Notice of Proposal to Engage in Nonbanking Activities or to Acquire Companies that are Engaged in Nonbanking Activities

[Federal Register Volume 61, Number 181 (Tuesday, September 17, 1996)]
[Notices]
[Pages 48956-48957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23482]


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FEDERAL RESERVE SYSTEM

Notice of Proposal to Engage in Nonbanking Activities or to 
Acquire Companies that are Engaged in Nonbanking Activities

    Carolina First Corporation, Greenville, South Carolina (Applicant), 
has given notice pursuant to section 4(c)(8) of the Bank Holding 
Company Act (12 U.S.C. 1843(c)(8)) (BHC Act) and section 225.23(a) of 
the Board's Regulation Y (12 CFR 225.23(a)) to acquire up to 20.2 
percent of the voting shares of Affinity Technology, Inc., Columbia, 
South Carolina (Company), and thereby engage in providing data 
processing software and hardware to insured depository institutions 
(financial institutions). The software consists of a proprietary 
Decision Support System (DSS) that would automate the data collection 
and collation and credit scoring involved in processing and acting on 
mortgage and other loan applications. The hardware consists of 
automated loan machines (ALMs) at which financial institution customers 
could apply for and receive proceeds of loans processed by DSS. Company 
also would provide the software to operate the ALMs. Company currently 
provides these services to financial institutions throughout the United 
States, and would continue to provide services on a nationwide basis.
    Section 4(c)(8) of the BHC Act provides that a bank holding company 
may engage in any activity that the Board, after due notice and 
opportunity for hearing, has determined by order or regulation to be so 
closely related to banking or managing or controlling banks as to be a 
proper incident thereto. This statutory test requires that two separate 
tests be met for an activity to be permissible for a bank holding 
company. First, the Board must determine that the activity is, as a 
general matter, closely related to banking. Second, the Board must find 
in a particular case that the performance of the activity by the 
applicant bank holding company may reasonably be expected to produce 
public benefits that outweigh possible adverse effects.
    A particular activity may be found to meet the ``closely related to 
banking'' test if it is demonstrated that banks have generally provided 
the proposed services, that banks generally provide services that are 
operationally or functionally similar to the proposed services so as to 
equip them particularly well to provide the proposed services, or that 
banks generally provide services that are so integrally related to the 
proposed services as to require their provision in a specialized form. 
National Courier Ass'n v. Board of Governors, 516 F.2d 1229, 1237 (D.C. 
Cir. 1975). In addition, the Board may consider any other basis that 
may demonstrate that the activity has a reasonable or close 
relationship to banking or managing or controlling banks. Board 
Statement Regarding Regulation Y, 49 FR 806 (1984); Securities Industry 
Ass'n v. Board of Governors, 468 U.S. 207, 210-11, n.5 (1984). A bank 
holding company also may engage in any incidental activities that are 
necessary to carry on an activity that is closely related to banking. 
See 12 CFR 225.21(a)(2); National Courier at 1239-1241.
    Applicant states that the Board previously has determined by 
regulation that providing certain data processing and data transmission 
services and facilities (including software) and providing access to 
such services and facilities by any technological means are closely 
related to banking for purposes of section 4(c)(8) of the BHC Act. In 
order to be found to be closely related to banking, the data to be 
handled must be ``financial, banking, or economic'' in nature, and such 
activities must be conducted within certain additional limitations 
established by the Board. See 12 CFR 225.25(b)(7). Applicant maintains 
that Company's proposed activities would relate to financial, banking, 
or economic data, and would otherwise conform to Regulation Y.
    Applicant states that the ALM hardware to be provided under the 
proposal is special purpose hardware because it is designed to process 
only financial, banking, or economic data related to automated loan 
transactions, and therefore asserts that the provision of the hardware 
is closely related to banking. See Citicorp, 72 Fed. Res. Bull. 497, 
499 (1986) (Citicorp). To the extent that it is determined that the 
hardware includes general purpose hardware, Applicant states that it 
will be offered only in conjunction with permissible data processing 
software and will not constitute more than 30 percent of the cost of 
any packaged offering in which it is contained, as required by 
Regulation Y. See 12 CFR 225.25(b)(7)(iii). Applicant also states that 
there is no other producer of ALM hardware, and contends that as a 
result the production of ALM hardware by Company is permissible as a 
necessary incident to Company's other activities. See Citicorp at 500; 
Board Ruling at II F.R.R.S. 4-472.1 (June 19, 1989).
    In order to approve the proposal, the Board also must determine 
that the proposed activities to be engaged in by Company are a proper 
incident to banking that ``can reasonably be expected to produce 
benefits to the public, such as greater convenience, increased 
competition, or gains in efficiency, that outweigh possible adverse 
effects, such as undue concentration of resources, decreased or unfair 
competition, conflicts of interests, or unsound banking practices.'' 12 
U.S.C. 1843(c)(8). Applicant contends that its proposal would produce 
public benefits by reducing cost and providing greater convenience in 
loan processing that outweigh any potential adverse effects.
    In publishing the proposal for comment, the Board does not take a 
position on issues raised by the proposal. Notice of the proposal is 
published solely to seek the views of interested persons on the issues 
presented by the notice and does not represent a determination by the 
Board that the proposal meets, or is likely to meet, the standards of 
the BHC Act.
    Any comments or requests for hearing should be submitted in writing 
to William W. Wiles, Secretary, Board of Governors of the Federal 
Reserve System, Washington, D.C. 20551, not later than September 27, 
1996. Any request for a hearing on this notice must, as required by 
Sec.  262.3(e) of the Board's Rules of Procedure (12 CFR 262.3(e)), be 
accompanied by a

[[Page 48957]]

statement of reasons why a written presentation would not suffice in 
lieu of a hearing, identifying specifically any questions of fact that 
are in dispute, summarizing the evidence that would be presented at a 
hearing, and indicating how the party commenting would be aggrieved by 
approval of the proposal.
    This application may be inspected at the offices of the Board of 
Governors or the Federal Reserve Bank of Richmond.

    Board of Governors of the Federal Reserve System, September 9, 
1996.
Jennifer J. Johnson

Deputy Secretary of the Board

[FR Doc. 96-23482 Filed 9-16-96; 8:45 am]

BILLING CODE 6210-01-F