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FED ERAL RE SER VE BANK
O F NEW YORK

f Circular N o. 4 8 9 4 1
I
M ay 26, 1960
J

New Law on Bank Mergers, Consolidations, Acquisitions o f Assets,
and Assumptions of Deposit Liabilities

To A ll Banks in the Second Federal R eserve D istrict:

On May 13, 1960, the President o f the United States signed into law an act (Public Law
No. 86-463) amending section 18(c) of the Federal Deposit Insurance Act. That section, as
amended, prohibits the merger, consolidation, or acquisition o f assets and assumption of
deposit liabilities, of federally insured banks without the prior written consent of the appropri­
ate Federal bank supervisory agency. I f the acquiring, assuming, or resulting bank is to be a
national bank or a District o f Columbia bank, approval must be obtained from the Comptroller
of the Currency; if the acquiring, assuming, or resulting bank is to be a State member bank,
approval must be obtained from the Board o f Governors of the Federal Reserve System ; and
if the acquiring, assuming, or resulting bank is to be an insured nonmember State bank, ap­
proval must be obtained from the Federal Deposit Insurance Corporation.
The appropriate supervisory agency is required to consider the following factors regard­
ing each bank involved: (1) its financial history and condition, (2) the adequacy o f its capital
structure, (3) its future earnings prospects, (4) the general character of its management, (5)
the convenience and needs o f the community to be served, and (6) whether or not its corporate
powers are consistent with the purposes o f the Federal Deposit Insurance Act. The agency is
also required to consider the effect o f the transaction on competition, including any tendency
toward monopoly. In the interest o f uniform standards, the new law provides fo r reports, to
the appropriate supervisory agency from the Attorney General and the other two agencies,
on the competitive factors involved. The appropriate agency may not approve any transaction
unless, after considering all seven factors, it finds the transaction to be in the public interest.
The full text o f Public Law No. 86-463 is set forth on the reverse side of this circular.
Pending the form al adoption by the Board of Governors o f a definitive form o f appli­
cation, this Bank, upon request, will furnish a tentative form o f application to State member
banks for use in applying through this Bank for the written consent o f the Board o f Governors
under amended section 18(c) of the Federal Deposit Insurance Act.
Additional copies o f this circular will be furnished upon request.




A

lfred

H

ayes,

President.

(o v e r )

[P

u b l ic

L

aw

86-463— 8 6 t h C o n g r e s s ]
[S. 1062]

[M ay 13, 1960]

A N ACT
T o amend the Federal D eposit Insurance A c t to require Federal approval fo r
mergers and consolidations o f insured banks.

B e it enacted by the Senate and H ouse o f R epresentatives o f the United States o f Am erica
in Congress assembled, That subsection (e ) o f section 18 o f the Federal Deposit Insurance A ct is
amended b y striking out the third sentence and inserting in lieu thereof the follow in g : “ No
insured bank shall merge or consolidate with any other insured bank or, either directly or in ­
directly, acquire the assets of, or assume liability to pay any deposits made in, any other insured
bank without the p rior written consent (i) o f the Comptroller o f the Currency i f the acquiring,
assuming, or resulting bank is to be a national bank or a D istrict bank, or (ii) o f the Board o f
Governors o f the Federal Reserve System if the acquiring, assuming, or resulting bank is to be
a State member bank (except a D istrict ban k), or (iii) o f the Corporation if the acquiring, as­
suming, or resulting bank is to be a nonmember insured bank (except a D istrict b an k ). Notice o f
any proposed merger, consolidation, acquisition o f assets, or assumption o f liabilities, in a form
approved b y the Comptroller, the Board, or the Corporation, as the case m ay be, shall (except in
a case where the furnishing o f reports under the seventh sentence o f this subsection is not re­
quired) be published, at appropriate intervals during a period (p rior to the approval or dis­
approval o f the transaction) at least as long as the period allowed under such sentence fo r
furnishing such reports, in a newspaper o f general circulation in the com munity or communities
where the main offices o f the banks involved are located (or, if there is no such newspaper in any
such com munity, then in the newspaper o f general circulation published nearest thereto). In
granting or withholding consent under this subsection, the Comptroller, the Board, or the C orpo­
ration, as the case may be, shall consider the financial history and condition o f each o f the banks
involved, the adequacy o f its capital structure, its future earnings prospects, the general character
o f its management, the convenience and needs o f the com munity to be served, and whether or not
its corporate powers are consistent with the purposes o f this A ct. In the case o f a merger, consoli­
dation, acquisition o f assets, or assumption o f liabilities, the appropriate agency shall also take
into consideration the effect o f the transaction on com petition (in clu din g any tendency toward
m on op oly), and shall not approve the transaction unless, after considering all o f such factors, it
finds the transaction to be in the public interest. In the interests o f u niform standards, before
acting on a merger, consolidation, acquisition o f assets, or assumption o f liabilities under this
subsection, the agency (unless it finds that it must act immediately in order to prevent the prob­
able failure o f one o f the banks involved) shall request a report on the competitive factors in ­
volved from the A ttorney General and the other two banking agencies referred to in this sub­
section (which report shall be furnished within thirty calendar days o f the date on which it is
requested, or within ten calendar days o f such date if the requesting agency advises the A ttorney
General and the other two banking agencies that an em ergency exists requiring expeditious
a ction ). The Comptroller, the Board, and the Corporation shall each include in its annual report
to the Congress a description o f each merger, consolidation, acquisition o f assets, or assumption
o f liabilities approved by it during the period covered by the report, along with the follow ing
inform ation : the name and total resources o f each bank involved; whether a report has been
submitted by the A ttorney General hereunder, and, if so, a summary b y the A ttorney General o f
the substance o f such re p o r t; and a statement by the Comptroller, the Board, or the Corporation,
as the case may be, o f the basis fo r its approval. ’ ’

Approved May 13, 1960.