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Bank Holding Company/Change in Control
2001 Letters
December 21, 2001
To Peter T. Grauer of Credit Suisse First Boston, regarding the provision in the Gramm-Leach-Bliley Act generally prohibiting a financial holding company (FHC) from routinely managing or operating a portfolio company the shares of which are owned or controlled by the FHC under the Act's merchant banking authority, 12 U.S.C. 1843(k)(4)(H). The letter provides examples of covenants believed by Board staff to be permissible for an FHC to have with a portfolio company consistent with the Act and the Board's Regulation Y, 12 CFR 225.171(d).

June 5, 2001
To Stanley F. Farrar, indicating that a package of services that Zions Bancorporation, Salt Lake City, Utah, proposes to provide to customers would be within the scope of permissible data processing and data transmission activities under section 225.28(b)(14) of Regulation Y (12 C.F.R. 225.28(b)(14)). The package of services would allow customers to create, store, retrieve, transfer, modify, and digitally certify electronic forms.

May 16, 2001
To Carl Howard, regarding the application of the anti-tying prohibitions of section 106 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. § 1972) and the Board's safe harbor for combined-balance discounts (12 C.F.R. 225.7(b)(2)) to a combined-balance discount program proposed by Citibank (South Dakota), N.A. and its banking affiliates ("Citibank"). Citibank proposes to offer incentives to its credit card, mortgage, or loan customers who maintain a combined minimum balance in a package of products and services that would include annuities, auto, homeowners, life, and/or long term care insurance from affiliates of Citibank. The letter confirms that financial products offered by a bank or its affiliates, including insurance products, may properly be included among eligible products in that bank's combined-balance discount program, and that the principal amount of an annuity may be counted in determining the size of a customer's balance in eligible products, as may the premiums paid on non-annuity insurance products.

March 7, 2001
To William J. Sweet in response to an inquiry on behalf of Citigroup Inc. regarding the capital status of $4.25 billion of subordinated debt the company issued in the fall of 2000. Through inadvertence, the debt included several events of acceleration, including breach of administrative covenants and nonpayment of interest, that are beyond those permitted for inclusion in Tier 2 capital under the Board's capital adequacy guidelines. See 12 CFR 225 Appendix A; and 12 CFR 250.166. The Federal Reserve determined, given a number of unique facts and circumstances, to allow the subordinated debt to be considered Tier 2 capital for regulatory purposes in this case. In particular, Citigroup committed to conduct its business in a manner that assures compliance with the covenants and to place in escrow the present value of five years of interest payments on the subordinated debt. Citigroup will also deduct from its Tier 1 capital an amount equal on a present value basis to one full year's interest on the subordinated debt. The Federal Reserve's determination took into account a number of unique factors, including Citigroup's representation that the flaw in the subordinated debt was inadvertent, that Citigroup gained no financial benefit from issuing debt that did not meet the Board's criteria, and that Citigroup has taken steps to ensure that the circumstances that led to this situation will not recur.

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