Robert S. Royer, Esq.
Royer & Babyak
Suite 900
1747 Pennsylvania Avenue, N.W.
Washington, D.C. 20006

Dear Mr. Royer:

Thank you for your letter to Chairman Greenspan regarding Credit Lyonnais and the provisions of the Bank Holding Company Act ("BHC Act") relating to divestiture of shares in nonconforming assets acquired by a bank holding company in satisfaction of a debt previously contracted ("DPC"). Your letter has been forwarded to me for response.

As you note, under the BHC Act a bank holding company that acquires on a DPC basis shares of companies engaged in impermissible activities should divest those shares within a two-year period. However, the BHC Act also authorizes the Board to grant up to three one-year extensions of time for the bank holding company to dispose of such shares. The authority to hold such shares on a DPC basis does not extend beyond five years after the date on which the shares are acquired.

The BHC Act provides for the possibility of extensions of time because a bank holding company may encounter difficulties selling some assets acquired on a DPC basis in a timely fashion without causing significant losses to the bank holding company. It is not uncommon in DPC situations for the acquiring banking organization to need sufficient time to put the acquired company into such condition as to make its sale attractive to potential buyers. Requests for extensions of time under the BHC Act generally provide information on the efforts of the bank holding company to make the property saleable and its efforts to achieve divestiture.

The authority to grant such extensions has been delegated by the Board to the Reserve Banks. Consistent with the BHC Act, the appropriate Reserve Bank exercises its authority to grant an extension upon a determination that an extension would not be detrimental to the public interest.

In this case, Credit Lyonnais acquired the shares of Metro-Goldwyn Mayer, Inc. ("MGM") in 1992 as a result of foreclosing on a defaulted loan. The Federal Reserve Bank of New York has granted two requests by Credit Lyonnais for additional time within which to divest the MGM shares. Credit Lyonnais' final extension request is currently pending with the Reserve Bank and will be processed consistent with the foregoing.

I hope this information is helpful.

Sincerely yours,

(signed) Kathleen M. O'Day

Kathleen M. O'Day