Preview
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NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022
Exhibit 45
FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022
JUN. 23. 2004 12:4 5PM Ma i I OCC_NY FI EL D_O FFICE N0.9 24 P. 1/9
()
Comptrolle r of the Currency
Administra tor of National Banks
Northeaste rn District
1114 Avenue of the Americas, Suite 3900
New York, New York 10036
June 23 , 2004
Martha A. Pampel, Esq.
Associate General Counsel
HSBC North America Jnc.
2700 Sanders Road
Prospect Heights, Illlilois 60070
Re: Applicati ons to merge HSBC Bank & Trust Company (Delaware ), National
Associati on, Wilmingt on, Delaware , into a newly establishe d interim national bank
with the title, HSBC Bank USA, National Association, New Castle, Delaware , and
the subseque nt merger of HSBC Bank USA, Buffalo, New York, into HSBC Bank
USA, National Associatio n, New Castle, Delaware , under the charter number and
title of the latter. '
Control Numbers: 2004-NE- 02-0020 and 2004-NE- 02-0021
Dear Ms. Pampel:
This is to inform you that on June 23, 2004, the Office of the Comptrol ler of the
Currency c•ocC") conditionally approved HSBC USA, Inc.'s proposal to merge HSBC
Ban{{ & Trust Company (Delaware), National Associati on (''HBT"), Wihrrington,
Delaware , into a newly formed interim national bank with the title, HSBC Bank USA,
National Associatio n, New Castle, Delaware.
The OCC also condition ally approved, on June 23, 2004, the merger of HSBC Bank USA
("HSBC" ), Buffalo, New York, into HSBC Bank USA, National Associati on, ("HUNA "
or "Resultin g Bank'') New Castle, Delaware (the resulting bank from the merger
1
described above), under the charter and the titleof the latter. HSBC is currently a New
York state-char tered bank regulated by the Board of Governor s of the Federal Re.serve
System and the New York State Banking Departme nt
1
HBT and HSBC, are subsidiaries of HSBC USA, Inc., a Marylaud corporation, which is indirectly owned
by HSBC Holdings plc, Lo;c,don, England. HUNA will be a direct subsidiary o£HSBC USA, Inc.
Confidential HSBC-RPCHS_00004929
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Legal Authorit y
ed
The merger ofHBT into the HSBC Bank USA, Nationa l Associa tion is legally authoriz
nuder 12 U.S.C. § 215a, and tbemerg erofHSB C into HUNA is legally authorized as an
interstate merger transacti on W1der tb,e Ri~gle-Neal Act, 12 U.S.C. §§ 215a-l and 1831u.
The OCC reviewe d the propose d merger under the criteria of the Bank Merger Act (12
U.S_C, § 1828(c)), the CommunityReinvest:o.i,ent Act (12 U.S.C. §§ 2901 et seg_), and
applicable OCC regulatio ns, includin g 12 C.F.R. § 5.33, and policies. Among other
m.att~rs, we found that the propose d transaction would not have any anticom petitive
effects. The OCC consider ed the financial and manager ial resource sof the banks, their
future prospect s, and the convenie nce and needs of the commun ities to be served. In
addition, the Bank Merger Act requires the OCC to consider, " ... the effective ness of any
insured deposito ry institutio n involved in the propose d merger transact ion in combati ng
money lau.;udering activities, includin g in overseas branches ." (12 U.S.C. §
1828(c)( l 1).)2 We consider ed these factors and believe the approva l of thistransacti on is
consistent with the statutory provisions.
Commun ity Reinves ttnent Act
With respect to the Commu nity Reinves tment Act ("CRA" ), the OCC takes into account
the applican ts' record of helping to meet the credit needs of their entire commun ities,
includmg low- and moderat e-incom e neighborhoods, when evaluati ng certain
3
applications, includin g transactions subject to the Bank Merger Act. Based on HSBC' s
CRA record of perform ance, the OCC foUlld approval to be consiste nt with the CRA.
HBT is a national bank whose operations are limited to those of a trust compan y and
activities related thereto, HBT does not accept deposits, and it is not an insured bank
under the Federal Deposit fusurance Act. As a result, HBT is not subject to the
..,requirements of the CRA and does not have a CRA performance rating.
ent
HSBC's two most recent CRA examina tions by the New York State Banking Departm
and the Federal Resenre Bank of New York (''Reserv e Bank") have resulted in
consecut ive "Outstan ding" ratings, The Reserve Bank's Perform ance Evaluati on ("PE")
dated Februar y 24, 2003, and covering perform ance from January 1, 2001, through
Decemb er 31, 2002, assigned an overall "Outstan ding" rating under the Lending ,
Investment, and Service Tests. The Reserve Bank found that the total volume of
mortgage and small business lendmg showed excellent responsi veness to credit needs
in
tbe bank's assessm ent areas, the o-verall distribut ion of loans to individu als of different
income levels was excellent, commun ity developm ent lending levels were excellent, and
the "!'Plicatio ns ~
iOCC examiners conducted a linrited on-site examinati on ofHSBC in connectio n with
istaking appropriatemeasures tostrengtheu complianc ewith anti-mone y
determ:i.tled that the bank
laundering laws and regulations.
3See 12 U.S.C. § 2903; 12 CF.R. § 25.29(a). The special commUD.ity reinvestmeDt ;requirements of the
Riegle-Ne al Act,12 U.S.C. § 1831 (u)(b)(3), not applicable because HSBC and the n.ewly formed
a:t"t':
Thus, the Resulting Bank will not have ab.ranch or bank affiliate
m±erimnation.al bank are affiliated baok.!L
itumediately following the mergen: any
:in stateiu which HSBC did ll.Ot previously have a brauch or bank
a£Eiliate.
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the level of qualified investm ents was excellent. Overall, the bank's retail delivery
systems were readily accessib le to geograph ies and io.dividuals of differing income levels
through.out the bank's assessm ent areas. The Reserve Bank noted that it did not identify
any violation s·of the substant ive provisio ns of the anti-disc riminatio n laws and
regulations. The OCC does not expect the merger to have any adverse impact on ~e
CRA efforts or program s of the Resultin g Bank, which will be headqua rtered in New
Castle, Delawar e.
The Resultin g Bank's CRA assessm ent area will be expande d beyond HSBC's current
assessm ent area to include the northem half of New Castle· County in the State of
Delaware.
4
This area-includes the Wilmington-Newarlc Metropo litan Statistic al Area and
consists of 119 census tracts. All low-inco me census tracts in Delawar e are located
within thls area.
The applican t has represen ted that Ht.NA will launch and promote a CRA program in
Delawar e that includes commun ity developm ent loans, investme nts and grants. In
addition, HUNA will retain a full-time CRA officer to supPort its CRA efforts iu
Delawar e and to develop relations hips with commun ity develop ment financia l
intermediaries and commun ity developm ent groups, consortia, and intennedi.aries.
e
During the first 12 months after consun.nnation, the Resultin g Bank. as part of a Delawar
commun ity developm ent program . has committ ed to provide at least $2 million towards
communi.ty developm ent loans and investments, and up to $250,00 0 for commun ity
developm ent grants. '
The OCC received commen ts from one commun ity organization. One concern raised by
tbe commen ter was that HSBC Investments (North America ) Inc. (''HSBC In.vestments"),
HSBC's intenned iate parent company, will try to move its subpritn e operatio ns from
Househo ld Internati onal, Inc. ("IIlI'), to HUNA in order to preempt the applicat ion of
state consume r protectio n laws.
5
Howeve r, the applican t has represen ted that HIT' s
branch-b ased consume r lending business, conducte d through Househo ld Finance
Compan y ("HFC") aud Benefici al Corpora tion ("Bene:ficiar'), will continue to be
operated as a state-reg ulated business. Moreover, the applican t has represen ted that HFC
HSBC's current a.sae86Illent area includes most of the State of New York and small portions
4 of California
Florida,Oregon. PennsylV"ania,and Washingto n.
of HSBC
5
BII, which was acq:uiced by HSBC Holdings plc, o:c. March 28, 2003, is a direct subsidiary
America) Inc. (Delaware). The OCC has noregulatory or supervisoryauthority over
h.\vestments (North
National Associatio;n,alimi1ed purpose
Hil or its subsidiaries, 'With the exception ofBoweh old Bank (SB),
from the OCC ~ of
credit card bank, which receiV"ed a "Satisfact ory" Communi ty Rew;vestment Act rating
December 16, 2003. BTI and its es
~ubsidiari arenot partiestothese na.
applicatio
How!Wer, as
M.w.y of the concerns raised by the commente r related to Im and its D.on-bank subsidiaries.
the OCC have
noted above, the OCC currently has DO regulatory authority over these entities, :om -would
proposed n.
transactio According ly, the OCC
any rngulatory authority over those entities as a result of the
was unable to address thoseconcerm.
Confidential HSBC-RPCHS_ 00004931
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and Benefici al will co;ntinue to meet the commitments of the 2002 multi-sta te settlement
6
agreement addressi ng real estate secured lending practice5.
to
The commen ter also expresse d co11cerns with USBC's lending record to minorities and
low- and moderate-income,(''LMI'') applicants and census tracts in vajous Nm.v Yo{l~
ts
markets in relation to the lending record of HFC and Benefici al to those same applican
and census tracts. Using 2002 Home Mortgage Disclosure Act (''I-Th1DA'') data, the
commenter concluded that HSBC' s prime lending units were lending mostly to whites, 7
while Hil's subprim e Ullits were lending mostly to minorities and LMI applicants.
However, because HSBC Investm ents did not acquire HIT until March 2003, 2002
HMDA data is not a relevant comparison for the actio11s of HSBC Investments.
Furthermore, the applicant provided an analysis of HMDA data indicating that HSBC and
its subsidiary, HSBC Mortgag e Corpora wm, are among the leading mortgag e lenders to
Liv.ll and minority applicants in New York.
The applicant also represen ted that HFC, Beneficial, and HSBC are coopera ting in an
effort to make priUle and near prime products avail.able to qualified HFC and Benefici al
customers. HFC and Beneficial will deliver these products to qualifying customers either
directly or on behalf of HSBC, HFC, Beneficial, and HSBC have ad.opted a common
pricing matrix for these products, and credit unde:rwriting is to be perfonn ed centrally.
Testing of the program has already been conducte d and nationw ide impleme ntation
should be complet e by the end of 2004.
Additionally, HSBC has engaged in a variety of efforts to assist potentia l homebuyers.
For example, the applicant represents that it has recently launched a special mortgag e
progr;-am in Buffalo, Rochester, Syracuse, and Albany, in partnership with conmnm ity
groups, to assist homebu yers with closing costs and to provide home ownersh ip
counseling. The Reserve Bank's 2003 CRAPE recounts HSBC's impleme ntation of
flexible underwriting criteria for New York LMl borrowe rs for the purchas e or
refinancing of properties located in ll1I census tracts.
In sum, based on HSBC's CRA record ofperfo wance, the OCC found approva l to be
consistent with tho CRA..
Request for Hearing
8
The commen ter also requeste d that the OCC conduct a public hearing. After careful
consideration, the OCC has determin ed not to conduct a hearing on these merger
ns
6
The $484 million settlement agn!:ed to by Hil in 2002 will not be affected by the cunent apPlica.tio
OCC
The applicant has represeDted to the thatHIT willcontinue to abide by the
pending be:fore the OCC.
terms of this agreement.
g that a.
It is important to note that HMDA data aloJJ.e: are not adequa.t~ to provide a basis for concludin
7
whether itslesveloflending is .
sufficient Htv.IDA
bank is engaged :in lending discrimination or :in indicating
tiouborrower hiness,
creditwort housing prices,and other factorsrelevant io.
data do not take into con.sidera
ofthe mm:ketsi
iJi.dividual nor do theyfullyreflecttherange of abank's lending activities or efforts.
each
s Additio,:ial.ly, the CO:tnme%ltey requested that the: OCC extend ~ public comment period.
The OCC
tograut anextension of thecomment period,becam:e the commente rdidnot demonstra te
determioed not
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applications. The general standa:rd the OCC applies to determine whether to hold a
public hearing is containe d in 12 C.F.R. § 5.11, '\Vhich provides:
The OCC generally 'grants a hearing request only if the OCC determin es that
written submissions would be jn,sufficient or that a hearing would otherwis e
benefit the decision making process. The OCC also may order a hearing if it
conclude s that a hearing would be in the public interest.
Since the commen ter did not indicate why -written submissions would be insuffici ent to
ed
make an adequate presenta tion of these and other issues to the OCC, the OCC detennin
that the standards for conducti ng a hearing were not satisfied,
For the reasons set forth above, the OCC found that the transacti on met the relevant
statutory criteria. for approval. Inasmuc h as the transacti on also raised no supervis ory or
policy concerns~ the applications are approved.
Commun ity Develop ment Investm ents
HUNA will retain prev:iously-made commun ity develop ment investm ents :under the
investment authority of 12 U.S.C, § 24(Eleventh) and 12 C.F.R Part 24 conce.ming
ity
national bank investme nts in coru.tUunity and economi c develop ment entities, commun
d~velopment projects, and other public welfare investments.
.
First, HUNA will retain the HSBC Commun ity Develop ment Corpora tion (the "CDC")
developm ent corporat ion that has a
The CDC is a wholly o-wned subsidia ry coD.Ullunity
that
primary purpose of commun ity development, specifica lly to build affordable housing
primarily benefits LMI individuals or areas. Currently, the CDC holds no assets other
tban cash of $29,000 . Second, HUNA -will retain equity investme nts of $157,54 4,358 in
limited partnerships and limited liability compani es that finance the develop ment and
operation of affordable housing and qualify for federal low-inco me housing tax credits,
or finance economi c developm ent and are eligible for Kew Markets Tax Credits. Third,
HUNA will retain investme nts of $14,415,610 :in commun ity and economi c develop ment
entities, commun ity develop ment prpjects, ,or other public welfare in-vestments. Those
by
investmeuts primaril y benefit 1MI persons, LMI-inc ome areas, or other areas targeted
a governm ental entity for redevelo pment~ or the :investm ents would receive consider ation
as "qualified :investments" under 12 C.F.!t § 25.23 of the CRA. The aggrega te amount
of HUNA's commun ity develop ment investments will total $171,98 8,968, which is less
than 5 percent of its capital and swplus, and the invesunents do not expose HUNA to
unlimited liability. The investme nts, therefore, are consistent -with Section 24 (Eleventh)
- and Part 24.
nces were
that additiwial time was necessary to develop factual :information, and no extenuating circumsta
theOCC considered allcomments received after
present See 12 C.F.R. § 5.10(b)(2)(ii), (iii).
Howev~,
the close of the commentperiod.
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Inves1ments jn Subsidiar ies
Additionally, HUNA will retain as operating subsidiaries a number of entities that HSBC
currently owns. The applicant has represente d that all subsidiari es will be operated in
accordanc e with all applicable OCC regulation s.
HSBC owns noncontto lling interests in two additional entities, Iden1Ius and The Clearing . ·
House Service Company , LLC. HSBC Financial Services Corp., a wholly owned
subsidiary of HSBC, holds a 7.29% ownership interest in Identrus, a limited liability
company that provides digital certificati on services to banking institution s. HSBC
Clearing Services (USA) Inc., also a wholly owned subsidiary of HSBC, holds a 7.4%
nonvoting interest in The Clearing House Service Company , LLC ("Clearin g House"),
With regard to both of these holdings, HSBC has certified that the Resulting Bank: will
be well-capi talized and well-man aged at the time it acquires the investmen ts; will have
the ability to prevent each enterprise from engaging in activities that are not permissib le
for a. ;national bank or an operating subsidiary because the limited liability agreemen ts
tmder which each of these entities was formed contains provision s to ensure that they will
engage only in activities that are permitted for national banks and their operating
subsidiaries, and permits a member to withdraw if the company engages in any
impermis sible activity; will accollllt for its investments under the equity or cost method
of accounting; and as a legal and accountin g matter, does not have open-end ed liability
for Identrus's obligation s or for the obligation s of Clearing House or any of its
subsidiaries and, thus, its loss exposure as a result of these investmen ts is limited. The
applicant also has certified that Identrus and Clearing House have agreed to be subject to
OCC supervisio n and exammation, subject to the limitation s and requireme nts of section
45 of the Federal Deposit Insurance Act (12 U.S.C. § 1831v) and section 115 of the
Gramm-Leach-Bliley Act (12 U.S.C. § 1820a).
Moreover, the ownership by national banks of a noncontro lling interest in Identru.s meets
the remaining standards for the o-wnership of a noncontrolli.ng interest in an enterprise ,
12 C.F.R. § 5.36(e). The OCC in published precedent has recognize d that national banks
may hold a noncontro lling interest in Identrus. OCC Condition al Approval No. 339
(Novembe r 16, 1999); OCC Corporate Decision No. 2002-4 (February 18, 2002); and
OCC Conditional Approval No , 301 (January 15, 1999), See also 12 C.F.R.
§ 5.34(e)(5)(v)(X). Likewise, the ownership by national banks ofanonco ntrolling
interest in Clearing House meets the remaining standards for the ownership of a
noncontro lling interest in an ente1prise under Section 5.36(e) and the OCC has
determined that national banks may hold a noncontro lling interest in Clearing House.
Interpretiv e Letter by Julie L. Willia.ms, Chief Counsel (May 16, 1997) (to be published ).
Residency Waivers
A request for the residency waivers for the Board of Directors of the interim national
bank and citizenship waiver for director Martin J. G. Glynn is approved. In addition,
your request for the residency waivers for the Board of Directors of the Resulting Bank
'
Confidential HSBC-RPCHS_00004934
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and citizenshi p waivers for directors Martin. J. G. Glynn, Stephen K. Green, James H.
Cleave, Douglas J. Flint, and Carole S. Taylor is also approved.
Consummation Guidance
Please refer to the Business Combinat ion booklet for the required steps to complete the
organizati on of the interim national bank. The steps to complete the mergers are also
contained in. the Business Combinat ion 'B~oldet.
This approval. is granted based on a thorough review of all information available,
inchtding commitm ents and representa tions made in the applications and the merger
agreement and those of your representatives. This includes your represent ation that au,
an affiliate of HSBC, will continue to abide by the terms of a Decembe r 2002 multi-stat e
settlement agreemen t with state attomeys general and regulatory agencies relating to its
non-prime real estate secured lending.
The approval is subject to the following conditions:
1. After consumm ation of tho merger, HONA and its institution -affiliated parties~ as
that term is defined at 12 U.S.C. § 1813(u), shall continue to comply with each
and every term and condition contained in the April 30, 2003 Written Agreemen t
entered into by .and among HSBC, the Federal Reserve Bank of New York (the
''Reserve Bank'), and the New York State Banking Departme nt (''Departm ent';),
docket no.: 03-012-WA/RB-SM (the "Agreeme nf'). For pmposes of clarification,
references in the Agreemen t to 12 C.F.R. § 208.62 and/or to 3 'N.Y.C.R. R. Part
300 shall hereinafte r be deemed to be references to 12 C.F.R § 21.11, and
references in the Agreemen t to 12 C.F.R. § 208.63 shall hereinafte r be deemed to
be references to 12 C.F.R. § 21.21. For purposes of further clarificati on,
references in the Agreemen tto obligation s of HSBC to the Reserve Bank and/or
to the Departme nt shall hereinafte r be deemed to be obligation s af HUNA that ·axe
owed to the OCC.
2. HUNA must notify potential affiliated vendors in writing of the OCC's
e~amination and regulatory authority under 12 U.S.C. § 481 and 12 U.S.C. § 1867
(c). All fuiaJ. Service Level Agreemen ts and other outsouxcing contracts between
HUNA and affiliates must stipulate that the perfonuan ce of services provided by
the affiliated companie s to HUNA is subject to the OCC's examinati on and
regulatory authority. The provision s of 12 C.F.R. § 9 would be applicable to any
.fiduciary activities contracted out to affiliates.
3. Within two years of the consumm ation of the merger between HONA and HSBC,
HUNA must divest, coDfonn, or demonstrate to the satisfactio n of the OCC, the
pormissib ility of the activities and ownership iu.terests held by HSBC Asset
Management (Americas ) Inc. If, within this time period, HUNA divests or
coofonns the acti'Vities and hoklings of this entity, please notify Large Bank
Supervision.
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These condition s are condition s imposed in writing by the agency in connectio n with the
granting of any application or other requests witb:iJ.i the meaning of12 U.S.C. § 1818. As
such, the condition s are enforceab le under 12 U.S.C. § 1818.
As a reminder, the district office :must be advised in writing 10 dayB in. advance of the
desired. e;ffective date for the mergers so that the OCC may issue the necessary
certification.
The OCC will issue a letter certifying consumm ation of the transactio ns when we
receive:
1. Evidence that all required regulatory approvals, waivers, or non-objec tions have
been received.
2. Articles of A$sociati on for the Resulting Bank.
If the merger is not consumm ated within one year from the approval date, the approval
shall automatic ally ternrinate, w:i1ess the OCC grants an extension of the time period.
This condition al approv~ and the activities and coinmuni cations by OCC employee s in
connection with the filing, do not constitute a contract, express or :implied, or any other
obligation binding upon the OCC, the U.S., any agency or entity of the U.S., or my
officer or employee of1he U.S., and do not affect the ability of the OCC to exercise its
supervisory, regulatory and e,;;:amination authorities under applicable 1raw and regulation s.
The foregoing may not be waived or modified by any employee or agency of the QCC or
tb.eU.S.
If you have any questions, please contact me at (212) 790-405 5.
Sincerely,
cc: file
Chron
EIC DiLorenz o
Large Bank Supervisi on
New York State Banking Departme nt
FDIC New York Regional Office
Federal Reserve Bank of New York
Hong Kong Monetary Authority
Financial Services Authority
Confidential HSBC-RPCHS_00004936
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Matthew Lee/ICP
Confidential HSBC-RPCHS_00004937
Preview
FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 Exhibit 45 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 2004 12:4 5PM Ma i I OCC_NY FI EL D_O FFICE N0.9 24 P. 1/9 () Comptrolle r of the Currency Administra tor of National Banks Northeaste rn District 1114 Avenue of the Americas, Suite 3900 New York, New York 10036 June 23 , 2004 Martha A. Pampel, Esq. Associate General Counsel HSBC North America Jnc. 2700 Sanders Road Prospect Heights, Illlilois 60070 Re: Applicati ons to merge HSBC Bank & Trust Company (Delaware ), National Associati on, Wilmingt on, Delaware , into a newly establishe d interim national bank with the title, HSBC Bank USA, National Association, New Castle, Delaware , and the subseque nt merger of HSBC Bank USA, Buffalo, New York, into HSBC Bank USA, National Associatio n, New Castle, Delaware , under the charter number and title of the latter. ' Control Numbers: 2004-NE- 02-0020 and 2004-NE- 02-0021 Dear Ms. Pampel: This is to inform you that on June 23, 2004, the Office of the Comptrol ler of the Currency c•ocC") conditionally approved HSBC USA, Inc.'s proposal to merge HSBC Ban{{ & Trust Company (Delaware), National Associati on (''HBT"), Wihrrington, Delaware , into a newly formed interim national bank with the title, HSBC Bank USA, National Associatio n, New Castle, Delaware. The OCC also condition ally approved, on June 23, 2004, the merger of HSBC Bank USA ("HSBC" ), Buffalo, New York, into HSBC Bank USA, National Associati on, ("HUNA " or "Resultin g Bank'') New Castle, Delaware (the resulting bank from the merger 1 described above), under the charter and the titleof the latter. HSBC is currently a New York state-char tered bank regulated by the Board of Governor s of the Federal Re.serve System and the New York State Banking Departme nt 1 HBT and HSBC, are subsidiaries of HSBC USA, Inc., a Marylaud corporation, which is indirectly owned by HSBC Holdings plc, Lo;c,don, England. HUNA will be a direct subsidiary o£HSBC USA, Inc. Confidential HSBC-RPCHS_00004929 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 2004 12:45PM Mai I OCC_N Y FIE LD_OF FI CE NO. 924 P. 2/ 9 2 Legal Authorit y ed The merger ofHBT into the HSBC Bank USA, Nationa l Associa tion is legally authoriz nuder 12 U.S.C. § 215a, and tbemerg erofHSB C into HUNA is legally authorized as an interstate merger transacti on W1der tb,e Ri~gle-Neal Act, 12 U.S.C. §§ 215a-l and 1831u. The OCC reviewe d the propose d merger under the criteria of the Bank Merger Act (12 U.S_C, § 1828(c)), the CommunityReinvest:o.i,ent Act (12 U.S.C. §§ 2901 et seg_), and applicable OCC regulatio ns, includin g 12 C.F.R. § 5.33, and policies. Among other m.att~rs, we found that the propose d transaction would not have any anticom petitive effects. The OCC consider ed the financial and manager ial resource sof the banks, their future prospect s, and the convenie nce and needs of the commun ities to be served. In addition, the Bank Merger Act requires the OCC to consider, " ... the effective ness of any insured deposito ry institutio n involved in the propose d merger transact ion in combati ng money lau.;udering activities, includin g in overseas branches ." (12 U.S.C. § 1828(c)( l 1).)2 We consider ed these factors and believe the approva l of thistransacti on is consistent with the statutory provisions. Commun ity Reinves ttnent Act With respect to the Commu nity Reinves tment Act ("CRA" ), the OCC takes into account the applican ts' record of helping to meet the credit needs of their entire commun ities, includmg low- and moderat e-incom e neighborhoods, when evaluati ng certain 3 applications, includin g transactions subject to the Bank Merger Act. Based on HSBC' s CRA record of perform ance, the OCC foUlld approval to be consiste nt with the CRA. HBT is a national bank whose operations are limited to those of a trust compan y and activities related thereto, HBT does not accept deposits, and it is not an insured bank under the Federal Deposit fusurance Act. As a result, HBT is not subject to the ..,requirements of the CRA and does not have a CRA performance rating. ent HSBC's two most recent CRA examina tions by the New York State Banking Departm and the Federal Resenre Bank of New York (''Reserv e Bank") have resulted in consecut ive "Outstan ding" ratings, The Reserve Bank's Perform ance Evaluati on ("PE") dated Februar y 24, 2003, and covering perform ance from January 1, 2001, through Decemb er 31, 2002, assigned an overall "Outstan ding" rating under the Lending , Investment, and Service Tests. The Reserve Bank found that the total volume of mortgage and small business lendmg showed excellent responsi veness to credit needs in tbe bank's assessm ent areas, the o-verall distribut ion of loans to individu als of different income levels was excellent, commun ity developm ent lending levels were excellent, and the "!'Plicatio ns ~ iOCC examiners conducted a linrited on-site examinati on ofHSBC in connectio n with istaking appropriatemeasures tostrengtheu complianc ewith anti-mone y determ:i.tled that the bank laundering laws and regulations. 3See 12 U.S.C. § 2903; 12 CF.R. § 25.29(a). The special commUD.ity reinvestmeDt ;requirements of the Riegle-Ne al Act,12 U.S.C. § 1831 (u)(b)(3), not applicable because HSBC and the n.ewly formed a:t"t': Thus, the Resulting Bank will not have ab.ranch or bank affiliate m±erimnation.al bank are affiliated baok.!L itumediately following the mergen: any :in stateiu which HSBC did ll.Ot previously have a brauch or bank a£Eiliate. Confidential HSBC-RPCHS_ 00004930 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 200 4 12:45PM Mai I OCC_NY FIE LD_OF FI CE NO. 924 P. 3/ 9 3 the level of qualified investm ents was excellent. Overall, the bank's retail delivery systems were readily accessib le to geograph ies and io.dividuals of differing income levels through.out the bank's assessm ent areas. The Reserve Bank noted that it did not identify any violation s·of the substant ive provisio ns of the anti-disc riminatio n laws and regulations. The OCC does not expect the merger to have any adverse impact on ~e CRA efforts or program s of the Resultin g Bank, which will be headqua rtered in New Castle, Delawar e. The Resultin g Bank's CRA assessm ent area will be expande d beyond HSBC's current assessm ent area to include the northem half of New Castle· County in the State of Delaware. 4 This area-includes the Wilmington-Newarlc Metropo litan Statistic al Area and consists of 119 census tracts. All low-inco me census tracts in Delawar e are located within thls area. The applican t has represen ted that Ht.NA will launch and promote a CRA program in Delawar e that includes commun ity developm ent loans, investme nts and grants. In addition, HUNA will retain a full-time CRA officer to supPort its CRA efforts iu Delawar e and to develop relations hips with commun ity develop ment financia l intermediaries and commun ity developm ent groups, consortia, and intennedi.aries. e During the first 12 months after consun.nnation, the Resultin g Bank. as part of a Delawar commun ity developm ent program . has committ ed to provide at least $2 million towards communi.ty developm ent loans and investments, and up to $250,00 0 for commun ity developm ent grants. ' The OCC received commen ts from one commun ity organization. One concern raised by tbe commen ter was that HSBC Investments (North America ) Inc. (''HSBC In.vestments"), HSBC's intenned iate parent company, will try to move its subpritn e operatio ns from Househo ld Internati onal, Inc. ("IIlI'), to HUNA in order to preempt the applicat ion of state consume r protectio n laws. 5 Howeve r, the applican t has represen ted that HIT' s branch-b ased consume r lending business, conducte d through Househo ld Finance Compan y ("HFC") aud Benefici al Corpora tion ("Bene:ficiar'), will continue to be operated as a state-reg ulated business. Moreover, the applican t has represen ted that HFC HSBC's current a.sae86Illent area includes most of the State of New York and small portions 4 of California Florida,Oregon. PennsylV"ania,and Washingto n. of HSBC 5 BII, which was acq:uiced by HSBC Holdings plc, o:c. March 28, 2003, is a direct subsidiary America) Inc. (Delaware). The OCC has noregulatory or supervisoryauthority over h.\vestments (North National Associatio;n,alimi1ed purpose Hil or its subsidiaries, 'With the exception ofBoweh old Bank (SB), from the OCC ~ of credit card bank, which receiV"ed a "Satisfact ory" Communi ty Rew;vestment Act rating December 16, 2003. BTI and its es ~ubsidiari arenot partiestothese na. applicatio How!Wer, as M.w.y of the concerns raised by the commente r related to Im and its D.on-bank subsidiaries. the OCC have noted above, the OCC currently has DO regulatory authority over these entities, :om -would proposed n. transactio According ly, the OCC any rngulatory authority over those entities as a result of the was unable to address thoseconcerm. Confidential HSBC-RPCHS_ 00004931 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 2004 12:45PM Mai I OCC_N Y FIE LD_OF FI CE NO. 92 4 P. 4/ 9 4 and Benefici al will co;ntinue to meet the commitments of the 2002 multi-sta te settlement 6 agreement addressi ng real estate secured lending practice5. to The commen ter also expresse d co11cerns with USBC's lending record to minorities and low- and moderate-income,(''LMI'') applicants and census tracts in vajous Nm.v Yo{l~ ts markets in relation to the lending record of HFC and Benefici al to those same applican and census tracts. Using 2002 Home Mortgage Disclosure Act (''I-Th1DA'') data, the commenter concluded that HSBC' s prime lending units were lending mostly to whites, 7 while Hil's subprim e Ullits were lending mostly to minorities and LMI applicants. However, because HSBC Investm ents did not acquire HIT until March 2003, 2002 HMDA data is not a relevant comparison for the actio11s of HSBC Investments. Furthermore, the applicant provided an analysis of HMDA data indicating that HSBC and its subsidiary, HSBC Mortgag e Corpora wm, are among the leading mortgag e lenders to Liv.ll and minority applicants in New York. The applicant also represen ted that HFC, Beneficial, and HSBC are coopera ting in an effort to make priUle and near prime products avail.able to qualified HFC and Benefici al customers. HFC and Beneficial will deliver these products to qualifying customers either directly or on behalf of HSBC, HFC, Beneficial, and HSBC have ad.opted a common pricing matrix for these products, and credit unde:rwriting is to be perfonn ed centrally. Testing of the program has already been conducte d and nationw ide impleme ntation should be complet e by the end of 2004. Additionally, HSBC has engaged in a variety of efforts to assist potentia l homebuyers. For example, the applicant represents that it has recently launched a special mortgag e progr;-am in Buffalo, Rochester, Syracuse, and Albany, in partnership with conmnm ity groups, to assist homebu yers with closing costs and to provide home ownersh ip counseling. The Reserve Bank's 2003 CRAPE recounts HSBC's impleme ntation of flexible underwriting criteria for New York LMl borrowe rs for the purchas e or refinancing of properties located in ll1I census tracts. In sum, based on HSBC's CRA record ofperfo wance, the OCC found approva l to be consistent with tho CRA.. Request for Hearing 8 The commen ter also requeste d that the OCC conduct a public hearing. After careful consideration, the OCC has determin ed not to conduct a hearing on these merger ns 6 The $484 million settlement agn!:ed to by Hil in 2002 will not be affected by the cunent apPlica.tio OCC The applicant has represeDted to the thatHIT willcontinue to abide by the pending be:fore the OCC. terms of this agreement. g that a. It is important to note that HMDA data aloJJ.e: are not adequa.t~ to provide a basis for concludin 7 whether itslesveloflending is . sufficient Htv.IDA bank is engaged :in lending discrimination or :in indicating tiouborrower hiness, creditwort housing prices,and other factorsrelevant io. data do not take into con.sidera ofthe mm:ketsi iJi.dividual nor do theyfullyreflecttherange of abank's lending activities or efforts. each s Additio,:ial.ly, the CO:tnme%ltey requested that the: OCC extend ~ public comment period. The OCC tograut anextension of thecomment period,becam:e the commente rdidnot demonstra te determioed not Confidential HSBC-RPCHS_ 00004932 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 2004 12:45PM Mai I OCC_N Y FIE LD_OF FI CE NO. 92 4 P. 5/ 9 5 applications. The general standa:rd the OCC applies to determine whether to hold a public hearing is containe d in 12 C.F.R. § 5.11, '\Vhich provides: The OCC generally 'grants a hearing request only if the OCC determin es that written submissions would be jn,sufficient or that a hearing would otherwis e benefit the decision making process. The OCC also may order a hearing if it conclude s that a hearing would be in the public interest. Since the commen ter did not indicate why -written submissions would be insuffici ent to ed make an adequate presenta tion of these and other issues to the OCC, the OCC detennin that the standards for conducti ng a hearing were not satisfied, For the reasons set forth above, the OCC found that the transacti on met the relevant statutory criteria. for approval. Inasmuc h as the transacti on also raised no supervis ory or policy concerns~ the applications are approved. Commun ity Develop ment Investm ents HUNA will retain prev:iously-made commun ity develop ment investm ents :under the investment authority of 12 U.S.C, § 24(Eleventh) and 12 C.F.R Part 24 conce.ming ity national bank investme nts in coru.tUunity and economi c develop ment entities, commun d~velopment projects, and other public welfare investments. . First, HUNA will retain the HSBC Commun ity Develop ment Corpora tion (the "CDC") developm ent corporat ion that has a The CDC is a wholly o-wned subsidia ry coD.Ullunity that primary purpose of commun ity development, specifica lly to build affordable housing primarily benefits LMI individuals or areas. Currently, the CDC holds no assets other tban cash of $29,000 . Second, HUNA -will retain equity investme nts of $157,54 4,358 in limited partnerships and limited liability compani es that finance the develop ment and operation of affordable housing and qualify for federal low-inco me housing tax credits, or finance economi c developm ent and are eligible for Kew Markets Tax Credits. Third, HUNA will retain investme nts of $14,415,610 :in commun ity and economi c develop ment entities, commun ity develop ment prpjects, ,or other public welfare in-vestments. Those by investmeuts primaril y benefit 1MI persons, LMI-inc ome areas, or other areas targeted a governm ental entity for redevelo pment~ or the :investm ents would receive consider ation as "qualified :investments" under 12 C.F.!t § 25.23 of the CRA. The aggrega te amount of HUNA's commun ity develop ment investments will total $171,98 8,968, which is less than 5 percent of its capital and swplus, and the invesunents do not expose HUNA to unlimited liability. The investme nts, therefore, are consistent -with Section 24 (Eleventh) - and Part 24. nces were that additiwial time was necessary to develop factual :information, and no extenuating circumsta theOCC considered allcomments received after present See 12 C.F.R. § 5.10(b)(2)(ii), (iii). Howev~, the close of the commentperiod. Confidential HSBC-RPCHS_ 00004933 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JU N.23. 2004 12: 45PM Ma i I OC C_N Y FI EL D_O FFICE NO. 924 P. 6/ 9 6 Inves1ments jn Subsidiar ies Additionally, HUNA will retain as operating subsidiaries a number of entities that HSBC currently owns. The applicant has represente d that all subsidiari es will be operated in accordanc e with all applicable OCC regulation s. HSBC owns noncontto lling interests in two additional entities, Iden1Ius and The Clearing . · House Service Company , LLC. HSBC Financial Services Corp., a wholly owned subsidiary of HSBC, holds a 7.29% ownership interest in Identrus, a limited liability company that provides digital certificati on services to banking institution s. HSBC Clearing Services (USA) Inc., also a wholly owned subsidiary of HSBC, holds a 7.4% nonvoting interest in The Clearing House Service Company , LLC ("Clearin g House"), With regard to both of these holdings, HSBC has certified that the Resulting Bank: will be well-capi talized and well-man aged at the time it acquires the investmen ts; will have the ability to prevent each enterprise from engaging in activities that are not permissib le for a. ;national bank or an operating subsidiary because the limited liability agreemen ts tmder which each of these entities was formed contains provision s to ensure that they will engage only in activities that are permitted for national banks and their operating subsidiaries, and permits a member to withdraw if the company engages in any impermis sible activity; will accollllt for its investments under the equity or cost method of accounting; and as a legal and accountin g matter, does not have open-end ed liability for Identrus's obligation s or for the obligation s of Clearing House or any of its subsidiaries and, thus, its loss exposure as a result of these investmen ts is limited. The applicant also has certified that Identrus and Clearing House have agreed to be subject to OCC supervisio n and exammation, subject to the limitation s and requireme nts of section 45 of the Federal Deposit Insurance Act (12 U.S.C. § 1831v) and section 115 of the Gramm-Leach-Bliley Act (12 U.S.C. § 1820a). Moreover, the ownership by national banks of a noncontro lling interest in Identru.s meets the remaining standards for the o-wnership of a noncontrolli.ng interest in an enterprise , 12 C.F.R. § 5.36(e). The OCC in published precedent has recognize d that national banks may hold a noncontro lling interest in Identrus. OCC Condition al Approval No. 339 (Novembe r 16, 1999); OCC Corporate Decision No. 2002-4 (February 18, 2002); and OCC Conditional Approval No , 301 (January 15, 1999), See also 12 C.F.R. § 5.34(e)(5)(v)(X). Likewise, the ownership by national banks ofanonco ntrolling interest in Clearing House meets the remaining standards for the ownership of a noncontro lling interest in an ente1prise under Section 5.36(e) and the OCC has determined that national banks may hold a noncontro lling interest in Clearing House. Interpretiv e Letter by Julie L. Willia.ms, Chief Counsel (May 16, 1997) (to be published ). Residency Waivers A request for the residency waivers for the Board of Directors of the interim national bank and citizenship waiver for director Martin J. G. Glynn is approved. In addition, your request for the residency waivers for the Board of Directors of the Resulting Bank ' Confidential HSBC-RPCHS_00004934 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 20 04 12: 45PM Mai I OC C_N Y FI EL D_O FFICE N0. 924 P. 7/9 7 and citizenshi p waivers for directors Martin. J. G. Glynn, Stephen K. Green, James H. Cleave, Douglas J. Flint, and Carole S. Taylor is also approved. Consummation Guidance Please refer to the Business Combinat ion booklet for the required steps to complete the organizati on of the interim national bank. The steps to complete the mergers are also contained in. the Business Combinat ion 'B~oldet. This approval. is granted based on a thorough review of all information available, inchtding commitm ents and representa tions made in the applications and the merger agreement and those of your representatives. This includes your represent ation that au, an affiliate of HSBC, will continue to abide by the terms of a Decembe r 2002 multi-stat e settlement agreemen t with state attomeys general and regulatory agencies relating to its non-prime real estate secured lending. The approval is subject to the following conditions: 1. After consumm ation of tho merger, HONA and its institution -affiliated parties~ as that term is defined at 12 U.S.C. § 1813(u), shall continue to comply with each and every term and condition contained in the April 30, 2003 Written Agreemen t entered into by .and among HSBC, the Federal Reserve Bank of New York (the ''Reserve Bank'), and the New York State Banking Departme nt (''Departm ent';), docket no.: 03-012-WA/RB-SM (the "Agreeme nf'). For pmposes of clarification, references in the Agreemen t to 12 C.F.R. § 208.62 and/or to 3 'N.Y.C.R. R. Part 300 shall hereinafte r be deemed to be references to 12 C.F.R § 21.11, and references in the Agreemen t to 12 C.F.R. § 208.63 shall hereinafte r be deemed to be references to 12 C.F.R. § 21.21. For purposes of further clarificati on, references in the Agreemen tto obligation s of HSBC to the Reserve Bank and/or to the Departme nt shall hereinafte r be deemed to be obligation s af HUNA that ·axe owed to the OCC. 2. HUNA must notify potential affiliated vendors in writing of the OCC's e~amination and regulatory authority under 12 U.S.C. § 481 and 12 U.S.C. § 1867 (c). All fuiaJ. Service Level Agreemen ts and other outsouxcing contracts between HUNA and affiliates must stipulate that the perfonuan ce of services provided by the affiliated companie s to HUNA is subject to the OCC's examinati on and regulatory authority. The provision s of 12 C.F.R. § 9 would be applicable to any .fiduciary activities contracted out to affiliates. 3. Within two years of the consumm ation of the merger between HONA and HSBC, HUNA must divest, coDfonn, or demonstrate to the satisfactio n of the OCC, the pormissib ility of the activities and ownership iu.terests held by HSBC Asset Management (Americas ) Inc. If, within this time period, HUNA divests or coofonns the acti'Vities and hoklings of this entity, please notify Large Bank Supervision. Confidential HSBC-RPCHS_00004935 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 2004 12:4 5PM Ma i I OCC_NY FI EL D_O FFICE N0.9 24 P. 8/9 8 These condition s are condition s imposed in writing by the agency in connectio n with the granting of any application or other requests witb:iJ.i the meaning of12 U.S.C. § 1818. As such, the condition s are enforceab le under 12 U.S.C. § 1818. As a reminder, the district office :must be advised in writing 10 dayB in. advance of the desired. e;ffective date for the mergers so that the OCC may issue the necessary certification. The OCC will issue a letter certifying consumm ation of the transactio ns when we receive: 1. Evidence that all required regulatory approvals, waivers, or non-objec tions have been received. 2. Articles of A$sociati on for the Resulting Bank. If the merger is not consumm ated within one year from the approval date, the approval shall automatic ally ternrinate, w:i1ess the OCC grants an extension of the time period. This condition al approv~ and the activities and coinmuni cations by OCC employee s in connection with the filing, do not constitute a contract, express or :implied, or any other obligation binding upon the OCC, the U.S., any agency or entity of the U.S., or my officer or employee of1he U.S., and do not affect the ability of the OCC to exercise its supervisory, regulatory and e,;;:amination authorities under applicable 1raw and regulation s. The foregoing may not be waived or modified by any employee or agency of the QCC or tb.eU.S. If you have any questions, please contact me at (212) 790-405 5. Sincerely, cc: file Chron EIC DiLorenz o Large Bank Supervisi on New York State Banking Departme nt FDIC New York Regional Office Federal Reserve Bank of New York Hong Kong Monetary Authority Financial Services Authority Confidential HSBC-RPCHS_00004936 FILED: NEW YORK COUNTY CLERK 08/04/2022 07:50 PM INDEX NO. 650337/2013 NYSCEF DOC. NO. 2425 RECEIVED NYSCEF: 08/04/2022 JUN. 23. 2004 12:45PM Mai I OCC_NY FIELD_OFFICE N0.924 P. 9/9 9 Matthew Lee/ICP Confidential HSBC-RPCHS_00004937