[Federal Register Volume 59, Number 226 (Friday, November 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29041]
[[Page Unknown]]
[Federal Register: November 25, 1994]
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FEDERAL RESERVE SYSTEM
The Bank of Montreal; Application To Engage in Nonbanking
Activities
The Bank of Montreal, Toronto, Canada, has applied pursuant to
section 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 retain its interest in Burns Fry and Timmins Holdings
Inc., Chicago, Illinois (Burns Fry), and, subsequent to the merger of
the operating subsidiaries of Burns Fry into Applicant's section 20
subsidiary, Harris Nesbitt Thomson Securities Inc., New York, New York
(Harris Nesbitt), to continue to engage indirectly through Harris
Nesbitt in the following activities: (1) providing investment and
financial advice, including financial advice to Canadian federal,
provincial, and municipal governments; (2) providing securities
brokerage service on a discount and full-service basis; (3)
underwriting and dealing in all types of bank-eligible securities; (4)
acting as agent for issuers in the private placement of all types of
securities; (5) appraising real estate and tangible and intangible
personal property, including securities; and (6) arranging commercial
real estate equity financing. Applicant proposes to conduct these
activities on a nationwide basis.
Section 4(c)(8) of the BHC Act provides that a bank holding company
may, without Board approval, engage in any activity that 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 provide
services that are so operationally or functionally similar to the
proposed activity as to equip them particularly well to engage in 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).
Applicant states that the Board previously has determined by
regulation that some of the proposed activities, when conducted within
limitations established by the Board, are closely related to banking
for purposes of section 4(c)(8) of the BHC Act. See 12 CFR 225.25(b)(4)
(providing investment and financial advice, including financial advice
to Canadian federal, provincial, and municipal governments); 12 CFR
225.25(b)(15) (providing securities brokerage service on a discount and
full-service basis); 12 CFR 225.25(b)(16) (underwriting and dealing in
bank-eligible securities); 12 CFR 225.25(b)(13) (appraising real estate
and tangible and intangible personal property, including securities);
and 225.25(b)(14) (arranging commercial real estate equity financing).
Applicant also states that the Board has determined by order that
the remaining proposed activity, when conducted within limitations
established by the Board in previous orders, is closely related to
banking. See J.P. Morgan & Company Incorporated, 76 Federal Reserve
Bulletin 26 (1990), and Bankers Trust New York Corporation, 75 Federal
Reserve Bulletin 829 (1989) (acting as agent for issuers in the private
placement of securities). In addition, Applicant maintains that Harris
Nesbitt may provide execution-only services solely to a single
affiliate, Nesbitt Burns Inc., Toronto, Canada, for the purchase and
sale of certain exchange-traded futures contracts and options on
futures contracts, pursuant to section 4(c)(1)(C) of the BHC Act (12
U.S.C. 1843(c)(1)(C)).
Applicant maintains that it would conduct these previously approved
activities in conformance with the conditions and limitations
established by the Board in prior cases. For this reason, Applicant
contends that approval of the application would not be barred by
section 20 of the Glass-Steagall Act (12 U.S.C. 377), which prohibits
the affiliation of a state member bank with any company principally
engaged in the underwriting, public sale, or distribution of
securities.
In order to approve the proposal, the Board 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.'' 12 U.S.C.
1843(c)(8). Applicant states that the proposal will produce public
benefits that outweigh any potential adverse effects. In particular,
Applicant maintains that the proposal will enhance competition and
enable it to offer its customers a broader range of services. In
addition, Applicant states that the proposed activities will not result
in adverse effects such as an undue concentration of resources,
decreased or unfair competition, conflicts of interests, 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
to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, Washington, DC 20551, not later than December 12, 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 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, November 18,
1994.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 94-29041 Filed 11-23-94; 8:45 am]
BILLING CODE 6210-01-F