[Federal Register Volume 61, Number 86 (Thursday, May 2, 1996)]
[Notices]
[Pages 19627-19628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10907]
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FEDERAL RESERVE SYSTEM
The Bank of New York Company, Inc.; Notice to Engage in Certain
Nonbanking Activities
The Bank of New York Company, Inc., New York, New York (BNY), has
applied for Board approval pursuant to section 4(c)(8) of the Bank
Holding Company Act (12 U.S.C. 1843(c)(8)) (BHC Act) and section
225.23(a) of the Board's Regulation Y (12 CFR 225.23(a)), to engage de
novo through its indirect wholly owned subsidiary, BNY Capital Markets,
Inc., New York, New York (Company), in the following nonbanking
activities: (i) providing investment and financial advisory services
pursuant to 12 CFR 225.25(b)(4); (ii) providing full-service brokerage
services pursuant to 12 CFR 225.25(b)(15); underwriting and dealing in
government obligations and other obligations that state member banks
may underwrite and deal in pursuant to 12 CFR 225.25(b)(16); making,
acquiring and servicing loans or other extensions of credit pursuant to
12 CFR 225.25(b)(1); underwriting and dealing in, to a limited extent,
certain municipal revenue bonds (including unrated and certain
``private ownership'' municipal revenue bonds), mortgage-related
securities, commercial paper and consumer-receivable-related securities
(Tier 1 Securities); buying and selling all types of debt and equity
securities on the order of customers as a ``riskless principal;'' and
acting as agent in the private placement of all types of debt and
equity securities. Company currently is a subsidiary of BNY's bank
subsidiary, The Bank of New York, New York, New York. Company would
engage in the proposed activities on a worldwide basis following a
reorganization in which it would become a subsidiary of BNY's wholly
owned nonbank subsidiary, BNY Capital Markets Holdings, Inc., New York,
New York.
The Board previously has determined that the proposed activities
are closely related to banking. See 12 CFR 225.25(b)(1), (4), (15) and
(16); Citicorp et al., 73 Fed. Res. Bull. 473 (1987) (underwriting and
dealing in, to a limited extent, Tier 1 Securities); Bank South
Corporation, 81 Fed. Res. Bull. 1116 (1995); Letter Interpretating
Cross-Marketing Firewall, 81 Fed. Res. Bull. 198 (1995). Bankers Trust
New York Corporation, 75 Fed. Res. Bull. 829 (1989)(Bankers Trust);
J.P. Morgan & Company Incorporated, 76 Fed. Res. Bull. 26 (1990) (J.P.
Morgan) (riskless principal and private placement activities). BNY
proposes to engage in these activities in accordance with the
limitations and conditions established by the Board in Regulation Y and
in its prior orders approving these activities.
In authorizing bank holding companies to engage in riskless
principal activities under section 4(c)(8) of the BHC Act, the Board
previously has relied upon a commitment that the applicant would
conduct the proposed riskless principal activities in accordance with
most of the prudential limitations governing the bank-ineligible
securities underwriting and dealing activities of section 20 companies
(Section 20 Firewalls). See Bankers Trust, 75 Fed. Res. Bull. at 834;
J.P. Morgan, 76 Fed. Res. Bull. at 27. BNY, however, does not propose
to conduct the riskless principal activities of Company in accordance
with the Section 20 Firewalls. BNY states that riskless principal
transactions are essentially equivalent to brokerage transactions, and
notes that the Board
[[Page 19628]]
has not imposed similar limitations on the securities brokerage
activities of bank holding companies. See 12 CFR 225.25(b)(15). BNY
also contends that riskless principal transactions do not involve the
potential conflicts of interests, unsound banking practices and other
adverse effects that are sought to be addressed by the Section 20
Firewalls. Furthermore, BNY asserts that compliance with the section 20
Firewalls would place a bank holding company engaged in riskless
principal transactions at a competitive disadvantage to other broker-
dealers engaged in such activity.
Company, however, would conduct its riskless principal activities
subject to the other conditions established by the Board in previous
orders, including those conditions that are designed to assure that a
bank holding company's riskless principal activities do not constitute
the underwriting, public sale, or distribution of securities for
purposes of the Glass-Steagall Act. See Bankers Trust; J.P. Morgan;
BankAmerica Corporation, 79 Fed. Res. Bull. 1163 (1993). For example,
Company would engage in riskless principal transactions only in the
secondary market and would not engage in riskless principal
transactions for any security carried in its inventory. Company also
would not act as riskless principal with respect to registered
investment company securities or the securities of investment companies
advised by BNY or any of its affiliates.
In order to approve the proposal, the Board must determine that the
proposed activities to be conducted by BNY ``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). BNY believes that the proposal would
produce public benefits that outweigh any potential adverse effects. In
particular, BNY maintains that the proposal would increase competition
for the proposed services.
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, D.C. 20551, not
later than May 28, 1996. 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, April 26,
1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-10907 Filed 5-1-96; 8:45 am]
BILLING CODE 6210-01-F
