Orders issued under Bank Holding Company Act

Federal Reserve Bulletin,  Summer, 2004  by Robert DeV. Frierson

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Based on a careful review of these and other facts of record, the Board concludes that the SOD data overstate the competitive effect of the proposal in the Houston banking market and that the characteristics of the market further mitigate the transaction's potential anticompetitive effects. Although the analysis and data in this case are more complex than in previous cases, the Board believes that, together and under the particular circumstances of this case, they provide a more accurate picture of the likely competitive effects of the proposed transaction.

The Board also has consulted with and considered the views of the DOJ on the competitive effects of the proposal in the Houston banking market. The DOJ has advised the Board that consummation likely would not have a significantly adverse effect on competition in any relevant market. In addition, the Board has requested the views of the Comptroller of the Currency ("OCC") on the competitive effects of the proposal, and the OCC has not indicated that it raises competitive issues.

In this light, and based on all the facts of record, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in the Houston banking market or in any relevant banking market. Accordingly, competitive considerations are consistent with approval.

Financial, Managerial, and Other Supervisory Factors

Section 3 of the BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal and certain other supervisory factors. The Board has carefully considered the financial and managerial resources and future prospects of JP Morgan, Bank One Corporation, and their respective subsidiary banks in light of all the facts of record. In reviewing the financial and managerial factors, the Board has considered, among other things, confidential reports of examination and other supervisory information received from the primary federal supervisors of the organizations and institutions involved in the proposal, the Federal Reserve System's confidential supervisory information, and public comments on the proposal. In addition, the Board has consulted with the relevant supervisory agencies, including the OCC, the primary supervisor for two of JP Morgan's banks and all of Bank One Corporation's banks. The Board also has considered publicly available financial and other information on the organizations and their subsidiaries and all information on the proposal's financial and managerial aspects submitted by JP Morgan and Bank One Corporation during the application process.

In addition, the Board has considered the public comments that relate to these factors. Commenters expressed concern about the size of the combined organization and questioned whether the Board and other federal agencies have the ability to supervise the combined organization and whether the combined organization presents special risks to the federal deposit insurance funds or the financial system in general.