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F ederal reserve bank o f Dallas DALLAS, TEXAS 75222 Circular No. 71-189 August 12, 1971 AMENDMENT TO REGULATION Y (Certain Insurance Agencies To Be Permitted) To All Member Banks and Others Concerned in the Eleventh Federal Reserve District: The Board of Governors of the Federal Reserve System announced on August 10, 1971? an additional amendment to Regulation Y (Bank Holding Companies), adding paragraph (9) to §222.L(a) to permit holding companies to engage, directly or through a subsidiary, in certain insurance agency activities. This was one of the ten activities proposed by the Board on January 25 when it commenced implementation of the 1970 Amendments to the Bank Holding Company Act. Enclosed is a copy of the amendment, which is effective September 1A 1971-? and "the Board's press statement relative thereto. A current version of Regulation Y now consists of the pamphlet, effective March 15? 1 9 6 8 ; amendments to §222.L(a) through (c), effective June 15? 1971; an amendment adding paragraph (d) to that section, effective June 30? 1971; an amendment adding para graph (e), effective July 1, 1971; an amendment adding paragraph (a)(8 ), effective July 1, 1971; and the enclosed amendment. Yours very truly, P. E. Coldwell President Enclosures This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM BANK HOLDING COMPANIES A M EN D M EN T TO REGULATION Y Effective September 1, 1971, section 222.4(a) of Regulation Y is amended by changing the period at the end thereof to a semicolon and adding subparagraph (9) as follows: SECTION 222.4— N O NBANKING ACTIVITIES (a) Activities closely related to banking or managing or controlling banks. ***The following activities have been determined by the Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto: (9) acting as insurance agent or broker in offices at which the holding company or its subsidiaries are otherwise engaged in business (or in an office adjacent thereto) with respect to the following types of insurance: (i) any insurance for the holding company and its subsidiaries; (ii) any insurance that (A ) is directly related to an extension of credit by a bank or a bank-related firm of the kind described in this regula tion, or (B) is directly related to the provision of other financial services by a bank or such a bank-related firm, or (C) is otherwise sold as a matter of convenience to the purchaser, so long as the premium income from sales within the subclause (C) does not constitute a significant portion of the aggregate insurance premium income of the holding company from insur ance sold pursuant to this clause (ii); (iii) any insurance sold in a community that (A) has a population not exceeding 5,000, or (B) the holding company demonstrates has inade quate insurance agency facilities. F E D E R A L press R E S E R V E release A u g u st 10, For im m e d ia te r e l e a s e 1971 The Board o f G o v e r n o r s o f t h e F e d e r a l R e s e r v e S y s te m to d a y an n ou n ced c e r t a i n t y p e s o f i n s u r a n c e a g e n c y a c t i v i t i e s i n w h ich bank h o l d i n g c o m p a n ie s may e n g a g e u n d er th e 1970 amendments t o t h e Bank H o ld in g Company A c t . I n an amendment, e f f e c t i v e company r e g u l a t i o n , th e l i s t S ep tem b er 1, to i t s bank h o l d i n g t h e Board added i n s u r a n c e a g e n c y a c t i v i t i e s to o f b u s i n e s s e s i t h a s fo u n d th u s f a r " t o b e s o c l o s e l y r e l a t e d t o b a n k in g o r m an agin g or c o n t r o l l i n g bank s a s t o b e a p r o p e r i n c i d e n t th e r e to ." The Board e a r l i e r d e t e r m in e d e i g h t o t h e r a c t i v i t i e s " c lo s e ly r e la te d " t o be t o b a n k in g u n d er s e c t i o n 4 ( c ) 8 o f t h e A c t . The amendment a d d s t h e f o l l o w i n g a c t i v i t y to th e B o a rd 's list: " A c t in g a s i n s u r a n c e a g e n t or b r o k e r i n o f f i c e s h o l d i n g company or i t s a t w h ic h th e s u b s i d i a r i e s a r e o t h e r w i s e e n g a g ed i n b u s i n e s s ( o r i n an o f f i c e a d j a c e n t t h e r e t o ) w i t h r e s p e c t to t h e f o l l o w i n g t y p e s o f in su ra n ce : " (i) any i n s u r a n c e f o r t h e h o l d i n g company and i t s " ( 1 1 ) any i n s u r a n c e t h a t (A) i s d i r e c t l y r e l a t e d s i o n o f c r e d i t b y a bank o r a b a n k - r e l a t e d s c r ib e d su b s id ia r ie s ; t o an e x t e n f i r m o f t h e k in d d e i n t h i s r e g u l a t i o n , o r (B) i s d i r e c t l y r e l a t e d t o th e p r o v i s i o n o f o t h e r f i n a n c i a l s e r v i c e s by a bank o r s u c h a bankr e la te d fir m , or (C) i s o th e r w is e s o ld as a m a tter o f c o n v e n ie n c e t o t h e p u r c h a s e r , s o lo n g a s t h e premium in com e from s a l e s w i t h i n - 2- t h e s u b c l a u s e (C) d o e s n o t c o n s t i t u t e a s i g n i f i c a n t p o r t i o n o f t h e a g g r e g a t e i n s u r a n c e premium in com e o f t h e h o l d i n g company from i n s u r a n c e s o l d p u r s u a n t t o t h i s c l a u s e ( i i ) ; " (iii) an y i n s u r a n c e s o l d i n a com m unity t h a t (A) h a s a popu l a t i o n n o t e x c e e d i n g 5 , 0 0 0 , or (B ) t h e h o l d i n g company demon s t r a t e s h as in a d e q u a te in s u r a n c e agen cy f a c i l i t i e s . ” The B oard e x p r e s s e d t h e e x p e c t a t i o n t h a t a h o l d i n g company or s u b s id ia r y th a t en g a g es in th e in s u r a n c e a g en cy b u s in e s s w i l l e x e r c ise i t s fid u c ia r y r e s p o n s ib ilit y - - t h a t i s , b y m aking i t s b est e f f o r t t o o b t a i n t h e i n s u r a n c e a t t h e l o w e s t p r a c t i c a b l e c o s t t o th e cu sto m er. The Board a c t e d on i n s u r a n c e a g e n c y a c t i v i t i e s a f t e r c o n s i d e r i n g p u b l i c comments and t h e r e c o r d o f a h e a r i n g h e l d b e f o r e members o f t h e B oard on May 1 2 . In su r a n c e a g en cy b u s i n e s s was one o f t h e 10 a c t i v i t i e s p r o p o s e d by t h e B oard l a s t J a n u a r y 25 when i t o u t l i n e d p l a n s t o amend R e g u l a t i o n Y a s a f i r s t s t e p tow ard im p le m e n tin g t h e 1970 am endm ents t o t h e A c t . The o r i g i n a l p r o p o s a l w o u ld h a v e p e r m i t t e d a bank h o l d i n g company t o a c t " a s i n s u r a n c e a g e n t o r b r o k e r p r i n c i p a l l y in c o n n e c tio n w i t h e x t e n s i o n s o f c r e d i t by t h e h o l d i n g company or any o f i t s s id ia r ie s ." In t h e amendment an n ou n ced t o d a y , t h e Board s p e l l e d o u t i n m ore d e t a i l t h e t y p e s o f i n s u r a n c e a g e n c y a c t i v i t i e s c lo s e ly r e la te d su b th a t i t fou n d t o b e to b a n k in g . In a r e l a t e d m a t t e r , t h e Board a l s o c o n s i d e r e d b u t d e c i d e d n o t t o a d o p t a t t h i s tim e a g e n e r a l r e g u l a t o r y p r o v i s i o n r e g a r d i n g in su r a n c e u n d e r w r itin g a c t i v i t i e s as c l o s e l y r e l a t e d to b a n k in g . A c o p y o f t h e i n s u r a n c e a g e n c y amendment i s a t t a c h e d . -0 -
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