Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act

Federal Reserve Bulletin, Nov, 1998 by Robert Dev. Frierson

Banc One and First Chicago each control a subsidiary bank in the following 16 local banking markets: Aurora, Chicago, Elgin and Rockford, in Illinois; Louisville, Kentucky; Milwaukee and Madison, in Wisconsin; and Gary-Hammond, Marion, Elkhart-Niles-South Bend, Bloomington, Corydon, Indianapolis, Lafayette, Lawrence County, and Rensselaer, in Indiana.(17) The Board has reviewed carefully the competitive effects of the proposal in each of these banking markets in light of all the facts of record, including the characteristics of the markets and the projected increase in the concentration of total deposits in depository institutions in these markets ("market deposits"),(18) as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines").(19)

A. Banking Markets Without Divestitures

Consummation of the proposal, without divestitures, would be consistent with the DOJ Guidelines and prior Board precedent in ten banking markets: Chicago, Aurora, Elgin, and Rockford, in Illinois; Elkhart-Niles-South Bend, Gary-Hammond, and Marion, in Indiana; Louisville, Kentucky; and Milwaukee and Madison, in Wisconsin. After consummation of the proposal, all of these banking markets would remain unconcentrated or moderately concentrated, as measured by the HHI. Moreover, in eight of these ten markets, consummation of the proposal would increase market concentration, as measured by the HHI, by less than half of the 200-point threshold in the DOJ Guidelines.(20) Numerous competitors would remain in each of the ten markets after consummation of the proposal.

B. Banking Markets With Proposed Divestitures

Consummation of the proposal would exceed DOJ Guidelines in the remaining six banking markets in which Banc One and First Chicago compete, all in Indiana. To mitigate the anticompetitive effects of the proposal in these six Indiana banking markets, Banc One has committed to divest 39 branches, which account for approximately $1.47 billion in deposits and represent approximately 18.1 percent of the total deposits controlled in Indiana by First Chicago.(21) After accounting for the proposed divestitures, consummation of the proposal would be consistent with the DOJ Guidelines and prior Board precedents in four of the Indiana banking markets: Bloomington, Corydon, Lawrence County, and Rensselaer. These markets are discussed in Appendix D. Numerous competitors would remain in each market after consummation of the proposal.(22)

Indianapolis. Consummation of the proposal in the Indianapolis banking market would exceed the DOJ Guidelines after accounting for the proposed divestitures. Banc One is the largest depository institution in the Indianapolis banking market, controlling $3.5 billion in deposits, representing approximately 21.4 percent of market deposits. First Chicago is the third largest depository institution in the market, controlling $3 billion in deposits, representing 19.9 percent of market deposits.

Banc One proposes to divest 25 branches with deposits of approximately $890 million in the Indianapolis banking market to a banking organization that does not currently have a presence in the market. On consummation of the proposal and after divestitures, New Bank One would remain the largest depository institution in the market. controlling $5.8 billion in deposits, representing approximately 35.6 percent of market deposits.