[Federal Register Volume 60, Number 59 (Tuesday, March 28, 1995)]
[Proposed Rules]
[Pages 15881-15882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7518]



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FEDERAL RESERVE SYSTEM

12 CFR Part 225

[Regulation Y; Docket No. R-0872]


Bank Holding Companies and Change in Bank Control

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is proposing to amend its Regulation Y to eliminate 
the need for a bank holding company to file a request with the Board 
for a determination under section 2(g)(3) of the Bank Holding Company 
Act that it no longer controls shares or assets that it has sold to a 
third party with financing if: The purchaser is not an affiliate or 
principal shareholder of the divesting holding company, or a company 
controlled by the principal shareholder; and there are no officers, 
directors, trustees or beneficiaries of the acquiror in common with or 
subject to control by the divesting company. The Board believes that 
the elimination of the requirement for a determination of control for 
these types of divestitures will reduce the regulatory burden on bank 
holding companies without undermining the purposes of the Bank Holding 
Company Act. This proposal has been identified in connection with the 
Board's continuing effort to eliminate obsolete or unnecessary 
regulations or applications.

DATES: Comments must be submitted on or before April 28, 1995.

ADDRESSES: Comments should refer to Docket No. R-0872 and may be mailed 
to William W. Wiles, Secretary, Board of Governors of the Federal 
Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 
20551. Comments also may be delivered to Room B-2222 of the Eccles 
Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the guard 
station in the Eccles Building courtyard on 20th Street NW. (between 
Constitution Avenue and C Street NW.) at any time. Comments may be 
inspected in Room MP-500 of the Martin Building between 9:00 a.m. and 
5:00 p.m. weekdays, except as provided in 12 CFR 261.8 of the Board's 
rules regarding availability of information.

FOR FURTHER INFORMATION CONTACT: Pamela G. Nardolilli, Senior Attorney 
(202/452-3289), Legal Division, Board of Governors of the Federal 
Reserve System. For the hearing impaired only, Telecommunication Device 
for the Deaf (TDD), Dorothea Thompson (202/452-3544), Board of 
Governors of the Federal Reserve System, 20th and C Streets NW., 
Washington, D.C. 20551.

SUPPLEMENTARY INFORMATION: Under section 2(g)(3) of the Bank Holding 
Company Act (12 U.S.C. 1841(g)), shares transferred by a bank holding 
company to any transferee where the transferee is indebted to the 
transferor or has one or more officers, directors, trustees, or 
beneficiaries in common with the transferor, are deemed to be 
controlled by the transferor unless the Board, after an opportunity for 
a hearing, determines that the transferor is not capable of controlling 
the transferee. The Board proposes to amend Sec. 225.32 of the Board's 
Regulation Y (12 CFR 225.32) to exempt from the presumption of control 
those divestitures where a bank holding company is financing the sale 
of assets or shares that it acquired so long as (i) the property is not 
sold to an affiliate or principal shareholder of the divesting holding 
company, or a company controlled by such a principal shareholder; and 
(ii) there are no officers, directors, trustees, or beneficiaries of 
the acquiror in common with or subject to control by the divesting 
company.
    A review of the 2(g)(3) determinations over the past ten years 
indicates that almost all control determinations under 
[[Page 15882]] that section have arisen from bank holding companies 
selling property they acquired in satisfaction of a debt previously 
contracted (``dpc property'') where the bank holding company was trying 
to recoup its losses on a loan from the sale of the collateral. In 
these cases, the record indicates that the divestitures and financing 
arrangements have been conducted on an arm's-length basis, and there is 
no evidence of divesting companies exercising control of the assets 
after the sale. In other cases where a bank holding company sold an 
asset or subsidiary that it had acquired in the normal course of 
business and financed the sale of the asset or subsidiary, the assets 
were sold because, in most cases, the bank holding company was no 
longer interested in engaging in that business.
    The elimination of the requirement to obtain a control 
determination will reduce the regulatory burden on bank holding 
companies without eliminating the Board's ability to supervise any 
attempt to control the divested asset in the future. Although the Board 
would no longer require a bank holding company to obtain a control 
determination, the Board, through the examination process, can review 
the authority under which a bank holding company controls the asset in 
question, and take appropriate supervisory action if any unlawful 
control is found to persist. In addition, the Board would continue to 
require a divesting company to obtain a 2(g)(3) determination if: (i) 
The asset were transferred to an affiliate or principal shareholder of 
the divesting holding company, or a company controlled by the principal 
shareholder; or (ii) an interlock existed between the divesting company 
and the acquiring person. In these cases, staff believes that there is 
a greater potential for continued control by the bank holding company 
that should be reviewed. The General Counsel will continue to review 
these divestitures on a case by case basis to determine if a control 
determination is appropriate.

Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), the Board certifies that the proposed amendment 
will not have a significant adverse economic impact on a substantial 
number of small entities and that any impact on those entities should 
be positive. The amendments would reduce regulatory burdens imposed by 
Regulation Y, and the amendment would have no particular adverse effect 
on other entities.

Paperwork Reduction Act Analysis

    No collection of information pursuant to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501, et seq.) is contained in these 
changes.

List of Subjects in 12 CFR Part 225

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

    For the reasons set forth in the preamble, the Board proposes to 
amend 12 CFR part 225 as set forth below:

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

    1. The authority citation for 12 CFR part 225 continues to read as 
follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i, 1831p-1, 
1843(c)(8), 1844(b), 1972(l), 3106, 3108, 3310, 3331-3351, 3907, and 
3909.

    2. In Sec. 225.32, paragraph (a)(2) is redesignated as paragraph 
(a)(3) and a new paragraph (a)(2) is added to read as follows:


Sec. 225.32  Divestiture proceedings.

    (a) * * *
    (2) The presumption of control in paragraph (a)(1)(i) of this 
section shall not apply to the sale or divestiture of assets or voting 
securities by a divesting company if:
    (i) The acquiring person is not an affiliate or a principal 
shareholder of the divesting company, or a company controlled by such a 
principal shareholder; and
    (ii) The acquiring person does not have any officer, director, 
trustee, or beneficiary in common with or subject to control by the 
divesting company.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, March 22, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-7518 Filed 3-27-95; 8:45 am]
BILLING CODE 6210-01-P