[Federal Register Volume 59, Number 209 (Monday, October 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26871]


[[Page Unknown]]

[Federal Register: October 31, 1994]


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FEDERAL RESERVE SYSTEM

 

Banco Santander, S.A.; Application to Engage in Nonbanking 
Activities

    Banco Santander, S.A., Madrid Spain, 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(a)(3) of the Board's Regulation Y (12 
CFR 225.23(a)(3)), to engage de novo through its subsidiary, Santander 
Investment Securities, Inc., New York, New York, in the following 
activities: (1) Underwriting and dealing in obligations of the United 
States and Canada, general obligations of states and their political 
subdivisions, other obligations that state member banks of the Federal 
Reserve System may be authorized to underwrite and deal in, and money 
market instruments (``bank-eligible securities''); (2) underwriting and 
dealing, to a limited extent, in all types of debt securities; (3) 
underwriting and dealing, to a limited extent, in all types of equity 
securities; (4) acting as agent for issuers in the private placement of 
all types of securities and acting as a riskless principal with respect 
to all types of securities; (5) engaging in ``full service brokerage'' 
by providing investment and financial advisory services in combination 
with securities brokerage services; (6) making and servicing loans; and 
(7) buying and selling futures and forwards for, options on futures and 
forwards for, and options on, bank eligible and ineligible securities 
solely for hedging purposes, and in the case of instruments based on 
ineligible securities, solely as an incident to the proposed 
underwriting and dealing activities. Applicant proposes to conduct 
these activities throughout the United States and the world.
    Section 4(c)(8) of the BHC Act provides that a bank holding company 
may, with Board approval, engage in any activity that 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. This statutory 
test requires that two separate tests be met for an activity to be 
permissible for a bank holding company. First, the Board must determine 
that the activity is, as a general matter, closely related to banking. 
Second, the Board must find in a particular case that the performance 
of the activity by the applicant bank holding company may reasonably be 
expected to produce public benefits that outweigh possible adverse 
effects.
    A particular activity may be found to meet the ``closely related to 
banking'' test if it is demonstrated that banks generally have provided 
the proposed activity, that banks generally provide services that are 
so operationally or functionally similar to the proposed activity as to 
equip them particularly well to engage in the proposed activity, or 
that banks generally provide services that are so integrally related to 
the proposed activity as to require their provision in a specialized 
form. National Courier Ass'n v. Board of Governors, 516 F.2d 1229, 1237 
(D.C. Cir. 1975). 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).
    Banco Santander states that the Board previously has determined by 
regulation that some of the proposed activities, when conducted within 
limitations established by the Board, are closely related to banking 
for purposes of section 4(c)(8) of the BHC Act. See 12 CFR 225.25(b)(1) 
(making and servicing loans); 12 CFR 225.25 (b)(15) (full-service 
brokerage services); 12 CFR 225.25(b)(16) (underwriting and dealing in 
bank-eligible securities).
    Banco Santander also states that the Board has determined by order 
that the remaining proposed activities, when conducted within 
limitations established by the Board in previous orders, are closely 
related to banking. See  Canadian Imperial Bank of Commerce,, 76 
Federal Reserve Bulletin 158 (1990), J.P. Morgan & Company 
Incorporated,, 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. 
Securities Industry Association v. Board of Governors of the Federal 
Reserve System, 900 F.2d 360 (D.C. Cir 1990), and Citicorp, et al., 73 
Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry 
Association v. Board of Governors of the Federal Reserve System, 839 
F.2d 47 (2d Cir.), cert. denied, 486 U.S. 1059 (1988) (underwriting and 
dealing in debt and equity securities); Bankers Trust New York 
Corporation, 75 Federal Reserve Bulletin 829 (1989) (riskless principal 
and private placement activities); Swiss Bank Corporation, 77 Federal 
Reserve Bulletin 759 (1991) (trading in derivatives of bank-eligible 
securities); Dai-Ichi Kangyo Bank, 77 Federal Reserve Bulletin 184 
(1991) (trading in derivatives of bank-ineligible securities for 
hedging purposes as an incident to approved underwriting and dealing 
activities).
    Banco Santander maintains that it and Santander Investment 
Securities would conduct these previously approved activities in 
conformance with the conditions and limitations established by the 
Board in prior cases, including the Board's 10 percent revenue 
limitation on underwriting and dealing activities. For this reason, 
Banco Santander contends that approval of the application would not be 
barred by section 20 of the Glass-Steagall Act (12 U.S.C. 377), which 
prohibits the affiliation of a state member bank with any company 
principally engaged in the underwriting, public sale, or distribution 
of securities.
    In order to approve the proposal, the Board must determine that 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). Banco Santander states that the proposal will produce 
public benefits that outweigh any potential adverse effects. In 
particular, Banco Santander maintains that the proposal will enhance 
competition and enable it to offer its customers a broader range of 
products. In addition, Banco Santander 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 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 
to William W. Wiles, Secretary, Board of Governors of the Federal 
Reserve System, Washington, D.C. 20551, not later than November 15, 
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 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 New York.


    Board of Governors of the Federal Reserve System, October 25, 
1994.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 94-26871 Filed 10-28-94; 8:45 am]
BILLING CODE 6210-01-F