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Federal R eserve B ank OF DALLAS W IL L IA M H. WALLACE DALLAS, TEXAS 75222 FIRST V IC E P R E S ID EN T AND CH IE F O PER ATING O FFIC ER February 9, 1987 C ir c u la r 87-10 TO: The Chief Executive O f f i c e r of a l l member banks, bank holding companies and other s concerned in the Eleventh Federal Reserve D i s t r i c t SUBJECT Request for public comment on Regulation Y — and Change in Bank Control Bank Holding Companies DETAILS The Board of Governors of the Federal Reserve System has requested public comment on a proposed amendment to i t s Regulation Y to implement c e r t a i n amendments to the Change in Bank Control Act ("CBCA") require d by the Anti-Drug Abuse Act of 1986. Comments should be addressed to Mr. William W Wiles, S e cretary , . Board of Governors of the Federal Reserve System, Washington, D.C. 20551. All correspondence should r e f e r to Docket No. R-0595 and must be received by March 6, 1987. ATTACHMENTS The Board's press r e l e a s e and the m ater ial as published in the Federal R e g is ter are atta c h e d . MORE INFORMATION For f u r t h e r information, please c o n t a c t Basil Asaro a t (214) 698-4345, Gayle Teague a t (214) 651-6481, or David W Dixon of the Legal . Department a t (214) 651-6228. S incerely yours, For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800) 527-9200 (interstate). This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) .^TEM FEDERAL RESERVE press release January 28, 1987 For immediate r e l e a s e The Federal Reserve Board today requested comment on a proposed amendment t o Regulation Y implementing amendments t o th e Change in Bank Control Act required by th e Anti-Drug Abuse Act of 1986. The Anti-Drug Abuse Act of 1986 amended t h e Change 1n Bank Control Act (CBCA) t o r e q u i re federa l banking agencies t o publish n o ti c e of any f i l i n g made under the CBCA t o acquire control of a bank or bank holding company. The Anti-Drug Abuse Act r e q u i r e s t h e banking agencies t o publish th e name of each p arty acquiring control of a bank o r bank holding company, as well as t h e name of the t a r g e t i n s t i t u t i o n , and t o s o l i c i t public comment on the proposed a c q u i s i t i o n , in p a r t i c u l a r from persons in the r elev an t local area. Comments should be received by th e Board on t h i s m atter by March 6, 1987. The Board's n o t i c e 1s a t ta c h e d . - Attachment 0- FEDERAL RESERVE SYSTEM 12 CPR Part 225 (Regulation Y? Docket No, R-0595) Bank Holding Companies and Change in Bank Control Procedures Regarding Publication and Processing of Notices Filed Under the Change in Bank Control Act AGENCY: Board of Governors of the Federal Reserve System. ACTION: Notice of Proposed Rulemaking. SUMMARY: The Federal Reserve Board is proposing to amend Subpart E of its Regulation Y, section 225 of Title 12, Code of Federal Regulations, to implement certain amendments to the Change in Bank Control Act ("CBCA") made by section 1360 of the Anti-Drug Abuse Act of 1986, Public Law 99-570. proposal, publish, notificants under the CBCA would be Under this required to in a newspaper of general circulation in communities where the bank or bank holding company to be acquired is located, an announcement of the proposed acquisition no later than 10 calendar days after the notice has been accepted by the appropriate provides Federal Reserve an exception Bank. The proposed to the publication regulation requirement where disclosure would threaten the safety or soundness of the bank to be acquired. In addition, publication may be delayed by the Board for good cause shown. The proposed regulation also authorizes the Board to extend the period of time it has to consider a CBCA notice for up to two additional periods of 45 days each. - 2- Finally, as required by the Anti-Drug Abuse Act, proposed regulation states investigation of that the Board the competence, shall experience, conduct integrity, the an and financial ability of each proposed acquiror and shall make an independent determination of the accuracy and completeness of the information submitted. A written report of the investigation will be prepared which will become part of the record. DATE: Comments must be received by March 6, 1987. ADDRESS: All No. R-0595, comments, which should refer to Docket should be mailed to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551, or delivered to Room B-2223, 20th & Constitution Avenue, N.W., Washington, D.C., between 8:45 a.m. and 5:15 p.m. weekdays. Comments may be inspected in Room B-1122 between 8:45 a.m. and 5:15 p.m. weekdays. FOR FURTHER INFORMATION CONTACT: General Counsel Counsel (202/452-3583), Assistant (202/452-3430), Director Legal J. Virgil Mattingly, Scott G. Division; (202/452-2638), Alvarez, or Senior Sidney Division of Deputy Sussan, Banking Supervision and Regulation, Board of Governors of the Federal Reserve impaired System, Washington, D.C. only, Telecommunications 20551. Service For for the hearing the Earnestine Hill or Dorothea Thompson (202/452-3544). Deaf, - 3- SUPPLEMENTARY INFORMATION: Background Under the CBCA, persons acting either individually or in concert to acquire control of any insured state member bank or bank holding company must provide the Board with 60 days prior written notice describing the proposed acquisition and containing certain information concerning the resources and background of the notificant. financial The transaction may proceed at the end of the 60-day period, unless the Board disapproves the transaction or extends the notice period. An acquisition may proceed prior to the expiration of the 60-day review period if the Board issues a written statement of its intent not to disapprove the transaction. On October 27, 1986, the President signed into law the Anti-Drug Abuse Act of 1986, Public Law 99-570. of this Act amendments (hereinafter the "1986 Amendment") to the CBCA that necessitate Section 1360 makes several a revision in the Board's implementing regulations. Publication and Solicitation of Comments Prior to the 1986 Amendment, the CBCA did not require notice to, or solicitation of comments from, the public in connection with a notice filed under the CBCA. The Board's regulation provided that the Board or the appropriate Reserve Bank could solicit information or views from including any bank or bank holding company any person, involved in the - notice, and any appropriate governmental authority. The 4state, federal or foreign (See 12 C.F.R. § 225.43(d)). 1986 Amendment provides that the appropriate Federal agency shall publish the name of the insured bank or bank holding company proposed to be acquired and the name of each person identified as a person by whom or for whom such acquisition is to be made, and solicit public comments on the proposed acquisition, in particular geographic area where the bank from persons to be acquired in the is located. Publication is not required if the agency determines in writing that such disclosure or solicitation would seriously threaten the safety or soundness of the bank or bank holding company to be acquired. Regulations promulgated by both the Federal Deposit Insurance Corporation (12 C.F.R. § 303.4(b)) and the Office of the Comptroller of the Currency (12 C.F.R. for the public disclosure S 5.50(h)) provide and solicitation of comments by requiring the notificant to publish a disclosure statement in a newspaper serving the community where the head office of the bank to be acquired is located. The Board is proposing to amend its regulation in a similar manner to require the person or persons seeking to acquire a bank announcement or bank holding company of the proposed acquisition to publish an in a newspaper of general circulation in the community in which the head office - 5- of the state member bank or bank holding company to be acquired is located and, in the case of a bank holding company, in each community in which the head office of a bank subsidiary of the holding company is located. The newspaper announcement must contain each proposed acquirer, the percentage of the name of shares to be acquired, the name of each bank or bank holding company to be acquired, and, in the case of a bank holding company, the names of each of its subsidiary banks. The announcement must also state that any person wishing to comment on the proposed acquisition may do so by submitting written comments to the appropriate Reserve Bank within 20 calendar days of publication or such shorter period of time as the Board may prescribe in a particular case. As proposed, the announcement may be published no earlier than 10 calendar days before the CBCA notice is filed with the appropriate Reserve Bank and no later than 10 calendar days after the notice has been accepted by the Reserve Bank. In addition to requiring newspaper publication by the notificant, made the Board proposes to publish notice of filings under the CBCA in the Federal Register, including the names of persons who propose to acquire control of a bank or bank holding company, the amount of shares to be acquired, and the names of all banks to be acquired. the Federal Register notice permit The Board proposes that a minimum period of 15 calendar days for public comment, unless the Board determines - 6- that the public interest requires shortening or waiving this comment period. The Federal Register notice will be published upon submission to the Reserve Bank of the CBCA The Board may dispense with public notice. notice if it determines in writing that such publication and solicitation of comment bank would seriously threaten the safety or soundness of the or bank holding company to be acquired. proposed regulation will provide that the Finally, the publication requirement does not give any person standing to intervene in proceedings on the CBCA notice or to appeal or otherwise contest the Board's action regarding a notice. Tender Offers The Board notes that the FDIC and the OCC regulations provide that publication of a filing under the CBCA may be delayed for up to 34 days after the filing in the case of a proposed tender offer that requires notice under the CBCA and is simultaneously subject to the requirements of the Williams Act (15 U.S.C. 78m and 78n).-^ 1/ The tender offer regulations applicable to bank holding companies and to state memberbanks, 17 C.F.R. 240.14(d) and 12 C.F.R. 206.8, require that an offer remain open for at least 20 business days from the date the tender offer is first published, sent or given to security holders. Shares tendered or deposited pursuant to the offer may be withdrawn by a depositing shareholder at anytime within the first 15 business days of the offering. (17 C.F.R. 240.14(d)(7)? 12 C.F.R. 206.8(g)). Under the CBCA, a bidder may not purchase shares deposited in response to a tender offer in amounts exceeding the CBCA limits until the expiration of the review period unless notified by the Board at an earlier time that the acquisition may commence. - 7- The Board's proposed rule would permit the Board, in its discretion, to postpone, but not eliminate, the publication requirement under the CBCA for such period as the Board deems appropriate where an acquiring party requests such delay and confidential treatment of a CBCA notice. Extension of Time For Disapproving Transactions Prior to the 1986 Amendment, the CBCA authorized the appropriate federal agency to extend for up to 30 days the statutory period disapproved. in which a proposed acquisition could be The 1986 Amendment provides that, in addition to this 30-day extension, the appropriate agency may authorize two additional extensions of not more than 45 days each. In order to utilize this authority, the agency must determine that: an acquiring required party under § 1817(j)(6)); substantially has section (ii) not furnished 7(j)(6) material inaccurate; of all the CBCA information (iii) an the (i) information (12 U.S.C. submitted investigation of is an acquiring party has not been completed because of inadequate cooperation or delay by the acquiring party; or (iv) additional time is needed to investigate and determine that no acquiring party has a record of failing to comply with transaction reporting requirements of the Bank the currency Secrecy Act, subchapter II of chapter 53 of title 31, United States Code. The Board is proposing to amend section 225.43(c) its regulations to reflect this change in the CBCA. Board acts under this authority to extend the time for of If the - 8- disapproval beyond the initial 30-day extension, the proposed regulation requires the Board to notify the acquiring party of the reasons for such extension, including a statement of any information that is determined by the Board to be incomplete, inadequate, or inaccurate. Investigation and Report The 1986 Amendment requires the appropriate agency to conduct an integrity, investigation of the competence, experience, and financial ability of each person named in a notice of a proposed acquisition as a person by or for whom such acquisition is to be made, determination information agency. of the required accuracy by The agency is the then and to make an independent and CBCA completeness to be of submitted required to prepare the to the a written report of such investigation, which is to become part of the record. The Board is proposing to amend section 225.43(d) of its regulation to reflect this change in the law. Interim Applicability Because the amendments to the CBCA made Anti-Drug Abuse Act of 1986 are already effective, by the the Board will follow the procedures set out in the proposed regulation pending final action on the regulation. Regulatory Flexibility Act This proposal to provide for publication of notices filed under the CBCA implements specific statutory requirements recently imposed by the Anti-Drug Abuse Act of 1986. The CBCA generally requires persons seeking to acquire control of a bank or bank holding company to provide prior written notice to the appropriate federal banking agency, but imposes no requirements on the target bank or bank holding company itself. The proposal to publish notice of a proposed acquisition subject to the CBCA would likewise not impose any regulatory burden on banks or bank holding companies of any size that targets of a proposed change in control. have the benefit, however, are the The proposal would of providing such banks or bank holding companies notice of a proposed change of control and permitting an opportunity for such banks, bank holding companies, and other interested persons to provide comment and information regarding the proposal to the Board. Thus, the proposal is not expected to have a significant economic impact on a substantial number of small business entities within the meaning of the Regulatory Flexibility Act (5 U.S.C. S 601 et seg.). Paperwork Reduction Act The proposal would require persons proposing to acquire a bank or bank holding company in a transaction subject to the CBCA to publish notice of the proposed transaction in a newspaper of general circulation in communities served by the target bank or bank holding company and to provide the Board with verification of such publication. No additional reporting requirements or modification to existing reporting requirements are proposed. — 10o List of Subjects in 12 C.F.R, Part 225 Banks, banking, Federal Reserve System, Holding Companies, Reporting and recordkeeping requirements. For the reasons set out in this notice, and pursuant to the Board's authority under section 13 of the Change in Bank Control Act (12 U.S.C. § 1817(j)(13)), the Board proposes to amend 12 C.F.R. Part 225 as follows: 1. The authority citation for Part 225 continues to read as follows: Authority: 12 U.S.C. 1817(j)(13), 1818, 1843(c)(8), 1844(b), 3106, 3108, 3907 and 3909 2. The Board proposes to amend section 225.43(a) to read as follows: SECTION 225.43 — Procedures for Filing, Processing, Publishing, and Acting on Notices (a)(1) Filing notice. A notice required under this subpart shall be filed with the appropriate Reserve Bank and shall contain the information required by paragraph 6 of the Change in prescribed Bank Control Act in the designated (12 U.S.C. Board 1817(j)(6)), form. With or respect to personal financial statements required by paragraph 6(B) of the Change in Bank Control Act, an individual may include a statement of assets and liabilities as of a date within 90 days of filing the notice, a brief income summary, and a description of any subsequent material changes, subject to the authority of the Reserve Bank or the Board to require additional information. - 11- (2) Acceptance of notice. The 60-day notice period specified in section 225.41 of this subpart shall commence on the date all required information is appropriate Reserve Bank or the Board. received by the The Reserve Bank shall notify the person or persons submitting a notice under this subpart of the date all such required information is received and the notice is accepted for processing. (3) Publication. (i) Newspaper announcement. A person(s) filing a notice under this subpart shall publish, in a form prescribed by the Board, an announcement public comment on the proposed acquisition. soliciting The announcement shall be published in a newspaper of general circulation in the community in which the head office of the state member bank to be acquired is located or, in the case acquisition of a bank holding company, of a proposed in the community in which its head office is located and in the community in which the head office of each of its subsidiary banks is located. The announcement shall be published no earlier than 10 calendar days prior to the filing of the notice with the appropriate Reserve Bank and no later than 10 calendar acceptance of the notice by the Reserve Bank. days after A copy of the announcement and the publisher's affidavit of publication shall be provided to the appropriate Reserve Bank. (ii) newspaper announcement shall state: Contents of newspaper announcement. - 12- (A) the name of each person identified in the notice as a proposed acquiror of the bank or bank holding company and the percentage of shares proposed to be acquired; (B) the name of the bank company to be acquired, including, or bank holding in the case of a bank holding company, the name of each of its subsidiary banks; and (C) a statement that interested persons may submit comments on the notice to the Board or the appropriate Reserve Bank for a period of 20 days or such shorter period as may be provided pursuant to subparagraph (v). (iii) Federal Register announcement. The Board will, upon the filing of a notice under this subpart, publish announcement in the Federal Register of receipt of the notice. The Federal Register announcement will contain the information required under subparagraph (ii)(A ) and that interested persons may submit (B) and a statement comments on the proposed acquisition for a period of 15 days or such shorter period as may be provided pursuant to subparagraph waive publication in the Federal (v). Register The Board may if the Board determines that such action is appropriate. (iv) Delay of publication. The Board may permit delay in the publication required under this paragraph if the Board determines, for good cause shown, that it is in the public interest to grant such a delay. of publication may be submitted Reserve Bank. Requests for delay to the appropriate Federal - 13- (v) Shortening circumstances requiring prompt action, or waiving notice. the Board may shorten the public comment period required under this paragraph. The Board may also waive the newspaper publication and solicitation of public comment requirements of this paragraph, or it may act on a notice before the expiration of a public comment period, if it certifies in writing that such disclosure of the notice m- or solicitation of public comment would seriously threaten the safety or soundness of the bank or bank holding company to be acquired. (4) upon a notice Consideration of public comments. filed under this consider all public comments period specified announcement. in the subpart, received newspaper At the Board's option, In acting the Board shall in writing within the or Federal Register comments received after this period may, but need not, be considered. (5) Standing. No person (other than the acquiring person) who submits comments or information on a notice filed under this subpart shall thereby become a party to the proceeding or acquire any standing or right to participate in the Board's consideration of the notice or to appeal or otherwise contest the notice or the Board's action regarding the notice. In - 14- 3. The Board proposes to amend section 225.43(c)(2) to read as follows: (2) Extensions of time period. extend the 60-day period in paragraph (i) The Board may (1) of this subsection for an additional 30 days by notifying the acquiring person(s). (ii) The Board may further extend during which it may disapprove a notice for the period two additional periods of not more than 45 days each if the Board determines that: (A) any acquiring person has not furnished all the information required under subsection (a); (B) any material information submitted is substantially inaccurate; (C) investigation it is unable to of an acquiring person complete because of the inadequate cooperation or delay by that person; or (D) additional time is needed to investigate and determine that no acquiring person has a record of failing to comply with the requirements of the Bank Secrecy Act, subchapter II of Chapter 53 of Title 31, United States Code. (iii) under this paragraph, If the Board extends the time period it shall notify the acquiring person(s) of the reasons therefor and shall include a statement of the information, if any, deemed incomplete or inaccurate. - 4. 15- The Board proposes to amend section 225.43(d) to read as follows: (d) Investigation and report. (1) After receiving a notice under this the Board or the appropriate Reserve Bank investigation of the competence, subpart, shall conduct an experience, integrity, and financial ability of each person by and for whom an acquisition is to be made. determination information subsection The Board of the required (a). shall accuracy to be also make and ani independent completeness contained in of any a notice In investigating any notice under accepted under this subpart, the Board or Reserve Bank may solicit information or views from any person, company involved federal, including any bank or bank holding in the notice, and any appropriate state, or foreign governmental authority. (2) The Board or the appropriate Reserve Bank shall prepare a written contain, at report a minimum, of its investigation, a summary of the which results of shall the investigation. Board of Governors of the Federal Reserve System, January 28, 1987. (signed) William W. Wiles William W. Wiles FEDERAL RESERVE BANK OF DALLAS STATION K DALLAS, TEXAS 7 5 2 2 2 BULK RATE U.S. POSTAGE PAID RETURN POSTAGE GUARANTEED DALLAS, TEXAS Permit No. 151