(a) Filing of
notice.
(1)
Information required. A bank holding company
that meets the requirements of paragraph (c) of this section may satisfy
the notice requirement of this subpart in connection with the acquisition
of voting securities or assets of a company engaged in nonbanking
activities that the Board has permitted by order or regulation (other
than an insured depository institution),
1 or a proposal to engage de novo, either directly or indirectly,
in a nonbanking activity that the Board has permitted by order or
by regulation, by providing the appropriate Reserve Bank with a written
notice containing the following:
(i) a certification that all of the
criteria in paragraph (c) of this section are met;
(ii) a description of the transaction
that includes
identification of the companies involved in the transaction, the activities
to be conducted, and a commitment to conduct the proposed activities
in conformity with the Board’s regulations and orders governing the
conduct of the proposed activity;
(iii) if the proposal involves an acquisition of a going concern:
(A) if the acquiring bank
holding company is not a qualifying community banking organization
(as defined in section 217.12 of this chapter) that is subject to
the community bank leverage ratio framework (as defined in section
217.12 of this chapter):
(1) if the bank holding company
has consolidated assets of $3 billion or more, an abbreviated consolidated pro forma balance sheet for the acquiring bank holding company
as of the most recent quarter showing credit and debit adjustments
that reflect the proposed transaction, consolidated pro forma risk-based capital ratios for the acquiring bank holding company
as of the most recent quarter, a description of the purchase price
and the terms and sources of funding for the transaction, and the
total revenue and net income of the company to be acquired; or
(2) if the bank holding company
has consolidated assets of less than $3 billion, a pro forma parent-only balance sheet as of the most recent quarter showing
credit and debit adjustments that reflect the proposed transaction,
a description of the purchase price and the terms and sources of funding
for the transaction and the sources and schedule for retiring any
debt incurred in the transaction, and the total assets, off-balance
sheet items, revenue and net income of the company to be acquired;
(B) if the acquiring
bank holding company is a qualifying community banking organization
(as defined in section 217.12 of this chapter) that is subject to
the community bank leverage ratio framework (as defined in section
217.12 of this chapter), an abbreviated consolidated pro forma balance sheet for the acquiring bank holding company as of the most
recent quarter showing credit and debit adjustments that reflect the
proposed transaction, consolidated pro forma leverage ratio
for the acquiring bank holding company as of the most recent quarter,
a description of the purchase price and the terms and sources of funding
for the transaction, and the total revenue and net income of the company
to be acquired;
(C) for each insured
depository institution (that is not a qualifying community banking
organization (as defined in section 217.12 of this chapter) that is
subject to the community bank leverage ratio framework (as defined
in section 217.12 of this chapter)) whose tier 1 capital, total capital,
total assets or risk-weighted assets change as a result of the transaction,
the total risk-weighted assets, total assets, tier 1 capital and total
capital of the institution on a pro forma basis; and
(D) for each insured depository institution
that is a qualifying community banking organization (as defined in
section 217.12 of this chapter) that is subject to the community bank
leverage ratio framework (as defined in section 217.12 of this chapter)
whose tier 1 capital (as defined in section 217.2 of this chapter
and calculated in accordance with section 217.12(b) of this chapter)
or total assets change as a result of the transaction, the total assets
and tier 1 capital of the institution on a pro forma basis;
(iv) identification
of the geographic markets in which competition would be affected by
the proposal, a description of the effect of the proposal on competition
in the relevant markets, a list of the major competitors in that market
in the proposed activity if the affected market is local in nature,
and, if requested, the market indexes for the relevant market; and
(v) a description of the public benefits
that can reasonably be expected to result from the transaction.
(2) Waiver of unnecessary information. The
Reserve Bank may reduce the information requirements in paragraphs
(1)(iii) and (iv) as appropriate.
4-037.2
(b) (1) Action on proposals under this section. The Board or the appropriate
Reserve Bank shall act on a proposal submitted under this section,
or notify the bank holding company that the transaction is subject
to the procedure in section 225.24, within 12 business days following
the filing of all of the information required in paragraph (a) of
this section.
(2) Acceptance of notice if expedited procedure
not available. If the Board or the Reserve Bank determines, after
the filing of a notice under this section, that a bank holding company
may not use the procedure in this section and must file a notice under
section 225.24, the notice shall be deemed accepted for purposes of
section 225.24 as of the date that the notice was filed under this
section.
4-037.3
(c) Criteria for use
of expedited procedure. The procedure in this section is available
only if—
(1) Well-capitalized organization.
(i) Bank
holding company. Both at the time of and immediately after the
proposed transaction, the acquiring bank holding company is well capitalized;
(ii) Insured depository institutions. Both at the time of and immediately
after the transaction—
(A) the lead insured depository institution of the acquiring bank
holding company is well capitalized;
(B) well-capitalized insured depository institutions control at least
80 percent of the total risk-weighted assets of insured depository
institutions controlled by the acquiring bank holding company; and
(C) no insured depository institution
controlled by the acquiring bank holding company is undercapitalized;
(2) Well-managed organization.
(i) Satisfactory
examination ratings. At the time of the transaction, the acquiring
bank holding company, its lead insured depository institution, and
insured depository institutions that control at least 80 percent of
the total risk-weighted assets of insured depository institutions
controlled by the holding company are well managed and have received
at least a satisfactory rating for compliance at their most recent
examination if such rating was given;
(ii) No poorly
managed institutions. No insured depository institution controlled
by the acquiring bank holding company has received 1 of the 2 lowest
composite ratings at the later of the institution’s most recent examination
or subsequent review by the appropriate federal banking agency for
the institution;
(iii) Recently acquired institutions excluded. Any insured depository institution that has been acquired by the
bank holding company during the 12-month period preceding the date
on which written notice is filed under paragraph (a) of this section
may be excluded for purposes of paragraph (c)(2)(ii) of this section
if—
(A) the bank holding
company has developed a plan acceptable to the appropriate federal
banking agency for the institution to restore the capital and management
of the institution; and
(B) all insured
depository institutions excluded under this paragraph represent, in
the aggregate, less than 10 percent of the aggregate total risk-weighted
assets of all insured depository institutions controlled by the bank
holding company;
4-037.4
(3) Permissible
activity.
(i)
The Board has determined by regulation or order that each activity
proposed to be conducted is so closely related to banking, or
managing or controlling banks, as to be a proper incident thereto;
and
(ii) The Board has not indicated
that proposals to engage in the activity are subject to the notice
procedure provided in section 225.24;
(4) Competitive
criteria.
(i) Competitive screen. In the case of the
acquisition of a going concern, the acquisition, without regard to
any divestitures proposed by the acquiring bank holding company, does
not cause—
(A) the acquiring
bank holding company to control in excess of 35 percent of the market
share in any relevant market; or
(B)
the Herfindahl-Hirschman index to increase by more than 200 points
in any relevant market with a post-acquisition index of at least 1800;
and
(ii) Other competitive factors. The Board has
not indicated that the transaction is subject to close scrutiny on
competitive grounds;
4-037.5
(5) Size of acquisition.
(i) In
general.
(A) Limited growth. Except as provided in paragraphs
(c)(5)(ii) and (iii) of this section, the sum of aggregate risk-weighted
assets to be acquired in the proposal and the aggregate risk-weighted
assets acquired by the acquiring bank holding company in all other
qualifying transactions does not exceed 35 percent of the consolidated
risk-weighted assets of the acquiring bank holding company. For purposes
of paragraph (c)(5) of this section, “other qualifying transactions”
means any transaction approved under this section or section 225.14
during the 12 months prior to filing the notice under this section;
(B) Consideration
paid. Except as provided in paragraph (c)(5)(iii) of this section,
the gross consideration to be paid by the acquiring bank holding company
in the proposal does not exceed 15 percent of the consolidated tier
1 capital of the acquiring bank holding company; and
(C) Individual size
limitation. Except as provided in paragraph (c)(5)(iii) of this
section, the total risk-weighted assets to be acquired do not exceed
$7.5 billion;
(ii) Small bank holding companies. Paragraph (c)(5)(i)(A) shall not apply if, immediately following
consummation of the proposed transaction, the consolidated risk-weighted
assets of the acquiring bank holding company are less than $300 million;
(iii) Qualifying community banking organizations. Paragraphs (c)(5)(i)(A)
through (C) of this section shall not apply if:
(A) the acquiring bank holding company
is a qualifying community banking organization (as defined in section
217.12 of this chapter) that is subject to the community bank leverage
ratio framework (as defined in section 217.12 of this chapter); and
(B) the sum of the total assets to be
acquired in the proposal and the total assets acquired by the acquiring
bank holding company in all other qualifying transactions does not
exceed 35 percent of the average total consolidated assets (as used
in section 217.12 of this chapter) of the acquiring bank holding company
as last reported to the Board;
(C)
the gross consideration to be paid by the acquiring bank holding company
in the proposal does not exceed 15 percent of the tier 1 capital (as
defined in section 217.2 of this chapter and calculated in accordance
with section 217.12(b) of this chapter) of the acquiring bank holding
company; and
(D) the total assets to
be acquired do not exceed $7.5 billion;
(6) Supervisory
actions. During the 12-month period ending on the date on which
the bank holding company proposes to consummate the proposed transaction,
no formal administrative order, including a written agreement, cease-and-desist
order, capital directive, prompt-corrective-action directive, asset-maintenance
agreement, or other formal enforcement order is or was outstanding
against the bank holding company or any insured depository institution
subsidiary of the holding company, and no formal administrative enforcement
proceeding involving any such enforcement action, order, or directive
is or was pending; and
(7) Notification. The bank holding company has not been notified by the Board, in
its discretion, prior to the expiration of the period in paragraph
(b) that a notice under section 225.24 is required in order to permit
closer review of any potential adverse effect or other matter related
to the factors that must be considered under this part.
4-037.6
(d) Branches and agencies of foreign banking
organizations. For purposes of this section, a U.S. branch or
agency of a foreign banking organization shall be considered to be
an insured depository institution.
(e) Qualifying community banking organizations. For purposes of
this section, a qualifying community banking organization (as defined
in section 217.12 of this chapter) that is subject to the community
bank leverage ratio framework (as defined in section 217.12 of this
chapter) controls total risk-weighted assets equal to the qualifying
community banking organization’s average total consolidated assets
(as used in section 217.12 of this chapter) as last reported to its
primary banking supervisor.
