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F ed er a l R e ser ve Ba DALLAS, TEXAS n k o f D a lla s 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.