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Release Date: March 11, 1998


For immediate release

The Federal Reserve Board today announced its approval of the notice of Dresdner Bank AG, Frankfurt, Germany, to engage de novo through its nonbanking subsidiaries, Oechsle International Advisors, L.P., Boston, Massachusetts, and RCM Capital Management, L.L.C., San Francisco, California, in acting as commodity pool operators for private limited partnerships organized as commodity pools investing in assets in which a bank holding company is permitted to invest.

Attached is the Board's Order relating to this action.


Dresdner Bank AG
Frankfurt, Germany

Oechsle International Advisors, L.P.
Boston, Massachusetts

RCM Capital Management, L.L.C.
San Francisco, California

Order Approving Notice to Engage in Nonbanking Activities

Dresdner Bank AG, Frankfurt, Germany ("Dresdner"), a foreign bank subject to the provisions of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to engage de novo through its nonbanking subsidiaries, Oechsle International Advisors, L.P., Boston, Massachusetts, and RCM Capital Management, L.L.C., San Francisco, California (together, "Companies"), in acting as commodity pool operators ("CPOs") for private limited partnerships organized as commodity pools investing in assets in which a bank holding company is permitted to invest ("Partnerships").

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 229 (1998)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.

Dresdner, with consolidated assets of approximately $358.8 billion, is the second largest banking organization in Germany.1 In the United States, Dresdner operates branches in New York, New York, and Chicago, Illinois, and an agency in Los Angeles, California.2 Dresdner also controls several subsidiaries that engage in various nonbanking activities in the United States.

Dresdner proposes that Companies provide administrative services and serve as investment advisor and sole general partner to Partnerships.3 Companies would privately place Partnership interests with "accredited investors," as that term is defined in the rules of the Securities and Exchange Commission ("SEC").4 In connection with providing investment advice to Partnerships, Companies would be registered as commodity trading advisors with the Commodity Futures Trading Commission ("CFTC") and the National Futures Association ("NFA"). Because Partnerships would hold positions in commodity futures contracts and would be controlled by Companies, Companies also must register as CPOs with the CFTC and the NFA. Companies would be subject to the record keeping, reporting, fiduciary standards, and other requirements of the Commodity Exchange Act (7 U.S.C. 2 et seq.), the CFTC, and the NFA.

The Board previously has determined by order that acting as a CPO for and controlling a private limited partnership that invests solely in investments that a bank holding company is permitted to make directly are activities that are closely related to banking and therefore permissible for bank holding companies.5 Dresdner has stated that all the investments of Partnerships would be permissible for a bank holding company to make directly.

In order to approve this proposal, the Board must determine that the proposed transaction "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."6 Previously, the Board has relied on a number of commitments that were offered by bank holding companies to address potential adverse effects that could arise from acting as general partner to private investment partnerships.7 The Board has reviewed these commitments in the context of this notice.

Several of the commitments relied on by the Board in the past were offered to mitigate potential adverse financial effects associated with the proposed activities by limiting the exposure of the bank holding company to financial risks associated with the partnerships' activities and by requiring the maintenance of corporate separateness between the partnership and the bank holding company and its affiliates. To address these concerns, the Board has determined that in the event that a bank holding company reports its investment in a partnership on other than a consolidated basis, the bank holding company is required to include, when calculating its consolidated regulatory capital ratios, an amount of the assets in the denominator that is equal to all liabilities reported by the partnership. The Board also has determined that bank holding companies may not directly or indirectly guarantee the obligations of a subsidiary acting as general partner to the partnerships or enter into any guarantee, indemnity, or loss-sharing agreement or any similar arrangement intended to protect an investor in any partnership from any type of loss associated with an interest in the partnership.

The Board notes, furthermore, that transactions between Dresdner's subsidiary banks and Partnerships would continue to be governed by sections 23A and 23B of the Federal Reserve Act.8 In addition, to ensure compliance with the Glass-Steagall Act, the Board will continue to rely on the restriction prohibiting partnerships controlled by bank holding companies from offering interests more than four times a year.9

In this case, the Board also has reviewed Dresdner's risk management systems and has concluded that they are adequate to address the financial risks associated with the proposed activities. The Board expects Dresdner to apply prudent risk and financial management policies to the proposed activities and maintain the legal separateness of the general partner from its bank holding company affiliates. Examinations of Dresdner would continue to check the adequacy of its systems for monitoring and assessing the financial risks associated with this activity.

As part of its evaluation of the public interest factors, the Board considers the financial condition and managerial resources of the notificant and its subsidiaries and the effect the proposed transaction would have on such resources.10 The Board also has reviewed other aspects of the financial condition and resources of Dresdner, including the effect of this proposal on the financial condition and resources of Dresdner. The Board notes that Dresdner's capital ratios meet applicable risk-based capital standards under the Basle Accord and are equivalent to the capital levels that would be required of a U.S. banking organization. Based on all the facts of record, the Board concludes that financial and managerial considerations are consistent with approval.

The Board expects that the conduct by Dresdner of the proposed activities de novo would enhance market competition and provide greater convenience to Dresdner's customers. The Board also expects that the proposed transaction would benefit the public by increasing the number of commodity pools available to investors.

For the reasons discussed above, and in reliance on all the facts of record, including the commitments made by Dresdner and subject to the conditions in this order, the Board concludes that the conduct of the proposed activities by Dresdner is not likely to result in significantly adverse effects that would outweigh the public benefits of the proposal. Accordingly, the Board has determined that performance of the proposed activities by Dresdner is a proper incident to banking for purposes of section 4(c)(8) of the BHC Act.

Conclusion
Based on the foregoing and all the facts of record, including the commitments discussed in this order and all other commitments and representations made by Dresdner in connection with this notice, and subject to the terms and conditions set forth in this order, the Board has determined that the notice should be, and hereby is, approved. The Board's determination is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with and to prevent evasion of the provisions of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision specifically is conditioned on Dresdner's compliance with the commitments and representations made in connection with this notice, including the commitments and conditions discussed in this order. The commitments and conditions shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decisions and may be enforced in proceedings under applicable law.

This transaction shall not be consummated later than three months after the effective date of this order unless such period is extended for good cause by the Board or by the Federal Reserve Bank of New York, acting pursuant to delegated authority.

By order of the Board of Governors,11 effective March 11, 1998.

(signed) Jennifer J. Johnson

Jennifer J. Johnson

Deputy Secretary of the Board


Appendix

Commitments provided by Dresdner in connection with acting as general partner of private limited partnerships.

  1. Dresdner, directly or indirectly, will not guarantee the obligations of Partnerships or a subsidiary acting as general partner or commodity pool operator of Partnerships, and, directly or indirectly, will not enter into any guarantee, indemnity, or loss-sharing agreement or any similar arrangement intended to protect an investor in any Partnership from any type of loss associated with an interest in the Partnership.
  2. In the event that Dresdner reports its investment in Partnerships on other than a consolidated basis, Dresdner will include, when calculating its consolidated regulatory capital ratios, an amount of assets in the denominator equal to all liabilities reported by the Partnership(s). The amount of this adjustment will be risk-weighted at 100 percent for purposes of calculating the risk-based capital ratios.
  3. Partnerships shall not offer interests more than four times per year unless the Board determines that more frequent issuances are consistent with the Glass-Steagall Act.


Footnotes

1 Asset and ranking data are as of December 31, 1996, and use exchange rates then in effect.

2 Dresdner Bank Lateinamerika AG, Hamburg, Germany, a wholly owned subsidiary of Dresdner, also operates an agency in Miami, Florida.

3 Dresdner previously has received approval to engage in private placement, investment advisory, and other transnational activities. See Letter dated June 23, 1997, from Jay Bernstein, Bank Supervision Officer, to Hartmut Grossman; Dresdner Bank AG, 82 Federal Reserve Bulletin 850 (1996). Dresdner also has received approval to provide administrative services to closed-end investment companies. See Dresdner Bank AG, 82 Federal Reserve Bulletin 676 (1996).

4 SEC Regulation D, 17 C.F.R. 230.501. Partnerships would not be registered as investment companies under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.).

5 See The Bessemer Group, Inc., 82 Federal Reserve Bulletin 569 (1996) ("Bessemer"); Meridian Bancorp, Inc., 80 Federal Reserve Bulletin 736 (1994).

6 See 12 U.S.C. 1843(c)(8).

7 See Bessemer.

8 A number of the commitments offered by bank holding companies in past cases are addressed by applicable statutes and regulations, such as the limitations on inter-affiliate transactions set out in sections 23A and 23B of the Federal Reserve Act and the standards governing control or the definition of the activities under the BHC Act and Regulation Y. These commitments are unnecessary because they restate certain statutory and regulatory obligations and confirm Board interpretations that, by force of law, govern the activities of Dresdner and Partnerships. Many other commitments previously relied on by the Board in similar cases were restrictions that governed private placement activities. In connection with its recent revision to Regulation Y, the Board removed those restrictions from all bank holding companies conducting private placement activities.

9 The commitments relied on by the Board in this case are listed in the Appendix.

10 See 12 C.F.R. 225.26; see also The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155 (1987).

11 Voting for this action: Chairman Greenspan and Governors Phillips, Meyer, Ferguson, and Gramlich. Absent and not voting: Vice Chair Rivlin and Governor Kelley.

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