[Federal Register Volume 61, Number 147 (Tuesday, July 30, 1996)]
[Notices]
[Pages 39660-39661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19276]


-----------------------------------------------------------------------


FEDERAL RESERVE SYSTEM

Notice of Proposals to Engage in Nonbanking Activities or to 
Acquire Companies that are Engaged in Nonbanking Activities

    Bank of Montreal, Montreal, Canada; The Bank of Nova Scotia, 
Toronto, Canada; Canadian Imperial Bank of Commerce, Toronto, Canada; 
The Chase Manhattan Corporation, New York, New York; First Chicago NBD 
Corporation, Chicago, Illinois; National Bank of Canada, Montreal, 
Canada; The Toronto-Dominion Bank, Toronto, Canada; and Royal Bank of 
Canada, Montreal, Canada (collectively, Applicants), have given notice 
pursuant to section 4(c)(8) of the Bank Holding Company Act (12 U.S.C. 
1843(c)(8)) (BHC Act) and 225.23(a)(3) of the Board's Regulation Y (12 
CFR 225.23(a)(3)) to engage de novo through their direct, wholly owned 
subsidiary, Multinet International Bank, New York, New York (Company), 
in acting as a clearinghouse for foreign exchange and foreign exchange-
related transactions. Each Applicant would acquire 12.5 percent of the 
voting shares of Company. Company would be organized under New York 
banking law as a limited purpose trust company, and would engage in 
certain trust, foreign exchange, and data processing activities in 
connection with its function as a clearinghouse. Multinet's principal 
function would be to become the substituted counterparty to each 
foreign exchange transaction that is submitted by participants in the 
clearinghouse and that is accepted by the clearinghouse. All such 
transactions would be multilaterally netted, and settlement for all 
netted transactions would be subject to delivery versus payment 
restrictions. These techniques are intended to reduce the volume of 
settlement transactions and reduce forward, settlement, and liquidity 
risk. Incidental to its clearinghouse function, Company would engage in 
risk management, data processing, collateral management, and payment 
and settlement functions. Company also would provide data processing 
services to subscribers that desire to match and net transactions on a 
bilateral basis. Company would provide the proposed services to all 
financial institutions meeting its credit and operational standards on 
a worldwide basis.
    Section 4(c)(8) of the BHC Act provides that a bank holding company 
may 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 have generally provided 
the proposed services, that banks generally provide services that are 
operationally or functionally similar to the proposed services so as to 
equip them particularly well to provide the proposed services, or that 
banks generally provide services that are so integrally related to the 
proposed services 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); Securities Industry 
Ass'n v. Board of Governors, 468 U.S. 207, 210-11, n.5 (1984).
    Applicants state that the Board previously has determined by 
regulation that the proposed foreign exchange, trust, and data 
processing and transmission services are closely related to banking for 
purposes of section 4(c)(8) of the BHC Act. See 12 CFR 225.25(b)(3), 
(7), and (17). Applicant maintains that Company's proposed activities 
would conform to Regulation Y. The Board also may consider whether the 
proposed combination of these activities in the operation of a foreign 
exchange clearinghouse, as described in Applicants' proposal, 
constitutes an activity that is distinct from the constituent 
activities contributing to the operation of the clearinghouse.
    In order to approve the proposal, the Board also must determine 
that the proposed activities to be engaged in by Company are a proper 
incident to banking that ``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). Applicant contends that its proposal would produce 
public benefits that outweigh any potential 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 to seek the views of interested persons on the issues 
presented by the notice 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 August 14, 1996. 
Any request for a hearing on this notice must, as

[[Page 39661]]

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, the Federal Reserve Bank of New York, or the Federal Reserve 
Bank of Chicago.
    Board of Governors of the Federal Reserve System, July 24, 1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-19276 Filed 7-29-96; 8:45 a.m.]
BILLING CODE 6210-01-F