Who must file?
A state member bank must file an application for prior Federal Reserve approval under section 5(a) of the Bank Service Company Act (BSC Act) to invest in or establish a bank service company if the company would engage in activities under sections 4(c), 4(d), or 4(e) of the BSC Act. A bank (regardless of its charter) must file an application for prior Federal Reserve approval under section 5(b) of the BSC Act to invest in or establish a bank service company if the company would engage in activities under sections 4(b) or 4(f) of the BSC Act.
Publication requirements - newspaper/Federal Register
No publication notice is required for applications under section 5 of the BSC Act.
The information required in Form FR Y-4 must be submitted. The bank's filing must include the following information:
- a description of each proposed activity and a discussion of how the activity is consistent with section 4(f) of the BSC Act;
- the name(s) of the bank(s) proposing to invest in the bank service company;
- a description of the terms and sources of funds for the transaction for each investing bank,
- the effect of the proposal on competition if there are multiple investing banks that are currently engaged in any activities to be conducted by the bank service company; and
- pro forma financial statements and three-year projections for the proposed bank service company.
Processing time frames
The Federal Reserve normally acts on an application under section 5 within 30 or 60 calendar days after receipt unless the Federal Reserve notifies the applicant that the processing period is being extended.
For an application submitted under section 5, the Federal Reserve considers the following:
- the financial and managerial resources and future prospects of the investing bank(s) and the bank service company, including the financial capability of a bank to make an investment in the bank service company;
- the potential for any adverse effects, such as undue concentration of resources, unfair or decreased competition, conflicts of interest, or unsafe or unsound banking practices; and
- whether the proposed activities to be conducted by the bank service company have been approved for bank holding companies by the Board through regulation or Order.
Proposals to invest in or establish a bank service company may be consummated immediately.