Bank of New York Seen Winning Support from Fed to Acquire State St. Boston Stock
Moyer, Liz, American Banker
Bank of New York Co.'s bid to boost its ownership of State Street Boston Corp. is likely to get support from the Federal Reserve Bank, according to analysts and observers.
But a Fed ruling in favor of Bank of New York could touch off months of litigation because a Massachusetts agency has already rejected the bank's application to buy an additional 4.9% of State Street's stock.
A decision by the Fed is expected in the next few weeks.
The Massachusetts Board of Bank Incorporation ruled last Friday that the Bank of New York had "failed to meet its burden to demonstrate that the public convenience and advantage will be promoted" by the stock purchase.
However, market watchers said the Fed has typically approved such applications-even controversial ones-when they have involved smaller banks.
Regulatory lawyers said the Fed would likely approve Bank of New York's bid because it apparently is not seeking a stake that would lead to ownership or control issues.
"There has been a long history of Fed approvals of minority positions," said a bank regulatory attorney who asked not to be identified. "At the end of the day, I don't think there would be any problems with the Bank of New York in this case."
A spokeswoman for the New York Fed said the issue, as with similar cases in the past, would be decided by the Federal Reserve Board in Washington.
Bank of New York has said that the purchase would only be a "passive" investment. …