[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