WASHINGTON -- The Federal Reserve Board approved Banc One Corp.'s application to acquire Premier Bancorp in Louisiana, but denied Banc One's request for an exemption from the so-called source-of-strength doctrine.

In an apparent first, Banc One asked not to be required to cover capital deficits at a bank it controls, as the source-of-strength policy would mandate.

Banc One wanted assurances that it would not have to provide source-of-strength support before it acquires full ownership of Premier, which could occur by 1995.

Since Banc One will have a major say in Premier's management, "it would not be appropriate to relieve Banc One of the responsibility to serve as a source of financial strength," the Fed ruled.

The Fed said Banc One would benefit from any profit improvements by Premier, and is free to terminate its stock option "in the event the [Premier] should experience difficulties in the future."

Premier, based in Baton Rouge, is turning around from severe losses fueled by bad real estate loans.

Option to Buy Stock

In the deal that gained Fed approval this week, Ohio-based Banc One agreed to provice $65 million in capital to the $3.9 billion-asset Premier and gained an option to purchase all outstanding stock for 125% of book value by 1995.

The agreement, approved by Premier shareholders in February, effectively places Premier under Banc One's control.

Legal observers were surprised that Banc One raised the source of strength doctrine in its application.

New Bank Law Gives Choice

Howard Cayne, a lawyer with Arnold & Porter, said the source-of-strength policy has been superseded by a provision in the 1991 banking law that permits holding companies to choose between recapitalizing or relinquishing control of troubled subsidiaries.

Banc One sought the waiver to protect its shareholders if Premier takes a turn for the worse, said John Russell, a spokesman. "We wanted to make sure the outside loss would be no more than the investment we made, which was $65 million."

He said the company will review the conditions before deciding whether to proceed with the transaction.

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