Academic journal article Federal Reserve Bulletin

Orders Issued under Bank Holding Company Act. (Legal Developments)

Academic journal article Federal Reserve Bulletin

Orders Issued under Bank Holding Company Act. (Legal Developments)

Article excerpt

Orders Issued Under Section 3 of the Bank Holding Company Act

Charter One Financial, Inc. Cleveland, Ohio

Charter-Michigan Bancorp, Inc. Dearborn, Michigan

Order Approving the Acquisition of a Bank and the Formation of a Bank Holding Company

Charter One Financial, Inc. ("Charter One Financial"), 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) for several applications related to the conversion of Charter One Bank, F.S.B., Cleveland, Ohio ("Charter One FSB"), a thrift institution, to a national bank charter. On its conversion, Charter One FSB would become Charter One Bank, N.A., Cleveland, Ohio ("National Bank"); and Charter-Michigan Bancorp, Inc. ("Charter-Michigan"), a wholly owned subsidiary of Charter One Financial, would become a bank holding company.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (67 Federal Register 1979 (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 section 3 of the BHC Act.

Charter One Financial, with total consolidated assets of $38.2 billion, is the 28th largest commercial banking organization in the United States, controlling less than 1 percent of total assets of insured depository institutions in the United States. (1) Charter One Financial operates depository institutions in Illinois, Massachusetts, Michigan, New York, Ohio, and Vermont. Charter One Financial is headquartered in Ohio, where it is the ninth largest banking organization, controlling deposits of $5.7 billion in the state, representing approximately 3.2 percent of total deposits in insured depository institutions in the state. (2)

Competitive Considerations

The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed combination that would substantially lessen competition or tend to create a monopoly in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal 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. (3)

The proposal represents the conversion of Charter One Financial's subsidiary savings association into a national bank and does not involve the acquisition of any depository institution not already controlled by Charter One Financial. Accordingly, and based on all the facts of record, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market and that competitive considerations are consistent with approval. (4)

Convenience Needs Considerations

In acting on proposals under section 3 of the BHC Act, the Board is required to consider the effects of the proposal on the convenience and needs of the communities to be served and take into account the records of the relevant depository institutions under the Community Reinvestment Act ("CRA"). (5) The CRA requires the federal financial supervisory agencies to encourage financial institutions to help meet the credit needs of local communities in which they operate, consistent with safe and sound operation, and requires the appropriate federal supervisory agency to take into account an institution's record of meeting the credit needs of its entire community, including low- and moderate-income ("LMI") neighborhoods, in evaluating bank expansion proposals. The Board has carefully considered the convenience and needs factor and the CRA performance records of the subsidiary depository institutions of Charter One Financial in light of all the facts of record, including public comments received on the effect of the proposal. …

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