FAIRCHILD, Chief Judge.
Petitioner, Association of Bank Travel Bureaus, Inc., petitions for review of a refusal by the Board of Governors of the Federal Reserve System (hereinafter referred to as "the Board") in a rulemaking proceeding to add operation of a travel agency to the list of activities permissible for a bank holding company. The Board found that the activities of a travel agency are not "closely related to banking" within the meaning of § 4(c)(8) of the Bank Holding Company Act, 12 U.S.C. § 1843(c)(8).
I. THE DECISION OF THE BOARD
On September 7, 1973, First Bancorp., Inc. of Corsicana, Texas, applied pursuant to § 4(c)(8) for the Board's approval to continue in the business of a travel agency. After finding that a reasonable basis existed
On January 26, 1976, the Board decided not to adopt the operation of a travel agency as a permissible activity for bank holding companies. In its order, the Board first identified the two relevant considerations under § 4(c)(8) of the Act: (1) whether the activity in question is closely related to banking, and, if so, (2) whether the activity is a proper incident to banking. Under the Board's interpretation of the Act, the question of whether a particular activity is in the public interest is only relevant to the second part of the test and only comes into play if the activity has been found to be closely related to banking. The Board stated that at least three considerations could be considered in determining whether the operation of a travel bureau was closely related to banking:
The Board concluded that only the first factor that banks generally have provided the proposed service was applicable. Ultimately, however, the Board rejected even this consideration because: (1) the nature of travel services offered by present day banks is significantly different from that offered a century ago to immigrants; (2) the number of banks currently providing travel agency services is only about 150 or less than one percent of all commercial banks in the United States, and they account for less than two percent of all travel agencies in the nation; and (3) nearly two-thirds of all travel agencies affiliated with banks have been established within the past fifteen years. Having found that the "closely related" test was not met, the Board did not reach the further question regarding the public benefits, and decided against including travel agencies within the permissible activities for bank holding companies.
Petitioner contends that the Board applied an erroneous legal standard in making its decision and that its findings were not supported by substantial evidence. We find neither of these contentions persuasive.
II. THE LEGAL STANDARD APPLIED BY THE BOARD
The Board has interpreted § 4(c)(8) to include two distinct tests. First, the Board must determine whether an activity is "closely related" to banking. If the Board finds that the activity is closely related to banking within the meaning of the Act, it then must decide whether the activity is a "proper incident" to banking by weighing the benefits against the possible adverse effects. In this case, the Board found that the activity of operating a travel agency was not closely related to banking and therefore had no need to consider the second part of the test.
Petitioner contends, however, that § 4(c)(8) contemplates only one test rather than the two-tiered test applied by the Board. The proper test, petitioner asserts, combines both the "closely related" test and the "proper incident" test. Under this view, the Board presumably would be obligated to consider the benefits resulting from a particular activity in evaluating any application.
H.Rep.No.1747, 91st Cong., 2d Sess., p. 12 (1970) reprinted at 1970 U.S.Code Cong. & Admin.News at 5572-73.
III. PETITIONER'S CONTENTION THAT THE BOARD'S FINDINGS ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE
Petitioner contends that the Board's findings that services of travel agencies have changed, that less than one percent of all banks provide travel agency services, and that two-thirds of bank travel agencies established in the past fifteen years were not supported by substantial evidence. At the outset, we note that petitioner has misconceived the proper standard of review. As the Board engaged in a rulemaking proceeding which did not involve findings "required by statute to be made on the record after opportunity for an agency hearing," see 5 U.S.C. §§ 553, 556, 557, the substantial evidence standard of review is inappropriate. Rather, the proper test is whether the Board's findings of fact are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706 (1970), see, e. g., Alabama Ass'n of Ins. Agents, supra, at 240; National Courier Ass'n, supra, 170 U.S.App.D.C. at 307, 516 F.2d at 1235.
The findings of the Board were not arbitrary, capricious, or an abuse of discretion. Other courts, for example, have found that the character of travel services has evolved over the past century. E. g., Arnold Tours v. Camp, 472 F.2d 427, 434
The petition for review is DENIED.