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

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

To the Addressee:
Enclosed is a reprint of Regulation Y, as amended effective
June 2 h , 197^» of the Board of Governors of the Federal Reserve System.

It

replaces your previous printing of the Regulation, as amended effective
December 1, 1971, and all subsequent amendments thereto.

Interpretations of

the Regulation are not included in the reprint and, therefore, should not be
discarded.




Circulars Division
Federal Reserve Bank of Nev York

BOARD OF GOVERNORS
of the

FEDERAL RESERVE SYSTEM

BANK HOLDING COMPANIES

R E G U L A T IO N Y
(12 CFR 225)
As amended effective June 24, 1974

A ny inquiry relating to this regulation should be addressed to the Federal
Reserve Bank o f the Federal Reserve district in which the inquiry arises.
Form s for the preparation o f registration statements, applications, re­
quests, and reports may be obtained from any Federal Reserve Bank.




CONTENTS

Page

Page
S e c . 2 2 5 .1 — D

e f i n it io n s

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

(a ) Term s used in the A c t .........................................3
( b ) Federal Reserve Bank .........................................3
S e c . 2 2 5 .2 — D

e t e r m in a t io n s

C ontrol

c q u is it io n

A

ssets

of

Bank

Sh ar es

3
3
4

o n b a n k in g

A

c t iv it ie s

........................... 5

( a ) Activities closely related to banking or
managing or controlling banks ......... ......... 5




(d )

(e )

or

.................................................... .......... 4

(a ) Submission o f a p p lic a tio n s ........................ .........4
( b ) A ction on applications ........................................5
( c ) A pplication to retain shares acquired
in a fiduciary capacity ................................... 5
S e c . 2 2 5 .4 — N

(c )

R e g a r d in g

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

( a ) C onclusive presumptions o f c o n t r o l. . . .
( b ) Rebuttable presumptions o f c o n t r o l . . . .
( c ) Procedures for determining control . . . .
S e c . 2 2 5 .3 — A

(b )

(f)
(g )

( 1 ) D e n ovo e n t r y ......................................

8

(2) Acquisition of going c o n c e rn .........

8

( 3 ) Simplified procedures ........................
Tie-ins, alterations, relocations, con soli­
dations .........................................................
Certain acquisitions by com panies that
becam e bank holding com panies on
D ecem ber 31, 1970, as a result o f the
1970 amendments ....................................
Activities o f com panies in which national
banks may in v e s t ......................................
Foreign activities o f dom estic holding
com panies
..................................................
Foreign bank holding com panies ..........

8

S e c . 2 2 5 .5 — A d m i n i s t r a t i o n

9

9
10
10
10

...................................

11

( a ) Effective date o f registration ...................
( b ) Reports and examinations ........................

11
12

St a t u t o r y A

p p e n d ix

.......................................................

13

REGULATION Y
(12 C F R 22 5 )
A s amended effective June 2 4 , 1 9 7 4

BANK HOLDING COMPANIES*

2(a)(2)(A) and (B) and by section 2(g)(1) and (2 )
of the Act. In addition, the Board has determ ined
(a) Term s used in the A ct. As used in this Part,
that, w henever the transferability of 25 per cent
the term s “bank holding com pany”, “com pany” ,
o r m ore of any class of voting securities of a
“bank”, “subsidiary” , and “ Board” have the same
com pany is conditioned in any m anner, w hether
m eanings as those given such term s in the Act.
p ursuant to an agreem ent, by-law, article of in ­
(b) Federal Reserve Bank. The term “Federal
corporation, or otherwise, upon the tran sfer of
Reserve Bank” as used in this P art with respect
25 per cent or m ore of any class of voting secu­
to action by, on behalf of, or directed to be taken
rities of another com pany, the holders of the se­
by a bank holding com pany or other organization
curities affected by the condition (th at is, those
shall m ean either the Federal Reserve Bank of the
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 com pany or other organization
can be required to satisfy the condition) consti­
are principally conducted, as m easured by total
tute, in their capacity as such, a “com pany” fo r
deposits held or controlled by it on the date on
the purposes of the A ct unless one o f the issuers
w hich it becam e, or is to become, a bank holding
of such securities is a subsidiary of the oth er and
com pany, or such Reserve Bank as the Board may
is so identified in an o rder of the B oard or in a
designate.
registration statem ent or report accepted by the
Board u n d er the Act.
(b)
Rebuttable presumptions o f control. A re­
SEC TIO N 225.2— D E T E R M IN A T IO N S
buttable presum ption th at a com pany controls a
R E G A R D IN G C O N T R O L
bank or other com pany is established by section
2 ( g ) ( 3 ) of the Act. In addition, the Board has es­
(a)
Conclusive presumptions o f control. C on­
tablished, for use in proceedings instituted in ac­
clusive presum ptions that a com pany controls a
cordance with the procedures of paragraph (c)
bank or other com pany are established by section
below, the following rebuttable presum ptions:
(1 )
A com pany that owns, controls, o r has
*
This text corresponds to the C ode o f Federal
Regulations, Title 12, Chapter II, Part 225, cited as
pow er to vote m ore than 5 per cent of any class
12 C F R 225. The “ A ct” referred to herein is the
of voting securities of a bank o r other com pany
Bank H olding C om pany A ct o f 1956. The words
(except w here such securities are held in a fidu­
“ this Part,” as used herein, mean Regulation Y .
ciary
capacity and the com pany does not have
(P rior to D ecem ber 1, 1971, this Part was designated
sole discretionary authority to exercise the voting
as Part 22 2 .)
SEC T IO N 225.1— D E F IN IT IO N S




3

REGULATION Y

§ 225.3

rights) presum ably controls that bank or other
com pany if (i) one or m ore of the com pany’s di­
rectors, trustees, or partners, or officers or em ­
ployees w ith policym aking functions serves in any
of these capacities w ith the bank or other com ­
pany, and (ii) no other person owns, controls, or
has pow er to vote as m uch as 5 per cent of any
class of voting securities of th at bank or other
com pany.
(2) A com pany that owns, controls, or has
pow er to vote m ore than 5 per cent of any class
of voting securities of a bank or other com pany
(except w here such securities are held in a fidu­
ciary capacity and the com pany does not have
sole discretionary authority to exercise the voting
rights) presum ably controls th at bank or other
com pany if additional voting securities are owned,
controlled, or held with pow er to vote by indi­
viduals (or m em bers of their im m ediate families
as defined in § 206.2(k) of this chapter (Regula­
tion F)) who are directors, officers, trustees, or
partners of the com pany (or own, directly or in­
directly, 25 p er cent or m ore of any class of vot­
ing securities of the com pany) and, together with
the com pany’s securities, aggregate 25 per cent or
m ore of any class of voting securities of that
bank or other com pany.

securities presum ably owns or controls the voting
securities.
(c) Procedures for determining control. (1) In
any case in w hich a presum ption established by
paragraph (b) o f this section applies, o r in any
other case w here it appears to the B oard that a
com pany exercises a controlling influence over
the m anagem ent or policies of a bank or other
com pany, and the com pany has not com plied
with the provisions of the A ct, the Board m ay in­
form the com pany that a prelim inary determ ina­
tion of control has been m ade on the basis of the
facts sum m arized in the com m unication. Such
com pany shall w ithin 30 days (or such longer
period of tim e as m ay be perm itted by the Board
(i) indicate to the Board its willingness to term i­
nate the control relationship and to furnish
prom ptly its specific plan to do so; or (ii) state
th at it will prom ptly seek Board approval to
retain the control relationship, or, if the control
relationship has existed continuously since prior
to D ecem ber 31, 1970 (in a m anner not covered
by section 2(a)(2)(A) or (B)), that it will register
as a bank holding com pany or, if already a hold­
ing com pany report the bank o r other com pany
as a subsidiary, or otherw ise com ply with the
applicable provisions of the A ct; or (iii) set forth
such facts and circum stances as m ay support its
contention that there is not a control relationship.
(2)
A com pany m ay request a hearing to con­
test the Board's prelim inary determ ination of con­
trol. In the event a hearing is held, any applicable
presum ptions established by paragraph (b) of this
section shall be considered in the usual m anner 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 circum stances. In the event no hearing is
held, but the prelim inary determ ination of con­
trol is contested, the Board will decide the m atter
on the basis of the evidence available to it, rely­
ing on the presum ptions established in paragraph
(b) of this section, and will by order direct such
action as may be necessary o r appropriate in the
circum stances.

(3) A com pany th at enters into any agreem ent
or understanding with a bank or other com pany
(other than an investm ent advisory agreement),
such as a m anagem ent contract, pursuant to
which the com pany or any of its subsidiaries ex­
ercises significant influence w ith respect to the
general m anagem ent or overall operations of the
bank or other com pany presum ably controls such
bank or other com pany.
(4) A com pany that enters into any agreem ent
or understanding under w hich the rights of a
holder of voting securities of a bank or other
com pany are restricted in any m anner presum ­
ably controls the shares involved, unless the
agreem ent or understanding (i) is a m utual agree­
m ent am ong shareholders granting to each other
a right of first refusal w ith respect to their shares,
or (ii) is incident to a bona fide loan transaction,
or (iii) relates to restrictions on transferability
and continues only for such tim e as m ay reason­
ably be necessary to obtain approval from a F ed­
eral bank supervisory authority with respect to
acquisition by the com pany of such securities.

SEC T IO N 225.3— A C Q U ISIT IO N O F
B A N K SH A RES OR ASSETS
(a)
Submission o f applications. An application
for approval by the Board of any transaction re­
quiring approval under section 3(a) of the Act
shall be filed with the Federal Reserve Bank. A

(5) A com pany that owns directly or indirectly
securities that are im m ediately convertible at the
option of the holder or ow ner thereof into voting




4

§ 225.4

REGULATION Y

this section. As to such an aplication, the Board
will publish in the F ederal Register a notice of
opportunity fo r hearing only if it believes that
there is a reasonable basis fo r the holding com ­
pany’s opinion. T he following activities have been
(b ) Action on applications. A pplications under
determ ined by the Board to be so closely related
this section are processed in accordance w ith the
to banking o r m anaging or controlling banks as to
procedures specified in the A ct and in § 262.3 of
be a p roper incident thereto:
the B oard’s Rules of P rocedure (P a rt 262 of this
(1 ) m aking or acquiring, fo r its ow n account or
ch a p te r). A ny application for the B oard’s ap­
for the account of others, loans and o th er exten­
proval of the form ation of a com pany that con­
sions of credit (including issuing letters of credit
trols only one bank shall be deem ed to be ap­
and accepting d ra fts), such as would be m ade, for
proved 45 days after the com pany has been in­
exam ple, by a m ortgage, finance, credit card, or
form ed by its Reserve Bank that said application
factoring com pany;1
has been accepted, unless the com pany is notified
(2 ) operating as an industrial bank, M orris Plan
to the contrary w ithin that time o r is granted ap­
bank, o r industrial loan com pany, in the m anner
proval at an earlier date.
authorized by State law so long as the institution
(c) Application to retain shares acquired in a
does not both accept dem and deposits and m ake
fiduciary capacity. A pplications u nder this sub­
com m ercial loans;
section are processed on the basis of a letter of
(3 ) servicing loans and oth er extensions of
notification w ithout com pliance w ith section
credit fo r any person;
2 6 2 .3 (h ) of the B oard’s Rules of P rocedure. Any
(4) perform ing or carrying on any one or
application for the B oard’s approval to retain
m ore of the functions or activities that m ay be
shares of bank stock acquired in a fiduciary
perform ed or carried on by a trust com pany (in ­
capacity (w ith sole voting rights), w hich is ac­
cluding activities of a fiduciary, agency, o r custo­
com panied by an unconditional undertaking by
dian n a tu re ), in the m anner authorized by Federal
the A pplicant to dispose of such shares or its sole
or State law, so long as the institution does not
“discretionary voting rights w ith respect to such
m ake loans or investm ents o r accept deposits
shares w ithin two years from the date of such
other than (i) deposits th at are generated from
acquisition, shall be deem ed to be approved 45
trust funds not currently invested and are properly
days after the A pplicant has been inform ed by
secured to the extent required by law, o r (ii) de­
the Reserve Bank that said application has been
posits representing funds received fo r a special
accepted, unless the A pplicant is notified to the
use in the capacity of managing agent or custo­
contrary w ithin that tim e or is granted approval
dian fo r an ow ner of, or investor in, real p ro p ­
at an earlier date.
erty, securities, o r other personal property, or for
such ow ner or investor as agent or custodian of
funds held for investm ent o r escrow agent, or for
S EC T IO N 225.4— N O N B A N K IN G
an issuer of, or b roker o r dealer in securities,
A C T IV IT IE S
in a capacity such as paying agent, dividend dis­
bursing
agent, or securities clearing agent, and not
(a)
Activities closely related to banking or man­
em ployed by or for the account of the custom er
aging or controlling banks. In accordance with the
in the m anner of a general purpose checking ac­
procedures set forth in paragraphs (b ) and (c) of
count
or bearing interest, or (iii) m aking of call
this section, any bank holding com pany may en­
loans
to
securities dealers or purchase of m oney
gage, or retain or acquire an interest in a com ­
m
arket
instrum
ents such as certificates of deposit,
pany that engages, solely in one or m ore of the
com m ercial paper, governm ent or m unicipal secu­
activities specified below, including such incidental
rities, and bankers acceptances (such authorized
activities as are necessary to carry on the activities
loans and investments, however, may not be used
so specified. A ny bank holding com pany that is of
the opinion that other activities in the circum ­
1 Operating a savings and loan association is not
stances surrounding a particular case are closely
regarded by the Board as within the description o f
related to banking or m anaging or controlling
this activity. W hether to propose expanding activity
banks may file an application in accordance w ith
( 2 ) to include operating that type o f financial insti­
the procedures set forth in paragraph ( b ) ( 2 ) of
tution is under consideration by the Board.
separate application shall be filed w ith respect to
each bank the voting shares or assets of which are
sought to be acquired by an existing bank holding
com pany or nonbanking subsidiary thereof.




REGULATION Y

§ 225.4

as a m ethod of channeling funds to nonbanking
affiliates of the trust com pany). . . .
(5 ) acting as investm ent or financial adviser to
the extent of (i) serving as the advisory com pany
for a m ortgage or a real estate investm ent trust;
(ii) serving as investm ent adviser, as defined in
section 2 (a ) (20) of the Investm ent Com pany
A ct of 1940, to an investm ent com pany regis­
tered under that A ct; (iii) providing portfolio in­
vestm ent advice 2 to any other person; (iv) fu r­
nishing general econom ic inform ation and advice,
general econom ic statistical forecasting services
and industry stu d ie s;3 and (v) providing financial
advice to State and local governm ents, such as
with respect to the issuance of their securities;
(6 ) (a ) Leasing personal property or acting as
agent, broker or adviser in leasing such property
provided:
(i) the lease is to serve as the functional
equivalent of an extension of credit to the lessee
of the property;
(ii) the property to be leased is acquired spe­

cifically for the leasing transaction under consid­
eration or was acquired specifically for an earlier
leasing transaction;
(iii) the lease is on a nonoperating basis;
(iv) at the inception of the initial lease the ef­
fect of the transaction (and, w ith respect to goverm m ental entities only, reasonably anticipated
future tra n sa c tio n s4) will yield a retu rn that will
com pensate the lessor fo r n o t less than the les­
sor’s full investm ent in the property plus the esti­
m ated total cost of financing the property over
the term of the lease,5 from : (1 ) rentals; (2 ) es­
tim ated tax benefits (investm ent tax credit, net
econom ic gain from tax deferral from accelerated
depreciation, and other tax benefits w ith a sub­
stantially sim ilar effect); (3 ) the estim ated resid­
ual value of the property at the expiration of the
initial term of the lease, w hich in no case shall
exceed 20 per cent of the acquisition cost of the
property to the lessor; and (4 ) in the case of a
lease of not m ore than 7 years in duration, such
additional am ount, w hich shall not exceed 60 per
cent of the acquisition cost of the property, as
may be provided by an unconditional guarantee
by a lessee, independent third party or m anufac­
turer, w hich has been determ ined by the lessor to
have the financial resources to m eet such obliga­
tion, that will assure the lessor of recovery of its
investm ent and cost of financing;
(v) the m axim um lease term during which the
lessor m ust recover the lessor’s full investm ent in
the property plus the estim ated total cost of
financing the property shall be 40 years; and
(vi) at the expiration of the lease (including
any renewals or extensions with the same lessee),

2 The term “ p ortfolio investment” as used herein
is intended to refer generally to the investment o f
funds in a “ security” as defined in section 2 ( 1 ) o f
the Securities A ct o f 1933 (15 U .S.C. § 77a) or in
real property interests, except where the real property
is to be used in the trade o r business o f the person
being advised. In furnishing p ortfolio investment
advice, bark holding com panies and their subsidiaries
shall observe the standards o f care and conduct ap­
plicable to fiduciaries.
3 This is to be contrasted with “ management con ­
sulting” which the Board views as including, but not
limited to, the provision o f analysis or advice as to
a firm’s ( i ) purchasing operations, such as inventory
con trol, sources o f supply, and cost minim ization
subject to constraints; (ii) production operations,
such as quality control, work measurement, product
methods, scheduling shifts, time and m otion studies,
and safety standards; (iii) marketing operations,
such as market testing, advertising program s, market
developm ent, packaging, and brand developm ent;
(iv ) planning operations, such as demand and cost
projections, plant location, program planning, corp ­
orate acquisitions and mergers and determination o f
long-term and short-term goals; ( v ) personnel oper­
ations, such as recruitment, training, incentive pro­
grams, em ployee com pensation, and managementpersonnel relations; (v i) internal operations, such as
taxes, corporate organization, budgeting systems,
budget control, data processing systems evaluation,
and efficiency evaluation; or (v ii) research opera­
tions, such as product developm ent, basic research,
and product design and innovation. The Board has
determined that “ management consulting” is not an
activity that is so closely related to banking or man­
aging o r controlling banks as to the proper incident
thereto.




4
The Board understands that som e Federal, State
and local governmental entities may not enter into a
lease for a period in excess o f one year. Such an
impediment does not prohibit a com pany authorized
under § 2 2 5 .4 (a ) from entering into a lease with
such governmental entities if the com pany reasonably
anticipates that such governmental entities will re­
new the lease annually until such time as the com ­
pany is fully com pensated fo r its investment in the
leased property plus its costs o f financing the prop­
erty. Further, a com pany authorized under § 225.4
( a ) ( 6 ) m ay also engage in so-called “ bridge"’ lease
financing o f personal property, but not real property,
where the lease is short term pending com pletion o f
long term financing, by the same or another lender.
■
r’ The estimate by the lessor o f the total cost o f
financing the property over the term o f the lease
should reflect am ong other factors, the term o f the
lease, the m odes o f financing available to the lessor,
the credit rating o f the lessor a n d /o r the lessee, if a
factor in the financing, and prevailing rates in the
m oney and capital markets.

6

§ 225.4

REGULATION Y

all interest in the property shall be either liqui­
dated or released on a nonoperating basis as soon
as practicable but in no event later than, two
years from the expiration of the lease,6 however,
in no case shall the lessor retain any interest in
the property beyond 50 years after its acquisition
of the property.

in no case shall the lessor retain any interest in
the property beyond 50 years after its acquisition
of the property.

(i) the lease is to serve as the functional
equivalent of an extension of credit to the lessee
of the property;

holding com pany and its subsidiaries and (ii)
storing and processing oth er banking, financial, or
related econom ic data, such as perform ing pay­
roll, accounts receivable or payable, or billing
services, and

(7 ) m aking equity and debt investm ents in
corporations or projects designed prim arily to
prom ote com m unity welfare, such as the eco­
nom ic rehabilitation and developm ent of low-in(6 )
(b ) Leasing real property or acting as com e areas;
agent, b roker or adviser in leasing such property
( 8 ) ( i ) providing bookkeeping o r d ata process­
provided:
ing services fo r the internal operations of the

(ii) the property to be leased is acquired spe­
cifically for the leasing transaction under consid­
eration or was acquired specifically for an earlier
leasing transaction;

(9 ) acting as insurance agent or b ro k er in
offices at w hich the holding com pany or its sub­
sidiaries are otherwise engaged in business (o r in
an office adjacent thereto) w ith respect to the
following types of insurance:

(iii) the lease is on a nonoperating basis;
(iv) at the inception of the initial lease the ef­
fect of the transaction (and, w ith respect to gov­
ernm ental entities only, reasonably anticipated fu ­
ture transactions 4) will yield a return that will
com pensate the lessor for not less than the les­
sor’s full investm ent in the property plus the esti­
m ated total cost of financing the property over
the term of the lease,5 from : (1 ) rentals; (2 ) es­
tim ated tax benefits (investm ent tax credit, net
econom ic gain from tax deferral from accelerated
depreciation, and other tax benefits w ith a sub­
stantially sim ilar effect); and (3 ) the estim ated
residual value of the property at the expiration of
the initial term of the lease, w hich in no case
shall exceed 20 per cent of the acquisition cost of
the property to the lessor.

(i) A ny insurance fo r the holding com pany
and its subsidiaries;
(ii) A ny insurance that (a ) is directly related
to an extension of credit by a bank o r a b ank-re­
lated firm of the kind described in this regulation,
or ( b ) is directly related to the provision of
other financial services by a b ank o r such a
bank-related firm or (c) is otherw ise sold as a
m atter of convenience to the purchaser, so long
as the prem ium incom e from sales w ithin this
subdivision (ii) (c) does not constitute a signifi­
cant portion of the aggregate insurance prem ium
income of the holding com pany from insurance
sold pursuant to this subdivision (ii);

(v) the m axim um lease term during w hich the
lessor must recover the lessor’s full investm ent in
the property plus the estim ated total cost of
financing the property shall be 40 years; and

(iii) Any insurance sold in a com m unity that
(a ) has a population not exceeding 5,000, or ( b )

the holding com pany dem onstrates has inade­
quate insurance agency facilities.

(vi) at the expiration of the lease (including
any renewals or extensions w ith the same lessee),
all interest in the property shall be either liqui­
dated o r released on a nonoperating basis as soon
as practicable but in no event later than two
years from the expiration of the lease,6 however,

(1 0 ) acting as underw riter for credit life in­
surance and credit accident and health insurance
which is directly related to extensions of credit
by the bank holding com pany system .7

See page six fo r footnotes 4 and 5.
6 In the event o f a default on a lease agreement
prior to the expiration o f the lease term, the lessor
shall either release such property, subject to all the
conditions o f this subsection 6(b), or liquidate such
property as soon as practicable but in no event later
than tw o years from the date o f default on a lease
agreement.




7

7
T o assure that engaging in the underwritirg o f
credit life and credit accident and health insurance
can reasonably be expected to be in the public in­
terest, the Board will only approve applications in
which an applicant demonstrates that approval will
benefit the consum er or result in other public bene­
fits. N orm ally such a showing w ould be made by a
projected reduction in rates or increase in p olicy
benefits to bank holding com pany perform ance o f
this service.

REGULATION Y

§ 225.4

(1 1 ) providing courier service (i) for the in­
ternal operations of the holding com pany and its
subsidiaries; (ii) for checks, com m ercial papers,
docum ents, and w ritten instrum ents (excluding
currency or bearer-type negotiable instrum ents)
as are exchanged am ong banks and banking insti­
tutions; (iii) for audit and accounting m edia of a
banking or financial nature and other business
records and docum ents used in processing such
m edia.8
(1 2 ) providing
m anagem ent
consulting
advice 9 to nonaffiliated banks Provided that, (i)
neither the bank holding com pany nor any of its
subsidiaries own or control, directly or indirectly,
any equity securities in the client bank; (ii) no
officer, director, or em ployee of the bank holding
com pany or any of its subsidiaries serves as an
officer, director or em ployee of the client bank
except w here such interlocking relationships are
or would be perm itted by section 2 1 2 .3 (g ) of
Regulation L; (iii) the advice is rendered on an
explicit fee basis w ithout regard to correspondent
balances m aintained by the client bank at any
subsidiary bank of the bank holding com pany;
and (iv) disclosure is m ade to each potential
client bank of (a ) the nam es of all banks w hich
are affiliates of the consulting com pany, and (b )
the nam es of all existing client banks located in
the same m arket area(s) as the client bank.10
( b ) ( 1 ) De novo entry. A bank holding com ­
pany may engage de novo (o r continue to engage
in an activity earlier com m enced de n o v o ) di­
rectly or indirectly, solely in activites described
in paragraph (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 substan­

(c)(8).

tially the same form as F.R. Y -4A ) published
w ithin the preceding 30 days in a new spaper of
general circulation in the com m unities to be
served, unless the com pany is notified to the con­
trary w ithin that time or unless it is perm itted to
consum m ate the transaction at an earlier date on
the basis o f exigent circum stances of a particular
case. If adverse com m ents of a substantive nature
are received by the Reserve Bank w ithin 30 days
after the com pany has so published its proposal,11
o r if it otherw ise appears appropriate in a p artic­
ular case, the Reserve Bank may inform the com ­
p any th at (i) the proposal shall not be consum ­
m ated until specifically authorized by the Reserve
Bank or by the Board or (ii) the proposal should
be processed in accordance w ith the procedures
o f subparagraph (2 ) o f this paragraph.
(2 ) Acquisition o f going concern. A bank
holding com pany m ay apply to the Board to ac­
quire or retain the assets o f or shares in a com ­
pany engaged solely in activities described in p a r­
agraph (a) of this section by filing an application
w ith its Reserve Bank (F o rm F.R . Y -4 ). Every
such application shall be accom panied 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 new spaper of general cir­
culation in the com m unities to be served. The
Board will publish in the F ederal Register notice
of any such application and will give interested
persons an opportunity to express their views (in ­
cluding, w here appropriate, by means of a hear­
ing) on the question w hether perform ance of the
activity proposed by the holding com pany can
reasonably be expected to produce benefits to the
public, such as greater convenience, increased
com petition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentra­
tion of resources, decreased or u n fair com peti­
tion, conflicts of interests, or unsound banking
practices.
(3 ) Simplified procedures.* (i) T he proce­
dures of subparagraphs (1 ) and (2 ) of this p ara­

9 In perform ing this activity bank holding co m ­
panies are not authorized to perform tasks or oper­
ations or provide services to client banks either on a
daily or continuing basis, except as shall be neces­
sary to instruct the client bank on how to perform
such services fo r itself. See also the B oard’s interpre­
tation o f bank management consulting advice (12
C F R 225.130).
10Applicants to engage de n ovo in providing man­
agement consulting advice to nonaffiliated banks
should be filed in accordance with the procedures o f
§ 2 2 5 .4 ( b ) ( 2 ) rather than § 2 2 5 .4 ( b ) ( 1 ) o f Regu­
lation Y .

11
If a Reserve Bank decides that adverse co m ­
ments are not o f a substantive nature, the person
submitting the com m ents may request review by the
Board o f that decision in accordance with the p ro­
visions o f § 265.3 o f the B oard’s Rules Regarding
D elegation o f Authority (12 C F R 265.3) by filing a
petition fo r review with the Secretary o f the Board.
*
By order dated D ecem ber 21, 1971, the Board
suspended the operation o f § 225.4(b)(3) o f Regula­
tion Y until further notice (36 Federal Register
25048, D ecem ber 28, 1971).

8 A pplications to engage de n o v o in providing
courier services should be filed in accordance with
the procedures o f § 225.4(b)(2) rather than § 225.4
(b)(1). See also the B oard’s interpretation on courier
activities (12 C F R 225.129), w hich sets forth con di­
tions fo r holding com pany entry pursuant to § 4




8

REGULATION Y

§ 225.4
gra p h shall n o t a p p ly w ith resp ect to a h o ld in g

a p p ly w ith resp ect to ev e ry a cq u isition c o n s u m ­

c o m p a n y o r a su b sidiary th e r e o f en ga gin g in the

m a ted o r a ctivity en g a g ed in o n the a u th ority o f

fo llo w in g :

section 4 ( c ) ( 8 )

(a )

m a k in g,

a cq u irin g ,

o f the A c t : ( 1 ) the p r o v is io n o f

o r serv icin g loa n s o r

any cred it, p r o p e rty o r services in v o lv e d shall n o t

o th e r exten sion s o f cred it f o r person a l, fa m ily , or

b e su b ject to a n y c o n d itio n w h ich , i f im p o s e d b y

h o u s e h o ld p u rp o ses i f the co m m e n c e m e n t o r e x ­

a b a n k , w o u ld con stitu te an u n la w fu l tie-in a r­

p a n s io n o f su ch activity d o e s n ot in v o lv e an a c ­

ra n gem en t u n d er s ection 106 o f the B an k H o ld ­

qu isition o f assets o f $ 1 0 m illio n o r m o r e ( o r the

in g C o m p a n y A c t A m e n d m e n ts o f 1 9 7 0 ; ( 2 ) the

a cq u isitio n o f shares o f a c o m p a n y h av in g such

activities in v o lv e d shall n o t b e altered in a n y sig­

assets) e x ce p t that ( 7 ) n o h o ld in g c o m p a n y m a y

n ifican t

a cq u ire m o r e than $ 5 0 m illion in assets in any

B oa rd in m a k in g the d eterm in a tion , n o r p r o v id e d

resp ect

fr o m

th ose

c o n s id e re d

by

the

ca le n d a r y e a r u n d e r the p r o v is io n s o f this clau se,

at a n y lo c a t io n oth er than th ose d e s crib e d in the

(2 )

n o tice p u b lish ed w ith resp ect to su ch d e te rm in a ­

w ith in 30 da ys a fter co n su m m a tio n o f su ch

an a cq u isition , the h o ld in g c o m p a n y in fo rm s its

tion, e x ce p t u p o n c o m p lia n c e w ith the p r o ce d u re s

R e se rv e B ank o f the a cq u isition (in substantially

o f p a ra gra p h ( b ) ( 1 )

the sam e f o r m as F .R . Y - 4 B ) , and ( 5 ) w h e n e v e r

m erger, o r a cq u isition o f assets o th e r than in the

n ecessa ry to effectu a te the p u rp o s e s o f the A c t ,

ord in a ry

the B o a rd m a y req u ire su sp en sion o r d is co n tin u a ­

q u ired c o m p a n y is a party shall b e c o n su m m a te d

tion o f a n y a ctio n taken , o r divestiture o f a n y a c ­

w ith ou t p r io r

qu isition m a d e, o n a u th ority o f this p r o v is io n and

ba n k h o ld in g c o m p a n y w ill co n tin u e to o w n , d i­

m a y w ith d ra w su ch a u th ority w ith resp ect to any

rectly o r in directly , m o r e than five p e r cen t o f

pa rticu la r h o ld in g c o m p a n y ;
( b ) en ga gin g
§ 2 2 5 .4 ( a )

in

co u rs e

of

o f this s e ctio n ; a nd ( 3 ) n o
busin ess,

to

w h ich

the

ac­

B oa rd a p p ro v a l, if th erea fter the

the v o tin g shares o f su ch c o m p a n y o r its s u cc e s ­

activities

that are sh ifted f r o m

d e s crib e d

sor.

in

(d )

a b a n k in the

Certain acquisitions by companies that be­

came bank holding companies on Decem ber 3 1 ,

h o ld in g c o m p a n y system and w ere en ga ged in b y
a

1 9 7 0 , as a result o f the 1 9 7 0 amendments. E x ­

m e rg e r tran sa ction d e s crib e d in and a p p ro v e d b y

ce p t as p r o v id e d in this p a ra grap h , n o b a n k h o ld ­

a F e d e ra l su p e rv isory a g e n cy pursuant to section

ing c o m p a n y m a y a cq u ire, d ire ctly o r in d irectly ,

1 8 ( c ) o f the F e d era l D e p o s it In su ra n ce A c t (1 2

any shares o r c o m m e n c e to en ga ge in a n y a ctiv i­

the

bank

either d e

n ovo

or

as a

result

of

U .S .C . 1 8 2 8 ( c ) ) , 45 da ys a fter the h o ld in g c o m ­

ties o n the basis o f s ection 4 ( c ) ( 1 2 ) o f th e A ct.

p a n y has in fo r m e d its R eserv e B ank o f its p r o ­

A c o m p a n y m a y file w ith the B o a rd an ir r e v o c a ­

p o sa l to sh ift su ch a ctivity (in substan tially the

b le

sam e fo r m as F .R . Y - 4 B ) , unless the c o m p a n y is

B o a r d ,12 that it w ill cea se to b e a b a n k h o ld in g

d e cla ra tio n ,

in

the

fo r m

a p p ro v e d

by

the

n otified to the co n tra ry w ith in that tim e o r is p e r­

c o m p a n y b y Janu ary 1, 1981, unless it is gra n ted

m itted to co n su m m a te the tran sa ction at an ea r­

an e x e m p tio n u n d er s e ctio n 4 ( d )

lier date.

com p a n y

(ii)

The

p r o ce d u re s

of

su b p arag ra p h

(1 )

of

o f the A c t . A

that has filed su ch a d ecla ra tion

m ay

( 1 ) c o m m e n c e n ew activities d e n o v o , either d i­

this p a ra gra p h shall n ot a p p ly w ith resp ect to a

rectly o r th rou gh a subsidiary, w ith ou t fu rth er a c ­

h o ld in g c o m p a n y o r a subsidiary th e r e o f en ga gin g

tion u n d er this p a ra grap h , until su ch tim e as the

d e n o v o as in su ra n ce agen t o r b ro k e r w ith re­

B oa rd n otifies the c o m p a n y to the co n tra ry , and

sp ect to the types o f in su ra n ce agent o r b ro k e r

(2 )

w ith resp ect to the types o f in su ra n ce listed in

days after the c o m p a n y has in fo r m e d its R e serv e

su b d ivision s ( i ) ,
(a)(9)

( i i ) , and ( iii) ( a )

Bank

o f paragrap h

its R eserv e

of

the

proposed

a cq u isition ,

unless

the

c o m p a n y is n otified to the co n tra ry w ith in that

o f this s e cto n , 4 5 days a fter the h o ld in g

co m p a n y has in fo r m e d

m a k e an a cq u isition o f a g o in g c o n c e r n 4 5

tim e o r unless it is p erm itted to m a k e the a cq u is i­

Bank o f its

p ro p o s a l to en ga ge in su ch a ctivity (in substan ­
tially the sam e fo r m

as F .R . Y - 4 B ) , unless the

12
Although the form o f declaration is in terms o f
a com pany divesting itself o f whatever interest it has
in the bank, a com pany is regarded by the Board
as com plying with this condition if it furnishes the
Board with convincing evidence that it does not
exercise a controlling influence over the management
or policies o f the bank despite retention o f som e in­
terest in the bank.

co m p a n y is n otified to the co n tra ry w ith in that
tim e o r is perm itted to co n su m m a te the tran sa c­
tion at an ea rlier date.
(c )

Tie-ins, alterations, relocations, consolida­

tions. E x ce p t as oth erw ise p r o v id e d in an o rd e r
in a p a rticu la r case, the fo llo w in g co n d itio n s shall




9

REGULATION Y

§ 225.4

tio n at an ea rlier date, b a sed o n exigen t c ir c u m ­

T h e B oa rd m a y at any tim e, u p o n n o tice , sus­

stances o f a p a rticu la r case. I f the c o m p a n y has

pen d the gen era l co n se n t p r o ce d u re s w ith resp ect

n o t filed su ch a d e cla ra tio n , n o a cq u isition m a y

to any ba n k h o ld in g c o m p a n y o r w ith resp ect to

b e m a d e , o r a ctivity c o m m e n c e d , o n the basis o f

the a cq u isition o f shares o f co m p a n ie s en ga ged in

s e ctio n 4 ( c ) ( 1 2 )

particu lar kin ds o f activities.

e x ce p t w ith p r io r a p p ro v a l o f

the B oa rd . N o r m a lly o n ly requ ests w ith resp ect

(3 )

It shall b e a co n d itio n to the B o a r d ’s sp e­

to a cq u isition s o r ex p a n s io n o f a ctivities that the

c ific co n se n t to the c o n tin u e d h o ld in g o f v o tin g

c o m p a n y d em on stra tes to the sa tisfa ction o f the

shares o f any su b sidiary o f a b a n k h o ld in g c o m ­

B o a rd are n ecessa ry to en ab le it m o r e efficien tly

p a n y w h ich are a cq u ire d o r h eld o n the basis o f

to m ark et its assets su b ject to divestiture w ill be

an e x e m p tio n u n d er s ection 4 ( c ) ( 1 3 )

a p p ro v e d . T h is p a ra g ra p h d o e s n o t a p p ly to a c ­

that the su b sidiary m a y take the fo llo w in g a ction s

qu isition s m a d e pursuant to a b in d in g c o m m it­

o n ly

m en t en tered in to b e fo r e M a rch 2 3 , 1971.

b ra n ch offices o r a g en cies in the U n ited States o r

(e )

Activities o f companies in which national

to

banks may invest. N o b a n k h o ld in g c o m p a n y or

w ith

en ga ge

p r io r

B o a rd

in re ce iv in g

a p p r o v a l:
d ep osits

o f the A c t

(a )
in

any

establish
fo re ig n

co u n try (o th e r than a fo r e ig n co u n tr y in w h ich it

su b sidiary th e r e o f that is n ot a b a n k o r su b sidiary

a lrea d y has su ch an a ctivity w ith the B o a r d ’ s a p ­

of

a cq u ire

p r o v a l) o r ( b ) issue in the U n ited States any d e ­

a bank

m ay,

a fter Jun e

30,

1971,

o f the A c t

ben tu res, b o n d s , p r o m is s o ry n otes, o r sim ilar o b li­

unless su ch shares are o f the k in ds an d a m ou n ts

shares o n the basis o f section 4 ( c ) ( 5 )

ga tion s, o th e r than instru m en ts o r o b lig a tio n s due

e x p licitly e ligib le b y F ed era l statute f o r in vest­

w ith in o n e year.

m en t b y a n ation a l b a n k . A n a tion a l b a n k o r a

(4 )

su b sidiary th e r e o f m a y a cq u ire o r retain shares
on

the basis o f s e ctio n 4 ( c ) ( 5 )

A b a n k h o ld in g c o m p a n y shall in fo r m the

B oa rd , th rou g h its F ed era l R eserv e B ank w ith in

in a c c o r d a n c e

30 da ys a fter the clo s e o f ea ch sem ian nu al p e ­

w ith the rules and regu la tion s o f the C o m p tr o lle r

riod , o f all shares a cq u ire d o r d isp o se d o f du rin g

o f the C u rre n c y . S o fa r as F ed era l law is c o n ­

that p e r io d that are o r w ere h eld u n d er the a u ­

ce rn e d ,

th ority o f this p a ra gra p h . W ith resp ect to any a c­

a S ta te-ch a rtered

th e r e o f m a y ( 1 )

bank

or

a subsidiary

a cq u ir e o r retain shares on the

basis o f s e ctio n ( 4 ) ( c ) ( 5 )

q u isition ,

if su ch shares are o f

v iou sly

su ch

in fo rm a tio n

fu rn is h e d )

in clu d e

shall

(u n less

pre­

b rie f d escrip tion s o f

the k in ds and a m ou n ts ex p licitly eligib le b y F e d ­

the business o f the co m p a n ie s w h o s e shares w ere

eral statute f o r

a cq u ired .

and

(2 )

in vestm en t b y

a n ation a l b a n k

a cq u ire o r retain all

(b u t, e x ce p t f o r

u sed

the shares o f a c o m p a n y that en ga ges s o le ly in

en tly a p p lie d ; ( i i )

the b a n k w ere en g a g in g in the a ctivity d irectly .
of

domestic

holding

sion

“ rev en u es”

As

m ean s

“ fo r e ig n c o u n tr y ” m eans any

th e r e o f;

and

(iii)

“ fo r e ig n

bank

h o ld in g

c o m p a n y ” m eans a b a n k h o ld in g c o m p a n y , o r g a ­

w ith the co n se n t o f the B oa rd , o w n o r co n tr o l

n ized u n d er the law s o f a fo re ig n co u n try , m o re

v o tin g shares o f a n y c o m p a n y in w h ich a c o m ­

than

o f the F e d ­

eral R e se rv e A c t ( 1 2 U .S .C . 6 1 1 - 6 3 1 )

(i)

fo re ig n n ation o r c o lo n y , d e p e n d e n cy , o r p osses­

companies. ( 1 ) A n y b a n k h o ld in g c o m p a n y m ay,

pan y o rg a n iz e d u n d er s e ctio n 2 5 ( a )

p a ra g ra p h :

co u n tin g p rin cip les in the U n ited States co n sist­

a ctivity, and su b ject to the sam e lim ita tion s as if
activities

this

da ted in a c c o r d a n c e w ith g en era lly a cce p te d a c ­

at lo ca tio n s at w h ich the b a n k m a y en ga ge in the

Foreign

in

gross in c o m e and “ c o n s o lid a te d ” m ean s c o n s o li­

a ctivities in w h ich the paren t b a n k m a y en ga ge,

(f)

Foreign bank holding companies. ( 1 )

(g )

d ir e cto rs ’ q u a lify in g shares, n ot less than all) o f

h a lf o f

w hose

c o n s o lid a te d

assets are l o ­

ca ted , o r c o n s o lid a te d reven u es d eriv ed , ou tside

m a y in ­

the U n ited States.

vest o th e r than a c o m p a n y that a ccep ts d ep osits
(2 )

o r sim liar cred it b a la n ces in the U n ited States.
(2 )

The

p r o ce d u re s

g o v e r n in g

the

B o a r d ’s

(i)

A fo re ig n ba n k h o ld in g c o m p a n y m a y :
en ga ge in d irect activities o f any k in d o u t­

side the U n ited States;

co n se n t shall b e the sa m e as th ose set fo rth in

(ii)

§ 2 1 1 . 8 o f this ch a p te r (R e g u la tio n K ) . In a d d i­

en ga ge in d irect a ctivities in the U n ited

tion , the B o a rd grants its gen era l co n s e n t f o r any

States that are in cid en ta l to its a ctivities ou tsid e

bank h o ld in g c o m p a n y to a cq u ire fr o m any o f its

the U n ited States;
(i i i )

subsidiaries a n y shares the su b sidiary h old s w ith

o w n o r c o n tr o l v o tin g shares o f any c o m ­

the co n se n t o f the B oa rd pursuant to Parts 211

p a n y that is n ot en g a g ed , d ire ctly o r in directly , in

o r 2 1 3 o f this ch a p te r (R e g u la tio n s K an d M ) .

a n y activities in the U n ited States e x ce p t as shall




10

§ 225.5

*

REGULATION Y

be incidental to the international or foreign busi­
ness of such com pany;
(iv) w ith the consent of the Board, own or
control voting shares of any com pany principally
engaged in the U nited States in financing or fa ­
cilitating transactions in international or foreign
com m erce;
(v) own or control voting shares of any com ­
pany, organized under the laws of a foreign
country, that is engaged, directly or indirectly, in
any activities in the U nited States if ( a) such
com pany is not a subsidiary of such bank holding
com pany, ( b ) m ore than half of such com pany’s
consolidated assets and revenues are located and
derived outside the U nited States, and (c) such
com pany does not engage, directly or indirectly,
in the business of underw riting, selling, or distrib­
uting securities in the U nited States; and
(vi) own o r control voting shares of any com ­
pany in a fiduciary capacity under circum stances
which would entitle such shareholding to an ex­
em ption under section 4 ( c ) ( 4 ) of the A ct if the
shares were held or acquired by the bank.
N othing in this subparagraph shall authorize a
foreign bank holding com pany to own o r control
m ore than 5 per cent of any class of voting shares
of any other bank holding com pany or com pany
accepting deposits or sim ilar credit balances in the
U nited States, except in a fiduciary capacity or
with prior approval of the Board.
(3 ) A foreign bank holding com pany that is
of the opinion that other activities or investm ents
may, in particular circum stances, m eet the condtions for an exem ption under section 4 ( c ) ( 9 ) of
the A ct may apply to the Board for such a deter­
m ination by subm itting to the Reserve Bank of
the district in w hich its banking operations in the
U nited States are principally conducted a letter
setting forth the basis for that opinion.
(4 ) A foreign bank holding com pany shall in­
form the Board, through such Reserve Bank
within 30 days after the close of each quarter, of
all shares of com panies engaged, directly or indi­
rectly, in activities in the U nited States that were
acquired during such q u arter under the authority
of this paragraph. Such inform ation shall (unless
previously furnished) include a brief description
o f the nature and scope of each such com pany’s
business in the U nited States. Inform ation re­
quired need be given only insofar as it is known
or reasonably available to a foreign bank holding
com pany, if any required inform ation is unknow n
and not reasonably available to the bank holding




com pany, either because the obtaining thereof
would involve unreasonable effort or expense or
because it rests peculiarly w ithin the know ledge
of a com pany th at is n o t controlled by the bank
holding com pany, the inform ation need not be
provided, but the bank holding com pany shall (i)
give such inform ation on the subject as it pos­
sesses or can acquire w ithout unreasonable effort
or expense together with the sources thereof, and
(ii) include a statem ent either showing th at u n ­
reasonable effort or expense would be involved o r
indicating that the com pany whose shares were
acquired is not controlled by the bank holding
com pany and stating the result of a request m ade
to such com pany for inform ation. N o such re­
quest need be made, how ever, to any foreign
governm ent, or an agency o r instrum entality
thereof, if, in the opinion of the bank holding
com pany, such request would be harm ful to ex­
isting relationships.
(5 )
If, in the B oard’s judgm ent, a com pany is
a substantial com petitor in any line of com m erce
in the U nited States, an exem ption u nder this
p aragraph w ith respect to ow nership or control of
such com pany’s voting shares may not be p red i­
cated on the unavailability of inform ation to es­
tablish w hether or not such com pany’s activities
in the U nited States are consistent w ith such an
exem ption. In the absence of available in fo rm a­
tion, it will be presum ed that such a com pany’s
activities do not justify an exem ption u n d er this
p aragraph for the holding of its shares by a fo r­
eign bank holding com pany. A com pany will be
deem ed to be a substantial com petitor in any line
of com m erce in the U nited 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 m arket in w hich a b an k ­
ing subsidiary, branch or agency of the foreign
bank holding com pany is located. If unable to
obtain sufficient inform ation to establish w hether
or not an exem ption is available, a foreign bank
holding com pany should seek prior approval of
the Board before investing in any com pany that
m ight be a substantial com petitor in any line of
com m erce in the U nited States.

SEC T IO N 225.5— A D M IN IS T R A T IO N
(a )
Effective date o f registration. T he date of
registration of a bank holding com pany shall be
the date on which its registration statem ent is
filed with the Federal Reserve Bank.

11

REGULATION Y

§ 225.5

(b )
Reports and examinations. E ach bank
holding com pany shall furnish to the Board in a
form prescribed by the Board a report of the
com pany’s operations for the fiscal year in w hich
it becomes a bank holding com pany, and for
each fiscal year thereafter until it ceases to be a
bank holding com pany. E ach such annual report
shall be filed w ith the F ederal Reserve Bank.
E ach bank holding com pany shall furnish to the
Board additional inform ation at such times as the




12

Board may require. The Board m ay examine any
bank holding com pany or any of its subsidiaries
and the cost of any such exam ination shall be as­
sessed against and paid by such bank holding
com pany. As far as possible the Board will use
reports of exam inations m ade by the C om ptroller
of the C urrency, the Federal Deposit Insurance
C orporation, or the appropriate State bank super­
visory authority.

REGULATION Y

STATUTORY APPENDIX
STATUTORY APPENDIX

a com pany m ay not be held to have had con­
trol over any given bank or com pany at any
given tim e unless that com pany, at the tim e in
question, directly o r indirectly owned, con­
trolled, or had pow er to vote 5 p er centum or
m ore of any class of voting securities of the
bank or com pany, or had already been found
to have control in a proceeding u n d er p ara­
graph (2 ) (C ).
(5 )
N otw ithstanding any other provision of
this subsection.
(A ) N o bank and no com pany ow ning or
controlling voting shares of a bank is a bank
holding com pany by virtue of its ow nership
o r control of shares in a fiduciary capacity,
except as provided in paragraphs (2 ) and
(3 ) of subsection (g ) of this section. F o r
the purpose of the preceding sentence, bank
shares shall not be deem ed to have been ac­
quired in a fiduciary capacity if the acquir­
ing bank or com pany has sole discretionary
authority to exercise voting rights w ith re­
spect thereto; except th at this lim itation is
applicable in the case of a bank or com pany
acquiring such shares prior to the date of
enactm ent of the Bank H olding C om pany
A ct A m endm ents of 1970 only if the bank
or com pany has the right consistent w ith its
obligations u nder the instrum ent, agreem ent,
or oth er arrangem ent establishing the fidu­
ciary relationship to divest itself of such vot­
ing rights and fails to exercise that right to
divest w ithin a reasonable period not to ex­
ceed one year after the date of enactm ent of
the Bank H olding C om pany A ct A m end­
ments of 1970.
(B ) N o com pany is a bank holding com ­
pany by virtue of its ow nership or control of
shares acquired by it in connection w ith its
underw riting of securities if such shares are
held only for such period of tim e as will
perm it the sale thereof on a reasonable
basis.
(C ) N o com pany form ed for the sole
purpose of participating in a proxy solicita­
tion is a bank holding com pany by virtue of
its control of voting rights of shares ac­
quired in the course of such solicitation.
(D ) N o com pany is a bank holding com ­
p any by virtue of its ow nership or control of
shares acquired in securing or collecting a
debt previously contracted in good faith,
until two years after the date of acquisition.

B A N K H O L D I N G C O M P A N Y A C T O F 1 9 56

A ct o f M a y 9, 1 9 5 6 (70 Stat. 133)

T o define bank holding com panies, control their
future expansion, and require divestm ent of their
nonbanking interests.
B e it e n a c te d b y th e S en a te an d H o u s e o f R e p ­
resen ta tiv es o f th e

U n ited

S tates o f A m e r ic a in

T hat this A ct m ay be cited
as the “Bank H olding Com pany A ct of 1956” .
C o n g r e s s a ssem b led ,

D e f in it io n s

Bank holding company
S e c . 2. ( a ) ( 1 ) Except as provided in p ara­
graph (5 ) of this subsection, “bank holding com ­
pany” m eans any com pany which has control
over any bank or over any com pany that is or
becomes a bank holding com pany by virtue of
this Act.
(2 ) A ny com pany has control over a bank
or over any com pany if—
(A ) the com pany directly or indirectly or
acting through one or m ore other persons
owns, controls, or has pow er to vote 25 per
centum or m ore of any class of voting secu­
rities of the bank o r com pany;
(B ) the com pany controls in any m anner
the election of a m ajority of the directors or
trustees of the bank or com pany; or
(C ) the Board determ ines, after notice
and opportunity for hearing, that the com ­
pany directly or indirectly exercises a con­
trolling influence over the m anagem ent or
policies of the bank or com pany.
(3 ) F o r the purposes of any proceeding
under paragraph ( 2 ) ( C ) of this subsection,
there is a presum ption that any com pany
w hich directly or indirectly owns, controls, or
has pow er to vote less than 5 per centum of
any class of voting securities of a given bank
or com pany does not have control over that
bank or com pany.
(4) In any adm inistrative or judicial pro­
ceeding under this Act, other than a proceed­
ing under paragraph ( 2 ) ( C ) of this subsection,




13

STATUTORY APPEND IX

REGULATION Y
(E ) N o com pany is a bank holding com ­
pany by virtue of its ow nership or control
of any State chartered bank or trust com ­
p any w hich is w holly ow ned by thrift insti­
tutions and w hich restricts itself to th e ac­
ceptance of deposits from th rift institutions,
deposits arising out of the corporate business
of its owners, and deposits of public moneys.
( F ) N o trust com pany o r m utual savings
bank w hich is an insured bank under the
F ederal D eposit Insurance A ct is a bank
holding com pany by virtue of its direct or
indirect ow nership or control of one bank
located in the same State, if (i) such ow ner­
ship or control existed on the date of enact­
m ent of the Bank H olding C om pany A ct
A m endm ents of 1970 and is specifically
authorized by applicable State law, and (ii)
the trust com pany or m utual savings bank
does not after that date acquire an interest
in any com pany that, together w ith any other
interest it holds in th a t com pany, will exceed
5 per centum of any class of the voting
shares of that com pany, except that this lim i­
tation shall not be applicable to investm ents
of the trust com pany or m utual savings bank,
direct and indirect, w hich are otherw ise in
accordance w ith the lim itations applicable to
national banks under section 5136 of the
Revised Statutes (12 U.S.C. 2 4 ).

Bank

(c ) “B ank” m eans any institution organized
under the laws of the U nited States, any State
o f the U nited States, the D istrict of Colum bia,
any territo ry of the U nited States, P uerto Rico,
G uam , A m erican Samoa, or the V irgin Islands
w hich (1 ) accepts deposits th at the depositor has
a legal right to w ithdraw on dem and, and (2 )
engages in the business of m aking com m ercial
loans. Such term does n o t include any organiza­
tion operating under section 25 o r section 2 5 (a )
o f the F ederal Reserve A ct, or any organization
w hich does not do business w ithin the U nited
States except as an incident to its activities outside
the U nited States. “D istrict b an k ” m eans any
b ank organized or operating under the Code of
Law for the D istrict of Colum bia.
Subsidiary

(d ) “Subsidiary”, w ith respect to a specified
bank holding com pany, m eans (1 ) any com pany
25 p er centum or m ore of whose voting shares
(excluding shares owned by the U nited States or
by any com pany wholly owned by the U nited
States) is directly o r indirectly ow ned o r con­
trolled by such bank holding com pany, o r is held
by it with pow er to vote; (2 ) any com pany the
election of a m ajority of whose directors is con­
trolled in any m anner by such bank holding com ­
pany; or (3 ) any com pany w ith respect to the
(6 )
F o r the purposes of this A ct, any suc­ m anagem ent o r policies of w hich such bank hold­
cessor to a bank holding com pany shall be
ing com pany has the power, directly or indirectly,
deem ed to be a bank holding com pany from
to exercise a controlling influence, as determ ined
the date on w hich the predecessor com pany
by the Board, after notice and opportunity for
becam e a bank holding com pany.
hearing.
Company

Successor

(b )
“C om pany” m eans any corporation, p art­
nership, business trust, association, or sim ilar or­
ganization, or any other trust unless by its term s
it m ust term inate w ithin twenty-five years or not
later than tw enty-one years and ten m onths after
the death of individuals living on the effective
date of the trust, but shall not include any cor­
poration the m ajority of the shares of w hich are
ow ned by the U nited States or by any State.
“C om pany covered in 1970” m eans a com pany
w hich becomes a bank holding com pany as a
result o f the enactm ent of the Bank H olding
C om pany A ct A m endm ents of 1970 and w hich
w ould have been a bank holding com pany on
June 30, 1968, if those am endm ents had been
enacted on th at date.




14

(e) T he term “successor” shall include any
com pany w hich acquires directly or indirectly
from a bank holding com pany shares of any
bank, w hen and if the relationship between such
com pany and the bank holding com pany is such
th at the transaction effects no substantial change
in the control of the bank or beneficial ow nership
of such shares of such bank. The Board may, by
regulation, fu rth er define the term “successor” to
the extent necessary to prevent evasion of the
purposes of this A ct.
Board

(f) “B oard” m eans the Board of G overnors
of the F ederal 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) F o r the purposes of this A ct—
(1 ) shares ow ned or controlled by any sub­
sidiary of a bank holding com pany shall be
deem ed to be indirectly owned or controlled by
such bank holding com pany;
(2 ) shares held o r controlled directly or
indirectly by trustees for the benefit of (A )
a com pany, (B ) the shareholders or m em bers
of a com pany, o r (C ) the em ployees (w hether
exclusively or not) of a com pany, shall be
deem ed to be controlled by such com pany; and
(3 ) shares transferred after January 1, 1966,
by any bank holding com pany (o r by any
com pany which, but for such transfer, would
be a bank holding com pany) directly or indi­
rectly to any transferee that is indebted to the
transferor, or has one o r m ore officers, direc­
tors, trustees, or beneficiaries in com m on w ith
or subject to control by the transferor, shall
be deem ed to be indirectly ow ned or controlled
by the transferor unless the Board, after op­
portunity for hearing, determ ines that the tran s­
feror is not in fact capable of controlling the
transferee.

Transactions requiring approval; exceptions
S e c . 3. (a ) It shall be unlaw ful, except w ith
the p rio r approval of the Board, (1 ) fo r any
action to be taken th at causes any com pany to
becom e a bank holding com pany; (2 ) for any
action to be taken th at causes a b ank to becom e
a subsidiary of a bank holding com pany; (3 )
for any bank holding com pany to acquire direct
or indirect ow nership or control of any voting
shares of any bank if, after such acquisition,
such com pany will directly or indirectly own or
control m ore than 5 per centum of the voting
shares of such bank; (4 ) for any bank holding
com pany or subsidiary thereof, oth er than a bank,
to acquire all or substantially all of the assets of
a bank; or (5 ) for any bank holding com pany to
merge or consolidate with any other bank hold­
ing com pany. N otw ithstanding the foregoing this
prohibition shall not apply to (A ) shares acquired
by a bank, (i) in good faith in a fiduciary capac­
ity, except w here such shares are held under a
tru st th at constitutes a com pany 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 enactm ent of this A ct
in securing or collecting any such previously con­
tracted debt shall be disposed of w ithin a period
of two years from the date on w hich they were
acquired; or (B ) additional shares acquired by
a bank holding com pany in a bank in w hich such
bank holding com pany owned or controlled a
m ajority of the voting shares p rio r to such acqui­
sition. F o r the purpose of the preceding sentence,
bank shares acquired after the date of enactm ent
of the Bank H olding Com pany A ct A m endm ents
o f 1970 shall not be deem ed to have been
acquired in good faith in a fiduciary capacity if
the acquiring bank or com pany has sole discre­
tionary authority to exercise voting rights w ith
respect thereto, b ut in such instances acquisitions
m ay be m ade w ithout prior approval of the B oard
if the Board, upon application filed w ithin 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 w ithin two years after
issuance of the o rder of disapproval.

Extraterritorial application

(h ) T he application of this A ct and of section
23A of the Federal Reserve A ct (12 U.S.C. 3 7 1 ),
as am ended, shall not be affected by the fact th at
a transaction takes place wholly or partly outside
the U nited States or that a com pany is organized
or operates outside the U nited States: Provided,
however, T h at the prohibitions of section 4 of this
A ct shall not apply to shares of any com pany
organized under the laws of a foreign country th at
does not do any business w ithin the U nited States,
if such shares are held or acquired by a bank
holding com pany th at is principally engaged in
the banking business outside the U nited States.
Thrift institution

(i) T he term “thrift institution” m eans (1 ) a
dom estic building and loan or savings and loan
association, (2 ) a cooperative bank w ithout
capital stock organized and operated for m utual
purposes and w ithout profit, or (3 ) a m utual
savings bank not having capital stock represented
by shares.
[U. S. C., title 12, sec. 1841. As amended by Acts of
July 1, 1966 (80 Stat. 236) and Dec. 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.]




15

STATUTORY APPENDIX

REGULATION Y

stantially to lessen com petition, or to tend to
create a m onopoly, or which in any other m an­
ner w ould be in restraint of trade, unless it
finds th at the anticom petitive effects of the
proposed transaction are clearly outw eighed in
the public interest by the probable effect of
the transaction in m eeting the convenience and
needs of the com m unity to be served.

Hearings on applications

(b ) U pon receiving from a com pany any ap­
plication for approval under this section, the
Board shall give notice to the C om ptroller of the
C urrency, if the applicant com pany or any bank
the voting shares or assets of w hich are sought
to be acquired is a national banking association
or a D istrict bank, or to the appropriate super­
visory authority of the interested State, if the
applicant com pany or any bank the voting shares
or assets of which are sought to be acquired is
a State bank, and shall allow thirty days w ithin
w hich the views and recom m endations of the
C om ptroller of the C urrency or the State super­
visory authority, as the case m ay be, m ay be sub­
m itted. If the C om ptroller of the C urrency or the
State supervisory authority so notified by the
Board disapproves the application in w riting w ith­
in said thirty days, the B oard shall forthw ith give
w ritten notice of that fact to the applicant. W ithin
three days after giving such notice to the applicant,
the Board shall notify in w riting the applicant and
the disapproving authority of the date for com ­
m encem ent of a hearing by it on such applica­
tion. A ny such hearing shall be com m enced not
less than ten nor m ore than thirty days after the
B oard has given w ritten notice to the applicant
of the action of the disapproving authority. T he
length of any such hearing shall be determ ined
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 m ade at such hearing. In
the event of the failure of the Board to act on any
application for approval u nder this section w ithin
the ninety-one-day period w hich begins on the
date of submission to the Board of the com plete
record on that application, the application shall
be deem ed to have been granted.

In every case, the Board shall take into con­
sideration the financial and m anagerial resources
and future prospects of the com pany or com ­
panies and the banks concerned, and the con­
venience and needs o f the com m unity to be
served.

Acquisitions in other states

(d ) N othw ithstanding any other provision of
this section, no application shall be approved
under this section w hich will perm it any bank
holding com pany 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 w hich the operations of such bank
holding com pany’s banking subsidiaries were
principally conducted on the effective date of this
am endm ent or the date on w hich such com pany
becam e a bank holding com pany, w hichever is
later, unless the acquisition of such shares or
assets of a State bank by an out-of-State bank
holding com pany is specifically authorized by the
statute laws of the State in w hich such bank is
located, by language to that effect and not m erely
by im plication. F o r the purposes of this section,
the State in w hich the operations of a bank hold­
ing com pany’s subsidiaries are principally con­
ducted is th at State in w hich total deposits o f all
such banking subsidiaries are largest.

Deposit insurance

Factors to be considered

(c) The Board shall not approve—
(1 ) any acquisition or m erger or consolida­
tion under this section w hich would result in
a m onopoly, o r which would be in furtherance
of any com bination or conspiracy to m onopo­
lize or to attem pt to m onopolize the business
of banking in any p art of the U nited States, or
(2 ) any other proposed acquisition or m erger
o r consolidation under this section whose effect
in any section of the country m ay be sub­




(e) Every bank that is a holding com pany and
every bank th at is a subsidiary of such a com pany
shall become and rem ain an insured bank as such
term is defined in section 3 (h ) o f the Federal
D eposit Insurance A ct.
[U. S. C., title 12, sec. 1842. As amended by Acts of
July 1, 1966 (80 Stat. 237); and Dec. 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
Dec. 31, 1970; the date of the amendment referred to in
paragraph (d ) is July 1, 1966.]

16

STATUTORY APPENDIX

REGULATION Y
to the purposes of this A ct, th at such action is
necessary to prevent undue concentration of
resources, decreased or u n fair com petition, con­
flicts of interest, or unsound banking practices;
and in the case of any such com pany co n tro l­
ling a bank having bank assets in excess of
$60,000,000 on o r after the date of enactm ent
of the Bank H olding C om pany A ct A m en d ­
m ents of 1970 the Board shall determ ine, w ith­
in two years after such date (or, if later, w ithin
two years after the date on w hich the bank
assets first exceed $ 60,000,000), w hether the
authority conferred by the preceding proviso
w ith respect to such com pany should be ter­
m inated as provided in this sentence. N othing
in this paragraph shall be construed to au th o r­
ize any bank holding com pany referred to in
the preceding proviso, or any subsidiary th ere­
of, to engage in activities authorized by that
proviso through the acquisition, p u rsu an t to a
contract entered into after June 30, 1968, of
any interest in or the assets of a going concern
engaged in such activities. A ny com pany w hich
is authorized to engage in any activity p u rsu an t
to the preceding proviso o r subsection (d ) of
this section but, as a result of action of the
Board, is required to term inate such activity
m ay (notw ithstanding any otherw ise applicable
tim e lim it prescribed in this p arag rap h ) retain
the ow nership or control of shares in any com ­
pany carrying on such activity for a period of
ten years from the date on w hich its authority
was so term inated by the Board.
T he Board is authorized, upon application by a
bank holding com pany, to extend the tw o-year
period referred to in paragraph (2 ) above from
time to tim e as to such bank holding com pany
for not m ore than one year at a time, if, in its
judgm ent, such an extension w ould not be d etri­
m ental to the public interest, b ut no such exten­
sions shall in the aggregate exceed three years.

I n t e r e s t s in N o n b a n k i n g O r g a n i z a t i o n s

Prohibitions
S e c . 4.

(a )

E x ce p t as oth erw ise p r o v id e d in

this A c t , n o b a n k h o ld in g c o m p a n y shall—

(1 ) after the date of enactm ent of this A ct
acquire direct or indirect ow nership or con­
trol of any voting shares of any com pany which
is not a bank, or .
(2 ) after two years from the date as of which
it becomes a bank holding com pany, or in the
case of a com pany which has been continuously
affiliated since M ay 15, 1955, w ith a com pany
w hich was registered under the Investm ent
C om pany A ct of 1940, prior to M ay 15, 1955,
in such a m anner as to constitute an affiliated
com pany w ithin the m eaning of that A ct, after
D ecem ber 31, 1978, or in the case of any com ­
pany which becomes, as a result of the enact­
m ent of the Bank H olding C om pany A ct
A m endm ents of 1970, a bank holding com ­
pany on the date of such enactm ent, after D e­
cem ber 31, 1980, retain direct o r indirect
ow nership or control of any voting shares of
any com pany which is not a bank or bank hold­
ing com pany or engage in any activities other
than (A ) those of banking or of m anaging
or controlling banks and other subsidiaries
authorized under this A ct or of furnishing
services -to or perform ing services for its sub­
sidiaries, and (B ) those perm itted 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,
T hat a com pany covered in 1970 may also en­
gage in those activities in w hich directly or
through a subsidiary (i) it was lawfully en­
gaged on June 30, 1968 (o r on a date subse­
quent to June 30, 1968 in the case of activities
carried on as the result of the acquisition by
such com pany or subsidiary, pursuant to a
binding w ritten contract entered into on or
before June 30, 1968, of another com pany
engaged in such activities at the tim e of the
acquisition), and (ii) it has been continuously
engaged since June 30, 1968 (o r such subse­
quent d ate). The Board by order, after oppor­
tunity for hearing, may term inate the authority
conferred by the preceding proviso on any
com pany to engage directly or through a sub­
sidiary in any activity otherwise perm itted by
that proviso if it determ ines, having due regard




Divorcement of shares

(b )
A fter two years from the date of en act­
m ent of this A ct, no certificate evidencing shares
of any bank holding com pany shall bear any state­
m ent purporting to represent shares of any other
com pany except a bank or a bank holding com ­
pany, nor shall the ownership, sale, or transfer of
shares of any bank holding com pany be condi­
tioned in any m anner whatsoever upon the ow ner­
ship, sale, or transfer of shares of any other
com pany except a bank or a bank holding
com pany.

17

REGULATION Y

STATUTORY APPENDIX

Exemptions

(c)
T he prohibitions in this section shall not
apply to any bank holding com pany w hich is (i)
a labor, agricultural, or horticultural organization
and w hich is exem pt from taxation under section
501 of the Internal Revenue Code of 1954, or (ii)
a com pany covered in 1970 m ore than 85 per
centum of the voting stock of w hich was collec­
tively owned on June 30, 1968, and continuously
thereafter, directly or indirectly, by or for m em ­
bers of the same family, or their spouses, who are
lineal descendants of com m on ancestors; and such
prohibitions shall not, w ith respect to any other
bank holding com pany, apply to—
(1 ) shares of any com pany engaged or to be
engaged solely in one or m ore of the following
activities: (A ) holding or operating properties
used wholly or substantially by any banking
subsidiary of such bank holding com pany 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 perform ing services for such bank
holding com pany or its banking subsidiaries; or
(D ) liquidating assets acquired from such bank
holding com pany or its banking subsidiaries or
acquired from any other source prior to M ay 9,
1956, or the date on w hich such com pany
becam e a bank holding com pany, w hichever 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
w ithin a period of two years from the date on
w hich they were acquired, except that the Board
is authorized upon application by such bank
holding com pany to extend such period of two
years from time to tim e as to such holding com ­
pany for not m ore than one year at a time if, in
its judgm ent, such an extension w ould not be
detrim ental to the public interest, but no such
extensions shall extend beyond a date five years
after the date on w hich such shares were
acquired;
(3 ) shares acquired by such bank holding
com pany from any of its subsidiaries w hich sub­
sidiary has been requested to dispose of such
shares by any F ederal or State authority having
statutory pow er to exam ine such subsidiary, but
such bank holding com pany shall dispose of
such shares w ithin a period of two years from
the date on w hich they were acquired;
(4 ) shares held or acquired by a bank in




18

good faith in a fiduciary capacity, except w here
such shares are held under a trust that con­
stitutes a com pany as defined in section 2 (b )
and except as provided in paragraphs (2 ) and
(3 ) o f section 2 ( g ) ;
(5 ) shares w hich are o f the kinds and
am ounts eligible for investm ent by national
banking associations under the provisions of
section 5136 o f the Revised Statutes;
(6 ) shares of any com pany which do not
include m ore th an 5 per centum of the o u t­
standing voting shares of such com pany;
(7 ) shares of an investm ent com pany which
is not a bank holding com pany and which is
not engaged in any business other than investing
in securities, w hich securities do not include
m ore than 5 per centum o f the outstanding
voting shares of any com pany;
(8 ) shares of any com pany the activities of
w hich the Board after due notice and oppor­
tunity fo r hearing has determ ined (by order or
regulation) to be so closely related to banking
or m anaging or controlling banks as to be a
proper incident thereto. In determ ining w hether
a particular activity is a proper incident to
banking or m anaging or controlling banks the
Board shall consider w hether its perform ance
by an affiliate of a holding com pany can reason­
ably be expected to produce benefits to the
public, such as greater convenience, increased
com petition, or gains in efficiency, th at o u t­
weigh possible adverse effects, such as undue
concentration of resources, decreased or unfair
com petition, conflicts of interests, or unsound
banking practices. In orders and regulations
under this subsection, the Board may differen­
tiate between activities com m enced de novo and
activities com m enced by the acquisition, in
whole or in part, of a going concern;
(9 ) shares held or activities conducted by any
com pany organized under the laws of a foreign
country the greater part of whose business is
conducted outside the U nited States, if the
Board by regulation or order determ ines that,
under the circum stances and subject to the con­
ditions set forth in the regulation or order, the
exem ption w ould not be substantially at variance
w ith the purposes of this A ct and would be in
the public interest;
(1 0 ) shares lawfully acquired and owned
prior to M ay 9, 1956, by a bank w hich is a
bank holding com pany, or by any of its wholly
ow ned subsidiaries;

STATUTORY APPENDIX

REGULATION Y
Hardship exemption

(11) shares owned directly or indirectly by
a com pany covered in 1970 in a com pany which
does not engage in any activities other than
those in w hich the bank holding com pany, or
its subsidiaries, m ay engage by virtue of this
section, but nothing in this paragraph authorizes
any bank holding com pany, or subsidiary
thereof, to acquire any interest in or the assets
of any going concern (except pursuant to a
binding w ritten contract entered into before June
30, 1968, or pursuant to another provision of
this A ct) other than one which was a subsidiary
on June 30, 1968;
(1 2 ) shares retained or acquired, or activities
engaged in, by any com pany which becomes, as
a result of the enactm ent of the Bank H olding
C om pany A ct A m endm ents of 1970, a bank
holding com pany on the date of such enact­
ment, o r by any subsidiary thereof, if such
com pany—
(A ) w ithin the applicable tim e limits pre­
scribed in subsection ( a ) ( 2 ) of this section
(i) ceases to be a bank holding com pany,
or (ii) ceases to retain direct or indirect
ow nership or control of those shares and to
engage in those activities not authorized
under this section; and
(B ) com plies with such other conditions
as the Board may by regulation or order
prescribe; or
(13) shares of, or activities conducted by,
any com pany which does no business in the
U nited States except as an incident to its in­
ternational or foreign business, if the Board
by regulation or order determ ines that, under
the circum stances and subject to the conditions
set forth in the regulation or order, the exem p­
tion would not be substantially at variance
w ith the purposes of this A ct and w ould 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 )
o f this subsection w ithin the ninety-one-day pe­
riod w hich begins on the date of submission to
the Board of the com plete record on that applica­
tion, the application shall be deem ed to have
been granted. T he Board shall include in its an­
nual report to the Congress a description and a
statem ent 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 ) T o the extent th at such action w ould not
be substantially at variance with the purposes of
this A ct and subject to such conditions as it con­
siders necessary to protect the public interest, the
Board by order, after opportunity fo r hearing,
m ay grant exem ptions from the provisions o f this
section to any bank holding com pany w hich con­
trolled one bank p rio r 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
o f years w ithout adversely affecting the banks or
com m unities involved, or (2 ) to avoid forced
sales of small locally owned banks to purchasers
not sim ilarly representative o f com m unity inter­
ests, or (3 ) to allow retention of banks th at are
so small in relation to the holding com pany’s total
interests and so small in relation to the banking
m arket to be served as to m inimize the likelihood
th at the b an k ’s powers to grant or deny credit
m ay be influenced by a desire to fu rth er the hold­
ing com pany’s other interests.
Retention of shares after repeal of exemption

(e) W ith respect to shares w hich w ere not sub­
ject to the prohibitions of this section as originally
enacted by reason of any exem ption w ith respect
thereto but w hich were m ade subject to such p ro ­
hibitions by the subsequent repeal of such exem p­
tion, no bank holding com pany shall retain direct
or indirect ow nership or control of such shares
after five years from the date of the repeal of such
exem ption, except as provided in paragraph (2 )
of subsection ( a ) . A ny bank holding com pany
subject to such five-year lim itation on the retention
of nonbanking assets shall endeavor to divest it­
self of such shares prom ptly and such bank hold­
ing com pany shall report its progress in such di­
vestiture to the Board two years after repeal of
the exem ption applicable to it and annually there­
after.
[U. S. C., title 12, sec. 1843. As amended by Acts of
July 1, 1966 (80 Stat. 238) and Dec. 31, 1970 (84 Stat.
1763).]
A d m in is tr a tio n

Registration statements
S e c . 5. (a ) W ithin one hundred and eighty
days after the date of enactm ent of this A ct, or
w ithin one hundred and eighty days after becom ­
ing a bank holding com pany, w hichever is later,

19

REGULATION Y

STATUTORY APPENDIX

each bank holding com pany shall register w ith
the Board on form s prescribed by the Board,
w hich shall include such inform ation w ith respect
to the financial condition and operations, m anage­
m ent, and intercom pany relationships of the bank
holding com pany and its subsidiaries, and related
m atters, as the Board m ay deem necessary or ap­
propriate to carry out the purposes of this Act.
T he Board may, in its discretion, extend the tim e
w ithin w hich a bank holding com pany shall regis­
ter and file the requisite inform ation.
Regulations

(b ) The Board is authorized to issue such reg­
ulations and orders as m ay be necessary to enable
it to adm inister and carry out the purposes of this
A ct and prevent evasions thereof.
Reports and examinations

(c) T he Board from tim e to tim e m ay require
reports under oath to keep it inform ed as to
w hether the provisions of this A ct and such reg­
ulations and orders issued thereunder have been
com plied with; and the B oard m ay m ake exam i­
nations of each bank holding com pany and each
subsidiary thereof, the cost of w hich shall be
assessed against, and paid by, such holding com ­
pany. The Board shall, as far as possible, use the
reports of exam inations m ade by the C om ptroller
of the Currency, the F ederal D eposit Insurance
C orporation, or the appropriate State bank super­
visory authority for the purposes of this section.

ig h t s

to

States

S tates’ rights

R

e v ie w

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

Sec. 7. The enactm ent by the Congress of the

Bank H olding C om pany A ct of 1956 shall not be




Sec. 8. A ny com pany w hich willfully violates
any provision of this A ct, or any regulation or
order issued by the Board pursuant thereto, shall
upon conviction be fined not m ore than $1,000
for each day during w hich the violation continues.
A ny individual who willfully participates in a
violation of any provision of this A ct shall upon
conviction be fined not m ore than $10,000 or
im prisoned not m ore than one year, o r both.
Every officer, director, agent, and em ployee of a
bank holding com pany shall be subject to the
same penalties for false entries in any book, re­
port, o r statem ent of such bank holding com pany
as are applicable to officers, directors, agents, and
employees of m em ber banks fo r false entries in
any books, reports, or statem ents of m em ber
banks under section 1005 of title 18, U nited States
Code.

Sec. 9. A ny party aggrieved by an order of the
B oard under this A ct may obtain a review of such
o rder in the U nited States C ourt of A ppeals w ith­
in any circuit wherein such party has its principal
place of business, or in the C ourt of A ppeals in
the D istrict of Colum bia, by filing in the court,
w ithin thirty days after the entry of the B oard’s
order, a petition praying th at the order of the
Board be set aside. A copy of such petition shall
be forthw ith transm itted to the Board by the clerk
o f the court, and thereupon the Board shall file in
the court the record m ade before the Board, as
provided in section 2112 of title 28, U nited States
Code. U pon the filing o f such petition the court
shall have jurisdiction to affirm, set aside, or
m odify the ord er 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.

[Section 6 was repealed by section 9 of the Act of July
1, 1966 ( 80 Stat. 240).]
R

Criminal penalties

Judicial review

[U. S. C., title 12, sec. 1844.]

of

P e n a l t ie s

Ju d ic ia l

(d ) Before the expiration of two years follow­
ing the date of enactm ent of this A ct, and each
year thereafter in the B oard’s annual report to
the Congress, the Board shall report to the C on­
gress the results of the adm inistration of this Act,
stating what, if any, substantial difficulties have
been encountered in carrying out the purposes of
this Act, and any recom m endations as to changes
in the law w hich in the opinion of the Board
w ould be desirable.

e s e r v a t io n

[U. S. C., title 12, sec. 1846.]

[U. S. C., title 12, sec. 1847.]

Annual Reports of Board

R

construed as preventing any State from exercising
such pow ers and jurisdiction w hich it now has or
m ay hereafter have with respect to banks, bank
holding com panies, and subsidiaries thereof.

20

REGULATION Y

STATUTORY APPENDIX
A m en d m en ts

“ (ii) com m on stock received in an ex­
change to w hich subsection (c ) (2 ) applies
to a shareholder, in exchange fo r its com ­
m on stock; or
“ (iii) preferred stock or com m on stock
received in an exchange to w hich subsec­
tion (c) (2 ) applies to a shareholder, in
exchange for its preferred stock; or
“ (iv) securities o r preferred or com m on
stock received in an exchange to w hich
subsection (c) (2 ) applies to a security
holder, in exchange fo r its securities; and
“ (B ) any preferred stock received has sub­
stantially the same term s as the preferred
stock exchanged, and any securities received
have substantially the same term s as the se­
curities exchanged,
then, except as provided in subsection ( f ) , no
gain to the shareholder o r security holder from
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 . — P ara­
graphs (1 ) and (2 ) shall apply to a distribu­
tion w hether or not the distribution is pro rata
w ith respect to all of the shareholders of the
distributing 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 w hich
has m ade any distribution p u rsu an t to subsec­
tion ( b ).

to

In te r n a l R evenue Code o f

1954

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

“P A R T V III— D IST R IB U T IO N S P U R S U ­
A N T TO B A N K H O L D IN G C O M P A N Y
A C T O F 1956
“ Sec. 1101. Distributions pursuant to Bank
H olding C om pany A ct o f 1956.
“ Sec. 1102. Special rules.
“ Sec. 1103. Definitions.
“SEC. 1101. DISTRIBUTIONS P U R SU AN T TO
B A N K H O L D IN G C O M P A N Y A C T OF 1956.
“ (a ) D

is t r ib u t io n s o f

C

e r t a in

N

on

-B a n k in g

P r o p e r t y .—
“ (1 )
e r t y .—

D

is t r ib u t io n s

of

p r o h ib it e d

prop­

If—

“ (A ) a qualified bank holding corporation
distributes prohibited property (other than
stock received in an exchange to w hich sub­
section (c ) (2 ) applies) —
“ (i) to a shareholder (with respect to
its stock held by such shareholder), w ith­
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
fo r its securities; and
“ (B ) the Board has, before the distribu­
tion, certified th at the distribution of such
prohibited property is necessary or approp ri­
ate to effectuate section 4 of the Bank H old ­
ing C om pany A ct of 1956,
then no gain to the shareholder or security
holder from the receipt of such property shall
be recognized.
“ (2 ) D i s t r i b u t i o n s o f s t o c k a n d s e c u r i ­

“ (5 )

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

­

.—

“ 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 s in g

to

Be

a

Bank

H o l d i n g C o m p a n y .—
“ (1 )

t i e s RECEIVED IN AN EXCHANGE TO W H IC H SUB­

cause

D
a

is t r ib u t io n s

c o r p o r a t io n

of
to

property
be

a

bank

w h ic h
h o l d in g

c o m p a n y . --- If---

(2 ) APPLIES.--- If--“ (A ) a qualified bank holding corporation
distributes—
“ (i) com m on stock received in an ex­
change to w hich subsection (c) (2 ) applies
to a shareholder (w ith respect to its stock
held by such shareholder), w ithout the sur­
render by such shareholder of stock in such
corporation; or

SECTION (C )




D

p e n s a t io n

“ (A ) a qualified bank holding corporation
distributes property (o th er than stock re­
ceived in an exchange to w hich subsection
(c) ( 3 ) ap p lies)—
“ (i) to a shareholder (with respect to
its stock held by such sh areh o ld er), w ith­
out the surrender by such shareholder of
stock in such corporation; or

21

REGULATION Y

STATUTORY APPENDIX

“ (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 p art of the
property by reason of w hich such co rpora­
tion controls (w ithin the m eaning of sec­
tion 2 (a) of the Bank H olding Com pany
A ct of 1956) a bank or bank holding com ­
pany, or such property is p art of the p ro p ­
erty by reason of w hich 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
A ct,
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

r e c e iv e d

s e c t io n

(c )

in

(3 )

an

of

stock

exchange

a p p l i e s .—

to

and

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 . — P ara­
graphs (1 ) and (2 ) shall apply to a distribution
w hether 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 . — T his subsection shall not
apply to any distribution by a corporation which
has m ade any distribution pursuant to subsec­
tion ( a ) .
“ (5 )

­

.—

“ (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 M ay 15, 1955, u n ­
less (i) gain to such corporation with respect
to the receipt of such property was not recog­
nized by reason of subsection (a) o r ( b ), or
(ii) such property was received by it in ex­
change for all of its stock in an exchange to
w hich paragraph (2 ) o r (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 ) , or
“ (B ) any property w hich was acquired by
the distributing corporation in a distribution
with respect to stock acquired by such cor­
poration after M ay 15, 1955, unless such
stock was acquired by such corporation (i)
in a distribution (w ith respect to stock held
by it on M ay 15, 1955, o r w ith respect to
stock in respect of w hich all previous appli­
cations of this clause are satisfied) w ith re­
spect to w hich gain to it was not recognized
by reason of subsection (a ) or ( b ) , or (ii)
in exchange fo r all o f its stock in an exchange
to w hich paragraph (2 ) or (3 ) applies, or
(iii) in a transaction in w hich gain was not

sub­

If—

“ (A ) a qualified bank holding corporation
distributes—
“ (i) com m on stock received in an ex­
change to which subsection (c) (3 ) applies
to a shareholder (w ith respect to its stock
held by such sh areholder), w ithout the sur­
render by such shareholder of stock in such
corporation; or
“ (ii) com m on stock received in an ex­
change to w hich subsection (c) (3 ) applies
to a shareholder, in exchange for its com ­
m on stock; or
“ (iii) preferred stock or com m on stock
received in an exchange to w hich subsec­
tion (c ) (3 ) applies to a shareholder, in
exchange for its preferred stock; or
“ (iv) securities or preferred or com m on
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 sam e term s as the preferred
stock exchanged, and any securities received
have substantially the sam e term s as the se­
curities exchanged,
then, except as provided in subsection ( f ) , no
gain to the shareholder or security holder from




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

“In the case of a distribution to which para­
graph (1) or (2) applies, but which—

s e c u r i­

w h ic h

D

p e n s a t io n

22

STATUTORY APPENDIX

REGULATION Y

recognized under section 305 (a ) o r section
332, or under section 354 w ith 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
w hich 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

in v o l v in g

“ (B ) im m ediately after the exchange, the
qualified bank holding corporation distributes
all of such stock in a m anner prescribed in
subsection (b ) (2 ) ( A ) ; and
“ (C ) before such exchange, the Board has
certified (w ith respect to the property ex­
changed which consists of property w hich,
under subsection (b ) ( 1 ) , such corporation
could distribute directly to its shareholders
or security holders w ithout the recognition of
gain) th at—
“ (i) such property is all o r p art of the
property by reason of w hich such co rp o ra­
tion controls (w ithin the m eaning of sec­
tion 2 (a ) of the Bank H olding Com pany
A ct of 1956) a bank or bank holding com ­
pany, or such property is p art of the p ro p ­
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 u n d er subsection (b ) (1 )
or exchanged u nder this paragraph; and
“ (ii) the exchange and distribution are
necessary o r ap propriate to effectuate the
policies of such A ct,
then paragraph (1 ) shall not apply w ith respect
to such distribution.
“ (d ) D i s t r i b u t i o n s t o A v o i d F e d e r a l I n ­

p r o h ib it e d

P R O P E R T Y . --- If---

“ (A ) A ny 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 w ithout the recognition of gain
to such shareholders or security holders, and
other property (except property described in
subsection ( b ) ( l ) ( 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 ) im m ediately after the exchange, the
qualified bank holding corporation distributes
all such stock in a m anner prescribed in sub­
section (a ) (2 ) ( A ); and
“ (C ) before such exchange, the Board has
certified (w ith 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 w ithout the recognition of
gain) that the exchange and distribution are
necessary or appropriate to effectuate section
4 of the Bank H olding C om pany A ct of
1956.
then paragraph (1 ) shall not apply w ith respect
to such distribution.
“ (3)

E xchanges

in v o l v in g

in t e r e s t s

c o m e T a x .—
“ ( 1 ) P r o h i b i t e d p r o p e r t y . — Subsection (a )
shall not apply to a distribution if, in connec­
tion w ith such distribution, the distributing cor­
poration retains, or transfers after M ay 15,
1955, to any corporation, property (o th er than
prohibited property) as p art of a plan one of
the principal purposes of w hich is the distribu­
tion of the earnings and profits of any co rp o ra­
tion.
“ (2 ) B a n k i n g p r o p e r t y . — Subsection (b )
shall not apply to a distribution if, in connec­
tion with such distribution, the distributing co r­
poration retains, or transfers after M ay 15,
1955, to any corporation, property (o th er than
property described in subsection (b ) (1 ) ( B )
( i) ) as p art of a plan one of the principal p u r­
poses of w hich is the distribution of the earn ­
ings and profits of any corporation.

in

B AN K S. --- 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 w ithout the recognition of gain
to such shareholders or security holders, and
other property (except prohibited pro p erty ),
fo r (ii) all of the stock of a second corpora­
tion created and availed of solely for the p u r­
pose of receiving such property;




“ (3)

C e r ta in

c o n tr ib u tio n s

to

c a p ita l.

— In the case of a distribution a portion of
w hich is attributable to a transfer w hich is a
contribution to the capital o f a corporation,
m ade after M ay 15, 1955, and prior to the date
of the enactm ent of this part, if subsection (a )

23

STATUTORY APPENDIX

REGULATION Y

(iv ), subsection (a ) or subsection (b ) (as the
case m ay be) shall apply only to the extent that
the principal am ount of the securities received
does not exceed the principal am ount of the
securities exchanged.

or (b ) w ould apply to such distribution but for
the fact that, under paragraph (1 ) or (2 ) (as
the case m ay be) of this subsection, such con­
tribution to capital is p art of a plan one of the
principal purposes of w hich is to distribute the
earnings and profits of any corporation, then,
notw ithstanding paragraph (1 ) or ( 2 ) , subsec­
tion (a ) or (b ) (as the case m ay 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 i n 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 i o 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 perm itted
under section 4 (a ) of the Bank H olding C om ­
pany A ct 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 w hich is
necessary or appropriate to effectuate section 4
o f such A ct (or w ould 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 i o n ( b ) .—
“ (A ) Subsection (b ) shall not apply w ith
respect to any distribution by any corp o ra­
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 com pany.
“ (B ) The period referred to in subpara­
graph (A ) is the period which expires 2 years
after the date of the enactm ent of this p art
or 2 years after the date on w hich the cor­
poration becom es a bank holding com pany,
w hichever date is later. T he Board is auth o r­
ized, on application by any corporation, to
extend such period from tim e to tim e with
respect to such corporation for not m ore than
one year at a tim e if, in its judgm ent, such
an extension w ould not be detrim ental to the
public interest; except that such period m ay
n ot in any case be extended beyond the date
5 years after the date of the enactm ent of
this p art or 5 years after the date on which
the corporation becomes a bank holding com ­
pany, w hichever date is later.
“ (f) C e r t a i n E x c h a n g e s o f S e c u r i t i e s . — In
the case of an exchange described in subsection
(a ) (2 ) (A ) (iv) o r subsection (b ) (2 ) (A )




“SEC. 1102. SPECIAL RULES.

“ (a)

B a s is o f P r o p e r t y A c q u i r e d i n D i s t r i ­

b u t i o n s . — If,

by reason of section 1101, gain is
not recognized w ith 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 w ith respect to stock, w ithout the sur­
render by such shareholder of stock, the basis
of the property received and of the stock with
respect to w hich it is distributed shall, in the
d istributee’s hands, be determ ined 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 sam e as the adjusted basis of the
stock or securities exchanged, increased by—
“ (A ) the am ount of the property received
w hich was treated as a dividend, and
“ (B ) the am ount of gain to the taxpayer
recognized on the property received (n o t in­
cluding any portion o f 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 . — T he periods of
lim itation provided in section 6501 (relating to
lim itations on assessment and collection) shall not
expire, w ith respect to any deficiency (including
interest and additions to the tax) resulting solely
from the receipt of property by shareholders in a
distribution w hich 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 m anner and
with such accom panying inform ation as the Sec­
retary or his delegate m ay by regulations pre­
scribe) th at the period (including extensions
thereof) prescribed in section 4 (a ) of the Bank
H olding Com pany A ct of 1956, or section 1101
(e) (2 ) (B ), w hichever is applicable, has expired;
and such assessment may be m ade notw ithstanding
any provision of law or rule of law which would
otherw ise prevent such assessment.
“ (c) A l l o c a t i o n o f E a r n i n g s a n d P r o f i t s . —
“ (1)
t r o lle d

24

D is t r ib u t io n

o f

c o r p o r a t i o n . — In

stock

in

a

con ­

the case of a dis­

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 ) o f section
stock in a controlled corporation, proper allo­
1103, the date A p ril 12, 1965’ shall be sub­
cation w ith respect to the earnings and profits
stituted for the date ‘M ay 15, 1955’.
of the distributing corporation and the con­
“ (4 ) In applying subsection (d ) (3 ) of sec­
trolled corporation shall be m ade under regula­
tion 1101, the date of the enactm ent 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 s c r i b e d in s e c t i o n 1101
enactm ent of this part.
(c)
(2 ) o r ( 3 ) . — In the case of any exchange
“ (5 ) In applying subsection (b ) (2 ) (A ) o f
described in section 1101 (c) (2 ) or ( 3 ) ,
section 1103, the reference to the Bank H o ld ­
proper allocation w ith respect to the earnings
ing Com pany A ct of 1956 shall be treated as
and profits of the corporation transferring the
referring to such A ct as am ended by Public Law
property and the corporation receiving such
89-485.
property shall be m ade under regulations pre­
scribed by the Secretary or his delegate.
“SEC. 1103. DEFINITIONS.
“ (3 )

D e fin itio n

of

c o n tr o lle d

corp ora­

“ (a ) B a n k H o l d i n g C o m p a n y . — F o r purposes
of this part, the term ‘bank holding com pany’ has
the m eaning assigned to such term by section 2
of the Bank H olding C om pany A ct of 1956.
“ (b ) Q u a l i f i e d B a n k H o l d i n g C o r p o r a ­

F o r purposes of paragraph ( 1 ), the
term ‘controlled corporation’ m eans a corpora­
tion w ith respect to w hich at least 80 per cent
of the total com bined voting pow er of all classes
of stock entitled to vote and at least 80 per cent
of the total num ber of shares of all other classes
of stock is owned by the distributing qualified
bank holding corporation.
“ (d ) I t e m i z a t i o n o f P r o p e r t y . — In any cer­
tification under this part, the Board shall m ake
such specification and item ization of property as
m ay be necessary to carry out the provisions of
this part.
t i o n .—

“ (e )

C e r t a in

Bank

H o l d in g

t io n .—
“ ( 1 ) I n g e n e r a l . — E xcept as provided in
paragraph ( 2 ), fo r purposes of this p art the
term ‘qualified bank holding co rporation’ m eans
any corporation (as defined in section 7701
(a) ( 3 ) ) w hich is a bank holding com pany and
w hich holds prohibited property acquired by
it—
“ (A ) on or before M ay 15, 1955.
“ (B ) in a distribution in w hich 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 fo r all of its stock in an
exchange described in section 1101 (c ) (2 )
o r (c) ( 3 ).
“ (2 ) L i m i t a t i o n s . —
“ (A ) A bank holding com pany shall not
be a qualified bank holding corporation, u n ­
less it would have been a bank holding com ­
pany on M ay 15, 1955, if the Bank H olding
C om pany A ct of 1956 had been in effect on
such date, or unless it is a bank holding com ­
pany determ ined solely by reference to—
“ (i) property acquired by it on or be­
fore M ay 15, 1955,
“ (ii) property acquired by it in a distri­
bution in w hich gain to such corporation
w ith respect to the receipt of such property
was not recognized by reason of subsec­
tion (a ) o r (b ) of section 1101, and

C o m p a n i e s .—

T h is part shall apply in respect o f any co m p a n y
w hich b e co m es a bank h old in g co m p a n y as a re­
sult o f the en actm en t o f the A c t entitled A n A c t
to

am en d

the

B ank

H o ld in g

Com pany

A ct

of

1956’, ap p roved July 1, 1966 (P u b lic L a w 894 8 5 ), with the fo llo w in g m o difications:
“ (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 m ade—
“ (A ) after A pril 12, 1965, and
“ (B ) on or before the date on w hich the
Board of G overnors of the Federal Reserve
System makes its final certification under sec­
tion 1101 (e ),
are pro rata. F o r purposes of the preceding sen­
tence, any redem ption of stock m ade in whole
or in p art with property other than money shall
be treated as a distribution.




25

REGULATION Y

STATUTORY APPENDIX
division thereof or by any instrum entality of a
governm ent or subdivision; or
“ (3 ) m oney, and the right to receive money
not evidenced by a security or obligation (o th er
than a security o r obligation described in p ara­
graph (1 ) o r ( 2 ) ) .
“ (e) B o a r d . — F o r purposes of this part, the
term ‘B oard’ m eans the Board of G overnors 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 com pany 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 w ith
respect to stock, w hich stock was acquired
by such bank holding com pany—
“ (i) on o r before M ay 15, 1955,
“ (ii) in a distribution (w ith respect to
stock held by it on M ay 15, 1955, or w ith
respect to stock in respect of w hich all
previous applications of this clause are
satisfied) w ith respect to w hich 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 ) o r ( 3 ).
“ (C ) A corporation shall be treated as a
qualified bank holding corporation only if the
Board certifies th at it satisfies the foregoing
requirem ents of this subsection.
“ (c) P r o h i b i t e d P r o p e r t y . — F or purposes of
this part, the term ‘prohibited p roperty’ m eans, in
the case of any bank holding com pany, property
(other than nonexem pt property) the disposition
of w hich w ould be necessary or appropriate to ef­
fectuate section 4 of the Bank H olding Com pany
A ct of 1956 if such com pany continued to be a
bank holding com pany beyond the period (includ­
ing any extensions thereof) specified in subsection
(a ) of such section o r in section 1101 (e) (2 )
(B ) of this part, as the case m ay be. T he term
‘prohibited property’ does not include shares of
any com pany held by a bank holding com pany to
the extent that the prohibitions of section 4 of the
Bank H olding C om pany A ct of 1956 do not apply
to the ow nership by such bank holding com pany
of such property by reason of subsection (c) (5 )
of such section.
“ (d) N onexem pt
P r o p e r t y . — F o r purposes
of this part, the term ‘nonexem pt p rop erty ’
m eans—
“ (1 ) obligations (including notes, drafts, bills
of exchange, and bankers’ acceptances) having
a m aturity at the tim e of issuance of not ex­
ceeding 24 m onths, exclusive of days of grace;
“ (2 ) securities issued by or guaranteed as to
principal o r interest by a governm ent or sub­




(b ) T he table of parts for subchapter O of
chapter 1 of the Internal Revenue Code of 1954
is am ended by adding at the end thereof the fol­
lowing:
“P art V III. D istributions pursuant to Bank
H olding C om pany A ct of 1956.”
(c) The am endm ents m ade by this section shall
apply w ith respect to taxable years ending after
the date of the enactm ent of this Act.
S a v in g P r o v is io n

Saving clause
S e c . 11. (a ) N othing herein contained shall be
interpreted or construed as approving any act, ac­
tion, o r 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, o r proceeding pending o r hereafter in­
stituted on account of any prohibited antitrust or
m onopolistic act, action, or conduct, except as
specifically provided in this section.

Applicability of and procedure with respect to anti­
trust laws

(b )
T he Board shall im m ediately notify the
A ttorney G eneral of any approval by it pursuant
to section 3 of a proposed acquisition, merger, or
consolidation transaction, and such transaction
m ay not be consum m ated before the thirtieth cal­
endar day after the date of approval by the Board.
A ny action brought u nder the antitrust laws aris­
ing out of an acquisition, m erger, or consolidation
transaction approved under section 3 shall be com ­
m enced w ithin such thirty-day period. The com ­
m encem ent of such an action shall stay the effec­
tiveness of the B oard’s approval unless the court
shall otherw ise specifically order. In any such ac­
tion, the co u rt shall review de novo the issues pre­
sented. In any judicial proceeding attacking any
acquisition, merger, or consolidation transaction
approved p u rsuant to section 3 on the ground that
such transaction alone and of itself constituted a

26

STATUTORY APPEND IX

REGULATION Y
Meaning of “antitrust laws”

violation of any antitrust laws other than section
2 of the A ct of July 2, 1890 (section 2 of the
Sherm an A ntitrust A ct, 15 U.S.C. 2 ), the stand­
ards applied by the court shall be identical w ith
those th at the Board is directed to apply under
section 3 of this Act. U pon the consum m ation of
an acquisition, m erger, o r consolidation transac­
tion approved under section 3 in com pliance w ith
this A ct and after the term ination of any antitrust
litigation com m enced within the period prescribed
in this section, or upon the term ination of such
period if no such litigation is com m enced therein,
the transaction m ay not thereafter be attacked in
any judicial proceeding on the ground th at it alone
and of itself constituted a violation of any anti­
trust laws other than section 2 of the A ct of July
2, 1890 (section 2 of the Sherm an A ntitrust A ct,
15 U.S.C. 2 ), but nothing in this A ct shall exem pt
any bank holding com pany involved in such a
transaction from com plying w ith the antitrust laws
after the consum m ation of such transaction.

(f)
F o r the purposes of this section, the term
“antitrust laws” m eans the A ct o f July 2, 1890
(the Sherm an A n titru st A ct, 15 U.S.C. 1-7), the
A ct of O ctober 15, 1914 (th e C layton A ct, 15
U.S.C. 12-27), and any other A cts in pari m ateria.
[U. S. C., title 12, sec. 1849. As amended by Acts of
July 1, 1966 (80 Stat. 240) and Dec. 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 is io n s

Separability clause
S e c . 12. If any provision of this A ct, o r the
application of such provision to any person or
circum stance, shall be held invalid, the rem ainder
of the A ct, and the application of such provision
to persons or circum stances other th an those to
w hich 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, m erger, or
consolidation transaction approved by the Board
under section 3 of this A ct, the Board and any
State banking supervisory agency having jurisdic­
tion w ithin the State involved, may appear as a
p arty of its own m otion and as of right, and be
represented by its counsel.

B A N K H O L D IN G C O M P A N Y A C T
A M E N D M E N T S 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. W ith respect to any proceeding be­
fore the Federal Reserve Board wherein an appli­
can t seeks authority to acquire a subsidiary which
is a bank under section 3 of the Bank H olding
C om pany A ct of 1956, to engage directly or in­
directly in a nonbanking activity pursu an t to sec­
tion 4 of such A ct, or to engage in an activity
otherw ise prohibited under section 106 of this A ct,
a party who would become a com petitor of the
applicant or subsidiary thereof by virtue o f the
applicant’s o r 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 ord er of the
Board, shall have the right as an aggrieved party
to obtain judicial review thereof as provided in
section 9 of such A ct of 1956 o r as otherw ise p ro ­
vided by law.

(d ) A ny acquisition, m erger, o r consolidation
o f the kind described in section 3 (a ) of this A ct
w hich was consum m ated at any time prior or sub­
sequent to M ay 9, 1956, and as to w hich no litiga­
tion was initiated by the A ttorney G eneral prior to
the date of enactm ent of this am endm ent, shall be
conclusively presum ed not to have been in viola­
tion of any antitrust laws other than section 2 of
the A ct of July 2, 1890 (section 2 of the Sherm an
A ntitrust A ct, 15 U .S.C. 2 ).
Litigation pending on or after July 1, 1966

(e) A ny court having pending before it on or
after the date of enactm ent of this am endm ent any
litigation initiated under the antitrust laws by the
A ttorney G eneral w ith respect to any acquisition,
m erger, or consolidation of the kind described in
section 3 (a ) of this A ct shall apply the substantive
rule of law set fo rth in section 3 of this A ct.




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

27

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 term s
“bank”, “bank holding com pany”, “subsidiary”,
and “B oard” have the m eaning ascribed to such
term s in section 2 of the Bank H olding C om pany
A ct of 1956. F or purposes of this section only,
the term “com pany”, as used in section 2 of the
Bank H olding Com pany A ct of 1956, m eans any
person, estate, trust, partnership, corporation, as­
sociation, or sim ilar organization, but does not
include any corporation the m ajority of the shares
of w hich are owned by the U nited States or by
any State. The term “trust service” m eans any
service custom arily perform ed by a bank trust de­
partm ent.
S ec.

Judicial proceedings

(c) T he district courts of the U nited States have
jurisdiction to prevent and restrain violations of
subsection (b ) of this section and it is the duty
of the U nited States attorneys, under the direction
of the A ttorney G eneral, to institute proceedings
in equity to prevent and restrain such violations.
The proceedings m ay be by w ay of a petition
setting forth the case and praying th at the viola­
tion be enjoined or otherw ise prohibited. W hen
the parties com plained of have been duly notified
of the petition, the court shall proceed, as soon
as possible, to the hearing and determ ination of
the case. W hile the petition is pending, and before
[U. S. C., title 12, sec. 1971.]
final decree, the court m ay at any tim e m ake such
tem porary restraining o rder or prohibition as it
Tie-in arrangements
deems just. W henever it appears to the co u rt th at
(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 fu r­
brought before it, the court m ay cause them to
nish any service, or fix o r vary the consideration
be sum m oned w hether or not they reside in the
for any of the foregoing, on the condition or re­
district in w hich the court is held, and subpenas
quirem ent—
to th at end m ay be served in any district by the
(1 ) that the custom er shall obtain some ad­
m arshal 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 custom er shall obtain some ad­
(d ) In any action brought by or on behalf of
ditional credit, property, or service from a bank
the U nited States u nder subsection ( b ), subpenas
holding com pany of such bank, or from any
fo r witnesses m ay run into any district, but no
other subsidiary of such bank holding com pany;
w rit of subpena m ay issue for witnesses living out
(3 ) that the custom er 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 w ithout 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 custom er provide some addi­
[U. S. C., title 12, sec. 1974.]
tional credit, property, or service to a bank
holding com pany of such bank, or to any other
Civil actions
subsidiary of such bank holding com pany; or
(e) A ny person who is injured in his business
(5 ) that the custom er shall not obtain some
or property by reason of anything forbidden in
other credit, property, or service from a com ­
* subsection (b ) m ay sue therefor in any district
petitor of such bank, a bank holding com pany
court of the U nited States in w hich the defendant
of such bank, or any subsidiary of such bank
resides or is found or has an agent, w ithout re­
holding com pany, other than a condition or re­
gard
to the am ount in controversy, and shall be
quirem ent that such bank shall reasonably im ­
entitled to recover three tim es the am ount of the
pose in a credit transaction to assure the sound­
dam ages sustained by him, and the cost of suit,
ness of the credit.
including a reasonable attorney’s fee.
T he Board m ay by regulation o r order perm it such
exceptions to the foregoing prohibition as it con­




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

28

STATUTORY APPENDIX

REGULATION Y
u n d er this section and based in w hole or in p art
on such m atter shall be suspended during the
pendency of the enforcem ent action so instituted
and for one year th ereafter: Provided, T h at
w henever the running of the statute of lim itations
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 com m enced either w ithin
the period of suspension or w ithin the four-year
period referred to in paragraph ( 1 ).

Injunctions

(f) A ny person m ay sue for and have injunc­
tive relief, in any court of the U nited States hav­
ing jurisdiction over the parties, against threatened
loss or dam age 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 dam age is granted
by courts of equity and under the rules governing
such proceedings. U pon the execution of proper
bond against dam ages for an injunction improvidently granted and a showing that the danger
of irreparable loss or dam age is im m ediate, a
prelim inary injunction m ay issue.

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

Actions under other Federal or State laws

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

(h )
N othing contained in this section shall be
construed
as affecting in any m anner the right of
Limitation of actions
the U nited States o r any oth er p arty to bring
( g ) ( 1 ) Subject to paragraph ( 2 ), any action
an action u nder any other law of the U nited
to enforce any cause of action under this section
States or of any State, including any right w hich
shall be forever barred unless com m enced w ithin
m ay exist in addition to specific statutory au th o r­
four years after the cause of action accrued.
ity, challenging the legality of any act or practice
(2 )
W henever any enforcem ent action is insti­
w hich m ay be proscribed by this section. N o
tuted by or on behalf of the U nited States with
regulation or order issued by the B oard u nder
respect to any m atter which is or could be the
this section shall in any m anner constitute a
subject of a private right of action under this
defense
to such action.
section, the running of the statute of lim itations in
respect of every private right of action arising
[U. S. C., title 12, sec. 1978.]




29