For immediate release

The Federal Reserve Board today announced its approval of the notice of Commerce Bancorp, Inc., Cherry Hill, New Jersey, to engage de novo through its wholly owned subsidiary, Commerce Capital Markets, Inc., Philadelphia, Pennsylvania, in underwriting and dealing to a limited extent in 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.

Commerce Bancorp, Inc. Cherry Hill, New Jersey Order Approving a Notice to Engage in Underwriting and Dealing in All Types of Debt and Equity Securities on a Limited Basis

Commerce Bancorp, Inc. ("Commerce"), 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 225.24 of the Board's Regulation Y (12 C.F.R. 225.23) to expand the activities of its section 20 subsidiary, Commerce Capital Markets, Inc., Philadelphia, Pennsylvania ("Company"), to include underwriting and dealing in, to a limited extent, all types of debt and equity securities (other than ownership interests in open-end investment companies). Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 28,386 (1998)). 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. Commerce, with total consolidated assets of approximately $4 billion, operates subsidiary banks in New Jersey and Pennsylvania.1 Company currently engages in limited underwriting and dealing in bank-ineligible securities,2 as permitted under section 20 of the Glass-Steagall Act (12 U.S.C. § 377).3 Company currently 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 -- subject to the framework of prudential limitations established in previous decisions to address the potential for conflicts of interests, unsound banking practices, or other adverse effects -- that 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 The Board also has determined that conduct of bank-ineligible securities underwriting and dealing is consistent with section 20 of the Glass-Steagall Act (12 U.S.C. § 377), provided that the company engaged in the activity derives no more than 25 percent of its gross revenues from underwriting and dealing in bank-ineligible securities.5 Commerce has committed that Company will conduct its underwriting and dealing activities using the methods and procedures and subject to the prudential limitations established by the Board in the Section 20 Orders and other previous cases. Commerce also has committed that Company will conduct its bank-ineligible securities underwriting and dealing activities subject to the Board's revenue restrictions. As a condition of this order, Commerce is required to conduct its bank-ineligible securities activities subject to the revenue limitations and Operating Standards established for section 20 subsidiaries ("Operating Standards").6 In order to approve the proposal, the Board also must determine that the proposed activities are a proper incident to banking, that is, that the proposed transaction "can reasonably be expected to produce benefits to the public . . . 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 evaluation of these factors, the Board considers the financial and managerial resources of the notificant, its subsidiaries, and any company to be acquired, and the effect the transaction would have on such resources.8 The Board has reviewed the capitalization of Commerce 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 projections of the volume of Company's underwriting and dealing activities in bank-ineligible securities. The Board also has reviewed the managerial resources of Commerce and Company in light of relevant reports of examination and all the facts of record. On the basis of all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of this notice. As noted above, Commerce has committed that Company will conduct its bank-ineligible securities underwriting and dealing activities in accordance with the prudential framework established by the Board's Section 20 Orders. Under the framework and conditions established in this order and the Section 20 Orders, the Board concludes that 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 also expects that the proposed expansion of the underwriting and dealing services of Company would provide added convenience to Commerce's customers, lead to improved methods of meeting customers' financing needs, and increase the level of competition among existing providers of these services. Accordingly, the Board has determined that performance of the proposed activities by Commerce 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 the record, the Board has determined that the notice should be, and hereby is, approved, 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. The Board's approval of this proposal to underwrite and deal in all types of debt and equity securities also is conditioned on a determination that Commerce and Company have established policies and procedures to ensure compliance with the Operating Standards 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 ("infrastructure review"). After notification that this condition has been satisfied, Company may commence the proposed underwriting and dealing activities, subject to the other conditions of this order, the Section 20 Orders, and the Modification Orders. The Board's determination is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries that 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's 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 Federal Reserve Bank of Philadelphia, acting pursuant to delegated authority.

By order of the Board of Governors,9 effective July 13, 1998. (signed) Robert deV. Frierson Robert deV. Frierson Associate Secretary of the Board

Footnotes 1 Asset data are as of December 31, 1997. 2 As used in this order, "bank-ineligible securities" refers to all types of debt and equity securities that a member bank may not underwrite or deal in directly under section 16 of the Glass-Steagall Act. See 12 U.S.C. § 335. 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 Commerce Bancorp, Inc., 84 Federal Reserve Bulletin 358 (1998). Company also is authorized to engage in a variety of other nonbanking activities. See id. 4 See 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, 61 Federal Register 57,679 (1996); Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal Register 45,295 (1997); and Clarification to the Board's Section 20 Orders, 63 Federal Register 14,803 (1998) (collectively, "Section 20 Orders"). 5 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 12 C.F.R. 225.200. Company may provide services 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 treated as ineligible revenues subject to the Board's revenue limitation. 7 See 12 U.S.C. § 1843(c)(8). 8 See 12 C.F.R. 225.26(b). 9 Voting for this action: Governors Kelley, Meyer, Ferguson, and Gramlich. Absent and not voting: Chairman Greenspan and Vice Chair Rivlin.

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1998 Orders on banking applications