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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.]