Paul N. Watterson, Jr., Esq.
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022

Dear Mr. Watterson:

This is in regard to the request of Dai-Ichi Kangyo Bank, Ltd., Tokyo, Japan ("Dai-Ichi"), for a staff opinion regarding the divestiture period for an oil refinery that was acquired in satisfaction of a debt previously contracted ("dpc") pursuant to section 4(a)(2) of the Bank Holding Company Act (12 U.S.C. § 1843(c)(2)).¹

CIT Group/Equipment Financing, Inc., Livington, New Jersey ("CIT"), an indirect subsidiary of Dai-Ichi, acquired a 52 percent interest in the oil refinery on May 4, 1993, as a result of a default by El Paso Refinery Property L.P., El Paso, Texas, on a term loan made by CIT and four unaffiliated lenders.

Section 4(c)(2) of the BHC Act permits a bank holding company or any of its subsidiaries to hold shares acquired dpc.² Such assets generally must be disposed of within two years from the date they were acquired. Section 2215 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (Pub. L. No. 104-208, § 2215 110 Stat. 3009 (1996)) (the "Regulatory Relief Act") recently amended section 4(c)(2) to permit the Board to extend the two-year disposition period if, in the Board's judgment, the extension would not be detrimental to the public interest.³ In addition, if the bank holding company has not disposed of the dpc assets within five years, section 2215 authorizes the Board to grant additional extensions for up to five years (for a total of ten years) if, in the Board's judgement, the extensions would not be detrimental to the public interest and, either the bank holding company has made a good faith attempt to dispose of such shares during the five-year period, or the disposal of such shares during the five year period would have been detrimental to the company.

Accordingly, Dai-Ichi may request that the System extend the divestiture period to May 4, 1998, five years after the date the assets were acquired. If Dai-Ichi has not disposed of the oil refinery by May 4, 1998, it may request that the System grant additional extensions for up to five years (for a total of ten years). In requesting these extensions, Dai-Ichi should outline the efforts it has made to divest its interest in the refinery and the reasons that an extension is consistent with the public interest, as provided in the BHC Act as amended.

Please call Pamela G. Nardolilli (202) 452-3289 or Deneen L. Donnley-Evans (202) 736-5567 if you have any questions regarding this matter.

Sincerely, yours

(signed) Scott G. Alvarez

Scott G. Alvarez

cc: Federal Reserve Bank of San Francisco

Footnotes 1. Dai-Ichi also requested a one-year extension of the two-year divestiture period for disposing of the oil refinery. On May 2, 1996, the Federal Reserve Bank of San Francisco extended the divestiture period until May 4, 1997. Return to text 2. 12 U.S.C. § 1843(c)(2). Even though the statute refers specifically to "shares," the Board has taken the position that section 4(c)(2) applies to dpc acquisitions of assets other than shares by bank holding companies and their nonbank subsidiaries. See 12 C.F.R. 225.22 and 225.140. Return to text 3. Previously, the section 4(c)(2) permitted the Board to extend the two-year disposition period for up to three additional one-year periods, if, in the Board's judgment, a one-year extension would not be detrimental to the public interest. Return to text