Order Approving an Application to Become a Bank Holding Company and Notices to Acquire Nonbanking Companies - Board of Governors approves the merger of Bankers Trust Corporation and Deutsche Bank AG - Statistical Data Included

Federal Reserve Bulletin, July, 1999 by Robert De V. Frierson

Deutsche Bank AG ("Deutsche Bank"), a foreign banking organization subject to the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [sections] 1842) to become a bank holding company by acquiring all the voting shares of Bankers Trust Corporation, New York, New York ("BT Corp"), and its wholly owned subsidiary banks, Bankers Trust Company, New York, New York ("Bankers Trust"); Bankers Trust (Delaware), Wilmington, Delaware ("Delaware Bank"); and Bankers Trust Florida, N.A., Palm Beach, Florida ("Florida Bank").(1) Deutsche Bank also has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire the nonbanking subsidiaries of BT Corp and thereby engage worldwide in certain permissible nonbanking activities.(2) In addition, Deutsche Bank proposes to acquire the Edge corporations of BT Corp pursuant to section 25A of the Federal Reserve Act (12 U.S.C. [sections] 611 et seq.) and the Board's Regulation K (12 C.F.R. 211).(3)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 5061 (1999)). 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.

Deutsche Bank, with total consolidated assets of $734 billion, is the largest bank in Germany and one of the largest banking organizations in the world.(4) Deutsche Bank operates a branch in New York, New York, which controls $21.9 billion in deposits in New York State,(5) and a representative office in San Francisco, California. Deutsche Bank also engages in a broad range of permissible nonbanking activities in the United States through subsidiaries, including underwriting and dealing in debt and equity securities to a limited extent.

BT Corp, with total consolidated assets of $133 billion, is the eighth largest commercial banking organization in the United States, and the third largest commercial banking organization in New York, controlling deposits of approximately $26.8 billion in the state. BT Corp also engages in a broad range of permissible nonbanking activities in the United States, including underwriting and dealing in debt and equity securities to a limited extent.

The proposal would represent the largest acquisition by a foreign bank of a U.S. banking organization to date. On consummation of the proposal, Deutsche Bank would become the largest commercial banking organization in the world ranked by assets.

Factors Governing Board Review of Transaction

The BHC Act sets forth the factors that the Board must consider when reviewing the formation of a bank holding company or the acquisition of banks. These factors are the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the proposal; the convenience and needs of the community to be served, including the records of performance under the Community Reinvestment Act (12 .S.C. [sections] 2901 et seq.) ("CRA") of the insured depository institutions involved in the transaction; the availability of information needed to determine and enforce compliance with the BHC Act and other applicable federal banking law; and, in the case of applications involving a foreign bank such as Deutsche Bank, whether the foreign bank is subject to comprehensive supervision and regulation on a consolidated basis by its home country supervisor. In cases involving interstate bank acquisitions, the Board also must consider the concentration of deposits in the nation and relevant individual states, as well as compliance with other provisions of section 3(d) of the BHC Act.

The Board has considered these factors in light of a comprehensive record that includes information provided by Deutsche Bank, confidential supervisory and examination information, and publicly reported financial and other information. The Board also has considered information collected from the primary home country supervisors of Deutsche Bank and various federal and state agencies, including the New York State Banking Department, the United States Department of State ("State Department"), and other relevant agencies. In addition, the Board has considered information provided by public commenters in connection with the proposal.(6)

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 Deutsche Bank is New York,(7) and the subsidiary banks of BT Corp are located in New York, Delaware, and Florida.(8) All the conditions for an interstate acquisition enumerated in section 3(d) are met in this case.(9) In light of all the facts of record, the Board is permitted to approve the proposal under section 3(d) of the BHC Act.