| For immediate release |
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The Federal Reserve Board today announced its approval of the notice by The Bank of New York Company, Inc., New York, New York, to engage through BNY Capital Markets, Inc., New York, New York, in underwriting and dealing in all types of debt and equity securities on a limited basis. Attached is the Board's Order relating to this action. |
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The Bank of New York Company, Inc. |
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The Bank of New York Company, Inc., New York, New York ("Bank of New York"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to expand the activities of its section 20 subsidiary, BNY Capital Markets, Inc., New York, New York ("Company"), to include underwriting and dealing in, to a limited extent, all types of debt and equity securities except ownership interests in open-end investment companies. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 1118 (1997)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. Bank of New York, with total consolidated assets of approximately $52.4 billion, is the 16th largest banking organization in the United States. Bank of New York's two subsidiary banks operate in New York, Delaware, New Jersey, and Connecticut.1 Company currently engages in limited underwriting and dealing in bank-ineligible securities2 as permitted under section 20 of the Glass-Steagall Act (12 U.S.C. § 377).3 Company is, and will continue to be, a broker-dealer registered with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Company, therefore, is subject to the record-keeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the SEC, and the NASD. The Board previously has determined that, subject to the prudential framework of limitations established in previous decisions to address the potential for conflicts of interests, unsound banking practices, or other adverse effects ("section 20 firewalls"), the proposed activities of underwriting and dealing in bank-ineligible securities are so closely related to banking as to be proper incidents thereto within the meaning of section 4(c)(8) of the BHC Act.4 Bank of New York has committed that Company will conduct the proposed underwriting and dealing activities using the same methods and procedures, and subject to the same prudential limitations as those established by the Board in the Section 20 Orders and other cases. |
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The Board also has determined that the conduct of these securities underwriting and dealing activities is consistent with section 20 of the Glass-Steagall Act (12 U.S.C. § 377), provided that the company engages in only limited underwriting and dealing activities.5 Effective March 6, 1997, the Board increased from 10 percent to 25 percent the amount of total revenue that a section 20 subsidiary may derive from underwriting and dealing in bank-ineligible securities.6 Bank of New York has committed that Company will conduct its underwriting and dealing activities in bank-ineligible securities subject to the Board's revenue test.7 Under section 4(c)(8) of the BHC Act, the Board considers the financial and managerial resources of the notificant and its subsidiaries and the effect of the transaction on such resources.8 The Board has reviewed the capitalization of Bank of New York and Company in accordance with the standards set forth in the Section 20 Orders and finds the capitalization of each to be consistent with approval. With respect to Company, this determination is based on all the facts of record, including Bank of New York's projections of the volume of Company's underwriting and dealing activities in bank-ineligible securities. On the basis of all the facts of record, including the foregoing, the Board has concluded that financial and managerial considerations are consistent with approval of this notice. In order to approve this proposal, the Board also must find that the performance of the proposed activities by Bank of New York can reasonably be expected to produce benefits that would outweigh possible adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act. Based on the facts of record in the notice and the framework established in prior decisions, consummation of this proposal is not likely to result in any significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. The Board expects that consummation of the proposal would provide added convenience to Bank of New York's customers and would increase the level of competition among existing providers of these services. Accordingly, the Board has determined that the performance of the proposed activities by Bank of New York can reasonably be expected to produce public benefits that outweigh possible adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act. |
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For the reasons set forth in this order and in the Section 20 Orders, the Board has concluded that Bank of New York's proposal to engage through Company in the proposed activities is consistent with the Glass-Steagall Act, and that the proposed activities are so closely related to banking as to be proper incidents thereto within the meaning of section 4(c)(8) of the BHC Act, provided that Bank of New York limits the activities of Company as specified in this order and the Section 20 Orders, as modified by the Modification Orders. On the basis of the record, the Board has determined to, and hereby does, approve this notice subject to all the terms and conditions discussed in this order and in the Section 20 Orders, as modified by the Modification Orders. The Board's approval of this proposal extends only to activities conducted within the limitations of those orders and this order, including the Board's reservation of authority to establish additional limitations to ensure that Company's activities are consistent with safety and soundness, avoidance of conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in any manner other than as approved in this order and the Section 20 Orders (as modified by the Modification Orders) is not authorized for Company. Included among the conditions set forth in the Section 20 Orders is a condition that Company may not commence the proposed underwriting and dealing activities until the Board has determined that Bank of New York and Company have established policies and procedures to ensure compliance with the section 20 firewalls and the other requirements of this order and the Section 20 Orders, including computer, audit, and accounting systems, internal risk management controls, and the necessary operational and managerial infrastructure for underwriting and dealing in all types of debt and equity securities. On the basis of a recent review by the Federal Reserve Bank of New York ("Reserve Bank") and all the facts of record, the Board has determined that Bank of New York and Company have in place the managerial and operational infrastructure and other policies and procedures necessary to comply with the requirements of this order and the Section 20 Orders. Accordingly, Company may commence underwriting and dealing in all types of debt and equity securities as permitted by, and subject to the other conditions of, this order and the Section 20 Orders. |
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The Board's determination also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.23(g) (12 C.F.R. 225.7 and 225.23(g)), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries the Board finds necessary to assure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on compliance with all the commitments made in connection with this notice, including the commitments discussed in this order and the conditions set forth in the Board regulations and orders noted above. The commitments and conditions shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law. This proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Reserve Bank, acting pursuant to delegated authority. |
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By order of the Board of Governors,9 effective February 12, 1997.
(signed) Jennifer J. Johnson
Jennifer J. Johnson
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Footnotes 1 Asset and ranking data are as of September 30, 1996. 2 As used in this order, "bank-ineligible securities" refers to all types of debt and equity securities that a bank may not underwrite or deal in directly under section 16 of the Glass-Steagall Act (12 U.S.C. § 24(7)). 3 Company has authority to underwrite and deal in, to a limited extent, certain municipal revenue bonds, 1-4 family mortgage-related securities, commercial paper, and consumer-receivable-related securities. See Bank of New York Company, Inc., 82 Federal Reserve Bulletin 748 (1996). Company also is authorized to engage in a variety of other nonbanking activities. 4 See Canadian Imperial Bank of Commerce, 76 Federal Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industries Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert. denied, 486 U.S. 1059 (1988) (collectively, "Section 20 Orders"). 5 See Section 20 Orders. Compliance with the revenue limitation shall be calculated in accordance with the method stated in the Section 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989) and 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996) (collectively, "Modification Orders"). 6 Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 68,750 (1996). 7 Company also may engage in activities that are necessary incidents to the proposed underwriting and dealing activities. Unless Company receives specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently, any revenues from the incidental activities must be counted as ineligible revenues subject to the Board's revenue limitation. 8 See 12 C.F.R. 225.24. 9 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Yellen. Absent and not voting: Governor Meyer. |
1997 Orders on banking applications
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