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FED ER A L RESER VE BANK O F NEW YORK Circular No. 7 3 7 A pril 8, 1974 4"] J APPROVAL OF CERTAIN BANK HOLDING COMPANY AND MERGER APPLICATIONS Amendments to Rules Regarding Delegation of Authority T o A ll M em ber Banks, and O thers Concerned, in the Second Federal R eserv e D istrict: The following statement was issued April 4 by the Board of Governors of the Federal Reserve System: The Board of Governors of the Federal Reserve System today revised its rules under which Federal Reserve Banks can approve, on behalf of the Board, certain bank holding company formations, bank acqui sitions and bank mergers. The revised rules also gave the Reserve Banks authority which they had not had before, to approve the merger or consolidation of bank holding companies, on the basis of criteria similar to those for bank acquisitions by holding companies. The Board’s Rules Regarding Delegation of Authority previously authorized Reserve Banks to approve— on the basis of criteria set forth by the Board— the formation o f one-bank holding companies, bank acqui sitions by existing bank holding companies, and bank mergers. These rules, and criteria, were stated in an order of the Board published April 25, 1973. The revisions announced today modify two of the criteria in use since that time. Reserve Banks may now approve bank acquisitions by bank holding companies where revenues of the applicant from non-bank activities are as much as 20 per cent o f its total operating income, instead of 10 per cent as previously. Secondly, Reserve Banks may now approve the financing of bank holding company formations and mergers, and bank acquisitions by bank holding companies involving debt, with respect to all the holding company’s acquisitions, amounting to as much as 20 per cent of the equity capital accounts of the holding company, instead of 10 per cent as previously. A new criterion respecting bank holding company formations and mergers, bank acquisitions and mergers of banks, prohibits action under delegated authority on applications involving a covenant not to compete. In submitting the amendments to its Rules Regarding Delegation of Authority for publica tion in the Federal Register, the Board of Governors made the following additional statement: The Reserve Banks presently have delegated authority to approve one-bank holding company formations, bank holding company formations involving more than one bank, bank acquisitions by existing bank holding companies, and bank mergers under certain standards.* The Board has decided to expand this authority by modifying certain of the standards within which this authority may be exercised and by delegating to the Reserve Banks authority to approve certain mergers and consolidations of bank holding companies. In expanding such authority, the Board has also added a section concerning so-called covenants not to com pete. Applications falling outside the standards set forth herein will be forwarded to the Board for further consideration. * B y O rd er o f O cto b e r 12, 1973, the B oa rd ann ou n ced an am endm ent to its rules reg a rd in g the au th ority o f R e se rv e Banks to a p p rove certain app lication s bv bank h oldin g com panies to a cqu ire add ition al banks. T h a t am endm ent elim inated fro m the crite ria that R eserve B anks con sid er in processin g such app lication s the requ irem en t that an equal o ffe r be m ade to all shareholders o f the hank to be acquired. Enclosed is a copy of amendments to the Board of Governors’ Rules Regarding Delegation of Authority, giving effect to the delegation referred to in the above statements. Additional copies of the enclosure will be furnished upon request. A lfred H a y e s , President.
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