158 1 no cash dividends would be paid out for the purpose : 2 of serving what is, in effect, acquisition debt? 3 4 5 MR. TUTTLE: The first question, obviously, would be, do you have a particular ratio in mind? 13 14 15 16 17 alternative. It is difficult at this stage to determine whether that is the most appropriate means of maintaining adequate capital or whether in discussions with management, they might feel that there is a better Also you would get into the question, 18 I think, of exactly what is the ratio, but I think 19 it is a subject that we would be glad to explore with MR. RYAN: The problem I have, you know, is that adequate capital, is determining which adequate capital was more of an art form than a science. And adequacy is often in the eye of the beholder, and the management of an institution very often has a different (202) 234-4433 159 1 view of what is adequate than the regulatory agency 2 that is resonsible for the oversight, regulatory over- MR. CLIFFORD: Often times there is a good deal of difference, too, between a smaller bank and a very much larger bank. ; MR. RYAN: There certainly is, but we could explore that some more. As I say, it is so critical because of the addition of this $50 million of debt in the organization that's not there now, and we, at the Federal Reserve, don't want to be in the posi- to bring additional debt over a group of banks that 13 14 to service that debt. That's kind of the reverse of 15 16 17 18 19 20 the traditional role we see of bank holding companies LIBRARIES 160° that that would not occur, and we think that a rather conclusive assurance in that regard is given by the investors' statement that they would be willing, out of their personal funds, to pay the debt service in any year in which income was inadequate. But I do believe that we are sensitive to the concerns of the 13 10 10 11 12 MR. MANNION: Why don't we move onto the last area that we have, and that is the ongoing super visory concerns that may exist with foreign individuals owning a U.S. banking organization. I think our initial concern in this area is the prospect or the possibility that individuals, zation itself. What plans do you have in mind for seeing to it that the Financial General subsidiary banks are not abused to further the individual interests of the individual investors? MR. ALTMAN: Well, the record should show (202) 234-4433 Mr. Mannion, and I won't be labor it but there are built 5 in protections as we visualize the future of Financial 7 10 11 12 General. First place, just very briefly, the funds of the individual banks are under the control of the management which, in turn, is under the control of the Boards of Directors. protection. And there, as we mentioned, is the first The management of that bank, supported by the Board, has to make any kind of a decision 13 14 15 16 I'm saying that that is the kind of protection that will continue to exist. You have heard His Excellency General toward extending continued autonomy to the that in each instance that we have met with the indi vidual banks, we have asked management to stay and we have asked the Board members to stay. I know of no way that instructions or directions can be given that would force the individual 25 banks to lend money in a manner or transfer funds in (202) 234-4433 162 a manner that would be inimical to the best interests 1 7 will continue to be made up of Americans at the will 8 9 10 11 and direction of the investors, so that there, again, they are not subject to the direction of anyone. They are the managers. The Board of Directors of Financial General sets the policy of Financial General. Nobody 12 else sets the policy of Financial General. The Board 13 of Directors does, and they, in turn, inform the manage 14 ment of Financial General what that policy is. 15 I say again that think the last level 16 17 18 of protection is the fact that we have mentioned to you that we have agreed with the investors that we shall stay in the picture, and that we shall continue to be close to it. We shall monitor what goes on at Financial General which, in turn, is in charge of seeing what goes on in the member banks. Also at all stages, there are the regulatory authorities - state regulatory authorities of each state and the federal regulatory authorities which require periodic reports as to what is going on within (202) 234-4433 |