either party. As a result, these business relationships between BNPP and FHI would not
appear to provide BNPP with the ability to exercise a controlling influence over FHI.

BNPP has further represented that it does not intend to exert or attempt to
exert a controlling influence over FHI, and it does not appear that BNPP entered into the
various separation agreements with FHI in order to exert a controlling influence over
FHI.

Based on all the facts of record in this case, and specifically conditioned on
compliance with all the representations and commitments made in connection with your
request, staff of the Legal Division would not recommend that the Board find BNPP to
control FHI for purposes of the BHC Act in light of BNPP’s disposition of its entire
voting interest in FHI, its lack of director representation on FHI’s board of directors, the
continued winding down and eventual termination of the transition services, and the
limited continuing business relationships that will exist between BNPP and FHI.

This opinion is based on all the facts of record, including all the
representations and commitments made by or on behalf of BNPP, whether noted in this
letter or otherwise contained in correspondence or discussions with staff of the Board or
the Federal Reserve Bank of New York. Any change in the facts or representations may
result in a different opinion and should be reported immediately to Board and
Reserve Bank staff.

If you have any questions about this matter, please contact
Gregory Frischmann, Senior Counsel (202-452-2803), or Brian Phillips, Attorney
(202-452-3321) of the Board’s Legal Division.

Sincerely,



BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C., 20551

Mark E. Van Der WEIDE
GENERAL COUNSEL

February 12, 2019

Thomas Corsi, Esq.

BNP Paribas

787 7th Avenue

New York, New York 10019

Dear Mr. Corsi:

This letter responds to your request for an opinion that BNP Paribas
(“BNPP”), Paris, France, would not control First Hawaiian, Inc. (“FHI”), Honolulu,
Hawaii, for purposes of the Bank Holding Company Act of 1956 (“BHC Act”), in light of
BNPP’s sale of all of its voting securities of FHI, the winding down and eventual
termination of transitional services between BNPP and FHI, and the continuation of
existing limited business relationships between BNPP and FHI. BNPP is a foreign bank
as defined under section 1(7) of the International Banking Act of 1978! and a bank
holding company under the BHC Act.

Beginning in 2016, BNPP began to reduce its ownership in FHI. Through a
series of public offerings ending on February 1, 2019, BNPP sold all of its voting
securities in FHI. As a result, BNPP no longer has any ownership interest in FHI. BNPP
also represents that there are no employee, officer, or director interlocks between BNPP,
on the one hand, and FHI or its subsidiaries, on the other hand.

For purposes of the BHC Act, a company has control over another
company if the first company (i) directly or indirectly or acting through one or more other
persons owns, controls, or has power to vote 25 percent or more of any class of voting

' 12 U.S.C. § 3101(7).

www.federalreserve.gov


securities of the other company; (ii) controls in any manner the election of a majority of
the directors of the other company; or (iii) directly or indirectly exercises a controlling
influence over the management or policies of the other company.” In addition, the
Board’s Regulation Y sets forth a set of rebuttable presumptions of control. The

BHC Act and the Board’s Regulation Y presume that any company that directly or
indirectly owns, controls, or has the power to vote less than 5 percent of any class of
voting securities of a bank or other company does not control the bank or other
company.*

In determining whether a company has the power to exercise a controlling
influence over another company, the Board typically has considered a number of factors,
including the size and structure of the company’s voting and total equity investment; the
company’s rights to director representation; any management, employee, or director
interlocks between the companies; any covenants or other agreements that allow the
company to influence or restrict management decisions of the other company; the nature
and scope of the business relationships between the companies; and other indicia of the
ability or incentive to exercise a controlling influence.°

The Board previously has found that a company that controlled another
company for a significant period of time may be able to exert a controlling influence over
the company even after a substantial divestiture.® As a result, the Board has generally
applied a stricter standard for determining non-control in divestiture cases than the
standard applied when a company seeks to establish that a de novo investment in another
company is non-controlling. Thus, in determining whether a reduction in ownership is
effective to terminate an existing control relationship, the Board has placed significant
weight on the size of any voting investment retained by the divesting company and the

2 12 US.C. § 1841(a)(2); 12 CFR 225.2(e).
3 See 12 CFR 225.31(d).
4 12 U.S.C. § 1841(a)(3); 12 CFR 225.31(e).

5 See Policy Statement on equity investments in banks and bank holding companies
(September 22, 2008), available at www.federalreserve.gov/newsevents/press/bcreg/
20080922c.htm (“Policy Statement”).

© See, e.g., C.LT. Financial Corporation, 65 Federal Reserve Bulletin 369 (1979);
65 Federal Reserve Bulletin 440; Letter from the Board to Anne R. Williams, Esq.,
Steptoe & Johnson, dated June 4, 1985.



ongoing relationships between the divesting company and the company being divested.’
The Board has paid particular attention to the size and qualitative importance of the
business relationships to each counterparty and whether the business relationships are on
market terms, non-exclusive, and terminable without penalty by the company being
divested.’

Through a series of public offerings starting in 2016, BNPP began to sell its
voting securities in FHI. On February 1, 2019, BNPP sold the remainder of its ownership
stake in FHI. As a result, BNPP no longer owns or controls any voting securities of FHI.

Accordingly, BNPP is presumed by both the BHC Act and the Board’s Regulation Y not
to control FHI.

BNPP represents that it does not have any director, employee, or officer
interlocks with FHI or its subsidiaries. BNPP also represents that it does not have any
continuing right to elect directors at FHI or any of its subsidiaries. In addition, as of the
date of this letter, BNPP represents that it no longer has any veto rights over FHI’s major
policies and decisions, and FHI’s obligation to abide by BNPP’s policies and other
oversight for purposes of compliance with BNPP’s home country law has terminated.

BNPP and FHI have entered into several agreements to facilitate the
orderly separation of the two companies. To minimize disruption and ensure continuity
of their respective business operations, BNPP and FHI have agreed to provide each other
with temporary transitional services that do not involve either party’s core banking
operations. Although important to facilitating an orderly separation of BNPP and FHI,
the transitional services would be quantitatively limited. The transitional services relate
to, among other things, budget planning and analysis software, model and operational
risk management software, and data transmission through a third-party service provider.
These services are generally expected to terminate by December 31, 2019.

BNPP and FHI also would have minimal ongoing business relationships.
As measured against each party’s gross revenues and expenses, these relationships are
and will remain quantitatively limited. The relationships also are qualitatively
immaterial, as none of the relationships is core to either institution. Further, the business
relationships are on market terms, non-exclusive, and terminable without penalty by

7 See supra note 6; see also Letter from Scott G. Alvarez, General Counsel of the Board,
to Richard W. Decker, Jr., Belvedere Capital Partners II, LLC, dated April 5, 2010.

8 See Letter from Scott G. Alvarez, General Counsel of the Board, to Rolando Mayans,
Equity Bancshares, Inc., dated October 13, 2016; Letter from Scott G. Alvarez, General
Counsel of the Board, to Luigi L. De Ghenghi, Esq., Davis Polk & Wardwell LLP, dated
January 28, 2016.