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February 14, 2002

Mr. Theodore D. Itzkowitz
General Counsel and Secretary
Israel Discount Bank of New York
511 Fifth Avenue
New York, New York 10017-4997

Dear Mr. Itzkowitz:

This is in response to the request by Israel Discount Bank of New York, New York, New York ("IDBNY"), for an exemption from section 23A of the Federal Reserve Act in order that IDBNY may acquire the assets of the Miami agency of Israel Discount Bank Limited, Tel Aviv, Israel. IDBNY is a subsidiary of IDB, and thus IDB is an affiliate of IDBNY for purposes of section 23A of the Federal Reserve Act.1 IDBNY requested an exemption to acquire assets and assume liabilities of approximately [amount redacted] from the Miami agency.

Section 23A limits the amount of "covered transactions," which include loans and purchases of assets, between a bank (and its subsidiaries) and any single affiliate to 10 percent of the bank's capital stock and surplus, and limits the aggregate of all covered transactions between a bank (and its subsidiaries) and all its affiliates to 20 percent of the bank's capital stock and surplus. IDBNY's acquisition of the Miami agency�s assets is covered by section 23A.2 IDBNY's capital stock and surplus totaled approximately $535 million as of September 30, 2001.

Section 23A specifically authorizes the Board to exempt purchases of real or personal property and to exempt "at its discretion [other]. . . transactions or relationships from the requirements of this section if it finds such exemptions to be in the public interest and consistent with the purposes of this section."3 The Board has approved exemptions in similar cases for one-time transfers that are part of a corporate reorganization and that are structured to ensure the quality of the transferred assets.4 As in previous cases reviewed by the Board, the proposed transaction in this case is a by-product of a one-time corporate reorganization. IDBNY is restructuring its U.S. banking business to consolidate all the organization�s operations in Florida under IDBNY. In IDBNY�s view, the proposed consolidation would allow it to better serve its customers.

IDBNY and IDB also have made the following commitments accepted by the Board in similar exemption requests:

  1. None of the assets of the Miami agency that IDBNY will purchase will be "low-quality" within the meaning of section 23A of the Federal Reserve Act, 12 U.S.C. � 371c(b)(10).

  2. Before acquiring the assets of the Miami agency, IDBNY will review the assets to ensure that the transaction is consistent with safe and sound banking practices.

  3. For two years after the purchase, IDB will repurchase quarterly from IDBNY any asset acquired from the Miami agency that becomes a low-quality asset at book value and make a cash capital contribution to IDBNY for any write-down of the acquired asset.

  4. Before the purchase of the assets, the majority of the directors who serve on IDBNY's board of directors and who are not affiliated with IDB will review and approve the purchase.

IDBNY also has represented that the fair market value of the assets that it will acquire would equal or exceed the fair market value of the liabilities assumed.

In light of these considerations and all the facts you have presented, the transaction appears to be consistent with safe and sound banking practices and on terms that would ensure the quality of the assets transferred. In addition, the Board has contacted the Federal Deposit Insurance Corporation (�FDIC�), which approved the transaction under the Bank Merger Act on January 14, 2002. The FDIC has informed the Board that it has no objection to this proposal. Accordingly, the transaction appears to be consistent with the purposes of section 23A, and the Director of the Division of Banking Supervision and Regulation, pursuant to authority delegated by the Board, and with the concurrence of the General Counsel, hereby grants the requested exemption.

This determination is specifically conditioned on compliance by IDB and IDBNY with all the commitments and representations they made in connection with the exemption request. These commitments and representations are deemed to be conditions imposed in writing in connection with this action and, as such, may be enforced in proceedings under applicable law. This determination is based on the specific circumstances surrounding this transaction, and may be revoked in the event of any material change in those circumstances or any failure by IDB or its subsidiaries to observe any of their commitments. This action does not represent a determination concerning the permissibility of any other transactions that are subject to section 23A or concerning any other affiliate of IDBNY.

Sincerely yours,

(Signed) Robert deV. Frierson

Robert deV. Frierson
Deputy Secretary of the Board

cc: Federal Reserve Bank of New York
 Federal Deposit Insurance Corporation
 Robert E. Mannion, Esq.

Footnotes

1. 12 U.S.C. � 371c(b)(1)(A). Return to text

2. Section 23A defines the purchase of assets as a covered transaction. 12 U.S.C. � 371c(b)(7)(C). Return to text

3. 12 U.S.C. �� 371c(b)(7)(C) and 371c(e)(2) (emphasis added). Return to text

4. See Travelers Group Inc., 84 Federal Reserve Bulletin 985, 1013-14 (1998); Letter dated November 14, 1996, from William W. Wiles to John Byam; Letter dated April 19, 1988, from James McAfee to Timothy C. Roach, Esq.; Letter dated August 6, 1987, from William W. Wiles to Timothy McGinnis. Return to text

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Last update: February 25, 2002