Orders Issued Under Bank Holding Company Act

Federal Reserve Bulletin, Sept, 2001 by Robert Dev. Frierson

Orders Issued Under Section 3 of the Bank Holding Company Act

Citigroup Inc. New York, New York

Citigroup Holdings Company Wilmington, Delaware

Citicorp New York, New York

Order Approving Acquisition of a Bank

Citigroup Inc., Citigroup Holdings Company, and Citicorp, financial holding companies within the meaning of the Bank Holding Company Act ("BHC Act") (together, "Citigroup"), have applied under section 3 of the BHC Act (12 U.S.C. [sections] 1842) to acquire indirectly all the voting shares of European American Bank, Uniondale, New York ("EAB"). EAB is a wholly owned subsidiary of ABN AMRO, Amsterdam, The Netherlands. The proposed transaction is primarily a merger of EAB with and into Citibank, N.A., New York, New York ("Citibank NA"), a wholly owned subsidiary of Citigroup, with Citibank NA as the surviving entity.(1) As a merger of banks, the transaction is subject to review by the Office of the Comptroller of the Currency ("OCC") under the Bank Merger Act (12 U.S.C. [sections] 1828(c)). The OCC has completed its review under that Act and has today approved the merger based on its review of essentially the same standards as the Board is required to review under the BHC Act.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (66 Federal Register 13,927 (2001)). 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 section 3 of the BHC Act.

Citigroup, with total consolidated assets of $902.2 billion, is the largest commercial banking organization in the United States, controlling approximately 3.9 percent of the total assets of insured commercial banks in the United States, and is one of the largest commercial banking organizations in the world.(2) Citigroup operates the second largest depository organization in New York, with $53.6 billion in deposits, representing approximately 12.2 percent of total deposits in insured depository institutions in the state ("state deposits").(3) Citigroup also operates depository institutions in California, Connecticut, Delaware, Florida, Georgia, Illinois, Maryland, Nevada, New Jersey, South Dakota, Texas, Utah, Virginia, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.

EAB operates only in New York and is the 11th largest depository institution in the state, with $10.9 billion in deposits, representing approximately 2.5 percent of state deposits. After consummation of the proposal, Citigroup would remain the second largest depository organization in New York, with $64.5 billion in deposits, representing approximately 14.6 percent of state deposits. Citigroup also would remain the largest commercial banking organization in the United States.(4)

Factors Governing Board Review of Bank Acquisition

The BHC Act sets forth the factors that the Board must consider when reviewing the formation of bank holding companies or the acquisition of banks. These factors are the competitive effects of the proposal in the relevant geographic markets; the convenience and needs of the community to be served, including the records of performance of the insured depository institutions involved in the transaction under the Community Reinvestment Act ("CRA");(5) the financial and managerial resources and future prospects of the companies and banks involved in the proposal; and the availability of information needed to determine and enforce compliance with the BHC Act and other applicable federal banking laws.(6)

The Board has considered these factors in light of a record that includes information provided by Citigroup, confidential supervisory and examination information, publicly reported financial and other information, and public comments submitted on the proposal.

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or be in furtherance of a monopoly. The BHC Act also prohibits the Board from approving a proposal that would substantially lessen competition in any relevant banking market unless the anticompetitive effects of the proposal in that banking market are clearly outweighed in the public interest by the probable effects of the proposal in meeting the convenience and needs of the community to be served.(7)

Citigroup and EAB compete directly in the Metropolitan New York/New Jersey banking market ("New York banking market").(8) The Board has reviewed carefully the competitive effects of the proposal in the New York banking market in light of all the facts of record, including the number of competitors that would remain in the market, the relative shares of total deposits in depository institutions in the market ("market deposits") controlled by Citigroup and EAB,(9) the concentration level of market deposits and the increase in this level as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines"),(10) and other characteristics of the market.