[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