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F ed er a l Reserve Ba n k o f Da lla s
DALLAS, TEXAS

7S222

Circular No. 72-87
May 8, 1972

INTERPRETATIONS OF THE BANK HOLDING COMPANY ACT
("Grandfather" Clause and Nonbank Activities)

To All Banks, Bank Holding Companies, and Others
Concerned in the Eleventh Federal Reserve District:
The Board of Governors of the Federal Reserve System
announced on April 25, 1972, that it will decide on a case-bycase basis how the "grandfather" clause in the 1970 amendments
to the Bank Holding Company Act will apply to one-bank holding
companies that acquire additional banks.
A copy of the press release concerning this action is
printed on the reverse.
In addition, the Board has determined that the follow­
ing activities are not so closely related to banking or managing
or controlling banks as to be a proper incident thereto:
(a)

Equity funding— that is, the combined sale of
mutual funds and insurance.

(b)

Underwriting life insurance that is not sold in
connection with a credit transaction by a bank
holding company, or a subsidiary thereof.

(c)

Real estate brokerage (see 1972 Federal Reserve
Bulletin U 2 8 ).

(d)

Land development (see 1972 Federal Reserve Bulletin

^29).
(e)

Real estate syndication.
Yours very truly,
P. E. Coldwell,
President

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

:O£
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FEDERAL
p r e s s

RESERVE

r e l e a s e

For immediate release

April 25, 1972

The Board of Governors of the Federal Reserve System said
today it will decide on a case-by-case basis--rather than by a
general regulation--how the "grandfather" clause in the 1970 amend­
ments to the Bank Holding Company Act will apply to one-bank holding
companies that acquire additional banks.
Under the grandfather provisions, some companies that con­
trolled one bank on December 31, 1970--the day the Act became law-may retain certain nonbanking activities on an indefinite basis.

In

other cases, nonbanking activities must be divested within 10 years
unless the Board determines that the activity is closely related to
banking.
Last October 26, the Board proposed a regulatory amendment
to clarify the effect of the grandfather provisions on one-bank
holding companies that acquire additional banks.

The proposal

generally would have required divestiture of nonbanking activities
within two years after an additional bank was acquired, unless the
Board ruled otherwise.
The Board said the case-by-case procedure it has adopted-rather than a general regulation--will afford it "an opportunity to
examine the relatively few companies involved from the standpoint of
whether the combination of banking and nonbanking interests for the
prescribed period of time is likely to have an adverse effect on the
public interest."

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