Order Approving Formation of a Bank Holding Company and Notice to Engage in Nonbanking Activities

Article excerpt

Travelers Group Inc. ("Travelers"), a holding company for securities, insurance and other financial services firms, has requested the Board's approval under section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. [sections] 1842) ("BHC Act") to become a bank holding company by acquiring all the voting shares of Citicorp, a bank holding company within the meaning of the BHC Act, and all of Citicorp's subsidiary banks, including its lead subsidiary bank, Citibank, N.A., New York, New York ("Citibank").(1) Travelers also has requested the Board's approval under section 4(c)(8) of the BHC Act and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire various domestic nonbank subsidiaries and investments of Citicorp, including Citibank, Federal Savings Bank, San Francisco, California, and Citicorp Securities Inc., New York, New York, and to retain certain nonbanking subsidiaries of Travelers, including Travelers Bank & Trust, fsb, Newark, Delaware, and Salomon Smith Barney Inc., New York, New York. Travelers proposes to own and operate these companies and to conduct the proposed activities in accordance with the requirements of the BHC Act, Regulation Y and relevant Board orders governing these activities and subsidiaries. In addition, Travelers has filed applications and notices under section 4(c)(13) of the BHC Act (12 U.S.C. [sections] 1843(c)(13)) and the Board's Regulation K (12 C.F.R. 211) to acquire the foreign operations of Citicorp and to retain certain foreign investments and continue certain foreign activities of Travelers.(2) Finally, Travelers has requested an exemption from the quantitative requirements of section 23A of the FRA to permit Citicorp to transfer its existing mortgage subsidiary, Citicorp Mortgage, Inc. ("CMI"), to Citibank to facilitate financing for CMI's business using liquidity available to Citibank.(3)

Travelers, with total consolidated assets of approximately $420 billion, is a diversified financial services firm engaged in a variety of securities, insurance, lending, financial advisory, and other financial activities in the United States and overseas.(4) More than 70 percent of Travelers's total assets and more than 60 percent of its total revenues are associated with activities that are permissible for bank holding companies under the BHC Act, including securities underwriting, dealing, brokerage, and advisory activities; mortgage lending and consumer finance activities; consumer advisory activities; and credit-related insurance activities.(5)

Travelers also engages domestically and internationally in a number of nonbanking activities that are not permissible for bank holding companies, which Travelers proposes to conform to the requirements of the BHC Act or divest. These activities include underwriting property and casualty, life and commercial insurance and annuities; general insurance agency activities; investing in more than 5 percent of the voting shares of commercial companies; controlling and distributing shares of open-end investment companies registered under the Investment Company Act of 1940 ("mutual funds"); real estate management and investing activities; proprietary trading in physical commodities; oil and gas exploration and investments; and certain other impermissible activities and investments. Travelers has committed to conform all impermissible activities to the requirements of the BHC Act by restructuring the activity or subsidiary, by terminating the activity, or by selling or divesting the subsidiary, as necessary, within the period provided in the BHC Act for new bank holding companies to conform impermissible investments and activities.

In addition, Travelers controls several domestic subsidiaries that cannot be affiliated with a bank under section 20 of the Glass-Steagall Act (12 U.S.C. [sections] 377). These companies engage in securities underwriting and dealing activities, distributing shares of open-end mutual funds, and controlling open-end mutual funds. …