[Federal Register Volume 60, Number 146 (Monday, July 31, 1995)]
[Notices]
[Pages 38998-38999]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18693]



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FEDERAL RESERVE SYSTEM


Commerzbank AG, Frankfurt am Main, Germany; Application to Engage 
in Nonbanking Activities

    Commerzbank AG, Frankfurt am Main, Germany (Applicant), 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 acquire at least 60 percent and 
up to 100 percent of the partnership interest in Martingale Asset 
Management, L.P., Boston, Massachusetts (Company), and thereby to 
engage de novo in the following nonbanking activities: (1) providing 
investment and financial advisory services; and (2) providing 
investment advice to nonaffiliated persons with respect to the purchase 
and sale of financial futures contracts and options on such contracts 
on bonds, interest rates, and stock and bond indices that the Board has 
previously approved. Applicant proposes to provide investment advice to 
clients (A) directly, (B) through two unaffiliated, registered, open-
end investment companies, and (C) through limited partnerships, for 
which Company would act as general partner and in which Company would 
maintain a financial interest. The scope of the proposed activity is 
nationwide.
    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 


[[Page 38999]]
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 have generally provided 
the proposed activity; that banks generally provide services that are 
operationally or functionally similar to the proposed activity so as to 
equip them particularly well to provide 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)).
    The Board has previously approved, by regulation, providing 
investment and financial advisory services, 12 CFR 225.25(b)(4)(i)-(iv) 
and (vi)(A)(1) and (2), and providing investment advice to non-
affiliated persons with respect to the purchase and sale of financial 
futures contracts and options on such contracts, 12 CFR 225.25(b)(19). 
The Board also has previously determined by order that the provision of 
investment advisory services with respect to financial futures on 
bonds, interest rate, and stock and bond indices is a permissible 
activity pursuant to Section 4(c)(8) of the BHC Act. See SR 93-27; 
National Westminster Bank plc, 78 Federal Reserve Bulletin 953 (1992); 
Manufacturers Hanover Corporation, 76 Federal Reserve Bulletin 774 
(1990); and The HongKong and Shanghai Banking Corporation, 76 Federal 
Reserve Bulletin 770 (1990). The Board also has approved the providing 
of investment advice through limited partnerships. See Meridian 
Bancorp, Inc., 80 Federal Reserve Bulletin 736 (1994). Applicant 
maintains that Company will conduct its proposed investment advisory 
activities subject to the requirements and limitations of the Board's 
Regulation Y and the conditions and limitations of the Board's previous 
orders.
    In order to satisfy the proper incident to banking test, section 
4(c)(8) of the BHC Act requires the Board to find that the performance 
of the activities 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 interest, or unsound banking practices. 
Applicant believes that the proposed activities will benefit the public 
by promoting competition in the delivery of high quality investment 
management services. Applicant also believes that approval of this 
application would allow Company to enhance its services to existing 
clients and provide additional investment advisory services to new 
clients. Applicant believes that the proposed activities will not 
result in any unsound banking practices or other adverse effects.
    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, D.C. 20551, not later than August 
15, 1995. 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 or the Federal Reserve Bank of New York.

    Board of Governors of the Federal Reserve System, July 25, 1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-18693 Filed 7-28-95; 8:45 am]
BILLING CODE 6210-01-F