Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Bank Examinations > FDIC Enforcement Decisions and Orders




FDIC Enforcement Decisions and Orders

ED&O Home | Search Form | Text Search | ED&O Help


{{5-31-02 p.C-1785}}

   [10,410A] In the Matter of Banco Santander Puerto Rico, San Juan, Puerto Rico, Docket No. 91-408kk (12-19-91).

   FDIC issues order conditionally granting approval for waiver of cross-guaranty.

   [.1] Cross-Guaranty—Waiver—Prior Notice of Acquisitions Required

   [.2] Cross-Guaranty—Waiver—Effective Upon Obtaining Regulatory Approvals for Purchase

   [.3] Cross-Guaranty—Waiver—Expiration

   [.4] Cross-Guaranty—Waiver—Reasonable Losses

   [.5] Cross-Guaranty—Waiver—Compliance with Federal Reserve Act Restrictions—Required

   [.6] Cross-Guaranty—Waiver—Revocation for Non-Compliance

In the Matter of
BANCO SANTANDER PUERTO RICO
SAN JUAN, PUERTO RICO
and
SANTANDER FEDERAL SAVINGS BANK
BAYAMON, PUERTO RICO
(Commonly Controlled Insured Depository Institutions)
Which may become related to
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, NEW JERSEY
NEWARK, NEW JERSEY
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, NORTH JERSEY
TOTOWA, NEW JERSEY
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, SOUTH JERSEY
BURLINGTON TOWNSHIP, NEW JERSEY
FIDELITY BANK, NATIONAL ASSOCIATION
PHILADELPHIA, PENNSYLVANIA
MERCHANTS BANK, NATIONAL ASSOCIATION
ALLENTOWN, PENNSYLVANIA
MERCHANTS BANK (NORTH)
WILKES-BARRE, PENNSYLVANIA
(Commonly Controlled Insured Depository Institutions)
ORDER CONDITIONALLY GRANTING APPROVAL FOR WAIVER OF CROSS-GUARANTY

FDIC-91-408kk

   WHEREAS, Banco de Santander, Sociedad Anonima de Credito, Madrid, Spain ("Banco de Santander" or "Applicant"), pursuant to an agreement between Banco de Santander and First Fidelity Bancorporation, Newark, New Jersey ("First Fidelity") dated March 18, 1991 (the "Investment Agreement"), has expressed a willingness to purchase warrants (the "Warrants") and 9,505,000 shares (the "Shares") of newly issued shares of common stock of First Fidelity for $220,991,250 that would result in Banco de Santander owning approximately 14.0 percent of First Fidelity's common stock;

   WHEREAS, Banco de Santander would hold an option pursuant to the warrants to purchase up to an additional 9,505,000 shares of stock for an additional infusion of up to $242,000,000, which if fully exercised would result in Banco de Santander's ownership of approximately 24.0 percent of First Fidelity's common stock;

   WHEREAS, First Fidelity is a bank holding company and presently owns the following subsidiaries which are insured depository institutions: First Fidelity Bank, National Association, New Jersey, Newark, New Jersey; First Fidelity Bank, National Association, North Jersey, Totowa, New Jersey; First Fidelity Bank, National Association, South Jersey, Burlington Township, New Jersey; Fidelity Bank, National Association, Philadelphia, Pennsylvania; Merchants Bank, National Association, Allentown, Pennsylvania; and Merchants Bank (North), Wilkes-Barre, Pennsylvania;

   WHEREAS, Banco de Santander is a bank holding company and presently owns the following subsidiaries which are insured depository institutions: Banco Santander Puerto Rico, San Juan, Puerto Rico, and Santander Federal Savings Bank, Bayamon, Puerto Rico;

   WHEREAS, Banco de Santander and First Fidelity have been advised by the Board of Governors of the Federal Reserve System that Banco de Santander's investment in First Fidelity will provide Banco de Santander with a "controlling influence" within the definition of "control" as that term is defined in section 2(a)(2)(c) of the Bank Holding Company Act ("BHC Act"), 12 U.S.C. §1841(a)(2)(c);

   WHEREAS, the respective subsidiaries of Banco de Santander and First Fidelity could be construed as being commonly controlled pursuant to section 5(e)(9) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1815(e)(9);

   WHEREAS, Banco de Santander has requested pursuant to the provisions of section 5(e)(5)(A) of the Act, 12 U.S.C. §1815(e)(5)(A), that the Federal Deposit Insurance Corporation ("FDIC" or the "Corporation") grant an exemption from liability for any losses the FDIC may incur or reasonably anticipates incurring from any default of and/or assistance by the FDIC to any insured depository institution subsidiary of First Fidelity;

   WHEREAS, the Board of Directors ("Board") of the FDIC, having fully considered the facts and information relating to the foregoing request for exemption from liability, has concluded that an exemption is in the best interest of the Bank Insurance Fund and the Savings Association Insurance Fund and that approval of the application for exemption should be and hereby is granted, subject to the conditions and restrictions set forth below.

   IT IS THEREFORE ORDERED:

   [.1]1. That, subject to the terms and conditions of this ORDER CONDITIONALLY GRANTING APPROVAL FOR WAIVER OF CROSS-GUARANTY (the "ORDER"), there is hereby granted to the insured depository institutions controlled by Applicant, whether in existence or hereafter acquired, an exemption with respect to any liability that may arise pursuant to section 5(e) of the Act with respect to any of the insured depository institutions controlled by First Fidelity, whether in existence or hereafter acquired; however, the exemption with respect to any insured depository institutions hereafter acquired by either First Fidelity or Banco de Santander shall not take effect unless and until the Regional Director of the FDIC's New York Regional Office ("Regional Director") has received prior written notice of each such acquisition of control.

   [.2]2. This ORDER shall become effective upon obtaining the regulatory approvals required to consummate the purchase by Banco de Santander of the Shares and the Warrants under the Investment Agreement which includes any approvals, consents, or waivers required by law from, or any filing with, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Pennsylvania Department of Banking, the New Jersey Department of Banking, and the Puerto Rico Department of Banking.

   [.3]3. Notwithstanding the foregoing, this exemption granted by this ORDER shall expire upon the earlier of: (i) December 31, 1991, unless, prior to such date, a minimum of $200,000,000 of the proceeds of the sale of First Fidelity common stock to Banco de Santander is provided to some of the insured depository institutions controlled by First Fidelity as Part 325 Tier 1 capital, as that term is presently defined by section 325.2 of the FDIC's Rules and Regulations, 12 C.F.R. §325.2, in a form acceptable to and allocated among those institutions in a manner acceptable to, the Regional Director; (ii) the date on which Banco de Santander, or any subsidiary of Banco de Santander, acquires actual ownership or control of 25 percent or more of any class of voting securities of First Fidelity or any insured depository institution subsidiary institution of First Fidelity; (iii) the date on which the FDIC's Board of Directors determines that Banco de Santander is exerting, directly or indirectly, actual managerial or operational control over First Fidelity or one or more of First Fidelity's insured depository institution subsidiaries; or (iv) December 31, 1995, unless in the meantime, the Corporation has approved a request for an extension of such date. The Regional Director, or his designee, may approve such requests for an extension in increments not to exceed one year. The Applicant shall promptly notify the Regional Director in writing upon the termination of the Investment Agreement, the amendment or other modification of the Investment Agreement in any material respect, and/or the occurrence of any event which would trigger an expiration under this paragraph.

   [.4]4. The exemption granted by this ORDER will apply only to losses resulting from the default of, or Corporation assistance to, any insured depository institution subsidiary of First Fidelity. Liability for loss resulting from the default of, or Corporation assistance to, any other insured depository institution controlled by the Applicant will remain with all other commonly controlled insured depository institutions.

   [.5]5. During the period the exemption granted by this ORDER is in effect, the Applicant and all insured depository institution subsidiaries of the Applicant shall comply fully with the restrictions of section 23A and 23B of the Federal Reserve Act without regard to section 23A(d)(1), 12 U.S.C. §371(d)(1), in connection with any transactions between any of such subsidiaries and any insured depository institution subsidiary of First Fidelity.

   [.6]6. The FDIC shall have the right to revoke the exemption granted by this ORDER after giving the Applicant written notice of said revocation and a reasonable opportunity to be heard should the FDIC determine that the Applicant, or any insured depository subsidiary of the Applicant, ceases to comply with the aforesaid restrictions.

   By order of the Board of Directors.

   Dated at Washington, D.C., this 19th day of December, 1991.

ED&O Home | Search Form | Text Search | ED&O Help

Last Updated 6/6/2003 legal@fdic.gov