Full text of Federal Reserve Bank of New York Circulars : Regulation Y

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f

December 10, 1971
To the Addressee:
Enclosed is a reprint, in the new size, of Regulation Y, as amended
effective December 1, 1971? together with a statutory appendix.

It replaces

your small-size printing of the regulation, as revised effective March 15, 1968,
and of the amendments thereto, effective through December 1, 1971.

The reprint

reflects the redesignation, for technical reasons, of the regulation as Part 225
of Title 12 of the Code of Federal Regulations, rather than Part 222.
pretations of the regulation were similarly redesignated.

Inter­

In addition, former

sections 222.5 ? 2 22 .6 , and 2 2 2 .7 were combined, amended, and redesignated as
section 2 25.5 *




Circulars Division
Federal Reserve Bank of New York




^Regulation Y

45058

BOARD OF GOVERNORS
of the

FEDERAL RESERVE SYSTEM

BANK HOLDING COMPANIES

REGULATION Y
(12 CFR 225)
As amended effective December 1, 1971

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Bank of the Federal Reserve district in which the inquiry arises.
Forms for the preparation of registration statements, applications, re­
quests, and reports may be obtained from any Federal Reserve Bank.

CONTENTS

Page

(a) Terms used in the A c t ...............................3
(b ) Federal Reserve B a n k ...............................3
S e c . 225 .2 — D e t e r m in a t io n s R e g a r d in g
C ontrol

................................... .......3

(a) Conclusive presumptions of control .
(b ) Rebuttable presumptions of control .
(c) Procedures for determining control .

3
3
4

S e c . 2 2 5 .3 — A cquisition of B an k S hares
or A sse ts
....................................... 4

(a) Submission of a p p lic a tio n s......................4
(b) Action on applications ...................... ......5
S ec . 2 2 5 .4 — N o nba nk ing A c t i v i t i e s .......... ...... 5

(a ) Activities closely related to banking
or managing or controlling banks .




5

(b) (1) De novo e n t r y .............................
(2) Acquisition of going concern ..
(3) Simplified p ro c e d u re s..................
(c) Tie-ins, alterations, relocations, con­
solidations ...........................................
(d) Certain acquisitions by companies
that became bank holding com­
panies on December 31, 1970, as a
result of the 1970 amendments . .
(e) Activities of companies in which na­
tional banks may i n v e s t ................
(f) Foreign activities of domestic holding
companies ........................................
(g) Foreign bank holding companies . . . .
225.5— A d m i n i s t r a t i o n ......................
(a) Effective date of registration
(b) Reports and examinations .

Sec.

S t a t u t o r y A p p e n d i x ......................................................

6
6
6
7

7
7
7
8
9
VO

S ec . 2 2 5 .1 — D e f i n i t i o n s ................................... ...... 3

VO

Page

11

REGULATION Y
(12 CFR 225)
As amended effective December 1, 1971

BANK HOLDING COMPANIES*

bank or other company are established by section
2(a)(2)(A) and (B) and by section 2(g)(1) and (2)
(a) Terms used in the Act. As used in this Part,
of the Act. In addition, the Board has determined
the terms “bank holding company”, “company”,
that, whenever the transferability of 25 per cent
“bank”, “subsidiary”, and “Board” have the same
or more of any class of voting securities of a
meanings as those given such terms in the Act.
company is conditioned in any manner, whether
(b) Federal Reserve Bank. The term “Federal
pursuant to an agreement, by-law, article of in­
Reserve Bank” as used in this Part with respect
corporation, or otherwise, upon the transfer of
to action by, on behalf of, or directed to be taken
25 per cent or more of any class of voting secu­
by a bank holding company or other organization
rities of another company, the holders of the se­
shall mean either the Federal Reserve Bank of the
curities affected by the condition (that is, those
who hold both the securities whose transferability
Federal Reserve district in which the operations of
is so conditioned and the securities whose transfer
the bank holding company or other organization
can be required to satisfy the condition) consti­
are principally conducted, as measured by total
tute, in their capacity as such, a “company” for
deposits held or controlled by it on the date on
the purposes of the Act unless one of the issuers
which it became, or is to become, a bank holding
of such securities is a subsidiary of the other and
company, or such Reserve Bank as the Board may
designate.
is so identified in an order of the Board or in a
registration statement or report accepted by the
Board under the Act.
SECTION 225.2— DETERM INATIONS
(b)
Rebuttable presumptions of control. A re­
R EG A RD IN G CONTROL
buttable presumption that a company controls a
(a)
Conclusive presumptions of control. Con­ bank or other company is established by section
2(g)(3) of the Act. In addition, the Board has es­
clusive presumptions that a company controls a
tablished, for use in proceedings instituted in ac­
cordance with the procedures of paragraph (c)
*This text corresponds to the Code of Federal
below, the following rebuttable presumptions:
Regulations, Title 12, Chapter II, Part 225, cited as
(1)
A company that owns, controls, or has
12 CFR 225. The “Act” referred to herein is the
Bank Holding Company Act of 1956. The words
power to vote more than 5 per cent of any class
“this Part,” as used herein, mean Regulation Y.
of voting securities of a bank or other company
(Prior to December 1, 1971, this Part was designated
(except where such securities are held in a fidu­
as Part 222.)
SECTION 225.1— D EFIN ITIO N S




3

REGULATION Y
ciary capacity and the company does not have
sole discretionary authority to exercise the voting
rights) presumably controls that bank or other
company if (i) one or more of the company’s di­
rectors, trustees, or partners, or officers or em­
ployees with policymaking functions serves in any
of these capacities with the bank or other com­
pany, and (ii) no other person owns, controls, or
has power to vote as much as 5 per cent of any
class of voting securities of that bank or other
company.
(2) A company that owns, controls, or has
power to vote more than 5 per cent of any class
of voting securities of a bank or other company
(except where such securities are held in a fidu­
ciary capacity and the company does not have
sole discretionary authority to exercise the voting
rights) presumably controls that bank or other
company if additional voting securities are owned,
controlled, or held with power to vote by indi­
viduals (or members of their immediate families
as defined in § 206.2(k) of this chapter (Regula­
tion F)) who are directors, officers, trustees, or
partners of the company (or own, directly or in­
directly, 25 per cent or more of any class of vot­
ing securities of the company) and, together with
the company’s securities, aggregate 25 per cent or
more of any class of voting securities of that bank
or other company.
(3) A company that enters into any agreement
or understanding with a bank or other company
(other than an investment advisory agreement),
such as a management contract, pursuant to which
the company or any of its subsidiaries exercises
significant influence with respect to the general
management or overall operations of the bank or
other company presumably controls such bank
or other company.
(4) A company that enters into any agreement
or understanding under which the rights of a
holder of voting securities of a bank or other
company are restricted in any manner presumably
controls the shares involved, unless the agreement
or understanding (i) is a mutual agreement among
shareholders granting to each other a right of first
refusal with respect to their shares, or (ii) is inci­
dent to a bona fide loan transaction, or (iii) relates
to restrictions on transferability and continues
only for such time as may reasonably be necessary
to obtain approval from a Federal bank super­
visory authority with respect to acquisition by the
company of such securities.
(5) A company that owns directly or indirectly
securities that are immediately convertible at the




§ 225.3
option of the holder or owner thereof into voting
securities presumably owns or controls the voting
securities.
(c) Procedures for determining control. (1) In
any case in which a presumption established by
paragraph (b) of this section applies, or in any
other case where it appears to the Board that a
company exercises a controlling influence over the
management or policies of a bank or other com­
pany, and the company has not complied with the
provisions of the Act, the Board may inform the
company that a preliminary determination of con­
trol has been made on the basis of the facts sum­
marized in the communication. Such company
shall within 30 days (or such longer period of time
as may be permitted by the Board) (i) indicate to
the Board its willingness to terminate the control
relationship and to furnish promptly its specific
plan to do so; or (ii) state that it will promptly
seek Board approval to retain the control relation­
ship, or, if the control relationship has existed
continuously since prior to December 31, 1970
(in a manner not covered by section 2(a)(2)(A) or
(B)), that it will register as a bank holding com­
pany or, if already a holding company, report the
bank or other company as a subsidiary, or other­
wise comply with the applicable provisions of the
Act; or (iii) set forth such facts and circumstances
as may support its contention that there is not a
control relationship.
(2)
A company may request a hearing to con­
test the Board’s preliminary determination of con­
trol. In the event a hearing is held, any applicable
presumptions established by paragraph (b) of this
section shall be considered in the usual manner in
accordance with the rules of evidence, and the
Board will by order, on the basis of the record of
the hearing, decide the issues involved and direct
such action as may be necessary or appropriate in
the circumstances. In the event no hearing is held,
but the preliminary determination of control is
contested, the Board will decide the matter on the
basis of the evidence available to it, relying on the
presumptions established in paragraph (b) of this
section, and will by order direct such action as
may be necessary or appropriate in the circum­
stances.
SECTION 225.3— ACQUISITION OF
BANK SHARES OR ASSETS
(a)
Submission of applications. An application
for approval by the Board of any transaction re­
quiring approval under section 3(a) of the Act

§ 225.4

REGULATION Y

(2) operating as an industrial bank, Morris Plan
bank, or industrial loan company, in the manner
authorized by State law so long as the institution
does not both accept demand deposits and make
commercial loans;
(3) servicing loans and other extensions of
credit for any person;
(4) performing or carrying on any one or more
of the functions or activities that may be per­
formed or carried on by a trust company (includ­
ing activities of a fiduciary, agency, or custodian
nature), in the manner authorized by State law
so long as the institution does not both accept
demand deposits and make commercial loans;**
(5) acting as investment or financial adviser,
including (i) serving as the advisory company for
a mortgage or a real estate investment trust and
(ii) furnishing economic or financial informa­
tion;**
SECTION 225.4— N O NBANKING
(6) leasing personal property and equipment, or
ACTIVITIES
acting as agent, broker, or adviser in leasing of
such property, where at the inception of the initial
(a)
Activities closely related to banking or man­
lease the expectation is that the effect of the trans­
aging or controlling banks. In accordance with the
action and reasonably anticipated future trans­
procedures set forth in paragraphs (b) and (c) of
actions with the same lessee as to the same prop­
this section, any bank holding company may en­
erty will be to compensate the lessor for not less
gage, or retain or acquire an interest in a com­
than the lessor’s full investment in the property;
pany that engages, solely in one or more of the
(7) making equity and debt investments in cor­
activities specified below, including such incidental
porations or projects designed primarily to pro­
activities as are necessary to carry on the activities
mote community welfare, such as the economic
so specified. Any bank holding company that is of
rehabilitation and development of low-income
the opinion that other activities in the circum­
areas; * * *
stances surrounding a particular case are closely
related to banking or managing or controlling
(8) (i) providing bookkeeping or data proces­
banks may file an application in accordance with
sing services for the internal operations of the
the procedures set forth in paragraph (b)(2) of this
holding company and its subsidiaries and (ii) stor­
section. As to such an application, the Board will
ing and processing other banking, financial, or re­
publish in the Federal Register a notice of oppor­
lated economic data, such as performing payroll,
tunity for hearing only if it believes that there is
accounts receivable or payable, or billing services,
a reasonable basis for the holding company’s
and
(9) acting as insurance agent or broker in of­
opinion. The following activities have been deter­
mined by the Board to be so closely related to
fices at which the holding company or its sub­
banking or managing or controlling banks as to be
sidiaries are otherwise engaged in business (or in
an office adjacent thereto) with respect to the fol­
a proper incident thereto:
(1)
making or acquiring, for its own account or lowing types of insurance:
for the account of others, loans and other exten­
sions of credit (including issuing letters of credit
**Acting as investment adviser to an open-end invest­
ment company or as a management consultant is not
and accepting drafts), such as would be made, for
regarded by the Board as within the description of this
example, by a mortgage, finance, credit card, or
activity. The Board has proposed to expand activity (5)
to include acting as an investment adviser to an open-end
factoring company;*

shall be filed with the Federal Reserve Bank. A
separate application shall be filed with respect to
each bank the voting shares or assets of which are
sought to be acquired by an existing bank holding
company or nonbanking subsidiary thereof.
(b)
Action on applications. Applications under
this section are processed in accordance with the
procedures specified in the Act and in § 262.3 of
the Board’s Rules of Procedure (Part 262 of this
chapter). Any application for the Board’s ap­
proval of the formation of a company that con­
trols only one bank shall be deemed to be ap­
proved 45 days after the company has been in­
formed by its Reserve Bank that said application
has been accepted, unless the company is notified
to the contrary within that time or is granted ap­
proval at an earlier date.

* Operating a savings and loan association is not re­
garded by the Board as within the description of this
activity. Whether to propose expanding activity (2) to in­
clude operating that type of financial institution is under
consideration by the Board.




investment company. Whether to propose expanding ac­
tivity (5) to include management consulting is under
consideration by the Board.
*** Investing in an industrial development corporation
is hot regarded by the Board as within the description of
this activity. Whether to propose adding that and other
activities to the list is under consideration.

REGULATION Y

§ 225.4
with its Reserve Bank (Form F.R. Y-4). Every
such application shall be accompanied by a copy
of a notice of the proposal (in substantially the
same form as F.R. Y-4B) published within the
preceding 30 days in a newspaper of general cir­
culation in the communities to be served. The
Board will publish in the Federal Register notice
of any such application and will give interested
persons an opportunity to express their views
(including, where appropriate, by means of a
hearing) on the question whether performance of
the activity proposed by the holding company can
reasonably be expected to produce benefits to the
public, such as greater convenience, increased
competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentra­
tion of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices.

(1) Any insurance for the holding company and
its subsidiaries;
(ii) Any insurance that (a) is directly related to
an extension of credit by a bank or a bank-related
firm of the kind described in this regulation, or
(b) is directly related to the provision of other
financial services by a bank or such a bank-related
firm, or (c) is otherwise sold as a m atter of con­
venience to the purchaser, so long as the premium
income from sales within this subdivision (ii)(c)
does not constitute a significant portion of the
aggregate insurance premium income of the hold­
ing company from insurance sold pursuant to this
subdivision (ii);
(iii) Any insurance sold in a community that
(a) has a population not exceeding 5,000, or (b)
the holding company demonstrates has inadequate
insurance agency facilities.
(b)(1) De novo entry. A bank holding company
may engage de novo (or continue to engage in an
activity earlier commenced de novo) directly or
indirectly, solely in activities described in para­
graph (a) of this section, 45 days after the com­
pany has furnished its Reserve Bank with a copy
of a notice of the proposal (in substantially the
same form as F.R. Y-4A) published within the
preceding 30 days in a newspaper of general cir­
culation in the communities to be served, unless
the company is notified to the contrary within that
time or unless it is permitted to consummate the
transaction at an earlier date on the basis of exi­
gent circumstances of a particular case. If adverse
comments of a substantive nature are received
by the Reserve Bank within 30 days after the
company has so published its proposal,1 or if it
otherwise appears appropriate in a particular case,
the Reserve Bank may inform the company that
(i) the proposal shall not be consummated until
specifically authorized by the Reserve Bank or by
the Board or (ii) the proposal should be processed
in accordance with the procedures of subpara­
graph (2) of this paragraph.

(3)
Simplified procedures, (i) The procedures of
subparagraphs (1) and (2) of this paragraph shall
not apply with respect to a holding company or
a subsidiary thereof engaging in the following:
(a) making, acquiring, or servicing loans or
other extensions of credit for personal, family, or
household purposes if the commencement or ex­
pansion of such activity does not involve an acqui­
sition of assets of $10 million or more (or the
acquisition of shares of a company having such
assets) except that (7) no holding company may
acquire more than $50 million in assets in any
calendar year under the provisions of this clause,
(2) within 30 days after consummation of such
an acquisition, the holding company informs its
Reserve Bank of the acquisition (in substantially
the same form as F.R. Y-4B), and (3) whenever
necessary to effectuate the purposes of the Act,
the Board may require suspension or discontinua­
tion of any action taken, or divestiture of any
acquisition made, on authority of this provision
and may withdraw such authority with respect to
any particular holding company;
(b) engaging in activities described in § 225.4(a)
that are shifted from a bank in the holding com­
(2) Acquisition of going concern. A bank hold­
pany system and were engaged in by the bank
ing company may apply to the Board to acquire
either de novo or as a result of a merger trans­
or retain the assets of or shares in a company
action described in and approved by a Federal
engaged solely in activities described in para­
supervisory agency pursuant to section 18(c) of
graph (a) of this section by filing an application
1 If a Reserve Bank decides that adverse comments are the Federal Deposit Insurance Act (12 U.S.C.
1828(c)), 45 days after the holding company has
not of a substantive nature, the person submitting the
comments may request review by the Board of that deci­
informed its Reserve Bank of its proposal to shift
sion in accordance with the provisions of § 265.3 of the
such activity (in substantially the same form as
Board’s Rules Regarding Delegation of Authority (12
CFR 265.3) by filing a petition for review with the Sec­
F.R. Y-4B), unless the company is notified to the
retary of the Board.




6

§ 225.4

REGULATION Y

contrary within that time or is permitted to con­
summate the transaction at an earlier date.
(ii) The procedures of subparagraph (1) of this
paragraph shall not apply with respect to a hold­
ing company o r a subsidiary thereof engaging
de novo as insurance agent or broker with respect
to the types of insurance listed in subdivisions (i),
(ii), and (iii)(a) of paragraph (a)(9) of this sec­
tion, 45 days after the holding company has in­
formed its Reserve Bank of its proposal to engage
in such activity (in substantially the same form as
F.R. Y-4B), unless the company is notified to the
contrary within that time or is permitted to con­
summate the transaction at an earlier date.
(c) Tie-ins, alterations, relocations, consolida­
tions. Except as otherwise provided in an order in
a particular case, the following conditions shall
apply with respect to every acquisition consum­
mated or activity engaged in on the authority of
section 4(c)(8) of the Act: (1) the provision of any
credit, property or services involved shall not be
subject to any condition which, if imposed by a
bank, would constitute an unlawful tie-in arrange­
ment under section 106 of the Bank Holding
Company Act Amendments of 1970; (2) the ac­
tivities involved shall not be altered in any signifi­
cant respect from those considered by the Board
in making the determination, nor provided at any
location other than those described in the notice
published with respect to such determination, ex­
cept upon compliance with the procedures of
paragraph (b)(1) of this section; and (3) no merger,
or acquisition of assets other than in the ordinary
course of business, to which the acquired com­
pany is a party shall be consummated without
prior Board approval, if thereafter the bank hold­
ing company will continue to own, directly or
indirectly, more than five per cent of the voting
shares of such company or its successor.
(d) Certain acquisitions by companies that be­
came bank holding companies on December 31,
1970, as a result of the 1970 amendments. Except
as provided in this paragraph, no bank holding
company may acquire, directly or indirectly, any
shares or commence to engage in any activities on
the basis of section 4(c)(12) of the Act. A com­
pany may file with the Board an irrevocable decla­
ration, in the form approved by the Board,2 that
it will cease to be a bank holding company by

January 1, 1981, unless it is granted an exemption
under section 4(d) of the Act. A company that has
filed such a declaration may (1) commence new
activities de novo, either directly or through a sub­
sidiary, without further action under this para­
graph, until such time as the Board notifies the
company to the contrary, and (2) make an acquisi­
tion of a going concern 45 days after the company
has informed its Reserve Bank of the proposed
acquisition, unless the company is notified to the
contrary within that time or unless it is permitted
to make the acquisition at an earlier date, based on
exigent circumstances of a particular case. If the
company has not filed such a declaration, no ac­
quisition may be made, or activity commenced,
on the basis of section 4(c)(12) except with prior
approval of the Board. Normally only requests
with respect to acquisitions or expansion of activi­
ties that the company demonstrates to the satisfac­
tion of the Board are necessary to enable it more
efficiently to market its assets subject to divestiture
will be approved. This paragraph does not apply
to acquisitions made pursuant to a binding com­
mitment entered into before March 23, 1971.
(e) Activities of companies in which national
banks may invest. No bank holding company or
subsidiary thereof that is not a bank or subsidiary
of a bank may, after June 30, 1971, acquire
shares on the basis of section 4(c)(5) of the Act
unless such shares are of the kinds and amounts
explicitly eligible by Federal statute for invest­
ment by a national bank. A national bank or a
subsidiary thereof may acquire or retain shares on
the basis of section 4(c)(5) in accordance with the
rules and regulations of the Comptroller of the
Currency. So far as Federal law is concerned, a
State-chartered bank or a subsidiary thereof may
(1) acquire or retain shares on the basis of section
4(c)(5) if such shares are of the kinds and amounts
explicitly eligible by Federal statute for invest­
ment by a national bank and (2) acquire or retain
all (but, except for directors’ qualifying shares, not
less than all) of the shares of a company that en­
gages solely in activities in which the parent bank
may engage, at locations at which the bank may
engage in the activity, and subject to the same
limitations as if the bank were engaging in the
activity directly.
(f) Foreign activities of domestic holding com­
panies. (1) Any bank holding company may, with

2 Although the form of declaration is in terms of a
company divesting itself of whatever interest it has in the
bank, a company is regarded by the Board as complying
with this condition if it furnishes the Board with convinc-




7

ing evidence that it does not exercise a controlling influ­
ence over the management or policies of the bank despite
retention of some interest in the bank.

REGULATION Y

§ 225.4

the consent of the Board, own or control voting
shares of any company in which a company orga­
nized under section 25(a) of the Federal Reserve
Act (12 U.S.C. 611-631) may invest other than
a company that accepts deposits or similar credit
balances in the United States.
(2) The procedures governing the Board’s con­
sent shall be the same as those set forth in § 211.8
of this chapter (Regulation K). In addition, the
Board grants its general consent for any bank
holding company to acquire from any of its sub­
sidiaries any shares the subsidiary holds with the
consent of the Board pursuant to Parts 211 or 213
of this chapter (Regulations K and M). The Board
may at any time, upon notice, suspend the general
consent procedures with respect to any bank hold­
ing company or with respect to the acquisition of
shares of companies engaged in particular kinds
of activities.
(3) It shall be a condition to the Board’s spe­
cific consent to the continued holding of voting
shares of any subsidiary of a bank holding com­
pany which are acquired or held on the basis of
an exemption under section 4(c)( 13) of the Act
that the subsidiary may take the following actions
only with prior Board approval: (a) establish
branch offices or agencies in the United States or
to engage in receiving deposits in any foreign
country (other than a foreign country in which
it already has such an activity with the Board’s
approval) or (b) issue in the United States any
debentures, bonds, promissory notes, or similar
obligations, other than instruments or obligations
due within one year.
(4) A bank holding company shall inform the
Board, through its Federal Reserve Bank within
30 days after the close of each semiannual period,
of all shares acquired or disposed of during that
period that are or were held under the authority
of this paragraph. With respect to any acquisi­
tion, such information shall (unless previously fur­
nished) include brief descriptions of the business
of the companies whose shares were acquired.
(g)
Foreign bank holding companies. (1) As
used in this paragraph: (i) “revenues” means gross
income and “consolidated” means consolidated in
accordance with generally accepted accounting
principles in the United States consistently applied;
(ii) “foreign country” means any foreign nation or
colony, dependency, or possession thereof; and
(iii) “foreign bank holding company” means a




8

bank holding company, organized under the laws
of a foreign country, more than half of whose con­
solidated assets are located, or consolidated reve­
nues derived, outside the United States.
(2) A foreign bank holding company may:
(i) engage in direct activities of any kind outside
the United States;
(ii) engage in direct activities in the United
States that are incidental to its activities outside
the United States;
(iii) own or control voting shares of any com­
pany that is not engaged, directly or indirectly, in
any activities in the United States except as shall
be incidental to the international or foreign busi­
ness of such company;
(iv) with the consent of the Board, own or con­
trol voting shares of any company principally en­
gaged in the United States in financing or facilitat­
ing transactions in international or foreign com­
merce;
(v) own or control voting shares of any com­
pany, organized under the laws of a foreign coun­
try, that is engaged, directly or indirectly, in any
activities in the United States if (a) such company
is not a subsidiary of such bank holding company,
(6) more than half of such company’s con­
solidated assets and revenues are located and
derived outside the United States, and (c) such
company does not engage, directly or indirectly,
in the business of underwriting, selling, or dis­
tributing securities in the United States; and
(vi) own or control voting shares of any com­
pany in a fiduciary capacity under circumstances
which would entitle such shareholding to an ex­
emption under section 4(c)(4) of the Act if the
shares were held or acquired by a bank.
Nothing in this subparagraph shall authorize a
foreign bank holding company to own or control
more than 5 per cent of any class of voting shares
of any other bank holding company or company
accepting deposits or similar credit balances in the
United States, except in a fiduciary capacity or
with prior approval of the Board.
(3) A foreign bank holding company that is of
the opinion that other activities or investments
may, in particular circumstances, meet the condi­
tions for an exemption under section 4(c)(9) of
the Act may apply to the Board for such a deter­
mination by submitting to the Reserve Bank of the
district in which its banking operations in the
United States are principally conducted a letter
setting forth the basis for that opinion.

REGULATION Y

§ 225.5
(4) A foreign bank holding company shall in­
form the Board, through such Reserve Bank with­
in 30 days after the close of each quarter, of all
shares of companies engaged, directly or indirectly,
in activities in the United States that were acquired
during such quarter under the authority of this
paragraph. Such information shall (unless previ­
ously furnished) include a brief description of the
nature and scope of each such company’s business
in the United States. Information required need be
given only insofar as it is known or reasonably
available to a foreign bank holding company. If
any required information is unknown and not
reasonably available to the bank holding company,
either because the obtaining thereof would involve
unreasonable effort or expense or because it rests
peculiarly within the knowledge of a company
that is not controlled by the bank holding com­
pany, the information need not be provided, but
the bank holding company shall (i) give such
information on the subject as it possesses or can
acquire without unreasonable effort or expense
together with the sources thereof, and (ii) include
a statement either showing that unreasonable effort
or expense would be involved or indicating that
the company whose shares were acquired is not
controlled by the bank holding company and
stating the result of a request made to such com­
pany for information. No such request need be
made, however, to any foreign government, or an
agency or instrumentality thereof, if, in the opin­
ion of the bank holding company, such request
would be harmful to existing relationships.
(5) If, in the Board’s judgment, a company is a
substantial competitor in any line of commerce in
the United States, an exemption under this para­
graph with respect to ownership or control of
such company’s voting shares may not be pre­
dicated on the unavailability of information to
establish whether or not such company’s activities
in the United States are consistent with such an
exemption. In the absence of available informa­
tion, it will be presumed that such a company’s




activities do not justify an exemption under this
paragraph for the holding of its shares by a foreign
bank holding company. A company will be deemed
to be a substantial competitor in any line of com­
merce in the United States if its products or
services are nationally advertised or distributed
in this country or if they are widely advertised or
distributed in a regional market in which a bank­
ing subsidiary, branch or agency of the foreign
bank holding company is located. If unable to
obtain sufficient information to establish whether
or not an exemption is available, a foreign bank
holding company should seek prior approval of
the Board before investing in any company that
might be a substantial competitor in any line of
commerce in the United States.
SECTION 225.5—ADM INISTRATION
(a) Effective date of registration. The date of
registration of a bank holding company shall be
the date on which its registration statement is filed
with the Federal Reserve Bank.
(b) Reports and examinations. Each bank hold­
ing company shall furnish to the Board in a form
prescribed by the Board a report of the company’s
operations for the fiscal year in which it becomes
a bank holding company, and for each fiscal year
thereafter until it ceases to be a bank holding
company. Each such annual report shall be filed
with the Federal Reserve Bank. Each bank hold­
ing company shall furnish to the Board additional
information at such times as the Board may re­
quire. The Board may examine any bank holding
company or any of its subsidiaries and the cost of
any such examination shall be assessed against
and paid by such bank holding company. As far
as possible the Board will use reports of examina­
tions made by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, or the
appropriate State bank supervisory authority.

9




REGULATION Y

STATUTORY APPENDIX

a company may not be held to have had con­
trol over any given bank or company at any
given time unless that company, at the time
in question, directly or indirectly owned, con­
trolled, or had power to vote 5 per centum
or more of any class of voting securities of the
bank or company, or had already been found
to have control in a proceeding under para­
graph (2) (C ).
(5)
Notwithstanding any other provision of
this subsection—
(A ) No bank and no company owning or
controlling voting shares of a bank is a bank
holding company by virtue of its ownership
or control of shares in a fiduciary capacity,
except as provided in paragraphs (2) and
(3) of subsection (g) of this section. For
the purpose of the preceding sentence, bank
shares shall not be deemed to have been
acquired in a fiduciary capacity if the acquir­
ing bank or company has sole discretionary
authority to exercise voting rights with re­
spect thereto; except that this limitation is
applicable in the case of a bank or company
acquiring such shares prior to the date of
enactment of the Bank Holding Company
Act Amendments of 1970 only if the bank
or company has the right consistent with its
obligations under the instrument, agreement,
or other arrangement establishing the fidu­
ciary relationship to divest itself of such
voting rights and fails to exercise that right
to divest within a reasonable period not to
exceed one year after the date of enactment
of the Bank Holding Company Act Amend­
ments of 1970.
(B) No company is a bank holding com­
pany by virtue of its ownership or control
of shares acquired by it in connection with
its underwriting of securities if such shares
are held only for such period of time as
will permit the sale thereof on a reasonable
basis.
(C) No company formed for the sole
purpose of participating in a proxy solicita­
tion is a bank holding company by virtue
of its control of voting rights of shares
acquired in the course of such solicitation.
(D ) No company is a bank holding com­
pany by virtue of its ownership or control
of shares acquired in securing or collecting
a debt previously contracted in good faith,
until two years after the date of acquisition.

STATUTORY APPENDIX

BANK HOLDING COMPANY ACT OF 1956
Act of May 9, 1956 (70 Stat. 133)

To define bank holding companies, control their
future expansion, and require divestment of their
nonbanking interests.
Be it enacted by the Senate and House o f Rep­
resentatives o f the United States o f America in
Congress assembled, That this Act may be cited
as the “Bank Holding Company Act of 1956”.
D e f in it io n s

Bank holding company

Sec . 2. ( a )(1 ) Except as provided in para­
graph (5) of this subsection, “bank holding com­
pany” means any company which has control
over any bank or over any company that is or
becomes a bank holding company by virtue of
this Act.
(2) Any company has control over a bank
or over any company if—
(A ) the company directly or indirectly or
acting through one or more other persons
owns, controls, or has power to vote 25 per
centum or more of any class of voting secu­
rities of the bank or company;
(B) the company controls in any manner
the election of a majority of the directors
or trustees of the bank or company; or
(C) the Board determines, after notice
and opportunity for hearing, that the com­
pany directly or indirectly exercises a con­
trolling influence over the management or
policies of the bank or company.
(3) For the purposes of any proceeding un­
der paragraph (2 )(C ) of this subsection, there
is a presumption that any company which
directly or indirectly owns, controls, or has
power to vote less than 5 per centum of any
class of voting securities of a given bank or
company does not have control over that bank
or company.
(4) In any administrative or judicial pro­
ceeding under this Act, other than a proceed­
ing under paragraph (2 )(C ) of this subsection,




11

STATUTORY APPENDIX

REGULATION Y
(E ) N o company is a bank holding com­
pany by virtue of its ownership or control
of any State chartered bank or trust com­
pany which is wholly owned by thrift insti­
tutions and which restricts itself to the ac­
ceptance of deposits from thrift institutions,
deposits arising out of the corporate business
of its owners, and deposits of public moneys.
(F ) N o trust company or mutual savings
bank which is an insured bank under the
Federal Deposit Insurance Act is a bank
holding company by virtue of its direct or
indirect ownership or control of one bank
located in the same State, if (i) such owner­
ship or control existed on the date of enact­
ment of the Bank Holding Company Act
Amendments of 1970 and is specifically
authorized by applicable State law, and (ii)
the trust company or mutual savings bank
does not after that date acquire an interest
in any company that, together with any other
interest it holds in that company, will exceed
5 per centum of any class of the voting
shares of that company, except that this limi­
tation shall not be applicable to investments
of the trust company or mutual savings bank,
direct and indirect, which are otherwise in
accordance with the limitations applicable to
national banks under section 5136 of the
Revised Statutes (12 U.S.C. 24).

Bank

(c) “Bank” means any institution organized
under the laws of the United States, any State
of the United States, the District of Columbia,
any territory of the United States, Puerto Rico,
Guam, American Samoa, or the Virgin Islands
which (1) accepts deposits that the depositor has
a legal right to withdraw on demand, and (2)
engages in the business of making commercial
loans. Such term does not include any organiza­
tion operating under section 25 or section 25(a)
of the Federal Reserve Act, or any organization
which does not do business within the United
States except as an incident to its activities outside
the United States. “District bank” means any
bank organized or operating under the Code of
Law for the District of Columbia.
Subsidiary

(d) “Subsidiary”, with respect to a specified
bank holding company, means (1) any company
25 per centum or more of whose voting shares
(excluding shares owned by the United States or
by any company wholly owned by the United
States) is directly or indirectly owned or con­
trolled by such bank holding company, or is held
by it with power to vote; (2) any company the
election of a majority of whose directors is con­
trolled in any manner by such bank holding com­
pany; or (3) any company with respect to the
(6)
For the purposes of this Act, any suc­ management or policies of which such bank hold­
cessor to a bank holding company shall be
ing company has the power, directly or indirectly,
deemed to be a bank holding company from
to exercise a controlling influence, as determined
the date on which the predecessor company
by the Board, after notice and opportunity for
became a bank holding company.
hearing.
Company

(b)
“Company” means any corporation, part­
nership, business trust, association, or similar or­
ganization, or any other trust unless by its terms
it must terminate within twenty-five years or not
later than twenty-one years and tea months after
the death of individuals living on the effective
date of the trust, but shall not include any cor­
poration the majority of the shaies of which are
owned by the United States or by any State.
“Company covered in 1970” means a company
which becomes a bank holding company as a
result of the enactment of the Bank Holding
Company Act Amendments of 1970 and which
would have been a bank holding company on
June 30, 1968, if those amendments had been
enacted on that date.




12

Successor

(e) The term “successor” shall include any
company which acquires directly or indirectly
from a bank holding company shares of any
bank, when and if the relationship between such
company and the bank holding company is such
that the transaction effects no substantial change
in the control of the bank or beneficial ownership
of such shares of such bank. The Board may, by
regulation, further define the term “successor” to
the extent necessary to prevent evasion of the
purposes of this Act.
Board

(f) “Board” means the Board of Governors
of the Federal Reserve System.

STATUTORY APPENDIX

REGULATION Y

Indirect ownership and control

A c q u is it io n o f B a n k S h a r e s o r A s s e t s

(g) For the purposes of this Act—
(1) shares owned or controlled by any sub­
sidiary of a bank holding company shall be
deemed to be indirectly owned or controlled by
such bank holding company;
(2) shares held or controlled directly or
indirectly by trustees for the benefit of (A)
a company, (B) the shareholders or members
of a company, or (C ) the employees (whether
exclusively or not) of a company, shall be
deemed to be controlled by such company; and
(3) shares transferred after January 1, 1966,
by any bank holding company (or by any
company which, but for such transfer, would
be a bank holding company) directly or indi­
rectly to any transferee that is indebted to the
transferor, or has one or more officers, direc­
tors, trustees, or beneficiaries in common with
or subject to control by the transferor, shall
be deemed to be indirectly owned or controlled
by the transferor unless the Board, after op­
portunity for hearing, determines that the trans­
feror is not in fact capable of controlling the
transferee.

Transactions requiring approval; exceptions
S e c . 3. (a) It shall be unlawful, except with
the prior approval of the Board, (1) for any
action to be taken that causes any company to
become a bank holding company; (2) for any
action to be taken that causes a bank to become
a subsidiary of a bank holding company; (3)
for any bank holding company to acquire direct
or indirect ownership or control of any voting
shares of any bank if, after such acquisition,
such company will directly or indirectly own or
control more than 5 per centum of the voting
shares of such bank; (4) for any bank holding
company or subsidiary thereof, other than a bank,
to acquire all or substantially all of the assets of
a bank; or (5) for any bank holding company to
merge or consolidate with any other bank hold­
ing company. Notwithstanding the foregoing this
prohibition shall not apply to (A) shares acquired
by a bank, (i) in good faith in a fiduciary capac­
ity, except where such shares are held under a
trust that constitutes a company as defined in
section 2(b) and except as provided in paragraphs
(2) and (3) of section 2 (g ), or (ii) in the reg­
ular course of securing or collecting a debt pre­
viously contracted in good faith, but any shares
acquired after the date of enactment of this Act
in securing or collecting any such previously con­
tracted debt shall be disposed of within a period
of two years from the date on which they were
acquired; or (B) additional shares acquired by
a bank holding company in a bank in which such
bank holding company owned or controlled a
majority of the voting shares prior to such acqui­
sition. For the purpose of the preceding sentence,
bank shares acquired after the date of enactment
of the Bank Holding Company Act Amendments
of 1970 shall not be deemed to have been
acquired in good faith in a fiduciary capacity if
the acquiring bank or company has sole discre­
tionary authority to exercise voting rights with
respect thereto, but in such instances acquisitions
may be made without prior approval of the Board
if the Board, upon application filed within ninety
days after the shares are acquired, approves
retention or, if retention is disapproved, the
acquiring bank disposes of the shares or its sole
discretionary voting rights within two years after
issuance of the order of disapproval.

Extraterritorial application

(h) The application of this Act and of section
23A of the Federal Reserve Act (12 U.S.C. 371),
as amended, shall not be affected by the fact that
a transaction takes place wholly or partly outside
the United States or that a company is organized
or operates outside the United States: Provided,
however, That the prohibitions of section 4 of this
Act shall not apply to shares of any company
organized under the laws of a foreign country that
does not do any business within the United States,
if such shares are held or acquired by a bank
holding company that is principally engaged in
the banking business outside the United States.
Thrift institution

(i) The term “thrift institution” means (1) a
domestic building and loan or savings and loan
association, (2) a cooperative bank without
capital stock organized and operated for mutual
purposes and without profit, or (3) a mutual
savings bank not having capital stock represented
by shares.
[U. S. C., title 12, sec. 1841. A s amended by A cts of
July 1, 1966 (80 Stat. 236) and D ec. 31, 1970 (84 Stat.
1760). The date of enactment of the Bank Holding Com­
pany Act Amendments of 1970 referred to in this section is
Dec. 31, 1970.]




13

STATUTORY APPENDIX

REGULATION Y

stantially to lessen competition, or to tend to
create a monopoly, or which in any other m an­
ner would be in restraint of trade, unless it
finds that the anticompetitive effects of the
proposed transaction are clearly outweighed in
the public interest by the probable effect of
the transaction in meeting the convenience and
needs of the community to be served.

Hearings on applications

(b) Upon receiving from a company any ap­
plication for approval under this section, the
Board shall give notice to the Comptroller of the
Currency, if the applicant company or any bank
the voting shares or assets of which are sought
to be acquired is a national banking association
or a District bank, or to the appropriate super­
visory authority of the interested State, if the
applicant company or any bank the voting shares
or assets of which are sought to be acquired is
a State bank, and shall allow thirty days within
which the views and recommendations of the
Comptroller of the Currency or the State super­
visory authority, as the case may be, may be sub­
mitted. If the Comptroller of the Currency or the
State supervisory authority so notified by the
Board disapproves the application in writing with­
in said thirty days, the Board shall forthwith give
written notice of that fact to the applicant. Within
three days after giving such notice to the applicant,
the Board shall notify in writing the applicant and
the disapproving authority of the date for com­
mencement of a hearing by it on such applica­
tion. Any such hearing shall be commenced not
less than ten nor more than thirty days after the
Board has given written notice to the applicant
of the action of the disapproving authority. The
length of any such hearing shall be determined
by the Board, but it shall afford all interested
parties a reasonable opportunity to testify at such
hearing. A t the conclusion thereof, the Board
shall by order grant or deny the application on
the basis of the record made at such hearing. In
the event of the failure of the Board to act on any
application for approval under this section within
the ninety-one-day period which begins on the
date of submission to the Board of the complete
record on that application, the application shall
be deemed to have been granted.

In every case, the Board shall take into con­
sideration the financial and managerial resources
and future prospects of the company or com­
panies and the banks concerned, and the con­
venience and needs of the community to be
served.
Acquisitions in other states

(d) Nothwithstanding any other provision of
this section, no application shall be approved
under this section which will permit any bank
holding company or any subsidiary thereof to
acquire, directly or indirectly, any voting shares
of, interest in, or all or substantially all of the
assets of any additional bank located outside of
the State in which the operations of such bank
holding company’s banking subsidiaries were
principally conducted on the effective date of this
amendment or the date on which such company
became a bank holding company, whichever is
later, unless the acquisition of such shares or
assets of a State bank by an out-of-State bank
holding company is specifically authorized by the
statute laws of the State in which such bank is
located, by language to that effect and not merely
by implication. For the purposes of this section,
the State in which the operations of a bank hold­
ing company’s subsidiaries are principally con­
ducted is that State in which total deposits of all
such banking subsidiaries are largest.
Deposit insurance

Factors to be considered

(c) The Board shall not approve—
(1) any acquisition or merger or consolida­
tion under this section which would result in
a monopoly, or which would be in furtherance
of any combination or conspiracy to monopo­
lize or to attempt to monopolize the business
of banking in any part of the United States, or
(2) any other proposed acquisition or merger
or consolidation under this section whose effect
in any section of the country may be sub­




(e) Every bank that is a holding company and
every bank that is a subsidiary of such a company
shall become and remain an insured bank as such
term is defined in section 3(h ) of the Federal
Deposit Insurance Act.
[U. S. C., title 12, sec. 1842. A s amended by Acts of
July 1, 1966 (80 Stat. 237); and D ec. 31, 1970 (84 Stat.
1763). The date of enactment of the Bank Holding Company
Act Amendments o f 1970 referred to in this section is
D ec. 31, 1970; the date of the amendment referred to in
paragraph (d ) is July 1, 1966.]

14

STATUTORY APPENDIX

REGULATION Y
to the purposes of this Act, that such action is
necessary to prevent undue concentration of
resources, decreased or unfair competition, con­
flicts of interest, or unsound banking practices;
and in the case of any such company control­
ling a bank having bank assets in excess of
$60,000,000 on or after the date of enactment
of the Bank Holding Company Act Amend­
ments of 1970 the Board shall determine, with­
in two years after such date (or, if later, within
two years after the date on which the bank
assets first exceed $60,000,000), whether the
authority conferred by the preceding proviso
with respect to such company should be ter­
minated as provided in this sentence. Nothing
in this paragraph shall be construed to author­
ize any bank holding company referred to in
the preceding proviso, or any subsidiary there­
of, to engage in activities authorized by that
proviso through the acquisition, pursuant to a
contract entered into after June 30, 1968, of
any interest in or the assets of a going concern
engaged in such activities. Any company which
is authorized to engage in any activity pursuant
to the preceding proviso or subsection (d) of
this section but, as a result of action of the
Board, is required to terminate such activity
may (notwithstanding any otherwise applicable
time limit prescribed in this paragraph) retain
the ownership or control of shares in any com­
pany carrying on such activity for a period of
ten years from the date on which its authority
was so terminated by the Board.
The Board is authorized, upon application by a
bank holding company, to extend the two-year
period referred to in paragraph (2) above from
time to time as to such bank holding company
for not more than one year at a time, if, in its
judgment, such an extension would not be detri­
mental to the public interest, but no such exten­
sions shall in the aggregate exceed three years.

In t e r e s t s i n N o n b a n k in g O r g a n iz a t io n s

Prohibitions
S e c . 4. (a) Except as otherwise provided in
this Act, no bank holding company shall—
(1) after the date of enactment of this Act
acquire direct or indirect ownership or con­
trol of any voting shares of any company which
is not a bank, or
(2) after two years from the date as of which
it becomes a bank holding company, or in the
case of a company which has been continuously
affiliated since May 15, 1955, with a company
which was registered under the Investment
Company Act of 1940, prior to May 15, 1955,
in such a manner as to constitute an affiliated
company within the meaning of that Act, after
December 31, 1978, or in the case of any com­
pany which becomes, as a result of the enact­
ment of the Bank Holding Company Act
Amendments of 1970, a bank holding com­
pany on the date of such enactment, after De­
cember 31, 1980, retain direct or indirect
ownership or control of any voting shares of
any company which is not a bank or bank hold­
ing company or engage in any activities other
than (A ) those of banking or of managing
or controlling banks and other subsidiaries
authorized under this Act or of furnishing
services to or performing services for its sub­
sidiaries, and (B) those permitted under para­
graph (8) of subsection (c) of this section
subject to all the conditions specified in such
paragraph or in any order or regulation issued
by the Board under such paragraph: Provided,
That a company covered in 1970 may also en­
gage in those activities in which directly or
through a subsidiary (i) it was lawfully en­
gaged on June 30, 1968 (or on a date subse­
quent to June 30, 1968 in the case of activities
carried on as the result of the acquisition by
such company or subsidiary, pursuant to a
binding written contract entered into on or
before June 30, 1968, of another company
engaged in such activities at the time of the
acquisition), and (ii) it has been continuously
engaged since June 30, 1968 (or such subse­
quent date). The Board by order, after oppor­
tunity for hearing, may terminate the authority
conferred by the preceding proviso on any
company to engage directly or through a sub­
sidiary in any activity otherwise permitted by
that proviso if it determines, having due regard




Divorcement of shares

(b)
After two years from the date of enact­
ment of this Act, no certificate evidencing shares
of any bank holding company shall bear any state­
ment purporting to represent shares of any other
company except a bank or a bank holding com­
pany, nor shall the ownership, sale, or transfer of
shares of any bank holding company be condi­
tioned in any manner whatsoever upon the owner­
ship, sale, or transfer of shares of any other
company except a bank or a bank holding
company.

15

STATUTORY APPENDIX

REGULATION Y
Exemptions

(c)
The prohibitions in this section shall not
apply to any bank holding company which is (i)
a labor, agricultural, or horticultural organization
and which is exempt from taxation under section
501 of the Internal Revenue Code of 1954, or (ii)
a company covered in 1970 more than 85 per
centum of the voting stock of which was collec­
tively owned on June 30, 1968, and continuously
thereafter, directly or indirectly, by or for mem­
bers of the same family, or their spouses, who are
lineal descendants of common ancestors; and such
prohibitions shall not, with respect to any other
bank holding company, apply to—
(1) shares of any company engaged or to be
engaged solely in one or more of the following
activities: (A ) holding or operating properties
used wholly or substantially by any banking
subsidiary of such bank holding company in
the operations of such banking subsidiary or
acquired for such future use; or (B) conducting
a safe deposit business; or (C ) furnishing serv­
ices to or performing services for such bank
holding company or its banking subsidiaries; or
(D ) liquidating assets acquired from such bank
holding company or its banking subsidiaries or
acquired from any other source prior to May 9,
1956, or the date on which such company
became a bank holding company, whichever is
later;
(2) shares acquired by a bank in satisfaction
of a debt previously contracted in good faith,
but such bank shall dispose of such shares
within a period of two years from the date on
which they were acquired, except that the Board
is authorized upon application by such bank
holding company to extend such period of two
years from time to time as to such holding com­
pany for not more than one year at a time if, in
its judgment, such an extension would not be
detrimental to the public interest, but no such
extensions shall extend beyond a date five years
after the date on which such shares were
acquired;
(3) shares acquired by such bank holding
company from any of its subsidiaries which sub­
sidiary has been requested to dispose of such
shares by any Federal or State authority having
statutory power to examine such subsidiary, but
such bank holding company shall dispose of
such shares within a period of two years from
the date on which they were acquired;
(4) shares held or acquired by a bank in




16

good faith in a fiduciary capacity, except where
such shares are held under a trust that con­
stitutes a company as defined in section 2(b )
and except as provided in paragraphs (2) and
(3) of section 2 ( g ) ;
(5) shares which are of the kinds and
amounts eligible for investment by national
banking associations under the provisions of
section 5136 of the Revised Statutes;
(6) shares of any company which do not
include more than 5 per centum of the out­
standing voting shares of such company;
(7) shares of an investment company which
is not a bank holding company and which is
not engaged in any business other than investing
in securities, which securities do not include
more than 5 per centum of the outstanding
voting shares of any company;
(8) shares of any company the activities of
which the Board after due notice and oppor­
tunity for hearing has determined (by order or
regulation) to be so closely related to banking
or managing or controlling banks as to be a
proper incident thereto. In determining whether
a particular activity is a proper incident to
banking or managing or controlling banks the
Board shall consider whether its performance
by an affiliate of a holding company can reason­
ably be expected to produce benefits to the
public, such as greater convenience, increased
competition, or gains in efficiency, that out­
weigh possible adverse effects, such as undue
concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound
banking practices. In orders and regulations
under this subsection, the Board may differen­
tiate between activities commenced de novo and
activities commenced by the acquisition, in
whole or in part, of a going concern;
(9) shares held or activities conducted by any
company organized under the laws of a foreign
country the greater part of whose business is
conducted outside the United States, if the
Board by regulation or order determines that,
under the circumstances and subject to the con­
ditions set forth in the regulation or order, the
exemption would not be substantially at variance
with the purposes of this Act and would be in
the public interest;
(10) shares lawfully acquired and owned
prior to May 9, 1956, by a bank which is a
bank holding company, or by any of its wholly
owned subsidiaries;

REGULATION Y

STATUTORY APPENDIX
Hardship exemption

(11) shares owned directly or indirectly by
a company covered in 1970 in a company which
does not engage in any activities other than
those in which the bank holding company, or
its subsidiaries, may engage by virtue of this
section, but nothing in this paragraph authorizes
any bank holding company, or subsidiary
thereof, to acquire any interest in or the assets
of any going concern (except pursuant to a
binding written contract entered into before June
30, 1968, or pursuant to another provision of
this Act) other than one which was a subsidiary
on June 30, 1968;
(12) shares retained or acquired, or activities
engaged in, by any company which becomes, as
a result of the enactment of the Bank Holding
Company Act Amendments of 1970, a bank
holding company on the date of such enact­
ment, or by any subsidiary thereof, if such
company—
(A ) within the applicable time limits pre­
scribed in subsection ( a )(2 ) of this section
(i) ceases to be a bank holding company,
or (ii) ceases to retain direct or indirect
ownership or control of those shares and to
engage in those activities not authorized
under this section; and
(B) complies with such other conditions
as the Board may by regulation or order
prescribe; or
(13) shares of, or activities conducted by,
any company which does no business in the
United States except as an incident to its in­
ternational 'Or foreign business, if the Board
by regulation or order determines that, under
the circumstances and subject to the conditions
set forth in the regulation or order, the exemp­
tion would not be substantially at variance
with the purposes of this Act and would be in
the public interest.
In the event of the failure of the Board to act on
any application for an order under paragraph (8)
of this subsection within the ninety-one-day pe­
riod which begins on the date of submission to
the Board of the complete record on that applica­
tion, the application shall be deemed to have
been granted. The Board shall include in its an­
nual report to the Congress a description and a
statement of the reasons for approval of each
activity approved by it by order or regulation
under such paragraph during the period covered
by the report.




(d) To the extent that such action would not
be substantially at variance with the purposes of
this Act and subject to such conditions as it con­
siders necessary to protect the public interest, the
Board by order, after opportunity for hearing,
may grant exemptions from the provisions of this
section to any bank holding company which con­
trolled one bank prior to July 1, 1968, and has
not thereafter acquired the control of any other
bank in order (1) to avoid disrupting business
relationships that have existed over a long period
of years without adversely affecting the banks or
communities involved, or (2) to avoid forced
sales of small locally owned banks to purchasers
not similarly representative of community inter­
ests, or (3) to allow retention of banks that are
so small in relation to the holding company’s total
interests and so small in relation to the banking
market to be served as to minimize the likelihood
that the bank’s powers to grant or deny credit
may be influenced by a desire to further the hold­
ing company’s other interests.
Retention of shares after repeal of exemption

(e) With respect to shares which were not sub­
ject to the prohibitions of this section as originally
enacted by reason of any exemption with respect
thereto but which were made subject to such pro­
hibitions by the subsequent repeal of such exemp­
tion, no bank holding company shall retain direct
or indirect ownership or control of such shares
after five years from the date of the repeal of such
exemption, except as provided in paragraph (2)
of subsection (a). Any bank holding company
subject to such five-year limitation on the retention
of nonbanking assets shall endeavor to divest it­
self of such shares promptly and such bank hold­
ing company shall report its progress in such di­
vestiture to the Board two years after repeal of
the exemption applicable to it and annually there­
after.
[U. S. C., title 12, sec. 1843. A s amended by Acts of
July 1, 1966 (80 Stat. 238) and D ec. 31, 1970 (84 Stat.
1763).]
A d m in is t r a t io n

Registration statements
S ec . 5. (a) Within one hundred and eighty
days after the date of enactment of this Act, or
within one hundred and eighty days after becom­
ing a bank holding company, whichever is later,

17

REGULATION Y

STATUTORY APPENDIX

each bank holding company shall register with
the Board on forms prescribed by the Board,
which shall include such information with respect
to the financial condition and operations, manage­
ment, and intercompany relationships of the bank
holding company and its subsidiaries, and related
matters, as the Board may deem necessary or ap­
propriate to carry out the purposes of this Act.
The Board may, in its discretion, extend the time
within which a bank holding company shall regis­
ter and file the requisite information.

construed as preventing any State from exercising
such powers and jurisdiction which it now has or
may hereafter have with respect to banks, bank
holding companies, and subsidiaries thereof.
[U. S. C., title 12, sec. 1846.]
P e n a l t ie s

Criminal penalties
S e c . 8. Any company which willfully violates
any provision of this Act, or any regulation or
order issued by the Board pursuant thereto, shall
upon conviction be fined not more than $1,000
for each day during which the violation continues.
Any individual who willfully participates in a
violation of any provision of this Act shall upon
conviction be fined not more than $10,000 or
imprisoned not more than one year, or both.
Every officer, director, agent, and employee of a
bank holding company shall be subject to the
same penalties for false entries in any book, re­
port, or statement of such bank holding company
as are applicable to officers, directors, agents, and
employees of member banks for false entries in
any books, reports, or statements of member
banks under section 1005 of title 18, United States
Code.

Regulations

(b) The Board is authorized to issue such reg­
ulations and orders as may be necessary to enable
it to administer and carry out the purposes of this
Act and prevent evasions thereof.
Reports and examinations

(c) The Board from time to time may require
reports under oath to keep it informed as to
whether the provisions of this Act and such reg­
ulations and orders issued thereunder have been
complied with; and the Board may make exami­
nations of each bank holding company and each
subsidiary thereof, the cost of which shall be
assessed against, and paid by, such holding com­
pany. The Board shall, as far as possible, use the
reports of examinations made by the Comptroller
of the Currency, the Federal Deposit Insurance
Corporation, or the appropriate State bank super­
visory authority for the purposes of this section.

[U. S. C., title 12, sec. 1847.]
J u d ic ia l R e v ie w

Judicial review

Sec . 9. Any party aggrieved by an order of the
Board under this Act may obtain a review of such
order in the United States Court of Appeals with­
in any circuit wherein such party has its principal
place of business, or in the Court of Appeals in
the District of Columbia, by filing in the court,
within thirty days after the entry of the Board’s
order, a petition praying that the order of the
Board be set aside. A copy of such petition shall
be forthwith transmitted to the Board by the clerk
of the court, and thereupon the Board shall file in
the court the record made before the Board, as
provided in section 2112 of title 28, United States
Code. Upon the filing of such petition the court
shall have jurisdiction to affirm, set aside, or
modify the order of the Board and to require the
Board to take such action with regard to the m at­
ter under review as the court deems proper. The
findings of the Board as to the facts, if supported
by substantial evidence, shall be conclusive.

Annual Reports of Board

(d) Before the expiration of two years follow­
ing the date of enactment of this Act, and each
year thereafter in the Board’s annual report to
the Congress, the Board shall report to the Con­
gress the results of the administration of this Act,
stating what, if any, substantial difficulties have
been encountered in carrying out the purposes of
this Act, and any recommendations as to changes
in the law which in the opinion of the Board
would be desirable.
[U. S. C., title 12, sec. 1844.]
[Section 6 was repealed by section 9 o f the A ct of July
1, 1966 (80 Stat. 240).]
R e s e r v a t io n

of

R ig h t s

to

States

States’ rights

[U. S. C., title 12, sec. 1848. A s amended by A cts of
Aug. 28, 1958 (72 Stat. 951) and July 1, 1966 (80
Stat. 240).]

7. The enactment by the Congress of the
Bank Holding Company Act of 1956 shall not be
Sec.




18

STATUTORY APPENDIX

REGULATION Y
“ (ii) common stock received in an ex­
change to which subsection (c) (2) applies
to a shareholder, in exchange for its com­
mon stock; or
“ (iii) preferred stock or common stock
received in an exchange to which subsec­
tion (c) (2) applies to a shareholder, in
exchange for its preferred stock; or
“ (iv) securities or preferred or common
stock received in an exchange to which
subsection (c) (2) applies to a security
holder, in exchange for its securities; and
“ (B) any preferred stock received has sub­
stantially the same terms as the preferred
stock exchanged, and any securities received
have substantially the same terms as the se­
curities exchanged,
then, except as provided in subsection (f), no
gain to the shareholder or security holder from
the receipt of such stock or such securities or
such stock and securities shall be recognized.
“ (3 ) N o n p ro r a t a d is t r ib u t io n . — Para­
graphs (1) and (2) shall apply to a distribu­
tion whether or not the distribution is pro rata
with respect to all of the shareholders of the
distributing qualified bank holding corporation.
“ (4 ) E x c e p t io n .— This subsection shall not
apply to any distribution by a corporation which
has made any distribution pursuant to subsec­
tion (b).

A m e n d m e n ts t o
I n t e r n a l R e v e n u e C o d e o f 1954

Tax provisions
S e c . 10. (a) Subchapter O of chapter 1 of the
Internal Revenue Code of 1954 is amended by
adding at the end thereof the following new part:

“PART V III— DISTRIBUTIONS PURSU­
ANT TO BANK H O LD IN G COMPANY
ACT OF 1956
“Sec. 1101. Distributions pursuant to Bank
H olding Com pany A ct o f 1956.
“Sec. 1102. Special rules.
“Sec. 1103. Definitions.

“SEC. 1101. DISTRIBUTIONS PURSUANT TO
BANK HOLDING COMPANY ACT OF 1956.
“ (a ) D istributions of C ertain N o n -B anking
P ro perty .—
“ (1 ) D istr ibution s of prohibited pr o p ­
e r t y .— If—

“ (A ) a qualified bank holding corporation
distributes prohibited property (other than
stock received in an exchange to which sub­
section (c) (2) applies) —
“ (i) to a shareholder (with respect to
its stock held by such shareholder), with­
out the surrender by such shareholder of
stock in such corporation; or
“ (ii) to a shareholder, in exchange for
its preferred stock; or
“ (iii) to a security holder, in exchange
for its securities; and
“ (B) the Board has, before the distribu­
tion, certified that the distribution of such
prohibited property is necessary or appropri­
ate to effectuate section 4 of the Bank Hold­
ing Company Act of 1956,
then no gain to the shareholder or security
holder from the receipt of such property shall
be recognized.
“ (2) D is t r ib u t io n s o f s t o c k and s e c u r i­

“ (5 ) D istributions involving gift or com ­
pe n sa t io n .—

“In the case of a distribution to which para­
graph (1) or (2) applies, but which—
“(A) results in a gift, see section 2501, and
following, or
“(B) has the effect of the payment of compen­
sation, see section 61 (a) (1).

“ (b) C o r p o r a tio n C e a sin g t o B e a B an k
H o ld in g C o m p a n y .—
“ (1 ) D istributions of property w hich

t i e s r e c e iv e d in a n e x c h a n g e t o w h ic h su b ­
s e c t io n (c) (2) a p p lie s .— If —

CAUSE A CORPORATION TO BE A BANK HOLDING
CO M PA N Y .---- If ----

“ (A ) a qualified bank holding corporation
distributes—
“ (i) common stock received in an ex­
change to which subsection (c) (2) applies
to a shareholder (with respect to its stock
held by such shareholder), without the sur­
render by such shareholder of stock in such
corporation; or




“ (A) a qualified bank holding corporation
distributes property (other than stock re­
ceived in an exchange to which subsection
(c) (3 ) applies) —
“ (i) to a shareholder (with respect to
its stock held by such shareholder), with­
out the surrender by such shareholder of
stock in such corporation; or

19

REGULATION Y

STATUTORY APPENDIX
the receipt of such stock or such securities or
such stock and securities shall be recognized.
“ (3) N o n p r o r a t a d i s t r i b u t i o n s . — Para­
graphs (1) and (2) shall apply to a distribution
whether or not the distribution is pro rata with
respect to all of the shareholders of the distrib­
uting qualified bank holding corporation.
“ (4) E x c e p t i o n .— This subsection shall not
apply to any distribution by a corporation which
has made any distribution pursuant to subsec­
tion (a).

“ (ii) to a shareholder, in exchange for
its preferred stock; or
“ (iii) to a security holder, in exchange
for its securities; and
“ (B) the Board has, before the distribu­
tion, certified that—
“ (i) such property is all or part of the
property by reason of which such corpora­
tion controls (within the meaning of sec­
tion 2 (a) of the Bank Holding Company
A ct of 1956) a bank or bank holding com­
pany, or such property is part of the prop­
erty by reason of which such corporation
did control a bank or a bank holding com­
pany before any property of the same kind
was distributed under this subsection or ex­
changed under subsection (c) (3 ); and
“ (ii) the distribution is necessary or ap­
propriate to effectuate the policies of such
Act,
then no gain to the shareholder or security
holder from the receipt of such property shall
be recognized.
“ (2 )
t ie s

D is t r ib u t io n s o f s t o c k a n d

“ (5 )

.—

“In the case of a distribution to which para­
graph (1) or (2) applies, but which—
“(A) results in a gift, see section 2501, and
following, or
“(B) has the effect of the payment of compen­
sation, see section 61(a) (1).

“ (c) P r o p e r t y A c q u i r e d A f t e r M a y 15,
1955.—
(1) I n g e n e r a l .— Except as provided in
paragraphs (2) and (3 ), subsection (a) or (b)
shall not apply to—
“ (A ) any property acquired by the dis­
tributing corporation after May 15, 1955, un­
less (i) gain to such corporation with respect
to the receipt of such property was not recog­
nized by reason of subsection (a) or (b ), or
(ii) such property was received by it in ex­
change for all of its stock in an exchange to
which paragraph (2) or (3) applies, or (iii)
such property was acquired by the distribut­
ing corporation in a transaction in which gain
was not recognized under section 305 (a) or
section 332, or under section 354 with respect
to a reorganization described in section 368
(a) (1) (E ) or ( F ) ,o r
“ (B) any property which was acquired by
the distributing corporation in a distribution
with respect to stock acquired by such cor­
poration after May 15, 1955, unless such
stock was acquired by such corporation (i)
in a distribution (with respect to stock held
by it on May 15, 1955, or with respect to
stock in respect of which all previous appli­
cations of this clause are satisfied) with re­
spect to which gain to it was not recognized
by reason of subsection (a) or (b ), or (ii)
in exchange for all of its stock in an exchange
to which paragraph (2) or (3) applies, or
(iii) in a transaction in which gain was not

s e c u r i­

RECEIVED IN AN EXCHANGE TO W HICH SU B ­

(c) (3) A PP L IE S.— If —
“ (A ) a qualified bank holding corporation
distributes—
“ (i) common stock received in an ex­
change to which subsection (c) (3) applies
to a shareholder (with respect to its stock
held by such shareholder), without the sur­
render by such shareholder of stock in such
corporation; or
“ (ii) common stock received in an ex­
change to which subsection (c) (3) applies
to a shareholder, in exchange for its com­
mon stock; or
“ (iii) preferred stock or common stock
received in an exchange to which subsec­
tion (c) (3) applies to a shareholder, in
exchange for its preferred stock; or
“ (iv) securities or preferred or common
stock received in an exchange to which
subsection (c) (3) applies to a security
holder, in exchange for its securities; and
“ (B) any preferred stock received has sub­
stantially the same terms as the preferred
stock exchanged, and any securities received
have substantially the same terms as the se­
curities exchanged,
then, except as provided in subsection (f), no
gain to the shareholder or security holder from

SECTION




D is t r ib u t io n s in v o l v in g g if t o r c o m ­

p e n s a t io n

20

STATUTORY APPENDIX

REGULATION Y

recognized under section 305 (a) or section
332, or under section 354 with respect to a
reorganization described in section 368 (a)
(1) (E ) or (F ), or
“ (C ) any property acquired by the dis­
tributing corporation in a transaction in
which gain was not recognized under section
332, unless such property was acquired from
a corporation which, if it had been a qualified
bank holding corporation, could have dis­
tributed such property under subsection (a)
(1) or (b) (1 ).
“ ( 2 ) E xchanges

involving

“ (B) immediately after the exchange, the
qualified bank holding corporation distributes
all of such stock in a manner prescribed in
subsection (b) (2) (A ); and
“ (C) before such exchange, the Board has
certified (with respect to the property ex­
changed which consists of property which,
under subsection (b) (1 ), such corporation
could distribute directly to its shareholders
or security holders without the recognition of
gain) that—
“ (i) such property is all or part of the
property by reason of which such corpora­
tion controls (within the meaning of sec­
tion 2 (a) of the Bank Holding Company
Act of 1956) a bank or bank holding com­
pany, or such property is part of the prop­
erty by reason of which such corporation
did control a bank or a bank holding com­
pany before any property of the same kind
was distributed under subsection (b) (1)
or exchanged under this paragraph; and
“ (ii) the exchange and distribution are
necessary or appropriate to effectuate the
policies of such Act,
then paragraph (1) shall not apply with respect
to such distribution.
“ (d) D is t r ib u t io n s t o A v o id F e d e r a l I n ­

prohibited

PR O PERTY.---If---

“ (A ) Any qualified bank holding corpora­
tion exchanges (i) property, which, under
subsection (a) (1 ), such corporation could
distribute directly to its shareholders or se­
curity holders without the recognition of gain
to such shareholders or security holders, and
other property (except property described in
subsection (b) (1) (B) ( i ) ), for (ii) all of the
stock of a second corporation created and
availed of solely for the purpose of receiving
such property;
“ (B) immediately after the exchange, the
qualified bank holding corporation distributes
all such stock in a manner prescribed in sub­
section (a) (2) (A ); and
“ (C) before such exchange, the Board has
certified (with respect to the property ex­
changed which consists of property which,
under subsection (a) (1 ), such corporation
could distribute directly to its shareholders
or security holders without the recognition of
gain) that the exchange and distribution are
necessary or appropriate to effectuate section
4 of the Bank Holding Company Act of
1956.
then paragraph (1) shall not apply with respect
to such distribution.
“ (3 )
ba n k s .—

c o m e T a x .—
“ (1 ) P r o h ib ite d p r o p e r ty . — Subsection (a)
shall not apply to a distribution if, in connec­
tion with such distribution, the distributing cor­
poration retains, or transfers after May 15,
1955, to any corporation, property (other than
prohibited property) as part of a plan one of
the principal purposes of which is the distribu­
tion of the earnings and profits of any corpora­
tion.
“ (2) B a n k in g p r o p e r ty .— Subsection (b)
shall not apply to a distribution if, in connec­
tion with such distribution, the distributing cor­
poration retains, or transfers after May 15,
1955, to any corporation, property (other than
property described in subsection (b) ( 1 ) (B )
(i)) as part of a plan one of the principal pur­
poses of which is the distribution of the earn­
ings and profits of any corporation.

E xchanges involving in t er e sts in
If—

“ (A ) any qualified bank holding corpora­
tion exchanges (i) property which, under
subsection (b) (1 ), such corporation could
distribute directly to its shareholders or se­
curity holders without the recognition of gain
to such shareholders or security holders, and
other property (except prohibited property),
for (ii) all of the stock of a second corpora­
tion created and availed of solely for the pur­
pose of receiving such property;




“ (3 ) C e r ta in

c o n t r ib u t io n s t o

c a p it a l.

— In the case of a distribution a portion of
which is attributable to a transfer which is a
contribution to the capital of a corporation,
made after May 15, 1955, and prior to the date
of the enactment of this part, if subsection (a)

21

STATUTORY APPENDIX

REGULATION Y

(iv), subsection (a) or subsection (b) (as the
case may be) shall apply only to the extent that
the principal amount of the securities received
does not exceed the principal amount of the
securities exchanged.
“SEC. 1102. SPECIAL RULES.
“ (a) B a sis o f P r o p e r t y A c q u ir e d in D i s t r i ­
b u tio n s . — If, by reason of section 1101, gain is
not recognized with respect to the receipt of any
property, then, under regulations prescribed by
the Secretary or his delegate—
“ (1) if the property is received by a share­
holder with respect to stock, without the sur­
render by such shareholder of stock, the basis
of the property received and of the stock with
respect to which it is distributed shall, in the
distributee’s hands, be determined by allocating
between such property and such stock the ad­
justed basis of such stock; or
“ (2) if the property is received by a share­
holder in exchange for stock or by a security
holder in exchange for securities, the basis of
the property received shall, in the distributee’s
hands, be the same as the adjusted basis of the
stock or securities exchanged, increased by—
“ (A ) the amount of the property received
which was treated as a dividend, and
“ (B) the amount of gain to the taxpayer
recognized on the property received (not in­
cluding any portion of such gain which was
treated as a dividend).
“ (b) P e r i o d s o f L i m i t a t i o n . — The periods of
limitation provided in section 6501 (relating to
limitations on assessment and collection) shall not
expire, with respect to any deficiency (including
interest and additions to the tax) resulting solely
from the receipt of property by shareholders in a
distribution which is certified by the Board under
subsection (a ), ( b ) , o r (c) of section 1101, until
five years after the distributing corporation notifies
the Secretary or his delegate (in such manner and
with such accompanying information as the Sec­
retary or his delegate may by regulations pre­
scribe) that the period (including extensions
thereof) prescribed in section 4 (a) of the Bank
Holding Company Act of 1956, or section 1101
(e) (2) (B ), whichever is applicable, has expired;
and such assessment may be made notwithstanding
any provision of law or rule of law which would
otherwise prevent such assessment.
“ (c) A l l o c a t i o n o f E a r n in g s a n d P r o f i t s . —

or (b) would apply to such distribution but for
the fact that, under paragraph (1) or (2) (as
the case may be) of this subsection, such con­
tribution to capital is part of a plan one of the
principal purposes of which is to distribute the
earnings and profits of any corporation, then,
notwithstanding paragraph (1) or (2 ), subsec­
tion (a) or (b) (as the case may be) shall
apply to that portion of such distribution not
attributable to such contribution to capital, and
shall not apply to that portion of such distribu­
tion attributable to such contribution to capital.
“ (e) F in a l C e r t i f i c a t i o n . —
“ ( 1 ) F o r s u b s e c t io n (a ).— Subsection (a)
shall not apply with respect to any distribution
by a corporation unless the Board certifies that,
before the expiration of the period permitted
under section 4 (a) of the Bank Holding Com­
pany Act of 1956 (including any extensions
thereof granted to such corporation under such
section 4 ( a ) ) , the corporation has disposed of
all the property the disposition of which is
necessary or appropriate to effectuate section 4
of such Act (or would have been so necessary
or appropriate if the corporation had continued
to be a bank holding com pany).
“ (2) F o r s u b s e c t io n ( b ) .—
“ (A ) Subsection (b) shall not apply with
respect to any distribution by any corpora­
tion unless the Board certifies that, before the
expiration of the period specified in subpara­
graph (B ), the corporation has ceased to be
a bank holding company.
“ (B) The period referred to in subpara­
graph (A ) is the period which expires 2 years
after the date of the enactment of this part
or 2 years after the date on which the cor­
poration becomes a bank holding company,
whichever date is later. The Board is author­
ized, on application by any corporation, to
extend such period from time to time with
respect to such corporation for not more than
one year at a time if, in its judgment, such
an extension would not be detrimental to the
public interest; except that such period may
not in any case be extended beyond the date
5 years after the date of the enactment of
this part or 5 years after the date on which
the corporation becomes a bank holding com­
pany, whichever date is later.
“ ( f ) C e r t a in E x c h a n g e s o f S e c u r it ie s .— In
the case o f an exchange described in subsection
(a ) (2) (A ) (iv ) or subsection (b ) (2) (A )




“ ( 1 ) D is t r ib u t io n o f s t o c k in a c o n ­
t r o l l e d c o r p o r a t io n . — In the case of a dis­

22

STATUTORY APPENDIX

REGULATION Y

tribution by a qualified bank holding corpora­
“ (3) In applying subsections (c) and (d) of
tion under section 1101 (a) (1) or (b) (1) of
section 1101 and subsection (b) of section
stock in a controlled corporation, proper allo­
1103, the date ‘April 12, 1965’ shall be sub­
cation with respect to the earnings and profits
stituted for the date ‘May 15, 1955’.
of the distributing corporation and the con­
“ (4) In applying subsection (d) (3) of sec­
trolled corporation shall be made under regula­
tion 1101, the date of the enactment of this sub­
tions prescribed by the Secretary or his delegate.
section shall be treated as being the date of the
“ (2) E x c h a n g e s d e sc r ib e d in s e c t io n 1101
enactment of this part.
(c)
(2) o r ( 3 ) . — In the case of any exchange
“ (5) In applying subsection (b) (2) (A ) of
described in section 1101 (c) (2) or (3 ),
section 1103, the reference to the Bank Hold­
proper allocation with respect to the earnings
ing Company Act of 1956 shall be treated as
and profits of the corporation transferring the
referring to such Act as amended by Public Law
property and the corporation receiving such
89-485.
property shall be made under regulations pre­
scribed by the Secretary or his delegate.
“SEC. 1103. DEFINITIONS.
“ (3 ) D e f in i t io n o f c o n t r o l l e d c o r p o r a ­
t i o n .— F or purposes of paragraph (1 ), the

term ‘controlled corporation’ means a corpora­
tion with respect to which at least 80 per cent
of the total combined voting power of all classes
of stock entitled to vote and at least 80 per cent
of the total number of shares of all other classes
of stock is owned by the distributing qualified
bank holding corporation.
“ (d) I t e m iz a t io n o f P r o p e r t y .— In any cer­
tification under this part, the Board shall make
such specification and itemization of property as
may be necessary to carry out the provisions of
this part.
“ (e ) C e r t a in B an k H o ld in g C o m p a n ies.—
T his part shall apply in respect o f any com pany
w hich b ecom es a bank holding com pany as a re­
sult o f the enactm ent o f the A ct entitled ‘An A ct
to am end the Bank H old in g C om pany A ct o f
1956’, approved July 1, 1966 (P ublic Law 89485), w ith the follow in g m odifications:

“ (1) Subsections (a) ( 3 ) and (b) (3 ) of
section 1101 shall not apply.
“ (2) Subsections (a) (1) and (2) and (b)
(1) and (2) of section 1101 shall apply in re­
spect of distributions to shareholders of the dis­
tributing bank holding corporation only if all
distributions to each class of shareholders which
are made—
“ (A ) after April 12, 1965, and
“ (B) on or before the date on which the
Board of Governors of the Federal Reserve
System makes its final certification under sec­
tion 1101 (e),
are pro rata. For purposes of the preceding sen­
tence, any redemption of stock made in whole
or in part with property other than money shall
be treated as a distribution.




23

“ (a ) B an k H o ld in g C om p an y.— For purposes
o f this part, the term ‘bank holding com pany’ has
the m eaning assigned to such term by section 2
o f the Bank H old in g C om pany A ct o f 1956.
“ (b ) Q ualified

B ank

H olding

C orpora ­

tio n .—

“ ( 1 ) In g e n e r a l .— E xcept as provided in
paragraph ( 2 ) , for purposes o f this part the
term ‘qualified bank holding corporation’ m eans
any corporation (as defined in section 7701
(a ) (3 )) w hich is a bank holding com pany and
w hich h olds prohibited property acquired by
it—

“ (A ) on or before May 15, 1955.
“ (B) in a distribution in which gain to
such corporation with respect to the receipt
of such property was not recognized by rea­
son of subsection (a) or (b) of section 1101,
or
“ (C) in exchange for all of its stock in an
exchange described in section 1101 (c) (2)
or (c) (3).
“ (2) L i m i t a t i o n s .—
“ (A) A bank holding company shall not
be a qualified bank holding corporation, un­
less it would have been a bank holding com­
pany on May 15, 1955, if the Bank Holding
Company Act of 1956 had been in effect on
such date, or unless it is a bank holding com­
pany determined solely by reference to—
“ (i) property acquired by it on or be­
fore May 15, 1955,
“ (ii) property acquired by it in a distri­
bution in which gain to such corporation
with respect to the receipt of such property
was not recognized by reason of subsec­
tion (a) or (b) of section 1101, and

REGULATION Y

STATUTORY APPENDIX
division thereof or by any instrumentality of a
government or subdivision; or
“ (3) money, and the right to receive money
not evidenced by a security or obligation (other
than a security or obligation described in para­
graph (1) o r ( 2 ) ) .
“ (e) B o a r d .— For purposes of this part, the
term ‘Board’ means the Board of Governors of the
Federal Reserve System.”

“ (iii) property acquired by it in ex­
change for all of its stock in an exchange
described in section 1101 (c) (2) or (3).
“ (B) A bank holding company shall not
be a qualified bank holding corporation by
reason of property described in subparagraph
(B) of paragraph (1) or clause (ii) of subparagraph (A ) of this paragraph, unless such
property was acquired in a distribution with
respect to stock, which stock was acquired
by such bank holding company—
“ (i) on or before May 15, 1955,
“ (ii) in a distribution (with respect to
stock held by it on May 15, 1955, or with
respect to stock in respect of which all
previous applications of this clause are
satisfied) with respect to which gain to it
was not recognized by reason of subsection
(a) or (b) of section 1101, or
“ (iii) in exchange for all of its stock in
an exchange described in section 1101 (c)
(2) or (3 ).
“ (C ) A corporation shall be treated as a
qualified bank holding corporation only if the
Board certifies that it satisfies the foregoing
requirements of this subsection.
“ (c) P r o h i b i t e d P r o p e r t y .— For purposes of
this part, the term ‘prohibited property’ means, in
the case of any bank holding company, property
(other than nonexempt property) the disposition
of which would be necessary or appropriate to ef­
fectuate section 4 of the Bank Holding Company
A ct of 1956 if such company continued to be a
bank holding company beyond the period (includ­
ing any extensions thereof) specified in subsection
(a ) of such section or in section 1101 (e) (2)
(B) of this part, as the case may be. The term
‘prohibited property’ does not include shares of
any company held by a bank holding company to
the extent that the prohibitions of section 4 of the
Bank Holding Company Act of 1956 do not apply
to the ownership by such bank holding company
of such property by reason of subsection (c) (5)
of such section.
“ (d ) N o n ex e m pt
P r o p e r t y — For purposes
of this part, the term ‘nonexempt property’
means—
“ (1) obligations (including notes, drafts, bills
of exchange, and bankers’ acceptances) having
a m aturity at the time of issuance of not ex­
ceeding 24 months, exclusive of days of grace;
“ (2) securities issued by or guaranteed as to
principal or interest by a government or sub­




(b) The table of parts for subchapter O of
chapter 1 of the Internal Revenue Code of 1954
is amended by adding at the end thereof the fol­
lowing:
“Part VIII. Distributions pursuant to Bank
Holding Company Act of 1956.”
(c) The amendments made by this section shall
apply with respect to taxable years ending after
the date of the enactment of this Act.
S a v in g P r o v is io n

Saving clause
S e c . 11. (a) Nothing herein contained shall be
interpreted or construed as approving any act, ac­
tion, or conduct which is or has been or may be
in violation of existing law, nor shall anything
herein contained constitute a defense to any ac­
tion, suit, or proceeding pending or hereafter in­
stituted on account of any prohibited antitrust or
monopolistic act, action, or conduct, except as
specifically provided in this section.

Applicability of and procedure with respect to anti­
trust laws

(b)
The Board shall immediately notify the
Attorney General of any approval by it pursuant
to section 3 of a proposed acquisition, merger, or
consolidation transaction, and such transaction
may not be consummated before the thirtieth cal­
endar day after the date of approval by the Board.
Any action brought under the antitrust laws aris­
ing out of an acquisition, merger, or consolidation
transaction approved under section 3 shall be com­
menced within such thirty-day period. The com­
mencement of such an action shall stay the effec­
tiveness of the Board’s approval unless the court
shall otherwise specifically order. In any such ac­
tion, the court shall review de novo the issues pre­
sented. In any judicial proceeding attacking any
acquisition, merger, or consolidation transaction
approved pursuant to section 3 on the ground that
such transaction alone and of itself constituted a

24

STATUTORY APPENDIX

REGULATION Y

violation of any antitrust laws other than section
2 of the Act of July 2, 1890 (section 2 of the
Sherman A ntitrust Act, 15 U.S.C. 2 ), the stand­
ards applied by the court shall be identical with
those that the Board is directed to apply under
section 3 of this Act. Upon the consummation of
an acquisition, merger, or consolidation transac­
tion approved under section 3 in compliance with
this Act and after the termination of any antitrust
litigation commenced within the period prescribed
in this section, or upon the termination of such
period if no such litigation is commenced therein,
the transaction may not thereafter be attacked in
any judicial proceeding on the ground that it alone
and of itself constituted a violation of any anti­
trust laws other than section 2 of the Act of July
2, 1890 (section 2 of the Sherman Antitrust Act,
15 U.S.C. 2 ), but nothing in this Act shall exempt
any bank holding company involved in such a
transaction from complying with the antitrust laws
after the consummation of such transaction.

Meaning of “antitrust laws”

(f)
For the purposes of this section, the term
“antitrust laws” means the Act of July 2, 1890
(the Sherman Antitrust Act, 15 U.S.C. 1-7), the
Act of October 15, 1914 (the Clayton Act, 15
U.S.C. 12-27), and any other Acts in pari materia.
[U. S. C., title 12, sec. 1849. As amended by Acts of
July 1, 1966 (80 Stat. 240) and D ec. 31, 1970 (84 Stat.
1766). The date of the amendment referred to in paragraphs
(d ) and (e ) is July 1, 1966.]

S e p a r a b il it y o f P r o v isio n s

Separability clause
S ec . 12. If any provision of this Act, or the
application of such provision to any person or
circumstance, shall be held invalid, the remainder
of the Act, and the application of such provision
to persons or circumstances other than those to
which it is held invalid, shall not be affected
thereby.

Judicial rights of Board and State bank supervisors

(c) In any action brought under the antitrust
laws arising out of any acquisition, merger, or
consolidation transaction approved by the Board
under section 3 of this Act, the Board and any
State banking supervisory agency having jurisdic­
tion within the State involved, may appear as a
party of its own motion and as of right, and be
represented by its counsel.

BANK HOLDING COMPANY ACT
AMENDMENTS OF 1970
Act of December 31, 1970 (84 Stat. 1766)
P a r t y in In t e r e s t

Litigation not initiated before July 1, 1966

S e c . 105. With respect to any proceeding be­
fore the Federal Reserve Board wherein an appli­
cant seeks authority to acquire a subsidiary which
is a bank under section 3 of the Bank Holding
Company Act of 1956, to engage directly or in­
directly in a nonbanking activity pursuant to sec­
tion 4 of such Act, or to engage in an activity
otherwise prohibited under section 106 of this Act,
a party who would become a competitor of the
applicant or subsidiary thereof by virtue of the
applicant’s or its subsidiary’s acquisition, entry
into the business involved, or activity, shall have
the right to be a party in interest in the proceed­
ing and, in the event of an adverse order of the
Board, shall have the right as an aggrieved party
to obtain judicial review thereof as provided in
section 9 of such Act of 1956 or as otherwise pro­
vided by law.

(d) Any acquisition, merger, or consolidation
of the kind described in section 3(a) of this Act
which was consummated at any time prior or sub­
sequent to May 9, 1956, and as to which no litiga­
tion was initiated by the Attorney General prior to
the date of enactment of this amendment, shall be
conclusively presumed not to have been in viola­
tion of any antitrust laws other than section 2 of
the Act of July 2, 1890 (section 2 of the Sherman
Antitrust Act, 15 U.S.C. 2 ).
Litigation pending on or after July 1, 1966

(e) Any court having pending before it on or
after the date of enactment of this amendment any
litigation initiated under the antitrust laws by the
Attorney General with respect to any acquisition,
merger, or consolidation of the kind described in
section 3(a) of this Act shall apply the substantive
rule of law set forth in section 3 of this Act.




[U. S. C ., title 12, sec.1850.]

25

REGULATION Y

STATUTORY APPENDIX
siders will not be contrary to the purposes of this
section.

C o n d it io n a l T r a n s a c t io n s

Definitions

[U. S. C., title 12, sec. 1972.]

106. (a) As used in this section, the terms
“bank”, “bank holding company”, “subsidiary”,
and “Board” have the meaning ascribed to such
terms in section 2 of the Bank Holding Company
Act of 1956. For purposes of this section only,
the term “company”, as used in section 2 of the
Bank Holding Company Act of 1956, means any
person, estate, trust, partnership, corporation, as­
sociation, or similar organization, but does not
include any corporation the majority of the shares
of which are owned by the United States or by
any State. The term “trust service” means any
service customarily performed by a bank trust de­
partment.
Sec.

Judicial proceedings

(c) The district courts of the United States have
jurisdiction to prevent and restrain violations of
subsection (b) of this section and it is the duty
of the United States attorneys, under the direction
of the Attorney General, to institute proceedings
in equity to prevent and restrain such violations.
The proceedings may be by way of a petition
setting forth the case and praying that the viola­
tion be enjoined or otherwise prohibited. When
the parties complained of have been duly notified
of the petition, the court shall proceed, as soon
as possible, to the hearing and determination of
the case. While the petition is pending, and before
[U . S. C., title 12, sec. 1971.]
final decree, the court may at any time make such
tem porary restraining order or prohibition as it
Tie-in arrangements
deems just. Whenever it appears to the court that
(b)
A bank shall not in any m anner extend the ends of justice require that other parties be
credit, lease or sell property of any kind, or fur­
brought before it, the court may cause them to
nish any service, or fix or vary the consideration
be summoned whether or not they reside in the
for any of the foregoing, on the condition or re­
district in which the court is held, and subpenas
quirement—
to that end may be served in any district by the
(1) that the customer shall obtain some ad­
marshal thereof.
ditional credit property, or service from such
[U. S. C ., title 12, sec. 1973.]
bank other than a loan, discount, deposit, or
trust service;
Subpenas in actions by United States
(2) that the customer shall obtain some ad­
(d) In any action brought by or on behalf of
ditional credit, property, or service from a bank
the United States under subsection (b ), subpenas
holding company of such bank, or from any
for witnesses may run into any district, but no
other subsidiary of such bank holding company;
writ of subpena may issue for witnesses living out
(3) that the customer provide some addi­
of the district in which the court is held at a
tional credit, property, or service to such bank,
greater distance than one hundred miles from the
other than those related to and usually provided
place of holding the same without the prior per­
in connection with a loan, discount, deposit, or
mission of the trial court upon proper application
trust service;
and cause shown.
(4) that the customer provide some addi­
[U. S. C., title 12, sec. 1974.]
tional credit, property, or service to a bank
holding company of such bank, or to any other
Civil actions
subsidiary of such bank holding company; or
(e) Any person who is injured in his business
(5) that the customer shall not obtain some
or property by reason of anything forbidden in
other credit, property, or service from a com­
subsection (b) may sue therefor in any district
petitor of such bank, a bank holding company
court
of the United States in which the defendant
of such bank, or any subsidiary of such bank
resides
or is found or has an agent, without re­
holding company, other than a condition or re­
gard
to
the amount in controversy, and shall be
quirement that such bank shall reasonably im­
entitled to recover three times the amount of the
pose in a credit transaction to assure the sound­
damages sustained by him, and the cost of suit,
ness of the credit.
including a reasonable attorney’s fee.
The Board may by regulation or order permit such
exceptions to the foregoing prohibition as it con­




[U. S. C., title 12, sec. 1975.]

26

REGULATION Y

STATUTORY APPENDIX
Injunctions

under this section and based in whole or in part
on such matter shall be suspended during the
pendency of the enforcement action so instituted
and for one year thereafter: Provided, That
whenever the running of the statute of limitations
in respect of a cause of action arising under this
section is suspended under this paragraph, any
action to enforce such cause of action shall be
forever barred unless commenced either within
the period of suspension or within the four-year
period referred to in paragraph (1).

(f) Any person may sue for and have injunc­
tive relief, in any court of the United States hav­
ing jurisdiction over the parties, against threatened
loss or damage by reason of a violation of sub­
section (b ), under the same conditions and
principles as injunctive relief against threatened
conduct that will cause loss or damage is granted
by courts of equity and under the rules governing
such proceedings. Upon the execution of proper
bond against damages for an injunction improvidently granted and a showing that the danger
of irreparable loss or damage is immediate, a
preliminary injunction may issue.

[U. S. C., title 12, sec. 1977.]

Actions under other Federal or State laws

[U. S. C ., title 12, sec. 1976.]

(h)
Nothing contained in this section shall be
construed as affecting in any manner the right of
Limitation of actions
the United States or any other party to bring
(g )(1 ) Subject to paragraph (2 ), any action
an action under any other law of the United
to enforce any cause of action under this section
States or of any State, including any right which
shall be forever barred unless commenced within
may exist in addition to specific statutory author­
four years after the cause of action accrued.
ity, challenging the legality of any act or practice
(2)
Whenever any enforcement action is insti­
which may be proscribed by this section. No
tuted by or on behalf of the United States with
regulation or order issued by the Board under
respect to any matter which is or could be the
this section shall in any manner constitute a
subject of a private right of action under this
defense to such action.
section, the running of the statute of limitations in
respect of every private right of action arising
[U. S. C., title 12, sec. 1978.]




27