EXHIBIT 4 FOREIGN BANKING ORGANIZATIONS WHICH HAVE ENGAGED 3 35 Banco di Roma, Caisse des Depots et Consignations, Commerzbank AG, and Credit Lyonnais Cho Hund five other Korean banks Bank, Compagnie Financiere de Paribas United Bank of Switzerland Barclays Bank Derived from data provided by Morgan Guaranty Trust Company, the Securities Groupe Bruxelles Lambert owns a controlling interest in Banque Bruxelles First Boston Inc. owns The First Boston Corporation and 40% of Financiere On December 5, 1986, Sumitomo Bank, Ltd., invested $425 million in a profits interest in Goldman Sachs & Co. 1980-1986 Comm. Bank Fact Book. Mutual Funds Sec. Brkr. & Dealer Source: Federal Reserve Bulletin, New York Stock Exchange • Short-term borrowing includes: Commercial Paper, Acceptances, Finance Company Loans, and Commercial and Industrial Loans at Large Banks Sources: Federal Reserve Board Flow of Funds Accounts and Federal Reserve Bulletin. FDIC-insured commercial banks with $100 Million or Less of Assets Source: Consolidated Reports of Condition and Income submitted to the Federal Deposit Insurance Corporation. Section 23A of the Federal Reserve Act (12 U.S.C. 371c) regulates extensions of credit and similar transactions between FDIC insured banks and their affiliates. Under this section an insured bank may not make a loan to an affiliate, purchase securities issued by an affiliate, or purchase any of the assets of an affiliate in an amount greater than 10 percent of the bank's capital and surplus. Further, the total of all such transactions between a bank and all of its affiliates is limited to 20 percent of the banks's capital and surplus. In all cases, the transaction must be on terms ⚫ and conditions that are consistent with safe and sound banking practices. Any transaction with a third party is deemed to be a transaction with an affiliate to the extent that the proceeds are used for the benefit of, or transferred to an affiliate. Every extension of credit to an affiliate must be fully secured. A bank may hot purchase a low quality asset from an affiliate unless, pursuant to an independent credi▸ evaluation, it committed itself to purchase such asset prior to the time it was acquired by the affiliate. The Federal Reserve Board may exempt transactions from the requirements of this section if such action is found to be in the public interest. 81-027 0 - 88 - 18 1978 1979 1980 1981 1982 1983 1984 1985 1986 Years Source: Federal Deposit Insurance Corporation 2. Transactions with Affiliates Section 238 Under the Competitive Equality Banking Act, a new Section 238 was added In addition to extensions of credit and the other transactions covered by Section 23A, this section also applies to the sale of securities by the bank or its subsidiary to an affiliated company, the payment of money or the furnishing of services to an affiliated company, and any transaction in which the affiliate acts as an agent or broker. Further, any transaction with a third party is considered to be a transaction with an affiliate if the affiliate has an interest in or is a participant in the transaction, or if any of the proceeds of the transaction are used for the benefit of or transferred to an affiliate. Under Section 238, all of the transactions described above between a bank and an affiliate must be on an "arms length" basis; that is under terms and conditions substantially the same as those prevailing in the marketplace. In addition, a bank may not purchase any security during the underwriting period if a principal underwriter of that security is an affiliated company unless such purchase is specifically approved by a majority of the bank's directors who are not officers or employees of the bank. A bank may not purchase as a fiduciary any securities or assets of an affiliate unless specifically authorized by the trust agreement, court order, or other law governing the fiduciary relationship. Finally, a bank may not publish any advertisement or enter into any agreement stating or suggesting that the bank shall be responsible for the obligations of an affiliate. The Federal Reserve may exempt certain transactions from the requirements of this section if such exemption is found to be in the public interest. subsidiary thereof, or provide an additional credit, property or a vice to the bank or holding company. An exception is made to permit a bank to require that the customer obtain an additional loan, discount, deposit or trust service, and for additional conditions that related to and usually required in connection with the bank service in question, as well as conditions imposed by the bank to assure the soundness of the credit. For purposes of these restrictions, a "bank" is defined in the same Banner as under the Bank Holding Company Act, which now includes FDIC insured banks. 3. Purchase of Securities From Directors Section 22(d) of the Federal Reserve Act (12 U.S.C. 375) provides that a member bank may not purchase from any of its directors any securities or other property unless such purchase is made in the regular course of business and on an "aras length" basis, or when such purchase is approved by a majority of the bank's board of directors. Similarly, a member bank may only sell securities or other property to a director is such sale is on an arms length basis and in the regular course of business. 6. Restrictions on Dividends National banks may not pay any dividends if its losses equal or exceed its undivided profits, after subtracting losses and bad debts. (12 U.S.C. 56). The approval of the Comptroller of the Currency is required before any dividends may be declared in excess of the institution's net profits for that year, combined with its retained net profits of the preceding two years (less any required transfers to surplus). (12 U.S.C. 60). Restrictions on dividends declared by state chartered banks may also be imposed under state laws. Loans to Officers, Directors and Major Shareholders Section 22(g) and (h) of the Federal Reserve Act (12 U.S.C. 375a-b) regulates extensions of credit by an FDIC insured bank to officers, directors and major shareholders of that institution. A major shareholder is defined as any person or group of persons with the power to vote 10 percent or more of any class of the bank's voting securities. These restrictions also apply to extensions of credit to an officer, director or major shareholder of an affiliated company or a parent bank holding company, or a company controlled by such persons, or to a political action committee controlled by or established for the benefit of such persons. Such loans may only be made on an "arms length" basis, and may not involve more than the normal risk of repayment. Various approvals and restrictions are placed on the amount and purposes for which these loans may be made. Extensions of credit made to officers, directors and major shareholders of correspondent banks are similarly regulated. (12 U.S.C. 1972) 5. Anti-Tying Provisions The Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1971 et. seq.) generally provide that a bank may not furnish any service or change the cost of any service, on the condition that a customer obtain some additional service from that bank or the parent holding company or 7. Management Interlocks The Depository Institution Management Interlocks Act (12 U.S.c. 3201 et. seq.) generally provides that a management official of a depository institution or holding company may not serve as a management official with another depository institution or holding company not affiliated with the first institution, if an office of both institutions are located within the same metropolitan area. However, a management official of an institution with $1 billion or more in assets may not serve as a management official in any other nonaffiliated depository institution with assets of $ 500 million Pursuant to section 12(1) of the Securities and Exchange Act of 1934 (15 U.S.C. 781(1)), FDIC insured banks are exempt from the registration requirements of that Act with respect to their own securities. However, the federal bank regulatory agencies are directed by that statutory provision to promulgate regulations which are substantially similar to the regulations issued by the SEC. Thus, banks with 500 or more shareholders and at least $ 1 million in assets are required to file registration statements and periodic reports, issue proxy statements and make other public disclosures is a similar manner as other publicly held corporations. (See, a.g. 12 C.F.R. pt. 206). 9. Anti-Fraud Provisions Banks are not exempt from the anti-fraud provisions of the Securities Act of 1933 or the Securities and Exchange Act of 1934. Under these laws it is unlawful to employ any device, scheme or artifice to defraud or to make any untrue statement of a material fact, or to omit to make a statement necessary to make a statement already made not misleading, or to engage in any other act or practice or course of business which would operate as a fraud on a person in connection with the purchase or sale of any security. (See, e.g. 17 C.F.R. 240.10b-5). Under these provisions, for example, it has been held that a bank cannot take actions which have the effect of manipulating the market for a security, and cannot trade based on inside information. 10. Capital Adequacy The federal bank regulatory agencies determine minimum capital ratios through administrative actions. In general, the bank agencies have set the minimum ratio of total capital to adjusted total assets at 6%. The agencies have the authority to establish higher capital ratios as may be necessary, either on an individual basis or through general regulations. Thus, for example, a newly chartered bank, a bank receiving special supervisory attention, or a bank having a high proportion of off-balance sheet risks (such as standby letters of credit) may be required to have a higher capital ratio. In addition, under the International Lending Supervision Act (12 U.S.C. 3907), a banking agency may issue a directive to a particular institution requiring that institution to establish a plan to increase its capital. 11. Authority to Examine Affiliates Under the Bank Holding Company Act (12 U.S.C. 1844), the Federal Reserve Board is authorized to conduct examinations of all subsidiaries of a holding company, including the nonbanking subsidiaries. In addition, under the Federal Reserve Act (12 U.S.C. 338), the Board may examine all affiliates of a state member bank. Similar authority is granted to the FDIC with respect to affiliates of insured banks (12 U.S.C. 1820(b)), and the Comptroller of the Currency, with respect to national banks (12 U.S.C. 481). 12. Bank Loans Used to Purchase Securities From Affiliates Section 7 of the Securities and Exchange Act (15 U.S.C. 78g) authorizes (12 C.F.R. 221.8.) Section 11(d) of the Securities and Exchange Act (15 U.S.C. 781) prohibits a securities firm from arranging for an extension of credit to or for a customer on any security which was part of a new issue the securities firm participated in the distribution of within the past 30 days. In addition, both sections 23A and 238 of the Federal Reserve Act cover loans made to third parties which are used for the benefit of an affiliate, and thus would appear to include extensions of credit used to purchase securities from an affiliate. 13. Conversion of Bad Bank Loans Into Bond Issues The disclosure requirements of the Securities Act of 1933 (15 U.S.C. |