JUSTICE POWELL delivered the opinion of the Court.
This case presents the question whether the Federal Reserve Board has statutory authority under § 4(c)(8) of the Bank Holding Company Act of 1956, 12 U. S. C. § 1843(c)(8), to authorize a bank holding company to acquire a nonbanking affiliate engaged principally in retail securities brokerage.
BankAmerica Corp. (BAC) is a bank holding company within the meaning of the Bank Holding Company Act.
The Court of Appeals held that the Board had acted within its statutory authority in authorizing BAC's acquisition of Schwab under § 4(c)(8) of the BHC Act. The court accordingly affirmed the Board's order. 716 F.2d 92 (1983). We granted SIA's petition for certiorari, 465 U.S. 1004 (1984), and now affirm.
Section 4 of the Bank Holding Company Act (BHC Act) prohibits the acquisition by bank holding companies of the voting shares of nonbanking entities unless the acquisition is specifically exempted. The principal exemption to that prohibition is found in § 4(c)(8). That provision authorizes bank holding companies, with prior Board approval, to engage in nonbanking activities that the Board determines are "so closely related to banking . . . as to be a proper incident thereto." 12 U. S. C. § 1843(c)(8).
Application of the § 4(c)(8) exception requires the Board to make two separate determinations. First, the Board must determine whether the proposed activity is "closely related" to banking.
In this case, the Board held that the securities brokerage services offered by Schwab were "closely related" to banking within the meaning of § 4(c)(8). Relying on record evidence and its own banking expertise, the Board articulated the ways in which the brokerage activities provided by Schwab were similar to banking. The Board found that banks currently offer, as an accommodation to their customers, brokerage services that are virtually identical to the services
Finally, the Board concluded that the use by banks of "sophisticated techniques and resources" to execute purchase and sell orders for the account of their customers was sufficiently widespread to justify a finding that banks generally are equipped to offer the type of retail brokerage services provided by Schwab. Id., at 108. On the basis of these findings, the Board held that a securities brokerage business that is "essentially confined to the purchase and sale of securities for the account of third parties, and without the provision of investment advice to the purchaser or seller" is "closely related" to banking within the meaning of § 4(c)(8) of the BHC Act. Id., at 117.
The Board next determined that the public benefits likely to result from BAC's acquisition of Schwab outweighed the possible adverse effects. Specifically, the Board identified as public benefits the increased competition and the increased convenience and efficiencies that the acquisition would bring to the retail brokerage business. Id., at 109-110. As to possible adverse effects, the Board determined that the proposed acquisition would not result in the undue concentration of resources, decreased competition, or unfair competitive prices. Id., at 110-114.
Finally, the Board concluded that BAC's acquisition of Schwab was not prohibited by the Glass-Steagall Act.
SIA challenges the Board's order in this case on two grounds. First, it argues that the Board may not approve an activity as "closely related" to banking unless it finds that the activity will facilitate other banking operations. Second, it argues that § 20 of the Glass-Steagall Act, 12 U. S. C. § 377, prohibits a bank holding company from owning any entity that is engaged principally in retail securities brokerage and thus that the Board lacked statutory authority under § 4(c)(8) to approve BAC's acquisition of Schwab.
There is no express requirement in § 4(c)(8) that a proposed activity must facilitate other banking operations before it may be found to be "closely related" to banking. Indeed, the relevant statutory language does not specify any factors that the Board must consider in making that determination. The general nature of the statutory language, therefore, suggests that Congress vested the Board with considerable discretion to consider and weigh a variety of factors in determining whether an activity is "closely related" to banking. In this case, the Board concluded that Schwab's brokerage services were "closely related" to banking because it found that the services were "operationally and functionally very similar to the types of brokerage services that are generally provided by banks and that banking organizations are particularly well equipped to provide such services." 69 Fed. Res. Bull., at 107.
Banks long have arranged the purchase and sale of securities as an accommodation to their customers. Congress expressly endorsed this traditional banking service in 1933. Section 16 of the Glass-Steagall Act authorizes banks to continue the practice of "purchasing and selling . . . securities and stock without recourse, solely upon the order, and for the account of, customers, and in no case for [their] own account[s]." 12 U. S. C. § 24 Seventh.
Congress has committed to the Board the primary responsibility for administering the BHC Act. Accordingly, the Board's determination of what activities are "closely related" to banking within the meaning of § 4(c)(8) "is entitled to the
The Board expressly considered and rejected SIA's argument that BAC's acquisition of Schwab violates the Glass-Steagall Act. That Act comprises four sections of the Banking Act of 1933.
A bank holding company's subsidiaries are bank affiliates within the meaning of § 20. 12 U. S. C. § 221a(b). Section 20, therefore, prohibits BAC's proposed acquisition if Schwab is "engaged principally" in any of the activities listed therein.
"Public sale" is used in conjunction with the terms "issue," "flotation," "underwriting," and "distribution" of securities. None of these terms has any relevance to the brokerage business at issue in this case. Schwab does not engage in issuing or floating the sale of securities, and the terms "underwriting" and "distribution" traditionally apply to a function distinctly different from that of a securities broker.
This reading of the statute is further supported by the Board's longstanding interpretation of identical language found in § 32 of the Glass-Steagall Act, 12 U. S. C. § 78. That section prohibits interlocking management or employment between banks and any entity "primarily engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicate participation" of securities. 12 U. S. C. § 78 (emphasis added).
Because §§ 32 and 20 contain identical language, were enacted for similar purposes, and are part of the same statute, the long-accepted interpretation of the term "public sale" to exclude brokerage services such as those offered by Schwab should apply as well to § 20.
The legislative history demonstrates that Congress enacted § 20 to prohibit the affiliation of commercial banks with entities that were engaged principally in "activities such as underwriting." ICI, 450 U. S., at 64; see Camp, supra, at 630-634. In 1933, Congress believed that the heavy involvement
Congressional concern over the underwriting activities of bank affiliates included both the fear that bank funds would be lost in speculative investments and the suspicion that the more "subtle hazards" associated with underwriting would encourage unsound banking practices. See Camp, 401 U. S., at 630.
In sum, we see no reason to disturb the Board's determination that "the business of purchasing or selling securities upon the unsolicited order of, and as agent for, a particular customer does not constitute the `public sale' of securities for purposes of section 20." 69 Fed. Res. Bull., at 114. This interpretation of the Glass-Steagall Act is reasonable, consistent with the plain language of the statute and its legislative history, and deserves the deference normally accorded the Board's construction of the banking laws.
The Board determined in this case that a securities brokerage business that is essentially limited to the purchase and sale of securities for the account of customers, and without provision of investment advice to purchaser or seller, is "closely related" to banking. We hold that the Board's determination is consistent with the language and policies of the BHC Act. We also hold that the Board's determination that the Glass-Steagall Act permits bank holding companies to acquire firms engaged in such a brokerage business is reasonable and supported by the plain language and legislative history of the Act. We therefore affirm the judgment of the Court of Appeals.
It is so ordered.
"(8) shares of any company the activities of which the Board after due notice and opportunity for hearing has determined (by order or regulation) to be so closely related to banking or managing or controlling banks as to be a proper incident thereto . . . . In determining whether a particular activity is a proper incident to banking or managing or controlling banks the Board shall consider whether its performance by an affiliate of a holding company can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices." 12 U. S. C. § 1843(c)(8).
"1. Banks generally have in fact provided the proposed services.
"2. Banks generally provide services that are operationally or functionally so similar to the proposed services as to equip them particularly well to provide the proposed service.
"3. Banks generally provide services that are so integrally related to the proposed services as to require their provision in a specialized form." Id., at 313, 516 F. 2d, at 1237.
The Board has recognized, however, that the National Courier guidelines do not provide the exclusive basis for finding that an activity is "closely related" to banking, and has stated that it will consider "any . . . factor that an applicant may advance to demonstrate a reasonable or close connection or relationship of the activity to banking." 49 Fed. Reg. 806 (1984).
"(15) providing securities brokerage services, related securities credit activities pursuant to the Board's Regulation T (12 CFR Part 220), and incidental activities such as offering custodial services, individual retirement accounts, and cash management services, provided that the securities brokerage services are restricted to buying and selling securities solely as agent for the account of customers and do not include securities underwriting or dealing or investment advice or research services." 48 Fed. Reg. 37006 (1983) (emphasis in original).
Moreover, it is not clear that the Board in this case applied the "functionally related" test arguably rejected by Congress in 1970. The Board found that Schwab's brokerage business was both "operationally and functionally very similar to" traditional banking services and that banks were well equipped to provide those services. 69 Fed. Res. Bull., at 107.
"No officer, director, or employee of any corporation or unincorporated association, no partner or employee of any partnership, and no individual, primarily engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicated participation, of stocks, bonds, or other similar securities, shall serve the same time as an officer, director, or employee of any member bank . . . ." 12 U. S. C. § 78.
Moreover, § 16 applies only to banks, not to bank holding companies, and is not applicable here. Thus, we have no occasion to determine whether § 16 would permit banks to engage in brokerage activity on the behalf of the general public as well as for their own customers.
"The legislative history of the Glass-Steagall Act shows that Congress also had in mind and repeatedly focused on the more subtle hazards that arise when a commercial bank goes beyond the business of acting as fiduciary or managing agent and enters the investment banking business either directly or by establishing an affiliate to hold and sell particular investments." 401 U. S., at 630.