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

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

In evaluating financial factors in expansion proposals by bank holding companies, the Board consistently has considered capital adequacy to be an especially important factor.(30) The Board notes that Banc One and First Chicago and their subsidiary banks are well capitalized and would remain so on consummation of the proposal. Both institutions have reported strong earnings. The Board has considered that the proposed merger is structured as a stock-for-stock transaction and would not increase the debt service requirements of the combined company.

The Board also has considered the managerial resources of the entities involved and the proposed combined organization. Banc One, First Chicago, and their subsidiary depository institutions currently are well managed, with appropriate risk management processes in place. Senior management of New Bank One would draw from the senior executives of Banc One and First Chicago, based on the individual management strengths of each company.(31) Senior executives of the two companies also would form a transition team to manage and plan the integration of the bank holding companies and their subsidiaries. Banc One and First Chicago have past experience with merger transactions and have indicated that they are devoting significant resources to address all aspects of the merger process.

In addition, the Board has considered other aspects of the financial condition and managerial resources of the two organizations, including the Board's extensive supervisory experience with Banc One and First Chicago, plans for integration of the two companies, plans for achieving Year 2000 readiness, and records of compliance with relevant banking laws. Based on all the facts of record, including a careful review of the comments received, the Board concludes that considerations relating to the financial and managerial resources and future prospects of Banc One, First Chicago, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.(32)

Convenience and Needs Considerations

The BHC Act requires the Board to consider the convenience and needs of the communities to be served in connection with its review of proposals to acquire a bank. The CRA requires the federal financial supervisory agencies to encourage financial institutions to help meet the credit needs of local communities in which they operate, consistent with their safe and sound operation, and requires the appropriate federal supervisory authority, in evaluating bank expansion proposals, to take into account an institution's record under the CRA of meeting the credit needs of its entire community, including LMI neighborhoods. The Board has carefully considered the convenience and needs factor and the CRA performance records of the subsidiary depository institutions of Banc One and First Chicago in light of all the facts of record, including public comments on the proposal.