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FEDERAL RESERVE BANK OF NEW YORK [ Circular No. 10794 July 26, 1995 “I BANK HOLDING COMPANIES Amendment to Regulation Y To All Bank Holding Companies, and Others Concerned, in the Second Federal Reserve District: The Board of Governors of the Federal Reserve System has amended its 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 under certain circumstances. The amendment is effective July 6, 1995. Enclosed — for depository institutions, bank holding companies, and others who maintain sets of the Board’s regulations — is the text of the amendment to Regulation Y as published in the Federal Register. Others may obtain copies by calling the Circulars Division (Tel. No. 212-720-5215 or 5216). Questions on Regulation Y may be directed to our Banking Applications Department (Tel. No. 212-720-5861). W il l ia m J. M cD onough President. , Board of Governors of the Federal Reserve System BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL Amendment to Regulation Y (Effective July 6, 1995) in most cases, the bank holding SUPPLEMENTARY INFORMATION: Under company was no longer interested in section 2(g)(3) of the Bank Holding Company Act (12 U.S.C. 1841(g)), shares engaging in that business. The elimination of the requirement to transferred by a bank holding company 12CFR Part 225 to any transferee where the transferee is obtain a control determination will [Regulation Y; Docket No. R-0872] indebted to the transferor or has one or reduce the regulatory burden on bank holding companies without eliminating more officers, directors, trustees, or Bank Holding Companies and Change the Board’s ability to supervise any beneficiaries in common with the in Bank Control transferor, are deemed to be controlled attempt to control the divested asset in AGENCY: Board of Governors of the by the transferor unless the Board, after the future. Although the Board would Federal Reserve System. an opportunity for a hearing, determines no longer require a bank holding company to obtain a control that the transferor is not capable of ACTION: Final rule. controlling the transferee. On March 28, determination, the Board can take SUMMARY: The Board is amending its appropriate supervisory action if control 1995, the Board proposed to amend Regulation Y to eliminate the need for § 225.32 of the Board’s Regulation Y (12 of a divested asset is found to persist a bank holding company to file a request CFR 225.32) to exempt from the through the examination process or by with the Board for a determination other means. In addition, the Board presumption of control those under section 2(g)(3) of the Bank would continue to require a divesting divestitures where a bank holding Holding Company Act that it no longer company is financing the sale of assets company to obtain a 2(g)(3) controls shares or assets that it has sold or shares that it acquired so long as (i) determination if: (1) the asset were to a third party with financing if the the property is not sold to an affiliate or transferred to an affiliate or principal purchaser is not an affiliate or principal principal shareholder of the divesting shareholder of the divesting holding shareholder of the divesting holding company, or a company controlled by holding company, or a company company, or a company controlled by the principal shareholder: or (2) an controlled by such a principal the principal shareholder, and there are shareholder: and (ii) there are no interlock existed between the divesting no officers, directors, trustees or company and the acquiring person. In officers, directors, trustees, or beneficiaries of the acquiror in common beneficiaries of the acquiror in common these cases, the Board believes that with or subject to control by the with or subject to control by the there is a greater potential for continued divesting company. The Board believes divesting company (60 FR 15881) control by the bank holding company that the elimination of the requirement (March 28,1995). that should be reviewed. The General for a determination of control for these A review of the 2(g)(3) determinations Counsel will continue to review these types of divestitures will reduce the over the past ten years indicates that divestitures on a case by case basis to regulatory burden on bank holding almost all control determinations under determine if a control determination is companies without undermining the that section have arisen from bank appropriate. In addition, if a bank purposes of the Bank Holding Company holding companies selling property they holding company needs a formal control acquired in satisfaction of a debt Act. This proposal has been identified determination for tax or other reasons, in connection with the Board’s previously contracted (dpc property) the Board will continue to process a where the bank holding company was continuing effort to eliminate obsolete request for a control determination even trying to recoup its losses on a loan from or unnecessary regulations or when the sale meets the regulation. the sale of the collateral. In these cases, applications. the record indicates that the divestitures P u b l i c C o m m e n t EFFECTIVE DATE: July 6, 1995. and financing arrangements have been FOR FURTHER INFORMATION CONTACT: The Board received sixteen comments conducted on an arm’s-length basis, and Pamela G. Nardolilli, Senior Attorney on its proposed amendment to there is no evidence of divesting (202/452-3289), Legal Division, Board Regulation Y. The Board received eight companies exercising control of the of Governors of the Federal Reserve assets after the sale. In other cases comments from Reserve Banks, five System. For the hearing impaired only, where a bank holding company sold an comments from commercial banking Telecommunication Device for the Deaf asset or subsidiary that it had acquired organizations, two comments from trade (TDD), Dorothea Thompson (202/452- in the normal course of business and associations and one comment from a 3544), Board of Governors of the Federal financed the sale of the asset or law firm. All commenters supported the Reserve System, 20th and C Streets, subsidiary, the assets were sold because, Board’s effort to reduce regulatory N.W., Washington, D.C. 20551. FEDERAL RESERVE SYSTEM P R IN T E D I N N E W YO R K , F R O M F E D E R A L R E G IS T E R , VOL. 60, NO. 129, pp. 35120-35122. [Enc. Cir. No. 10794] (OVER) burden. Two commenters suggested that the Board expand the scope of the regulation to include divestitures to companies with director interlocks. The Board receives few requests for divestitures involving interlocks and the Board does not believe that an exemption is needed at this time for these divestitures. The comments also raise several administrative questions regarding the implementation of the regulation. In response to public comment, the Board has modified the proposed language to clarify the applicability of the proposed regulation. In another comment, 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 requirements should be covered by the new regulation and no further action is needed. Because a 2(g)(3) determination is a statutory requirement and some bank holding companies may need proof of the divestiture for tax or other reasons, one Reserve Bank recommended that the regulation state that if a bank holding company wants a 2(g)(3) determination, that the bank holding company can request a determination even if the regulation no longer requires it. As noted above, the preamble indicates that the Board will continue to provide 2(g)(3) determinations if a bank holding company requests such a determination. R e g u la to r y F le x ib ilit y A c t A n a ly s is Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the Board certifies that the final rule will not have a significant adverse economic impact on a substantial number of small entities and that any impact on those entities should be positive. The amendments would reduce regulatory burdens imposed by Regulation Y, and the amendment would have no particular adverse effect on other entities. Pursuant to 5 U.S.C. § 553(d), the amendment to Regulation Y will become effective immediately. The change grants an exemption to bank holding companies, and therefore the Board waives the 30 days general requirement for publication of a substantive rule. In addition, any transaction that is subject to section 2(g)(3) but meets the regulation’s requirements is now exempt and no further action is required. P a p e r w o r k R e d u c tio n A c t A n a ly s is No collection of information pursuant to section 3504(h) of the Paperwork Reduction Act (44 U.S.C. 3501, et seq.) is contained in the final rule. L is t o f S u b j e c t s i n 1 2 C F R P a r t 2 2 5 Administrative practice and procedure, Banks, banking, Federal Reserve System, Holding companies, Reporting and recordkeeping requirements, Securities. For the reasons set forth in the preamble, the Board amends 12 CFR part 225 as set forth below: part 225 continues to read as follows: Authority: 12 U.S.C. 1817(j)(13), 1818, 1831 i, 1831p-l, 1843(c)(8), 1844(b), 1972(1), 3106,3108,3310,3331-3351, 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 follows: § 225.32 Divestiture proceedings. (a) * * * (2) Except in the case of a proceeding initiated under paragraph (f) of this section or § 225.31 of this subpart, the Board will regard the presumption 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 of the sale or divestiture of assets or voting securities by a divesting company if: (i) The acquiring person is not an affiliate or a principal shareholder of the divesting company, or a company controlled by such a principal shareholder; and (ii) The acquiring person does not have any officer, director, trustee, or beneficiary in common with or subject to control by the divesting company. * * * * * By order of the Board o f Governors o f the Federal Reserve System, June 29, 1995. W illiam W. Wiles, Secretary of the Board. [FR Doc. 95-16539 Filed 7-5-95; 8:45 am] BILUNG CODE 6 2 1 0 -0 1 -P PART 225— BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL (REGULATION Y) 1. The authority citation for 12 CFR
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