[Federal Register Volume 59, Number 128 (Wednesday, July 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16289]
[[Page Unknown]]
[Federal Register: July 6, 1994]
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FEDERAL RESERVE SYSTEM
Deutsche Bank AG, Frankfurt, Germany; Application to engage in
Nonbanking Activities
Deutsche Bank AG, Frankfurt, Germany (Deutsche Bank), has applied
pursuant to Sec. 4(c)(8) of the Bank Holding Company Act (12 U.S.C.
1843(c)(8)) (BHC Act) and Sec. 225.23(a)(3) of the Board's Regulation
Y (12 CFR 225.23(a)(3)) to engage in various activities through
Deutsche Bank Sharps Pixley, Inc. (DBSPI) and Sharps Pixley Brokers,
Inc. (``Brokers''), both of New York, New York, which were acquired
indirectly by Deutsche Bank from Kleinwort Benson Group plc, London,
England on December 31, 1993. Deutsche Bank proposes to engage in the
following activities through DBSPI: (1) trading for its own account for
nonhedging purposes in gold, silver and platinum bullion in the spot,
forward and over-the-counter (OTC) option markets; and (2) providing
various financing services. Deutsche Bank proposes to provide futures
commission merchant (FCM) execution and investment advisory services
through Brokers, an FCM registered under the Commodity Exchange Act (7
U.S.C. Sec. 1 et seq.), on the following contracts: Copper Futures,
Options on Copper Futures, Gold Futures, Options on Gold Futures,
Silver Futures, and Options on Silver Futures on the Commodity
Exchange, Inc.; Copper Futures, Options on Copper Futures, Lead
Futures, Options on Lead Futures, Zinc Futures, Options on Zinc
Futures, Aluminum Futures, Options on Aluminum Futures, Tin Futures,
Options on Tin Futures, Nickel Futures, Options on Nickel Futures,
Aluminum Alloy Futures, and Options on Aluminum Alloy Futures on The
London Metal Exchange, Limited. The activities will be conducted on a
world wide basis.
Section 4(c)(8) of the BHC Act provides that a bank holding company
may, with Board approval, engage in any activity which the Board, after
due notice and opportunity for hearing, has determined (by order or
regulation) to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. This statutory
test requires that two separate tests be met for an activity to be
permissible for a bank holding company. First, the Board must determine
that the activity is, as a general matter, closely related to banking.
Second, the Board must find in a particular case that the performance
of the activity by the applicant bank holding company may reasonably be
expected to produce public benefits that outweigh possible adverse
effects.
A particular activity may be found to meet the ``closely related to
banking'' test if it is demonstrated that banks generally have provided
the proposed activity, that banks generally provide services that are
operationally or functionally similar to the proposed activity so as to
equip them particularly well to provide the proposed activity, or that
banks generally provide services that are so integrally related to the
proposed activity as to require their provision in a specialized form.
National Courier Ass'n v. Board of Governors, 516 F.2d 1229, 1237 (D.C.
Cir. 1975). In addition, the Board may consider any other basis that
may demonstrate that the activity has a reasonable or close
relationship to banking or managing or controlling banks. Board
Statement Regarding Regulation Y, 49 FR 806 (1984).
Deutsche Bank states that the Board previously has determined by
Regulation that certain of the proposed activities, when conducted
within limitations established by the Board in its regulations and in
related interpretations and orders, are closely related to banking for
purposes of Sec. 4(c)(8) of the BHC Act. See 12 C.F.R. 225.25(b)(1)
and Westpac Banking Corporation, 73 Federal Reserve Bulletin 61 (1987)
(making, acquiring or servicing loans or other extensions of credit);
12 C.F.R. 225.25(b)(18) and (19) (providing FCM transactional and
advisory services with respect to bullion contracts).
Deutsche Bank also maintains that the Board has determined by order
that several of the other proposed activities, when conducted within
the limitations established by the Board in previous orders, are
closely related to banking. See Midland Bank, PLC, 76 Federal Reserve
Bulletin 860 (1990) (trading gold and silver bullion in the spot market
for a bank holding company's own account); J.P. Morgan & Co.
Incorporated, 80 Federal Reserve Bulletin 151 (1994) (providing FCM
transactional and advisory services with respect to nonfinancial
commodity contracts). Deutsche Bank maintains that DBSPI and Brokers
would conduct these previously approved activities in conformity with
the conditions and limitations established by the Board in prior cases.
Deutsche Bank further states that the Board previously has not
approved trading platinum bullion in the spot market for a bank holding
company's own account, or trading gold, silver or platinum bullion in
the forward or OTC option market for a bank holding company's own
account for nonhedging purposes. With respect to trading gold and
silver in the forward and OTC option markets, Deutsche Bank maintains
that the Board previously has determined that trading for nonhedging
purposes in the proposed derivative contracts with respect to other
bank-eligible investments is closely related to banking, and,
therefore, that trading these contracts with respect to silver and gold
bullion also is closely related to banking. See Hongkong and Shanghai
Banking Corporation, 75 Federal Reserve Bulletin 217 (1989) (trading
foreign exchange for a bank holding company's own account for
nonhedging purposes in the spot, forward, options, futures and options
on futures markets).
With respect to its proposal that Company trade for its own account
in platinum bullion, Deutsche Bank states that the OCC and the New York
State Banking Department have approved this activity for banks under
their respective jurisdictions. Deutsche Bank also states that the
Board has approved under Sec. 4(c)(8) of the BHC Act the purchase and
sale of platinum coins, under limited circumstances. See Standard
Chartered PLC, 76 Federal Reserve Bulletin 681 (1990). Deutsche Bank
also states that the Board has approved, under Regulation K (12 C.F.R.
part 211), trading in platinum by bank holding company subsidiaries
located outside the United States. See J.P. Morgan & Co. Incorporated,
76 Federal Reserve Bulletin 552 (1990). Deutsche Bank maintains that
for these reasons, the proposed trading in platinum bullion is closely
related to banking.
In order to approve the proposal, the Board must determine that the
proposed activities to be conducted by DBSPI and Brokers ``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.'' 12 U.S.C. Sec. 1843(c)(8).
Deutsche Bank believes that the proposal will produce public
benefits that outweigh any potential adverse effects. In particular,
Deutsche Bank maintains that the proposal will enhance competition and
enable Deutsche Bank to offer its customers a broader range of
products. In addition, Deutsche Bank states that the proposed
activities will not result in the adverse effects such as an undue
concentration of resources, decreased or unfair competition, conflicts
of interest, or unsound banking practices.
In publishing the proposal for comment, the Board does not take a
position on issues raised by the proposal. Notice of the proposal is
published solely to seek the views of interested persons on the issues
presented by the application and does not represent a determination by
the Board that the proposal meets, or is likely to meet, the standards
of the BHC Act.
Any comments or requests for hearing should be submitted in writing
and received by William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, Washington, D.C. 20551, not later than July 31,
1994. Any request for a hearing on this application must, as required
by Sec. 262.3(e) of the Board's Rules of Procedure (12 CFR 262.3(e)),
be accompanied by a statement of the reasons why a written presentation
would not suffice in lieu of a hearing, identifying specifically any
questions of fact that are in dispute, summarizing the evidence that
would be presented at a hearing, and indicating how the party
commenting would be aggrieved by approval of the proposal.
This application may be inspected at the offices of the Board of
Governors or the Federal Reserve Bank of Chicago.
Board of Governors of the Federal Reserve System, June 29, 1994.
Jennifer J. Johnson,
Associate Secretary of the Board.
[FR Doc. 94-16289 Filed 7-5-94; 8:45 am]
BILLING CODE 6210-01-F