[Federal Register Volume 65, Number 246 (Thursday, December 21, 2000)]
[Proposed Rules]
[Pages 80384-80388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32505]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 65, No. 246 / Thursday, December 21, 2000 / 
Proposed Rules  

[[Page 80384]]



FEDERAL RESERVE SYSTEM

12 CFR Part 225

[Regulation Y; Docket No. R-1092]


Bank Holding Companies and Change in Bank Control

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Board invites public comment on a proposal to amend its 
Regulation Y to change the conditions that govern the conduct of 
financial data processing activities previously found to be closely 
related to banking in order to permit all bank holding companies to 
conduct a greater amount of nonfinancial data processing in connection 
with processing financial data, and to allow financial holding 
companies, as an activity that is complementary to financial 
activities, to own companies engaged in certain types of data storage, 
Internet and portal hosting activities, and broad advisory activities 
involving data processing activities, so long as the companies also 
provide financial data processing or other financial products and 
services. In addition, the Board seeks comment on whether it should 
permit financial holding companies to make investments in companies 
that engage in developing new technologies that might support the sale 
and availability of financial products and services, companies that 
provide communication links for the delivery of financial products and 
services and/or companies that engage in the electronic sale and 
delivery of products and services that include, but are not limited to, 
financial products and services.

DATES: Comments must be received by February 16, 2001.

ADDRESSES: Comments should refer to docket number R-1092 and should be 
mailed to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW, 
Washington, DC, 20551, or mailed electronically to 
[email protected]. Comments addressed to Ms. Johnson 
also may be delivered to the Board's mailroom between 8:45 a.m. and 
5:15 p.m. and, outside those hours, to the Board's security control 
room. Both the mailroom and the security control room are accessible 
from the Eccles Building courtyard entrance, located on 20th Street 
between Constitution Avenue and C Street, NW. Members of the public may 
inspect comments in room MP-500 of the Martin Building between 9:00 
a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Scott G. Alvarez, Associate General 
Counsel (202/452-3583), or Adrianne G. Threatt, Senior Attorney (202/
452-3554), Legal Division; Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue, NW., Washington, DC, 
20551. For users of Telecommunications Device for the Deaf (``TDD'') 
only, contact Janice Simms at 202/872-4984.

SUPPLEMENTARY INFORMATION:

Background

    A number of financial holding companies, represented by the New 
York Clearing House, the American Bankers Association and the Financial 
Services Roundtable, have requested that the Board permit financial 
holding companies (FHCs) to engage in and make investments in companies 
engaged in broad data processing and e-commerce activities. The 
requested activities involve:
    1. Acting as a finder;
    2. Operating an electronic marketplace;
    3. Purchasing aggregation and marketing access arrangements;
    4. Conducting nonfinancial data processing activities in connection 
with financial data processing activities;
    5. Data collection, processing, imaging, storage and retrieval for 
financial and nonfinancial data;
    6. Providing web and portal hosting services, electronic links to 
Internet and Intranet sites (including serving as an Internet Service 
Provider), data transmission security and authentication, software and 
ongoing support and maintenance for third party web sites and portals;
    7. Advisory and consulting services related to the development, 
implementation and operation of Internet and Intranet sites and web 
portals;
    8. Owning communication linkages;
    9. Owning companies engaged in developing new technologies that 
might in the future support the sale and provision of financial 
products and services; and
    10. Owning companies engaged in the electronic marketing and sale 
of nonfinancial products and services for the purpose of allowing the 
FHC to market and provide financial products and services.\1\
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    \1\ Several companies also requested that the Board permit FHCs 
to provide identity certification services, including digital 
certification services. The Board has already permitted these 
activities for all bank holding companies, including financial 
holding companies. See Bayerische Hypo- und Vereinsbank AG, 86 
Federal Reserve Bulletin 56 (January 2000).
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    The FHCs argue that recent dramatic changes in technology and in 
the manner in which products and services are sold over the Internet 
make these types of activities and investments either financial in 
nature, incidental to financial activities or complementary to 
financial activities. They argue in particular that there is no 
practical distinction between processing financial data (a permissible 
activity for bank holding companies) and processing nonfinancial data 
(an activity permitted for bank holding companies only in limited 
amounts). FHCs also contend that the experience that they have gained 
over the years conducting data processing activities for financial, 
banking and economic data is readily transferable to other types of 
data processing. For example, FHCs contend that activities such as the 
storage, imaging and retrieval of nonfinancial data are a natural 
extension of permissible activities already conducted by bank holding 
companies and banks.
    FHCs also argue that, while in the past a banking organization 
could make contractual arrangements with a nonfinancial firm to market 
financial products and services of the banking organization along with 
products and services of the nonfinancial firm, today companies that 
market products and services over the Internet or intranets typically 
seek equity partners rather than contractual partners in order to share 
the equity risk of these ventures and to raise equity capital. 
Consequently, banking organizations

[[Page 80385]]

contend that they must be in a position to make equity investments in 
companies that have found innovative methods of reaching the same 
customers that the banking organizations seek to reach for their own 
financial products and services.
    In addition, FHCs argue that they must be able to participate in 
the development of new technologies that in the future may be useful in 
delivering financial products and services. They contend that FHCs must 
be able to participate in the development of the standards and industry 
protocols for new technology and in the development of delivery systems 
and equipment to be sure that these standards and equipment will be 
capable of delivering banking products and services.
    Again, FHCs contend that the paradigm of the past--where financial 
products and services were largely delivered over uniquely designed 
systems developed by or under contract to banking organizations--has 
changed. Today, technology is designed to accommodate a series of 
partners that bind together to develop a number of simultaneous uses 
for the new technology. FHCs argue that, unless they are permitted to 
be partners in the development of new technologies and standards, FHCs 
risk being required to comply with standards and limitations imposed by 
other industries that will tailor new delivery systems to their own 
products and services. Similarly, FHCs contend that they must be 
permitted to own delivery systems, such as communication lines and 
systems, in order to assure that these broad technologies for the 
delivery of products and services remain available to them.

Legal Framework

    The Gramm-Leach-Bliley Act broadened in two ways the authority of 
the Board to determine the scope of activities permissible for FHCs. 
First, FHCs may conduct any activity that the Board, in consultation 
with the Secretary of the Treasury, determines to be ``financial in 
nature or incidental to a financial activity.'' \2\ This new authority 
was specifically designed to create a test that is broader than the 
``closely related to banking'' test that applied previously. The 
closely related test has been construed over the years by the Board and 
the courts to allow bank holding companies to conduct activities that 
are permissible for banks to conduct, are operationally similar to 
activities conducted by banks, or are activities that bank holding 
companies are particularly well equipped to conduct because of their 
other activities. The new ``financial in nature'' test was intended to 
allow activities to be authorized in response to technological and 
other developments that more broadly affect the market for financial 
products and services.\3\
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    \2\ 12 U.S.C. 1843(k)(1)(A).
    \3\ In considering whether an activity is financial in nature or 
incidental to a financial activity, the Board is directed to 
consider (1) the purposes of the Bank Holding Company Act and the 
Gramm-Leach-Bliley Act; (2) changes and reasonably expected changes 
in the marketplace in which financial holding companies compete and 
in the technology for delivering financial services; and (3) whether 
the activity is necessary or appropriate to allow a FHC to compete 
effectively with other companies providing financial services, to 
deliver efficiently information and services that are financial in 
nature through the use of technological means, including any 
application necessary to protect the security or efficacy of systems 
for the transmission of data or financial transactions, and to offer 
customers any available or emerging technological means for using 
financial services or for the document imaging of data. 12 U.S.C. 
1843(k)(3).
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    In addition, the Board may allow an FHC to engage in any 
nonfinancial activity that the Board determines to be ``complementary 
to a financial activity.'' \4\ The activity must be complementary to a 
financial activity. That is, the activity must in some way complement 
or enhance a financial activity or there must be a relationship or 
connection between the complementary activity and a financial activity. 
In considering whether an activity is complementary, the Board must 
also consider whether the activity poses a substantial risk to the 
safety and soundness of depository institutions or the financial system 
generally.\5\
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    \4\ 12 U.S.C. 1843(k)(1)(B).
    \5\ Id.
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    The authority to engage in complementary activities was included as 
a mechanism for allowing some amount of commercial or nonfinancial 
activities so long as there is a connection between the complementary 
activity and a financial activity conducted by the FHC and the activity 
does not pose unacceptable risks to the safety and soundness of the 
FHC, its banks or the banking system. At the same time, Congress 
rejected the invitation to allow depository institutions to affiliate 
in an unrestricted manner with commercial companies and determined not 
to permit FHCs to engage in a basket of purely commercial activities 
that have no connection to financial activities.
    The requesting FHCs have indicated that some of the investments 
they have requested authority to make are similar to investments that 
could be made under the merchant banking authority granted to FHCs 
under the Gramm-Leach-Bliley Act. However, that authority does not 
permit cross-marketing between the depository institutions owned by the 
FHC and the portfolio company, and it is precisely this cross-marketing 
opportunity that motivates many of the requested investments.

Proposal

    In response to the requests described above, the Board proposes 
several steps. As an initial matter, items 1, 2 and 3 in the list above 
involve various aspects of a finder proposal that the Board, in 
consultation with the Secretary of the Treasury, has already published 
for public comment and recently adopted as a final rule.\6\
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    \6\ This rule received Board approval on December 13, 2000, and 
will be published in a later issue of the Federal Register.
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    The Board proposes several additional amendments to Regulation Y to 
address other aspects of the requests. First, the Board, under the 
closely related to banking test, has already allowed bank holding 
companies to engage in processing financial, economic and banking data 
(and providing limited amounts of general purpose data processing 
hardware). In connection with those activities, the Board authorized 
bank holding companies to own a company engaged in processing any type 
of data so long as the revenues generated by the company from 
processing nonfinancial data do not exceed 30 percent of the company's 
total data processing revenues.
    The Board proposes to expand from 30 to 49 percent the amount of 
revenues that may be derived from nonfinancial data processing. This 
would allow bank holding companies, including FHCs, to make more 
efficient use of their data processing expertise and equipment and 
recognizes that processing nonfinancial data is in many cases 
operationally and functionally indistinguishable from processing 
financial, economic and banking data. At the same time, the revenue 
test assures that a majority of the business of each data processing 
subsidiary would be financial data processing. This would address item 
4 in the above list.
    The Board proposes this change as a change in the conditions that 
govern the conduct of financial data processing activities under 
section 4(c)(8) of the Bank Holding Company Act (BHC Act) and the 
Board's Regulation Y. Accordingly, this change, if adopted, would allow 
all bank holding companies and financial holding companies to engage in 
broader data processing activities. The Board has authority to modify 
the conditions that

[[Page 80386]]

govern activities that were previously found to be closely related to 
banking.\7\
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    \7\ 12 U.S.C. 1843(c)(8).
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    Second, to address items 5, 6 and 7 listed above, the Board 
proposes to amend Regulation Y to authorize FHCs, as an activity that 
is complementary to related financial activities, to invest up to an 
aggregate of 5 percent of the FHC's Tier 1 capital in the following 
types of companies:
    (1) Data storage. Companies that act as custodian of files that 
involve any type of data, including financial and nonfinancial data, so 
long as the custodian provides these services for financial data. This 
activity would include data imaging, data storage and data retrieval 
for data in any form, including in electronic, paper, micro-fiche or 
other form.
    (2) General data processing. Companies that provide general data 
processing and data transmission services, including data processing 
and data transmission hardware, software, documentation and operating 
personnel, data bases, advice and facilities, without limit as to the 
type of data processed or transmitted, so long as at least 20 percent 
of the total revenues of the company conducting these activities are 
derived from providing data processing services to depository 
institutions and their affiliates and/or processing financial data and/
or the sale of other financial products and services. This authority 
would be in addition to investments permitted above in companies that 
engage primarily in financial data processing, and would be available 
only to FHCs.
    (3) Electronic information portal services. Companies that provide 
or facilitate information search, exchange, consolidation, screening, 
filtering or aggregation services over electronic networks. This 
activity would include providing on-line search engines that display 
sites meeting criteria selected by the user, bulletin boards, newsgroup 
services on general or specific topics, ``chat'' rooms, Internet web 
sites or portals that contain links to other web sites, and aggregation 
services that accumulate and display any type of data selected by the 
user on a customized web page. This activity would also include acting 
as an Internet Service Provider. It would be expected that FHCs would 
market and provide financial products and services through these 
companies.
    Each of these proposed investments involves investing in companies 
engaged in some degree of commercial activities. Consequently, the 
Board proposes to find that investments in these companies are 
complementary to a financial activity.
    As explained above, in order to determine that an activity is 
permissible as a complementary activity, the Board must determine that 
the activity is related to or complements a financial activity. In each 
case, the proposal includes a connection with a previously approved 
financial activity or with the marketing and delivery of financial 
products and services.
    The Board seeks comment on whether the connections to financial 
activities described above are appropriate and sufficient to indicate 
that each of the types of investments or activities described above is 
complementary to a financial activity within the meaning of the BHC 
Act. In addition, comment is invited on whether the Board should adopt 
other requirements to assure that the investment or activity is related 
to or complements a financial activity. For example, the Board requests 
comment on whether the Board should require that some amount of 
revenues of the target company be derived from financial data 
processing or from marketing financial products and services of the FHC 
in order to satisfy the complementary test.
    The Board does not propose that any restrictions be placed on the 
FHC's ability to be involved in managing these companies or cross-
marketing or delivering financial products and services through these 
companies. In fact, as noted above, in each case it is expected that 
financial products and services, such as storing and processing 
financial data or providing access to financial advice or home banking 
services, would be provided as an integral part of the activities of 
the company.
    In order to limit the potential risk of these investments and 
activities to the safety and soundness of the FHC, its depository 
institutions and the financial system generally as required by section 
4(k)(1)(B) of the BHC Act,\8\ the proposal would limit the total 
carrying value of all investments permitted under the 3 categories 
listed above to an aggregate of 5 percent of the FHC's Tier 1 capital. 
The Board believes that this limitation will also help to ensure that 
the proposed investments and activities remain complementary to the 
FHC's overall financial activities.
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    \8\ 12 U.S.C. 1843(k)(1)(B).
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    The Board requests comment on whether an investment limit is an 
appropriate way to limit the potential risk to the safety and soundness 
of affiliated depository institutions and to the financial system 
generally and whether the limit proposed is the appropriate level given 
the potential risks of these activities and the nature of the 
activities. The Board also requests comment on whether a stronger 
connection between the activity and a related financial activity may 
justify a higher or different type of limit. In addition, the Board 
requests comment on whether, either as an alternative to the limit 
described above or as a supplement to that limit, the Board should 
require that additional capital be maintained by FHCs against 
investments made in the three types of companies listed above.
    Section 4(j) of the BHC Act as amended by the Gramm-Leach-Bliley 
Act requires that a financial holding company provide notice to the 
Board at least 60 days prior to conducting any activity or acquiring 
any company that conducts any activity that is complementary to a 
financial activity.\9\ At least initially, the Board proposes that each 
investment under any of the complementary authorities would be subject 
to review by the Board on a case-by-case basis pursuant to section 4(j) 
of the BHC Act. In this process, the FHC would be expected to explain 
the connection between its proposed complementary investment or 
activity and a related financial activity. The Board proposes that its 
review be focused on a review of the permissibility of the investment 
under the appropriate category and a brief review of the public 
benefits. This notice would satisfy the approval process in the Gramm-
Leach-Bliley Act. After the System has gained more experience with 
these types of investment activities, the Board would revisit whether a 
more streamlined process (e.g., a one-time approval to make investments 
in companies engaged in the listed activities) is appropriate.
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    \9\ 12 U.S.C. 1843(j)(1)(A) and (E).
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    In addition to these activities, FHCs have requested authority to 
make investments in companies engaged in developing new technologies, 
in providing communication links or in e-commerce (Items 8, 9 and 10 
above). The Board requests comment on whether conducting or investing 
in companies that conduct any of these activities would be financial in 
nature, incidental to a financial activity or complementary to a 
financial activity. In particular, the Board requests comment on how 
these types of activities or investments should be defined or 
identified. Commenters favoring a finding regarding these activities or 
investments should provide detailed

[[Page 80387]]

arguments and information supporting their recommended action. In 
particular, to the extent that an activity or investment would be 
financial in nature or incidental to a financial activity, commenters 
are requested to provide detailed arguments and data explaining and 
supporting how the activity or investment is financial or incidental. 
Similarly, to the extent that an activity or investment is considered 
to be complementary to a financial activity, detailed information is 
sought on what connection exists between these activities/investments 
and financial activities that are conducted by FHCs or how the proposed 
activity or investment would otherwise complement a financial activity.
    In addition, comment is sought on how investing in companies 
engaged in developing new technologies, providing communication links 
or selling products electronically might be conducted in a manner 
consistent with the separation of banking and commerce. Comment is also 
sought on whether any supervisory limits, such as those discussed above 
for data processing activities, might be appropriate to address 
potential risks to affiliated depository institutions and the financial 
system generally.
    The Board also seeks comment on whether it should permit FHCs to 
make noncontrolling investments in companies engaged in developing new 
technologies, providing communication links or selling products 
electronically. The Board already permits bank holding companies to 
acquire up to 25 percent of the equity, in the form of nonvoting 
shares, of any company so long as the bank holding company does not 
have the ability to exercise control over the portfolio company. Under 
this proposal, the Board would permit FHCs to invest in up to 25 
percent of the voting stock of these companies and engage in cross-
marketing activities through these companies so long as the FHC does 
not exercise control over the companies and there is another person or 
group of persons that owns more voting shares than the FHC. As an 
alternative, the Board could permit FHCs to make equity investments 
that represent in the aggregate more than 25 percent of the equity of 
the portfolio company, such as the levels permitted for portfolio 
investments overseas under Regulation K (that is, in up to 20 percent 
of the voting shares and up to another 20 percent of equity in the form 
of nonvoting shares). In this event, it would be particularly important 
that another person or control group, such as the management of the 
company, control more shares of the portfolio company than the FHC and 
have responsibility for actively managing the company.
    The Board invites comment on all aspects of the proposed rule, and 
particularly on the items specifically identified in the foregoing 
discussion.
    Section 722 of the GLB Act requires the Board to use ``plain 
language'' in all proposed and final rules published after January 1, 
2000. In light of this requirement, the Board has sought to present the 
proposed rule in a simple and straightforward manner. The Board invites 
comment on whether the Board could take additional steps to make the 
proposed rule easier to understand.

Regulatory Flexibility Act

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(5 U.S.C. 603(a)), the Board must publish an initial regulatory 
flexibility analysis with this proposed rulemaking. The proposed rule, 
if adopted, would: (1) Change the conditions that govern the conduct of 
data processing activities that already are permissible for a bank 
holding company; and (2) allow a bank holding company or foreign bank 
that qualifies as an FHC, on a case by case basis, to own companies 
engaged in certain types of data processing and web hosting activities 
as an activity that is complementary to its financial activities. A 
description of the reasons for the Board's consideration of this action 
and a statement of the objectives of and legal basis for the proposed 
rule are contained in the supplementary material provided above.
    The proposed rule would apply to bank holding companies and FHCs 
regardless of their size and should enhance the ability of all such 
companies, including small ones, to compete with other providers of 
financial services in the United States and to respond to technological 
and other changes in the marketplace in which banking organizations 
compete. The Board specifically seeks comment on the likely burden the 
proposed rule would have on bank holding companies, including FHCs.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR part 1320 Appendix A.1), the Board has reviewed the 
proposed rule under authority delegated to the Board by the Office of 
Management and Budget. If the proposal is adopted, bank holding 
companies and financial holding companies, including foreign banks, 
would be required by statute to file notice with the Board prior to 
making the investments or conducting the activities addressed in the 
proposal (12 U.S.C. 1843(j)). The applicable notice procedures, which 
already are in place, are described at sections 225.22 to 225.24 and 
section 225.89 of the Board's Regulation Y. In addition, the Board 
would be required to monitor the compliance of a bank holding company 
or financial holding company with the 49 percent revenue limitation on 
nonfinancial data processing and the 5 percent of Tier I capital 
limitation on the proposed complementary activity, which are described 
in more detail above. The Board intends to monitor compliance with 
these limitations through existing financial reports filed by bank 
holding companies and financial holding companies. Because all 
paperwork collection procedures associated with this proposed rule 
already are in place, the Board anticipates that no additional burden 
will be imposed as a result of this proposal. The Board specifically 
requests comment on the likely burden that would result from 
implementation of this rule.

List of Subjects in 12 CFR Part 225

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

Authority and Issuance

    For the reasons set forth in the preamble, Title 12, Chapter II, of 
the Code of Federal Regulations is proposed to be amended as follows:

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

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

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1843(k), 1844(b), 1972(l), 3106, 3108, 3310, 3331-3351, 
3907, and 3909.

    2. Section 225.28(b)(14) is revised to read as follows:


Sec. 225.28  List of Permissible Nonbanking Activities.

* * * * *
    (b) * * *
    (14) Data processing. (i) Providing data processing and data 
transmission services, facilities (including data processing and data 
transmission hardware, software, documentation, or operating 
personnel), data bases, advice, and access to such services, 
facilities, or data bases by any technological means, if:
    (A) The data to be processed or furnished are financial, banking, 
or economic; and

[[Page 80388]]

    (B) The hardware provided in connection therewith is offered only 
in conjunction with software designed and marketed for the processing 
and transmission of financial, banking, or economic data, and where the 
general purpose hardware does not constitute more than 30 percent of 
the cost of any packaged offering.
    (ii) A company conducting data processing and data transmission 
activities may conduct data processing and data transmission activities 
not described in paragraph (b)(14)(i) of this section if the total 
annual revenue derived from those activities does not exceed 49 percent 
of the company's total annual revenues derived from data processing and 
data transmission activities.
    3. Section 225.89 is amended by adding a new paragraph (d) to read 
as follows:


Sec. 225.89  How to request approval to engage in an activity that is 
complementary to a financial activity?

* * * * *
    (d) What activities have been determined to be complementary to a 
financial activity? The following activities are complementary to the 
described financial activity
    (1) Expanded data processing and related activities. (i) When 
conducted in accordance with the limitation in paragraph (d)(1)(ii) of 
this section--
    (A) Data storage. Acting as custodian of files that involve any 
type of data, including financial and nonfinancial data, so long as the 
custodian provides these services for financial data. This activity 
includes data imaging, data storage and data retrieval for data in any 
form, including in electronic, paper, microfiche or other form.
    (B) General data processing. Providing general data processing and 
data transmission services, including data processing and data 
transmission hardware, software, documentation and operating personnel, 
data bases, advice and facilities, without limit as to the type of data 
processed or transmitted, so long as at least 20 percent of the total 
revenues of the company conducting these activities are derived from 
providing data processing services to depository institutions and their 
affiliates and/or processing financial, banking and economic data and/
or the sale of other financial products and services.
    (C) Electronic information portal services. Providing or 
facilitating information search, exchange, consolidation, screening, 
filtering or aggregation services over electronic networks. This 
activity includes acting as an Internet Service Provider, providing on-
line search engines that display sites meeting criteria selected by the 
user, bulletin boards, newsgroup services on general or specific 
topics, ``chat'' rooms, Internet web sites or portals that contain 
links to other web sites, and aggregation services that accumulate and 
display any type of data selected by the user on a customized web page. 
These activities must be provided in connection with the marketing and 
delivery of financial products and services.
    (ii) The aggregate carrying value of all investments in companies 
engaged in activities described in paragraph (d)(1)(i) of this section 
may not exceed 5 percent of the Tier 1 capital of the financial holding 
company.
    (2) [Reserved]

    Dated: December 13, 2000.

    By order of the Board of Governors of the Federal Reserve 
System, December 13, 2000.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 00-32505 Filed 12-20-00; 8:45 am]
BILLING CODE 6210-01-P