Full text of Federal Reserve Bank of New York Circulars : 4362. Regulation Y, Effective September 1, 1956, Bank Holding Companies

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F E D E R A L R E S E R V E BANK
O F NEW YORK
f C ircular N o. 4 3 6 2 T
L A u g u st 17, 1956 J

R EG U LATIO N Y
E ffectiv e S ep tem b er 1, 1956
B A N K H O L D IN G C O M P A N IE S

To All Banks and Trust Companies, and Others Concerned,
in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System has issued its Regulation Y
pu rsuant to the Bank Holding Company Act of 1956. The Act, which became law on
May 9, 1956, and the Regulation, which will become effective on Septem ber 1, 1956, apply
to all banks w hether or not members of the Federal Reserve System.
Subject to certain exceptions, a bank holding company, for the purposes of the Act
and the Regulation, is any company which owns or controls, directly or indirectly, 25
per cent or more of the stock of each of two or more banks. In general, the Act and the
Regulation require every bank holding company (1) to obtain the p rio r approval of the
B oard of Governors before it acquires, directly or indirectly, the stock or substantially all
the assets of any bank, and (2) w ithin two years after the date of the Act to dispose of
any nonbanking assets held by such bank holding company. Any bank which is a subsidiary
of a bank holding company is prohibited from making any loans to, or investing in the
stock or obligations of, such bank holding company or any other subsidiary of such
company. E very bank holding company m ust register with the Board on or before
November 5, 1956, by filing a registration statem ent with the Federal Reserve Bank of its
district. The Regulation provides that every bank holding company m ust also file an
annual report with the Federal Reserve Bank. Violations of the Act are subject to
criminal penalties.
Form s pursuant to the Act and the Regulation are now in process of preparation. In
the meantime, any bank holding company th a t has its principal office in the Second
Federal Reserve D istrict and th a t proposes to acquire the stock or substantially all the
assets of any bank should file application fo r the B o ard ’s approval with this Bank. Any
inquiries with respect to the provisions of the Act or the Regulation should also be
directed to this Bank.
A copy of Regulation Y, with statutory appendix, is enclosed. Additional copies of
this circular and of the Regulation will be furnished upon request.




A lfred

H a y es,

President.

BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM

BANK HOLDING COMPANIES




REGULATION Y

E ffe c tiv e S e p te m b e r 1 , 1 9 5 6

IN Q U IR IE S R E G A R D IN G T H IS R E G U L A T IO N

Any in q u iry relating to this regu latio n should be addressed
to th e F ederal Reserve B ank o f th e F ederal R eserve district
in which th e in q u iry arises. F orm s necessary fo r th e p rep aratio n
of reg istratio n statem ents, applications, requests an d re p o rts
m ay be obtained fro m any F ederal R eserve B ank.




CONTENTS
Pago
S ec .

1. A uthority

and

Scope ............................................................................................ 1

Sec . 2. D efin itio n s ....................................................................................................... ......... 1
(a ) B ank holding com pany ................................................................ ......... 1
(b ) E xceptions from definition o f “ Bank holding com pany”
1
(c) C om pany ............................................................................................. ......... 2
(d ) B ank ............................................................................................................... 2
(e ) S ta te m em ber ban k .................................................................................. 2
(/) D istrict ban k ..................................................................................... ......... 2
(? ) Subsidiary ..................................................................................................... 3
( h ) Successor ............................................................................................. ......... 3
(t) B oard ............................................................................................................... 3
(;') T h e A c t ........................................................................................................... 3
( k ) F ederal R eserve B ank .................................................................. ......... 3
S ec . 3. R egistration ................................................................................... .................. ......... 3
(a) R eg istratio n sta te m e n t ............................................................................ 3
( b ) D a te of registration ......................................................................... .........3
S ec . 4. A cquisition of B a n k S hares or A ssets
..................................................... I
(а) T ransactions requiring B oard a p p r o v a l ................................. ........... 4
(б ) E xcepted tran sactio n s ......................... .................................................. 4
(c) A pplications w hich will not be ap p ro v ed .............. ......................... 4
( d ) Subm ission of applications ....................... .............. .................. ........... 5
(e ) P rocedure on a pplications ........................................................ ........... 5
( /) H earings on applications .......................................................... ............. 5
( g ) A ction on a pplications ........................................................ ................... 6
( h ) F a c to rs affecting action .......................................................... ............... 6
S ec . 5. I nterests in N o nba n kin g Organizations ....................................... ............. 6
(а ) Period allow ed for d iv estm e n t .................................................... .........6
(б ) Shares of financial, fiduciary, o r insurance com panies..................7
(c) T ax certifications ....................................................................................7
S ec . 6. Borrowing

by

B a n k H olding C om pany

or its

S ubsidiaries

8

S ec . 7. H earings and P roceedings ..................................................................................8
(a) H e a r in g s ........................................................................................................ 8
(b ) R ecord o f P roceedings ............................................................................8
( c ) P a rtie s .................................................................................................. ........ 8
S ec . 8. R eports

and

E xam in ation s

............................................................ .................9

S ec. 9. S tatutory P enalties .............................................................................................. 9
A ppen d ix ...................................




........................................................................... .................... 10

R E G U L A T IO N Y
Effective September 1, 1956

BANK HOLDING COMPANIES
SECTION 1. AUTHORITY AND SCOPE
T h i s r e g u l a t i o n is is s u e d p u r s u a n t t o t h e B a n k H o l d i n g C o m p a n y
A c t o f 1 9 5 6 , t h e p r o v i s i o n s o f w h ic h a r e s e t f o r t h i n t h e A p p e n d ix t o
th is

r e g u la tio n .1

P ro v is io n s r e la tin g t o

h o ld in g

c o m p a n y a ffilia te s ,

a s d e f in e d in s e c ti o n 2 (c ) o f t h e B a n k i n g A c t o f 1 9 3 3 , a r e c o n ta i n e d
i n t h e B o a r d ’s R e g u l a t i o n P . 2

SECTION 2. DEFINITIONS
(а)

B ank h olding com pany. — S u b j e c t

to

th e

e x c e p ti o n s s t a t e d

in s u b s e c t io n ( 6 ) o f t h i s s e c ti o n , t h e t e r m “ b a n k h o ld in g c o m p a n y ”
m eans an y
(1 )

com pany—

w h ic h d i r e c t l y o r i n d i r e c t l y o w n s , c o n tr o l s , o r h o ld s w i t h

p o w e r to v o te e ith e r
( i ) 2 5 p e r c e n t u m o r m o r e o f t h e v o t i n g s h a r e s o f e a c h o f tw o
o r m o re b a n k s , o r
( i i) 2 5 p e r c e n t u m o r m o r e o f t h e v o t i n g s h a r e s o f a n y o t h e r
c o m p a n y w h i c h is o r b e c o m e s a b a n k h o l d in g c o m p a n y ; o r
( 2 ) w h ic h c o n tr o l s in a n y m a n n e r t h e e l e c t i o n o f a m a j o r i t y o f
th e d ire c to rs o f e a c h of tw o o r m o re b a n k s ; o r
(3 )

fo r th e b e n e fit o f w h o se s h a r e h o ld e r s o r m e m b e rs 2 5 p e r

c e n tu m o r m o re o f th e v o tin g s h a r e s o f e a c h o f tw o o r m o re b a n k s
o r o f a b a n k h o l d in g c o m p a n y is h e ld b y t r u s t e e s ; o r
( 4 ) w h ic h is a s u c c e s s o r t o a n y c o m p a n y t h a t f a ll s w i t h i n

(1 ),

( 2 ) , o r (3 ) a b o v e , a n d a n y su c h su c c e ss o r s h a ll b e d e e m e d to b e
a b a n k h o l d in g c o m p a n y f r o m t h e d a t e a s o f w h ic h i t s p r e d e c e s s o r
c o m p a n y b e c a m e a b a n k h o l d in g c o m p a n y .

(б) E xceptions fro m definition o f “ ban k h olding com pany.”
— N o c o m p a n y s h a l l b e c o n s i d e r e d a b a n k h o l d in g c o m p a n y —
( 1 ) if i t is a b a n k a n d i t w o u ld o t h e r w is e b e a b a n k h o ld in g
c o m p a n y o n l y b y v i r t u e o f i t s o w n e r s h i p o r c o n tr o l o f s h a r e s in
a

fid u c ia ry

c a p a c ity , p ro v id e d

su ch sh a re s a re

n o t h e ld

fo r th e

b e n e fit o f th e s h a re h o ld e rs o f su c h b a n k ; o r
(2 )

if

( i ) i t is r e g is te r e d u n d e r t h e I n v e s t m e n t C o m p a n y A c t

o f 1 9 4 0 a n d w a s s o r e g is te r e d p r i o r t o M a y 1 5 , 1 9 5 5 , o r is a ffilia te d
1 T h e r e c o r d k e e p i n g a n d r e p o r t i n g r e q u i r e m e n t s c o n t a in e d h e r e in h a v e b e e n a p p r o v e d b y
t h e B u r e a u o f t h e B u d g e t in a c c o r d a n c e w it h t h e F e d e r a l R e p o r t s A c t o f 1942.
*
do

T h e B a n k H o l d i n g C o m p a n y A c t o f 1 9 6 6 a n d t h is R e g u l a t i o n Y
not

S ta tu te s

ta k e th e
and

th e

p la c e o f.
B o a r d ’s

p r o v is i o n s
R e g u la tio n

a f f i li a t e s " a s d i s t i n g u i s h e d f r o m




of
P

oth er

la w s , s u c h

th e re u n d e r,

as

w h ic h

s e c t io n
r e la t e

a r e in a d d i t io n t o . a n d
5144
to

of

th e

“ h o l d in g

R e v is e d
com p an y

" b a n k b o l d i n g c o m p a n i e s .”

1

2

R E G U L A T IO N Y

Sec. 2

w i t h a n y s u c h r e g is te r e d c o m p a n y in s u c h m a n n e r a s t o c o n s t i t u t e
it a n a f filia te d c o m p a n y w i t h in t h e m e a n i n g o f t h a t A c t ,
it d o e s n o t d ir e c tly

o w n 25 p e r c e n tu m

o r m o re

and

o f th e

( ii)

v o t in g

s h a r e s o f e a c h o f t w o o r m o re b a n k s ; o r
( 3 ) if it w o u ld o th e r w is e b e a b a n k h o l d in g c o m p a n y o n l y b y
v i r t u e o f i ts o w n e r s h i p o r c o n tr o l o f s h a r e s a c q u i r e d b y i t in c o n ­
n e c tio n w i t h i ts u n d e r w r i t i n g o f s e c u r i t i e s a n d if s u c h s h a r e s a r e
h e ld o n l y f o r s u c h p e r io d o f t i m e a s w i l l p e r m i t t h e s a l e t h e r e o f
u p o n a re a s o n a b le b a s is ; o r
(4 ) if i t w a s f o r m e d f o r t h e s o le p u r p o s e o f p a r t i c i p a t i n g in a
p ro x y

so lic ita tio n

a n d w o u ld o th e r w is e b e a b a n k

h o l d in g c o m ­

p a n y o n l y b y v i r t u e o f i t s c o n tr o l o f v o t i n g r i g h t s o f s h a r e s a c ­
q u ire d

in t h e c o u r s e o f s u c h s o l i c i t a t i o n ; o r

( 5 ) if a t l e a s t 8 0 p e r c e n t u m o f i t s t o t a l a s s e t s a r e c o m p o s e d o f
h o ld in g s in t h e fie ld o f a g r i c u l t u r e , a n d f o r t h i s p u r p o s e t h e t e r m
“ a g r i c u l t u r e ” i n c lu d e s f a n n i n g i n a l l i t s b r a n c h e s , i n c l u d i n g f r u i t ­
g r o w in g , d a i r y i n g , t h e r a is in g o f liv e s t o c k , b e e s , f u r - b e a r i n g a n i ­
m a ls, o r p o u ltr y , f o r e s try o r lu m b e rin g o p e r a tio n s , a n d th e p r o ­
d u c ti o n

o f n a v a l s to r e s , a n d

C om pany. — T h e

(c )

(in c lu d in g
iz a tio n ,

a

te rm

o p e r a tio n s d ir e c tly
“com pany”

m eans

b a n k ) , b u sin e ss t r u s t , a s s o c ia tio n ,

re la te d
any

th e re to .

c o rp o ra tio n

o r s im ila r

o rg a n ­

except —

(1 )

any

c o rp o ra tio n

th e

m a jo rity

o f th e s h a r e s o f w h ic h a re

o w n e d b y th e U n ite d S ta te s o r b y a n y S ta te ;
(2 )

any

o r g a n iz e d

c o r p o r a t i o n o r c o m m u n i t y c h e s t, f u n d , o r f o u n d a t i o n ,
and

o p e ra te d

e x c lu siv e ly

fo r

r e lig io u s ,

c h a rita b le ,

or

e d u c a t i o n a l p u r p o s e s , n o p a r t o f t h e n e t e a r n i n g s o f w h ic h i n u r e s
to th e

b e n e fit o f a n y

p riv a te

s h a r e h o ld e r o r in d iv id u a l, a n d

no

s u b s t a n t i a l p a r t o f t h e a c t i v i t i e s o f w h i c h is c a r r y i n g o n p r o p a ­
g a n d a , o r o th e r w is e a t t e m p t i n g t o
(3 )

any

in f lu e n c e l e g i s l a t i o n ; a n d

p a rtn e rs h ip .

([d) B ank. — T h e

te rm

“bank”

m eans

any

n a tio n a l

b a n k in g

a sso c ia tio n o r a n y S ta te b a n k , s a v in g s b a n k , o r t r u s t c o m p a n y , b u t
sh a ll

not

in c lu d e a n y

o r g a n iz a tio n

o p e ra tin g

under

s e c ti o n

2 5 (a )

o f th e F e d e r a l R e se rv e A c t, o r a n y o r g a n iz a tio n w h ic h d o e s n o t d o
a n y b u s i n e s s w i t h in t h e U n i t e d S t a t e s .
(e )

State m em ber b an k . — T h e

te rm “S ta te m em b e r b a n k ” m ean s

a n y S t a t e b a n k w h ic h is a m e m b e r o f t h e F e d e r a l R e s e r v e S y s te m .
(/)

D istrict ban k . — T h e

te rm

“ D is tr ic t b a n k ” m ea n s a n y S ta te

b a n k o r g a n iz e d o r o j> e ra tin g u n d e r t h e C o d e o f L a w f o r t h e D i s t r i c t
o f C o lu m b ia .




R E G U L A T IO N Y

S e cs . 2, 3

igi Subsidiary. — T h e

te rm

3

" s u b s id ia ry ” , a s

used

w ith

re s p e c t

t o a s p e c if ie d b a n k h o ld in g c o m p a n y , m e a n s —
(1 )

a n y c o m p a n y 2 5 p e r c e n t u m o r m o r e o f w h o s e v o t in g s h a r e s

( e x c l u d in g s h a r e s o w n e d b y t h e U n i t e d S t a t e s o r b y a n y c o m p a n y
w h o lly o w n e d b y t h e U n i t e d S t a t e s ) is o w n e d o r c o n tr o l l e d b y s u c h
bank

h o ld in g

com pany;

1 2 1 a n y c o m p a n y t h e e le c t i o n o f a m a j o r i t y o f w h o s e d i r e c to r s
is c o n tr o l l e d in a n y m a n n e r b y s u c h b a n k h o l d in g c o m p a n y ; o r
(3 )

a n y c o m p a n y 2 5 p e r c e n t u m o r m o r e o f w h o s e v o t in g s h a r e s

is h e ld b y t r u s t e e s f o r t h e b e n e f i t o f t h e s h a r e h o l d e r s o r m e m b e rs
o f s u c h b a n k h o l d in g c o m p a n y .

(h) Successor. — T h e

te rm

“ su c c esso r”

i n c lu d e s

any

com pany

w h ic h a c q u i r e s d i r e c t l y o r i n d i r e c t l y f r o m a b a n k h o ld in g c o m p a n y
s h a r e s o f a n y b a n k , w h e n a n d if t h e r e l a t i o n s h i p b e tw e e n s u c h c o m ­
p a n y a n d s u c h b a n k h o l d in g c o m p a n y

is s u c h t h a t t h e t r a n s a c t i o n

e f f e c ts n o s u b s t a n t i a l c h a n g e in t h e c o n tr o l o f s u c h b a n k o r b e n e fic ia l
o w n e rs h ip o f su c h s h a re s o f su c h b a n k .
( i)

B oard. — T h e

te rm

“ B o a rd ” m e a n s th e

B o a rd

of G o v e rn o rs

o f t h e F e d e r a l R e s e r v e S y s te m .
(;')

T h e Act. — T h e

te r m “ th e A c t” m e a n s th e B a n k H o ld in g C o m ­

p a n y A c t o f 1956.
(A:)

F ederal Reserve B ank. — T h e

te rm

“ F e d e ra l R e se rv e B a n k ”

a s u s e d h e r e i n w i t h r e s p e c t t o t h e f ilin g o f r e g i s t r a t i o n s t a t e m e n t s ,
a p p lic a tio n s ,

re q u e s ts , o r re p o rts

by

a

bank

h o l d in g

com pany

or

o th e r c o m p a n y sh a ll m e a n th e F e d e ra l R e se rv e B a n k of th e F e d e ra l
R e s e r v e d i s t r i c t in w h ic h s u c h c o m p a n y h a s i ts p r i n c i p a l office.

SECTION 3. REGISTRATION
(а)

R egistration statem ent. — O n

or

b e f o re

N o v em b er 5,

1956,

o r w i t h i n 180 d a y s a f t e r i t b e c o m e s a b a n k h o l d in g c o m p a n y , w h ic h ­
e v e r is l a t e r , e a c h b a n k h o l d in g c o m p a n y s h a l l r e g i s t e r w i t h t h e B o a r d
b y f ilin g w i t h t h e F e d e r a l R e s e r v e B a n k a r e g i s t r a t i o n s t a t e m e n t , in
d u p lic a te , o n fo rm s p re s c rib e d b y th e B o a rd . U p o n tim e ly a p p lic a tio n
b y a n y b a n k h o l d in g c o m p a n y a n d u p o n a s a t i s f a c t o r y s h o w in g a s
t o t h e n e e d t h e r e f o r , t h e B o a r d in i t s d i s c r e t i o n m a y e x te n d t h e t im e
p r e s c r i b e d h e r e i n f o r t h e f ilin g o f a r e g i s t r a t i o n s t a t e m e n t b y s u c h
b a n k h o l d in g c o m p a n y .
(б )

D ate o f re g istratio n . — T h e

d a te

o f re g is tr a tio n

of a

bank

h o l d in g c o m p a n y s h a l l b e t h e d a t e o n w h ic h i t s r e g i s t r a t i o n s t a t e m e n t
is r e c e iv e d b y t h e F e d e r a l R e s e r v e B a n k w i t h w h ic h s u c h s t a t e m e n t
is r e q u i r e d t o b e file d .




R E G U L A T IO N Y

4

S ec . 4

SECTION 4. ACQUISITION OF BANK SHARES OR ASSETS

T ran sactions re q u irin g B oard approval. —

(а)

E x c e p t w ith th e

p r i o r a p p r o v a l o f t h e B o a r d o r e x c e p t a s p r o v i d e d i n s u b s e c t io n ( 6 ) o f
t h i s s e c tio n —
( 1 ) n o a c t i o n s h a l l b e t a k e n w h ic h w ill r e s u l t in a n y c o m p a n y
b e c o m in g a b a n k h o l d in g c o m p a n y ;
( 2 ) n o b a n k h o l d in g c o m p a n y s h a l l a c q u i r e d i r e c t o r i n d i r e c t
o w n e r s h i p o r c o n tr o l o f a n y v o t i n g s h a r e s o f a n y b a n k ;
(3 ) n o b a n k h o ld in g c o m p a n y w h ic h is n o t a b a n k a n d n o n o n ­
b a n k i n g s u b s i d i a r y o f a b a n k h o l d in g c o m p a n y s h a l l a c q u i r e a l l o r
s u b s ta n tia lly a ll o f th e a s s e ts o f a b a n k ; a n d
( 4 ) n o b a n k h o l d in g c o m p a n y s h a l l m e r g e o r c o n s o l i d a t e w i t h
a n y o t h e r b a n k h o ld in g c o m p a n y .
(б )

Excepted transactions. — P r i o r

a p p r o v a l b y t h e B o a r d is n o t

r e q u i r e d w i t h r e s p e c t t o a n y o f t h e f o llo w in g t r a n s a c t i o n s :
(1 )

T h e a c q u is itio n

b y a b a n k h o l d in g c o m p a n y o f d i r e c t o r

i n d i r e c t o w n e r s h i p o r c o n tr o l o f a n y v o t i n g s h a r e s o f a n y b a n k if ,
a f t e r s u c h a c q u i s i t io n , s u c h c o m p a n y w ill n o t d i r e c t l y o r i n d i r e c t l y
o w n o r c o n tr o l m o r e t h a n 5 p e r c e n t u m

o f th e v o tin g s h a re s o f

such b a n k ;
(2 ) T h e a c q u i s i t i o n b y a b a n k h o l d in g c o m p a n y o f a d d i t i o n a l
s h a r e s i n a b a n k in w h ic h s u c h b a n k h o ld in g c o m p a n y o w n e d o r
c o n tr o l l e d a m a j o r i t y o f t h e v o t i n g s h a r e s i m m e d i a t e l y p r i o r t o s u c h
a c q u is itio n ; o r
( 3 ) T h e a c q u i s i t i o n b y a b a n k ( i n c l u d i n g a b a n k w h ic h is a b a n k
h o l d in g c o m p a n y o r a s u b s i d i a r y o f a b a n k h o l d in g c o m p a n y ) o f
t h e v o t in g s h a r e s o f a n y b a n k , if —
( A ) s u c h s h a r e s a r e a c q u i r e d in g o o d f a i t h in a f i d u c i a r y c a p a ­
c i t y a n d a r e n o t h e ld f o r t h e b e n e f i t o f t h e s h a r e h o l d e r s o f t h e
a c q u irin g b a n k , o r
( B ) s u c h s h a r e s a r e a c q u i r e d in t h e r e g u l a r c o u r s e o f s e c u r i n g
o r c o ll e c t in g a d e b t p r e v i o u s l y c o n t r a c t e d in g o o d f a i t h , p r o v i d e d
t h a t a n y s h a re s a c q u ir e d a f te r th e d a te o f th e A c t in s e c u rin g o r
c o ll e c t in g a n y s u c h p r e v i o u s l y c o n t r a c t e d d e b t s h a l l b e d is p o s e d
o f w i t h i n a p e r io d o f tw o y e a r s f r o m

t h e d a t e o n w h ic h t h e y

w e re a c q u ire d .
(c )

A pplications w hich will n o t b e ap p ro v ed . — N o

a p p lic a tio n

w ill b e a p p r o v e d b y t h e B o a r d if s u c h a p p r o v a l w o u ld p e r m i t a b a n k
h o l d in g c o m p a n y o r a n y s u b s i d i a r y t h e r e o f t o

a c q u ire , d ire c tly

or

i n d i r e c t l y , a n y v o t i n g s h a r e s o f , i n t e r e s t i n , o r a l l o r s u b s t a n t i a l l y a ll
o f th e a s s e ts o f a n y b a n k w h ic h w a s n o t a s u b s id ia r y o f th e b a n k
h o l d in g c o m p a n y o n t h e d a t e o f e n a c t m e n t o f t h e A c t a n d w h i c h is




R E G U L A T IO N Y

Se c . 4

5

l o c a t e d o u t s i d e t h e S t a t e in w h ic h s u c h b a n k h o ld in g c o m p a n y m a i n ­
t a i n s i t s p r i n c i p a l office a n d p la c e o f b u s in e s s o r in w h ic h i t c o n d u c ts
i t s p r i n c i p a l o p e r a t i o n s , u n le s s t h e a c q u i s i t i o n o f s u c h s h a r e s o r a s s e ts
o f a S t a t e b a n k b y a n o u t - o f - S t a t e b a n k h o ld in g c o m p a n y is s p e c if i­
c a l l y a u t h o r i z e d b y t h e s t a t u t e l a w s o f t h e S t a t e i n w h ic h s u c h b a n k
is l o c a t e d , b y la n g u a g e t o t h a t e ffe c t a n d n o t m e r e ly b y i m p lic a tio n .

(d) Subm ission o f applications.— A p p l i c a t i o n
B o a rd o f a n y tra n s a c tio n

fo r a p p ro v a l b y th e

r e q u ir i n g s u c h a p p r o v a l u n d e r s u b s e c tio n

( a ) o f t h i s s e c ti o n s h a l l b e f ile d , i n t r i p l i c a t e , w i t h t h e F e d e r a l R e s e r v e
B ank.

A n y s u c h a p p l i c a t i o n s h a l l b e file d n o t le s s t h a n 6 0 d a y s b e f o re

t h e d a t e o n w h ic h i t is p r o p o s e d t h a t t h e t r a n s a c t i o n r e q u i r i n g a p p r o ­
v a l b e c o n s u m m a t e d .8 U p o n t i m e l y r e q u e s t a n d u p o n a s a t i s f a c t o r y
s h o w in g a s t o t h e n e e d t h e r e f o r , t h e B o a r d i n i t s d i s c r e t i o n m a y a c c e p t
a n a p p l i c a t i o n a l t h o u g h s u b m i t t e d w i t h i n s u c h p e r io d o f 6 0 d a y s .
s e p a ra te

a p p lic a tio n

s h a l l b e f ile d w i t h

re sp e c t to

each

A

b a n k th e

v o t i n g s h a r e s o r a s s e t s o f w h ic h a r e s o u g h t t o b e a c q u i r e d .
(e)

P ro ced u re on applications. — A

F e d e r a l R e s e r v e B a n k r e c e iv ­

i n g a n a p p l i c a t i o n u n d e r t h i s s e c ti o n w ill f o r w a r d tw o c o p ie s th e r e o f
to th e B o a rd .

I f e i t h e r t h e a p p l i c a n t o r t h e b a n k t h e v o t in g s h a r e s

o r a s s e t s o f w h ic h a r e s o u g h t t o b e a c q u i r e d i s a n a t i o n a l b a n k o r a
D i s t r i c t b a n k , t h e B o a r d w ill t r a n s m i t a c o p y o f t h e a p p l i c a t i o n t o
th e C o m p tr o lle r o f th e C u rre n c y .

I f e ith e r th e a p p lic a n t o r th e b a n k

t h e v o t i n g s h a r e s o r a s s e t s o f w h ic h a r e s o u g h t t o b e a c q u i r e d is a
S t a t e b a n k , t h e B o a r d w ill t r a n s m i t a c o p y o f t h e a p p l i c a t i o n t o t h e
a p p r o p r i a t e s u p e r v i s o r y a u t h o r i t y o f t h e S t a t e i n w h ic h s u c h b a n k
is lo c a t e d .

(/) H earings on A pplications. — I n

a n y c a s e i n w h ic h t h e B o a r d

r e c e iv e s w r i t t e n a d v ic e o f d i s a p p r o v a l o f t h e a p p l i c a t i o n
C o m p tr o lle r o f th e C u r r e n c y

o r th e

a p p ro p ria te S ta te

fro m

th e

su p e rv is o ry

a u t h o r i t y , a s t h e c a s e m a y b e , w i t h i n 3 0 d a y s f r o m t h e d a t e o f r e c e ip t
o f t h e a p p l i c a t i o n b y t h e n o t if i e d a u t h o r i t y , t h e B o a r d w ill s o n o t i f y
t h e a p p l i c a n t in w r i t in g , d i r e c t i n g t h e a p p l i c a n t ’s a t t e n t i o n
p r o v i s i o n s o f s e c ti o n 3 ( 6 ) o f t h e A c t .

to th e

W ith in th r e e d a y s a f te r th e

d a t e o f t h e s e n d i n g o f s u c h n o t ic e t o t h e a p p l i c a n t , t h e B o a r d w ill
n o t i f y in w r i t i n g t h e a p p l i c a n t a n d t h e C o m p t r o l l e r o f t h e C u r r e n c y
o r th e a p p r o p ria te S ta te s u p e rv is o ry a u th o r ity , a s th e c a se m a y be,
o f t h e d a t e fix e d b y t h e B o a r d f o r t h e c o m m e n c e m e n t o f a h e a r i n g o n
t h e a p p l i c a t i o n a n d o f t h e p l a c e a n d t i m e a t w h i c h s u c h h e a r i n g w ill
b e h e ld .

A n y s u c h h e a r i n g w ill b e c o m m e n c e d n o t le s s t h a n t e n d a y s

n o r m o r e t h a n t h i r t y d a y s a f t e r t h e d a t e o n w h ic h t h e B o a r d s e n t t h e
*

I n s o m e c a s e s I t m a y n o t b e p o s s ib l e f o r t h e B o a r d t o a c t u p o n

s u c h p e r i o d o f SO d a y s a n d t h is r e q u i r e m e n t s h o u ld
B o a r d w i l l a c t u p o n a l l a p p l ic a t i o n s w it h i n
b e m a d e t o e x p e d it e s u c h a c t io n .




a n a p p l ic a t i o n

n o t b e re g a rd e d a s s u n e s t in K

w it h in

th * t th e

t h a t p e r i o d o f t im e , a lt h o u g h e v e r y e f f o r t w i l l

6

R E G U L A T IO N Y

S ecs . 4. 5

a p p l i c a n t n o t ic e o f t h e d i s a p p r o v a l o f t h e C o m p t r o l l e r o f t h e C u r r e n c y
o r th e a p p r o p ria te S ta te s u p e rv is o ry a u th o r ity .

(g I Action on applications. — I n

a n y c a s e in w h ic h a h e a r i n g is

h e ld in a c c o r d a n c e w i t h s u b s e c t io n (/> o f t h i s s e c ti o n , t h e B o a r d , a f t e r
t h e c o n c lu s io n o f s u c h h e a r i n g , w ill b y o r d e r g r a n t o r d e n y t h e a p p l i ­
c a t i o n o n t h e b a s is o f t h e r e c o r d m a d e a t s u c h h e a r i n g .

I n a ll o t h e r

c a s e s , t h e B o a r d w ill b y o r d e r g r a n t o r d e n y t h e a p p l i c a t i o n a f t e r
r e c e ip t b y i t o f a d v ic e t h a t t h e C o m p t r o l l e r o f t h e C u r r e n c y o r t h e
a p p r o p ria te S ta te s u p e rv is o ry a u th o r ity , a s th e c ase m a y be, d o e s n o t
d i s a p p r o v e t h e a p p l i c a t i o n , o r , if n o s u c h a d v ic e is r e c e iv e d , a f t e r t h e
e x p i r a t i o n o f t h i r t y d a y s f r o m t h e d a t e o f r e c e ip t o f t h e c o p y o f t h e
a p p lic a tio n

by

th e

C o m p tr o lle r

of

th e

C u rre n c y

or

such

S ta te

a u th o rity .

{h) Factors affecting action. — I n

a c tin g u p o n a n y a p p lic a tio n th e

B o a r d , a s r e q u ir e d b y t h e A c t , w ill c o n s i d e r t h e

f o llo w in g f a c t o r s :

(1 ) T h e f i n a n c ia l h i s t o r y a n d c o n d it i o n o f t h e a p p l i c a n t a n d t h e
b a n k o r b a n k s co n ce rn ed ;
(2 ) T h e p r o s p e c t s o f t h e a p p l i c a n t a n d t h e b a n k o r b a n k s c o n ­
c ern e d ;
( 3 1 T h e c h a r a c te r o f th e m a n a g e m e n t o f th e a p p lic a n t a n d th e
b a n k o r b an k * co n ce rn ed ;
(4» T h e c o n v e n ie n c e , n e e d s , a n ti w e l f a r e o f t h e c o m m u n i ti e s a n d
th e a re a co n ce rn ed ; a n d

15)

W h e t h e r o r n o t t h e e ffe c t o f t h e p r o p o s e d t r a n s a c t i o n

fo r

w h ic h a p p r o v a l is d e s i r e d w o u ld b e t o e x p a n d t h e s iz e o r e x t e n t o f
t h e b a n k h o l d in g c o m p a n y s y s t e m in v o lv e d b e y o n d l i m i t s c o n s i s t e n t
w ith a d e q u a te a n d s o u n d b a n k in g , th e p u b lic in te r e s t, a n d th e p r e ­
s e r v a t i o n o f c o m p e t it i o n in t h e fie ld o f b a n k in g .

SECTION 5. INTERESTS IN NONBANKING ORGANIZATIONS

[a)

P erio d allowed fo r divestm ent. — N o

b a n k h o l d in g c o m p a n y ,

e x c e p t a s p r o v i d e d in s e c tio n 4 ( c ) o f t h e A c t . t h e p r o v i s i o n s o f w h ic h
a r e s e t f o r t h in t h e A p p e n d i x t o t h i s r e g u l a t i o n , s h a l l

(1 ) a f t e r t h e

d a t e o f e n a c t m e n t o f t h e A c t a c q u i r e d i r e c t o r i n d ir e c t o w n e r s h i p o r
c o n tr o l o f a n y v o t i n g s h a r e s o f a n y c o m p a n y w h ic h is n o t a b a n k , o r
(2> a f t e r t w o y e a r s f r o m t h e d a t e o f e n a c t m e n t o f t h e A c t o r f ro m
t h e d a t e a s o f w h ic h it b e c o m e s a b a n k h o l d in g c o m p a n y , w h i c h e v e r
is l a t e r , r e t a i n d i r e c t o r i n d i r e c t o w n e r s h i p o r c o n tr o l o f a n y v o tin ir
s h a r e s o f a n y c o m p a n y w h ic h is n o t a b a n k o r a b a n k h o l d in g c o m ­
p a n y , o r e n g a g e in a n y b u s i n e s s o t h e r t h a n t h a t o f b a n k i n g o r o f
m a n a g i n g o r c o n t r o l l i n g b a n k s o r o f f u r n i s h i n g *«>rvices t o o r p e r ­
f o r m in g s e r v i c e s f o r a n y b a n k o f w h i c h it o w n s o r c o n t r o l s 2 5 p e r
c e n tu m o r m o re o f th e v o tin g s h a re s .

U p o n tim e ly r e q u e s t a n d u p o n

a s a t i s f a c t o r y s h o w in g o f t h e r e e d t h e r e f o r , t h e B o a r d in i t s d i s c r e t i o n




S ec . 5

R E G U L A T IO N Y

7

may extend the two-year period referred to in the preceding sentence,
except that, as provided by the Act, no such extension of time may be
approved by the Board for more than one year at a time or for any
period beyond a date five years after the date of enactment of the
Act or five years after the date as of which the company became a
bank holding company, whichever is later.
(6 ) S h a r es o f fin a n cia l, fid u cia ry , o r in su r a n c e c o m p a n ie s.—

Any bank holding company which is of the opinion that a company
all the activities of which are of a financial, fiduciary', or insurance
nature is so closely related to the business of banking or of managing
or controlling banks, as conducted by such bank holding company or
its banking subsidiaries, as to be a proper incident thereto and as to
make it unnecessary for the prohibitions of section 4 of the Act to
apply in order to carry out the purposes of the Act, may request the
Board for such a determination pursuant to section 4(c)(6) of the
Act. Any such request shall be filed in duplicate with the Federal
Reserve Bank. After receipt of any such request, the Board will
notify the bank holding company of the place and time fixed for-a
hearing on the requested determ ination; and, after the conclusion of
such hearing and on the basis of the record made at the hearing, the
Board will by order make or decline to make the requested
determination.
(r) T a x c e r tific a tio n s.— Any bank holding company desiring a
certification by the Board for purposes of the provisions of P art VIII
of Subchapter () of Chapter 1 of the Internal Revenue Code of 1954,
as amended by the Act, may file an application in duplicate for &ueh
certification with the Federal Reserve Bank; and any such applica­
tion will be forwarded by the Federal Reserve Bank to the Board.
Any application for a certification under subsections (a ), ( 6 ), or (c)
of section 1101 of said P art V III shall be filed not less than sixty days
in advance of the distribution, or exchange and distribution, with
respect to which such certification is desired . 4 Upon timely request
by any bank holding company and upon a satisfactory showing as to
the need therefor, the Board in its discretion may accept an applica­
tion for any such certification although submitted within such 60-day
period. On the basis of an application under this subsection, the
Board will either issue a certification or by order deny the applica­
tion. A duplicate original of each certification will be transm itted
to the Internal Revenue Service of the Treasury Department.
4 I n so m e ca ses i t m a y n o t b e p o s sib le f o r t h e B o a rd t o a c t u p o n a n a p p lic a tio n w ith in
s u c h p e rio d o f 60 d a y s a n d th is re q u ire m e n t s h o u ld n o t be re g a rd e d a s su g g e s tin g m a t th e
B o a rd w ill a c t upon a ll a p p lic a tio n s w ith in th a t p e rio d o f tim e , a lth o u g h ev e ry e lfo rt w ill oe




R E G U L A T IO N Y

8

S ecs . 6, 7

SECTION 6. BORROWING BY BANK HOLDING COMPANY
OR ITS SUBSIDIARIES

I t is unlawful under the Act, with certain exceptions, for any bank
which is a subsidiary of a bank holding company to invest in the capi­
tal stock, bonds, debentures, or other obligations of such company or
of any other subsidiary of such company; to accept as collateral for
an advance to any person the capital stock, bonds, debentures, or
other obligations of such company or any such other subsidiary; to
purchase securities, other assets, or obligations under repurchase
agreement from such company or any such other subsidiary; or to
make any loan, discount or extension of credit to such company or any
such other subsidiary. For statutory provisions on this subject, see
section 6 of the Act, set forth in the Appendix to this regulation.
SECTION 7. HEARINGS AND PROCEEDINGS

(а) H e a rin g s. —In addition to hearings required by the Act (see
sections 4 (/) and 5(6) of this regulation), a hearing may be ordered
by the Board in its discretion with respect to any application or
request under this regulation, either upon its own motion or upon the
request of any party in interest, if the Board deems such hearing to
be in the interests of the parties or the public interest. Notice of any
hearing required by the Act will be published in the Federal Register
a reasonable time in advance of the date fixed for the hearing; and
any hearings so required will ordinarily be held before trial examiners
appointed in accordance with the provisions of the Administrative
Procedure Act. All hearings under this regulation will be conducted
in accordance with the Board’s “Rules of Practice for Formal H ear­
ings.”
( б ) R ec o rd o f p r o c e e d in g s. —The record in any proceeding under
this regulation upon which an order of the Board is based shall con­
sist of the application or request filed with the Board in connection
with such proceeding; any views and recommendations received by
the Board from the Comptroller of the Currency or the appropriate
State supervisory authority pursuant to section 3(6) of the Act; the
transcript of any hearing held with respect to such application or re­
quest and any report and recommendation made by the trial examiner
or hearing officer before whom such hearing was held; any other docu­
ment or writing relied upon by the Board in making disposition of
the m atter; and any order of the Board granting or denying the appli­
cation or request.
(c)
Parties.—A party to any proceeding under this regulation shall
include any person or agency named or adm itted as a party or any
person who has filed a request in writing to be adm itted as a party and
who is entitled as of right to be adm itted.



R E G U L A T IO N Y

S ecs . 8, 9

9

SECTION 8. REPORTS AND EXAMINATIONS

Each bank holding company shall furnish to the Board in a form
to be prescribed by the Board a report of its operations for its fiscal
year ending in 1956 or the fiscal year in which it became a bank hold­
ing company, whichever is later, and for each fiscal year thereafter
until it ceases to be a bank holding company. Each such annual re­
port shall be filed, in duplicate, with the Federal Reserve Bank. Each
bank holding company shall furnish to the Board such additional
information at such times as the Board may require. The Board may
examine any bank holding company or any of its subsidiaries and the
cost of any such examination shall be assessed against and paid by
such bank holding company. As far as possible the Board will use
reports of examinations made by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, or the appropriate State
bank supervisory authority for the purposes of this section.
SECTION 9. STATUTORY PENALTIES

Under the Act, any company which willfully violates any provision
of the Act or any regulation or order issued by the Board pursuant
thereto shall upon conviction be fined not more than $ 1 , 0 0 0 for each
day during which the violation continues; and any individual who
willfully participates in a violation of any provision of the Act shall
upon conviction be fined not more than $ 1 0 , 0 0 0 or imprisoned not
more than one year, or both. Every officer, director, agent, and em­
ployee of a bank holding company is subject under the Act to the
same penalties for false entries in any book, report, or statem ent of
such bank holding company as are applicable to officers, directors,
agents, and employees of member banks of the Federal Reserve Sys­
tem for false entries in any books, reports, or statements of member
banks under section 1005 of Title 18, United States Code.




APPENDIX
Bank Holding Company Act of 1956
Act of M ay 9, 1956 (70 Stat. 133)

AN ACT
T o define b a n k h o ld in g co m p an ies, c o n tro l t h e ir f u tu r e e x p a n sio n , a n d r e q u ir e d iv e stm e n t of
th e ir n o n b a n k in g in te r e s ts .

Be it enacted by the Senate and House of Representatives of the
United States of Amcrica in Congress assembled, T hat this Act may
be cited as the "Bank Holding Company Act of 1956”.
DEFINITIONS

Sec. 2. (a) “Bank holding company” means any company (1) which
directly or indirectly owns, controls, or holds with power to vote, 25
per centum or more of the voting shares of each of two or more banks
or of a company which is or becomes a bank holding company by vir­
tue of this Act, or (2) which controls in any manner the election of
a m ajority of the directors of each of two or more banks, or (3) for
the benefit of whose shareholders or members 25 per centum or more
of the voting shares of each of two or more banks or a bank holding
company is held by trustees; and for the purposes of this Act, any
successor to any such company shall be deemed to be a bank holding
company from the date as of which such predecessor company became
a bank holding company. Notwithstanding the foregoing (A) no bank
shall be a bank holding company by virtue of its ownership or control
of shares in a fiduciary capacity, except where such shares are held
for the benefit of the shareholders of such bank, (B) no company
shall be a bank holding company which is registered under the Invest­
ment Company Act of 1940, and was so registered prior to M ay 15,
1955 (or which is affiliated with any such company in such manner
as to constitute an affiliated company within the meaning of such A ct),
unless such company (or such affiliated com pany), as the case may be,
directly owns 25 per centum or more of the voting shares of each of
two or more banks, (C) no company shall be a bank holding company
by virtue of its ownership or control of shares acquired by it in con­
nection with its underwriting of securities and which are held only for
such period of time as will perm it the sale thereof upon a reasonable
basis, (D) no company formed for the sole purpose of participating
in a proxy solicitation shall be a bank holding company by virtue of
its control of voting rights of shares acquired in the course of such
solicitation, and (E) no company shall be a bank holding company
10




R E G U L A T IO N

Y

11

if a t least 80 per centum of its total assets are composed of holdings in
the field of agriculture.
( 6 ) “Company” means any corporation, business trust, association,
or similar organization, but shall not include ( 1 ) any corporation the
m ajority of the shares of which ar<> owned by the United States or by
any State, or (2) any corporation or community chest, fund, or foun­
dation, organized ami operated exclusively for religious, charitable, or
educational purposes, no part of the net earnings of which inures to
the benefit of any private shareholder or individual, and no substantial
part of the activities of which is carrying on propaganda, or otherwise
attem pting to influence legislation, or (3) any partnership.
(c) “B ank” means any national banking association or aay State
bank, savings bank, or trust company, but shall not include any or­
ganization operating under section 25 (a) of the Federal Reserve Act,
or any organization which does not do business within the United
States. “State member bank” means any State bank which is a mem­
ber of the Federal Reserve System. "D istrict bank” means any State
bank organized or operating under the Code of Law for the D istrict of
Columbia.
(d) “Subsidiary”, with respect to a specified bank holding company,
means (1) any company 25 per centum or more of whose voting shares
(excluding shares owned by the United States or by any company
wholly owned by the United States) is owned or controlled by such
bank holding company; or (2 ) any company the election of a majority
of whose directors is controlled in any manner by such bank holding
company; or (3) any company 25 per centum or more of whose voting
shares are held by trustees for the benefit of the shareholders or mem­
bers of such bank holding company.
(e) The term “successor” shall include any company which acquires
directly or indirectly from a bank holding company shares of any
bank, when and if the relationship between such company and the
bank holding company is such th a t the transaction effects no sub­
stantial change in the control of the bank or beneficial ownership of
such shares of such bank. The Board may, by regulation, further
define the term “successor” to the extent necessary to prevent evasion
of the purposes of this Act.
(/) "B oard” means the Board of Governors of the Federal Reserve
System.
(g) “Agriculture”, as used in section 2 (a ), includes farming in all
its branches including fruitgrowing, dairying, the raising of livestock,
bees, fur-bearing animals, or poultry, forestry or lumbering opera­
tions, and the production of naval stores, and operations directly
related thereto.



R E G U L A T IO N

12

Y

ACQUISITION OF BANK SHARES OR ASSETS

Sec. 3. (a) It shall be unlawful except with the prior approval of
the Board (1) for any action to be taken which results in a company
becoming a bank holding company under section 2 (a) of this Act;
(2 ) for any bank holding company to acquire direct or indirect owner­
ship or control of any voting shares of any bank if, after such acquisi­
tion, such company will dbectly or indirectly own or control more
than 5 per centum of t-he voting shares of such bank; (3) for any
bank holding company or subsidiary thereof, other than a bank, to
acquire all or substantially all of the assets of a bank; or (4) for any
bank holding company to merge or consolidate with any other bank
holding company. Notwithstanding the foregoing this prohibition
shall not apply to (A) shares acquired by a bank, (i) in good faith
In a fiduciary capacity, except where such shares are held for the
benefit of the shareholders of such bank, or (ii) in the regular course
of securing or collecting a debt previously contracted in good faith,
but any shares acquired after the date of enactm ent of this Act in
securing or collecting any such previously contracted debt shall be
disposed of within a period of two years from the date on which they
were acquired; or (B) additional shares acquired by a bank holding
company in a bank in which such bank holding company owned or
controlled a m ajority of the voting shares prior to such acquisition.
(b )
Upon receiving from a company any application for approval
under this section, the Board shall give notice to the Comptroller of
the Currency, if the applicant company or any bank the voting shares
or assets of which are sought to be acquired is a national banking asso­
ciation or a D istrict bank, or to the appropriate supervisory authority
of the interested State, if the applicant company or any bank the vot­
ing shares or assets of which are sought to be acquired is a State bank,
and shall allow thirty days within which the views and recommenda­
tions of the Comptroller of the Currency or the State supervisory
authority, as the case may be, m ay be submitted. If the Comptroller
of the Currency or the State supervisory authority so notified by the
Board disapproves the application in writing within said th irty days,
the Board shall forthwith give written notice Of th a t fact to the ap ­
plicant. Within three days after giving such notice to the applicant,
the Board shall notify in writing the applicant and the disapproving
authority of the date for commencement of a hearing by it on such
application. Any such hearing shall be commenced not less than ten
nor more than th irty days after the Board has given written notice
to the applicant of the action of the disapproving authority. The
length of any such hearing shall be determined by the Board, but it
shall afford all interested parties a reasonable opportunity to testify



R E G U L A T IO N Y

13

at such hearing. At the conclusion thereof, the Board shall by order
grant or deny the application on the basis of the record made at such
hearing.
(c) In determining whether or not to approve any acquisition or
merger or consolidation under this section, the Board shall take into
consideration the following factors: ( 1 ) the financial history and con­
dition of the company or companies and the banks concerned; (2 )
their prospects; (3) the character of their management; (4) the con­
venience, needs, and welfare of the communities and the .area con­
cerned; and (5) whether or not the effect of such acquisition or merger
or consolidation would be to expand the size or extent of the bank
holding company system involved beyond limits consistent with ade­
quate and sound banking, the public interest, and the preservation of
competition in the field of banking.
(d ) Notwithstanding any other provision of this section, no appli­
cation shall be approved under this section which will permit any
bank holding company or any subsidiary thereof to acquire, directly
or indirectly, any voting shares of, interest in, or all or substantially
all of the assets of any additional bank located outside of the State
in which such bank holding company m aintains its principal office and
place of business or in which it conducts its principal operations un­
less the acquisition of such shares or assets of a State bank by an
out-of-State bank holding company is specifically authorized by the
statute laws of the State in which such bank is located, by language
to th a t effect and not merely by implication.
INTERESTS IN NONBANKING ORGANIZATIONS

Sec. 4. (a) Except as otherwise provided in this Act, no bank holding
company shall—
(1) after the date of enactment of this Act acquire direct or in­
direct ownership or control of any voting shares of any company
which is not a bank, or
(2) after two years from the date of enactment of this Act or
from the date as of which it becomes a bank holding company,
whichever is later, retain direct or indirect ownership or control of
any voting shares of any company which is not a bank or a bank
holding company or engage in any business other than th at of bank­
ing or of managing or controlling banks or of furnishing services to
or performing services for any bank of which it owns or controls 25
per centum or more of the voting shares.
The Board is authorized, upon application by a bank holding com­
pany, to extend the period referred to in paragraph ( 2 ) above from
time to time as to such bank holding company for not more than one



R E G U L A T IO N

14

Y

year at a time if. in its judgment, such an extension would not be
detrimental to the public interest, but no such extensions shall ex­
tend beyond a date five years after the date of enactment of this Act
or five years after the date as of which a company becomes a bank
holding company, whichever is later.
(6 )
After two years from the date of enactment of this Act, no
certificate evidencing shares of any bank holding company shall bear
any statem ent purporting to represent shares of any other company
except a bank or a bank holding company, nor shall the ownership,
sale, or transfer of shares of any bank hold in cr conmanv be conditional
in any manner whatsoever upon the ownership, sale, or tr.i.n^'Vr of
shares of any other company except a bank o- a lv,nk holding com­
pany.
(r) The prohibitions in this section shall not aop'V—
( 1 ) to shares owned or acquired by a b r n k '. o l - i i r ^ ‘,o m tv * n y in
any company engaged solely in bolding or operating p r o p e r t i e s
used wholly or substantially by any bank w i t h respect to w h ic h it
is a bank holding company in its operations o r acquired for such
future use or engaged solely in conducting a safe deposit b u s in e s s ,
or solely in the business of furnishing services to or performing
services for such holding company and banks with respect to which
it is a bank holding company, or in liquidating assets acquired from
such bank holding company and such banks;
(2 ) to shares acquired by a bank holding company which is a
bank, or by any banking subsidiary of a bank holding company,
in satisfaction of a debt previously contracted in good faith, but
such bank holding company or such subsidiaries shall dispose of
such shares within a period of two years from the date on which
they were acquired or from the date of enactment of this Act, which­
ever is later;
(3) to shares acquired by a bank holding company from any of
its subsidiaries which subsidiary has been requested t*' dispose of
such shares by any Federal or State authority having statutory
power to examine such subsidiary, but such bank holding company
shall dispose of such shares within a period of two years from the
date on which they were acquired or from the date of enactment
of this Act, whichever is later;
( 4 ) t o s h a r e s w h ic h a r e h e ld o r a c q u i r e d b y a b a n k h o l d in g c o m ­
p a n y w h i c h is a b a n k o r b y a n y b a n k i n g s u b s i d i a r y o f a b a n k h o l d ­
i n g c o m p a n y , in g o o d f a i t h i n a f i d u c i a r y c a p a c i t y , e x c e p t w h e r e
s u c h s h a r e s a r e h e ld f o r t h e b e n e f i t o f t h e s h a r e h o l d e r s o f s u c h b a n k
h o l d in g c o m p a n y o r a n y o f i t s s u b s i d i a r i e s , o r t o s h a r e s w h i c h a r e
o f t h e k i n d s a n d a m o u n t s e li g i b le f o r i n v e s t m e n t b y N a t i o n a l b a n k -




R E G U L A T IO N

Y

15

ing associations under the provisions of section 5136 of the Revised
Statutes, or to shares lawfully acquired and owned prior to the date
of enactment of this Act by a bank which is a bank holding com­
pany, or by any of its wholly owned subsidiaries;
(5) to shares of any company which are held or acquired by a
bank holding company which do not include more than 5 per
centum of the outstanding voting securities of such company, and
do not have a value greater than 5 per centum of the value of the
total assets of the bank holding company, or to the ownership by a
bank holding company of shares, securities, or obligations of an
investment company wiiich is not a bank holding company and
which is not engaged in any business other than investing in secur­
ities, which securities do not include more than 5 per centum of the
outstanuing voting securities of auv company and do not include
any single asset having a value greater than 5 per centum of the
value of the total assets of the bank holding company;
(6 ) to shares of any company all the activities of which are of
a financial, fiduciary, or insurance nature and which the Board after
due notice and hearing, and on the basis of the record made at such
hearing, by order has determined to be so closely related to the busi­
ness of banking or of managing or controlling banks as to be a
proper incident thereto and as to make it unnecessary for the pro­
hibitions of this section to apply in order to carry out the purposes
of this Act;
(7) to any bank holding company which is a labor, agricultural,
or horticultural organization and which is exempt from taxation
under section 501 of the Internal Revenue Code of 1954; or
(8 ) to shares held or acquired by a bank holding company in any
company which is organized under the laws of a foreign country
and which is engaged principally in the banking business outside
the United States.
ADMINISTRATION

Sec. 5. (a) W ithin one hundred and eighty days after the date of
enactment of this Act, or within one hundred and eighty days after
becoming a bank holding company, whichever is later, each bank
holding company shall register with the Board on forms prescribed
by the Board, which shall include such information with respect to
the financial condition and operations, management, and intercom­
pany relationships of the bank holding company and its subsidiaries,
and related m atters, as the Board m ay deem necessary or appropriate
to carry out the purposes of this Act. The Board may, in its dis­
cretion, extend the time within which a bank holding company shall
register and file the requisite information.



R E G U L A T IO N

16

Y

( 6 ) The Board is authorized to issue such regulations and orders as
may be necessary to enable it to administer and carry out the purposes
of this Act and prevent evasions thereof.
(c) The Board from time to tim e may require reports under oath
to keep it informed as to whether the provisions of this Act and such
regulations and orders issued thereunder have been complied with;
and the Board may make examinations of each bank holding com­
pany and each subsidiary thereof, the cost of which shall be assessed
against, and paid by, such holding company. The Board shall, as far
as possible, use the reports of examinations made by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, or the
appropriate State bank supervisory authority for the purposes of this
section.
(d) Before the expiration of two years following the date of enact­
ment of this Act, and each year thereafter in the B oard’s annual re­
port to the Congress, the Board shall report to the Congress the results
of the adm inistration of this Act, stating what, if any, substantial
difficulties have been encountered in carrying out the purposes of this
Act, and any recommendations as to changes in the law which in the
opinion of the Board would be desirable.
BORROWING BY BANK HOLDING COMPANY OR ITS SUBSIDIARIES

Sec. 6 . (a) From and after the date of enactment of this Act, it
shall be unlawful for a bank—
( 1 ) to invest any of its funds in the capital stock, bonds, deben­
tures, or other obligations of a bank holding company of which it is
a subsidiary, or of any other subsidiary of such bank holding com­
pany;
(2 ) to accept the capital stock, bonds, debentures, or other obliga­
tions of a bank holding company of which it is a subsidiary or any
other subsidiary of such bank holding company, as collateral secur­
ity for advances made to any person or company: Provided, how­
ever, T h at any bank may accept such capital stock, bonds, deben­
tures, or other obligations as security for debts previously con­
tracted, but such collateral shall not be held for a period of over
two- y ea rs;
(3) to purchase securities, other assets or obligations under re­
purchase agreement from a bank holding company of which it is
a subsidiary or any other subsidiary of such bank holding com pany;
and
(4) to make any loan, discount or extension of credit to a bank
holding company of which it is a subsidiary or to any other sub­
sidiary of such bank holding company.



R E G U L A T IO N

Y

17

Non-interest-bearing deposits to the credit of a bank shall not be
deemed to be a loan or advance to the bank of deposit, nor shall the
giving of immediate credit to a bank upon uncollected items received
in the ordinary course of business be deemed to be a loan or advance
to the depositing bank.
(6 )
The provisions of this section shall not apply (1) to the capital
stock, bonds, debentures, or other obligations of any company de­
scribed in section 4 (c) (1) of this Act, or (2) to any company whose
subsidiary status has arisen out of a bona fide debt to the bank con­
tracted prior to the date of the creation of such status, or (3) to any
company whose subsidiary status exists by reason of the ownership or
control of voting shares thereof by the bank as executor, administra­
tor, trustee, receiver, agent, or depositary, or in any other fiduciary
capacity, except where such shares are held for the benefit of all or
a m ajority of the stockholders of such bank.
RESERVATION OF RIGHTS TO STATES

Sec. 7. The enactment by the Congress of the Bank Holding Com­
pany Act of 1956 shall not be construed as preventing any State from
exercising such powers and jurisdiction which it now has or may here­
after have with respect to banks, bank holding companies, and subsidi­
aries thereof.
PENALTIES

Sec. 8 . Any company which willfully violates any provision of this
Act, or any regulation or order issued by the Board pursuant thereto,
shall upon conviction be fined not more than $ 1 , 0 0 0 for each day dur­
ing which the violation continues. Any individual who willfully par­
ticipates in a violation of any provision of this Act shall upon convic­
tion be fined not more than $ 1 0 , 0 0 0 or imprisoned not more than one
year, or both. Every officer, director, agent, and employee of a bank
holding company shall be subject to the same penalties for false
entries in any book, report, or statem ent of, such bank holding com­
pany as are applicable to officers, directors, agents, and employees
of member banks for false entries in any books, reports, or statements
of member banks under section 1005 of title 18, United States Code.
JUDICIAL REVIEW

Sec. 9. Any party aggrieved by an order of the Board under this
Act may obtain a review of such order in the United States Court of
Appeals within any circuit wherein such party has its principal place
of business, or in the Court of Appeals in the D istrict of Columbia, by
filing in the court, within sixty days after the entry of the B oard’s
order, a petition praying th a t the order of the Board be set aside. A



R E G U L A T IO N

18

Y

copy of such petition shall be forthwith served upon the Board, and
thereupon the Board shall certify and file in the court a transcript of
the record made before the Board. Upon the filing of the transcript
the court shall have jurisdiction to affirm, set aside, or modify the
order of the Board and to require the Board to take such action with
regard to the m atter under review as the court deems proper. The
findings of the Board as to the facts, if supported by substantial evi­
dence, shall be conclusive.
AMENDMENTS TO INTERNAL REVENUE CODE OF 19M
S ec. 10. (a ) Subchapter O of chapter 1 of the Internal Revenue
Code of 1954 is amended by adding at the end thereof the following
new part:

“ PART V III—DISTRIBU TIO N S PURSUANT TO BANK
HOLDING COMPANY ACT OF 1956
“Sec. 1101. Distributions pursuant to Bank Holding Company Act of
1956.
“Sec. 1102. Special rules.
“Sec. 1103. Definitions.
“ S E C . 1 1 0 1 . D I S T R IB U T I O N S P U R S U A N T T O B A N K H O L D IN G CO M PA N Y
ACT OF 1956.

“ (a)

D is t r ib u t io n s
“ (1 )

of

C e r t a in

N o n -B a n k in g

D is t r ib u t io n s o f p r o h ib it e d

pro perty

P r o p e r t y .—
.— I f —

“ (A) a qualified bank holding corporation distributes pro­
hibited property (other than stock received in an exchange to
which subsection (c) (2 ) applies)—
“ (i) to a shareholder (with respect to its stock held by
such shareholder), without the surrender by such share­
holder of stock in such corporation; or
“ (ii) to a shareholder, in exchange for its preferred
stock; or
“ (iii) to a security holder, in exchange for its secu­
rities; and
“ (B) the Board has, before the distribution, certified that
the distribution of such prohibited property is necessary
or appropriate to effectuate section 4 of the Bank Holding
Company Act of 1956,
then no gain to the shareholder or security holder from the receipt
of such property shall be recognized.
“ (2 )

D is trib u tio n s

e x ch a n g e to

w h ic h

ok s to c k
s u b s e c tio n

and
(c )

s e c u ritie s

re c e iv e d

in

an

( 2 ) a p p lie s .— I f —

“ (A) a qualified bank holding corporation distributes—
“ (i) common stock received in an exchange to which
subsection (c) ( 2 ) applies to a shareholder (with respect



R E G U L A T IO N Y

19

to its stork held by such shareholder), without the
surrender by such shareholder of stock in such corpora­
tion; or
“ (ii) common stock received in an exchange to which
subsection (c > (2 ) applies to a shareholder, in exchange
for its common stock; or
“ (iii) preferred stock or common stock received in an
exchange to which subsection (c) (2 ) applies to a share­
holder. in exchange for its preferred stock; or
“ (iv) securities or preferred or common stock received
in an exchange to which subsection (c) (2 ) applies to a
security holder, in exchange for its securities; and
“ (B) any preferred stock received has substantially the
same terms as the preferred stock exchanged, and any securi­
ties received have substantially the same terms as the securi­
ties exchanged,
then, except as provided in subsection (f), no gain to the share­
holder or security holder from the receipt of such stock or such
securities or such stock a n d securities shall be recognized.
“ (3 1 Non pro r a ta d istrib u tio n * .- Paragraphs ( 1 > and <2i
shall apply to a distribu tion whether or not the distribution is
oro rata with respect to all of the >i areholders of the distributing
qualified bank holding corporation.
1 E x c f . p t i o n . — This subsection shall not apply to any dis­
tribution by i corporation which lias made any distribution pur­
suant to subsection To).
“ (5 1 D istributions involving gift o r c o m p e n s a t i o n . —
“ In th e ra*p o f a d istr ib u tio n t o w h ich p a ra g ra p h ( 1 ) or ( 2 )
a p p lie s , b ut w h ich
“ (A > re su lts in a p f t , s e e s e c tio n 2 5 0 1 . an d f o llo w in g , or
“ ( B ) h a s th e e f fe c t o f t h e p a y m e n t o f c o m p e n s a tio n , se e
se c tio n 6 1 ( a ) ( 1 ) .

“ (b) Corporation C easing T o B e a B ank H olding C ompany.—
“ (1) D istributions of property which cause a corporation
TO BE A BANK HOLDING COM PANY.— I f —

“ (A) a qualified bank holding corporation distributes
property (other than stock received in an exchange to which
subsection (c) (3) applies)—
“ (i) to a shareholder (with respect to its stock held
by such shareholder), without the surrender by such
shareholder of stock in such corporation; or
“ (ii) to a shareholder, in exchange for its preferred



20

R E G U L A T IO N

Y

stock; or
“ (iii) to a security holder, in exchange for its securi­
ties; and
“ (B) the Board has, before the distribution, certified that—
“ (i) such property is all or part of the property by
reason of which such corporation controls (within the
meaning of section 2 (a) of the Bank Holding Company
Act of 1956) a bank or bank holding company, or such
property is part of the property by reason of which such
corporation did control a bank or a bank holding com-,
pany before any property of the same kind was distrib­
uted under this subsection or exchanged under subsection
(c) (3 ); and
“ (ii) the distribution is necessary or appropriate to
effectuate the policies of such Act,
then no gain to the shareholder or security holder from the receipt
of such property shall be recognized.
“ (2) D istributions of stock and securities received in an
EXCHANGE TO WHICH SUBSECTION (c) (3) APPLIES.—If—
“ (A) a qualified bank holding corporation distributes—
“ (i) common stock received in an exchange to which
subsection (c) (3) applies to a shareholder (with respect
to its stock held by such shareholder), without the sur­
render by such shareholder of stock in such corporation;
or
“ (ii) common stock received in an exchange to which
subsection (c) (3) applies to a shareholder, in exchange
for its common stock; or
“ (iii) preferred stock or common stock received in
an exchange to which subsection (c) (3) applies to a
shareholder, in exchange for its preferred stock; or
“ (iv) securities or preferred or common stock received
in an exchange to which subsection (c) (3) applies to a
security holder, in exchange for its securities; and
“ (B) any preferred stock received has substantially the
same term s as the preferred stock exchanged, and any se­
curities received have substantially the same terms as the
securities exchanged,
then, except as provided in subsection (f), no gain to the share­
holder or security holder from the receipt of such stock or such
securities or such stock and securities shall be recognized.
“ (3) N on pro rata distributions.—Paragraphs (1) and (2)
shall apply to a distribution whether or not the distribution is
pro ra ta with respect to all of the shareholders of the distributing



R E G U L A T IO N Y

21

qualified bank holding corporation.
“ (4) E xception.— This subsection shall not apply to any dis­
tribution by a corporation which has made any distribution pur­
suant to subsection (a).
“ (5), D istributions involving gift or compensation.—
“ In th e c a se o f a d is tr ib u tio n t o w h ic h p a ra g ra p h ( 1 ) o r ( 2 )
a p p lie s , biM w h ich
“ ( A ) r e s u lts in a g if t , s e e s e c tio n 2 5 0 1 , a n d f o llo w in g , or
“ ( B ) h a s th e e ffe c t o f th e p a y m e n t o f c o m p e n sa tio n , see
s e c tio n 6 1 ( a ) ( 1 ) .

“ <c) P roperty Acquired A fter M ay 15, 1955.—
“ (1) I n general.—Except as provided in paragraphs (2) and
(3), subsection (a) or (b) shall not apply to—
“ (A) any property acquired by the distributing corpora­
tion after M ay 15, 1955, unless (i) gain to such corporation
with respect to the receipt of such property was not recog­
nized by reason of subsection (a) or (b), or (ii) such prop­
erty was received by it in exchange for all of its stock in
an exchange to which paragraph (2) or (3) applies, or (iii)
such property was acquired by the distributing corporation
in a transaction in which gain was not recognized under
section 305 (a) or section 332, or under section 354 with
respect to a reorganization described in section 368 (a) (1)
(E) or (F ), or
“ (B) any property which was acquired by the distributing
corporation in a distribution with respect to stock acquired
by such corporation after M ay 15, 1955, unless such stock was
acquired by such corporation (i) in a distribution (with
respect to stock held by it on M ay 15, 1955, or with respect
to stock in respect of which all previous applications of this
clause are satisfied) with respect to which gain to it was not
recognized by reason of subsection (a) or (b), or (ii) in
exchange for all of its stock in an exchange to which para­
graph (2) or (3) applies, or (iii) in a transaction in which
gain was not recognized under section 305 (a) or section 332,
or under section 354 with respect to a reorganization described
in section 368 (a) (1) (E) or (F ), or
“ (C) any property acquired by the distributing corpora­
tion in a transaction in which gain was not recognized under
section 332, unless such property was acquired from a corpo­
ration which, if it had been a qualified bank holding corpora­
tion, could have distributed such property under subsection
(a) ( 1 ) or (b) ( 1 ).




R E G U L A T IO N Y

“ (2) E xchanges involving prohibited property.—If—
“ (A) Any qualified bank holding corporation exchanges
(i) property, which, under subsection (a) ( 1 ), such corpo­
ration could distribute directly to its shareholders or se­
curity holders without the recognition of gain to such share­
holders or security holders, and other property (except prop­
erty described in subsection (b) (1) (B) (i)), for (ii) all of
the stock of a second corporation created and availed of solely
for the purpose of receiving such property;
“ (B) immediately after the exchange, the qualified bank
holding corporation distributes all of such stock in a manner
prescribed in subsection (a) (2) (A ); and
“ (C) before such exchange, the Board has certified (with
respect to the property exchanged which consists of property
which, under subsection (a) ( 1 ), such corporation could dis­
tribute directly to its shareholders or security holders with­
out the recognition of gain) th a t the exchange and distribu­
tion are necessary or appropriate to effectuate section 4 of the
Bank Holding Company Act of 1956,
then paragraph ( 1 ) shall not apply with respect to such distribu­
tion.
“ (3) E xchanges involving interests in banks.—I f—
“ (A) any qualified bank holding corporation exchanges (il
property which, under subsection lb) ( 1 ), such corporation
could distribute directly to its shareholders or security holders
without the recognition of gain to such shareholders or secur­
ity holders, and other property (except prohibited property!,
for (iii all of the stock of a second corporation created and
availed of solely for the purpose of receiving such property ;
“ (B) immediately after the exchange, the qualified bank
holding corporation distributes all of such stock in a manner
prescribed in subsection (b) (2) (A ); and
“ (C) before such exchange, the Board has certified (with
respect to the property exchanged which consists of property
which, under subsection (b) ( 1 ), such corporation could
distribute directly to its shareholders or security holders
without the recognition of gain) th a t—
“ (i) such property is all or part of the property by
reason of which such corporation controls (within the
meaning of. section 2 la) of the Bank Holding Com­
pany Act of 1956) a bank or bank holding company,
or such property is part of the property by reason of
which such corporation did control a bank or a bank




R E G U L A T IO N Y

23

holding company before any property of the same kind
was distributed under subsection (b) ( 1 ) or exchanged
under this paragraph; and
“ (ii) the exchange and distribution are necessary or
appropriate to effectuate the policies of such Act,
then paragraph ( 1 ) shall not apply with respect to such distri­
bution.
(d) D istributions T o Avoid F ederal I ncome T a x . —
“ (1) P rohibited property.—Subsection (a) shall not apply
to a distribution if, in connection with such distribution, the dis­
tributing corporation retains, or transfers after M ay 15. 1955,
to any corporation, property (other than prohibited property)
as part of a plan one of the principal purposes of which is the
distribution of the earnings and profits of any corporation.
“ (2) B anking property.—Subsection (b) shall not apply to
a distribution if, in connection with such distribution, the dis­
tributing corporation retains, or transfers after M ay 15, 1955,
to any corporation, property (other than property described in
subsection (b) (1) (B) (i)) as part of a plan one of the principal
purposes of which is the distribution of the earnings and profits
of any corporation.
“ (3) C ertain contributions to capital.—In the case of a dis­
tribution a portion of which is attributable to a transfer which
is a contribution to the capital of a corporation, made after M ay
15, 1955, and prior to the date of the enactment of this part, if
subsection (a) or (b) would apply to such distribution but for
the fact th at, under paragraph ( 1 ) or (2 ) (as the case may be)
of this subsection, such contribution to capital is part of a plan
one of the principal purposes of which is to distribute the earnings
and profits of any corporation, then, notwithstanding paragraph
( 1 ) or (2 ), subsection (a) or (b) (as the case may be) shall apply
to th at portion of such distribution not attributable to such con­
tribution to capital, and shall not apply to th a t portion of such
distribution attributable to such contribution to capital.
(e) F inal C ertification.—
“ (1) F or subsection (a ).—Subsection (a) shall not apply
with respect to any distribution by a corporation unless the Board
certifies th at, before the expiration of the period permitted under
section 4 (a) of the Bank Holding Company Act of 1956 (includ­
ing any extensions thereof granted to such corporation under
such section 4 (a )), the corporation has disposed of all the
property the disposition of which is necessary or appropriate to
effectuate section 4 of such Act (or would have been so necessary




24

R E G U L A T IO N Y

or appropriate if the corporation had continued to be a bank hold­
ing company).
“ (2) F or subsection (b).—
“ (A) Subsection (b) shall not apply with respect to any
distribution by any corporation unless the Board certifies
that, before the expiration of the period specified in subpara­
graph (B ), the corporation has ceased to be a bank holding
company.
“ (B) The period referred to in subparagraph (A) is the
period which expires 2 years after the date of the enactment
of this p art or 2 years after the date on which the corporation
becomes a bank holding company, whichever date is later.
The Board is authorized, on application by any corporation,
to extend such period from time to tim e with respect to
such corporation for not more than one year at a tim e if, in
its judgment, such an extension would not be detrimental
to the public interest; except th a t such period may not in
any case be extended beyond the date 5 years after the date
of the enactment of this part or 5 years after the date on
which the corporation becomes a bank holding • company,
whichever date is later.
“ (f) C ertain E xchanges of Securities .—In the case of an ex­
change described in subsection (a) (2) (A) (iv) or subsection (b)
(2) (A) (iv), subsection (a) or subsection (b) (as the case may be)
shall apply only to the extent th at the principal amount of the securi­
ties received does not exceed the principal amount of the securities
exchanged.
“ S E C . 1 1 0 2 . S P E C IA L R U L E S .

“ (a) B asis of P roperty A cquired in D istributions.—If, by reason
of section 1 1 0 1 , gain is not recognized with respect to the receipt of any
property, then, under regulations prescribed by the Secretary or his
delegate—
“ ( 1 ) if the property is received by a shareholder with respect
to stock, without the surrender by such shareholder of stock, the
basis of the property received and of the stock with respect to
which it is distributed shall, in the distributee’s hands, be deter­
mined by allocating between such property and such stock the
adjusted basis of such stock; or
“ (2 ) if the property is received by a shareholder in exchange
for stock or by a security holder in exchange for securities, the
basis of the property received shall, in the distributee’s hands, be
the same as the adjusted basis of the stock or securities exchanged,
increased by—
“ (A) the amount of the property received which was



R E G U L A T IO N Y

25

treated as a dividend, and
“ (B) the amount of gain to the taxpayer recognized on
the property received (not including any portion of such gain
which was treated as a dividend).
“ (b) P eriods of L imitation.—The periods of limitation provided
in section 6501 (relating to limitations on assessment and collection)
shall not expire, with respect to any deficiency (including interest and
additions to the tax) resulting solely from the receipt of property
by shareholders in a distribution which is certified by the Board
under subsection (a), (b), or (c) of section 1 1 0 1 , until five years after
the distributing corporation notifies the Secretary or his delegate
(in such manner and with such accompanying information as the
Secretary or his delegate may by regulations prescribe) th at the
period (including extensions thereof) prescribed in section 4 (a) of
the Bank Holding Company Act of 1956, or section 1101 (e) (2) (B ),
whichever is applicable, has expired; and such assessment may be
made notwithstanding any provision of law or rule of law which
would otherwise prevent such assessment.
“ (c) A llocation of E arnings and P rofits.—
“ (1) D istribution of stock in a controlled corporation.—
In the case of a distribution by a qualified bank holding corpora­
tion under section 1 1 0 1 (a) ( 1 ) or (b) ( 1 ) of stock in a controlled
corporation, proper allocation with respect to the earnings and
profits of the distributing corporation and the controlled corpora­
tion shall be made under regulations prescribed by the Secretary
or his delegate.
“ (2) E xchanges described in section 1101 (c) (2) or (3).—In
the case of any exchange described in section 1101 (c) (2) or (3),
proper allocation with respect to the earnings and profits of the
corporation transferring the property and the corporation receiv­
ing such property shall be made under regulations prescribed by
the Secretary or his delegate.
“ (3) D efinition of controlled corporation.—For purposes
of paragraph ( 1 ), the term ‘controlled corporation’ means a
corporation with respect to which at least 80 percent of the
total combined voting power of all classes of stock entitled to
vote and at least 80 percent of the total number of shares of all
other classes of stock is owned by the distributing qualified bank
holding corporation.
“ (d) I temization of P roperty.—In any certification under this
part, the Board shall make such specification and itemization of prop­
erty as may be necessary to carry out the provisions of this part.




26

R E G U L A T IO N

Y

“ S E C . 1 1 0 3 . D E F IN IT IO N S .

“ (a) B ank H olding C ompany.—F or purposes of this part, the
term ‘bank holding company’ has the meaning assigned to such term
by section 2 of the Bank Holding Company Act of 1956.
“ (b) Qualified B ank H olding C orporation.—
“ (1) In G eneral.—Except as provided in paragraph (2), for
purposes of this part the term ‘qualified bank holding corpora­
tion’ means any corporation (as defined in section 7701 (a) (3))
which is a bank holding company and which holds prohibited
property acquired by it—
“ (A) on or before M ay 15, 1955,
“ (B) in a distribution in which gain to such corporation
with respect to the receipt of such property was not recog­
nized by reason of subsection (a) or (b) of section 1 1 0 1 , or
“ (C) in exchange for all of its stock in an exchange de­
scribed in section 1101 (c) (2) or (c) (3).
“ (2) L imitations.—
“ (A) A bank holding company shall not be a qualified
bank holding corporation, unless it would have been a bank
holding company on M ay 15, 1955, if the Bank Holding Com­
pany Act of 1956 had been in effect on such date, or unless
it is a bank holding company determined solely by reference
to—
“ (i) property acquired by it on or before M ay 15.
1955,
“ (ii) property acquired by it in a distribution in
which gain to such corporation with respect to the re­
ceipt of such property was not recognized by reason of
subsection (a) or (b) of section 1 1 0 1 , and
“ (iii) property acquired by it in exchange for all of
its stock in an exchange described in section 1 1 0 1 (c)
(2) or (3).
“ (B) A bank holding company shall not be a qualified
bank holding .corporation by reason of property described
in subparagraph (B) of paragraph (1) or clause (ii) of
subparagraph (A) of this paragraph, unless such property
was acquired in a distribution with respect to stock, which
stock was acquired by such bank holding company—
“ (i) on or before M ay 15. 1955.
“ (ii) in a distribution (with respect to stock held by
it on May 15. 1955. or with respect to stock in respect
of which all previous applications of this clause are
satisfied! with respect to which gain to it was not




R E G U L A T IO N

Y

27

recognized by reason of subsection (a) or (b) of section
1 1 0 1 , or
“ (iii) in exchange for all of its stock in an exchange
described in section 1101 (c) (2) or (3).
“ (C) A corporation shall be treated as a qualified bank
holding corporation only if the Board certifies th at it satisfies
the foregoing requirements of this subsection.
“ (c) P rohibited P roperty.—For purposes of this part, the term
‘prohibited property’ means, in the case of any bank holding com­
pany, property (other than nonexempt property) the disposition of
which would be necessary or appropriate to effectuate section 4 of
the Bank Holding Company Act of 1956 if such company continued
to be a bank holding company beyond the period (including any exten­
sions thereof) specified in subsection (a) of such section or in section
1101 (e) (2) (B) of this part, as the case may be. The term ‘pro­
hibited property’ does not include shares of any company held by a
bank holding company to the extent th at the prohibitions of section 4
of the Bank Holding Company Act of 1956 do not apply to the owner­
ship by such bank holding company of such property by reason of
subsection (c) (5 1 of such section.
" id I N onexempt P roperty.—For purposes of this part, the term
•nonexempt property’ means—
“ ( 1 ) obligations (including notes, drafts, bills of exchange,
and bankers’ acceptances) having a m aturity at the time of
issuance of not exceeding 24 months, exclusive of days of grace;
“ (2 ) securities issued by or guaranteed as to principal or in­
terest by a government or subdivision thereof or by any instru­
m entality of a government or subdivision; or
" ( 3 1 money, and the right to receive money not evidenced by
a security or obligation (other than a security or obligation de­
scribed in paragraph ( 1 ) or (2 )).
“ (e) Board.—For purposes of this part, the term ‘Board’ means
the Board of Governors of the Federal Reserve System.”
(b) The table of parts for subchapter 0 of chapter 1 of the Internal
Revenue Code of 1954 is amended by adding a t the end thereof the
following:
“P art V III. Distributions pursuant to Bank Holding Company
Act of 1956 ”
(c) The amendments made by this section shall apply with respect
to taxable years ending after the date of the enactment of this Act.
S a v in g P r o v isio n

S e c . 11. Nothing herein contained shall be interpreted or construed

as approving any act. action, or conduct which is or has been or may



28

R E G U L A T IO N Y

be in violation of existing law, nor shall anything herein contained
constitute a defense to any action, suit, or proceeding pending or here­
after instituted on account of any prohibited antitrust or monopolistic
act, action, or conduct.
Separability

of

P rovisions

Sec. 12. If any provision of this Act, or the application of such
provision to any person or circumstance, shall be held invalid, the
remainder of the Act, and the application of such provision to persons
or circumstances other than those to which it is held invalid, shall
not be affected thereby.