The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F e d er a l R eser ve Ba n k DALLAS, TEXAS of D allas 75222 Circular No. 73-98 April 30, 1973 AMENDMENTS TO RULES REGARDING DELEGATION OF AUTHORITY (Granting Additional Authority for Federal Reserve Banks to Approve Certain Applications Under the Bank Holding Company and Bank Merger Acts) To All Member Banks, Bank Holding Companies and Others Concerned in the Eleventh Federal Reserve District: Effective April 23, 1973? the Board of Governors of the Federal Reserve System has approved additional delegation to the Federal Reserve Banks to approve certain types of bank holding company and merger applications. Attached is a copy of the amendments. Also, a copy of the press release is printed on the reverse of this circular. Yours very truly, P. E. Coldwell, President Attachment This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) t ■ FEDERAL p r e s s RESERVE release For immediate release April 25, 1973 The Board of Governors of the Federal Reserve System today announced additional steps--in the form of expanded authority to the Federal Reserve Banks--to expedite the processing of applications received by the System under the Bank Holding Company Act. The Board had previously delegated to the Reserve Banks the authority to approve certain formations of one-bank holding companies and acquisitions by bank holding companies of newly formed (de novo) banks. The Board is now expanding this authority by dele gating to the Reserve Banks the authority to approve certain formations of holding companies involving more than one bank, acquisitions by bank holding companies of existing banks and certain types of bank mergers. Standards for the exercise of this delegation are set forth in the attached Board order. Applications that fall outside these standards must be forwarded to the Board for consideration. The Board retains authority to deny an application. Last year, the System processed 769 holding company and merger applications, compared with 235 during 1971. Of the applica tions acted upon last year, 447 were handled by the Board while were handled by the Federal Reserve Banks. - 0 - 322 % BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RULES REGARDING DELEGATION OF AUTHORITY BANK ACQUISITIONS BY HOLDING COMPANIES Effective with respect to applications accepted by the Federal Reserve Banks after April 23, 1973, § 2 6 5 .2 ( f ) ( 2 2 ) and ( 2 4 ) are am ended and § 265 .2(f) (28) is added, to read as follows: SECTION 265.2 SPECIFIC FU NCTIONS DELEGATED TO BOARD EMPLOYEES A N D FED ER A L RESERVE BANKS. * * * * * (f)E a c h Federal R eserve Bank is authorized, as to member banks or other indicated organizations headquartered in its district, or under subpara graph (25 ) o f this paragraph as to its officers: * * * * * (22) Under the provisions of section 3 ( a ) ( 1 ) of the Bank Holding Company Act (12 U.S.C. 1842), to approve the formation of 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 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 issue is raised by the proposal as to which the Board has not expressed its view. (v) any offer to acquire shares of the bank or banks involved will be extended to all shareholders of the same class on a substantially equal basis.2 * * * * * 2 Less th a n all o f the outstanding shares o f th e b a n k m ay be acquired provided th a t where a greater num ber o f shares are tendered th a n are proposed to be purchased, the offeror will pu r chase the shares tendered on a pro rata basis (except for frac tional interests) according to the num ber of shares tendered by each shareholder. W here an offer is not identical to all share holders, the burden is on th e applicant to dem onstrate the sub stan tial equivalence of the offers extended. (vi) considerations relating to the convenience and needs of the communities to be served are consistent with or lend weight toward approval of the application. (vii) 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. (viii) 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. (ix) if Applicant or any of Applicant’s existing 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. (x) total nonbank gross revenues of Applicant and its subsidiaries do not exceed 10 per cent of total operating income of the proposed banking subsidiaries. (xi) 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. (xii) 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 of the proposed subsidiary bank. (xiii) 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) any offer to acquire shares of the bank or banks involved will be extended to all shareholders of the same class on a substantially equal basis.3 (vi) considerations relating to the convenience and needs of the communities to be served are 3 Less th a n all o f the outstanding shares of th e b an k may be acquired provided th a t where a greater num ber o f shares are ten dered th a n are proposed to be purchased, the offeror will pu r chase the shares tendered on a pro rata basis (except for frac tional interests) according to th e num ber of shares tendered by each shareholder. W here an offer is not identical to all share holders, the burden is on the applicant to dem onstrate the sub stantial equivalence of the offers extended. consistent with or lend weight toward approval of the application. (vii) 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 com parable 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. (viii) 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 reason able 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. (ix) if Applicant or any of Applicant’s existing or proposed nonbanking subsidiaries compete in the same geographic and product market as any proposed subsidiary, the resulting organization will not control more than 10 per cent of that product or service line after consummation of the proposal. (x) 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. (xi) 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. (xii) 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. (xiii) 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. (xiv) 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. (xv) if the bank to be acquired is an existing bank and if any of 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. (xvi) 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. (xvii) 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 Act (12 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 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) 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.4 (vi) if the banks compete in the same banking market, the resulting bank will control no more than 10 per cent of market deposits.5 (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 of 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. * sN * * * 4 If either o f the proponent banks is a subsidiary of a holding com pany, and the parent com pany has another ban k subsidiary operating in the m arket of the b an k to be acquired, deposits of such offices should be included in the com putation o f m arket shares. 5 See footnote 4, above.
@FedFRASER