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FED ER A L R ESER VE BANK O F NEW YORK r Circular No. 7 7 5 1 1 November 14, 1975 J L BANK HOLDING COMPANIES Automobile Leasing Activities by Bank Holding Companies To A ll Bank Holding Companies, and Others Concerned, in the Second Federal Reserve District: The Board of Governors of the Federal Reserve System has invited public comment on the question of w hether automobile leasing should continue to be a permissible activity for bank hold ing companies under its Regulation Y, “Bank H olding Companies,” and, if so, under w hat condi tions and limitations. P rinted below is the text of the Board of G overnors’ notice in this matter. Comments thereon should be submitted by December 22 and may be sent to our Domestic Banking Applications De partm ent. P aul A. V olcker, President. (Reg. Y) BANK HOLDING COMPANIES Notice of Proposed Rulemaking To Consider Whether Automobile Leasing Should Continue To Be a Permissible Activity for B ank Holding Companies In May, 1974, the Board issued an amendment to its Regulation Y, 12 C FR 225.4(a) ( 6 ) (a ), to permit bank holding companies to engage in certain leasing activities with respect to personal property where the lease was on a full payout basis and served as the functional equiva lent to an extension of credit. In June, 1974, the N a tional Automobile Dealers Association ( “ N A D A ” ) sought judicial review of this leasing regulation insofar as it permitted bank holding companies to engage in automobile leasing. N A D A objected, in particular, to the provision in the regulation allowing lessors to deduct 2 0 percent of the acquisition cost of the leased property as residual value that need not be recovered by rentals or tax benefits in computing a full payout lease (12 C FR 225.4(a) ( 6 ) (a ) (iv) (3) ) and the provision permitting a lessor to deduct up to 60 percent of the acquisition cost of the leased property when such amount was guaranteed by a financially qualified lessee, manufacturer or third party (12 C F R 225.4(a) ( 6 ) (a ) (iv) (4) ). In addition, N A D A argued that the activity of automobile leasing is not closely related to banking in that it is merchandising and dealing in used cars and does not serve as the “ functional equivalent of an extension of credit” as required by the Board’s regulation (12 CFR 225.4(a) ( 6 ) (a) ( i ) ) . After briefing and oral argument of the case before the U.S. Court of Appeals for the D.C. Circuit, the Board sought and the Court granted a remand of the matter so that the Board might consider these issues raised by NAD A and such other issues as are relevant to bank holding companies engaging in automobile leas ing. Accordingly, the Board proposes to determine whether automobile leasing ought to continue to be in cluded within the scope of the Board’s personal property leasing regulation (12 C FR 2 2 5 . 4 ( a ) ( 6 ) ( a ) ) and, if it should be, under what conditions and limitations. Interested persons are invited to submit relevant data, views, or arguments on this matter. Upon request, inter ested parties will be afforded an opportunity for an oral presentation of their views. Any such material and re quests should be submitted in writing to the Secretary, Board of Governors of the Federal Reserve System, Washington, D. C. 20551, to be received not later than December 22, 1975. Such material will be made available for inspection and copying upon request, except as pro vided in § 261.6(a) of the Board’s Rules Regarding Availability of Information.
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