Orders issued under Bank Holding Company Act - Legal Developments - Allied Irish Banks P.L.C. to acquire share of M&T's subsidiary banks

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

Orders Issued Under Section 3 of the Bank

Holding Company Act

Allied Irish Banks, p.l.c.

Dublin, Ireland

Order Approving Acquisition of Shares of a Bank Holding Company

Allied Irish Banks, p.l.c. ("Allied Irish"), 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 (12 U.S.C. [section] 1842) to acquire up to 25 percent of the voting shares of M&T Bank Corporation ("M&T") (1) and thereby indirectly acquire shares of M&T's subsidiary banks, including its lead subsidiary bank, Manufacturers and Traders Trust Company, both in Buffalo, New York ("Trust Company"). (2) In addition, Allied Irish has requested the Board's approval under section 4(c)(8) and (j) of the BHC Act (12 U.S.C. [section] 1843(c)(8) and (j)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire shares of nonbanking subsidiaries of M&T. (3) Allied Irish also has applied under section 211.22(b)(2) of Regulation K (12 C.F.R. 211.22(b)(2)) to change its home state for purposes of the International Banking Act (12 U.S.C. [section] 3101 et seq. "IBA") from Maryland to New York.

Notice of the proposal, affording interested persons an opportunity to comment, has been published (67 Federal Register 69,223 (2002)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in sections 3 and 4 of the BHC Act.

Allied Irish, with total assets of $87.3 billion, is the largest banking organization in Ireland. (4) Through Allfirst, it operates banks in Delaware, the District of Columbia, Maryland, Pennsylvania, and Virginia. Allied Irish also operates a branch in New York, New York, and representative offices in Atlanta, Georgia, Chicago, Illinois; Los Angeles, California; Philadelphia, Pennsylvania; San Francisco, California; and White Plains, New York.

M&T, with total consolidated assets of $34.1 billion, is the 33rd largest commercial banking organization in the United States. (5) M&T operates banks in Maryland, New York, Pennsylvania, and West Virginia.

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 Allied Irish is Maryland, and Allied Irish proposes to acquire banks in Maryland, New York, Pennsylvania, and West Virginia. (6)

The Board may not approve a proposal subject to section 3(d) if, after consummation, the applicant would control more than 10 percent of the total deposits of insured depository institutions in the United States. (7) In addition, the Board may not approve a proposal if, after consummation, the applicant would control 30 percent or more of the total deposits of insured depository institutions in any state in which both the applicant and the organization to be acquired operate an insured depository institution, or such higher or lower percentage as established by state law. (8)

On consummation of this proposal and the related acquisition of Allfirst by M&T, Allied Irish would control less than 1 percent of the total deposits of insured depository institutions in the United States. Allied Irish would control less than 30 percent of total deposits held by insured depository institutions in Maryland, New York, or Pennsylvania. (9)

All other requirements of section 3(d) of the BHC Act are met. Allied Irish is adequately capitalized and adequately managed, as defined by applicable law. In addition, M&T's subsidiary banks have been in existence for the minimum time required by applicable state law. (10) In view 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 requires 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. (11) In assessing the financial and managerial strength of Allied Irish and its subsidiaries, the Board has reviewed information provided by Allied Irish, confidential supervisory and examination information, and publicly reported and other financial information.

Since May 2002, Allied Irish has been subject to a written agreement with the Federal Reserve Bank of Richmond, the Maryland Commissioner of Financial Regulation, and the Central Bank of Ireland (the "Written Agreement") that addresses matters related to foreign exchange trading losses resulting from the illicit activities of a trader employed by Allfirst Bank. Among other things, the Written Agreement required Allied Irish to conduct a comprehensive and timely review of its U.S. operations, including risk management and internal controls, and required Allied Irish to submit a plan to the three regulatory agencies for improving the oversight of its U.S. operations. The Board has carefully considered Allied Irish's record of compliance with the requirements of the Written Agreement and concludes that its record is consistent with approval of this proposal. (12) The Written Agreement was lifted as of February 14, 2003, contingent on consummation of M&T's acquisition of Allfirst.