Full text of Federal Reserve Bank of New York Circulars : 10178. Amendment to Regulation Y

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FEDERAL RESERVE BAWK
OF fMEW YORK

[

Circular No. 10178 ~jj
June 23, 1987

J

AMENDMENT TO REGULATION Y
Implementing the Anti-Drug Abuse Act of 19^6
To All State Member Banks and Bank Holding Companies
in the Second Federal Reserve District, and Others Concerned:

The following statement has been issued by the Board of Governors of the
Federal Reserve System:
The Federal Reserve Board has announced approval of an amendment to Regula­
tion Y implementing amendments to the Change in Bank Control Act required by the
Anti-Drug Abuse Act of 1986.
The Anti-Drug Abuse Act of 1986 amended the Change in Bank Control Act
(CBCA) to require Federal banking agencies to publish notice of any filing made under
the CBCA to acquire control of a bank or bank holding company.
The Anti-Drug Abuse Act requires the banking agencies to publish the name of
each party acquiring control of a bank or bank holding company, as well as the name of
the target institution, and to solicit public comment on the proposed acquisition, in
particular from persons in the relevant local area.
Enclosed is the text of the amendment to Regulation Y, effective June 12,
1987, which has been reprinted from the Federal Register of June 17. Questions
regarding the regulation may be directed to our Domestic Banking Applications
Division (Tel. No. 212-720-5861).
E . G e r a l d C o r r ig a n ,

President.

Board of Governors of the Federal Reserve System

BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
A M E N D M E N T TO REGULATION Y

(effective June 12,1987)

Finally, as required by the Anti-Drug proposed acquisition and containing
certain information concerning the
Abuse Act, the amended regulation
12 CFR Part 22S
states that the Board shall conduct an financial resources and background of
the notificant. The transaction may
investigation of the competence,
[Regulation Y; Docket Wo. R-0595]
proceed at the end of the 60-day period,
experience, integrity, and financial
Bank IHteldling Compara©© and Chang©
ability of each proposed acquiror and unless the Board disapproves the
in Bank Control; Proetdyres
transaction or extends the notice period.
shall make an independent
Regarding Publication and Pr©€@®©!tof)
An acquisition may proceed prior to the
determination of the accuracy and
©f Notices Filed Under th© Chang© in
expiration of the 60-day review period if
completeness of the information
Bank Control Aet
the Board issues a written statement of
submitted. A written report of the
A©!Kiev: Board of Governors of the
its intent not to disapprove the
investigation will be prepared which
Federal Reserve System.
transaction.
will become part of the record.
On October 27,1986, the President
ACTION Final rule.
The Board published a preliminary
rule for public comment on February 4. signed into law the Anti-Drug Abuse Act
SUMMARY: The Federal Reserve Board is 1987 (52 FR 3447) and is adopting that of 1988. Pub. L. 99-570. Section 1360 of
adopting a Final rule that amends
this Act (hereinafter the “1988
rule substantially as proposed. The
Subpart E of its Regulation Y, section
Amendment") makes several
public comment period expired on
225 of Title 12. Code of Federal
amendments to the CBCA that
March 6,1987.
Regulations, to implement certain
necessitate a revision in the Board’s
BAT!: Effective June 12,1987.
amendments to the Change in Bank
implementing regulations.
Control Act (“CBCA”) made by section F@P3 FURTHER INFORMATION ©@MYA<gY:
Prior to the 1986 Amendment, the
J. Virgil Mattingly, Deputy General
1360 of the Anti-Drug Abuse Act of 1986,
CBCA did not require notice to, or
Counsel (202/452-3430), Scott G.
Pub. L. 99-570. Under the final rule,
comments from, the public
notificants under the CBCA are required Alvarez, Senior Counsel (202/452-3583), solicitation of with a notice filed under
in connection
Legal Division; or Sidney Sussan,
to publish, in a newspaper of general
the CBCA. The Board’s regulation
Assistant Director (202/452-2638),
circulation in communities where the
provided that the Board or the
Division of Banking Supervision and
bank or bank holding company to be
acquired is located, an announcement of Regulation, Board of Governors of the appropriate Reserve Bank could solicit
views
the proposed acquisition no later than 10 Federal Reserve System, Washington, information orbank orfrom any person,
including any
bank holding
calendar days after the notice has been DC 20551. For the hearing impaired only, company in v olved in the notice, and any
accepted by the appropriate Federal
Telecommunications Service for the
appropriate state, federal or foreign
Reserve Bank. The regulation provides Deaf, Eamestine Hill or Dorothea
governmental authority. (See 12 CFR
Thompson (202/452-3544).
an exception to the publication
225.43(d)).
requirement where disclosure would
SUPPLEMENTARY INFORMATION:
The 1986 Amendment requires the
threaten the safety or soundness of the Background
Board to publish the name of each
bank to be acquired. In addition,
person filing under the CBCA to acquire
publication may be delayed by the
an insured bank or bank holding
Under the CBCA, persons acting
Board for good cause shown.
company, and to solicit public comment
either individually or in concert to
on the proposed acquisition, in
acquire control of any insured state
The final rule also authorizes the
Board to extend the period of time it has member bank or bank holding company particular from persons in the
geographic area where the bank to be
to consider a CBCA notice for up to two must provide the Board with 60 days
prior written notice describing the
acquired is located. This publication
additional periods of 45 days each.
FEDERAL RESERVE SYSTEM

For this Regulation to be complete, retain:
1) Regulation Y pamphlet, revised effective February 3, 1984.
2) Amendments effective November 3, 1986; November 7, 1986 and
December 15, 1986 (included in slip sheet dated November, 1986.)
3) This slip sheet.
[Enc. Cir. No. 10178]
PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 52, NO. 116, p. 23021-23024

requirement may be waived only when
the agency determines in writing that
disclosure or solicitation of public
comment 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 CFR 303.4(b)) and the Office of the
Comptroller of the Currency (12 CFR
5.50(h)) provide for the public disclosure
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.
Summary of Issues
The Board published a proposed rule
to implement the 1988 Amendment on
February 4.1987, (52 FR 3447) and
invited public comment on this proposal
until March 6,1987. The Board received
33 comments regarding this proposal in
response to its request for public
comment.
Eight comments, including comments
from four Reserve Banks, one regional
bank holding company and three small
banking organizations, noted that the
proposed regulations were mandated by
the 1988 Amendment to the CBCA and
generally supported the Board’s
proposed implementation of those
statutory requirements.
Twenty-four comments, representing
primarily small banks and bank holding
companies whose principal shareholders
are frequently subject to the CBCA
requirements, urged the Board not to
adopt the proposed regulations requiring
notificants to publish notice of a
proposed acquisition. These commenters
argued that the publication requirements
would impose added costs in bank
acquirors and would further delay the
regulatory approval process without, in
the commenters view, contributing in
any meaningful way to the identification
of individuals involved in illegal
activities. These commenters were also
concerned that the publication
requirement would permit third parties
to interfere with the transfer of bank
shares and argued that the added
publicity surrounding bank stock
acquisitions would dissuade competent
individuals from purchasing shares of
banks. Opponents of the publication
process also argued that the current
Board procedures for investigating the
character, competence, experience and
financial resources of prospective bank

purchasers are adequate and that it is which the head office of the state
member bank or bank holding company
unlikely that additional relevant
information will he obtained from the to be acquired is located and, In the case
of a bank holding company, in each
public.
The Board recognizes that requiring community in which the head office of a
publication of CBGA notices imposes an bank subsidiary of the holding company
added burden on notificants under the is located.
Act. The Board notes, however, that this The newspaper announcement must
publication requirement is mandated by contain the name of each proposed
the recently enacted 198S> Amendments acquiror, the percentage of shares to be
to the CBCA. The Board hag attempted acquired, the name of each bank or bank
to minimize the procedural burdens that holding company to be acqtsked* ansi, m
are associated with these publication the case of a bank holding company, Sfe®
names of each of its subsidiary banks.
requirements by adopting a form of
publication that is similar to the form of The announcement may contain
additional information, including the
publication used under the Bank
percentage of shares already owned by
Holding Company Act, and by
permitting notificants to publish during a notificants or other information deemed
reasonable period that begins before the relevant by the notificants or the Board.
The announcement must also state,
time that a CBCA notice is filed. The
that any person wishing to comment on
Board has also adopted provisions
the proposed acquisition may do so by
designed to permit notificants to
coordinate the timing of the publication submitting written comments to the
appropriate Reserve Bank within 20
under the CBCA with public filings
of publication or such,
under other statutes, including the state calendar days of time as the Board may
shorter period
and federal securities laws. Moreover, prescribe in a particular case. The
the Board has adopted procedures that announcement may be published no
permit the Board to waive the
than
publication requirement where delay or earlier notice10 calendar days before the
CBCA
is filed with the
public disclosure would seriously
threaten the safety or soundness of the appropriate Reserve Bank and no late?
than 10 calendar days after the notice
bank to be acquired.
Reserve Bank.
The Board also notes that, while the has been accepted by the newspaper
In. addition to requiring
1986 Amendments require that the
publication by the notificant, fhi© Bo@?d
public be provided an opportunity to
has determined to publish notice of
comment on notices filed under the
filings made under the CBCA is the
CBCA, the 1986 Amendments do not
Register
confer any other rights on third parties Federal Register. The Feds?®!of persons
notice will contain the name
to participate in any other way in the
consideration of a notice filed under the who propose to acquire control o£ a
bank or bank holding company, the
CBCA. The final rule adopted by the
amount of shares to be acquired, and the
Board expressly recognizes this and
names of aH banks to be acquired, and
provides that no person, other than a
will permit a minimum; period of IS
notificant, who submits information
calendar
public comment,
regarding a notice filed under the CBCA unless thedays fordetermines that the
Bbard
shall thereby be entitled to any standing public interest requires shortening or
or right to participate in the Board’s
this comment
consideration of a notice, or to appeal or waiving Register noticeperiod. Tte$
Federal
will be published
otherwise contest the Board's action
upon submission to the Reses^e Bank of
regarding a notice.
the CBCA notice.
Under the final rule, the Board may
Summary of Final Rule
dispense with public notice if it
The final rule adopted by the Board is determines in writing that such
substantially similar to the rule
publication and solicitation of comment
proposed by the Board for comment
This rule is also similar to regulations would seriously threaten the safety and
previously adopted by the OCC and the soundnesstoof the bank or bank holding
be acquired.
FDIC. The final rule amends the Board’s company expressly statesFinally, the
final rule
that the
regulations to require that or persons
publication requirement does not give
seeking to acquire a bank or bank
any person
intervene to
holding company pursuant to the CBCA proceedingsstanding to the CBCA notice
regarding
to publish an announcement must of the or to appeal or otherwise contest the
proposed acquisition in a newspaper of
general circulation in the community in Board’s action regarding a notice.

2

Tender Offers
The Board notes that the FDIC and the
OCC regulations provide that
publication of a filing unde* 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.G 78m and 78nJ.i
The Board’s final 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 and demonstrates good
cause for the delay. The Board’s final
rule permits the Board to postpone
publication for whatever period is
deemed to be appropriate, and does not
adopt the specific 34-day delay period
adopted by the FDIC and the OCC.
Extension of Time for Disapproving
Transactions
iPrior to the 1988 Ameadroemsf, the
CBCA authorized the appropriate
federal banking agency to extend for up
to 30 days the statutory period in, which
a proposed acquisition could be
disapproved under the CBCA. 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 (i) An
acquiring party has not furnished all the
information required under section
7(j){6) of the CBCA (12 U.S.G 1817{j}(6});
(ii) material information submitted is
substantially inaccurate; (iii) an
investigation of an acquiring party has
not been completed because of delay or
inadequate cooperation by the acquiring
party; or (iv) additional time is needed
to investigate and determine that no
acquiring party has a record of failing to
1 The tender offer regulations applicafete to-hank
holding companies and to stete member banks, W
CFR 240.12(d) and 12 CFR 208.8, require that an
offer remain open for at least 2© business days from
the date the tender offer is first1published, sent or
given to security holders. Shares tendered or
deposited pursuant to the offer may be withdrawn
by a depositing shareholder at any time within the
first 15 business days of the offering. XT CFR
249.14fd)P): 12 CFR 206.8(g). Under die CBCA, a
bidder may not purchase shares deposited in
response to a tender offer in amounts, exseeding the
CBCA limits until the expiration of the review
period unless notified by the Board at an earlier
time that the acquisition may commence.

comply with the currency transaction
reporting requirements of the Bank
Secrecy Act, Subchapter II of Chapter 53
of Title 31, United States Code.
The final rule amending § 225.43(c) of
Regulation Y reflects this change in the
CBCA. If the Board acts under this
authority to extend the time for
disapproval beyond the initial 30-day
extension, the rule 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
investigation of the competence,
experience, integrity, and financial
ability of each person named in a notice
under the CBCA as a person by or for
whom such acquisition is to be made,
and to make an independent
determination of the accuracy and
completeness of the information
required by the CBCA to be submitted to
the agency. The agency is then required
to prepare a written report of such
investigation, which is to become part of
the record. The final rule amends
§ 225.43(d) of Regulation Y to reflect this
change in the law.
Regulatory Flexibility Act
This final rule adopted by the Board
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 requirement
that persons seeking to acquire a bank
or bank holding company under the
CBCA publish notice of the proposed
acquisition would likewise not impose
any regulatory burden on banks or bank
holding companies of any size that are
the targets of a proposed change in
control. The final rule would have the
benefit, moreover, of providing such
banks or bank holding companies with
notice of a proposed acquisition of then
shares under the CBCA and of
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 final
rule is not expected to have a significant
3

economic impact on a substantial
number of small business entities within
the meaning of the Regulatory Flexibility
Act (5 U.S.G. 601 et seq.).
Paperwork Reduction Act
The final rule adopted by the Board
requires 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 have been imposed by this
rule.
List of Subjects in 12 CFR Pari 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.G. 1817(j)(13)), 12
CFR Part 225 is amended as follows:

PAiRST 225—BANK HOL0SM©
©QEiPmSSiS AK1© CHA^©i llrvi BANK
CONTROL
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), 3108, 3108, 3807 and 3909.

2. Section 225.43(a) is revised to read
as follows:
§ 225.43 Pr@e©dyr©8 tf@ filing, pr@e@§sm§,
r
pajIbSSsMirsgi, and aetta® ®n n@Ste©8.

(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 Bank
Control Act (12 U.S.C. 1817(j)(6)), or
prescribed in the designated Board form.
With respect to personal financial
statements required by paragraph 0(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.
(2) Acceptance of notice. The 60-day
notice period specified in § 225.41 of this
subpart shall commence on the date all

required information is received by the
appropriate Reserve Bank or the Board.
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 soliciting public
comment on the proposed acquisition.
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 of a proposed
acquisition of a bank holding company,
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 that 10 calendar days prior to the
filing of the notice with the appropriate
Reserve Bank and no later than 10
calendar days after acceptance and the
publisher’s affidavit of a publication
shall be provided to the appropriate
Reserve Bank.
(ii) Contents of newspaper
announcement. The newspaper
announcement shall state:
(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 or bank
holding company to be acquired,
including, 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 appropriated
Reserve Bank for a period of 20 days or
such shorter period as may be provided
pursuant to paragraph (a)(3)(vj of this
section.
(iii) Federal Register announcement.
The Board will, upon 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 paragraphs
(a)(3)(ii)(A) and (a)(3)(ii)(B) of this
section and a statement that interested
persons may submit comments on the
proposed acquisition for a period of 15

days or such shorter period as may be
(ii) The Board may further extend the
provided pursuant to paragraph (a)(3)(v) period during which it may disapprove a
of this section. The Board may waive
notice for two additional periods of not
publication in the Federal Register if the more than 45 days each if the Board
Board determines that such action is
determines that:
(A) Any acquiring person has not
appropriate.
furnished ail the information required
(iv\ Delay of publication. The Board under paragraph (a) of this section;
may permit delay in the publication
(B) Any material information
required under paragraphs (a)(3)(i); and submitted is substantially inaccurate:
(a)(3)(iii}if the Board determines, for
(C) It is unable to complete the
good cause shown, that it is in the public investigation of an acquiring person
interest to grant such a delay. Requests because, of inadequate cooperation or
for delay of publication may be
delay by that person: or
submitted to the appropriate Reserve
(D) Additional time is needed to
Bank.
investigate and determine that no
(vj Shortening or waiving notice. In acquiring: person has a record of failing
circumstances requiring prompt action* to comply with the requirements of the
the Board may shorten the public
Bank Secrecy Act, subchap-ier 11 of
comment period required under this
Chapter 53 of Title 31, United States
paragraph. Tire Board may also waive Code.
the newspaper publication and
(iii) If the Board extends the time
solicitation of public comment
period under this paragraph, H shall
requirements of this paragraph, or it
notify the acquiring personfs) of the
may act on a notice before the
reasons therefor and shall include a
expiration of a public comment period, if statement of the information, if any,
it certifies in writing that disclosure, of deemed incomplete or inaccurate.
* **
*
the notice, solicitation of public
comment, or delay untir expiration of the 4. Section 225.43{d} is revised to read
public comment period would seriously as follows:
threaten the safety or soundness of the
bank or bank holding company to be
(d)(1) .favesbgflbro/? and report. After
acquired.
receiving a notice under this subpart, the
(4) Consideration of public comments.
or the
Bank
In acting upon a notice filed under this Boardconductappropriate Reserve the
shall
an investigation of
subpart, the Board shall consider all
competence, experience, integrity,, and
public comments received in writing
financial ability of each person by and
within the period specified in the
for whom an acquisition is to be made.
newspaper or Federal Register
announcement, whichever is later. At The Board shall also make an the
independent
the Board’s option, comments received accuracy anddetermination of any
completeness of
after this period may, but need not, be information required to be contained in
considered.
under paragraph (a) of this
(5) Standing. No person pother than a notice In investigating any notice
section.
the acquiring person) who submits
accepted under this subpart, the Board
comments or information on a notice
Reserve Bank may solicit information
filed under this subpart shall thereby or views from any person,, inciuding. any
or
become a party to the proceeding or
bank or bank holding company involved
acquire any standing or right to
participate in the Board’s; consideration in the notice, and any appropriate state,
of the notice or to appeal or otherwise federal, or foreign governmental
contest the notice or the Boards action authority. Board or the appropriate
(2) Th®
regarding the notice.
Reserve Bank shall prepare a written
*
* *
O *
report of its investigation, which shall
3. Section 225.43(e)(2): is revised to contain, at a minimum, a summary of the
read as follows:
results of the investigation.
*
a *
<
& it
O
<~
r
(c) * * *
Board o? Governors ®f the Federal1Reserve
(2) Extensions of time period, (i) The System, Jwis in. 1987.
Board may extend the 69-day period in W&lsaE© W. Wifos,
paragraph (c)(1) of this section' for a® Secretory of the Bomd.
additional 30 days by notifying the
[FR Das. 87-1376© Filed 6-16-87; 0:46 amj
acquiring persons).
BILLING CSSS 02KS-G1-K?

4

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