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F e d e r a l e s e r v eB a n k
R
O F DALLAS
ROBERT
AND
C H IE F
D. M c T E E R , J R .
E X E C U T IV E
O F F IC E R
September
28 , 1992
d a lla s ,t e x a s
75222
Notice 92-92
TO:
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Revisions to Applications Requirements Under
Regulation H (Membership of State Banking Institutions
in the Federal Reserve System) and Regulation Y (Bank
Holding Companies and Change in Bank Control)
DETAILS
The Federal Reserve Board has recently reviewed its applications
procedures and taken steps to reduce the burden associated with these proce
dures.
New procedures will be developed which will:
•
Limit extensions of the period for accepting applications from
banks and bank holding companies.
•
Offer prospective applicants the opportunity to submit a pre
filing notice of intent to file a formal application.
•
Establish a general consent limit for investments in bank premis
es for state member banks that are will capitalized and in
satisfactory condition.
•
Eliminate the stock redemption notice requirement for bank
holding companies that are will capitalized and in satisfactory
condition.
•
Expandthe authority of Reserve Banks to
applications without Board staff review.
process
all delegable
•
Modifythe B o a r d ’s delegation rules that
and market concentration.
pertain
to competition
•
Reduceredundant processing of cases acted upon by the Board.
For 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 (300) 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)
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The Board welcomes comment on further steps that might be taken to
improve efficiency in the applications process.
Comments should be addressed
to William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551.
All comments should refer to Docket No. R-0773 and should be submitted prior
to October 28, 1992.
ATTACHMENT
Attached is a copy of the B o a r d ’s invitation for comment.
MORE INFORMATION
For more information, please contact Marion White at (214) 922-6155.
For additional copies of this B a n k ’s notice, please contact the Public Affairs
Department at (214) 922-5254.
Sincerely yours,
Invitation for Comment on Steps to
Revise the Applications Requirements
Under Regulation H and Regulation Y
The Federal Reserve System ("System"), has taken a
number of significant steps over the past two decades to improve
the overall efficiency of its processing of applications.
The
Board has recently reviewed its applications procedures again,
and has taken a number of additional steps, described below, to
reduce the burden associated with these procedures.
The Board
will implement the changes described in this notice immediately.
In addition, the Board invites comment on any
additional steps the Board may take to improve the efficiency and
increase the effectiveness of the applications process.
In
particular, the Board invites public comment on any other steps
that the Board should consider for revising or streamlining the
applications and notice procedures under the Board's rules to
reduce the burden on applicants of these procedures without
impairing the Board's ability to fulfil its statutory obligations
in reviewing these proposals.
The Board requests that comments
on this matter be submitted prior to October 28, 1992.
Explanation of Board Actions to Date to Reduce Regulatory Burden
Overview of Applications Processing
The System has, for the past 15 years, met the Board's
publicly articulated goal of processing 90 percent or more of
System-wide applications within a self-imposed processing
deadline (currently, 60 days from acceptance).
During that time,
more than 35,000 applications and notices have been processed,
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including approximately 10,000 nonbanking activity applications
and notices, approximately 8,300 bank holding company formation
applications, and 5,800 bank acquisition applications.
The
number of applications and notices processed each year increased
during the late 1970s and early 1980s to a peak of approximately
3,000 in 1983.
Annual volumes declined in the mid 1980s, but
then increased back up to the 3,000 level in 1991.
Over the past several years, approximately 14 percent
of applications were processed for Board action, 52 percent were
processed under delegated authority with Board staff review, and
the remaining 34 percent were processed under delegated authority
without Board staff review.
The average post-acceptance
processing time per application generally has declined to a low
of 33 days in 1991.
The average processing time for delegated
cases has been significantly below the average processing time of
the typically more complex Board action cases.
In 1991, the
average processing time for delegated cases was 28 days, compared
to 50 days for Board action cases.-/
In comparison, in 1986
the average post-acceptance processing time per application was
30 days: the average processing time was 32 days for delegated
cases and 71 days for Board action cases.
Based on its experience in reviewing proposals under
the Federal banking laws, the Board has made a number of
-/ In 1991, the average processing time for domestic
delegated cases that required Board staff review was 29 days,
compared to 25 days for domestic delegated cases not requiring
Board staff review.
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revisions to the applications process designed to improve the
efficiency of the process and reduce burdens on interested
parties to the process.
Reserve Banks have been delegated
substantial authority; application forms have been streamlined
consistent with the Paperwork Reduction Act; unnecessary
application procedures have been eliminated and notice procedures
have been substituted for applications where appropriate under
the statutory framework; information requirements for certain
activities have been reduced; Board standards and policies have
been more widely disseminated; internal time guidelines for
reviewing and acting on proposals have been voluntarily imposed
by regulation, and, after experience, substantially shortened.
These efforts have resulted in the ability of the System to
process more quickly a large number of increasingly complex
applications with staffing levels that have remained relatively
constant.
On April 22, 1992, as part of a broad review of the
Board's regulations, policies, and reports, the Board requested
that staff conduct a review of various aspects of the
applications process.
This review has resulted in several final
and proposed changes to the Board's applications rules.
For
example, the Board determined to substantially lessen the
information required of a state member bank —
in satisfactory
conditions and with satisfactory community reinvestment and
consumer compliance ratings —
branches.
applying to establish additional
In an effort to facilitate acquisitions by nonbank
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subsidiaries of bank holding companies, the Board also revised
Regulation Y to increase the applicability of its expedited
applications procedure for small nonbank acquisitions.
This
revision, which became effective on June 29, 1992, increased the
size of acquisitions that could be made after expedited
procedures from a maximum of $15 million to a maximum of the
lesser of $100 million or 5 percent of the applicant's
consolidated assets, subject to certain criteria.
The Board also
increased the relative size of nonbank assets (from 20% to 50%)
that may be acquired by a bank holding company in the ordinary
course of business without any prior System approval, and
established criteria for determining whether an application under
the Bank Holding Company Act may be waived for transactions
involving certain bank mergers.-/
As a result of this review, the Board also requested
comment on other proposals to reduce regulatory burden.
In
particular, on June 29, 1992, the Board published for comment
proposed regulatory amendments that would reduce from twice to
once the number of times notice must be published in a newspaper
of general circulation of the filing, with the Board, of certain
applications under the Federal Reserve Act and the Bank Holding
Company Act.-/
These amendments, intended to reduce the burden
associated with the Board's notice requirements, would have no
effect on the length or timing of public comment periods, which
-/
57 Federal Register 28,777 (1992).
2/
57 Federal Register 28,807 (1992).
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currently start when the first notice is published.
At the same
time, the Board also published for comment a proposed rule that
would exempt from the limitations of section 23A of the Federal
Reserve Act the transfer of assets and liabilities between
affiliated insured depository institutions when such transfer is
part of the merger or consolidation of the affiliated
institutions.-/
This proposed exemption would be available for
transactions requiring the approval of the resulting insured
depository's primary regulator under the Bank Merger Act.
As part of the April review, the Board also directed
staff to analyze the extent of the information being required in
applications, timing considerations and procedures for pre
acceptance review and post-acceptance analysis of applications,
standardization of application forms, and procedures for Board
monitoring of the status of cases that exceed internal processing
guidelines.
This analysis had two primary objectives:
(1) to
determine whether applications are being processed as efficiently
as possible; and (2) to identify opportunities to increase
efficiency and/or reduce regulatory burden on the banking
industry without jeopardizing important public policy objectives
or the Board's ability to fulfill specific statutory objectives.
This review was particularly focused on issues affecting
processing time and duplication of effort, and this review
resulted in several additional changes to certain applications
-/
57 Federal Register 28,809 (1992).
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procedures to improve efficiency, eliminate redundancy and
otherwise reduce regulatory burden in the applications process.
Based on the Board's review, the Board has determined
to take the following steps.
Change #1: Implementation of certain procedures to limit
extension of the pre-acceptance period for applications.
The goal of the pre-acceptance review is to assure that
a reasonably complete record on which to base an analysis and
supportable action has been established at the inception of the
formal processing period.
The review is generally conducted by
Reserve Bank staff although Board staff, usually at the request
of the Reserve Bank, also may participate in pre-acceptance
review.
There is a common perception that pre-acceptance
processing has resulted in unnecessary delays in the processing
of applications.
This perception is largely a result of certain
conflicting considerations that often exist during the pre
acceptance period.
The applicant often elects, or is required,
to publicly announce a transaction soon after an agreement which
circumscribes the transaction has been reached.
From the
applicant's perspective, this announcement may signal the
beginning of the "processing period", yet the actual submission
of the application may not occur for several weeks or even months
after the announcement.
To a large extent, both the timing and
the quality of a submission are within the applicant's control,
regardless of efforts the System may make to facilitate the
process.
Board and Reserve Bank staff, faced with the
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responsibility of completing processing under a tight time
schedule, understandably are reluctant to accept a submitted
application until most of the factors requiring the Board's
consideration are addressed.
The System has taken a number of steps through the
years to attempt to address applicants' concerns with the pre
acceptance process.
These efforts include a willingness to
accept and review draft applications, periodic reviews and
modifications of the application forms, and an "open-door policy"
permitting prospective applicants to discuss informally their
proposals with Board or Reserve Bank staff.
In an attempt to monitor the timing of pre-acceptance
activities, the System has adhered to formal timing guidelines in
pre-processing most applications.
If an applicant chooses to
submit an application in draft, the draft application is to be
reviewed for no more than 10 business days, with up to 3
additional business days for complicated applications.
At the
end of this period, the Reserve Bank must return the application
to the applicant with comments.
Once a formal application is
received, the Reserve Bank has no more than 10 business days to
either accept the application for processing, return the
application to the applicant as materially deficient, or request
additional information from the applicant.
If more information
is requested, the applicant has 8 business days in which to
respond, after which the Reserve Bank has up to 5 business days
to review the submission.
At this point, the Reserve Bank must
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either accept the application for processing (under either
delegated authority or for Board action) or return it.-/
The pre-acceptance timing guidelines were last
tightened in 1983 from a 13-10-6-day standard to the current
10-8-5-day standard.
Given weekends and holidays, the current
pre-acceptance process can take up to approximately 34 calendar
days to complete if each step requires the maximum number of
days.
When organizations are contemplating a large
acquisition or a sophisticated proposal, the Reserve Banks often
have encouraged the applicant to file a draft application.
The
Reserve Banks believe that the filing of a draft application in
these cases helps both the System and the applicant identify and
address potential issues early in the process.
Although the
filing of a draft application may result in fewer questions being
asked during the official pre-acceptance process, such filing may
extend the total application processing period.
The Board always has considered draft applications to
be an option available to an applicant, but the Board's rules do
not require the filing of a draft under any circumstance.
In
this regard, the Board emphasizes that draft applications are not
required for any proposals, and may be filed when an applicant
determines in its discretion to do so.
-/ Current procedures do not provide for a second request
for information during pre-acceptance processing.
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There have been cases in which Reserve Banks have not
returned an incomplete application at the end of the
pre-acceptance process, and instead have accepted the application
after expiration of the time provided in the Board's regulations
governing the pre-acceptance process.
The Reserve Banks have
taken this step generally in an effort to reduce the applicant's
burden of refiling the application.
When the Board implemented its regulations establishing
a pre-acceptance schedule, the Board indicated that it intended
the Reserve Banks to abide by this schedule and to return
incomplete applications at the end of the period.
The Board has
determined to increase monitoring efforts to ensure that the
Reserve Banks abide by the pre-acceptance schedule.
To address
the possibility that an applicant may be able to complete an
application if given a brief extension of the pre-acceptance
process, the Board believes that an extension of the pre
acceptance review period should be permitted only where the
applicant files a written request for such an extension.
Change #2: Offering prospective applicants the
opportunity to submit a pre-filing notice of intent to
file an application.
The information used in processing an application comes
from four sources: the applicant, the System, other state and
federal agencies, and the public.
Each application form is
intended to enable the System to gather essential information
needed to make a reasoned judgment about the proposal.
The
formal questions in the application form are not intended to
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limit the applicant's presentation, but are designed to provide a
sufficient record in a majority of cases if answered fully and
appropriately.
The applicant bears the burden of presenting and
documenting a case to meet the statutory criteria for approval,
and is invited to submit any additional information that may
support its proposal.
All applicants use the same application form for the
same type of transaction regardless of the condition of the
applicant or differences in the structure of the transaction.
For example, bank holding company applications to acquire
additional banks are filed on a given application form, and all
applications to engage in nonbanking activities are filed on
another form.
The application forms contain sunset dates and are
reviewed and updated periodically through the System review
process.
The information requested in these forms has been
streamlined significantly over the past several years in an
attempt to limit requests for extraneous information, less
frequently needed information, and information that is otherwise
readily available to the System.
At the same time, however, there is some evidence that
an applicant's initial submission is becoming, on average, less
adequate because of a general increase in the complexity of
proposed transactions and because of a lack of focus on emerging
critical issues.
As a result, a growing volume of information is
being requested during Reserve Bank pre-acceptance processing and
post-acceptance communications between both Board and Reserve
Bank staff and the applicant.
Although the reasons for
additional information being requested varies, common reasons
include:
• application forms are not designed to request
information on issues that may be unique to a
particular proposal or that involve certain issues that
may vary by proposal but are, nonetheless, significant,
such as information regarding CRA performance and
programs, risk assessment involving various complex
activities, employment agreements, and commitment
requirements for proposed nonbanking activities;
• required follow-up on developments at subsidiaries in
less than satisfactory condition or with sub-par CRA
performance; and
• information necessitated by comments or protests on a
proposal.
Applicants occasionally provide more information than
is needed by the System to process a given application.
In some
of these cases, the applicant is endeavoring to anticipate
possible future questions; in general, however, the additional
information is comprised of readily available information.
In some cases, time and expense can be avoided if the
applicant is provided with early feedback on a proposal.
Although the draft application is intended to serve as a vehicle
for early feedback, in some cases, a pre-filing notice should
more effectively achieve the same goals and be less burdensome to
the applicant.
voluntary.
The submission of a pre-filing notice is entirely
It would not detract from the applicant's opportunity
to file a draft application, although the Board believes that the
notice could diminish the need for a draft application.
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The pre-filing notice should contain little more than a
description of the proposal, and may be communicated to the
Reserve Banks in writing or at a face-to-face meeting.
After a
brief review of the proposal, the Reserve Bank will then discuss
with the prospective applicant what, if any, unusual or
particular information beyond what is requested in the
application form will likely be needed to process the
application.
This should enable the applicant to better focus on
the issues in an application that are likely to be of greatest
concern.
Accordingly, the Board has determined to offer to
prospective applicants the opportunity to submit a pre-filing
notice of intent to file an application.
Change #3: Elimination of the stock redemption notice
requirement for bank holding companies that are and,
following the redemption, would remain "well
capitalized" on a consolidated basis and in generally
satisfactory condition.
Bank holding companies currently are required under
Regulation Y to submit a written notice before purchasing or
redeeming their equity securities if the gross consideration for
the purchase or redemption, when aggregated with the net
consideration paid by the company for all such purchases or
redemptions during the preceding 12 months, is equal to 10
percent or more of the company's consolidated net worth.-/
This notice requirement is a prudential requirement imposed by
the Board to monitor the capital levels of bank holding
companies, and is not a statutory requirement.
£/
12 C.F.R. 225.4(b).
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The Board has determined that a bank holding company
that is and will continue to be "well capitalized" and in
generally satisfactory condition should not be required to file
this notice prior to the redemption of its stock.
The Board
believes that the elimination of this notice requirement for
companies that meet the criteria noted above would not compromise
safety and soundness concerns.
Change #4: Expansion of the authority of Reserve Banks
to process all delegable applications without Board
staff review.
Upon accepting an application, the System currently has
four basic procedures for processing the application:
(1) Board Action ("Nondeleaated action") - Applications
analyzed by both Reserve Bank and Board staff, and presented to
the Board for action, normally within a 60-day time frame.
(2) Delegated Action with Prior Board Staff Review Applications analyzed by both Reserve Bank and Board staff, and
approved by the Reserve Bank, normally within a 30-day time
frame if no delegation criterion is violated.
(3) Delegated Action without Prior Board Staff Review Applications analyzed only by Reserve Bank staff, and approved
by the Reserve Bank, normally within a 30-day time frame.
(4) Delegated Action for Small Nonbank Activities Applications involving certain small 4(c)(8) proposals analyzed
by Reserve Bank staff, and approved with prior review by Board
staff, normally within a 15-day time frame.
The criteria for processing applications under delegated
authority are enumerated in the Board's Rules Regarding Delegation
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of Authority-/, and allow for Reserve Bank approval unless one or
more of the following conditions is present:
(i) a member of the Board has indicated an objection
prior to the Reserve Bank's action;
(ii) the Board has indicated that such delegated
authority shall not be exercised by the Reserve Bank in
whole or in part;
(iii) a written substantive objection to the application
has been properly made;
(iv) the application raises a significant policy issue or
legal question on which the Board has not established its
position;
(v) with respect to BHC formations, bank acquisitions or
mergers, the proposed transaction involves two or more
banking organizations:
(A) that upon consummation of the proposal,
would control over 30 percent of total deposits
in banking offices in the relevant geographic
market, or would result in an increase of at
least 200 points in the Herfindahl-Hirschman
Index (HHI) in a highly concentrated market (a
market with a post-merger HHI of at least
1800); or
(B) where divestitures designed to address any
substantive anticompetitive effects are not
effected on or before consummation of the
proposed transaction;
(vi) with respect to nonbank acquisitions, the nonbanking
activities involved do not clearly fall within activities
that the Board has designated as permissible for bank
holding companies under section 225.25(b) of
Regulation Y.
-/ 12 C.F.R. 265. The Board recently amended its
delegation rules to eliminate certain numerical criteria that
restricted a Reserve Bank's authority to act on applications
involving: (a) banking organizations that rank among a state's
five largest banking organizations or among the 50 largest
banking organizations in the United States; and (b) the
acquisition of certain large nonbanking companies by bank holding
companies with over $1 billion in assets.
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As explained above, a subset of applications delegated to
Reserve Banks currently may be approved without prior Board staff
review.
In 1991, 1,034 cases, or 34 percent of all applications
processed by the System, were approved under delegated authority
without Board staff review.
In general, these cases must be "non-
complex" and satisfy certain well-established financial and
v
competitive criteria.
These criteria were last revised at the end
of 1990, at which time the range of proposals eligible for Reserve
Bank approval without prior Board staff review was expanded.
At
the same time, the types of applications that could be processed
without Board staff review also was expanded to include
applications involving capital note requests, certain investments
in bank premises, state member bank mergers involving unaffiliated
banks, state bank memberships, change in bank control
notifications, and director interlocks under the Management
Interlock Revision Act of 1988.
Although each of the three delegated procedures described
above allow for Reserve Bank approval, only the second category
allows for Reserve Bank approval without concurrent Board staff
involvement.
In delegated cases that are subject to prior Board
staff review, Board and Reserve Bank staff both analyze and review
the case, although memoranda are not prepared for the Board because
approval authority has been delegated to the Reserve Bank.
In
delegated cases that are not subject to prior Board staff review,
all analysis and review is conducted at the Reserve Bank.
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The internal timing guidelines for post-acceptance
processing of delegated and Board action cases were last adjusted
in 1983.
The processing schedule for delegated cases was shortened
from 45 days to 30 days and the processing schedule for Board
action cases was reduced from 90 days to 60 days.
As discussed above, Reserve Banks over the years have
been given greater responsibility in processing applications.
Reserve Banks also have been given the authority to process a
larger variety of increasingly complex activities and proposals.
The Board has determined to broaden the Reserve Banks'
responsibilities further by giving the Reserve Banks the authority
to process all delegable cases without Board staff review.
According to the System's processing trends over the past few
years, this change could eliminate the duplication of efforts by
the Board and Reserve Bank staffs on approximately half of the
total applications and notices processed by the System.
Although the Board believes that some improvement in
average processing times will result from streamlining the
processing of delegated applications, the Board believes there are
two more important benefits that will result.
First, a reduction
in Board staff involvement should permit closer alignment of
Reserve Bank authority with responsibility and should facilitate
increased objectivity in measuring performance.
Second,
streamlining of delegated cases should permit more effective
allocation of Board staff resources to work on the larger and more
complicated cases that go to the Board, resulting in more efficient
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and timely processing of these cases.
In addition, the Board
believes that this change will enable Board staff to more
effectively assist with pre-acceptance reviews of cases that are
likely to be accepted for Board action, which should facilitate
earlier identification of issues and result in fewer post
acceptance requests for information.
Because this change does not expand the types of cases
that are delegable, the Reserve Banks essentially will be
processing cases in which they have had prior experience.
The
Board's views on specific policy issues and legal questions which
may affect the determination to delegate a case will continue to be
communicated to the Reserve Banks through monthly conference calls,
periodic meetings and conferences, Supervision and Regulation
("SR") letters, and distribution of case memoranda and Board
Orders.
To ensure that the System's policies and procedures are
being applied consistently across the System, Board staff will
continue to monitor processing of applications through operational
reviews of Reserve Banks, after-the-fact reviews of selected case
files, SR letters, conference calls, and System meetings.
In
addition, Reserve Bank staffs will be expected to continue to
consult with Board staff on issues and problems as they arise.
Change #5: Modification of the Board's delegation rules
pertaining to competition and market concentration.
Recent experience indicates that applications not meeting
the Board's rules for delegation solely because the combined market
share of the merging firms is slightly over 30 percent generally do
not raise competitive concerns.
Furthermore, in many applications
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the increase in the HHI is well under 200.
For example, an
application representing the combination of banks with respective
markets shares of 30 percent and 1 percent would result in an
increase in the HHI of only 60 points, but would not be a delegable
case.-/
Consequently, the Board has determined to increase the
market share criterion from 30 percent to 35 percent.
Although it
is difficult to specify the exact level at which a proposed merger
would be viewed as an antitrust violation based on the resulting
market share, the Board believes that 35 percent would be a
reasonable level and would conform with the Justice Department's
treatment of market concentration.-/
The Board also has determined to modify the delegated
processing criterion that an applicant proposing divestitures to
meet competitive concerns must complete the divestiture on or
before consummation of the proposed transaction.
The Board has
established its position on the timing of divestitures in several
recent Board Orders.— /
The Board has stipulated that applicants
-/ The increase in the HHI is calculated by multiplying the
product of the respective market shares of the institutions
involved in the transaction by 2. In other words, the increase
in the HHI is determined by the formula 2xy, where x and y
represent the respective market shares of the merging firms.
-/ The Department of Justice guidelines include what is
called a leading firm proviso under which the department is
likely to challenge the acquisition by the leading firm in a
market of any firm that has a market share of 1 percent or more.
The Department of Justice considers a company to be a leading
firm if it has a market share of at least 35 percent and this
share is approximately twice as large as that of the second
largest firm.
— / See e.g.. BankAmerica Corporation. 78 Federal Reserve
Bulletin 338, 340 n.15 (1992).
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may be given up to six months after consummation to complete a
divestiture provided that, prior to consummation, the applicant has
entered into a binding agreement with another party to acquire the
relevant offices.
If the divestiture is not accomplished within
this time frame, the branches to be divested must be placed with an
independent trustee for immediate sale.
The Board has determined
to modify its criterion for delegated action to reflect this
position on competitive divestitures.
With these two changes, the Board's fifth delegation
limitation would read as follows:
(v)
with respect to bank holding company formations, bank
acquisitions or mergers, the proposed transaction involves two
or more banking organizations that, upon consummation of the
proposal, would control over 35 percent of total deposits
(includes 50 percent of thrift deposits) in banking offices in
the relevant geographic market, or would result in an increase
of at least 200 points in the Herfindahl-Hirschman Index (HHI)
in a highly concentrated market (a market with a post-merger
HHI of at least 1800).
Change #6: Reduction of redundant post-acceptance processing
of Board action cases.
In processing Board action cases, both the Reserve Bank
and Board staff analyze the proposal, recommend action, and prepare
memoranda for the Board.
The memoranda often are redundant and
because the Reserve Bank must prepare its memorandum prior to
completion of Board staff memoranda, the Reserve Bank memorandum
may contain information that is not as current as the information
in Board staff memoranda.
In addition, communications between the
applicant and the System are occasionally duplicated.
The Board has determined to give the Reserve Banks more
discretion to determine the extent of their involvement in the
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post-acceptance analysis and memoranda writing on Board action
cases.
The Reserve Banks will continue to receive applications and
perform pre-acceptance analysis on all applications.
For
applications accepted for Board action processing, the Reserve
Banks generally will determine the extent of their subsequent
involvement.
The Board expects that Board staff will request the
Reserve Banks to provide analysis for some cases in the same manner
that the Reserve Banks currently analyze cases.
In other cases,
however, the Reserve Banks may elect not to participate in post
acceptance analysis or to participate to a limited extent in a more
focused manner.
This change will preserve the Reserve Bank's opportunity
to present its views on an application or on an issue raised by a
particular proposal, and should, in the case of requested comments,
provide further support for the record in cases where the Reserve
Bank's knowledge of local conditions would be especially
beneficial.
For example, Reserve Bank involvement can be an
essential element in the timely resolution of protested issues.
In addition to the efficiency benefits of reducing
duplicative processing in general, and memoranda writing in
particular, this change also will give the Reserve Banks greater
flexibility in allocating their resources.
For example, resources
that are currently devoted to the post-acceptance processing of
certain Board action cases could be shifted to time sensitive
delegated cases or to pre-acceptance meetings with prospective
applicants.
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Change #7: Increased monitoring of cases that require
extended processing.
As part of the System's current overall process of
monitoring applications activity, closer scrutiny is given to cases
that are not on schedule for timely processing or have exceeded
targeted action dates.
Once a week, managers responsible for
applications processing from the appropriate Board divisions (or
their representatives), meet to discuss each application that is
scheduled for Board action as well as other applications of
interest.
Previously delegated cases that have not been acted on
within 30 days also are discussed at these meetings, as these cases
usually have already been transferred to Board action status.
The
basis for this discussion is a weekly status report of applications
filed with the System that is distributed to managers and others
involved in the process.
Any bank holding company whose application does not meet
the internal timing target, regardless of the reason or responsible
party, receives a letter explaining the delay as required by
Regulation Y
/
A member of the Board must approve the letter
before it is sent.
Other monitoring efforts include an agenda
scheduling report, monthly conference calls, and an annual
applications processing conference.
Applications being processed
under delegated authority are tracked by either the Reserve Bank or
Board staff on an ongoing basis.
More intense scrutiny typically
is given to each case in which one-half of the processing period
12 C.F.R. 225.14(d)(2).
-
22-
for the application has elapsed without action having been taken or
without action being imminent.
Although the System monitors all phases of the
applications process, the Board has emphasized the importance of
minimizing the processing period and burden on the applicant
associated with the entire process.
Current monitoring efforts of
applications are driven primarily by the post-acceptance, 60-day
internal processing guideline, and to a lesser extent by the total
amount of time an applicant needs to obtain regulatory approval.
In an effort to heighten management's focus on this timing issue,
the Board has determined that a new report will be developed.
The
report will be organized in chronological order and will include
the total length of time an application is in process and an
explanation of the application's status.
The report will be
distributed to the directors of the divisions that are involved in
the applications process.
Change #8: Establishing a general consent limit for
investments in bank premises for state member banks.
Section 24A of the Federal Reserve Act requires state
member banks to obtain the Board's approval prior to making
investments in bank premises that would result in the bank's
aggregate level of direct and indirect investment in bank premises
exceeding the bank's capital stock account.— /
The Board has
— / 12 U.S.C. § 371d. Section 24A applies to:
(1) investments in bank premises, or in the stock, bonds,
debentures, or other such obligations of any corporation holding
the premises of such bank; and (2) the making of loans to or upon
the security of the stock of any such corporation.
-
23-
determined to amend Regulation H to establish a general consent
procedure that would allow a "well capitalized" state member bank
that is also in generally satisfactory condition to make bank
premises investments up to a certain percent of the bank's capital
accounts.
This would eliminate the current requirement that a
state member bank obtain approval for each investment in bank
premises that exceeds the bank's capital stock.
A proposed
revision to Regulation H to accomplish this goal, and a request for
comments on this proposal, will be published shortly in a separate
notice.
INVITATION FOR PUBLIC COMMENT:
As described above, the Board
invites public comment on any additional proposals or measures the
Board should consider for revising or streamlining the applications
and notice procedures under the Board's rules to reduce the burden
on applicants caused by the current procedures without impairing
the Board's ability to fulfil its statutory obligations in
reviewing applications and notices requiring Board approval.
Comments may be mailed to the Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue, NW,
Washington, DC
20551, to the attention of Mr. William W. Wiles,
Secretary; or delivered to the Board's Mail Room between 8:45 a.m.
and 5:15 p.m., or to the Board's Security Control Room outside of
those hours.
Both the Mail Room and the Security Control Room are
accessible from the courtyard entrance of 20th Street between
Constitution Avenue and C Street, NW.
Comments may be inspected in
room B-1122 between 9 a.m. and 5 p.m. weekdays, except as provided
-
24 -
in S 261.8 of the Board's Rules Regarding Availability of
Information, 12 C.F.R. 261.8.
SELECTED STATISTICS FOR APPLICATIONS PROCESSING
1984 - 6/30/92
First Half
1992
1991
1990
1989
1988
1987
1986
1985
1984
1,423
24
1,447
354
2,987
96
3,083
719
2,575
101
2,676
771
2,257
95
2,352
492
2,128
119
2,247
698
2,318
86
2,404
822
2,349
121
2,470
722
2,270
165
2,435
627
2,791
221
2,940
842
Applications Accepted
but withdrawn or returned:
59
142
94
102
88
96
95
270
192
Applications filed as final
but not accepted:
96
199
167
155
130
191
204
381
148
Domestic Applications Mix:
Bank Acquisitions and Mergers
and BHC Mergers
BHC Formations
Nonbank Going Concern
Nonbank De Novo
Change in Control
Stock Redemptions
179
106
297
29
62
39
336
215
434
84
183
94
410
286
371
126
248
103
423
338
219
189
250
111
508
400
288
173
198
110
555
447
420
210
204
91
672
520
273
240
217
142
621
655
232
305
188
119
565
964
297
476
167
141
Action Parties:
Board
Delegated w/prior review
Delegated w/o prior review
348
641
458
702
1,347
1,034
308
1,509
859
239
1,198
915
247
1,273
727
404
1,351
649
347
1,397
561
400
1,410
625
476
% Processed within 60 Davs:
Board Cases
Delegated Cases
Total
96%
98%
97%
83%
97%
94%
82%
97%
96%
70%
98%
95%
74%
93%
91%
73%
97%
93%
66%
98%
93%
78%
99%
96%
71%
99%
94%
43
24
28
50
28
33
69
30
34
70
32
36
70
35
39
75
34
41
71
32
38
61
31
36
79
33
40
Applications Volume:
Domestic
International
Total/1
Competitive Factors Reports
Average Processing Days
per Application:
Board Cases
Delegated Cases
Total
1/Does not include competitive factors reports.
—
—
@FedFRASER