[Federal Register Volume 59, Number 194 (Friday, October 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24880]


[[Page Unknown]]

[Federal Register: October 7, 1994]


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FEDERAL RESERVE SYSTEM

 

Bank South Corporation, Atlanta, GA, et al.

    Bank South Corporation, Atlanta, Georgia; Barnett Banks, Inc., 
Jacksonville, Florida; SunTrust Banks, Inc., Atlanta, Georgia; Synovus 
Financial Corp., Columbus, Georgia; TB&C Bancshares, Inc., Columbus, 
Georgia; BB&T Financial Corporation, Wilson, North Carolina; First 
Citizens Bancshares, Inc., Raleigh, North Carolina; First Union 
Corporation, Charlotte, North Carolina; NationsBank Corporation, 
Charlotte, North Carolina; Southern National Corporation, Lumberton, 
North Carolina; and Wachovia Corporation, Winston-Salem, North Carolina 
(collectively, Applicants), 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(a) of the Board's Regulation Y (12 CFR 225.23(a)) to expand the 
data processing services provided by Southeast Switch, Inc., Maitland, 
Florida (Company), which operates the Honor electronic funds transfer 
(EFT) network pursuant to section 225.25(b)(7) of the Board's 
Regulation Y.
    Applicants currently engage through Company and its subsidiary, 
Specialty Network Services, Inc., Maitland, Florida, in card production 
and related services to entities that are members of the Honor EFT 
network. Applicants now propose to provide card production and related 
services to entities that are not members of the Honor EFT network. The 
proposed card production services would include ordering magnetically 
striped and integrated circuit plastic cards (including plastic cards 
sometimes referred to as stored value cards) from card manufacturers, 
embossing the cards with the name and account numbers of cardholders, 
encoding information on the cards' magnetic strips, hot stamping cards, 
and generating and assigning personal identification numbers. 
Applicants propose to engage in this activity 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 proposed activities are closely 
related to banking within the meaning of the BHC Act. Specifically, 
Applicants maintain that the Board has previously authorized bank 
holding companies to provide data processing services to nonfinancial 
customers. See, e.g., Citicorp, 72 Federal Reserve Bulletin 497 (1986). 
In addition, Applicants maintain that the Board has authorized card 
embossing and issuance functions with respect to medical benefits cards 
issued by payer organizations. Banc One Corporation, 80 Federal Reserve 
Bulletin 139 (1994). In addition, Applicants maintain that the Board 
has authorized card embossing and encoding functions with respect to 
stored value cards for nonfinancial institutions. Banc One Corporation, 
79 Federal Reserve Bulletin 1158 (1993). Applicants further maintain 
that the data embossed on the type of cards that are the subject of 
this application are banking, economic, or financial data that permit 
the cardholder to initiate or consummate a banking or financial 
transaction, and that the identity of the customer does not change the 
financial nature of the information being encoded and processed.

Proper Incident to Banking Standard

    In order to approve the proposal, the Board also 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).
    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 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, DC 20551, not later than November 
1, 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, the Federal Reserve Bank of Atlanta, or the Federal Reserve 
Bank of Richmond.

    Board of Governors of the Federal Reserve System, October 3, 
1994.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 94-24880 Filed 10-6-94; 8:45 am]
BILLING CODE 6210-01-F