Orders issued under Bank Holding Company Act - Legal Developments - Royal Bank of Canada receives okay to acquire Admiralty Bancorp Inc

Federal Reserve Bulletin, March, 2003 by Robert DeV. Frierson

Orders Issued Under Section 3 of the Bank Holding Company Act

Royal Bank of Canada Montreal, Canada

RBC Centura Banks, Inc., and RBC Centura Bank, Rocky Mount, North Carolina

Order Approving the Acquisition of a Bank Holding Company, Merger of Depository Institutions, and Establishment of Branches

Royal Bank of Canada ("RBC"), a foreign banking organization subject to the provisions of the Bank Holding Company Act ("BHC Act"), and its wholly owned subsidiary, RBC Centura Banks, Inc. ("RBC Centura"), have requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [section] 1842) to acquire Admiralty Bancorp, Inc. ("Admiralty") and its wholly owned subsidiary, Admiralty Bank, both in Palm Beach Gardens, Florida. (1) RBC Centura Bank ("RBC Bank"), RBC Centura's wholly owned subsidiary, has also requested the Board's approval under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [section] 1828(c)) ("Bank Merger Act") to merge with Admiralty Bank, with RBC Bank as the surviving entity. (2) In addition, RBC Bank proposes to retain and operate branches at the main and branch offices of Admiralty Bank. (3)

Notice of the proposal, affording interested persons an opportunity to comment, has been published in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. [section] 262.3(b)) in the Federal Register (67 Federal Register 63,661 and 63,662 (2002)) and locally. As required by the BHC Act and the Bank Merger Act, reports on the competitive effects of the merger were requested from the U.S. Attorney General and relevant banking agencies. The time for filing comments has expired, and the Board has considered the applications and all comments received in light of the factors set forth in section 3 of the BHC Act, the Bank Merger Act, and the statutory provisions that govern the retention and operation of interstate branches.

RBC, with total assets of $225.4 billion, is the largest banking organization in Canada. (4) RBC operates depository institutions in Florida, Georgia, North Carolina, South Carolina, and Virginia. RBC Centura's subsidiary commercial bank, RBC Bank, controls deposits of $20.8 million in Florida, representing less than 1 percent of total deposits of insured depository institutions in the state ("state deposits"). (5) Admiralty's subsidiary commercial bank, Admiralty Bank, controls deposits of $527.0 million in Florida, representing less than 1 percent of state deposits. On consummation of the proposal, RBC Bank would become the 35th largest depository institution in Florida, controlling deposits of approximately $547.8 million, representing less than 1 percent of state deposits.

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 such bank holding company if certain conditions are met. For purposes of the BHC Act, the home state of RBC Centura is North Carolina, and RBC Centura proposes to acquire a depository institution in Florida. (6) Based on a review of all the facts of record, including a review of relevant state statutes, the Board finds that all conditions for an interstate acquisition enumerated in section 3(d) are met in this case. (7) In light of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.

Financial, Managerial, and Supervisory Considerations

The BHC Act and the Bank Merger Act require the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in a proposal and certain other supervisory factors. In assessing the financial and managerial strength of RBC and its subsidiaries, the Board has reviewed information provided by RBC, confidential supervisory and examination information, and publicly reported and other financial information. (8) RBC's capital levels exceed the minimum levels that would be required under the Basel Capital Accord, and its capital levels are considered equivalent to the capital levels that would be required of a U.S. banking organization. Based on all the facts of record, the Board concludes that the financial and managerial resources and future prospects of the organizations involved in the proposal are consistent with approval. (9)

Section 3 of the BHC Act also provides that the Board may not approve an application involving a foreign banking organization unless it is "subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the bank's home country." (10) The home country supervisor of RBC is Canada's Office of the Superintendent of Financial Institutions ("OSFI"), which is responsible for the supervision and regulation of Canadian financial institutions.

In approving applications under the BHC Act, the Board previously has determined that Canadian banks, including RBC, were subject to comprehensive consolidated supervision by the OSFI. (11) In this case, the Board finds that the OSFI continues to supervise RBC in substantially the same manner as it supervised Canadian banks at the time of those previous determinations. Based on this finding and all the facts of record, the Board concludes that RBC continues to be subject to comprehensive supervision on a consolidated basis by its home country supervisor.