in the Federal Republic of Germany includes the following information on two recent cash deposit regulations affecting domestic and foreign banks alike:

As of March 1, 1972, an ordinance was issued by the Federal Ministry of Economics Finance pursuant to Section 6A of the Foreign Trade Law [of April 28, 1961] which requires resident individuals, corporations and commercial partnerships to make a cash deposit of a specified percentage of money borrowed abroad with the German Federal Bank. At present, a deposit rate of 20 percent is applicable. The amount of loans is computed each month (base month) on the average daily loans, and there is a basic allowance for the first DM 100,000. During the second month following the base month, the cash deposit has to be maintained in a non-interest bearing special account with the German Federal Bank. The amounts borrowed abroad and the amounts to be deposited have to be reported to the German Federal Bank no later than on the 20th day of the calendar month following the base month.

It is the purpose of these cash deposit requirements to supplement the minimum reserve regulations applicable to banks and to provide the German Federal Bank with a means of controlling the influx of foreign funds. For these reasons, the ordinance provides for an exemption of borrowing loans for the purpose of investing abroad, organizing foreign companies, establishing branch offices or permanent establishments abroad, or for the acquisition of foreign enterprises. Since the term "resident" for the purposes of Foreign Trade Law includes German branch offices and permanent establishments of foreign enterprises, and since such outlets are treated like independent entities in relation to their head offices or other branch offices, the ordinance has a significant impact on the financial arrangements between them. The German Federal Bank summarized its interpretations of the ordinance in a Decree of May 29, 1974, which discusses, inter alia, the treatment of the assignment of claims against resident parties to a nonresident party, contributions by nonresident parties to their German branch offices, the contribution of capital to German corporations by nonresident shareholders, and the treatment of roll-over facilities.

No provision could be found which would not allow foreign banks to accept savings deposits. Inasmuch as, under the Foreign Trade Law and the regulations implementing its provisions, all transactions in principle are permitted except those which are specifically prohibited, and inasmuch as German branch offices and permanent establishments of foreign banks are included in the category of "resident" enterprises, there exists no discrimination with respect to handling savings deposits. Both domestic and foreign banks must refrain from misleading advertising and unlawful soliciting of accounts. Section 23 paragraph 2 provides:

In order to counteract abuses in the soliciting of business by credit institutions, the Federal Banking Supervisory Office may prohibit certain kinds of solicitation.