[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Notices]
[Pages 42614-42615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20902]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
Notice of Proposals to Engage in Permissible Nonbanking
Activities or to Acquire Companies that are engage in Permissible
Nonbanking Activities
Barclays PLC and Barclays Bank, PLC, both of London, England
(together, ``Notificants''), have applied for Board approval pursuant
to section 4(c)(8) of the Bank Holding Company Act (12 U.S.C. Sec.
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 their
indirect wholly-owned subsidiary, BZW Securities Inc., New York, New
York (``Company''), in the following nonbanking activities:
(1) making, acquiring, servicing and arranging for the purchase and
sale of loans and other extensions of credit;
(2) underwriting and dealing to a limited extent in all types of
equity securities that a state member bank may not underwrite and deal
in (``bank-ineligible securities''), except ownership interests in
open-end investment companies;
(3) acting as agent in the private placement of all types of
securities;
(4) buying and selling all types of debt and equity securities on
the order of customers as ``riskless principal''; and
(5) executing and clearing, executing without clearing, clearing
without executing, and providing related advisory services with respect
to futures and options on futures on financial and nonfinancial
commodities. Company would engage in the proposed activities on a
worldwide basis.
The Board previously has determined that each of the proposed
activities is closely related to banking. See, e.g., 12 CFR
225.25(b)(1); J.P. Morgan & Co. Incorporated, et. al., 75 Federal
Reserve Bulletin 192 (1989) (underwriting and dealing in all types of
equity securities) (``Morgan Order''); Bankers Trust New York Corp., 75
Federal Reserve Bulletin 829 (1989) (acting as private placement
agent); The Bank of New York Company, Inc., 82 Federal Reserve Bulletin
-- (Order dated June 10, 1996) (acting as riskless principal); J.P.
Morgan & Co. Incorporated, 80 Federal Reserve Bulletin 151 (1994)
(executing, clearing, and offering advisory services with respect to
futures and options on futures on commodities). Except as noted below,
Notificants would conduct these activities in accordance with
Regulation Y and the Board's prior orders involving these activities.
In conjunction with the proposal, Notificants have sought relief
from two of the conditions established by the Board in permitting
nonbank subsidiaries of a bank holding company (``Section 20
subsidiaries'') to underwrite and deal in bank-ineligible securities
and from a commitment that the Board has relied upon in authorizing
bank holding companies to engage in riskless principal activities.
Specifically, notificants have asked for relief from the prohibition on
personnel interlocks between a Section 20 subsidiary and any of its
bank or thrift affiliates (``affiliated banks'') and the restriction on
cross-marketing and agency activities by affiliated banks on behalf of
a Section 20 subsidiary. They also have asked to be relieved from the
prohibition on bank holding companies acting as riskless principal for
registered investment company securities.
In its orders authorizing bank holding companies to underwrite and
deal in bank-ineligible securities (``Section 20 Orders''), the Board
previously has relied upon the condition that there be no officer,
director, or employee interlocks between the Section 20
[[Page 42615]]
subsidiary and any of its affiliated banks. In the past, the Board has
granted limited exceptions to this condition to permit (a) two non-
officer, directors of the Section 20 subsidiary to serve as non-
officer, directors of the affiliated banks; (b) one officer of the
Section 20 subsidiary to serve as an officer of an affiliated bank; and
(c) limited numbers of employees of foreign subsidiaries of a bank to
serve also as employees of the Section 20 subsidiary. See. e.g.,
KeyCorp, 82 Fed. Res. Bull. 359 (1996); The Chase Manhattan Corp., 80
Federal Reserve Bulletin 731 (1994).
Notificants have requested that the Board allow (a) unlimited
director interlocks so long as a majority of the board of Company would
not be composed of persons who are directors, officers, or employees of
any affiliated bank, branch, or agency; and (b) up to five officers of
a branch or agency to serve as officers of Company provided that such
officers would not be managers of a branch and that such officers would
not be the chief executive officer of Company or, as officers of
Company, be responsible for its activities as underwriter or dealer in
bank-ineligible securities. Notificants contend that these interlocks
would not result in any lessening of the insulation of the affiliated
banks from the Section 20 subsidiary and would improve effective and
efficient management of Notificants' affiliates.
The Board's Section 20 Orders also prohibit an affiliated bank from
acting as agent for, or engaging in marketing activities on behalf of,
a Section 20 subsidiary. See, e.g., Morgan Order. Notificants request
that this prohibition be modified to permit Notificants' affiliated
banks and U.S. branches and agencies to act as agent for and engage in
marketing activities on behalf of Company to persons who would qualify
as ``accredited investors'' under Securities and Exchange Commission
Regulation D (17 CFR Sec. 230.501).
Notificants maintain that the requested modification would not
result in any adverse effects, such as increased customer confusion or
lessening the insulation of insured banks and deposit-taking offices
from the underwriting and dealing activities of the Section 20
subsidiary, because other regulatory and statutory restrictions would
remain in place to prevent such effects. Notificants also contend that
the cross-marketing and agency prohibition disserves customers, who are
prevented from learning about products and services just because they
are offered by a section 20 subsidiary. Notificants further note that
the Board previously has permitted other limited cross marketing
activities. See, e.g., Letter Interpreting Section 20 Orders, 81
Federal Reserve Bulletin 198 (1995) (permitting cross-marketing of
bank-eligible securities); BankAmerica Corporation, 80 Federal Reserve
Bulletin 1104 (1194) (permitting Regulation K subsidiaries of a
domestic bank to market, subject to certain conditions, the services
and securities of their Section 20 subsidiary).
Finally, in authorizing bank holding companies to engage in
riskless principal activities under section 4(c)(8) of the BHC Act, the
Board has relied on a commitment that the bank holding company not act
as riskless principal for registered investment company securities or
for any securities of investment companies that are advised by the bank
holding company. Notificants seek a limited modification of this
restriction to permit Company to act as riskless principal in
transactions involving securities of all registered investment
companies, other than investment companies advised by Notificants or
any of their affiliates. The Board also has before it proposals from
other bank holding companies to engage in this riskless principal
activity. See 61 Federal Register 31,942 (1996); id. at 37,480.
In publishing this proposal for comment, the Board does not take a
position on the issues raised by the notice. Notice of the proposal is
published solely to seek the views of interested parties on the issues
presented and does not represent a determination by the Board that the
proposal meets, or is likely to meet, the standards of the BHC Act.
Notificants' proposal is available for immediate inspection at the
Federal Reserve Bank of New York and the offices of the Board in
Washington, D.C. Interested persons may express their views on the
proposal in writing, including on whether 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). Any request
for a hearing on this notice must, as required by section 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.
Comments regarding the notice must be received not later than
August 30, 1996, at the Reserve Bank indicated or to the attention of
William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, N.W., Washington, D.C.
20551.
Board of Governors of the Federal Reserve System, August 12,
1996.
Jennifer J. Johnson
Deputy Secretary of the Board
[FR Doc. 96-20902 Filed 8-15-96; 8:45-am]
BILLING CODE 6210-01-F
