CONSOLIDATIONS, MERGERS AND PURCHASE AND SALE TRANSACTIONS
APPROVED BY THE STATE BANKING DEPARTMENTS Cont'd

1958 Cont'd

The following compilation, prepared in the Federal Reserve Board, was ordered inserted in the appendix. Reference will be found on page 124.

COMPILATION OF STATE LAWS RELATING TO DELEGATION OF AUTHORITY IN BANK MERGERS AND CONSOLIDATIONS

MARCH 17, 1959

(Prepared in the Legal Division of the Board of Governors of the Federal Reserve System)

FOREWORD

This is a compilation of Federal and State statutes, as of January 1, 1959, relating to the delegation of authority for the regulation and supervision of bank mergers and consolidations and also relating to standards established by State legislatures in such legislation where they in fact exist. It does not purport to cover the requirements of corporation statutes as they might affect bank mergers and consolidations except where the bank merger statute incorporates such a statute by reference. By virtue of statute in 45 States including Alaska and Hawaii (the District of Columbia banks coming under the Federal regulation of the Comptroller of the Currency), banks which merge into resulting State banks are regulated or supervised in such merger or consolidation by a State agent or agency.

For ready reference purposes the compilation is preceded by a tabular summary of the provisions of State laws with respect to the delegation of authority for the regulation and supervision of bank mergers and consolidations. Standards set forth in the State laws delegating such authority are itemized where possible or placed under an "other" category. Where no specific standard is considered to be set forth, it is so indicated.

The State of Alaska is included in the compilation although the citation is to Territorial laws. The Territory of Hawaii is also included because of its imminent admission to the Union.

The form of citation used throughout this compilation is such that the leading citation covers the general merger and consolidation laws. Specific portions of that law as it relates to this compilation are cited and quoted in the body of the text.

Prepared in the Legal Division of the Board of Governors of the Federal Reserve System.

1 An "X" in column indicates State has merger legislation. "No" indicates none.

2 Indicates State requires permission to operate banks and branches acquired through merger.

FEDERAL LAW

MERGER OR CONSOLIDATION WITH NONINSURED BANKS; ASSUMPTION OF LIABILITIES; TRANSFER OF ASSETS

Section 1828 (c) reads: "Without prior written consent by the Corporation, no insured bank shall (1) merge or consolidate with any noninsured bank or institution or convert into a noninsured bank or institution or (2) assume liability to pay any deposits made in, or similar liabilities of, any noninsured bank or institution or (3) transfer assets to any noninsured bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank. No insured bank shall convert into an insured State bank if its capital stock, or its surplus will be less than the capital stock or surplus, respectively, of the converting bank at the time of the shareholders' meeting approving such conversion, without prior written consent by the Comptroller of the Currency if the resulting bank is to be a District bank, or by the Board of Governors of the Federal Reserve System if the resulting bank is to be a State member bank (except a District bank), or by the Corporation if the resulting bank is to be a State nonmember insured bank (except a District bank). No insured bank shall (i) merge or consolidate with an insured State bank under the charter of a State bank or (ii) assume liability to pay any deposits made to another insured bank, if the capital stock or surplus of the resulting or assuming bank will be less than the aggregate capital stock or aggregate surplus, respectively, of all the merging or consolidating banks or of all the parties to the assumption of liabilities, at the time of the shareholders' meetings which authorized the merger or consolidation or at the time of the assumption of liabilities, unless the Comptroller of the Currency shall give prior written consent if the assuming bank is to be a national bank or the assuming or resulting bank is to be a District bank; or unless the Board of Governors of the Federal Reserve System gives prior written consent if the assuming or resulting bank is to be a State member bank (except a District bank); or unless the Corporation gives prior written consent if the assuming or resulting bank is to be a nonmember insured bank (except a District bank). No insured State nonmember bank (except a District bank) shall, without the prior consent of the Corporation, reduce the amount or retire any part of its common or preferred capital stock, or retire any part of its capital notes or debentures." (Sec. 18(c) Federal Deposit Insurance Act, 12 U.S.C. 1828 (c).)

ACQUISITION BY ONE CORPORATION OF STOCK OF ANOTHER

Section 18 reads: "No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.

"No corporation shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of one or more corporations engaged in commerce, where in any line of commerce in any section of the country, the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly.

"This section shall not apply to corporations purchasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substantially lessen competition.

"Nor shall anything herein contained be construed to prohibit any common carrier subject to the laws to regulate commerce from aiding in the construction