For immediate release

The Federal Reserve Board today announced its approval of the application of The Sumitomo Bank, Limited, Osaka, Japan, to retain its indirect interest in Daiwa SB Investments (USA) Ltd., New York, New York. Attached is the Board's Order relating to this action.

The Sumitomo Bank, Limited Osaka, Japan Order Approving Notice to Engage in Nonbanking Activities

The Sumitomo Bank, Limited ("Bank"), a foreign banking organization subject to the provisions 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. 225.24) to retain its indirect interest in Daiwa SB Investments (USA) Ltd., New York, New York ("Company"), and thereby engage in financial and investment advisory activities pursuant to section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6)). Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 29,646 (1999)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. Bank, with total consolidated assets of approximately $456 billion, is the third largest banking organization in Japan.1 In the United States, Bank operates branches in New York, New York; San Francisco and Los Angeles, California; and Chicago, Illinois. Company has under management approximately $1.1 billion in assets. Bank acquired an indirect interest in Company in connection with the reorganization of Daiwa Securities Co., Ltd., Tokyo, Japan, ("Daiwa Securities"). As a result of this transaction, Bank and its affiliates received a 44 percent interest in Daiwa Securities' Japanese investment management subsidiary, Daiwa International Capital Management Co., Ltd. ("DICAM"), while Daiwa Securities retained a 44 percent interest. DICAM was renamed Daiwa SB Investments Ltd., and Company was formed by renaming DICAM's wholly owned U.S. investment management subsidiary, Daiwa International Capital Management Corp. (USA), a registered investment advisor. Company continues to be an investment advisor registered with the Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940 ("1940 Act") (15 U.S.C. § 80b-1 et seq.). Accordingly, Company is, and will remain, subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the 1940 Act and the SEC. The Board previously has determined by regulation that financial and investment advisory activities are closely related to banking within the meaning of section 4(c)(8) of the BHC Act.2 Bank has committed that it will conduct the activities of Company in accordance with the limitations set forth in Regulation Y and the Board's orders and interpretations relating to the activities. In order to approve the proposal, the Board also must determine that the proposed activity is 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."3 As a part of its evaluation of these factors, the Board considers the financial condition and managerial resources of the notificant and its subsidiaries and the effect the transaction would have on those resources.4 The retention of Company would not require additional financial or managerial resources from Bank. The nature and size of Company's activities would not involve significant risk, nor would the proposal represent a significant expansion of Bank's U.S. operations. The most recently reported capital ratios of Bank exceed the relevant risk-based capital standards established under the Basle Accord, and the inclusion of Company would have no material effect on the capital ratios. The Board has also considered recent financial statements, including pro forma financial statements and other available information, and the condition of the U.S. operations of Bank. Based on these and other facts of record, including relevant supervisory information, the Board has determined that financial and managerial considerations are consistent with approval. There is no evidence in the record indicating that consummation of this proposal is likely to result in significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. There are numerous existing and potential competitors in the market for investment advisory services. This acquisition, therefore, would have a de minimis effect on competition in the market for these services. The Board expects that the acquisition would provide public benefits by giving Company access to the resources and experience of Bank and its affiliates. In addition, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments are consistent, as in this case, with the relevant considerations under the BHC Act. The Board has determined, therefore, that the performance of the proposed activities by Company 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. Based on the foregoing and all the facts of record, including the commitments made by Bank in connection with the notice, and subject to the terms and conditions set forth in this order, the Board has determined that the notice should be, and hereby is, approved. The Board's determination is subject to all the conditions set forth in the Board's 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 as 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 the notice, including the commitments and conditions discussed in this order. The commitments and conditions relied on in reaching this decision 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.

By order of the Board of Governors,5 effective July 20, 1999. (signed) Robert deV. Frierson Robert deV. Frierson Associate Secretary of the Board

Footnotes 1 Asset and ranking data are as of March 31, 1999, and use exchange rates then in effect. 2 See 12 C.F.R. 225.28(b)(6). 3 See 12 U.S.C. § 1843(c)(8). 4 See 12 C.F.R. 225.26. 5 Voting for this action: Chairman Greenspan and Governors Kelley, Meyer, Ferguson, and Gramlich.

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1999 Orders on banking applications