For immediate release

The Federal Reserve Board today announced its approval of the application of Crestar Financial Corporation to engage de novo through its subsidiary, Crestar Securities Corporation, both of Richmond, Virginia, in private placement and "riskless principal" activities, and underwriting and dealing in, to a limited extent, certain bank-ineligible securities. Attached is the Board's Order relating to this action.

Crestar Financial Corporation Richmond, Virginia Order Approving a Notice to Engage in Certain Nonbanking Activities

Crestar Financial Corporation, Richmond, Virginia ("Applicant"), a bank holding company within the meaning of the Bank Holding Company ("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 225.23 of the Board's Regulation Y (12�C.F.R. 225.23) to engage de novo in the following nonbanking activities through its wholly owned subsidiary, Crestar Securities Corporation, Richmond, Virginia ("Company"): (1) Underwriting and dealing in, to a limited extent, certain municipal revenue bonds (including certain unrated and "private ownership" municipal revenue bonds), 1-4 family mortgage-related securities, consumer receivable-related securities, and commercial paper (collectively, "bank-ineligible securities"); and (2) Acting as agent in the private placement of all types of securities, and buying and selling all types of securities on the order of customers as a "riskless principal." Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 7784 (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. Applicant, with total consolidated assets of approximately $18.8�billion, is the 43rd largest banking organization in the United States.1 Applicant owns one commercial bank subsidiary that operates in Virginia, Maryland, and the District of Columbia and engages, through other subsidiaries, in various permissible nonbanking activities. Company is, and will continue to be, registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15�U.S.C. � 78a et seq.) and a member of the National Association of Securities Dealers, Inc. ("NASD").2 Accordingly, Company is, and will continue to be, subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the SEC, and the NASD. Underwriting and Dealing in Bank-Ineligible Securities The Board previously has determined that, subject to the prudential framework of limitations established in previous decisions to address the potential for conflicts of interests, unsound banking practices, or other adverse effects ("section 20 firewalls"), the proposed activities of underwriting and dealing in bank-ineligible securities are so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.3 Applicant has committed that Company will conduct these underwriting and dealing activities using the same methods and procedures and subject to the same prudential limitations established by the Board in the Section 20 Orders.4 The Board also has previously concluded that underwriting and dealing in "private ownership" industrial development bonds that qualify as "exempt facility bonds" under section 142 of the Internal Revenue Code ("Code")5 is a permissible activity under section 4(c)(8) of the BHC Act.6 Company will conduct this activity according to the prudential limitations set forth in the Section�20 Orders.7 In addition, the Board has determined that the conduct of the securities underwriting and dealing activities proposed by Applicant is consistent with section�20 of the Glass-Steagall Act (12 U.S.C. � 377), provided that the company engaged in the underwriting and dealing activities derives no more than 25 percent of its total gross revenues from underwriting and dealing in bank-ineligible securities over any two-year period.8 Applicant has committed that Company will conduct its bank-ineligible securities underwriting and dealing activities subject to the Board's revenue test.9 Private Placement and "Riskless Principal" Activities Private placement involves the placement of new issues of securities with a limited number of sophisticated purchasers in a nonpublic offering. A financial intermediary in a private placement transaction acts solely as an agent of the issuer in soliciting purchasers and does not purchase the securities and attempt to resell them. Securities that are privately placed are not subject to the registration requirements of the Securities Act of 1933 and are offered only to financially sophisticated institutions and individuals and not to the public. Company will not privately place registered securities and will only place securities with customers that qualify as accredited investors. "Riskless principal" is the term used in the securities business to refer to a transaction in which a broker-dealer, after receiving an order to buy (or sell) a security for a customer, purchases (or sells) the security for its own account to offset a contemporaneous sale to (or purchase from) the customer.10 A broker-dealer acting as a riskless principal is not obligated to enter into a transaction with its customer until after the broker-dealer executes the offsetting transaction for its own account. Riskless principal transactions are understood in the industry to include only transactions in the secondary market. Thus, Company would not act as a riskless principal in selling bank-ineligible securities at the order of a customer that is the issuer of the securities to be sold, or in any transaction where Company has a contractual agreement to place the securities as agent of the issuer. Company also would not act as a riskless principal in any transaction involving a bank-ineligible security for which it or an affiliate makes a market. The Board has determined that, subject to the limitations established by the Board in prior orders, the proposed private placement and riskless principal activities are so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.11 The Board also has determined that acting as agent in the private placement of securities, and purchasing and selling securities on the order of investors as a riskless principal, do not constitute underwriting and dealing in securities for purposes of section 20 of the Glass-Steagall Act, and, therefore, that revenue derived from these activities is not subject to the revenue limitation on bank-ineligible securities underwriting and dealing activities.12 Applicant has committed that Company will conduct its private placement activities using the same methods and procedures and subject to the same prudential limitations as those established by the Board in Bankers Trust and J.P. Morgan, including the comprehensive framework of restrictions imposed by the Board in connection with underwriting and dealing in bank-ineligible securities, which were designed to avoid potential conflicts of interests, unsound banking practices, and other adverse effects.13 Applicant also has committed that Company will conduct its riskless principal activities subject to the limitations previously established by the Board.14 Among the limitations discussed more fully in Bank of New York and the Riskless Principal Order, Applicant has committed that Company will not act as riskless principal for registered investment company securities or for any securities of investment companies that are advised by Applicant or any of its affiliates. Also, neither Company nor its affiliates will hold themselves out as making a market in the bank-ineligible securities that Company buys and sells as riskless principal, or enter quotes for specific bank-ineligible securities in any dealer quotation system in connection with Company's riskless principal transactions, except that Company and its affiliates may enter bid or ask quotations, or publish "offering wanted" or "bid wanted" notices on trading systems other than NASDAQ or an exchange, if Company or an affiliate does not enter price quotations on different sides of the market for a particular security for two business days.15 Other Considerations In order to approve this notice, the Board also must determine that the proposed activities are a proper incident to banking, that is that the proposal "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."16 As part of the Board's evaluation of these factors, the Board considers the financial and managerial resources of the notificant and its subsidiaries and the effect the transaction would have on such resources.17 The Board has reviewed the capitalization of Applicant and Company in accordance with the standards set forth in the Section 20 Orders and finds the capitalization of each to be consistent with approval. The determination of the capitalization of Company is based on all the facts of record, including Applicant's projections of the volume of Company's underwriting and dealing activities in bank-ineligible securities. Based on all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of the notice. As noted above, Applicant has committed that Company will conduct its bank-ineligible securities underwriting and dealing activities in accordance with the prudential framework established by the Board's Section 20 Orders. The Board has concluded that, under the framework and conditions established in this order and prior orders, Company's conduct of the proposed limited securities underwriting and dealing, private placement, and riskless principal activities is not likely to result in significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. The Board expects, moreover, that the de novo entry of Company into the market for the proposed services would provide added convenience to Applicant's customers, would lead to improved methods of meeting customer financing needs, and would increase the level of competition among providers of these services. The Board has determined, therefore, that the performance of the proposed activities by Company can reasonably be expected to produce public benefits that outweigh possible adverse effects under the proper incident to banking standard of section�4(c)(8) of the BHC Act. Accordingly, and for the reasons set forth in this order and in the Section 20 Orders, the Board has concluded that Applicant's proposal to engage in the proposed activities is consistent with the Glass-Steagall Act, and that the proposed activities are so closely related to banking as to be proper incidents thereto within the meaning of section 4(c)(8) of the BHC Act, provided that Applicant limits Company's activities as specified in this order, the Section�20 Orders (as modified by the Modification Orders), and the other orders referenced herein. Based on all the facts of record, and subject to the commitments made by Applicant, as well as the terms and conditions set forth in this order and in the Board orders noted above, the Board has determined that the notice should be, and hereby is, approved. The Board's approval of the proposal extends only to the activities conducted within the limitations of those orders and this order, including the Board's reservation of authority to establish additional limitations to ensure that Company's activities are consistent with safety and soundness, avoidance of conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in any manner other than as approved in this order and the Section 20 Orders, as modified by the Modification Orders, is not authorized for Company. The Board's determination also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.23(g) of Regulation Y (12 C.F.R. 225.7 and 225.23(g)), and to the Board's authority to require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure 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 is specifically conditioned on compliance by Applicant and Company with all the commitments made in connection with the notice, including the commitments referenced in this order and the Board's regulations and orders noted above. These commitments and conditions 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 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 the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

By order of the Board of Governors,18 effective April 14, 1997. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Footnotes 1 Asset and ranking data are as of December 31, 1996. 2 Company currently engages in a variety of permissible nonbanking activities including lending, advisory, leasing, and securities brokerage activities and underwriting and dealing in obligations of the United�States, general obligations of states and their political subdivisions, and other obligations that state member banks may underwrite and deal in under 12 U.S.C. �� 335 and 24(7). See 12 C.F.R. 225.25(b)(1), (4), (5), (15), and (16). Company also engages in insurance agency activities pursuant to section 225.25(b)(8)(vii) of the Board's Regulation Y ("Exemption G"). Exemption G is one of seven specific exemptions enacted by Title VI of the Garn-St. Germain Depository Institutions Act of 1982 to that Act's general prohibition on insurance activities by bank holding companies. The exemption authorizes those bank holding companies that engaged in insurance agency activities prior to 1971 with prior Board approval to engage or control a company engaged in insurance agency activities. 3 See Citicorp et al., 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert. denied, 486 U.S. 1059 (1988), as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 61�Federal Register 57,679 (1996) (collectively, "Section 20 Orders"). 4 To address potential conflicts of interests arising from Company's conduct of full-service brokerage activities together with underwriting and dealing in bank-ineligible securities, Applicant has committed that Company will inform its full-service brokerage customers at the commencement of the relationship that, as a general matter, Company may be a principal or may be engaged in underwriting with respect to, or may purchase from an affiliate, those securities for which brokerage and advisory services are provided. In addition, at the time any brokerage order is taken, the customer will be informed (usually orally) whether Company is acting as agent or principal with respect to a security. Confirmations sent to customers also will state whether Company is acting as agent or principal. See PNC Financial Corp., 75 Federal Reserve Bulletin 396 (1989). 5 See 26 U.S.C. � 142. 6 See The Bank of New York Company, Inc., 82 Federal Reserve Bulletin 748 (1996) ("Bank of New York"); Bank South Corporation, 81�Federal Reserve Bulletin 1116 (1995). In addition to the private ownership bonds discussed in these previous orders, Applicant proposes that Company be permitted to engage to a limited extent in underwriting and dealing in private ownership bonds that are issued for the following traditional government services: qualified residential rental projects, qualified hazardous waste facilities, and environmental enhancements for existing hydroelectric generating facilities, all of which qualify as "exempt facility bonds" under the Code. Exempt facility bonds are issued to finance the acquisition or construction of facilities that provide certain types of traditional government services. 7 In connection with its proposal to underwrite and deal in unrated municipal revenue bonds, including unrated public ownership and "private ownership" industrial development bonds, Applicant has committed that Company will not underwrite any unrated municipal revenue bonds until Company conducts an independent credit review to determine that the securities are of investment grade quality and that no single issue of unrated municipal revenue bonds, including unrated public ownership and "private ownership" industrial development bonds, underwritten by Company would exceed $7.5�million. Applicant also has provided other commitments previously relied upon by the Board in authorizing a section�20 company to engage to a limited extent in underwriting and dealing in unrated municipal revenue bonds. 8 See Section 20 Orders. Effective March 6, 1997, the Board increased from 10 percent to 25 percent the proportion of total revenue that a section 20 subsidiary may derive from underwriting and dealing in bank-ineligible securities. See Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 68,750 (1996). Compliance with the revenue limitation shall be calculated in accordance with the method stated in the Section 20 Orders, as modified by the Order Approving Modifications to Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989), and 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996) (collectively, "Modification Orders"). 9 Company also may engage in activities that are necessary incidents to the proposed underwriting and dealing activities. Unless Company receives specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently, any revenues from the incidental activities must be counted as ineligible revenues subject to the Board's revenue limitation. 10 See SEC Rule 10b-10(a)(8)(i) (17 C.F.R. 240.10b-10(a)(8)(i)). The Board notes that Company, as a registered broker-dealer, must conduct its riskless principal activities in accordance with the customer disclosure and other requirements of federal securities laws and regulations. 11 See J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). 12 See Bankers Trust. 13 Among the prudential limitations discussed more fully in Bankers Trust and J.P. Morgan are that Company will not privately place open-end investment company securities or securities of investment companies that are advised by Applicant or any of its affiliates. In addition, Company will make no general solicitation or general advertising for securities it places. 14 See Bank of New York; Order Revising the Limitations Applicable to Riskless Principal Activities, 82 Federal Reserve Bulletin 759 (1996) ("Riskless Principal Order"). 15 Effective April�21, 1997, the proposed private placement and riskless principal activities will be included in the "laundry list" of nonbanking activities permissible for bank holding companies that is set forth in Regulation Y. See 62 Federal Register 9290 (1997) (to be codified at 12�C.F.R. 225.28(b)(7)(ii) and (iii)). Accordingly, from and after that date, Company may engage in such activities subject only to those conditions set forth in Regulation Y, as amended. 16 12 U.S.C. ��1843(c)(8). 17 See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155 (1987). 18 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer.

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1997 Orders on banking applications