[Federal Register Volume 61, Number 86 (Thursday, May 2, 1996)]
[Notices]
[Pages 19627-19628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10907]



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FEDERAL RESERVE SYSTEM

The Bank of New York Company, Inc.; Notice to Engage in Certain 
Nonbanking Activities

    The Bank of New York Company, Inc., New York, New York (BNY), has 
applied for Board approval pursuant to section 4(c)(8) of the Bank 
Holding Company Act (12 U.S.C. 1843(c)(8)) (BHC Act) and section 
225.23(a) of the Board's Regulation Y (12 CFR 225.23(a)), to engage de 
novo through its indirect wholly owned subsidiary, BNY Capital Markets, 
Inc., New York, New York (Company), in the following nonbanking 
activities: (i) providing investment and financial advisory services 
pursuant to 12 CFR 225.25(b)(4); (ii) providing full-service brokerage 
services pursuant to 12 CFR 225.25(b)(15); underwriting and dealing in 
government obligations and other obligations that state member banks 
may underwrite and deal in pursuant to 12 CFR 225.25(b)(16); making, 
acquiring and servicing loans or other extensions of credit pursuant to 
12 CFR 225.25(b)(1); underwriting and dealing in, to a limited extent, 
certain municipal revenue bonds (including unrated and certain 
``private ownership'' municipal revenue bonds), mortgage-related 
securities, commercial paper and consumer-receivable-related securities 
(Tier 1 Securities); buying and selling all types of debt and equity 
securities on the order of customers as a ``riskless principal;'' and 
acting as agent in the private placement of all types of debt and 
equity securities. Company currently is a subsidiary of BNY's bank 
subsidiary, The Bank of New York, New York, New York. Company would 
engage in the proposed activities on a worldwide basis following a 
reorganization in which it would become a subsidiary of BNY's wholly 
owned nonbank subsidiary, BNY Capital Markets Holdings, Inc., New York, 
New York.
    The Board previously has determined that the proposed activities 
are closely related to banking. See 12 CFR 225.25(b)(1), (4), (15) and 
(16); Citicorp et al., 73 Fed. Res. Bull. 473 (1987) (underwriting and 
dealing in, to a limited extent, Tier 1 Securities); Bank South 
Corporation, 81 Fed. Res. Bull. 1116 (1995); Letter Interpretating 
Cross-Marketing Firewall, 81 Fed. Res. Bull. 198 (1995). Bankers Trust 
New York Corporation, 75 Fed. Res. Bull. 829 (1989)(Bankers Trust); 
J.P. Morgan & Company Incorporated, 76 Fed. Res. Bull. 26 (1990) (J.P. 
Morgan) (riskless principal and private placement activities). BNY 
proposes to engage in these activities in accordance with the 
limitations and conditions established by the Board in Regulation Y and 
in its prior orders approving these activities.
    In authorizing bank holding companies to engage in riskless 
principal activities under section 4(c)(8) of the BHC Act, the Board 
previously has relied upon a commitment that the applicant would 
conduct the proposed riskless principal activities in accordance with 
most of the prudential limitations governing the bank-ineligible 
securities underwriting and dealing activities of section 20 companies 
(Section 20 Firewalls). See Bankers Trust, 75 Fed. Res. Bull. at 834; 
J.P. Morgan, 76 Fed. Res. Bull. at 27. BNY, however, does not propose 
to conduct the riskless principal activities of Company in accordance 
with the Section 20 Firewalls. BNY states that riskless principal 
transactions are essentially equivalent to brokerage transactions, and 
notes that the Board

[[Page 19628]]

has not imposed similar limitations on the securities brokerage 
activities of bank holding companies. See 12 CFR 225.25(b)(15). BNY 
also contends that riskless principal transactions do not involve the 
potential conflicts of interests, unsound banking practices and other 
adverse effects that are sought to be addressed by the Section 20 
Firewalls. Furthermore, BNY asserts that compliance with the section 20 
Firewalls would place a bank holding company engaged in riskless 
principal transactions at a competitive disadvantage to other broker-
dealers engaged in such activity.
    Company, however, would conduct its riskless principal activities 
subject to the other conditions established by the Board in previous 
orders, including those conditions that are designed to assure that a 
bank holding company's riskless principal activities do not constitute 
the underwriting, public sale, or distribution of securities for 
purposes of the Glass-Steagall Act. See Bankers Trust; J.P. Morgan; 
BankAmerica Corporation, 79 Fed. Res. Bull. 1163 (1993). For example, 
Company would engage in riskless principal transactions only in the 
secondary market and would not engage in riskless principal 
transactions for any security carried in its inventory. Company also 
would not act as riskless principal with respect to registered 
investment company securities or the securities of investment companies 
advised by BNY or any of its affiliates.
    In order to approve the proposal, the Board must determine that the 
proposed activities to be conducted by BNY ``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. 1843(c)(8). BNY believes that the proposal would 
produce public benefits that outweigh any potential adverse effects. In 
particular, BNY maintains that the proposal would increase competition 
for the proposed services.
    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, D.C. 20551, not 
later than May 28, 1996. 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, April 26, 
1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-10907 Filed 5-1-96; 8:45 am]
BILLING CODE 6210-01-F