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F ederal Reserve Bank DALLAS, TEXAS of Dallas 75222 C i r c u l a r No. 7 3 -2 6 5 O c to b e r 1 5 , 1973 AMENDMENT TO RULES REGARDING DELEGATION OF AUTHORITY (Equal Offer to Shareholders, Eliminates Criterion for Reserve Banks’ Consideration in Applications) To All Banks, Bank Holding Companies and Others Concerned in the Eleventh Federal Reserve District: The Board of Governors has amended its Rules Regarding Delegation of Authority, effective October 12, 1973- The amendment eliminates as a criterion for Reserve Banks’ consideration of an application under Sections 3(a)(1) and 3(a)(3) of* "the Bank Holding Company Act the requirements that the applicant propose to make an equal offer to all shareholders of the bank to be acquired. In order to accomplish this, Section 265.2(f) is amended. In Section 265.2(f)(22), subparagraph (v) is deleted, and subpara graphs (vi) through (xiii) are renumbered (v) through (xii). In Section 265.2(f)(2U), subparagraph (v) is deleted, and subparagraphs (vi) through (xiii) are renumbered (v) through (xii). As an incident to this amendment footnotes ^ and 5 of Section 265.2(f)(28) are designated as footnotes 2 and 3. A copy of the amendment is enclosed. Y ours v e r y t r u l y , P. E. C o ld w e ll, P re sid e n t Enclosure This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RULES REGARDING DELEGATION OF AUTHORITY B A N K ACQUISITIONS BY H O LDING COMPANIES Effective, October 12, 1973, Section 26 5 .2 (f) (2 2 ), (2 4 ) and (2 8 ) are amended to reads as follows: SECTION 265.2 SPECIFIC FU NC TIO N S D ELEG A TED TO BOARD EMPLOYEES A N D FED ER A L RESERVE BANKS. * * * * * (f) Each Federal Reserve Bank is authorized, as to member banks or other indicated organizations headquartered in its district, or under subpara graph (25) of this paragraph as to its officers: * * * * $ (22 ) Under the provisions of section 3 ( a ) ( 1 ) of the Bank Holding Company A ct (12 U.S.C. 1842), to approve the formation o f a bank holding company through the acquisition by a company of a controlling interest in the voting shares of one or more banks, if all o f the following conditions are met: (i) no member of the Board has indicated an objection prior to the Reserve Bank’s action. (ii) all relevant departments of the Reserve Bank recommend approval. (iii) no substantive objection to the proposal has been made by a bank supervisory authority, the United States Department of Justice, or a member of the public. (iv) no significant policy issue is raised by the proposal as to which the Board has not expressed its view. (v) considerations relating to the convenience and needs of the communities to be served are consistent with or lend weight toward approval of the application. (vi) in the event any debt is incurred by the holding company to purchase shares of any bank involved in the proposal: (a) an agreed plan for amortization of the debt within a reasonable time exists, such period normally not exceeding 12 years. (b) the interest rate on any loan to purchase the bank shares will be comparable with other stock collateral loans by the lender to persons of comparable credit standing. (c) no compensating balances, specifically at tributable to the loan, will be deposited in the lending institution and the amount of any corre spondent account which the proposed subsidiary bank will maintain with the lending institution should not exceed the amount necessary to com pensate the lending bank for correspondent ser vices rendered by it to the proposed subsidiary bank. (vii) the Reserve Bank determines that the managerial and financial resources, including the equity to debt relationships, of Applicant, its existing subsidiaries, and any proposed subsidiary bank, are adequate, or will be adequate within a reasonable period of time after consummation of the proposal, and any debt service requirements to which the holding company may be subject are such as to enable it to maintain the capital ade quacy of any proposed subsidiary bank in the foreseeable future. (viii) if Applicant or any of Applicant’s exist ing or proposed nonbanking subsidiaries compete in the same geographic and product market as any proposed subsidiary bank, the resulting organiza tion will control no more than 10 per cent of that product or service line after consummation of the proposal. (ix) total nonbank gross revenues of Applicant and its subsidiaries do not exceed 10 per cent of total operating income of the proposed banking subsidiaries. (x) if Applicant engages, or is to engage, in nonbanking activities requiring the Board’s ap proval under section 4 ( c ) ( 8 ) of the Act, the Reserve Bank must also have delegated authority to approve the section 4 ( c ) (8 ) activities. (xi) if the proposal involves the acquisition of the controlling stock of only one bank, and any debt is incurred by the holding company to pur chase shares of the bank, the amount of the loan does not exceed 75 per cent of the purchase price of the shares o f the proposed subsidiary bank. (xii) if the proposal involves the acquisition of the controlling stock of more than one bank, the following additional conditions must be met: (a) in the event any debt is incurred by the holding company to purchase shares of any pro posed subsidiary banks, the total amount of the debt does not exceed 10 per cent of the equity capital accounts of the holding company. (b) the Applicant will control no more than 15 per cent of total deposits in commercial banks in the State. * * * * * (24 ) Under the provisions of section 3 ( a ) ( 3 ) of the Bank Holding Company Act (12 U.S.C. 1842), to approve the acquisition by a bank hold ing company of a controlling interest in the voting shares of an additional bank, if all of the following conditions are met: (i) no member of the Board has indicated an objection prior to the Reserve Bank’s action. (ii) all relevant departments of the Reserve Bank recommend approval. (iii) no substantive objection to the proposal has been made by a bank supervisory authority, the United States Department of Justice, or a member of the public. (iv) no significant policy is raised by the pro posal as to which the Board has not expressed its view. (v) considerations relating to the convenience and needs of the communities to be served are consistent with or lend weight toward approval of the application. (vi) in the event any debt is incurred by the holding company to purchase shares of any bank involved in the proposal: (a) an agreed plan for amortization of the debt within a reasonable time exists, such period nor mally not exceeding 12 years. (b) the interest rate on any loan to purchase the bank shares will be comparable with other stock collateral loans by the lender to persons of comparable credit standing. (c) no compensating balances, specifically at tributable to the loan, will be deposited in the lending institution and the amount of any corre spondent account which the proposed subsidiary bank will maintain with the lending institution should not exceed the amount necessary to com pensate the lending bank for correspondent ser vices rendered by it to the proposed subsidiary bank. (vii) the Reserve Bank determines that the managerial and financial resources, including the equity to debt relationships, of Applicant, its exist ing subsidiaries, and any proposed subsidiary bank, are adequate, or will be adequate within a reasonable period of time after consummation of the proposal, and any debt service requirements to which the holding company may be subject are such as to enable it to maintain the capital ade quacy of any existing or proposed subsidiary bank in the foreseeable future. (viii) if Applicant or any of Applicant’s exist ing or proposed nonbanking subsidiaries compete in the same geographic and product market as any proposed subsidiary, the resulting organiza tion will not control more than 10 per cent of that product or service line after consummation of the proposal. (ix) total nonbank gross revenues of the Appli cant and its subsidiaries do not exceed 10 per cent of total operating income of the company’s exist ing or proposed bank subsidiaries. (x) if Applicant engages, or is to engage, in nonbanking activities requiring the Board’s ap proval under section 4 ( c ) ( 8 ) of the Act, the Re serve Bank must also have delegated authority to approve the section 4 ( c ) ( 8 ) activities. (xi) in the event any debt is incurred by Appli cant to purchase shares of the bank, the resulting total acquisition debt of the holding company will not exceed 10 per cent of the company’s equity capital accounts after consummation of the proposal. (xii) unless the proposed subsidiary is a pro posed new bank, Applicant will control no more than 15 per cent of deposits in the State after consummation of the proposal. (xiii) if the bank to be acquired is an existing bank and if no banking offices of Applicant’s exist ing subsidiary banks are located in the same mar ket as the proposed subsidiary, the proposed sub sidiary has no more than $25 million in deposits or controls no more than 15 per cent of market deposits. (xiv) if the bank to be acquired is an existing bank and if any o f Applicant’s existing subsidiary banks compete in the same market as the proposed subsidiary, Applicant will control no more than 10 per cent of market deposits after consummation. (xv) if the bank to be acquired is a proposed new bank, bank subsidiaries of Applicant will not hold in the aggregate more than 20 per cent of the commercial bank deposits in the relevant market area and Applicant will not be one of the dominant banking organizations in the State. (xvi) Applicant has proven record of fur nishing to its subsidiaries, when needed, special services, management, capital funds and general guidance. * * * * * (28 ) Under the provisions of section 18 (c) of the Federal Deposit Insurance A ct (1 2 U.S.C. 1 8 2 8 (c )), to approve a merger, consolidation, ac quisition of assets or assumption of liabilities, where the resulting bank is a State member bank, if all of the following conditions are met: (i) no member of the Board has indicated an objection prior to the Reserve Bank’s action. (ii) all relevant departments of the Reserve Bank recommend approval. (iii) no substantive objection to the proposal has been made by a bank supervisory authority, the United States Department o f Justice, or a member of the public. (iv) no significant policy issue is raised by the proposal as to which the Board has not expressed its view. (v) if the banks do not have offices in the same market, the bank to be acquired has no more than $25 million in deposits or controls no more than 15 per cent of market deposits.2 (vi) if the banks compete in the same banking market, the resulting bank will control no more than 10 per cent of market deposits.3 (vii) if a parent holding company or any of its subsidiaries competes in the same geographic and product market as the bank to be acquired, or any of its subsidiaries, the holding company will con trol no more than 10 per cent of that product or service line after consummation o f the proposal. (viii) the Reserve Bank determines that the managerial and financial resources, including the equity capital accounts of the resulting bank, are adequate, or will be adequate within a reasonable period of time after the proposal is consummated. (ix) considerations relating to the convenience and needs of the communities to be served are consistent with, or lend weight toward, approval of the application. * * * * * 2 If either of the proponent banks is a subsidiary of a holding com pany, and the paren t com pany has another ban k subsidiary operating in the m arket of the ban k to be acquired, deposits of such offices should be included in the com putation of m arket shares. 3 See footnote 2, above.
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