[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Notices]
[Pages 42614-42615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20902]


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FEDERAL RESERVE SYSTEM

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

    Barclays PLC and Barclays Bank, PLC, both of London, England 
(together, ``Notificants''), have applied for Board approval pursuant 
to section 4(c)(8) of the Bank Holding Company Act (12 U.S.C. Sec.  
1843(c)(8)) (``BHC Act'') and section 225.23(a) of the Board's 
Regulation Y (12 CFR 225.23(a)) to engage de novo through their 
indirect wholly-owned subsidiary, BZW Securities Inc., New York, New 
York (``Company''), in the following nonbanking activities:
    (1) making, acquiring, servicing and arranging for the purchase and 
sale of loans and other extensions of credit;
    (2) underwriting and dealing to a limited extent in all types of 
equity securities that a state member bank may not underwrite and deal 
in (``bank-ineligible securities''), except ownership interests in 
open-end investment companies;
    (3) acting as agent in the private placement of all types of 
securities;
    (4) buying and selling all types of debt and equity securities on 
the order of customers as ``riskless principal''; and
    (5) executing and clearing, executing without clearing, clearing 
without executing, and providing related advisory services with respect 
to futures and options on futures on financial and nonfinancial 
commodities. Company would engage in the proposed activities on a 
worldwide basis.
    The Board previously has determined that each of the proposed 
activities is closely related to banking. See, e.g., 12 CFR 
225.25(b)(1); J.P. Morgan & Co. Incorporated, et. al., 75 Federal 
Reserve Bulletin 192 (1989) (underwriting and dealing in all types of 
equity securities) (``Morgan Order''); Bankers Trust New York Corp., 75 
Federal Reserve Bulletin 829 (1989) (acting as private placement 
agent); The Bank of New York Company, Inc., 82 Federal Reserve Bulletin 
-- (Order dated June 10, 1996) (acting as riskless principal); J.P. 
Morgan & Co. Incorporated, 80 Federal Reserve Bulletin 151 (1994) 
(executing, clearing, and offering advisory services with respect to 
futures and options on futures on commodities). Except as noted below, 
Notificants would conduct these activities in accordance with 
Regulation Y and the Board's prior orders involving these activities.
    In conjunction with the proposal, Notificants have sought relief 
from two of the conditions established by the Board in permitting 
nonbank subsidiaries of a bank holding company (``Section 20 
subsidiaries'') to underwrite and deal in bank-ineligible securities 
and from a commitment that the Board has relied upon in authorizing 
bank holding companies to engage in riskless principal activities. 
Specifically, notificants have asked for relief from the prohibition on 
personnel interlocks between a Section 20 subsidiary and any of its 
bank or thrift affiliates (``affiliated banks'') and the restriction on 
cross-marketing and agency activities by affiliated banks on behalf of 
a Section 20 subsidiary. They also have asked to be relieved from the 
prohibition on bank holding companies acting as riskless principal for 
registered investment company securities.
    In its orders authorizing bank holding companies to underwrite and 
deal in bank-ineligible securities (``Section 20 Orders''), the Board 
previously has relied upon the condition that there be no officer, 
director, or employee interlocks between the Section 20

[[Page 42615]]

subsidiary and any of its affiliated banks. In the past, the Board has 
granted limited exceptions to this condition to permit (a) two non-
officer, directors of the Section 20 subsidiary to serve as non-
officer, directors of the affiliated banks; (b) one officer of the 
Section 20 subsidiary to serve as an officer of an affiliated bank; and 
(c) limited numbers of employees of foreign subsidiaries of a bank to 
serve also as employees of the Section 20 subsidiary. See. e.g., 
KeyCorp, 82 Fed. Res. Bull. 359 (1996); The Chase Manhattan Corp., 80 
Federal Reserve Bulletin 731 (1994).
    Notificants have requested that the Board allow (a) unlimited 
director interlocks so long as a majority of the board of Company would 
not be composed of persons who are directors, officers, or employees of 
any affiliated bank, branch, or agency; and (b) up to five officers of 
a branch or agency to serve as officers of Company provided that such 
officers would not be managers of a branch and that such officers would 
not be the chief executive officer of Company or, as officers of 
Company, be responsible for its activities as underwriter or dealer in 
bank-ineligible securities. Notificants contend that these interlocks 
would not result in any lessening of the insulation of the affiliated 
banks from the Section 20 subsidiary and would improve effective and 
efficient management of Notificants' affiliates.
    The Board's Section 20 Orders also prohibit an affiliated bank from 
acting as agent for, or engaging in marketing activities on behalf of, 
a Section 20 subsidiary. See, e.g., Morgan Order. Notificants request 
that this prohibition be modified to permit Notificants' affiliated 
banks and U.S. branches and agencies to act as agent for and engage in 
marketing activities on behalf of Company to persons who would qualify 
as ``accredited investors'' under Securities and Exchange Commission 
Regulation D (17 CFR Sec.  230.501).
    Notificants maintain that the requested modification would not 
result in any adverse effects, such as increased customer confusion or 
lessening the insulation of insured banks and deposit-taking offices 
from the underwriting and dealing activities of the Section 20 
subsidiary, because other regulatory and statutory restrictions would 
remain in place to prevent such effects. Notificants also contend that 
the cross-marketing and agency prohibition disserves customers, who are 
prevented from learning about products and services just because they 
are offered by a section 20 subsidiary. Notificants further note that 
the Board previously has permitted other limited cross marketing 
activities. See, e.g., Letter Interpreting Section 20 Orders, 81 
Federal Reserve Bulletin 198 (1995) (permitting cross-marketing of 
bank-eligible securities); BankAmerica Corporation, 80 Federal Reserve 
Bulletin 1104 (1194) (permitting Regulation K subsidiaries of a 
domestic bank to market, subject to certain conditions, the services 
and securities of their Section 20 subsidiary).
    Finally, in authorizing bank holding companies to engage in 
riskless principal activities under section 4(c)(8) of the BHC Act, the 
Board has relied on a commitment that the bank holding company not act 
as riskless principal for registered investment company securities or 
for any securities of investment companies that are advised by the bank 
holding company. Notificants seek a limited modification of this 
restriction to permit Company to act as riskless principal in 
transactions involving securities of all registered investment 
companies, other than investment companies advised by Notificants or 
any of their affiliates. The Board also has before it proposals from 
other bank holding companies to engage in this riskless principal 
activity. See 61 Federal Register 31,942 (1996); id. at 37,480.
    In publishing this proposal for comment, the Board does not take a 
position on the issues raised by the notice. Notice of the proposal is 
published solely to seek the views of interested parties on the issues 
presented and does not represent a determination by the Board that the 
proposal meets, or is likely to meet, the standards of the BHC Act.
    Notificants' proposal is available for immediate inspection at the 
Federal Reserve Bank of New York and the offices of the Board in 
Washington, D.C. Interested persons may express their views on the 
proposal in writing, including on whether 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). Any request 
for a hearing on this notice must, as required by section 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.
    Comments regarding the notice must be received not later than 
August 30, 1996, at the Reserve Bank indicated or to the attention of 
William W. Wiles, Secretary, Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 
20551.
    Board of Governors of the Federal Reserve System, August 12, 
1996.
Jennifer J. Johnson
Deputy Secretary of the Board
[FR Doc. 96-20902 Filed 8-15-96; 8:45-am]
BILLING CODE 6210-01-F