Scott A. Anenberg, Esq.
Shaw Pittman, LLP
2300 N Street, NW
Washington, DC 20037-1128

Dear Mr. Anenberg:

This is in response to the request by Bank Leumi (USA) New York, New York ("BLUSA"), for an exemption from section 23A of the Federal Reserve Act in order that BLUSA may acquire the assets of the Miami agency of Bank of Leumi le-Israel B.M., Tel Aviv, Israel ("Bank Leumi"). BLUSA is a subsidiary of Bank Leumi, and thus Bank Leumi is an affiliate of BLUSA for purposes of section 23A.¹ BLUSA has requested an exemption to acquire certain assets and assume certain liabilities valued at approximately [amount redacted] from the Miami agency.

Section 23A limits the amount of "covered transactions," which include loans and purchases of assets, between a bank (and its subsidiaries) and any single affiliate to 10 percent of the bank's capital stock and surplus, and limits the aggregate of all covered transactions between a bank (and its subsidiaries) and all its affiliates to 20 percent of the bank's capital stock and surplus. BLUSA's acquisition of the Miami agency's assets is covered by section 23A.² BLUSA's capital stock and surplus totaled approximately $498 million, as of March 31, 2002.

Section 23A specifically authorizes the Board to exempt purchases of real or personal property and to exempt "at its discretion [other]. . . transactions or relationships from the requirements of this section if it finds such exemptions to be in the public interest and consistent with the purposes of this section."³ The Board has approved exemptions in similar cases for one-time transfers that are part of a corporate reorganization and that are structured to ensure the quality of the transferred assets.⁴ As in previous cases reviewed by the Board, the proposed transaction in this case is the result of a one-time corporate reorganization. BLUSA is restructuring its U.S. banking business to consolidate the organization's operations in Florida under BLUSA. BLUSA states that the proposed consolidation would allow it to better serve its customers.

BLUSA and Bank Leumi have made the following commitments accepted by the Board in similar exemption requests:

1. None of the assets of the Miami agency that BLUSA will purchase will be "low-quality" within the meaning of section 23A.
2. Before acquiring the assets of the Miami agency, BLUSA will review the assets to ensure that the transaction is consistent with safe and sound banking practices.
3. For two years after the purchase, Bank Leumi will repurchase quarterly from BLUSA any asset acquired from the Miami agency that becomes a low-quality asset as defined by section 23A. Any such asset will be repurchased at BLUSA's original purchase price, as adjusted to give credit for any payments of principal and accrued interest or fees included in the original purchase price received by BLUSA.
4. Before the purchase of the assets, a majority of the directors who serve on BLUSA's board of directors who are not affiliated with Bank.

Leumi, except by virtue of their membership on the board of directors of BLUSA or Bank Leumi le-Israel Corporation, will review and approve the purchase.

BLUSA also has represented that the fair market value of the assets that it will acquire will equal or exceed the fair market value of the liabilities assumed.

In light of these considerations and all the facts presented, the transaction appears to be consistent with safe and sound banking practices and on terms that would ensure the quality of the assets transferred. In addition, the Federal Deposit Insurance Corporation approved the transaction pursuant to the Bank Merger Act on June 7, 2002, and has informed the Board that it has no objection to this proposal. Accordingly, the transaction appears to be consistent with the purposes of section 23A, and the Director of the Division of Banking Supervision and Regulation, pursuant to authority delegated by the Board, and with the concurrence of the General Counsel, hereby grants the requested exemption.

This determination is specifically conditioned on compliance by BLUSA and Bank Leumi with all the commitments and representations made in connection with this request. These commitments and representations are deemed to be conditions imposed in writing in connection with this action and, as such, may be enforced in proceedings under applicable law. This determination is based on the specific circumstances surrounding this transaction, and may be revoked in the event of any material change in those circumstances or any failure by Bank Leumi or its subsidiaries to observe any of their commitments. This action does not represent a determination concerning the permissibility of any other transactions that are subject to section 23A or concerning any other affiliate of BLUSA.

Sincerely yours,

(Signed) Robert deV. Frierson

1. 12 U.S.C. � 371c(b)(1)(A). Return to text

2. Section 23A defines the purchase of assets as a covered transaction. 12 U.S.C. � 371c(b)(7)(C). Return to text

3. 12 U.S.C. �� 371c(b)(7)(C) and 371c(e)(2) (emphasis added). Return to text

4. See Travelers Group Inc., 84 Federal Reserve Bulletin 985, 1013-14 (1998); Letter dated November 14, 1996, from William W. Wiles to John Byam; Letter dated April 19, 1988, from James McAfee to Timothy C. Roach; Letter dated August 6, 1987, from William W. Wiles to Timothy McGinnis. Return to text