Full text of Federal Reserve Bank of New York Circulars : 8651. Changes in Rules Regarding Delegation of Authority

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FEDERAL RESERVE BANK
O F N EW YORK

rCircular No. 8 6 5 1 T
L October 5, 1979 J

C H A N G E S IN R U L E S R E G A R D IN G D E L E G A T IO N O F A U T H O R I T Y

To All Member Banks, Bank Holding Companies,
and Others Concerned, in the Second Federal Reserve District:

T h e B o a rd o f G overn ors o f th e F ed eral R e se r v e S y ste m h a s am en d ed its R u les
R e g a r d in g D e le g a tio n o f A u th o r ity to ex p a n d the scope o f a u th o rity d eleg a ted to
F ed era l R eserv e B a n k s to ap p rove b ank h o ld in g com p an y and m erger ap p lication s
th at are u n d er th e ju risd ictio n o f the B o a rd o f G overn ors, and to a u th o rize the
R eserv e B a n k s to fu r n ish to the C om ptroller o f th e C u rren cy and th e F ed era l D e ­
p o sit In su ra n ce C orp oration co m p etitiv e fa c to r rep orts on m erg ers req u ired to be
approved by one o f th ose agen cies. T h e en closed cop y o f the B o a r d ’s official n o tice
o f the a m en d m en ts p rovid es th e d eta ils o f the n ew d eleg a tio n , in c lu d in g th e typ es
o f ap p lica tion s to w h ich it applies.
Q u estio n s reg a rd in g the am en d m en ts, e ffe c tiv e S ep tem b er 2 1 , 1979, m ay be
d irected to our D o m e stic B a n k in g A p p lica tio n s D ep a rtm en t (T e l. N o . 2 1 2 -7 9 1 -5 8 6 1 ).




T

homas

M. T

im l e n ,

F irst Vice President.

B o a r d o f G o v e r n o r s o f th e F e d e r a l R e se r v e S y stem
R U L E S R E G A R D IN G D E L E G A T IO N O F A U T H O R I T Y

AM ENDM ENTS
( effective September 2 1 , 1979 )

12CFR Part 265
RulM Regarding Delegation of
Authority
Board of Governors of the
Federal Reserve System.
a c t i o n : Final rule.

agency:

summary: In order to expedite and
facilitate performance of certain of its
functions, the Board of Governors has
amended its Rules Regarding Delegation
of Authority. The amendments are
intended to expand the scope of
authority previously delegated for bank
holding company formations, bank share
acquisitions by existing bank holding
companies, mergers of bank holding
companies, acquisitions and retentions
of companies engaged in nonbanking
activities by bank holding companies,
bank holding companies engaging de
novo in activities determined by the
Board to be permissible for bank holding
companies and bank mergers.
EFFECTIVE DATE: September 21,1979.
FOR FURTHER IN FO R M A TIO N CONTACT:

Michael E. Bleier, Senior Counsel (202452-3721), Legal Division, Board of
Governors of the Federal Reserve
System, Washington, D.C. 20551.
SUPPLEMENTARY IN FO RM A TIO N : The
Bank Holding Company Act (12 U.S.C.
1841 et seq.) generally prohibits, except
with prior approval of the Board, any
action to be taken that causes any
company to become a bank holding
company: any bank holding company to
acquire direct or indirect ownership or
control of any voting shares of a bank if.
after the acquisition, the company
would directly or indirectly own or
control more than 5 per cent of the
voting shares of the bank; any bank
holding company to merge or
consolidate with any other bank holding

company: any bank holding company to
acquire or retain companies engaged in
nonbanking activities, or engage de novo
in nonbanking activities the Board has
previously determined to be permissible
for bank holding companies. Section
18(c) of the Federal Deposit Insurance
Act (12 U.S.C 1828(c)) generally
prohibits, except with prior approval of
the Board, the merger, consolidation,
acquisition of assets, or assumption of
liabilities of insured banks where the
resulting bank would be a Statechartered bank that is a member of the
Federal Reserve System.
The Reserve Banks presently have
delegated authority to approve, under
certain conditions, formations of bank
holding companies, mergers and
consolidations of bank holding
companies, acquisitions by existing
bank holding companies of banks and
bank shares, acquisitions by bank
holding companies of certain existing
finance companies, industrial banks,
and insurance companies, applications
to engage de novo in certain nonbanking
activities the Board has previously
determined to be permissible for bank
holding companies, and bank mergers
where the resulting bank would be a
member of the Federal Reserve System.
After evaluating the manner in which
such delegated authority has been
exercised and the Board's experience in
considering applications Filed under
sections 3(a) and 4(c)(8) of the Bank
Holding Company Act and section 18(c)
of the Federal Deposit Insurance Act.
the Board has. by the instant
amendments, expanded the scope of
that delegated authority so that Reserve
Banks may approve all applications,
including retention applications and
applications to engage de novo in
permissible nonbanking activities, filed
under sections 3(a) and 4(c)(8) of the
Bank Holding Company Act and section

For these Rules to be complete, retain :
1) Pamphlet amended effective A ugust 2, 1978.
2 ) Amendments effective October 17, 1978, October 19, 1978,
January 1, 1979, M arch 10, 1979, M arch 21, 1979, and April 26,1979.
3) T his slip sheet.
P R IN T E D IN N E W YORK FROM F E D E R A L R E G IS T E R , VOL. 44, NO. 191
[Enc. Cir. No. 8651]




18(c) of the Federal Deposit Insurance
Act, and under the provisions of section
18(c)(4) of the Federal Deposit Insurance
Act, to furnish to the Comptroller of the
Currency and the Federal Deposit
Insurance Corporation reports on
competitive factors involved in a bank
merger required to be approved by one
of those agencies, unless one or more of
the following criteria is present
(1) A member of the Board of
Governors has indicated an objection
prior to the Reserve Bank’s action; or
(2) The Board has indicated that the
delegated authority shall not be
exercised in whole or in part or
(3) A written substantive objection to
the application has been properly made;
or
(4) The application raises a significant
policy issue or legal question; or
In formations, bank acquisitions or
mergers,.
(5) The transaction involves two or
more banking organizations:
(i) That rank among a State's ten
largest banking organizations; or

exercise of pro rata stock rights,
retention of bank shares acquired in a
fiduciary capacity, and acquisition of
additional shares of a bank in which the
bank holding company already owns 25
per cent or more of any class of voting
securities.
The Board continues to be of the view
that, as a matter of general policy, it is
not appropriate for a Reserve Bank to
act on applications when a director or
senior officer of (1) the holding
company, (2) any subsidiary bank of the
holding company, (3) the merging banks,
or (4) the nonbanking company to be
acquired or retained, is a director of a
Federal Reserve Bank or branch. In such
a situation, the Secretary of the Board
will have the authority to approve such
applications if all of the other regulatory
criteria for approval under delegated
authority have been met.
Applications falling outside the
standards for delegated authority will
be submitted to the Board for further
consideration.
The provisions of section 553 of Title
5, United States Code, relating to notice,
public participation, and deferred
effective date are not followed in
connection with the adoption of these
amendments because the changes
involved are procedural in nature and
do not constitute a substantive rule
subject to the requirements of such
section. The amendments are effective
September 21,1979.

(ii) Each banking organization has
over $100 million in market deposits and
after consummation the acquiring
organization would control over 5 per
cent of market deposits; or
In nonbank acquisitions.
(0) The nonbanking activities involved
do not clearly fall within activities the
Board has previously determined to be
permissible; or
(7) The bank holding company has
total domestic banking assets of over $1
billion and seeks to acquire a
nonbanking organization that appears to
have a significant presence in a
permissible nonbanking activity.
The Reserve Banks’ delegated
authority also includes authority to
approve applications filed under section
3(a) of the Bank Holding Company Act
and section 18(c) of the Federal Deposit
Insurance Act where it is found that an
emergency exists requiring expeditious
action or immediate action is required to
prevent the probable failure of a bank or
bank holding company. The authority to
approve bank share acquisitions
includes authority to approve
acquisition by a bank holding company
of bank shares acquired through the




^ 1. In order to accomplish this
delegation, § 265.2(a) is amended by
deleting subparagraphs (3), (4), (5), (6),
and (7), renumbering subparagraphs (8),
(9), (10), (11), (12), (13), (14), (15), (16),
(17) and (18) as subparagraphs (3), (4),
(5), (6), (7), (8), (9), (10), (11), (12) and
(13), respectivfely, and amending
subparagraph (2) to read as follows:
§ 265.2 Specific functions delegated to
Board employees and to Federal Reserve
Banks.

(a) The Secretary of the Board (or, in
the Secretary’s absence, the Acting
Secretary) is authorized:
*

*

*

*

*

(2) Under the provisions of sections
18(c) and 18(c)(4) of the Federal Deposit
Insurance Act (12 U.S.C. 1828(c) and
1828(c)(4)), §§ 3(a) and 4(c)(8) of the

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Bank Holding Company Act (12
U.S.C.1842(a) and 1843(c)(8)) and
§ § 225.3(b) and (c), and § § 225.4(a) and
(b) of Regulation Y (12 CFR 225.3(b) and
(c) , and 225.4(a) and (b)), to furnish
reports on competitive factors involved
in a bank merger to the Comptroller of
the Currency and the Federal Deposit
Insurance Corporation and to approve
applications the Reserve Bank could
approve under subparagraph (20) of
paragraph (f) of this section, except for
the fact that condition (ii) of that
subparagraph has not been met because
a director or senior officer of any
holding company, bank, or company to
be acquired or retained, involved in the
transaction, is a director of a Federal
Reserve Bank or branch.
* * * * *
2. In order to accomplish this
delegation, § 265.2(c) is amended by
deleting subparagraph 16 and
renumbering subparagraphs (17), (18),
(19), (20), (21), (22), (23), (24), and (25) as
subparagraphs (16), (17), (18), (19), (20),
(21) , (22), (23), and (24). Section 265.2(f)
is amended by deleting subparagraphs
(22) , (23), (24), (28), (29), (30), (31), (32),
(33), and (52), and footnotes (2), (3), (4),
(5), (6), (7), (8), (9), (10), (11) and (12), and
renumbering subparagraphs (25), (26),
(27), (34), (35), (36), (37), (38), (39), (40),
(41), (42), (43). (44). (45). (46), (47), (48),
(49), (50), (51), (53), (54), (55), and (56) as
subparagraphs (25), (26), (27), (28), (29),
(30). (31), (32), (33), (34), (35), (36), (37),
(38), (39), (40), (41). (42), (43), (44). (45),
(46), (47), (48) and (49), respectively, and
amending subparagraph (20) to read as
follows:

(b) of Regulation Y (12 CFR 225.3(b) and
(c) , and 225.4(a) and (b)), to approve
applications requiring prior approval of
the Board, and under the provisions of
section 18(c)(4) of the Federal Deposit
Insurance Act (12 U.S.C. 1828(c)(4)), to
furnish to the Comptroller of the
Currency and the Federal Deposit
Insurance Corporation reports on
competitive factors involved in a bank
merger required to be approved by one
of those agencies, unless one or more of
the following conditions is present:
(i) A member of the Board has
indicated an objection prior to the
Reserve Bank's action; or
(ii) The Board has indicated that such
delegated authority shall not be
excercised by the Reserve Bank in
whole or in part; or
(iii) A written substantative objection
to the application has been properly
made; or
(iv) .The application raises a
significant policy issue or legal question
on which the Board has not established
its position; or
In formations, bank acquisitions or
mergers;
(v) The proposed transaction involves
two or more banking organizations:
(a) That rank among a State’s ten
largest banking organizations in terms of
total domestic banking assets; or
(h)
Each of which has more than $100
million of total deposits in banking
offices in the same local banking market
that, after consummation of the
proposal, would control over 5 per cent
of total deposits in banking offices in
that local market; or
In nonbank acquisitions:
(vi) The nonbanking activities
involved do not clearly fall within
activities that the Board has designated
as permissible for bank holding
companies under § 225.4(a) of
Regulation Y; or
(vii) The proposal would involve the
acquisition by a banking organization
that has total domestic banking assets
of $1 billion or more of a nonbanking
organization that appears to have a

$ 265.2 Specific functions delegated to
Board employees and to Federal Reserve
Banks

*

. * * * *
(f)
Each Federal Reserve Bank is
authorized as to member banks or other
indicated organizations headquartered
in its district:
* * * * *

(20)
Under the provisions of section
18(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1828(c)), 3(a) and 4(c)(8)
of the Bank Holding Company Act (12
U.S.C. 1842(a) and 1843(c)(8)) and
§§ 225.3(b) and (c), and §§ 225.4(a) and




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sig n ifica n t p r e se n c e in a p e r m issib le
n o n b a n k in g a c tiv ity 2
(12 U.S.C. 248k)
E ff e c ti v e d a te : T h is a m en d m en t is
e ffe c tiv e on all a p p lic a tio n s p e n d in g on
S e p te m b e r 21 an d on a ll future
aD D lications.

By order of the Board of Governors.
September 21,1979.
Griffith L. Garwood,
D eputy Secretary o f the Board.
|FR Doc 79-30335 Filed 9-28-79 8:45 am|
BILLING CODE 8210-01-M

2 W hile other situations may involve
the issue of significant presence, the
Board regards, as a general guideline,
any company that ranks among the 20
largest independent firms in any industry
as having a significant presence.




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