For immediate release

The Federal Reserve Board today announced its approval of the application of Banc One Corporation to engage de novo through its indirect subsidiary, Banc One Capital Corporation, both of Columbus, Ohio, in underwriting and dealing in, to a limited extent, all types of debt and equity securities, other than ownership interests in open-end investment companies. Attached is the Board's Order relating to this action.

Banc One Corporation Columbus, Ohio Order Approving a Notice to Engage in Underwriting and Dealing in All Types of Debt and Equity Securities on a Limited Basis

Banc One Corporation, Columbus, Ohio ("Applicant"), 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 engage de novo in underwriting and dealing in, to a limited extent, all types of debt and equity securities (other than ownership interests in open-end investment companies) through its subsidiary, Banc One Capital Corporation, Columbus, Ohio ("Company"). Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 5008 (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. Applicant, with total consolidated assets of approximately $98.6�billion, is the 10th largest banking organization in the United States.1 Applicant operates subsidiary banks in Ohio, Arizona, Colorado, Illinois, Indiana, Kentucky, Louisiana, Oklahoma, Texas, Utah, West Virginia, and Wisconsin. Company currently is engaged 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 a member of the National Association of Securities Dealers, Inc. ("NASD"). Accordingly, Company is, and will continue to be, 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.

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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 Applicant 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 that were established by the Board in the Section�20 Orders. 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 engaged in the underwriting and dealing activities derives no more than 25 percent of its total gross revenue from underwriting and dealing in bank-ineligible securities over any two-year period.5 Applicant has committed that Company will conduct its underwriting and dealing activities in bank-ineligible securities subject to the Board's revenue test.6

In order to approve this notice, the Board also must determine that the proposed activities "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."7 As part of its review of these factors, the Board considers the financial and managerial resources of the notificant and its subsidiaries and the effect the transaction would have on such resources.8 The Board has reviewed the capitalization of Applicant 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 Applicant's projections of the volume of Company's underwriting and dealing activities in bank-ineligible securities. In connection with the proposal, the Federal Reserve Bank of Cleveland ("Reserve Bank") has reviewed the operational and managerial infrastructure of Company, including its computer, audit, and accounting systems and internal risk management procedures and controls, with respect to the proposed underwriting and dealing in debt securities. Based on the Reserve Bank's review and all other facts of record, the Board has determined that Company has established an adequate operational and managerial infrastructure with respect to debt securities to ensure compliance with the requirements of the Section 20 Orders. On the basis of all the facts of record, and subject to the completion of a satisfactory infrastructure review with respect to Company's proposed underwriting and dealing in all types of equity securities, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.

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In order to approve the proposal, the Board also must find that the performance of the proposed activities by Applicant can reasonably be expected to produce benefits that would outweigh possible adverse effects under the proper incident to bank standard of section 4(c)(8) of the BHC Act. Under the framework established in this and prior decisions, consummation of the 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 the customers of Applicant and would increase competition among providers of these services. Accordingly, the Board has determined that the performance of the proposed activities by Applicant 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. On the basis of all the facts of 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 the 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.

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The Board's approval of the proposed underwriting and dealing activities with respect to equity securities is conditioned on a future determination by the Board that Applicant and Company have established policies and procedures to ensure compliance with the conditions and restrictions previously relied on by the Board in approving these activities 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. On notification by the Board that this condition has been satisfied, Company may commence the proposed underwriting and dealing activities in equity securities, subject to the other conditions discussed in this order and the Section 20 Orders. 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 as the Board finds necessary to ensure 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.

By order of the Board of Governors,9 effective March 24, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

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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 Banc One Corporation, 76 Federal Reserve Bulletin 756 (1990). Company also is authorized to engage in a variety of other nonbanking activities. See id.; Banc One Corporation, 77 Federal Reserve Bulletin 61 (1991). 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.), cert. denied, 486 U.S. 1059 (1988); as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 82�Federal Reserve Bulletin 1113 (1996) (collectively, "Section 20 Orders"). Return to top 5 See Section 20 Orders. 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. See 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). 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 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. 7 12 U.S.C. § 1843(c)(8). 8 See 12 C.F.R. 225.24. 9 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer.

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