[Federal Register Volume 60, Number 129 (Thursday, July 6, 1995)]
[Rules and Regulations]
[Pages 35120-35122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16539]
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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: Final rule.
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SUMMARY: The Board is amending 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.
EFFECTIVE DATE: July 6, 1995.
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, N.W.,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: Under section 2(g)(3) of the Bank Holding
Company Act (12 U.S.C. 1841(g)), shares
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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. On March 28, 1995, the Board
proposed 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 (60 FR
15881) (March 28, 1995).
A review of the 2(g)(3) determinations over the past ten years
indicates that almost all control determinations under 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 can take appropriate supervisory action if
control of a divested asset is found to persist through the examination
process or by other means. In addition, the Board would continue to
require a divesting company to obtain a 2(g)(3) determination if: (1)
the asset were transferred to an affiliate or principal shareholder of
the divesting holding company, or a company controlled by the principal
shareholder; or (2) an interlock existed between the divesting company
and the acquiring person. In these cases, the Board 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. In addition, if a bank holding
company needs a formal control determination for tax or other reasons,
the Board will continue to process a request for a control
determination even when the sale meets the regulation.
Public Comment
The Board received sixteen comments on its proposed amendment to
Regulation Y. The Board received eight comments from Reserve Banks,
five comments from commercial banking organizations, two comments from
trade associations and one comment from a law firm. All commenters
supported the Board's effort to reduce regulatory burden. Two
commenters suggested that the Board expand the scope of the regulation
to include divestitures to companies with director interlocks. The
Board receives few requests for divestitures involving interlocks and
the Board does not believe that an exemption is needed at this time for
these divestitures.
The comments also raise several administrative questions regarding
the implementation of the regulation. In response to public comment,
the Board has modified the proposed language to clarify the
applicability of the proposed regulation. In another comment, one
Reserve Bank questioned the status of pending 2(g)(3) requests and
transactions. The Board believes that any pending 2(g)(3) request or
transaction that meets the regulation's requirements should be covered
by the new regulation and no further action is needed. Because a
2(g)(3) determination is a statutory requirement and some bank holding
companies may need proof of the divestiture for tax or other reasons,
one Reserve Bank recommended that the regulation state that if a bank
holding company wants a 2(g)(3) determination, that the bank holding
company can request a determination even if the regulation no longer
requires it. As noted above, the preamble indicates that the Board will
continue to provide 2(g)(3) determinations if a bank holding company
requests such a determination.
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 final rule 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.
Pursuant to 5 U.S.C. Sec. 553(d), the amendment to Regulation Y
will become effective immediately. The change grants an exemption to
bank holding companies, and therefore the Board waives the 30 days
general requirement for publication of a substantive rule. In addition,
any transaction that is subject to section 2(g)(3) but meets the
regulation's requirements is now exempt and no further action is
required.
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 the
final rule.
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 amends 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) Except in the case of a proceeding initiated under paragraph
(f) of this section or Sec. 225.31 of this subpart, the Board will
regard the presumption of control in paragraph (a)(1)(i) of this
section and section 2(g)(3) of the Bank Holding Company Act as
inapplicable in the case of the sale or divestiture of assets or voting
securities by a divesting company if:
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(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, June 29, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-16539 Filed 7-5-95; 8:45 am]
BILLING CODE 6210-01-P