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Release Date: April 2, 1998

For immediate release

The Federal Reserve Board today announced its approval of the notice of Popular, Inc., Hato Rey, Puerto Rico, to acquire through Popular Cash Express, Inc., Orlando, Florida, the assets of Florida Exchange, Ltd., and Mirando-J., Oak Park, Illinois.

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

Popular, Inc.
Hato Rey, Puerto Rico

Order Approving Notice to Engage in Nonbanking Activities

Popular, Inc. ("Notificant"), a bank holding company within the meaning 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(a) of the Board's Regulation Y (12 C.F.R. 225.24(a)) to acquire through its wholly owned subsidiary, Popular Cash Express, Orlando, Florida ("Cash Express"), certain assets of Florida Exchange, Ltd. and Mirando-J., Inc., both in Oak Park, Illinois (together "Companies").1 Cash Express would engage in the nonbanking activities discussed below.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 61,127 (1997)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.

Notificant, with total assets of approximately $19.9 billion, is the largest banking organization in Puerto Rico, and the 42nd largest banking organization in the United States.2 Notificant controls approximately $10.1 billion in deposits in the United States, and operates branches in New Jersey, Florida, Illinois, Texas, and California. Notificant also engages in a number of nonbanking activities in the United States.

The Board has determined by regulation3 that the following proposed activities are closely related to banking and permissible for bank holding companies under section 4(c)(8) of the BHC Act: (i) credit and credit related activities; (ii) leasing activities; (iii) financial and investment advisory services; (iv) transactional services; (v) investment and trading services; (vi) insurance activities related to extensions of credit; and (vii) issuing and selling consumer payment instruments.4 The Board also has determined by order that (i) check cashing and wire transmission services,5 and (ii) bill payment services6 are closely related to banking. Notificant has committed to conduct each of these activities in accordance with Regulation Y and the relevant Board interpretations and orders.

Notificant also proposes to provide the following government services at Cash Express offices: (i) postage stamps and postage-paid envelopes; (ii) vehicle registration services, including the sale, distribution and renewal of license plates and license tags for motor vehicles; (iii) public transportation tickets and tokens; and (iv) notary public services.7

Section 4(c)(8) of the BHC Act provides that a bank holding company may, with the Board's approval, engage in any activity that the Board determines to be closely related to banking.8 An activity may be deemed to be closely related to banking if it is demonstrated that (i) banks generally provide the proposed services; (ii) banks generally provide services that are operationally or functionally so similar to the proposed services as to equip them particularly well to provide the proposed services; or (iii) banks generally provide services that are so integrally related to the proposed services as to require their provision in a specialized form.9

Banks generally are permitted to provide customers access to the type of government services involved in the proposal. Banks are permitted to: (i) sell postage stamps; (ii) provide vehicle registration and licensing services as agent for state departments of motor vehicles; (iii) provide notary public services; and (iv) dispense public transportation tickets from automated teller machines ("ATMs").10 The proposed services, moreover, further the public policy objective of providing easier access to government services. Based on all the facts of record, the Board concludes that the proposed activities involving government services are closely related to banking.

In order to approve the proposal, the Board also must find that the performance of the proposed activities by Notificant "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." 12 U.S.C. § 1843(c)(8). As part of its evaluation of these factors, the Board considers the financial resources of the Notificant and its subsidiaries and the effect of the transaction on those resources.11 Based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the proposal.

The Board also has carefully considered the competitive effects of the proposed acquisition of the assets of Companies. The record reflects that there are few overlaps in the services provided by Companies and Notificant. To the extent that Notificant and Companies offer different types of products, the proposed acquisition would result in no loss of competition. In those markets in which the product offerings of Notificant and Companies overlap, there are numerous existing and potential competitors. Consummation of the proposal, therefore, would have a de minimis effect on competition, and the Board has determined that the proposal would not result in any significantly adverse competitive effects in any relevant market.

The Board expects that the proposed transaction would give Notificant an increased ability to serve the needs of its customers and would allow Notificant to provide existing and new customers with a broader range of products and services. Public benefits also would be derived from providing government services at locations that are convenient for customers. Additionally, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies may make potentially profitable investments in nonbanking companies when those investments are consistent, as in this case, with the relevant considerations under the BHC Act, and from permitting banking organizations to allocate their resources in the manner they believe is most efficient.

Based on the foregoing and all the other facts of record, including the commitments made by Notificant, the Board has determined that the performance of the proposed activities by Notificant can reasonably be expected to produce benefits to the public that would outweigh any possible adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act.

Based on all the facts of record, including all the commitments and representations made by Notificant, and subject to all the terms and conditions set forth in this order, the Board has determined that the notice should be, and hereby is, approved.12 This determination is subject to all the conditions set forth in the Board's Regulation Y, including those in sections 225.7 and 225.25(g) (12 C.F.R. 225.7 and 225.25(g)), 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, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on compliance with all the commitments and representations made in the notice, including the commitments and conditions discussed in this order. The commitments, representations, and conditions relied on in reaching this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law.

This proposal 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 the Federal Reserve Bank of New York, acting pursuant to delegated authority.

By order of the Board of Governors,13 effective April 2, 1998.

(signed) William W. Wiles

William W. Wiles

Secretary of the Board


1 Cash Express is a third-tier subsidiary of Notificant and a direct subsidiary of Popular North America, Inc., a bank holding company registered under the BHC Act. Popular North America, a second-tier subsidiary of Notificant is a direct subsidiary of Popular International Bank, Inc., also a registered bank holding company under the BHC Act. Popular International Bank, Inc. is a wholly owned direct subsidiary of Notificant.

2 Asset data are as September 30, 1997. Ranking data are as of December 31, 1996.

3 See 12 C.F.R. 225.28(b)(1), (b)(3), (b)(6), (b)(7), (b)(8)(ii), (b)(11), (b)(13), and (b)(14).

4 These activities include selling prepaid telephone cards and prepaid cellular phone time, and receiving payments for additional time from cellular phone customers. Notificant would not, however, sell or rent cellular phones.

5 See Midland Bank, PLC, 76 Federal Reserve Bulletin 860 (1990); and Norwest Corporation 81 Federal Reserve Bulletin 974 (1995) and 81 Federal Reserve Bulletin 1130 (1995). Notificant has committed that its check cashing and wire transfer services would be conducted in the same manner regardless of whether the transaction involved an affiliated or non-affiliated depository institution. Notificant also states that a customer would not be permitted to wire transfer funds to an account maintained by the customer in an affiliated depository institution or open an account at an affiliated depository institution through Cash Express. Cash Express and Notificant also would not generally cross-market products and services. Cash Express would make loans from affiliates available in a manner similar to a loan production office and in compliance with applicable branching laws.

6 Notificant's bill payment services would include the transfer of funds to the payee by the following means: (i) by wire transfer or money order from Cash Express, (ii) by transfer of funds using a third party provider, or (iii) by transfer of funds using hardware and software provided by a payee under an agreement with Cash Express. See Banc One Corporation 80 Federal Reserve Bulletin 139 (1994), and see, e.g., Norwest Corporation, 81 Federal Reserve Bulletin 974 (1995) and 81 Federal Reserve Bulletin 1130 (1995).

7 Cash Express also would provide services that are incidental to the proposed activities, such as providing mailboxes and related services, photocopying, and sending facsimiles. Revenue from the incidental activities would not exceed 10 percent of the total annual revenues earned by Cash Express.

8 12 U.S.C. § 1843(c)(8).

9 See National Courier Association v. Board of Governors of the Federal Reserve System, 516 F.2d 1229, 1237 (D.C. Cir. 1975). In addition, the Board may consider any other basis that may demonstrate that the proposed activity has a reasonable or close connection or relationship to banking or managing or controlling banks. See Board Statement Regarding Regulation Y, 49 Federal Register 806 (1984); Securities Industry Association v. Board of Governors of the Federal Reserve System, 468 U.S. 207, 210-211 n.5 (1984).

10 See, e.g., 12 C.F.R. 7.1010 and OCC Interpretive Letter No. 718 (March 14, 1996) (postage stamps, act as agent for the state in selling and renewing license plates and license tags, and public transportation tickets from ATMs); and OCC Conditional Approval Letter No. 267 (January 12, 1998) (notary services). See, e.g., Corbet v. Devon Bank 299 N.E.2d 521, 529 (Ill. App. Ct. 1988); and Legal Interpretation § 1.3 of Title 3 of the New York Compilation of Rules and Regulation (January 31, 1969) (New York trust companies can, under the New York Banking Law, provide vehicle registration and licensing services as agent of the New York State Department of Motor Vehicles).

11 See 12 C.F.R. 225.26; The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerishe Vereinbank AG, 73 Federal Reserve Bulletin 155 (1987).

12 Notificant indicates that it may provide the proposed services in the future by using technologies that are not described in the notice or discussed in the order. Notificant must consult with the Federal Reserve System before commencing any new activity that is not described in this order to ensure that the activity will satisfy the criteria in the BHC Act and Regulation Y, and to allow the Federal Reserve System an opportunity to consider whether a separate notice should be reviewed in any particular case.

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

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