[Federal Register Volume 59, Number 165 (Friday, August 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21051]
[[Page Unknown]]
[Federal Register: August 26, 1994]
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FEDERAL RESERVE SYSTEM
Banc One Corporation, CoreStates Financial Corp, PNC Bank Corp.,
KeyCorp, National City Corporation, Mellon Bank Corporation;
Applications to Engage in Certain Nonbanking Activities
Banc One Corporation, Columbus, Ohio (Banc One), CoreStates
Financial Corp, Philadelphia, Pennsylvania (CoreStates), PNC Bank
Corp., Pittsburgh, Pennsylvania (PNC), and KeyCorp, Cleveland, Ohio
(KeyCorp), have 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 acquire, through their joint
venture subsidiary, Electronic Payment Services, Inc., Wilmington,
Delaware (EPS): (1) Substantially all the assets of the Network
Services Division (NSD) of Mellon Bank, N.A., Pittsburgh, Pennsylvania,
and thereby engage in providing automated teller machine (ATM)
services, point of sale (POS) services, and merchant processing
services; and (2) certain data processing assets of National City
Corporation, Cleveland, Ohio (National City), which include assets
relating to the provision of ATM services and POS services. EPS
currently is authorized to engage, through its existing operating
subsidiaries (EPS Subsidiaries), in certain permissible nonbanking
activities. In connection with these transactions, and the transactions
described below, EPS will form a series of corporations, EPS 1, Inc.,
EPS 2, Inc., EPS 3, Inc., and EPS Corp., all of Wilmington, Delaware.
EPS Corp. will hold all the shares of the EPS Subsidiaries and engage,
through the EPS Subsidiaries, in the activities currently conducted by
the EPS Subsidiaries and NSD.
KeyCorp also has applied, pursuant to section 4(c)(8) of the BHC
Act, to increase its indirect ownership interest in the EPS
Subsidiaries through the acquisition of an interest in EPS 1, Inc., the
shares of which will be owned by EPS and a wholly-owned nonbanking
subsidiary of KeyCorp. In addition, National City has applied, pursuant
to section 4(c)(8) of the BHC Act, to acquire an indirect ownership
interest in the EPS Subsidiaries through the acquisition of an interest
in EPS 2, Inc., the shares of which will be owned by EPS 1, Inc. and a
wholly-owned nonbanking subsidiary of National City, and thereby engage
in certain nonbanking activities described below. Finally, Mellon Bank
Corporation, Pittsburgh, Pennsylvania (Mellon), has applied, pursuant
to section 4(c)(8) of the BHC Act, to acquire an indirect ownership
interest in the EPS Subsidiaries through the acquisition of an interest
in EPS 3, Inc., the shares of which will be owned by EPS 2, Inc. and a
wholly-owned nonbanking subsidiary of Mellon, and thereby engage in
certain nonbanking activities described below.
Upon consummation of the above transactions, Banc One, CoreStates,
PNC, KeyCorp, National City, and Mellon (collectively, Applicants) each
will indirectly control more than 5 percent of the voting shares of a
company controlling the EPS Subsidiaries. Applicants maintain that,
under this proposal, the EPS Subsidiaries would engage in the following
nonbanking activities:
1. Providing data processing and transmission services permissible
under Sec. 225.25(b)(7) of Regulation Y (12 CFR 225.25(b)(7)),
including certain ATM services,1 POS services,2 electronic
benefit transfer services, and electronic data interchange services;
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\1\Applicants maintain that ATM services include: ATM switching,
terminal driving, and gateway services; ATM network branded debit
card services; administrative terminal and ATM authorization
services; ATM card production and issuance; telephone banking and
bill paying services; information terminal and point of banking
services; and proprietary ATM services for non-financial
institutions.
\2\Applicants maintain that POS Services include: POS switching
and terminal driving services; POS electronic data capture and
authorization services; POS gateway, terminal software, and utility
payment services; and POS terminal sale, rental, and maintenance
services.
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2. Providing stored value card services; and
3. Providing merchant processing services.
Applicants seek 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).
Applicants maintain that the Board previously has determined that
the proposed data processing and transmission services and stored value
card services, when conducted within the limitations established by the
Board in its regulations and prior orders, are closely related to
banking within the meaning of section 4(c)(8) of the BHC Act. See 12
CFR 225.25(b)(7); Banc One Corporation, et al., 79 Federal Reserve
Bulletin 1158 (1993) (1993 EPS Order). See also Letter dated November
30, 1992, from the Federal Reserve Bank of Cleveland to Robert E.
Mannion, Esq.; Letter dated November 30, 1992, from the Federal Reserve
Bank of Philadelphia to Allen L. Raiken, Esq. (1992 EPS Approval
Letters). Applicants have stated that they will engage in the proposed
activities in conformity with the limitations established by the Board
in Regulation Y, the 1992 EPS Approval Letters, and the 1993 EPS Order.
Applicants also maintain that the proposed merchant processing
services are operationally and functionally similar to the permissible
nonbanking activities in which they currently engage and are
permissible data processing activities under Sec. 225.25(b)(7) of
Regulation Y. In addition, Applicants state that the Board previously
has approved similar merchant processing services as a loan servicing
activity permissible under Sec. 225.25(b)(1) of Regulation Y (12 CFR
225.25(b)(1)). See Citicorp, 76 Federal Reserve Bulletin 549 (1990).
Proper Incident to Banking Standard
In order to approve the proposal, the Board must determine that the
proposed activities to be conducted by EPS and its subsidiaries ``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).
Applicants believe that the proposal will produce public benefits
that outweigh any potential adverse effects. In particular, Applicants
maintain that the proposal will enhance customer convenience and
efficiency. In addition, Applicants state that the proposed activities
will not result in adverse effects such as an undue concentration of
resources, decreased or unfair competition, conflicts of interests, 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 applications, 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
September 19, 1994. Any request for a hearing on this proposal 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. The
applications may be inspected at the offices of the Board of Governors,
the Federal Reserve Bank of Cleveland, or the Federal Reserve Bank of
Philadelphia.
Board of Governors of the Federal Reserve System, August 22, 1994.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 94-21051 Filed 8-25-94; 8:45 am]
BILLING CODE 6210-01-P
