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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£ GV 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."