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FEDERAL RESERVE BANK OF NEW YORK J" Circular No. 7 4 3 6 1 L A ugust 7, 1974 J PROPOSED AMENDMENT TO REGULATION Y The Selling of “ Convenience” Insurance by Bank Holding Companies To A ll Bank H olding Companies, and O thers Concerned, in the Second Federal R eserve D istrict: Following is the text o f a statement issued August 1 by the Board o f Governors o f the Federal Reserve System: T he B oard of G overnors of the Federal Reserve System today invited public com m ent on a regulatory proposal to clarify the definition of insurance sold as a matter of convenience to borrow ers under its bank holding com pany regulation (R egu lation Y ) . Com m ent will be received by the B oard through September 6, 1974. U nder the existing regulation, a bank holding com pany and its subsidiaries may sell “ convenience” insurance only to the extent that the entire holding com pany system derives less than 5 per cent o f its over-all insurance premium incom e from such sales. T he proposed amendment w ould extend this general limitation on premium incom e to each individual insurance-selling office o f the holding com pany system. Printed below is the text o f the proposed amendment to Regulation Y . Comments thereon should be submitted by September 6, and may be sent to our Bank Applications Department. A lfred H a y e s, President. (Reg. Y ) BANK HOLDING COMPANIES N on b a n k in g A ctivities Pursuant to its authority under § 4 ( c ) ( 8 ) of the Bank H old in g C om pany A ct (1 2 U .S .C . 1 8 4 3 ( c ) ( 8 ) ) , the B oard proposes to amend § 2 2 5 .4 (a ) o f its R egu lation Y to clarify the boundaries for the conduct of insurance activities, with respect to “ convenience” in surance, which the Board has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. U nder the provisions o f the present regulation (1 2 C F R 2 2 5 . 4 ( a ) ( 9 ) ) concerning permissible insurance activities, a bank holding com pany may act as insurance agent o r broker in offices at which the holding com pany or its subsidiaries are otherwise engaged in business with respect t o : any insurance for the holding com pany and its subsidiaries; any insurance that is directly re lated to an extension of credit or provision of other financial services by a bank or bank-related fir m ; any insurance sold in a com m unity that has a population not exceedin g 5 ,000; and any insurance that is oth er wise sold as a matter of convenience to the purchaser so long as the premium incom e from such convenience insurance does not constitute a significant portion o f the aggregate insurance premium incom e of the holding com pany from insurance sold pursuant to subdivision ( i i ) of § 2 2 5 .4 (a ) ( 9 ) . T he B oard has interpreted pre mium incom e attributable to “ convenience” sales as not constituting a “ significant p ortion ” if such amount is less than 5 per cent o f the aggregate insurance premium ( over ) incom e o f the holding com pany system from insurance sold pursuant to § 2 2 5 .4 (a ) ( 9 ) ( i i ) . T h e proposed amendment w ould set forth a new standard on the amount of “ convenience” insurance that cou ld be sold by each insurance-selling subsidiary office o f a bank holding com pany as well as retain the exist ing standard on the aggregate amount o f such insurance that cou ld be sold by the holding com pany system. Thus, in addition to limiting a bank holding com pany to de riving less than 5 per cent o f its aggregate insurance prem ium incom e from convenience insurance pursuant to § 2 2 5 .4 (a ) ( 9 ) ( i i ) of Regulation Y , the amendment w ould limit the am ount of convenience insurance sold by each insurance-selling subsidiary office to less than 5 per cent of that office’s total insurance premium incom e. T h e proposed amended subdivision ( i i ) ( c ) o f §225.4 ( a ) ( 9 ) o f R egulation Y w ould read as fo llo w s: S E C T I O N 225.4— N O N B A N K I N G A C T I V I T I E S (a ) Activities closely related to banking or manag ing or controlling banks. * * * T h e follow in g activities have been determined by the B oard to be so closely related to banking or m anaging or controlling banks as to be a proper incident th e re to : * * * (9 ) acting as insurance agent or broker . . . with respect to the follow in g types o f in su ran ce: ( i i ) A n y insurance that . . . ( c ) is otherwise sold as a matter o f convenience to the purchaser, provided that the premium in com e derived by each insurance-selling office of a bank holding com pany from sales per mitted by this subdivision ( i i ) ( c ) shall con stitute less than 5 per cent o f the insurance premium incom e o f such an office sold pur suant to this subdivision ( i i ) ; . . . * * * T o aid in the consideration of this matter by the B oard, interested persons are invited to submit relevant data, view s, comm ents, or argument. A n y such mate rial should be submitted in writing to the Secretary, B oard of G overnors of the Federal R eserve System, W ashington, D . C. 20551, to be received not later than September 6, 1974. B y order o f the B oard o f G overnors, July 29, 1974.
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