[Federal Register Volume 59, Number 85 (Wednesday, May 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10689]
[[Page Unknown]]
[Federal Register: May 4, 1994]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Parts 225 and 265
[Regulation Y; Docket No. R-0773]
Bank Holding Companies and Change in Bank Control; Rules
Regarding Delegation of Authority
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: On August 12, 1992, the Board approved several proposals to
change certain procedures for obtaining Board approval of various
applications and notices filed under the Federal Reserve Act, the Bank
Holding Company Act, the Bank Merger Act, the Change in Bank Control
Act and various other statutes. All but one of these changes to the
Board's application and notice review procedures were implemented by
the Board at that time. Most of these changes involved revising certain
internal procedures of the Federal Reserve System (System), to improve
the efficiency of processing applications that are reviewed by the
Board in conjunction with the Reserve Banks and to reduce the
regulatory burden associated with these application and notice
procedures. Two of the changes--eliminating the stock redemption notice
requirement for ``well-capitalized'' bank holding companies, and
modifying the Board's delegation rules pertaining to competition and
market concentration--necessitate amendments to certain provisions of,
respectively, the Board's Regulation Y and Rules Regarding Delegation
of Authority.
EFFECTIVE DATE: May 4, 1994.
FOR FURTHER INFORMATION CONTACT: Terence F. Browne, Senior Attorney
(202/452-3707), Legal Division; or Sidney M. Sussan, Assistant Director
(202/452-2638), John S. Russell, Manager--Applications Processing (202/
452-2466), or Beverly Evans, Supervisory Financial Analyst (202/452-
2573), Division of Banking Supervision and Regulation. For the hearing
impaired only, Telecommunications Device for the Deaf (TDD), Dorothea
Thompson (202/452-3544).
SUPPLEMENTARY INFORMATION:
Background
As part of the Board's ongoing efforts to reduce the regulatory
burden associated with its application and notice procedures, in 1992
the Board approved a number of steps to reduce the burden associated
with these procedures.1 Although all but one of these streamlining
initiatives became effective upon publication in the Federal
Register,2 two of the initiatives require that the Board's
Regulations be amended to reflect the changes.
---------------------------------------------------------------------------
\1\See 57 FR 39641 (September 1, 1992). These changes included
establishing certain procedures to limit extension of the pre-
acceptance period for applications; offering prospective applicants
the opportunity to submit a pre-filing notice of intent to file an
application; eliminating the stock redemption notice requirement for
bank holding companies that are and, following the redemption would
remain, ``well-capitalized'' on a consolidated basis and in
generally satisfactory condition; expanding the authority of Reserve
Banks to process all delegable applications without Board staff
review; modifying the Board's delegation rules pertaining to
competition and market concentration; reducing redundant post-
acceptance processing of Board action cases; increasing the
monitoring of cases requiring extended processing; and establishing
a general consent procedure under section 24A of the Federal Reserve
Act for investments by state member banks in bank premises.
In publishing notice of these changes, the Board also invited
comment on any additional measures to eliminate or reduce burden
associated with the Board's notice and application procedures. The
comments received will be considered by the Board in its ongoing
efforts to streamline and reduce the regulatory burden associated
with the Board's notice and application procedures.
\2\The Board is currently finalizing a separate regulation
implementing a general consent procedure for investments in bank
premises pursuant to section 24A of the Federal Reserve Act.
---------------------------------------------------------------------------
Currently, Sec. 225.4(b)(1) of Regulation Y (12 CFR 225.4(b)(1))
requires a bank holding company to give the Board prior notice of
certain purchases or redemptions of its equity securities:
(b) Purchase or redemption by a bank holding company of its own
securities--(1) Filing notice. A bank holding company shall give the
Board prior notice before purchasing or redeeming its equity
securities, if the gross consideration for the purchase or
redemption, when aggregated with the net consideration paid by the
company for all such purchases or redemptions during the preceding
12 months, is equal to 10 percent or more of the company's
consolidated net worth. For the purposes of this section, ``net
consideration'' is the gross consideration paid by the company for
all of its equity securities purchased or redeemed during the period
minus the gross consideration received for all of its equity
securities sold during the period other than as part of a new issue.
The Board determined to eliminate this notice requirement for bank
holding companies that are and, following the redemption or purchase,
would remain ``well-capitalized'' on a consolidated basis and in
generally satisfactory condition. The Board believes that a bank
holding company would qualify for this exception to the notice
requirement if:
The total and tier 1 risk-based capital ratios and the
leverage capital ratio for the bank holding company, both before and
following the redemption, exceed the thresholds established for ``well-
capitalized'' state-member banks under 12 CFR 208.33(b)(1) as if the
bank holding company (on a consolidated basis) were deemed to be a
state-member bank;
The bank holding company received a composite ``1'' or
``2'' rating at its most recent BOPEC inspection, and
The bank holding company is not the subject of any
unresolved supervisory issues.
The Board also determined to revise its delegation rules pertaining
to competition and market concentration. If a party submits an
application or notice to the System pursuant to the Bank Holding
Company Act, Change in Bank Control Act, Bank Merger Act, or the Bank
Service Corporation Act, the Board's Rules Regarding Delegation of
Authority (12 CFR 265.1-265.11), permit the appropriate Reserve Bank to
act on such application or notice unless certain circumstances are
present. Specifically, Sec. 265.11(c)(11)(v) of the Board's Rules
provide that a Reserve Bank is not authorized to approve the following
transactions:
(v) With respect to BHC formations, bank acquisitions or mergers,
the proposed transaction involves two or more banking organizations:
(A) That upon consummation of the proposal, would control over 30
percent of total deposits in banking offices in the relevant geographic
market, or would result in an increase of at least 200 points in the
Herfindahl-Hirschman Index (HHI) in a highly concentrated market (a
market with a post-merger HHI of at least 1800); or
(B) Where divestitures designed to address any substantive
anticompetitive effects are not effected on or before consummation of
the proposed transaction[.]
The Board determined to revise its Rules Regarding Delegation of
Authority to increase the resulting market share criterion that would
require Board consideration of a bank merger or acquisition from 30
percent to 35 percent. In particular, the Reserve Banks may now act on
applications involving two or more banking organizations that, upon
consummation of the proposed transaction, would control 35 percent or
less of total deposits in banking offices in the relevant geographic
market. This change would also reflect the Board's practice, in
computing market share, of weighing deposits of thrifts in the subject
market at 50 percent.
As part of this change to the Board's Rules Regarding Delegation of
Authority, the Board also determined to eliminate the need for Board
approval of applications involving divestitures designed to address
anticompetitive effects, which divestitures are not completed on or
before consummation of the proposed transaction.3 As a result, the
Federal Reserve Banks may now act on applications involving proposed
divestitures to address competitive concerns, provided the divestitures
are undertaken in accordance with the Board's position on the timing of
divestitures.4
---------------------------------------------------------------------------
\3\See 57 FR 39641 (September 1, 1992).
\4\See id.; see also BankAmerica Corporation, 78 Federal Reserve
Bulletin 338, 340 n.15 (1992).
---------------------------------------------------------------------------
Final Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), the Board does not believe that these changes will
have a significant adverse economic impact on a substantial number of
small entities. The amendments would reduce regulatory burdens imposed
by Regulation Y and the Board's Rules Regarding Delegation of Authority
and have no particular adverse effect on other entities.
Effective Date
The provisions of the Administrative Procedures Act (APA)(5 U.S.C.
553) relating to notice, public participation, and deferred effective
date have not been followed in connection with the adoption of these
amendments because the changes to be effected are either procedural in
nature and do not constitute a substantive rule subject to the
requirements of that section, or grant an exemption and reduce
regulatory burden. The APA grants specific exemptions from its
requirements relating to notice, public participation and the deferred
effective date requirements in these instances (12 U.S.C. 553 (b)(3)(A)
and (d)(1)).
Final Paperwork Reduction Act Analysis
No collections of information pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in these
changes.
List of Subjects
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Holding
Companies, Reporting and recordkeeping requirements, Securities.
12 CFR Part 265
Authority delegation (Government agencies), Banks, banking.
For the reasons set forth in the preamble, the Board amends title
12 of the Code of Federal Regulations, parts 225 and 265, as follows:
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
1. The authority citation for part 225 is revised to read as
follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3907, 3909, 3310, and
3331-3351.
2. Section 225.4 is amended by revising paragraph (b)(1), and
adding a new paragraph (b)(6) to read as follows:
Sec. 225.4 Corporate practices.
* * * * *
(b) * * *--(1) Filing notice. Except as provided in paragraph
(b)(6) of this section, a bank holding company shall give the Board
prior written notice before purchasing or redeeming its equity
securities if the gross consideration for the purchase or redemption,
when aggregated with the net consideration paid by the company for all
such purchases or redemptions during the preceding 12 months, is equal
to 10 percent or more of the company's consolidated net worth. For the
purposes of this section, ``net consideration'' is the gross
consideration paid by the company for all of its equity securities
purchased or redeemed during the period minus the gross consideration
received for all of its equity securities sold during the period other
than as part of a new issue.
* * * * *
(6) Exception for well-capitalized bank holding companies. A bank
holding company seeking to redeem or purchase its equity securities is
not required to obtain prior Board approval for the redemption or
purchase under this section provided:
(i) The total and tier 1 risk-based capital ratios and the leverage
capital ratio for the bank holding company, both before and following
the redemption, exceed the thresholds established for ``well-
capitalized'' state-member banks under 12 CFR 208.33(b)(1) as if the
bank holding company (on a consolidated basis) were deemed to be a
state member bank;
(ii) The bank holding company received a composite ``1'' or ``2''
rating at its most recent BOPEC inspection; and
(iii) The bank holding company is not the subject of any unresolved
supervisory issues.
* * * * *
PART 265--RULES REGARDING DELEGATION OF AUTHORITY
1. The authority citation for part 265 continues to read as
follows:
Authority: 12 U.S.C. 248(i) and (k).
2. Section 265.11 is amended by revising paragraph (c)(11)(v) to
read as follows:
Sec. 265.11 Functions delegated to Federal Reserve Banks.
* * * * *
(c) * * *
(11) * * *
(v) With respect to bank holding company formations, bank
acquisitions or mergers, the proposed transaction involves two or more
banking organizations that, upon consummation of the proposal, would
control over 35 percent of total deposits (including 50 percent of
thrift deposits) in banking offices in the relevant geographic market,
or would result in an increase of at least 200 points in the
Herfindahl-Hirschman Index (HHI) in a highly concentrated market (a
market with a post-merger HHI of at least 1800); or
* * * * *
By order of the Board of Governors of the Federal Reserve
System, April 28, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-10689 Filed 5-3-94; 8:45 am]
BILLING CODE 6210-01-P
