CHICAGO -- ABN AMRO North America has received approval from the Federal Reserve Board to sell and underwrite corporate debt and more varieties of municipal debt through an expanded securities subsidiary.
The Amsterdam bank's U.S. subsidiary will become only the seventh foreign bank allowed to deal in corporate debt and equities. The Fed announced its approval of ABN AMRO's application last week.
The Fed also approved ABN AMRO's plan to merge the Capital Markets Group of its Chicago-based subsidiary LaSalle National Bank into ABN AMRO Securities.
Under the recent Fed action, the new entity is free from many restrictions laid out in the Glass-Steagall Act of 1933, which generally bars banks and bank-holding companies from engaging in securities and underwriting.
ABN AMRO Securities is already authorized to deal in and underwrite traditional municipal debt and other bank-eligible products under what are known as Tier I powers, according to Jonathan D. Gartner, a vice president at LaSalle Capital Markets.
And now that the Fed has conferred so-called Tier II powers on ABN AMRO Securities, the combined entity can deal in riskier industrial revenue bonds and junk-rated municipal bonds along with corporate debt and equities. "We don't plan to get into the business of junkrated municipal bonds," said Gartner.
ABN AMRO Securities officials said in a statement they will move their headquarters from New York City to Chicago early next year as part of the merger with LaSalle's capital group.
The new entity will have total assets of more than $2 billion, and regulatory capital of $100 million. Sources at LaSalle said they expect the firm to hire a significant number of new employees to handle an anticipated expansion in business. The entity will employ 200 people nationwide when the merger is completed.
"These expanded activities, when combined with the expertise brought to ABN AMRO Securities from the LaSalle National Bank Capital Markets Group, position ABN AMRO Securities to become one of the United States' leading securities firms. This is an important step in our long-term strategy of providing our U.S. corporate customers with a full range of financial services," Harrison Tempest, chairman and chief executive officer of ABN AMRO North America, said in a statement.
Only 16 banks in the country have federal approval to deal and underwrite corporate debt and equity under Tier II powers.