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Fed e r a l R e s e r v e B a n k o f N e w Yo r k N E W Y O R K , N.Y. 1 0 0 4 5 A R E A C O D E 212 7 9 1 - 5 2 6 8 A. M a r s h a l l P u c k e t t Vice P r e s i d e n t August 5, 1977 TO THE CHIEF E X E CUTI VE OFFICERS OF ALL M E M B E R BANKS, BANK H O L D I N G COMPANIES AND EDGE ACT AND A G R E E M E N T C ORPORATIONS IN THE SECOND FEDE RAL RESERVE DISTRICT: The Federal Reserve wishes to reemphasize its commitment to the timely p r o c e s s i n g of applications, with respect to both f o r eign and do m e s t i c matters, that require System action. Although Federal Reserve internal records for the entire System indicate that over eighty per cent of the a p p l i c a t i o n s pro c e s s e d during 1976 were acted upon w i t h i n ninety calendar days after the applications were a c c e p t e d for p r o c e s s i n g at the Reserve Banks, we are striving for even b e t t e r service. In an effort to improve timeliness in this area, the System is m a k i n g s i g n i f i c a n t m o d i f i c a t i o n s in its a p p l i c a t i o n p r o c e s s i n g procedures, p a r t i c u l a r l y in ha n d l i n g draft applications and o b t a i n i n g s u p p l e m e n t a l i n f o r mation -- two areas that have been sources of c o n s i d e r a b l e m i s u n d e r s t a n d i n g con c e r n i n g the time required for S y s t e m action. The m o d i f i c a t i o n s are intended to reduce, to the extent possible, delays over w h i c h the System has some degree of control. The c o o p e r a t i o n and u n d e r s t a n d i n g of applicants, however, is also needed if we are to make progress toward this mutually b e n e f i c i a l goal of more timely p r o c e s s i n g of applications. In this conn e c t i o n , we wish to bring to your a t t e n t i o n some of the more c o m m o n causes for delays. Some of the causes involve matters over w h i c h n e i t h e r an a p p l i c a n t nor the Federal Reserve has control, but others in volve m a t t e r s over w h ich each has v a r ying degrees of control. As n o t e d above, we are taking steps to mi n i m i z e those delays w i t h i n our direct control, and request that applicants make every effort to m i n i m i z e delays for w h ich they have responsibility. The f o l l o w i n g is a brief d i s c u s s i o n of some of the reasons why final a c t i o n on a p p l i c a t i o n s may be delayed: 2 1. Insuf f i c i e n t info r m a t i o n in a p p l i c a t i o n s . The Federal Reserve must have sufficient i n f o r m a t i o n to make a thorough analysis and reach an informed decision c o n c erning all factors relevant to an application. Insuf ficient i n f o r m a t i o n may delay the start of the p r o c e s s i n g procedure if the insufficiency bars a c c e p t a n c e of the application. Even though staff attempts in p reliminary reviews to a s c e r t a i n that an a p p l i c a t i o n is complete, the more intensive analysis that subsequently is applied may reveal i n s u f f iciencies that require either additional info r m a t i o n or return of an a p p l i c a t i o n b e c a u s e it is not p r o c e s s a b l e in its present form. Some of the more common i n s u f f iciencies of information include: (a) i n c o mplete d i s c u s s i o n of all significant details of the proposal (application forms and c hecklists p r e s cribed by the Federal Reserve are not intended to limit an a p p l i c a n t ’s p r e s e n t a t i o n of pertinent information); (b) i n a d equate d i s c u s s i o n of financial k n own to the applicant; and (c) insufficient current financial problems data. 2. Court p r o c e e d i n g s . If there are court proceedings on s u b s t a n t i v e matters involving either the specific p r o p o s a l or general matters that directly affect the proposal, p r o c e s s i n g may be interrupted until the matters have been resolved. 3. P r o t e s t e d a p p l i cations. S u b s t a n t i v e objections by other b a n k i n g institutions, supe r v i s o r y a u t h o r i ties, the United States Department of Justice, or m e m b e r s of the public obv i o u s l y lengthen the amount of time needed to c o m plete the record upon which the Board must base its decision. 4. P e r m i s s i b i l i t y i s s u e s . A p p l i cations to engage in n o n b a n k i n g activities that have not yet been found ge n e r a l l y p e r m i s s i b l e for bank h o l ding companies u s u a l l y involve c o m plex and p r e c e d e n t i a l issues, p a r t i c u l a r l y w h e n a major business activity is involved. Ext e n s i v e staff study, s o l i c i t a t i o n of comments from impacted busi n e s s e s and the public and, in some cases, formal hearings may be involved in the d e l i b e r a t i v e process. 3 5. C onditions and c o m m i t m e n t s . Because of the S y s t e m ’s concern that conditions imposed on, or c ommitments made by, applicants in connection w i t h a past a p p l i c a t i o n or in other circumstances are met, c o m p liance with such undertakings is reviewed as an integral part of the a pplication process. 6. Filing of r e p o r t s . D e l i nquency on the part of an app l i c a n t o r g a n i z a t i o n in filing periodic reg u l a t o r y or s upervisory reports as required may delay the p r o c e s s i n g of an a p p l i c a t i o n until such reports are received. 7. Possi b l e v i o l ations of the Federal Reserve Act, the Bank H o l d i n g Company Act or other laws or r e g u l a t i o n s . Possible v i o l ations may require intensive i n v e s t i g a t i o n by Federal Reserve staff and, d e p e n d i n g on the nature of the possible violation, may bar final action on an a pplication until the i n v e s t i g a t i o n is completed and proper remedial action can be formally considered. 8. O t her c o m p l i c a t i o n s . Other matters that, to v a r y i n g degrees, may require additional analysis or i n v e s t i g a t i o n and thus delay final action on a p p l i c a t i o n s include s ignificant changes by an a p p l i c a n t in the p r o posal after proc e s s i n g has b e gun and un c e r t a i n t i e s involving inter p r e t a t i o n of p e r t i n e n t State or foreign laws. O t her causes for delays may come readily to mind, although many are s i mply v a r i a t i o n s of the items listed above. We believe that by f o c u s i n g a t t e n t i o n on such causes, the Federal Reserve and a p p l i c a n t s can together achieve progress in expediting the p r o c e s s i n g of a p p l i c a t i o n s . I would e n c ourage you to contact the D o m estic B a n k i n g A p p l i c a t i o n s D e p a r t m e n t or the Foreign Banking A p p l i c a t i o n s D e p a r t m e n t at this Bank if you have any questions c o n c e r n i n g the System's general pro c e d u r e s in this area or if you w ish to c h eck on the status of any specific application. A. Ma r s h a l l Puckett Vice Pre s i d e n t
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