Full text of Federal Reserve Bank of New York Circulars : 7030. Revised Procedure for Handling Applications to Form One-Bank Holding Companies

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FEDERAL RESERVE BANK
OF NEW YORK
r C ircular No. 7 0 3 0"1
u

N ovember 1, 1972

J

Revised Procedure for Handling
Applications to Form One-Bank Holding Companies
To A ll Bank Holding Companies, and Others Concerned,
in the Second Federal Reserve D istrict:

T he follow ing statem en t w as m ade public y esterd ay by the B oard of G overnors of the Federal
R eserve S ystem :
The Board of Governors of the Federal Reserve System today announced a revised procedure designed
to expedite the handling of applications to form one-bank holding companies.
The Board issued revised guidelines for the use of the Federal Reserve Banks under delegated author­
ity in processing applications to form holding companies controlling one bank. Applications which meet the
standards set forth in the guidelines may be approved by the Reserve Banks.
Applications that do not meet the guideline standards must be forwarded to the Board for action. The
Board retains exclusive authority to deny applications of this type.
Effective September 1, 1971, the Board delegated to the Reserve Banks certain authority to approve
formations of one-bank holding companies and issued guidelines for the Reserve Banks to follow in process­
ing applications of this type. The revised guidelines now issued take the place of the previous guidelines. The
Board held an oral presentation in this matter on June 28, 1971.
After considering all material submitted, the Board authorized the attached new guidelines for the use of
Reserve Banks in approving the formation of one-bank holding companies.

In subm ittin g the am endm ent to its Rules R eg ard in g D elegation of A u th o rity fo r publica­
tion in the Federal Register, the B oard of G overnors issued the follow ing additional statem ent:
By order dated August 19, 1971, the Board delegated to the Reserve Banks authority to approve appli­
cations for the formation of one-bank holding companies, retaining exclusive authority to deny such ap­
plications. On August 20, 1971, by letter to the Reserve Banks, the Board established certain guidelines
for the use o f those Banks in exercising the authority delegated to them by the Board s Order of August 19,
1971.
Thereafter, the Board received comments from various persons to the effect that the guidelines were
being applied in a manner more restrictive than desirable and that the guidelines were having an undue
adverse effect upon the transferability of bank stock. In order to explore these questions, the Board, by
Order of May 26, 1972, ordered that an Oral Presentation before available members of the Board be
held on June 28, 1972. Upon consideration of material presented orally at that proceeding and through
written submissions, the Board has decided to revise the guidelines and to incorporate them into the Board s
Rules Regarding Delegation of Authority.
In adopting these guidelines, the Board emphasized that they are intended to expedite one-bank holding
company formations by establishing general standards as set forth therein that will be used by a Reserve Bank
under delegated authority to approve such applications. Applications not meeting such standards will be
forwarded to the Board for further consideration. The Board noted that the standards as adopted are to be
subject to continuing analysis and review. Amendments may be made if experience indicates that such
changes are necessary or appropriate.

Enclosed is a copy of the am endm ent to the B o ard ’s Rules R eg ard in g D elegation of
A uth ority. A dditional copies of this circu lar and its enclosure will be fu rn ish ed upon request.




A lfred H a y es,

President.

Board of Governors of the Federal Reserve System

RULES REGARDING DELEGATION OF AUTHORITY
AM ENDM ENT
Effective with respect to applications re­
ceived by the Reserve Banks after October 30,
1972, §265.2(f) (22) is amended to read as fol­
lows :
SECTION 265.2— SPECIFIC FU N CTIO N S
D ELEG ATED TO BOARD E M PLO Y EES
A N D FE D E R A L R E SE R V E BAN K S
*

*

*

(f)
Each Federal Reserve Rank is autho­
rized, as to member banks or other indicated
organizations headquartered in its district:
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*

(22) Under the provisions of section
3 ( a ) ( 1 ) of the Bank Holding Company Act
(12 U.S.C. 1842), to approve the acquisition
by a company of a controlling interest in the
voting shares of one bank,2 if all of the follow­
ing conditions are m et:
(i) No objection to the proposed acquisition
has been made by the bank’s supervisory au­
thority,
(ii) No significant policy issue is raised by
the proposal as to which the Board has not
expressed its views,
(iii) Neither the holding company nor any
of its subsidiaries or affiliates is engaged in
any activities other than those specifically per­
missible for bank holding companies by either
the Act or Part 225 of this chapter (Regula­
tion Y ) ,
(iv) Any offer to acquire shares of the bank
2 This delegation includes authority to approve (a ) a merger
transaction under the provisions o f section 1 8(c) of the Fed­
eral Deposit Insurance A ct (12 U .S.C . 1 8 2 8 (c)) and (b ) an
application, under section 9 o f the Federal Reserve A ct (12
U .S.C . 321), fo r membership in the Federal Reserve System
that are incidental to an application to become a one-bank
holding company.




will be extended to all shareholders of the same
class on a substantially equal basis,3
(v )
In the event any debt is incurred by
the holding company to purchase shares of the
bank: (a) that amount of the loan does not
exceed 75 per cent of the purchase price of the
shares of the proposed subsidiary bank; (b ) an
agreed plan for amortization of the debt within
a reasonable time exists, such period normally
not exceeding 12 years; (c ) the interest rate
on any loan to purchase the bank shares will
be comparable with other stock collateral loans
by the lender to persons of comparable credit
standing; (d ) no compensating balances, spe­
cifically attributable to the loan, will be depos­
ited in the lending institution and the amount
of any correspondent account which the pro­
posed subsidiary bank will maintain with the
lending institution should not exceed the
amount necessary to compensate the lending
bank for correspondent services rendered by
it to the proposed subsidiary bank; (e ) the
Reserve Bank determines that the managerial
and financial resources including the equity
capital accounts4 of the proposed subsidiary
bank are adequate, or will be adequate within
a reasonable period of time after the bank is
acquired, and any debt service requirements to
which the proposed holding company may be
subject are such as to enable it to maintain
the capital adequacy of the proposed subsidiary
bank in the foreseeable future.
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*

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3 Less than all of the outstanding shares of the bank may
be acquired provided that where a greater number o f shares
are tendered than are proposed to be purchased, the offeror
will purchase the shares tendered on a pro rata basis (except
for fractional interests) according to the number of shares
tendered by each shareholder. W here an offer is not identical
to all shareholders, the burden is on the applicant to demon­
strate the substantial equivalence o f the offers extended.
4 The term “ equity capital accounts” means capital stock,
surplus, undivided profits, and reserves for contingencies, and
other capital reserves.

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