The Board of Governors has
recently considered possible regulatory action with respect to the
issuance of small-denomination debt obligations by bank holding companies
and their nonbank affiliates, particularly where such obligations
are sold directly to the public and may bear interest at rates in
excess of Regulation Q ceilings established for similar obligation
issued by member banks. The Board concluded that regulations constraining
the issuance of such obligations are unnecessary at this time. However,
the Board indicated that all bank holding companies should be advised
that it will be monitoring debt issues registered with the Securities
and Exchange Commission by bank holding companies and nonbank affiliates
with a view to determining whether the issuance of such obligations
is likely to have a disproportionate impact on the deposit flows of
other financial institutions or adversely affect the bank holding
company itself.
Bank holding companies should also be cautioned that the
debt obligations issued publicly by bank holding companies and their
nonbank affiliates should prominently indicate in bold type on their
face and on prospectus covers that the obligations are not obligations
of a bank and are not insured by the Federal Deposit Insurance Corporation.
In addition, they should be reminded that the obligations should not
be sold on the premises of affiliated banks. S-2377; July 7, 1978.
[The staff opinion previously at 4-867.2 has been redesignated
4-655.4.]
