Orders issued under Bank Holding Company Act - Legal Developments - Mizuho Financial Group

Federal Reserve Bulletin,  April, 2003  by Robert deV. Frierson

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Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act

Mizuho Financial Group, Inc.
Tokyo, Japan

Order Approving the Formation of Bank Holding Companies and Acquisition of Nonbanking Companies

Mizuho Holdings, Inc., Tokyo, Japan ("Mizuho Holdings"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has submitted applications on behalf of Mizuho Financial Group, Inc. ("MHFG") and Mizuho Asset Trust & Banking Co., Ltd. ("MHAT") (collectively, "Applicants") under sections 3 and 4 of the BHC Act in connection with an internal reorganization of the operations of Mizuho Holdings and its subsidiaries. MHFG has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [section] 1842) to become a bank holding company by acquiring Mizuho Holdings and indirectly acquiring Mizuho Corporate Bank of California, Los Angeles, California ("MCB California"); Mizuho Corporate Bank (USA), New York, New York ("MCB (USA)"); and Mizuho Trust & Banking Co. (USA), also in New York ("MTBC (USA)"). MHAT has requested the Board's approval to become a bank holding company by merging with Mizuho Trust & Banking Co., Ltd., a subsidiary bank holding company of Mizuho Holdings also in Tokyo, and thereby directly acquire MTBC (USA). (1)

MHFG also has requested the Board's approval under section 4(c)(8) and 4(j) of the BHC Act (12 U.S.C. [section] 1843(c)(8) and (j)) and section 225.28 of the Board's Regulation Y (12 C.F.R. 225.28) to acquire the existing nonbanking companies of Mizuho Holdings and thereby engage in certain permissible nonbanking activities. (2) Applicants do not propose to expand the banking or nonbanking operations of Mizuho Holdings in the United States or to acquire or control any additional U.S. banks.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (68 Federal Register 1615 (2003)). 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 sections 3 and 4 of the BHC Act.

Mizuho Holdings, with total consolidated assets equivalent to $1.2 trillion, is the largest banking organization in the world by assets. (3) Mizuho Holdings operates depository institutions in California and New York. MCB California, with total consolidated assets of $592 million, controls deposits of $323 million, representing less than 1 percent of total deposits of insured depository institutions in California. (4) In New York, MCB (USA), with consolidated assets of $3.6 billion and deposits of $1 billion, and MTBC (USA), with consolidated assets of $118.3 million and deposits of $48.8 million, together control less than 1 percent of total deposits of insured depository institutions in that state.

Factors Reviewed by the Board

The BHC Act sets forth the factors that the Board must consider when reviewing the formation of bank holding companies or the acquisition of banks. These factors are the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved; the convenience and needs of the community to be served, including the records of performance of the relevant insured depository institutions under the Community Reinvestment Act ("CRA"); (5) the availability of information needed to determine and enforce compliance with the BHC Act and other applicable federal banking laws; and, in the case of applications involving a foreign bank, whether it is subject to comprehensive supervision and regulation on a consolidated basis by its home country supervisor. (6)

The Board has considered these factors in light of a record that includes information provided by Applicants, confidential supervisory and examination information from various federal agencies, and publicly reported financial and other information. The Board also has considered information from Japan's Financial Services Agency ("FSA"), the primary home country supervisor of Mizuho Holdings. The Board notes that the FSA has issued a preliminary approval of the proposed restructuring. In addition, the Board has considered all the public comments received on the proposal. (7)

Competitive Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly. The BHC Act also prohibits the Board from approving a proposed bank acquisition that would substantially lessen competition in any relevant banking market unless the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served. (8) This proposal would effect an internal reorganization of existing operations and would not result in either an expansion of operations or an acquisition of an additional bank in the United States. 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 any relevant banking market.