## Facts

- Wilshire Oil Company of Texas, a commercial oil-and-gas firm, controlled The Trust Company of New Jersey (TCNJ), a New Jersey-chartered trust company providing banking services.
- Under the Bank Holding Company Act (BHC Act), if TCNJ was a statutory “bank,” Wilshire was a “bank holding company” subject to restrictions on nonbanking activities and a divestiture/termination deadline of December 31, 1980.
- In November 1980, TCNJ notified depositors that it reserved the right to require up to 14 days’ prior written notice for withdrawals from certain transaction accounts, while stating it did not intend to exercise the right in the ordinary course.
- Wilshire asserted that the notice reservation eliminated depositors’ “legal right to withdraw on demand,” removing TCNJ from the BHC Act’s “bank” definition and avoiding bank-holding-company status.
- The Board of Governors initiated administrative proceedings and determined that TCNJ remained a “bank,” Wilshire remained a bank holding company, and Wilshire violated § 4(a)(2) by failing to divest or terminate bank status by the deadline.
- The Board issued a cease-and-desist order requiring Wilshire to end the violation, and Wilshire petitioned for judicial review.

## Issues

1. Whether TCNJ’s reservation of a right to require up to 14 days’ notice for withdrawals—paired with an expressed intent not to enforce it—eliminated depositors’ “legal right to withdraw on demand” under the BHC Act.
2. Whether the Board reasonably interpreted and applied the BHC Act’s “bank” definition in concluding TCNJ remained a bank and Wilshire remained subject to § 4(a)(2)’s nonbanking restrictions and divestiture requirements.

## Decision

- The court denied the petition for review and affirmed the Board’s cease-and-desist order.
- The court held that TCNJ remained a “bank” under the BHC Act despite the 14-day notice clause.
- The court upheld the Board’s conclusion that Wilshire was a bank holding company and was required to comply with § 4(a)(2).

## Legal Principles

- Reasonable agency interpretations of ambiguous terms in a complex regulatory statute administered by that agency are entitled to substantial judicial deference.
- For the BHC Act’s “legal right to withdraw on demand” requirement, regulators and courts may consider the practical operation and market reality of deposit accounts, not only formal contract language.
- A purely formal or nonoperative contractual modification adopted to avoid statutory coverage does not, by itself, alter an institution’s status as a “bank” when the institution continues to function as a demand-deposit bank in practice.
- Statutory interpretation should account for congressional purpose, including preventing evasion of the BHC Act’s separation of banking from commercial enterprises, particularly after coverage was extended to one-bank holding companies.

## Conclusion

The court sustained the Board’s determination that a notice-of-withdrawal clause that was not intended to be used did not change the substantive character of TCNJ’s deposit accounts; TCNJ therefore remained a “bank,” and Wilshire remained a bank holding company obligated to comply with the BHC Act’s divestiture and nonbanking-activity limits.


Wilshire Oil Co. of Tex. v. Bd. of Governors of the Fed. Reserve Sys., 668 F.2d 732 (3d Cir. 1981)