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FED E R A L R E S E R V E B A N K OF D A L L A S
Station K, Dallas, T exas 7 5 2 2 2

Circular No. 84-42
March 20, 1984

TO:

All member banks, bank holding companies, and others
concerned in the Eleventh Federal Reserve District

ATTENTION:

Chief Executive Officer

SUBJECT:

Proposed amendments to Regulation Y —
Companies and Change in Bank Control

SUMMARY:

The Board of Governors of the Federal Reserve System
has issued for public comment a proposal to expand the
list of nonbanking activities in which bank holding
companies may engage. Comments should be addressed to
Mr. William W. Wiles, Secretary, Board of Governors of
the Federal Reserve System, Washington, D.C., 20551.
All correspondence should refer to Docket No. R-0511
and must be received by May 2, 1984.

ATTACHMENTS:

Board's press release and Federal Register document

MORE INFORMATION:

Robert D. Hankins, Extension 6120; Carla
Extension 6477; or Gayle Teague, Extension 6481

ADDITIONAL COPIES:

Public Affairs Department, Extension 6289

Bank

Banks and others are encouraged to use the follow ing incoming W A T S numbers in contacting this Bank: 1-800-442-7140
(intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above.

Holding

Brooks,

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERALRESERVEpressmjea^
For immediate release

March 2, 1984

The Federal Reserve Board today proposed for public comment a list
of nine non-banking activities which, if adopted, would be permissible
activities for bank holding companies.

Comment should be submitted to the

Board by May 2.
Some of the activities proposed for inclusion in the Board's
Regulation Y have already been approved in individual cases.

Others are

being proposed for the first time.
Activities that would be added to the permissible list are:
1.

Commodity trading advisory services

2.

Check guaranty services

3.

Consumer financial counseling

4.

Armored car services

5.

Tax planning and tax preparation

6.

Operating a collection agency and credit bureau.

Proposed expansion of activities already on the permissible list:
1.

Property appraisals

2.

Future commission merchant advice

The Board also proposed to define the permissible insurance activities
that would be permitted under the Garn St Germain Depository Institutions Act
of 1982.
The attached Federal Register notice details each of these proposed
activities.
-

Attachment

0-

FEDERAL RESERVE SYSTEM
REGULATION Y
(12 CFR PART 225)
(DOCKET NO. R-0511)
BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
Expanded List of Permissible Nonbanking Activities

AGENCY:

Board of Governors of the Federal Reserve System

ACTION:

Proposed rulemaking.

SUMMARY:
On May 19, 1983, the Board proposed a revision of
Regulation Y, its regulation implementing the Bank Holding
Company Act of 1956, as amended (12 U.S.C. 1841 et se q . ), and
the Change in Bank Control Act of 1978 (12 U.S.C. 1817 (j )) .
The Federal Register notice accompanying the proposed revision
of Regulation Y requested suggestions for new nonbanking
activities that should be added to the Regulation Y list of
activities permissible generally for bank holding companies.
In this notice the Board is seeking public comment on the
addition of a number of these suggested new activities to the
Regulation Y list.
Addition of any of these activities to the
list would facilitate the processing of applications by bank
holding companies to engage in the activity.
DATE:
1984.

All comments should be received by the Board by May 2,

ADDRESS:
All comments, which should refer to Docket No.
R-0511, should be mailed to William W. Wiles, Secretary, Board
of Governors of the Federal Reserve System, Washington, D.C.
20551, or delivered to Room B-2223, 20th & Constitution Avenue,
N.W., Washington D.C., between 8:45 a.m. and 5:15 p.m.
weekdays.
Comments may be inspected in Room B-1122 between
8:45 a.m. and 5:15 p.m. weekdays.
FOR
FURTHER
INFORMATION
CONTACT:
J. Virgil Mattingly,
Associate General Counsel, (202/452-3430),
Bronwen Mason Chaiffetz, Senior Counsel,
(202/452-3564), or
Carl V. Howard, Senior Counsel, (202/452-3786), Legal Division;
David Kulig, Senior Counsel, (202/452-2347), Regulatory
Improvement Project; Don E. Kline, Associate Director,
(202/452-3421), or Sidney M. Sussan, Assistant Director,
(202/452-2638), Division of Banking Supervision and Regulation;

-

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and Stephen A. Rhoades, Economist, (202/452-3906), or
Paul R. Schweitzer, Economist,
(202/452-2918), Division
Research and Statistics,

of

SUPPLEMENTARY INFORMATION:
The Bank Holding Company Act of
1956, as amended ("BHC Act"), generally prohibits a bank
holding company (i.e., a company that controls one or more
banks) from engaging in nonbanking activities or acquiring
voting securities of a company engaged in nonbanking
activities.
Section 4(c)(8) of the BHC Act provides an
exception to this prohibition for a bank holding company to
obtain the Board's prior approval to engage in activities, or
to acquire shares of a company engaged in activities, that the
Board determines, after notice and opportunity for hearing, to
be "so closely related to banking or managing or controlling
banks as to be a proper incident thereto."
On May 19, 1983, the Board proposed for public comment
a revision of Regulation Y, its regulation implementing the BHC
Act.
In response to the proposal, the Board received a number
of suggestions for additional new nonbanking activities that
should be added to the Regulation Y list of activities
permissible for bank holding companies.
In this notice, the
Board seeks public comment on a number of the activities
suggested.i./
The notice includes 1) activities that the
Board previously has approved by order in individual cases or
that are similar to such approved activities? and 2) activities
that have not previously been considered by the Board and are
not the subject of pending Congressional consideration.
This
notice also seeks comment on the scope of insurance activities
that are permissible under the authority of Title VI of the
Garn-St
Germain
Depository
Institutions Act
of
1982
(P.L. 97-320, 96 Stat. 1469, 1536-38) ("Garn-St Germain Act").
In determining whether an activity is permissible for
bank holding companies under section 4(c)(8) of the BHC Act,
the Board must find that (1) the activity is closely related to
banking or managing or controlling banks, and (2) it is a
proper incident thereto.

i/
In separate Federal Register notices the Board sought
public comment on (i ) increasing from $1,000 to $10,000 the
maximum face amount of money orders permitted to be issued and
sold by bank holding companies (48 F e d . R e g . 52977 (Nov. 23,
1983))? and (ii) deleting the requirement in connection with
permissible credit insurance underwriting that a bank holding
company reduce the insurance premiums charged (48 F e d . R e g .
53125 (Nov. 25, 1983)).
These changes also were suggested by
the commenters on the proposed revision of Regulation Y.

-

3-

In considering whether an activity is closely related
to banking, the Board has found it useful to refer to three
criteria set forth in judicial opinions:£/
a) whether banks
generally have provided the proposed service; b) whether banks
have generally provided services that are operationally or
functionally so similar to the proposed service as to equip
them particularly well to provide the proposed service; or c)
whether banks generally provide services that are so integrally
related to the proposed service as to require the provision of
the service in a specialized form.
The Board also may consider
other factors that an applicant may advance to demonstrate a
reasonable or close connection or relationship of the activity
to banking or managing and controlling banks. 3/
With respect to determining whether an activity is a
proper incident to banking, section 4(c)(8) of the BHC Act
provides that the Board must consider whether performance of
the activity by bank holding companies can reasonably be
expected to produce benefits to the public that outweigh
possible adverse effects.£/
The Act states that public
benefits include greater convenience, increased competition,
and gains in efficiency.
Adverse effects include undue
concentration of resources, decreased or unfair competition,
conflicts of interests, and unsound banking practices.
The suggestions for new nonbanking activities often
did not include a description of the activity proposed.
Accordingly, in this notice the Board has provided a brief
description of each activity.
Commenters are specifically
asked to comment on the accuracy and adequacy of the proposed
description of each activity.
Comment is also requested on whether each activity is
closely related to banking or incidental to the performance of
such an activity under the judicially-formulated criteria or
other relevant criteria.
Comments on whether an activity is

Z/

E . g ., National Courier Ass'n
516 F .2d 1229 (D.C. Cir. 1975).

v.

Board

of

Governors,

3/
Alabama Association of Insurance Agents v . Board of
Governors, 533 F.2d 224 (5th Cir. 1976), c e r t . denied, 435 U.S.
904 (1978).
i/
In its evaluation of an application by a specific bank
holding company to engage in a listed activity, the Board also
must determine whether the performance of the activity by that
bank holding company meets the "proper incident" criteria.
Alabama Association of Insurance Agents, supra.

-

4-

closely related to banking should include the specific facts,
examples, and legal arguments on which the commenters base
their opinions.
In addition, comments should provide data and
information pertinent to the activity, including the identity
and size of industry participants, trends in profitability,
merger and failure rates, and the sources for such information
and data.
With respect to whether a proposed activity is a
proper incident to banking, some of the issues raised by a
particular activity have been identified in this notice.
Commenters are specifically requested to comment on the issues
identified by the Board, as well as any other issues that are
relevant under the proper incident test of section 4(c)(8) of
the BHC Act.
For those activities for which potential adverse
effects may exist, commenters are requested to propose methods
of reducing or eliminating the potential for the occurrence of
such adverse effects.
Comments regarding the proper incident
test also should include specific facts, examples, and legal
arguments concerning the issues.
Although the Board has not
specifically proposed limits on any of the activities, to
address issues raised by the activity, based on the comments
and other facts of record, limitations may be incorporated by
the Board when taking final action to add an activity to the
Regulation Y list.
Proposed Nonbanking Activities
The Board is seeking public comment on whether the
list of activities permissible for bank holding companies in
section 225.25 of Regulation Y
(49 F e d . R e g . 794
(1984)),
should be amended to add the following activities:
1.
Commodity trading advisory services. Commenters
suggested that bank holding companies be permitted to provide
commodity trading advisory services.
As defined by the
Commodities Futures Trading Commission,
commodity trading
advisory services involve the provision of advice, counsel,
publications, written analyses and reports relating to the
purchase and sale of commodities for future delivery on or
subject to the rules of a contract market.
The Board seeks
comment on whether this activity should be limited to the
provision of advice only with respect to such financial
commodities for which the Board has authorized future
commission merchant ("FCM") activities.
2.
Check guaranty services. Authorizing acceptance
by subscribing merchants of personal checks tendered by the
merchant's customers in payment for goods and services, and

-

5-

purchasing a validly authorized check from the merchant in the
event the check is not subsequently honored.
The Board
previously has determined that this activity is closely related
to banking and a proper incident thereto in connection with a
particular application, but the activity was not added to the
Regulation Y list at that time.
(Barnett Banks of Florida,
65 Federal Reserve Bulletin 263 (1979).)
One issue raised by
this activity on which comment is requested is whether
conditions should be imposed on the performance of the activity
to limit the liability of the bank holding company resulting
from the purchase of dishonored checks.
3.
Consumer financial counseling. Providing advice
to consumers on individual financial matters, including debt
consolidation, applying for a mortgage, bankruptcy, budget
management, tax planning, retirement and estate planning,
insurance, and portfolio management and investment planning.
This service is usually limited to counseling for a fee,
including educational courses and seminars, and does not
involve the sale of specific products or investments.
The Board previously has found consumer financial
counseling services to be closely related to banking in
connection with a particular application.
(Citicorp (Citicorp
Person-to-Person Financial Centers), 65 Federal Reserve
Bulletin 265 (1979).)
The Board notes that financial
counseling is permissible for service corporations of Federal
savings and loan associations ("S&Ls").
4.
Armored car services.
Providing fully-insured
transportation o? cash, securities, and valuables; primarily,
collecting currency and checks from commercial customers and
transporting and depositing these collections at financial
institutions.
Armored car services may also include bank
transfers, coin wrapping, change delivery, mail delivery,
payroll check cashing, servicing of automated teller machines,
and leasing safes to commercial customers.
Armored car services were proposed by the Board in
1971 together with courier services (transporting checks,
commercial paper, and similar documents, excluding cash and
bearer negotiable instruments) for addition to the Regulation Y
list.
While the Board added courier services to the list in
1973, it did not take final action on the armored car services
proposal.
(38 Federal Register 32126, and 59 Federal Reserve
Bulletin 892 (1973) . ) One issue raised by this activity on
which comment is requested is whether conditions should be
imposed on performance of the activity to limit the liability
of the bank holding company.

-

6-

5.
Tax planning and tax preparation. Tax planning
services involve providing advice and strategies designed to
minimize tax liabilities.
At the corporate level, the service
includes analyses of the tax implications of mergers and
acquisitions, portfolio mix, specific investments, previous tax
payments, and year-end tax planning (which involves projecting
expected tax liabilities and balancing these with expected
cash-flow). For the individual, the service includes analyses
of the tax implications of retirement plans, estate planning,
and family trusts.
One issue raised by this activity on which
comment is requested is whether corporate tax planning should
be regarded as management consulting,
an activity not
permissible under the regulation.
Tax preparation services involve preparation of tax
forms, and advice concerning how the client should file in
order to minimize the tax liability based on records and
receipts supplied by the client.
The Board notes that service
corporations of Federal S&Ls are permitted to prepare tax
returns for individuals and non-profit organizations.
6.
Operating a collection agency and credit bur e au .
Collection agency activities
include collecting overdue
accounts receivable, either retail or commercial, generally for
a contingent fee based on a specified percentage of the amount
collected.
Credit bureau activities include maintaining files
on the past credit history of certain borrowers and providing
that information for a fee to a credit grantor who is
considering a borrowers1 application for credit.
In addition, the Board is seeking public comment on
whether to amend certain activities specified
in the
Regulation Y list (section 225.25 of Regulation Y, 49 F e d .
R e g . 794 (1984)), to include the following activities:
1.
Insurance underwriting and agency activities
(sections 225.25(b)(8) and (9 )~H
Title VI of the Garn-St
Germain Act amended section 4 ( c ) (8) of the BHC Act to specify
the types of insurance activities in which bank holding
companies may engage and to limit some of those that the Board
had^ found to be permissible under Regulation Y.
The recent
revision of Regulation Y (49 F e d . R e g . 794, January 5, 1984)
did not amend the insurance activities provision of the
regulation, but the Board stated that it was reviewing the
issues raised by the Garn-St Germain Act provisions and that it
would amend Regulation Y to reflect the resolution of these
issues.
A number of commenters encouraged the Board to amend
the regulation to reflect the new statutory provisions.
Accordingly, the Board proposes to amend sections 225.25(b)(8)
and (9) of Regulation Y (as revised) to delete those provisions

-

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entirely and to substitute provisions permitting the following
insurance activities:
A. Acting as principal, agent or broker for insurance
directly related to an extension of credit by a bank holding
company or any of its subsidiaries, where such insurance is
limited to assuring the repayment of the outstanding balance
due on a specific extension of credit by such bank holding
company or subsidiary in the event of
death, disability or
involuntary unemployment of the debtor.
Since the sale of
insurance must be related to an extension of credit under this
provision of the Garn-St Germain Act, the sale of insurance
related to the provision of "other financial services" as
provided in section 225.25(b)(8)(i )(b) of Regulation Y, is no
longer permitted.
An "extension of credit" would include loans
which are purchased, but not those loans that are merely being
serviced.
Comment is requested whether an extension of credit
would include a lease.
The Board believes that the
enactment of this
provision in the Garn-St Germain Act warrants reexamination of
whether underwriting home mortgage life insurance is closely
related to banking.
Home mortgage life underwriting involves
underwriting the repayment of the unpaid balance of a home
mortgage loan in the event the insured borrower dies or is
disabled before the mortgage is paid in full.
Prior to the
Garn-St Germain Act, the Board declined to publish notice of
this activity on the basis that it is not closely related to
banking, because this type of insurance is more similar to
general life insurance than to credit life insurance.
(BankAmerica Corporation (BA Insurance
Company), Federal
66
Reserve Bulletin 660 (1980).)
The Board believes that home
mortgage
life
underwriting may be permissible
under
subparagraph (A) of section 601 of the Garn-St Germain Act, and
requests comment on whether it should be included in the
Regulation Y list.
B. Acting as principal, agent or broker for insurance
directly related to an extension of credit by a finance company
that is a subsidiary of a bank holding company, provided (1)
such insurance is limited to assuring repayment of the
outstanding balance on an extension of credit by such finance
company of such bank holding company in the event of loss or
damage to any property used as collateral for the extension of
credit; and (2) the extension of credit is not more than
$10,000, or $25,000 in the case of an extension of credit to
finance the purchase of, and that is secured by, a residential
manufactured home.
These dollar limitations shall be increased
each year after 1982 by the percentage increase in the Consumer

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Price Index for Urban Wage Earners and Clerical Workers
published monthly by the Bureau of Labor Statistics for the
period beginning on January 1, 1982, and ending on December 31
of the year preceding the year in which such extension of
credit is made.
The Board notes that this provision would authorize a
bank holding company to underwrite property and casualty
insurance that is allowed to be sold under this paragraph by a
finance company subsidiary of the bank holding company.
Comment is requested on the definition of finance company and
whether it excludes any deposit-taking entity.
C.
Any insurance agency activity (1) in a place that
has a population not exceeding 5,000 (as shown in the preceding
decennial census); or (2) in a town that the Board determines,
after notice and opportunity for hearing, has inadequate
insurance agency facilities.
The Board notes that the Garn-St
Germain Act does not impose the requirement, now found in
section 225.25(b)(8) of Regulation Y, that the bank holding
company have its principal place of banking business in the
community with a population not exceeding 5,000.
Comment is
requested on whether the proposed regulatory provision should
include this requirement.
D. Any insurance agency activity engaged in by a bank
holding company or any of its subsidiaries on May 1, 1982 (or
any insurance agency activity that the Board had approved for
such company or its subsidiaries on or before May 1,
1982).iL/
This paragraph would authorize a bank holding
company or a subsidiary of that bank holding company to perform
at any location any insurance agency activity, including the
sale of credit-related property and casualty insurance,
provided that that activity was approved for the bank holding
company or any of its subsidiaries on May 1, 1982.
This
provision is based on subparagraph (D) of section 601 of the
Garn-St Germain Act.

5/
For purposes of this paragraph, the bank holding company
activities engaged in or approved by the Board on May 1, 1982,
shall include activities carried on subsequent to that date as
the result of an application to engage in such activities
pending on May 1, 1982, and approved subsequent to that date or
as the result of the acquisition by such company pursuant to a
binding written contract entered into on or before May 1, 1982,
of another company engaged in such activities at the time of
the acquisition.

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In addition to authorizing bank holding companies and
their subsidiaries to engage in any insurance agency activities
they were engaged in on May 1, 1982, subparagraph (D) of the
Garn-St Germain Act provides that this authorization "includes"
engaging in such activities at specified locations.
The Board
seeks comment on whether the specification of locations in
subparagraph
(D) imposes a limitation on where the
insurance
agency activities allowed
under subparagraph (D)
may be
conducted.
Accordingly, the Board requests comment on whether
under subparagraph (D) of section 601 of the Garn-St Germain
Act a bank holding company or any of its subsidiaries that were
engaged in insurance agency activities as of May 1, 1982
(particularly, the sale of credit-related property and casualty
insurance), or any insurance agency activity that the Board
approved for such company or its subsidiaries on or before
May 1, 1982, may perform the activity under authority of this
paragraph only at locations:
(i)

in the state in which the principal place of
business of the bank holding
company (as defined in 12 U.S.C. 1842(d)) is
located;

(ii)

in any state or states immediately adjacent to
such state; and

(iii)

in any state or states in which such insurance
agency activity was conducted (or was approved
to be conducted) by such bank holding company
or its subsidiary on May 1, 1982, or other
insurance coverages that may become available
after May 1, 1982, so long as those coverages
insure against the same types of risks as, or
are otherwise functionally equivalent to,
coverages sold on May 1, 1982, or approved to
be sold on or before May 1, 1982.

The Board notes that these limitations as to
geographic location would only apply if the bank holding
company were seeking authority to expand the activity under
subparagraph (D).
These restrictions would not apply if the
insurance activity were conducted under any of the other
exemptions.
For example, they would not apply to the sale of
credit life, accident and health insurance under subparagraph
(A) or to the sale of insurance by a bank holding company with
assets of less than $50 million under subparagraph (F).

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In subparagraph (iii) of this alternative, expansion
of “grandfathered" insurance agency activities within a state
is limited to the subsidiary of the bank holding company that
was conducting (or approved to conduct) the activities in that
state on May 1, 1982,
Thus, if a bank holding company has two
consumer finance companies, but only one of them was selling
property and casualty insurance in a particular state on May 1,
1982, only that subsidiary could expand its property and
casualty insurance activities within the state.
However, the
Board has allowed the transfer of grandfather rights where the
grandfathered subsidiary was merged with another subsidiary of
the bank holding company for purposes of efficiency.
In this
regard, compare S. Rep. No. 976-36, 97th Cong., 2d Sess. 40
(1982) with H. Rep. No. 97-899, 97th Cong., 2d Sess. 91 (1982)
(Conference Report).
Also, under subparagraph (iii) of this alternative, a
bank holding company may sell insurance that was not sold prior
to May 1, 1982, as long as those coverages sold insure against
the "same types of risks as, or are otherwise functionally
equivalent to, coverages sold on May 1, 1982, or approved to be
sold on or before May 1, 1982."
Comment is requested on
whether since leasing may be the functional equivalent of an
extension of credit, the sale of property and casualty
insurance on leased items would be permissible.
E. Supervising on behalf of insurance underwriters the
activities of retail insurance agents who sell (1) fidelity
insurance and property and casualty insurance on the real and
personal property used in the operations of the bank holding
company or its subsidiaries; and (2) group insurance that
protects the employees of the bank holding company or its
subsidiaries.
F. Any insurance agency activity by a bank holding
company or its subsidiaries where the bank holding company has
total consolidated assets of $50 million or less.
Under the
Garn-St Germain Act, this provision does not authorize a bank
holding company to sell life insurance or annuities, other than
as authorized under paragraphs (A), (B) and (C) of that
statute.
Also, to qualify for this exemption, the holding
company system and not merely one subsidiary must have less
than $50 million in assets.
G. Any insurance agency activity performed directly or
indirectly by a bank holding company that was engaged in
insurance agency activities prior to January 1, 1971, as a
consequence of approval by the Board prior to January 1, 1971.
This provision ma^ authorize any qualifying company to sell

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insurance of any type from any location without
its pre-1971 activities.

reference

to

While the Garn-St Germain Act specified the insurance
activities that the Board may permit under section 4(c)(8), it
made no findings as to public benefits and it did not relieve
bank holding companies of the requirement for evaluation of an
application to engage in or expand nonbanking activities.
Accordingly, applications under section 4(c)(8) of the BHC Act,
in accordance with sections 225.21 and 225.23 of Regulation Y
(49 F e d . R e g . 794 (1984)), would be required by a bank holding
company to engage in, or expand through acquisition, any of the
insurance activities proposed here,
including those in
paragraph (G) for insurance agency activities engaged in by
bank holding companies prior to January 1, 1971.
The proposed
regulatory provision imposes no requirement to meet any
specified public benefit standard, such as reduced rates or
improved policy terms.
2.
Property
appraisals (section 225.25(b)(12)).
Appraisal of real property is currently on the Regulation Y
list of activities permissible for bank holding companies.
Several commenters suggested that this activity be expanded to
include appraisals of personal property.
The activity involves estimating or determining the
value of property other than real property.
In the broadest
sense, the activity requires expertise in markets of all types
of personal and business property? however, most appraisers
narrow their
activity to specialized areas of personal
property.
The commenters suggesting this activity maintained
that it is closely related to banking because banks engage in
personal property appraising through their trust departments.
3.
Futures commission merchant (section 225 .25(18)).
Future commission merchant ("F C M ' ) activities with respect to
*
certain financial commodities are on the Regulation Y list of
permissible activities, subject to certain conditions.
The
Board has approved the provision of portfolio advice on a
non-fee basis as an activity incidental to permissible FCM
activities
in connection with particular applications.
(Citicorp (Citicorp Futures Corporation), 68 Federal Reserve
Bulletin 776 (1982)? and First Interstate Bancorporation (F.I.
Futures Corporation), 69 Federal Reserve Bulletin 729 (1983).)
In the proposed regulation, the Board seeks comment on whether
to include advice offered in connection with FCM activities as
a permissible closely-related activity.

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Regulatory Flexibility Act Analysis
The Board certifies that adoption of these proposals
would not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act (5 U.S.C. 601).
These proposals would not
place additional burdens on any bank holding company.
They
would liberalize the rules for all bank holding companies, and
would facilitate the process by which bank holding companies
may receive permission to engage in nonbanking activities.
List of Subjects in 12 CFR Part 225
Banks, banking? Federal Reserve System?
companies? Reporting requirements? Securities.

Holding

Pursuant
to
the
Board's
authority
under
sections 4(c)(8) and 5(b) of the Bank Holding Company Act, as
amended (12 U.S.C. 1843(c)(8) and 1844(b)), the Board proposes
to amend 12 CFR Part 225 (as revised, 29 F e d . Reg . 794 (1984))
by revising sections 225.25(b)(8) and (9)? by amending sections
225.25(b)(13)and (18)? and by adding sections 225.25(b)(19),
(20), (21), (22), and (23), as follows:
SECTION 225.25— LIST OF PERMISSIBLE NONBANKING ACTIVITIES
*

*

*

*

*

(b )(8) Insurance sales and underwriting.
(i)
Acting as principal, agent or broker
for
insurance directly related to an extension of credit by a bank
holding company or any of its subsidiaries, provided such
insurance is
limited to assuring the repayment of
the
outstanding balance due on a specific extension of credit by
such bank holding company or subsidiary in the event of death,
disability or involuntary unemployment of the debtor.
(ii)
Acting as principal, agent or broker
for
insurance directly related to an extension of credit by a
finance company that is a subsidiary of a bank holding company,
provided (A) such insurance is limited to assuring repayment of
the outstanding balance on an extension of credit by such
finance company of such bank holding company in the event of
loss or damage to any property used as collateral for the
extension of credit? and (B) the extension of credit is not
more than $10,000, or $25,000 in the case of an extension of
credit to finance the purchase of, and that is secured by, a
residential manufactured home.
These limitations shall be
increased each year after 1982 by the percentage increase in

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the Consumer Price Index for Urban Wage Earners
Workers published monthly by the Bureau of Labor
the period beginning on January 1, 1982, and
December 31 of the year preceding the year in
extension of credit is made.

and Clerical
Statistics for
ending on
which such

(iii)
Any insurance agency activity (A) in a place that
has a population not exceeding 5,000 (as shown in the preceding
decennial census); or (B) in a town that the Board determines,
after notice and opportunity for hearing, has inadequate
insurance agency facilities.
(iv)
Any insurance agency activity engaged in by a
bank holding company or any of its subsidiaries on May 1, 1982
(or any insurance agency activity that the Board had approved
for such company or its subsidiaries on or before May 1,
1982) .1/
(v)
Supervising on behalf of insurance underwriters
the activities of retail insurance agents who sell (A) fidelity
insurance and property and casualty insurance on the real and
personal property used in the operations of the bank holding
company or its subsidiaries; and (B) group insurance that
protects the employees of the bank holding company or its
subsidiaries.
(vi)
Any insurance agency activity by a bank holding
company or its subsidiaries where the bank holding company has
total consolidated assets of $50 million or less.
A bank
holding company performing insurance agency activities under
this paragraph may not engage in the sale of life insurance or
annuities except as provided in paragraphs (i), (ii)/ and (iii)
of section 225.25(b) of this regulation.
(vii)
Any insurance agency activity performed directly
or indirectly by a bank holding company that was engaged in
insurance agency activities prior to January 1, 1971, as a
consequence of approval by the Board prior to January 1, 1971.

7/
For purposes of this subparagraph, the bank holding
company activities engaged in or approved by the Board on
May 1, 1982, shall include activities carried on subsequent to
that date as the result of an application to engage in such
activities pending on May 1, 1982, and approved subsequent to
that date or as the result of the acquisition by such company
pursuant to a binding written contract entered into on or
before May 1, 1982, of another company engaged in such
activities at the time of the acquisition.

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(9)
Check guaranty services. Authorizing acceptance
by subscribing merchants of personal checks tendered by the
merchant's customers in payment for goods and services, and
purchasing a validly authorized check from the merchant in the
event the check is not subsequently honored.
* * * * *

(13)
Property appraising.
real estate and other property.

Performing

appraisals

of

* * * * *

(18)
Futures commission merchant.
Acting as
a
futures
commission merchant for nonaffiliated persons in
the
execution and clearance on major commodity exchanges of futures
contracts and options on futures contracts for bullion, foreign
exchange, government securities, certificates of deposit and
other money market instruments that a bank may buy or sell in
the cash market for its own account, including the provision of
advice to a customer with respect to a transaction executed by
the futures commission merchant, if the activity is conducted
through
a separately incorporated subsidiary of the bank
holding company that:
* * * * *

(19)
Commodity trading advisory services. Providing
commodity trading advisory services, including the provision of
advice, counsel, publications, written analyses and reports
relating to the purchase and sale of financial commodities for
future delivery on or subject to the rules of a contract market
of the
type for which a bank holding company may act as
a
futures commission merchant.
(20)
Consumer financial counseling. Providing advice
to consumers on individual financial matters, including debt
consolidation, applying for a mortgage, bankruptcy, budget
management, real estate tax shelters, tax planning, retirement
and estate planning, insurance, and portfolio management and
investment planning.
(21)
Armored car services. Providing fully-insured
transportation of cash, securities, and valuables; primarily,
collecting currency and checks from commercial customers and
transporting and depositing these collections at financial
institutions.
Armored car services also include bank
transfers, coin wrapping, change delivery, mail delivery,
payroll check cashing, servicing of automated teller machines,
and leasing safes to commercial customers.

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(22) Tax preparation
and planning. Preparing tax
forms and providing advice and strategies designed to minimize
tax liabilities, including, for corporate customers, analyses
of the tax implications of mergers and acquisitions, portfolio
mix, specific investments, previous tax payments, and year-end
tax planning (which
involves
projecting expected tax
liabilities and balancing these with expected cash-flow); and,
for individual customers, analyses of the tax implications of
retirement plans, estate planning, and family trusts.
(23) Operating a collection agency and credit
bureau. Collecting overdue accounts receivable, either retail
or commercial accounts, for a
contingent fee based on a
specified percentage of the amount collected; and maintaining
files on the past credit history of certain borrowers and
providing that information for a fee to a credit grantor who is
considering a borrowers' application for credit.
Board of
March 2, 1984.

Governors

of

the

Federal

Reserve

(signed) William W. Wiles

William W. Wiles
Secretary of the Board

System,


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102