Full text of Federal Reserve Bank of New York Circulars : 6532. Interpretation of Regulation L

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FED E R AL R E S E R V E BANK
O F N E W YORK

C i r c u l a r N o . 6532
A p r i l 3C, 1 9 7 0

IN T E R P R E T A T IO N OF REGULATION L
In terlo ck in g R e la tio n s h ip B etw een Member Bank
and C red it C ard S ubsidiary of A nother Bank

To the Member B an ks o f the S econ d F e d era l R e s e r v e D is tr ic t:

Printed below is an excerpt from the Federal R egister of April 25, containing the text of
an interpretation of Regulation L of the Board of Governors of the Federal R eserve System
regarding the applicability of Section 8 of the Clayton Act and Regulation L to an interlock
between a member bank and a credit card subsidiary of another bank.
Additional copies of this circular will be furnished upon request.
Alfred Hayes,
President.

subsidiary cf a national bank and as a
director of another member bank in a
contiguous municipality was prohibited
Chapter II— Federal Reserve System bv section 8 of the Clayton Act (15 U.S.C.
19)..
SUBCHAPTER A— BOARD OF GOVERNORS OF
(b) Section 8 of the Act and § 212.1(a)
THE FEDERAL RESERVE SYSTEM
of the Board’s Regulation L issued pur­
[Reg. L]
suant thereto prohibit any “director, of­
PART 212— INTERLOCKING BANK RE­ ficer, or employee of any member bank
LATIONSHIPS UNDER THE CLAY­ * * * or any branch thereof” from serv­
ing “at the same time” as a “director,
TON ACT
officer, or employee of any other bank”,
Interlocking Relationship Between national
or State, subject to certain
Member Bank and Credit Card Sub­ exceptions.
sidiary of Another Bank
(c) The credit card subsidiary in­
1. Effective immediately the title of volved was an “operating subsidiary” of
this Part is amended to read as shown the national bank under a ruling of the
Comptroller of the Currency. Comptrol­
above.
ler’s Manual for National Banks If 7376.
2 . The following section is added:
The similar position of the Board as to
§ 212.101
Applicability o f section 8 o f
State member banks is published at
the Clayton Act to an interlock be­
§ 250.141 of this subchapter. The Comp­
tween a mem ber bank and a credit
troller’s
ruling states that, “Except as
card subsidiary o f another bank.
otherwise permitted by statute or reg­
(a)
The Board of Governors recently ulation, all provisions of Federal banking
considered the question whether simul­ laws applicable to the operations of the
taneous service by an individual as a parent bank shall be equally applicable
director of a wholly-owned credit card to the operations of its operating sub­

Title 12— BANKS AND BANKING




sidiaries.” The position of both the
Comptroller and Board sustaining the
legality of such subsidiaries is based on
the assumption that the only functions
performed by the subsidiary are func­
tions that could be lawfully performed by
the bank. So viewed, the method of
organization is irrelevant.
(d)
The Board was of the view that the
credit card subsidiary was essentially a
department or division of the bank, that
a contrary view would be inconsistent
with the purpose of section 8 of the Act,
and that none of the exceptions specified
in the Act o: Regulation L was applicable.
Accordingly, the Board concluded that
the interlocking service in question was
prohibited by section 8 of the Act and
Regulation L.
(Interprets and applies 15 U.S.C. 19)

By order of the Board of Governors,
March 12, 1970.
[ seal ]

K en n e th A. K e n y o n ,
D e p u ty S e c r e ta r y .

[F.R. Doc. 70-5023; Filed, Apr. 24, 1970;
8:45 a.m.]