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F ederal R eserve Bank OF DALLAS ROBERT D. M c T E E R , J R . Ju ly P R E S ID E N T AND C H IE F E X E C U T IV E O F F IC E R 19 1995 DALLAS, TE XAS 75265-5 9 0 6 ’ Notice 95-68 TO: The Chief Executive Officer of each member bank and bank holding company in the Eleventh Federal Reserve District SUBJECT Final Amendments to Regulation Y (Bank Holding Companies and Change in Bank Control) DETAILS The Board of Governors of the Federal Reserve System has amended Regulation Y (Bank Holding Companies and Change in Bank Control) to eliminate the requirement that a bank holding company obtain a Board determination that it no longer controls shares or assets sold to a third party. The Board believes that the elimination of the requirement for a determina tion of control will reduce the regulatory burden on bank holding companies without undermining the purposes of the Bank Holding Company Act. This proposal has been identified in connection with the Board’s continuing effort to eliminate obsolete or unnecessary regulations or applications. ATTACHMENT A copy of the Board’s notice as it appears on pages 35120-22, Vol. 60, No. 129, of the Federal Register dated July 6, 1995, is attached. MORE INFORMATION For more information, please contact Zane Rogers at (214) 922-6086. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, F o r additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333 -4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 35120 Federal Register / Vol. 60, No. 129 / Thursday, July 6, 1995 / Rules and Regulations FEDERAL RESERVE SYSTEM 12CFR Part 225 [Regulation Y; Docket No. R-0872] Bank Holding Companies and Change in Bank Control AGENCY: Board o f Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: The Board is am ending its Regulation Y to elim inate the need for a bank holding com pany to file a request w ith the Board for a determ ination under section 2(g)(3) o f the Bank Holding Company A ct that it no longer controls shares or assets that it has sold to a third party with financing if the purchaser is not an affiliate or principal shareholder o f the divesting holding com pany, or a com pany controlled by the principal shareholder, and there are no officers, directors, trustees or beneficiaries o f the acquiror in com m on with or subject to control by the divesting com pany. The Board believes that the elim ination of the requirem ent for a determ ination of control for these types of divestitures w ill reduce the regulatory burden on bank holding com panies without underm ining the purposes of the Bank Holding Company Act. T h is proposal has been identified in connection w ith the Board’s continuing effort to elim inate obsolete or unnecessary regulations or applications. EFFECTIVE DATE: July 6, 1995. FOR FURTHER INFORMATION CONTACT: Pamela G. N ardolilli, Senior Attorney (2 0 2 /4 5 2 -3 2 8 9 ), Legal D ivision, Board o f Governors o f the Federal Reserve System. For the hearing impaired only, Telecom m unication Device for the Deaf (TDD), Dorothea Thom pson (2 0 2 /4 5 2 3544), Board o f Governors of the Federal Reserve System , 20th and C Streets, N.W., W ashington, D.C. 20551. SUPPLEMENTARY INFORMATION: Under section 2(g)(3) of the Bank Holding Company A ct (12 U.S.C. 1841(g)), shares Federal Register / Vol. 60, No. 129 / Thursday, July 6, 1995 / Rules and Regulations transferred by a bank holding company to any transferee where the transferee is indebted to the transferor or has one or more officers, directors, trustees, or b eneficiaries in com m on with the transferor, are deemed to be controlled by the transferor unless the Board, after an opportunity for a hearing, determ ines that the transferor is not capable of controlling the transferee. On March 28, 1995, the Board proposed to amend § 225.32 o f the Board’s Regulation Y (12 CFR 225.32) to exem pt from the presum ption o f control those divestitures where a bank holding com pany is financing the sale of assets or shares that it acquired so long as (i) the property is not sold to an affiliate or principal shareholder of the divesting holding com pany, or a com pany controlled by such a principal shareholder; and (ii) there are no officers, directors, trustees, or beneficiaries of the acquiror in common with or subject to control by the divesting com pany (60 FR 15881) (March 28, 1995). A review of the 2(g)(3) determ inations over the past ten years indicates that almost all control determ inations under that section have arisen from bank holding com panies selling property they acquired in satisfaction of a debt previously contracted (dpc property) where the bank holding com pany was trying to recoup its losses on a loan from the sale o f the collateral. In these cases, the record indicates that the divestitures and financing arrangements have been conducted on an arm ’s-length basis, and there is no evidence of divesting com panies exercising control o f the assets after the sale. In other cases where a bank holding com pany sold an asset or subsidiary that it had acquired in the normal course o f business and financed the sale of the asset or subsidiary, the assets were sold because, in m ost cases, the bank holding com pany was no longer interested in engaging in that business. The elim ination of the requirem ent to obtain a control determ ination will reduce the regulatory burden on bank holding com panies without elim inating the Board’s ability to supervise any attempt to control the divested asset in the future. Although the Board would no longer require a bank holding com pany to obtain a control determ ination, the Board can take appropriate supervisory action if control of a divested asset is found to persist through the exam ination process or by other means. In addition, the Board would continue to require a divesting company to obtain a 2(g)(3) determ ination if: (1) the asset were transferred to an affiliate or principal shareholder of the divesting holding com pany, or a com pany controlled by the principal shareholder; or (2) an interlock existed betw een the divesting com pany and the acquiring person. In these cases, the Board believes that there is a greater potential for continued control by the bank holding com pany that should be reviewed. T he General Counsel w ill continue to review these divestitures on a case by case basis to determ ine if a control determ ination is appropriate. In addition, if a bank holding com pany needs a formal control determ ination for tax or other reasons, the Board w ill continue to process a request for a control determ ination even when the sale meets the regulation. Public Comment The Board received sixteen com m ents on its proposed amendment to Regulation Y. T he Board received eight com m ents from Reserve Banks, five com m ents from com m ercial banking organizations, two com m ents from trade associations and one com m ent from a law firm. A ll com m enters supported the Board’s effort to reduce regulatory burden. Two com m enters suggested that the Board expand the scope o f the regulation to include divestitures to com panies w ith director interlocks. The Board receives few requests for divestitures involving interlocks and the Board does not believe that an exem ption is needed at this tim e for these divestitures. The com m ents also raise several adm inistrative questions regarding the im plem entation o f the regulation. In response to public com m ent, the Board has m odified the proposed language to clarify the applicability o f the proposed regulation. In another com m ent, one Reserve Bank questioned the status of pending 2(g)(3) requests and transactions. The Board believes that any pending 2(g)(3) request or transaction that meets the regulation’s requirem ents should be covered by the new regulation and no further action is needed. Because a 2(g)(3) determ ination is a statutory requirem ent and some bank holding com panies may need proof o f the divestiture for tax or other reasons, one Reserve Bank recom m ended that the regulation state that if a bank holding com pany wants a 2(g)(3) determ ination, that the bank holding com pany can request a determ ination even if the regulation no longer requires it. As noted above, the pream ble indicates that the Board w ill continue to provide 2(g)(3) determ inations if a bank holding com pany requests such a determ ination. 3 5121 Regulatory Flexibility Act Analysis Pursuant to section 605(b) o f the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the Board certifies that the final rule w ill not have a significant adverse econom ic im pact on a substantial num ber of sm all entities and that any im pact on those entities should be positive. The am endm ents would reduce regulatory burdens im posed by Regulation Y, and the amendment would have no particular adverse effect on other entities. Pursuant to 5 U.S.C. § 553(d), the am endm ent to Regulation Y w ill becom e effective im m ediately. The change grants an exem ption to bank holding com panies, and therefore the Board w aives the 30 days general requirem ent for publication o f a substantive rule. In addition, any transaction that is subject to section 2(g)(3) but meets the regulation’s requirem ents is now exem pt and no further action is required. Paperwork Reduction Act Analysis No collection of inform ation pursuant to section 3504(h) of the Paperwork Reduction Act (44 U.S.C. 3501, et seq.) is contained in the final rule. List of Subjects in 12 CFR Part 225 A dm inistrative practice and procedure, Banks, banking, Federal Reserve System , Holding com panies, Reporting and recordkeeping requirem ents, Securities. For the reasons set forth in the pream ble, the Board amends 12 CFR part 225 as set forth below : PART 225— BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL (REGULATION Y) 1. The authority citation for 12 CFR part 225 continues to read as follows: Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i, 1831p —1, 1843(c)(8), 1844(b), 1972(1), 3 1 06, 3108, 3310, 3 3 3 1 -3 3 5 1 , 3907, and 3909. 2. In § 225.32, paragraph (a)(2) is redesignated as paragraph (a)(3) and a new paragraph (a)(2) is added to read as follow s: §225.32 (a ) * Divestiture proceedings. * * (2) E xcept in the case of a proceeding initiated under paragraph (f) of this section or § 225.31 of this subpart, the Board w ill regard the presum ption of control in paragraph (a)(l)(i) of this section and section 2(g)(3) of the Bank Holding Company Act as inapplicable in the case o f the sale or divestiture of assets or voting securities by a divesting com pany if: 35122 Federal Register / Vol. 60, No. 129 / Thursday, July 6, 1995 / Rules and Regulations (i) The acquiring person is not an affiliate or a principal shareholder of the divesting com pany, or a com pany controlled by such a principal shareholder; and (ii) The acquiring person does not have any officer, director, trustee, or beneficiary in com mon w ith or subject to control by the divesting com pany. * * * * * By order of the Board of Governors of the Federal Reserve System, June 2 9 ,1 9 9 5 . W illiam W . W iles, Secretary o f the Board. [FR Doc. 9 5 -1 6 5 3 9 Filed 7 - 5 - 9 5 ; 8:45 am] BILLING CODE 6210-01-P
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