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F

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DALLAS, TEXAS

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75222
Circular No. 72-289
December 19, 1972

AMENDMENT TO REGULATION Y
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 December 11, 1972 that underwriting credit life insurance and credit
accident and health insurance which is directly related to extensions of
credit by a bank holding company system is a permissible activity for a
bank holding company.
The Board’s decision followed consideration of the record of a
March 2 b , 1972 hearing on the subject of credit insurance underwriting
and comments received with respect to the hearing, together with the
Board’s prior experience in the field of bank holding company insurance
activities.
The new ruling amended the Board’s Regulation Y to add this
activity to the list of businesses closely related to banking or managing
or controlling banks in which a bank holding company may engage, subject
to approval of individual applications.
In announcing its decision, the Board set up the following tests
it will apply in considering applications under its new ruling:

"To assure that engaging in the underwriting of credit
life and credit accident and health insurance can reasonably
be expected to be in the public interest, the Board will only
approve applications in which an applicant demonstrates that
approval will benefit the consumer or result in other public
benefits. Normally such a showing would be made by a pro­
jected reduction in rates or increase in policy benefits due
to bank holding company performance of this service."

The Board also said:

"The operation of such a program assures a bank or bankrelated firm of repayment of a credit extension in the event
of death or disability while at the same time providing the
borrower with financial security in the event of a death or

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

disability. Further, the legislative history of the Bank
Holding Company Act indicates that Congress felt that the
operation of a credit life and credit accident and health
insurance program is closely related to banking."

A copy of the Board*s amendment of its Regulation Y is attached.

Yours very truly,
P. E. Coldwell,
President

Attachment

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

BANK HOLDING COMPANIES

AMENDMENT TO REGULATION Y f

Effective D ecem ber 11, 1972, section 2 2 5 .4 (a )(1 0 ) is am ended to read as follows.

controlling banks as to be a proper incident
thereto:

SEC TIO N 225.4— N O N B A N K IN G
A C T IV IT IE S

A t v t e c o e y r l t dt b n i g o man­
ciiis lsl e a e o a k n r
a i g o c n r l i g b n s * * * T he following
g n r otoln a k .
(a)

activities have been determ ined by the Board to
be so closely related to banking or m anaging or

3 To assure that engaging in the underwriting of
credit life and credit accident and health insurance
can reasonably be expected to be in the public interest,
the Board will only approve applications in which an
applicant demonstrates that approval will benefit the

(10 ) acting as underw riter for credit life in­
surance and credit accident and health insurance
w hich is directly related to extensions of credit by
the bank holding com pany system.3

consumer or result in other public benefits. Normally
such a showing would be made by a projected reduc­
tion in rates or increase in policy benefits due to
bank holding company performance of this service.

t For this Regulation to be complete as amended effective December 11,
1972, retain:
1) Printed Regulation pamphlet as amended effective December 1, 1971.
2) Amendment — Section 225.4(a)(5), Nonbanking Activities, effective
June 6, 1971.
3) This slip sheet.

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