Deposits payable only at an office of a bank located outside of the United States, the District of Columbia, Puerto Rico, Guam and the Virgin Islands shall not be a deposit for any of the purposes of the Federal Deposit Insurance Act or be included as part of total deposits or of an insured deposit (Sec. 3(1)(5), Federal Deposit Insurance Act).
In computations of net demand deposits subject to reserve requirements, net demand deposits were defined by the Banking Act of 1935 as the excess of all demand deposits, including deposits due to other banks and the U.S. government, over demand balances due from other domestic banks (except Federal Reserve banks, foreign banks or branches thereof, FOREIGN BRANCHES of domestic banks or branches thereof, and private banks) and cash items in process of collection.
The prohibition of interest on demand deposits contained in the Banking Act of 1933 has not applied to any deposit which is payable only at an office of the bank located outside of the states of the United States and the District of Columbia.
One of the motives for authorizing International Banking Facilities (IBFs) at New York has been the intention to popularize those IBFs, rather than the offshore Bahamas-Cayman Islands locations.