[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3867-3868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1305]



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FEDERAL RESERVE SYSTEM

CS Holding and Credit Suisse, both of Zurich, Switzerland; 
Application to Engage in Nonbanking Activities

    CS Holding and Credit Suisse, both of Zurich, Switzerland 
(Applicants), have 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)), through 
BEA Associates, New York, New York (Company), to engage de novo in 
providing investment advisory services (including discretionary 
portfolio management services) to institutional customers with respect 
to futures and options on futures on certain financial and nonfinancial 
commodities. Company would provide the proposed services with respect 
to financial contracts previously approved by the Board (See SR Letter 
93-27 (May 21, 1993)), Goldman Sachs Index Futures and options thereon 
that are traded on the Chicago Mercantile Exchange, and nonfinancial 
contracts previously approved by the Board. These activities would be 
conducted worldwide.
    Section 4(c)(8) of the BHC Act provides that a bank holding company 
may, with Board approval, engage in any activity which 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 have provided 
the proposed activity, that banks generally provide services that are 
operationally or functionally similar to the proposed activity so as to 
equip them particularly well to provide the proposed services, 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).
    Applicants maintain that the Board previously has determined by 
order and regulation that providing general investment advisory 
services with respect to futures and options on futures on financial 
and nonfinancial commodities is closely related to banking. See 12 CFR 
225.25(b)(19); Swiss Bank Corporation, 77 Federal Reserve Bulletin 126 
(1991) (Swiss Bank); J.P. Morgan & Co., Incorporated, 80 Federal 
Reserve Bulletin 151 (1994) (J.P. Morgan). Applicants state that they 
would provide general investment advisory services in accordance with 
the Board's rules and orders.
    Applicants also maintain that the Board previously has not 
determined that providing discretionary portfolio management services 
with respect to futures and options on futures on financial and 
nonfinancial commodities is closely related to banking. Applicants 
state that Company only would provide discretionary portfolio 
management services to institutional customers, and only with the 
consent of such customers. Applicants also state that Company would 
comply with applicable law, including fiduciary principles, and obtain 
the consent of its customer before engaging, as principal or as agent 
in a transaction in which an 

[[Page 3868]]
affiliate acts as principal, in transactions on the customer's behalf. 
Applicants maintain that the Board has permitted bank holding companies 
to provide general investment advisory services with respect to futures 
and options on futures on financial and nonfinancial commodities (12 
CFR 225.25(b)(19), Swiss Bank and J.P. Morgan), and that the proposed 
discretionary services appear to be functionally similar to the 
securities-related investment advisory activities the Board has 
approved for bank holding companies generally in Sec.  225.25(b)(4) of 
Regulation Y. Applicants conclude that for these reasons, providing 
discretionary portfolio management services with respect to futures and 
options on futures on financial and nonfinancial commodities is closely 
related to banking.
    In order to approve the proposal, the Board must determine that the 
proposed activities to be conducted by Company ``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. Sec.  1843(c)(8). Applicants 
believe that the proposal will produce public benefits that outweigh 
any potential adverse effects. In particular, Applicants maintain that 
the proposal will enhance competition and enable Applicants to offer 
their customers a broader range of products. In addition, Applicants 
state that the proposed activities will not result in adverse effects 
such as an undue concentration of resources, decreased or unfair 
competition, conflicts of interest, 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 
and received by William W. Wiles, Secretary, Board of Governors of the 
Federal Reserve System, Washington, DC 20551, not later than February 
3, 1995. 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 the 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 New York.

    Board of Governors of the Federal Reserve System, January 12, 
1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-1305 Filed 1-18-95; 8:45 am]
BILLING CODE 6210-01-F