Conference of State Bank Supervisors v. Conover

Before passage of the International Banking Act of 1978, foreign banks could operate in the United States only with a state charter, but domestic banks could choose between state and federal regulation. Congress adopted the act to remedy this disparity by authorizing the Office of the Comptroller of the Currency (comptroller) to allow foreign banks to establish branches or agencies that generally enjoyed equal treatment as domestic banks in the same state. Section 4(a) authorized the comptroller to approve a foreign bank’s branch or agency if the relevant state did not prohibit foreign banks. Section 5(a) allowed the comptroller to let a foreign bank establish a federal agency outside the bank’s home state if expressly permitted by the relevant state. Section 4(d) of the act stated that “a foreign bank shall not receive deposits” at any federal agency. The comptroller, C. Todd Conover (defendant), permitted Australian banks to establish federal branches in New York. New York did not bar all foreign banks, but it did not charter Australian banks because Australia did not provide reciprocal rights to United States banks. Conover also permitted two non-Illinois-home-state Australian banks to open federal branches in Illinois. Illinois did not bar foreign out-of-home-state branches, but its reciprocity rules prohibited state charters for Australian banks. Additionally, Conover issued a regulation allowing foreign-bank federal agencies to accept deposits, notwithstanding § 4(d). The Conference of State Bank Supervisors (conference) (plaintiff), representing state banking regulators, sued Conover for violating the act. Conover responded that §§ 4(a) and 5(a) empowered him to approve the Australian bank activities because §§ 4(a) and 5(a) restricted his authority solely in states that prohibited all foreign banks and did not require him to honor state-law reciprocity conditions because such conditions undermined Congress’s goal of treating foreign banks on a national basis. Conover further argued that Congress meant for § 4(d) to bar foreign federal agencies from accepting deposits only from domestic depositors and did not apply to foreign depositors. The district court ruled that §§ 4(a), 5(a), and 4(d) were ambiguous and that it should defer to the comptroller’s interpretations of them because there were no compelling indications that the comptroller was wrong. The district court also concluded that accepting the conference’s positions would nullify foreign banks’ abilities to pursue federal regulatory options. The conference appealed, arguing that the act’s legislative history revealed Congress’s desires to preserve state-reciprocity rules and to leave intact existing state banking regulations. The conference also argued that Conover violated § 4(d)’s clear mandate.