Legal Interpretations
Bank Holding Company/Change in Control - 1999 Letters
December 7, 1999
To a bank holding company, stating the opinion that the anti-tying provisions of section 106 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. § 1972) do not prohibit a credit card bank affiliated with a retailer from issuing private-label credit cards that may, as a practical matter, only be used to make purchases from the affiliated retailer.
September 24, 1999
To Mr. Patrick Butler stating that staff will not recommend that the Board take action under section 4(c)(6) of the Bank Holding Company Act, 12 USC 1843(c)(6), on a proposed investment. A bank holding company (BHC) proposes to acquire all Class B units of a Mississippi limited liability company's (M-LLC) whose only asset is 50% ownership of a Delaware limited liability company (D-LLC) that engages in oil and gas exploration. The Class B units will be convertible to no more that 4.9 percent of the Class A units of M-LLC, which control the day-to-day affairs of M-LLC. BHC has committed that it will not exercise or attempt to exercise a controlling influence over either M-LLC or D-LLC.
June 24, 1999
To Rodgin Cohen, regarding First Union's proposal to provide seed capital to mutual funds that it advises. To create new mutual funds, First Union will provide the initial capitalization to acquire securities to establish a performance record for the fund prior to soliciting public investors. Thus, First Union will own all or a significant percentage of the shares of these funds when they begin operations. To address concerns regarding the Glass-Steagall Act, First Union has committed to reduce its ownership of voting shares in each of the funds to no more than 24.9 percent within six months of the funds' organization. In addition, First Union has committed to certain limitations regarding ownership or control of an investment company, see 12 U.S.C. 1843(c)(7); 12 CFR 225.22(d)(6).
March 9, 1999
To Michigan National Corporation (MNC), regarding its continued ownership of 100 percent of preferred stock of Bloomfield Hills Bancorp (BHB). As holder of the preferred shares, MNC has the right to elect one director of BHB; thus these are "voting securities" for purposes of the Bank Holding Company Act, see 12 CFR 225.2(q)(1)(i). While MNC has not exercised this right since 1995, it is still considered to control BHB, because it owns more than 25 percent of a class of voting securities, see 12 CFR 225.2(e)(1)(i).
March 8, 1999
To Mr. Bryan Handlos, regarding the revenue restrictions in RegulationY, 12 CFR 225.28(b)(14)(ii), to data processing activities. A bank holding company proposes to transfer data processing activities from its bank to a new subsidiary (NewCo), but the bank would continue to bill non-affiliated clients for these services that would be provided to them by NewCo through a subservicing agreement between the bank and NewCo. NewCo should include the revenue received from the bank under this subservicing agreement when calculating the 30percent limit imposed by Regulation Y, but it should not include the revenue received from the bank and other affiliates for providing them these services, because section 225.22(b) authorizes bank holding companies to engage in servicing activities for themselves and their subsidiaries.
January 29, 1999
To Mr. J. Paul Compton, stating that the proposed activities of certain wholly-owned companies are within the scope of permissible community development activities under Regulation Y, 12 CFR 225.28(b)(12). The wholly-owned limited liability companies of a bank holding company would engage in the business of hiring, training, and leasing out the services of certain disadvantaged classes of people; or would serve as a manager for non-affiliated companies that provide similar services.
January 28, 1999
To Mr. Andrew Hodgkin, regarding the status of a company as a non-bank holding company pursuant to the "grandfather" clause of the Competitive Equality Banking Act of 1987 (CEBA), 12 USC 18431(f). A reorganization in which the grandfathered company transfers ownership of its bank to a wholly-owned subsidiary would not violate CEBA, so long as the wholly-owned subsidiary continues to be controlled by the grandfathered company.