CELEX: 31992M0213
Language: en
Date: 1992-05-21 00:00:00
Title: COMMISSION DECISION of 21.05.1992 declaring a concentration to be compatible with the common market (Case No IV/M.213 - HONG KONG & SHANGHAI BANK / MIDLAND) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0213

COMMISSION DECISION of 21.05.1992 declaring a concentration to be compatible with the common market (Case No IV/M.213 - HONG KONG & SHANGHAI BANK / MIDLAND) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 157 , 24/06/1992 P. 0000

 COMMISSION DECISION of 21.05.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.213 - HONG  KONG & SHANGHAI BANK / MIDLAND) according to Council Regulation  (EEC) No 4064/89  (Only the English text is authentic)  The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities. PUBLIC VERSION MERGER REGULATION ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying party Dear Sirs, Re.: <ind> Case No IV/M.213 - Hong Kong and Shanghai Bank /  Midland <ind> Notification of 23 April 1992 pursuant to Article 4 of  Council Regulation No 4064/89  1.<ind> This case concerns the planned acquisition by HSBC  Holdings plc (HSBC) of Midland Bank plc (Midland) by way of a  public bid announced on 14 April 1992. HSBC made an offer for  the whole of the issued share capital of Midland, other than  the shares already owned, on 8 May 1992.  2.<ind> After examination of the notification, the Commission  has concluded that the notified concentration falls within the  scope of Council Regulation No 4064/89 (the Merger Regulation),  and does not raise serious doubts as to its compatibility with  the common market.  I.<ind> THE PARTIES  3.<ind> HSBC is an investment company and the ultimate parent  company of the Hong Kong and Shanghai Banking Corporation Group  which is active mainly in domestic and international banking  and related financial services throughout the world but mainly  in Asia and North America.  4.<ind> Midland is one of the principal full service banks in  the United Kingdom. The Midland Group is active in banking,  financial and related services throughout the world.  II.<ind> THE CONCENTRATION  5.<ind> The offer made by HSBC could lead to the acquisition of  control of Midland within the meaning of Article 3(1) of the  Merger Regulation.  III. COMMUNITY DIMENSION  6.<ind> The concentration has a Community dimension. The  combined aggregate worldwide turnover of HSBC and Midland in  1991 was more than 5,000 million ECU (one-tenth of total assets  of HSBC 12,346 million ECU, of Midland 8,555 million ECU). <ind> The aggregate Community-wide turnover of each is more  than 250 million ECU (2,062 million ECU for HSBC, 9,814 million  ECU for Midland). <ind> The parties do not achieve more than two-thirds of their  Community-wide turnover in one and the same Member State.  7.<ind> As holding companies both undertakings have interests  in different economic areas such as banking, insurance,  financial and other services. Calculation of the geographic  breakdown of turnover of the various business activities under  the Merger Regulation requires a split of the assets according  to the main activities.  8.<ind> Article 5 of the Merger Regulation sets out the rules  governing the calculation of turnover with a view to  determining whether or not the operation under scrutiny has a  Community dimension within the meaning of Article 1. The rule  contained in Article 1(2) aims in particular at measuring the  impact of the concentration is the Community in order to  exclude from the scope of the Merger Regulation those  concentrations between companies which do not have an  appreciable commercial activity in more than one Member State.  <ind> As a general principle, therefore, the Merger Regulation  requires that turnover is allocated not by location of the  seller of the product or service, but by the location of the  consumer of the product or service. This principle is provided  for in Article 5(1).  9.<ind> For banking activity, applying this principle in the  context of Article 5(3)(a) requires analysis of lending in  terms of location of the borrower.  10.<ind> For interbank lending, this means that loans and  advances are best attributed by location of the borrowing bank  branch in order to be consistent with the underlying aim of the  Merger Regulation, even though, in risk assessment, which is at  the heart of lending decisions, banks take into account the  place of incorporation of the borrowing bank. The location of  the branch of the bank to which the loan is made is  presumptively the place at which the loan will be used.  Interbank lending carried out by the HSBC and Midland was  therefore required to be calculated on this basis.  11.<ind> For certain financial services carried out by HSBC and  Midland (for example money transmission, stockbroking, pension  consultancy) since no lending activity is involved, the  principle provided for in Article 5(1) has to be used in  determining the geographical breakdown of these activities.  12.<ind> In order to provide the breakdown required by the  Merger Regulation, HSBC was required to gather specific data  from all subsidiaries and branches in every country in which  banking operations are carried out, and to demonstrate how the  data reconcile to the audited published accounts. This data has  been carefully checked by the Commission.  IV.<ind> COMPATIBILITY WITH THE COMMON MARKET  13.<ind> HSBC is based in the Far East. In 1990 it changed its  legal domicile becoming an UK non-resident corporation for tax  purposes. Following a merger with Midland the HSBC would become  a fully-fledged UK bank. <ind> The HSBC Group ranks as the world 23rd largest bank by  shareholders' funds and 25th by assets. It is active mainly in  Hong Kong, Asia-Pacific and the Americas. Its presence in  Europe is relatively less significant representing around 18%  of its total assets.  <ind> Midland carries out its activities mainly in the UK.  Midland is also present in the other main world financial  centres. Midland group is the world 50th largest bank by  shareholders' funds and the 40th by assets. Within the EC,  Midland is currently the 19th largest bank.  <ind> The combined group would be the world 11th largest and EC  5th largest bank by shareholders' funds [After Credit Agricole,  Barclays, National Westminster and Deutsche Bank.]. 50% of the  combined assets and deposits of the group would be located in  Europe.  14.<ind> In overall terms, the two undertakings are  geographically complementary. There is no appreciable overlap  in any Member State in 15 separate sectors analysed in the  notification, these sectors grouping commercial activity of a  similar type [The sectors identified are : retail deposits,  retail lending, retail other banking, including credit and  debit cards and travellers' cheques, corporate banking, trade  finance, correspondent banking, treasury dealing, merchant  banking, leasing, securities dealing, investment management,  pension services, trustee services, insurance broking, and  insurance underwriting.]. The UK is the only Member State where  both Midland and HSBC carry out significant business. Even in  the UK, the actual or potential reduction in competition in  these sectors following the merger would have no appreciable  adverse impact on competition.  15.<ind> The only relevant product market identified as  affected by the proposed concentration is that of Gilt-edged  stock market-making [Gilt-edged means UK government, or UK  government-guaranteed stocks denominated in sterling. The  market is a means of financing the UK public sector deficit.]  in the UK, where Midland's subsidiary Greenwell Montagu Gilt  Edged and HSBC's subsidiary James Capel Gilts Ltd are both  market makers.  16.<ind> In this market, the Bank of England issues securities  on behalf of the UK government. Only registered gilt-edged  market makers (GEMMs) may purchase the stock from the Bank of  England and deal with it subsequently. The GEMMs' customers are  principally institutional investors such as banks, pension  funds, and investment houses. The market is regulated and  monitored by the Bank of England.  17.<ind> The market has operated in its present form since  1986. At the outset, the Bank of England accepted 27 GEMMs, 11  of which subsequently withdrew. There have been 3 new entrants,  the latest of which, Deutsche Bank Gilts, joined in April 1992.  Since 1990, the GEMMs overall have traded profitably. The Bank  of England, and the customers contacted consider that there is  strong competition between the GEMMs. Greenwell Montagu Gilt  Edged is among the top six GEMMs which together accounted for  63% of retail turnover in 1991. James Capel Gilts is among the   bottom six GEMMs which together accounted for 12% of the market  in 1991. The combination of Greenwell Montagu Gilt Edged and  James Capel Gilts will have no material impact on competition  in this market. This is confirmed by the Bank of England and  the customers contacted.  V.<ind> OVERALL CONCLUSION  18.<ind> It follows from the above that the proposed  acquisition would not create or strengthen a dominant position  as a result of which competition would be significantly impeded  in the common market or a substantial part thereof.  <ind> For the above reasons, the Commission has decided not to  oppose the notified concentration and to declare it compatible  with the common market. This decision is adopted in application  of Article 6(1)(b) of the Merger Regulation No 4064/89.  For the Commission,