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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 8829
May 16, 1980
]
Policy on Divestitures
Under the 1970 Amendments to the Bank Holding Company Act
To A ll Commercial Banks and Bank Holding Companies
in the Second Federal Reserve D istrict:
The Board of Governors of the Federal Reserve System has issued a policy statement setting
forth a program to ensure compliance with the law by those bank holding companies that have
divestiture obligations to meet by December 31, 1980 under the terms of the 1970 amendments to
the Bank Holding Company Act.
The following is quoted from the Board’s announcement of the policy:
The 1970 amendments to the Bank Holding Company Act provided that companies that became bank
holding companies by virtue of those amendments (i.e., one-bank holding companies) and which had acquired
non-bank activities between June 30, 1968 and December 30, 1970 had until December 31, 1980 to (1) divest
such non-bank activities or (2) get Board approval to keep them or (3) cease to be a bank holding company
by divesting their bank holdings.
The Board has twice earlier (in December 1978 and December 1979) warned bank holding companies that
had not filed plans for complying with the 1980 divestiture requirements that, to avoid forced liquidation
resulting from last-minute efforts to comply, they should file compliance plans with the Board well in advance
of the deadline. The Board’s policy statement issued today, which affects some 200 bank holding companies,
provides th at:
1. Applications to retain non-banking subsidiaries or activities subject to the 1980 divestiture requirements
should be submitted to the appropriate Federal Reserve Bank by July 1, 1980. Failure to meet this deadline will
be considered by the Board to be a declaration by the company that it does not intend to retain the subsidiary
or activity. Further, the Board expects affected companies to be actively engaged in divestiture or discontinuance
of impermissible activities or subsidiaries that it does not intend to retain, including those it has not applied
to retain.
2. The Congress has recently provided a special exemption for bank holding companies with real estate
holdings. This permits the Board to extend the 1980 deadline to December 31, 1982 for divestiture of such
interests where
—The Board finds the company has made continuing good faith efforts to divest, and
—The extension is necessary to avert substantial loss to the company.
Bank holding companies wishing to take advantage of this special provision must submit a request to the Board
to do so by July 1, 1980, together with information to enable the Board to evaluate the request.
3. Bank holding companies with non-banking subsidiaries or activities subject to the 1980 divestiture
requirements, but that have not filed applications or requests to retain by July 1, 1980 must begin to file
monthly progress reports on August 1, 1980. The reports, to be filed in letter form with the appropriate Reserve
Bank, should describe actions of the company undertaken to divest either the non-banking activity or the bank.
Letters are to be filed with the Reserve Banks on the first day of each month.
A copy of the Board’s policy statement is enclosed. Questions thereon may be directed to our
Domestic Banking Applications Department (Tel. No. 212-791-5861).
A
nthony
M.
So l o m o n ,
President.
<r>
FEDERAL RESERVE SYSTEM
Compliance With the 1980 Requirements
of the Bank Holding Company Act
Policy Statement
AGENCY:
Board of Governors of the Federal Reserve System.
ACTION:
Statement of Policy.
SUMMARY: This Policy Statement sets forth the program adopted by the
Board to ensure compliance with the law by those remaining bank holding
companies having 1980 divestiture obligations as a result of the 1970
Amendments to the Bank Holding Company Act.
FOR FURTHER INFORMATION CONTACT: Bronwen Mason, Senior Attorney (202/
452-3564), Legal Division, Board of Governors of the Federal Reserve
System.
SUPPLEMENTARY INFORMATION:
The Board has issued the following statement:
Policy Statement Regarding
Compliance With the 1980 Requirements
of the Bank Holding Company Act
Pursuant to the provisions of section 4(a)(2) of the Bank
Holding Company Act ("BHCA"), a bank holding company that became subject
to the BHCA as a result of the 1970 Amendments to the BHCA generally
may not retain nonbanking subsidiaries or activities beyond December 31,
1980, if it also wishes to remain a bank holding company beyond that
date. In its December 12, 1979, Policy Statement the Board stated that
it will regard as an extremely serious matter a violation of section 4
of the BHCA resulting from a bank holding company's failure to divest
or obtain approval for retention prior to December 31, 1980, and that
with respect to such violations, it intends to enforce the provisions
of the BHCA through appropriate actions, including initiation of ceaseand-desist proceedings and assessment of civil money penalties or referral
for criminal prosecution. In previous statements the Board has urged
bank holding companies to file a plan of divestiture with respect to
each subsidiary or activity that is subject to the divestiture require
ments of section 4(a)(2) of the BHCA.
While bank holding companies have met these voluntary deadlines,
a number of companies must take action on or before December 31, 1980,
in order to avoid violation of the 1980 requirements. The purpose of
this statement is to set forth a program the Board intends to follow
for the final six months of the ten-year divestiture period to guide
the remaining companies with 1980 obligations toward orderly compliance
Enc. Cir. No. 8829)
and to enable the Board to monitor their progress. Accordingly, bank
holding companies with 1980 obligations should observe the following
program:
1. Applications to Retain Under Section 4(c)(8). Any
application for Board approval to retain a nonbanking subsidiary or
activity subject to the 1980 divestiture requirements should be sub
mitted to the appropriate Federal Reserve Bank no later than July 1,
1980. Failure to file retention applications by July 1, 1980, will
be considered by the Board to be a declaration by the company that it
does not intend to retain such nonbank subsidiary or activity.
Moreover, the Board expects an affected company to be actively engaged
in steps to divest or discontinue all impermissible nonbanking subsidiaries
and activities that it does not intend to retain (including those it
has not applied to retain).
2. Requests for Special Extension. Section 701(b) of the
Monetary Control Act of 1980 (P.L. 96-221) contains a provision amending
section 4(a)(2) of the BHCA to provide that the Board may extend the
1980 divestiture date to December 31, 1982, for the divestiture by a
bank holding company of interests in real estate. The amendment specifies
that the Board may grant the extension where it finds the company has
made continuing good faith efforts to divest, and that the extension
is necessary to avert substantial loss to the company. Any bank holding
company wishing to take advantage of this special provision must submit
its request to the Board no later than July 1, 1980. Each such request
should provide information to enable the Board to evaluate the financial
impact of immediate divestiture, as well as the company's prior efforts
to divest. The appropriate Federal Reserve Bank may be contacted for
more information on how to file requests for this extension.
3. Monthly Reports. A bank holding company that has not
filed an application or request to retain any nonbanking subsidiary
or activity under paragraphs 1 and 2 above by July 1, 1980, is required
to file with the Board a monthly progress report concerning its actions
either to divest or discontinue such nonbar.ki
subsidiaries or
activities, or to divest its bank. These reports should be in letter
form and must be filed with the appropriate Reserve Bank on the first
day of each month, with the initial report due on August 1, 1980.
By Order of the Board of Governors of the Federal Reserve
System, effective May 9, 1980.
Theodore E. Allison
Secretary of the Board
[SEAL]
@FedFRASER