[Federal Register Volume 59, Number 209 (Monday, October 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26871]
[[Page Unknown]]
[Federal Register: October 31, 1994]
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FEDERAL RESERVE SYSTEM
Banco Santander, S.A.; Application to Engage in Nonbanking
Activities
Banco Santander, S.A., Madrid Spain, has 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)), to engage de novo through its subsidiary, Santander
Investment Securities, Inc., New York, New York, in the following
activities: (1) Underwriting and dealing in obligations of the United
States and Canada, general obligations of states and their political
subdivisions, other obligations that state member banks of the Federal
Reserve System may be authorized to underwrite and deal in, and money
market instruments (``bank-eligible securities''); (2) underwriting and
dealing, to a limited extent, in all types of debt securities; (3)
underwriting and dealing, to a limited extent, in all types of equity
securities; (4) acting as agent for issuers in the private placement of
all types of securities and acting as a riskless principal with respect
to all types of securities; (5) engaging in ``full service brokerage''
by providing investment and financial advisory services in combination
with securities brokerage services; (6) making and servicing loans; and
(7) buying and selling futures and forwards for, options on futures and
forwards for, and options on, bank eligible and ineligible securities
solely for hedging purposes, and in the case of instruments based on
ineligible securities, solely as an incident to the proposed
underwriting and dealing activities. Applicant proposes to conduct
these activities throughout the United States and the world.
Section 4(c)(8) of the BHC Act provides that a bank holding company
may, with Board approval, engage in any activity that 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
so operationally or functionally similar to the proposed activity as to
equip them particularly well to engage in the proposed activity, 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).
Banco Santander states that the Board previously has determined by
regulation that some of the proposed activities, when conducted within
limitations established by the Board, are closely related to banking
for purposes of section 4(c)(8) of the BHC Act. See 12 CFR 225.25(b)(1)
(making and servicing loans); 12 CFR 225.25 (b)(15) (full-service
brokerage services); 12 CFR 225.25(b)(16) (underwriting and dealing in
bank-eligible securities).
Banco Santander also states that the Board has determined by order
that the remaining proposed activities, when conducted within
limitations established by the Board in previous orders, are closely
related to banking. See Canadian Imperial Bank of Commerce,, 76
Federal Reserve Bulletin 158 (1990), J.P. Morgan & Company
Incorporated,, 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom.
Securities Industry Association v. Board of Governors of the Federal
Reserve System, 900 F.2d 360 (D.C. Cir 1990), and Citicorp, et al., 73
Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry
Association v. Board of Governors of the Federal Reserve System, 839
F.2d 47 (2d Cir.), cert. denied, 486 U.S. 1059 (1988) (underwriting and
dealing in debt and equity securities); Bankers Trust New York
Corporation, 75 Federal Reserve Bulletin 829 (1989) (riskless principal
and private placement activities); Swiss Bank Corporation, 77 Federal
Reserve Bulletin 759 (1991) (trading in derivatives of bank-eligible
securities); Dai-Ichi Kangyo Bank, 77 Federal Reserve Bulletin 184
(1991) (trading in derivatives of bank-ineligible securities for
hedging purposes as an incident to approved underwriting and dealing
activities).
Banco Santander maintains that it and Santander Investment
Securities would conduct these previously approved activities in
conformance with the conditions and limitations established by the
Board in prior cases, including the Board's 10 percent revenue
limitation on underwriting and dealing activities. For this reason,
Banco Santander contends that approval of the application would not be
barred by section 20 of the Glass-Steagall Act (12 U.S.C. 377), which
prohibits the affiliation of a state member bank with any company
principally engaged in the underwriting, public sale, or distribution
of securities.
In order to approve the proposal, the Board must determine that the
proposed activities ``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). Banco Santander states that the proposal will produce
public benefits that outweigh any potential adverse effects. In
particular, Banco Santander maintains that the proposal will enhance
competition and enable it to offer its customers a broader range of
products. In addition, Banco Santander states 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
to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, Washington, D.C. 20551, not later than November 15,
1994. 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 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, October 25,
1994.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 94-26871 Filed 10-28-94; 8:45 am]
BILLING CODE 6210-01-F
