[Federal Register Volume 59, Number 38 (Friday, February 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4286]
[[Page Unknown]]
[Federal Register: February 25, 1994]
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FEDERAL RESERVE SYSTEM
First Chicago Corporation; Application to Engage in Certain
Nonbanking Activities
First Chicago Corporation, Chicago, Illinois (Applicant), 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 of the Board's Regulation
Y (12 CFR 225.23), to engage de novo through its wholly owned
subsidiary, First Chicago Capital Markets, Inc., Chicago, Illinois
(Company), in the following nonbanking activities:
1. Underwriting and dealing in, to a limited extent, all types of
debt securities, including sovereign debt securities, municipal revenue
bonds, mortgage-related securities, consumer receivable-related
securities, commercial paper, corporate debt securities, convertible
debt securities, and debt securities issued by a trust or other vehicle
secured by or representing interests in debt obligations;
2. Acting as agent in the private placement of all types of
securities, and providing related advisory services;
3. Purchasing and selling all types of securities as a ``riskless
principal'' on the order of customers;
4. Providing full-service securities brokerage services, pursuant
to Sec. 225.25(b)(15)(ii) of Regulation Y;
5. Providing financial and transaction advice regarding the
structuring and arranging of swaps, caps, and similar transactions
relating to interest rates, currency exchange rates or prices, and
economic and financial indices, and similar transactions, pursuant to
Sec. 225.25(b)(4)(vi)(A)(2) of Regulation Y; and
6. Providing financial and transaction advice regarding the
structuring and arranging of swaps, caps, and similar transactions
relating to commodity prices and commodity indices, and similar
transactions.
Applicant seeks approval to conduct the proposed activities
throughout the United States.
Closely Related to Banking Standard
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.'' In determining
whether a proposed activity is closely related to banking for purposes
of the BHC Act, the Board considers, inter alia, the matters set forth
in National Courier Association v. Board of Governors of the Federal
Reserve System, 516 F.2d 1229 (D.C. Cir. 1975). These considerations
are:
(1) Whether banks generally have in fact provided the proposed
services;
(2) Whether banks generally provide services that are operationally
or functionally so similar to the proposed services as to equip them
particularly well to provide the proposed services; and
(3) Whether banks generally provide services that are so integrally
related to the proposed services as to require their provision in a
specialized form. See 516 F.2d at 1237. 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).
Applicant states that the Board previously has determined by
regulation that certain of the proposed activities, when conducted
within the limitations established by the Board in its regulations and
in related interpretations and orders, are closely related to banking
for purposes of section 4(c)(8) of the BHC Act. See 12 CFR 225.25(b)(4)
and (15) (certain investment and financial advisory services and full-
service brokerage activities).
Applicant also maintains that the Board previously has determined
by order that several of the other proposed activities, when conducted
within the limitations established by the Board in its previous orders,
are closely related to banking, and, where applicable, consistent with
section 20 of the Glass-Steagall Act (12 U.S.C. 377). See, e.g., J.P.
Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192
(1989), aff'd sub nom. Securities Industries Ass'n v. Board of
Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990),
Order Approving Modifications to the Section 20 Orders, 75 Federal
Reserve Bulletin 751 (1989), Order Approving Modifications to the
Section 20 Orders, 79 Federal Reserve Bulletin 226 (1993), and
Supplement to Order Approving Modifications to Section 20 Orders, 79
Federal Reserve Bulletin 360 (1993) (underwriting and dealing
activities); and Bankers Trust New York Corporation, 75 Federal Reserve
Bulletin 829 (1989) (private placement and riskless principal
activities).
Applicant maintains that Company will conduct the foregoing,
previously approved activities in conformity with the conditions and
limitations established by the Board in prior cases.
Applicant further states that the proposed advisory services
relating to swaps and other transactions based upon commodity prices or
commodity indices are closely related to banking within the meaning of
the BHC Act. In this regard, Applicant maintains that banks currently
provide such services, and argues, inter alia, that the New York State
Banking Department and the Office of the Comptroller of the Currency
have permitted banks under their respective jurisdictions to engage in
these activities, subject to certain limitations. See Letter from New
York State Banking Department dated November 14, 1988; OCC Interpretive
Letter No. 494 (December 20, 1989); OCC Interpretive Letter No. 507
(May 5, 1990).
Proper Incident to Banking Standard
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. 1843(c)(8).
Applicant believes that the proposal will produce public benefits
that outweigh any potential adverse effects. In particular, Applicant
maintains that the proposal will enhance competition and efficiency. In
addition, Applicant 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 in order 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, D.C. 20551, not later than March
14, 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 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 Chicago.
Board of Governors of the Federal Reserve System, February 18,
1994.
Jennifer J. Johnson,
Associate Secretary of the Board.
[FR Doc. 94-4286 Filed 2-24-94; 8:45 am]
BILLING CODE 6210-01-F
