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Qjt due $ W FEDERAL RESERVE BANK OF NEW YORK April 21, 1980 SP E C IA L C R E D IT R E ST R A IN T PROGRAM F in an cin g B ank H olding Com pany Form ations, and A cquisitions of B ank H olding Com panies, Banks, or N onbank Subsidiaries T o th e C h i e f E x e c u ti v e O f f ic e r s o f A l l C o m m e r c i a l B a n k in g I n s titu tio n s in th e S e c o n d F e d e r a l R e s e r v e D i s t r i c t : Enclosed is a letter, dated April 16, 1980, from Frederick H. Schultz, Vice Chairman of the Board of Governors of the Federal Reserve System, addressed to the chief executive officers of all commercial banks, concerning the Special Credit Restraint Program. In his letter, Vice Chairman Schultz indicates that the Board of Governors’ policy of encouraging banks to avoid financing corporate takeovers or mergers applies to the financing of bank holding company formations, and acquisitions of bank holding companies, banks, and nonbank subsidiaries. A nthony M. S olomon, President. 3 □ AR□ □ " GOVERNORS C ~ TH £ FEDERAL RESERVE SY57EM Wa s h i n g t o n ■S E a£.=?lC K ri. 3CHU vie s Ch a i r m a n A p r il 16, 1980 TO: C h ie f E x e c u tiv e O f f i c e r s o f A ll Com m ercial Banks RE: S p e c ia l C r e d i t R e s t r a i n t Program As you know in m e etin g th e g u i d e l i n e s f o r th e grow th in t o t a l bank c r e d i t o f 6-9 p e r c e n t under th e S p e c ia l C r e d i t R e s t r a i n t Program ban k s a r e e n co u ra g ed to a v o id th e f in a n c in g o f c o r p o r a te ta k e o v e r s or m e rg e rs and th e r e t i r e m e n t o f c o r p o r a te s to c k e x c e p t in th o s e li m it e d c irc u m s ta n c e s w here su ch a lo a n may be j u s t i f i e d in term s o f p r o d u c tio n o r econom ic e f f i c i e n c y com m ensurate w ith th e s i z e o f th e lo a n . I w ish to s t r e s s t h a t th e B oard c o n s id e r s t h i s p o li c y to be a p p l ic a b l e to th e f in a n c in g o f fo r m a tio n s o f bank h o ld in g com panies and a c q u i s i t i o n s o f bank h o ld in g co m p an ies, banks and nonbank s u b s i d i a r i e s . A c c o rd in g ly , banks sh o u ld ta k e s p e c i a l m easu res to a v o id lo a n s f o r such p u rp o s e s u n le s s th e y m eet th e p r o d u c tio n o r econom ic e f f i c i e n c y c r i t e r i a . The 3 o a rd e x p e c ts t h a t banks w i l l c a r e f u l l y rev ie w and m odify t h e i r le n d in g p o l i c i e s to be c o n s i s t e n t w ith th e p o l i c i e s e x p re s s e d in t h i s l e t t e r and w i l l exam ine t h e i r o u ts ta n d in g n o n b in d in g com m itm ents c o v e rin g a c q u i s i t i o n f in a n c in g w ith a view to re d u c in g o r te r m in a tin g such com m itm ents c o n s i s t e n t w ith th e p u rp o s e s o f th e S p e c ia l C r e d i t R e s t r a i n t P rogram . I I e x p e c t and a p p r e c i a t e your c o o p e r a tio n in t h i s and a l l o th e r a s p e c t s o f th e B o a r d 's and th e A d m i n i s t r a t i o n 's a n t i - i n f l a t i o n p rogram . S in c e r e ly ,
@FedFRASER