[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3867-3868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1305]
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FEDERAL RESERVE SYSTEM
CS Holding and Credit Suisse, both of Zurich, Switzerland;
Application to Engage in Nonbanking Activities
CS Holding and Credit Suisse, both of Zurich, Switzerland
(Applicants), have applied pursuant to section 4(c)(8) of the Bank
Holding Company Act (12 U.S.C. 1843(c)(8)) (BHC Act) and Sec.
225.23(a)(3) of the Board's Regulation Y (12 CFR 225.23(a)(3)), through
BEA Associates, New York, New York (Company), to engage de novo in
providing investment advisory services (including discretionary
portfolio management services) to institutional customers with respect
to futures and options on futures on certain financial and nonfinancial
commodities. Company would provide the proposed services with respect
to financial contracts previously approved by the Board (See SR Letter
93-27 (May 21, 1993)), Goldman Sachs Index Futures and options thereon
that are traded on the Chicago Mercantile Exchange, and nonfinancial
contracts previously approved by the Board. These activities would be
conducted worldwide.
Section 4(c)(8) of the BHC Act provides that a bank holding company
may, with Board approval, engage in any activity which the Board, after
due notice and opportunity for hearing, has determined (by order or
regulation) to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. This statutory
test requires that two separate tests be met for an activity to be
permissible for a bank holding company. First, the Board must determine
that the activity is, as a general matter, closely related to banking.
Second, the Board must find in a particular case that the performance
of the activity by the applicant bank holding company may reasonably be
expected to produce public benefits that outweigh possible adverse
effects.
A particular activity may be found to meet the ``closely related to
banking'' test if it is demonstrated that banks generally have provided
the proposed activity, that banks generally provide services that are
operationally or functionally similar to the proposed activity so as to
equip them particularly well to provide the proposed services, or that
banks generally provide services that are so integrally related to the
proposed activity as to require their provision in a specialized form.
National Courier Ass'n v. Board of Governors, 516 F.2d 1229, 1237 (D.C.
Cir. 1975). In addition, the Board may consider any other basis that
may demonstrate that the activity has a reasonable or close
relationship to banking or managing or controlling banks. Board
Statement Regarding Regulation Y, 49 FR 806 (1984).
Applicants maintain that the Board previously has determined by
order and regulation that providing general investment advisory
services with respect to futures and options on futures on financial
and nonfinancial commodities is closely related to banking. See 12 CFR
225.25(b)(19); Swiss Bank Corporation, 77 Federal Reserve Bulletin 126
(1991) (Swiss Bank); J.P. Morgan & Co., Incorporated, 80 Federal
Reserve Bulletin 151 (1994) (J.P. Morgan). Applicants state that they
would provide general investment advisory services in accordance with
the Board's rules and orders.
Applicants also maintain that the Board previously has not
determined that providing discretionary portfolio management services
with respect to futures and options on futures on financial and
nonfinancial commodities is closely related to banking. Applicants
state that Company only would provide discretionary portfolio
management services to institutional customers, and only with the
consent of such customers. Applicants also state that Company would
comply with applicable law, including fiduciary principles, and obtain
the consent of its customer before engaging, as principal or as agent
in a transaction in which an
[[Page 3868]]
affiliate acts as principal, in transactions on the customer's behalf.
Applicants maintain that the Board has permitted bank holding companies
to provide general investment advisory services with respect to futures
and options on futures on financial and nonfinancial commodities (12
CFR 225.25(b)(19), Swiss Bank and J.P. Morgan), and that the proposed
discretionary services appear to be functionally similar to the
securities-related investment advisory activities the Board has
approved for bank holding companies generally in Sec. 225.25(b)(4) of
Regulation Y. Applicants conclude that for these reasons, providing
discretionary portfolio management services with respect to futures and
options on futures on financial and nonfinancial commodities is closely
related to banking.
In order to approve the proposal, the Board must determine that the
proposed activities to be conducted by Company ``can reasonably be
expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interests, or
unsound banking practices.'' 12 U.S.C. Sec. 1843(c)(8). Applicants
believe that the proposal will produce public benefits that outweigh
any potential adverse effects. In particular, Applicants maintain that
the proposal will enhance competition and enable Applicants to offer
their customers a broader range of products. In addition, Applicants
state that the proposed activities will not result in adverse effects
such as an undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
In publishing the proposal for comment, the Board does not take a
position on issues raised by the proposal. Notice of the proposal is
published solely to seek the views of interested persons on the issues
presented by the application and does not represent a determination by
the Board that the proposal meets, or is likely to meet, the standards
of the BHC Act.
Any comments or requests for hearing should be submitted in writing
and received by William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, Washington, DC 20551, not later than February
3, 1995. Any request for a hearing on this application must, as
required by Sec. 262.3(e) of the Board's Rules of Procedure (12 CFR
262.3(e)), be accompanied by a statement of the reasons why a written
presentation would not suffice in lieu of a hearing, identifying
specifically any questions of fact that are in dispute, summarizing the
evidence that would be presented at a hearing, and indicating how the
party commenting would be aggrieved by approval of the proposal.
This application may be inspected at the offices of the Board of
Governors or the Federal Reserve Bank of New York.
Board of Governors of the Federal Reserve System, January 12,
1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-1305 Filed 1-18-95; 8:45 am]
BILLING CODE 6210-01-F
