Orders issued under Bank Holding Company Act

Federal Reserve Bulletin, Spring, 2005 by Robert de V. Frierson

Orders Issued Under Section 3 of the Bank Holding Company Act

Banco Bilbao Vizcaya Argentaria, S.A.

Bilbao, Spain

Order Approving the Acquisition of a Bank Holding Company

Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (1) to acquire Laredo National Bancshares, Inc. ("Laredo"), Laredo, Texas; Laredo National Bancshares of Delaware, Inc., Wilmington, Delaware; and The Laredo National Bank ("LNB") and South Texas National Bank of Laredo ("STNB"), both of Laredo.

Notice of the proposal, affording interested persons an opportunity to comment, has been published (69 Federal Register 65,196 (2004)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors set forth in section 3 of the BHC Act.

BBVA, with total consolidated assets of approximately $363 billion, is the 34th largest banking organization in the world. BBVA is the 110th largest depository organization in the United States, with total assets in the United States of $5.5 billion. (2) It controls approximately $2.7 billion in deposits, which represents less than 1 percent of the total amount of deposits of insured depository institutions in the United States. BBVA's U.S. subsidiary banks include Banco Bilbao Vizcaya Argentaria Puerto Rico ("BBVA Puerto Rico"), San Juan, Puerto Rico, a bank chartered in Puerto Rico; and Valley Bank, Moreno Valley, California, a state-chartered bank. BBVA also operates a branch in New York, New York, and an agency in Miami, Florida. BBVA's subsidiary bank in Mexico, BBVA Bancomer, S.A., operates a state-licensed agency in Houston, Texas. BBVA has no retail depository institution offices in Texas.

Laredo, with total consolidated assets of approximately $3.4 billion, is the 17th largest depository organization in Texas. It controls deposits of approximately $2.8 billion, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the state. (3) Laredo's subsidiary banks have branches only in Texas.

On consummation of this proposal, BBVA would become the 82nd largest depository organization in the United States, with total consolidated U.S. assets of $8.9 billion. BBVA would control deposits of $5.4 billion, representing less than 1 percent of the total amount of deposits of insured depository institutions in the United States. (4)

Interstate Analysis

Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of the bank holding company if certain conditions are met. For purposes of the BHC Act, the home state of BBVA is Puerto Rico and Laredo is located in Texas. Based on a review of all the facts of record, including a review of the relevant state statutes, the Board finds that all the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act are met in this case. (5) The Board is therefore permitted to approve the proposal under section 3(d) of the BHC Act.

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of an attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed bank acquisition that would substantially lessen competition in any relevant banking market unless the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served. (6)

Applicant does not currently compete with Laredo in any relevant banking market. Accordingly, the Board concludes, based on all the facts of record, that consummation of the proposal would not have a significant adverse effect on competition or on the concentration of banking resources in any relevant banking market and that competitive considerations are consistent with approval.

Financial, Managerial, and Supervisory Considerations

The BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and depository institutions involved in the proposal and certain other supervisory factors. The Board has carefully considered these factors in light of all the facts of record, including information provided by BBVA, confidential reports of examination and other supervisory information received from the federal and state banking supervisors of the organizations involved, publicly reported and other financial information, and public comments received on the proposal. (7) The Board also has consulted with the Bank of Spain, which is responsible for the supervision and regulation of Spanish financial institutions.

In evaluating financial factors in expansion proposals by banking organizations, the Board reviews the financial condition of the organizations involved on both a parent-only and consolidated basis, as well as the financial condition of the subsidiary banks and significant nonbanking operations. In this evaluation, the Board considers a variety of areas, including capital adequacy, asset quality, and earnings performance. In assessing financial factors, the Board consistently has considered capital adequacy to be especially important. The Board also evaluates the effect of the transaction on the financial condition of the combined organization on consummation, including its capital position, asset quality, and earnings prospects and the impact of the proposed funding of the transaction.