-1-

FEDERAL RESERVE SYSTEM 

The Desjardins Group 

Montreal, Canada 

Federation des caisses Desjardins du Quebec 

Levis, Canada 

La Caisse centrale Desjardins du Quebec 

Montreal, Canada 

Desjardins FSB Holdings, Inc. 

Wilmington, Delaware 

Order Approving the Formation of Bank Holding Companies 

The Desjardins Group, Montreal; Federation des caisses Desjardins 

du Quebec, Levis (“The Federation”); La Caisse centrale Desjardins du Quebec, 

Montreal (“CCD”), all in Canada; and Desjardins FSB Holdings, Inc., 

Wilmington, Delaware (“Desjardins Holdings”), have requested the Board’s 

approval under section 3 of the Bank Holding Company Act (12 U.S.C. § 1842) 

(“BHC Act”) to become bank holding companies. Applicants propose to convert 

their wholly owned subsidiary federal savings bank, Desjardins Federal Savings 

Bank, Hallandale, Florida (“Desjardins FSB”), to a national bank that would 

operate as Desjardins Bank, N.A. (“Desjardins Bank”), also in Hallandale. 

Notice of the proposal, affording interested persons an opportunity 

to submit comments, has been published (68 Federal Register 39,091 (2003)). 

The time for filing comments has expired, and the Board has considered the 

proposal and all comments received in light of the factors set forth in section 3 

of the BHC Act. 
The Desjardins Group is a cooperative network of financial 

institutions operating primarily in the province of Quebec, Canada, that 

functions in many respects as a single financial organization. It includes 

approximately 750 depository institutions (“caisses”); the Federation and CCD, 

also depository institutions under Quebec law; and nonbanking companies 

engaged in securities, asset management, and insurance activities in Canada. 

Quebec law controls the structure and supervision of the Desjardins Group, The 

Federation and CCD, and the caisses. 

The caisses are autonomous depository institutions chartered as 

savings and credit cooperatives and are required by Quebec law to be members 

of The Federation.1 Together, the caisses control all the shares of The 

Federation, and the boards of directors of The Federation are elected by the 

caisses.2 Quebec law requires The Federation to act as the coordinating and 

supervisory body for all the caisses. The Federation is responsible for the 

auditing and inspection of the caisses and is the regulatory authority for the 

caisses, particularly with respect to the their capital adequacy, general reserves, 

liquid assets, and credit and investment activities. The Federation also is the 

holding company for CCD and the nonbanking companies of the Desjardins 

Group. CCD primarily provides clearing services and funding for the caisses 

1 The principal activity of the caisses is accepting deposits from members of the 

caisses and investing in designated assets, including extensions of credit to 

those members, primarily through mortgage loans. Membership is typically 

based on geographical areas or common workplaces or professions. 

2 Approximately 80 of the 750 caisses are located outside Quebec and are 

auxiliary, nonvoting members of The Federation. 
-1-

and The Federation, and it directly holds all the shares of Desjardins Holdings, 

the parent company of Desjardins FSB. 

The Desjardins Group prepares consolidated financial statements 

and has total consolidated assets equivalent to approximately $67 billion. It is 

the largest financial organization in Quebec and the sixth largest in Canada.3 

Desjardins Bank would be the 200th largest banking organization in Florida, 

controlling total deposits of $74.6 million, which represents less than 1 percent 

of total deposits in depository institutions in the state. 4 On consummation of the 

proposed conversion, the Desjardins Group would be a qualifying foreign 

banking organization. 

Competitive and Convenience and Needs Considerations 

The BHC Act prohibits the Board from approving an application 

under section 3 of the BHC Act if the proposal would result in a monopoly. The 

BHC Act also prohibits the Board from approving a proposed bank acquisition 

that would substantially lessen competition in any relevant banking market, 

unless the Board finds that the anticompetitive effects of the proposal are clearly 

outweighed in the public interest by the probable effects of the proposal in 

meeting the convenience and needs of the community to be served.5 

The proposal involves a charter conversion from a savings 

association to a bank. The proposed charter conversion would result in neither 

3 Asset data are as of June 30, 2003, and are based on exchange rates then in 

effect. 

4 Deposit and ranking data are as of June 30, 2002. In this context, depository 

institutions include commercial banks, savings banks, and savings associations. 

5 12 U.S.C. § 1842(c). 
-2-

an expansion of operations nor the acquisition of an additional depository 

institution in the United States. Based on all the facts of record, the Board 

concludes that consummation of the proposal would not have a significantly 

adverse effect on competition or on the concentration of banking resources in 

any relevant banking market, and that competitive considerations are consistent 

with approval. 

The Board also is required to consider the convenience and needs 

of the community to be served by the depository institutions involved in a 

proposal, including their records of performance under the Community 

Reinvestment Act (“CRA”).6 Desjardins FSB received an “outstanding” CRA 

performance rating from the Office of Thrift Supervision (“OTS”) at its most 

recent examination, as of September 2001. Based on this rating and other facts 

of record, the Board concludes that considerations related to the convenience 

and needs of the communities to be served are consistent with approval of this 

proposal. 

Financial, Managerial, and Supervisory Considerations 

The BHC Act requires the Board to consider the financial and 

managerial resources and future prospects of the companies and banks involved 

in a bank acquisition proposal. In assessing the financial and managerial 

strength of the Desjardins Group and its affiliates, the Board has reviewed 

information concerning the proposal and the condition of the Desjardins Group 

and the entities that comprise the Desjardins Group, including information 

described below, from the appropriate home country authority that supervises 

the Desjardins Group, The Federation, and CCD; financial information from the 

6 12 U.S.C. § 2901 et seq. 
-3-

Desjardins Group, The Federation, CCD, Desjardins Holdings, and Desjardins 

FSB; and reports of examination from the OTS assessing the financial and 

managerial resources of the organizations’ U.S. operations. The Desjardins 

Group’s capital levels exceed the minimum levels that would be required under 

the Basel Capital Accord and are considered equivalent to the capital levels that 

would be required of a United States banking organization under similar 

circumstances. Based on all the facts of record, the Board concludes that the 

financial and managerial resources and future prospects of the organizations 

involved in this proposal are consistent with approval. 

Section 3 of the BHC Act also provides that the Board may not 

approve an application involving a foreign bank unless the bank is “subject to 

comprehensive supervision or regulation on a consolidated basis by the 

appropriate authorities in the bank’s home country.” 7 As provided in 

Regulation Y, the Board determines whether a foreign bank is subject to 

consolidated home country supervision under the standards set forth in 

Regulation K.8 The Board’s Regulation K provides that a foreign bank may be 

considered to be subject to comprehensive supervision or regulation on a 

consolidated basis if the Board determines that the home country supervisor 

receives sufficient information on the foreign bank’s worldwide operations, 

including the bank’s relationship to any affiliate, to assess the bank’s overall 

7 12 U.S.C. § 1842(c)(3)(B). 

8 12 C.F.R. 225.13(a)(4). 
-4-

financial condition and compliance with law and regulation.9 For purposes of 

the proposal, this determination is being made for The Federation and CCD. 

The Inspector General of Financial Institutions in Quebec, an 

agency official under the jurisdiction of Quebec’s Ministry of Finance, is the 

supervisor for The Federation and CCD.10 In this capacity, the Inspector 

General directly supervises and examines The Federation and CCD and 

oversees The Federation’s direct supervision and examination of the caisses. 

The Inspector General is responsible for developing regulations to govern The 

Federation and CCD, and The Federation, with the concurrence of the Inspector 

General, is responsible for developing standards for the caisses. Prudential 

9 In making this determination, the Board considers, among other factors, the 

extent to which the home country supervisor: (a) ensures that the bank has 

adequate procedures for monitoring and controlling its activities worldwide; 

(b) obtains information on the condition of the bank and its subsidiaries and 

offices outside the home country through regular reports of examination, audit 

reports, or otherwise; (c) obtains information on the dealings and relationships 

between the bank and its affiliates, both foreign and domestic; (d) receives from 

the bank financial reports that are consolidated on a worldwide basis, or 

comparable information that permits analysis of the bank’s financial condition 

on a worldwide, consolidated basis; (e) evaluates prudential standards, such as 

capital adequacy and risk asset exposure, on a worldwide basis. See 12 C.F.R. 

211.24(c)(1)(ii). 

10 As noted above, Quebec law governs the establishment, operation, and 

activities of the caisses, The Federation, and CCD. These entities are 

supervised by the Inspector General, and Canada’s federal supervisor of 

financial institutions, the Office of the Supervisor of Financial Institutions 

(“OSFI”), has no role in supervising the caisses, The Federation, or CCD. 

Certain of the nonbanking subsidiaries in the Desjardins Group, however, are 

regulated by both OSFI and the authorities of the various Canadian provinces in 

which they operate. 
-5-

regulations and standards address capital adequacy,11 asset classification and 

provisioning, single-borrower exposures, liquidity, equity investments, and 

transactions with affiliates.12 Quebec law vests the Inspector General with a 

range of enforcement powers to ensure compliance with these regulations and 

standards.13 

The Inspector General conducts annual on-site examinations of The 

Federation and CCD that include risk management systems, financial condition, 

policies and practices, internal control systems, and regulatory compliance. The 

examinations of The Federation also include an assessment of its responsibility 

for supervising and auditing the caisses. The examinations of CCD focus on 

asset quality, earnings, capital, and information systems. The Inspector General 

11 Quebec law requires the Desjardins Group on a consolidated basis to meet 

Basel capital guidelines as set forth by the Inspector General, which require a 

total risk-based capital ratio of 8 percent. The caisses have agreed to maintain 

CCD’s total risk-based capital ratio at 8.5 percent and its capital-to-liabilities 

ratio at a minimum of 5 percent, whichever is higher. Each caisse is required by 

The Federation to maintain capital levels at least equal to the greater of 

5.5 percent of growth assets or 8.8 percent of risk-weighted assets. 

12 Regulations and standards generally require that transactions with affiliates 

be on arm’s-length terms. 

13 As of February 1, 2004, the entities of the Desjardins Group supervised by 

the Inspector General will be supervised by a newly created single financial 

regulator, the National Agency for Regulation of the Financial Sector. This 

entity was created under a Quebec statute enacted in December 2002 that 

mandates the merger of five administrative bodies, including the Inspector 

General, into a new agency under the auspices of the Quebec Ministry of 

Finance. The functions now performed by the Inspector General will be 

performed by the Solvency Regulation Directorate, one of seven directorates 

that will report to the new agency head. Inspector General personnel are to be 

transferred to the new agency. 
-6-

may conduct additional targeted examinations of The Federation or CCD as the 

Inspector General deems necessary. 

The Federation and CCD provide the Inspector General with 

annual financial statements. In addition, The Federation files with the Inspector 

General quarterly reports on its capital adequacy and liquidity, as well as 

financial results on a stand-alone basis and as consolidated with the caisses. 

CCD also files with the Inspector General quarterly reports on related-party and 

affiliate transactions. 

The Bureau of Supervision and Financial Security, a bureau in The 

Federation, evaluates the operations and financial condition of the caisses 

through on-site examinations and off-site reviews. On-site examinations of 

each caisse are conducted at least every 18 months and focus on a review of 

financial policies and practices, asset quality and capital adequacy, 

management, internal control systems, and compliance with governing laws and 

standards. Examination results are reported to the Inspector General and to the 

board of directors of the caisse. The Federation also receives periodic reports 

from each caisse, including information relating to interest-rate-risk exposure, 

major loans and other significant risks acquired by the caisse, loan loss 

provision, credit management, and annual and monthly financial statements. 

Inspector General and Federation representatives meet periodically to discuss 

financial and supervisory information on the caisses. 

The Federation oversees and coordinates the operations of all the 

entities that comprise the Desjardins Group in various other ways, including 

director interlocks, policies and procedures, regular internal reporting 

requirements, conduct of internal audits, reviews of internal and external audit 

results, and on-site examinations. The Federation uses and would continue to 

use these means for overseeing the activities and operations of Desjardins Bank. 
-7-

The Federation establishes internal audit policies, procedures, and 

plans for the entities that comprise the Desjardins Group, which are subject to 

review by the Inspector General. An office of the Bureau of Supervision and 

Financial Security conducts audits of the caisses, verifying financial statements 

and assessing, among other things, the adequacy of internal controls. Another 

office of the bureau audits The Federation and ensures that the activities, 

products, and services of the Desjardins Group’s entities are consistent with The 

Federation’s operational and strategic plans. CCD and the nonbanking 

subsidiaries of The Federation have their own internal auditors. All internal 

audit results are provided to the Inspector General. In addition, The Federation 

provides the Inspector General with periodic reports on the activities of auditing 

staff. 

The Desjardins Group, The Federation, and CCD also undergo 

annual external audits. External auditors must be members in good standing of 

a professional association of accountants and must comply with the auditing 

standards of the Canadian Institute of Chartered Accountants. External auditors 

must attest to the accuracy of financial statements and report on situations or 

transactions contrary to sound and prudent management or applicable laws or 

regulations. All external audit results are provided to the Inspector General. 

External auditors, internal auditors, and Inspector General representatives meet 

periodically to share information. 

The Inspector General assesses the Desjardins Group through its 

direct supervision of The Federation and CCD and through a review of 

information, including examination reports, developed by The Federation on the 

individual caisses. The Desjardins Group regularly provides the Inspector 

General with financial information, on a consolidated and unconsolidated basis, 

as well as with a copy of the Desjardins Group’s annual report and business 
-8-

plans, bylaws, and similar corporate information on entities comprising the 

Desjardins Group. 

The Inspector General has direct supervisory responsibility for the 

insurance and trust subsidiaries of The Federation. The securities-related 

subsidiaries are supervised by a separate Quebec securities regulator. For 

purposes of supervising The Federation, the Inspector General may examine or 

investigate any subsidiary of The Federation, if deemed necessary, and has the 

authority to require special audits and may appoint an external auditor. The 

Inspector General shares supervisory information with other regulators that 

exercise jurisdiction over the subsidiaries of The Federation. 

For the reasons set forth above, and based on all the facts of record, 

the Board concludes that The Federation and CCD are subject to comprehensive 

supervision on a consolidated basis by their home country supervisors, and that 

supervision of the Desjardins Group is consistent with approval. 

Section 3 of the BHC Act also requires the Board to determine that 

a foreign bank has provided adequate assurances that it will make available to 

the Board such information on its operations and activities and those of its 

affiliates that the Board deems appropriate to determine and enforce compliance 

with the BHC Act.14 The Board has reviewed the restrictions on disclosure in 

relevant jurisdictions in which the entities that comprise the Desjardins Group 

operate and has communicated with relevant government authorities concerning 

access to information. In addition, the Desjardins Group, The Federation, and 

CCD have committed to make available to the Board such information on the 

operations of the Group, including all affiliated entities, that the Board deems 

14 See 12 U.S.C. § 1842(c)(3)(A); 12 C.F.R. 225.13(a)(3). 
-9-

necessary to determine and enforce compliance with the BHC Act and other 

applicable federal law and to cooperate with the Board to obtain any waivers or 

exemptions that may be necessary to enable these entities to make such 

information available to the Board. In addition, subject to certain conditions, 

the Inspector General may share information on the Desjardins Group’s 

operations with other supervisors, including the Board. 

In light of the commitments provided by the Desjardins Group, The 

Federation, and CCD, and other facts of record, the Board concludes that the 

Desjardins Group has provided adequate assurances of access to any necessary 

information the Board may request. For these reasons, and based on all the facts 

of record, the Board concludes that the supervisory factors it is required to 

consider under section 3(c)(3) of the BHC Act are consistent with approval. 

Conclusion 

Based on the foregoing, the Board has determined that the 

applications should be, and hereby are, approved. In reaching this conclusion, 

the Board considered all the facts of record in light of the factors that it is 

required to consider under the BHC Act and other applicable statutes. 

The Board’s approval is conditioned on compliance by the 

Desjardins Group, The Federation, CCD, and Desjardins Holdings with all 

commitments made in connection with the applications, and specifically the 

commitments on access to information and on the Board’s receiving access to 

information on the operations or activities of the Desjardins Group and the 

entities that comprise the Desjardins Group that the Board determines to be 

appropriate to determine and enforce compliance with applicable federal 

statutes. All the commitments and conditions on which the Board has relied in 

granting its approval, including the commitments and conditions specifically 

described above, are conditions imposed in writing by the Board in connection 
-10-

with its findings and decisions and, as such, may be enforced in proceedings 

under applicable law. 

The transaction shall not be consummated before the fifteenth 

calendar day after the effective date of this order or later than three months after 

the effective date of this order, unless such period is extended for good cause by 

the Board or by the Federal Reserve Bank of Atlanta, acting pursuant to 

delegated authority. 

By order of the Board of Governors,15 effective December 4, 2003. 

(signed)

______________________________

Robert deV. Frierson

Deputy Secretary of the Board

15 Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and 

Governors Gramlich, Bies, Olson, Bernanke, and Kohn