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FEDERAL RESERVE BANK OF NEW YORK r Circular N o.7 4 7 1 *1 L October 1 , 1974 J PROPOSED AMENDMENT TO REGULATION Y Requests for Hearing on the Sale of “ Convenience” Insurance by Bank Holding Companies To All Bank Holding Companies, and Others Concerned, in the Second Federal Reserve District: Our Circular No. 7436, dated August 7, 1974, contained the text of a proposal by the Board of Governors of the Federal Reserve System to amend its Regulation Y , “ Bank Holding Companies.” The proposed amendment would clarify the definition of insurance sold as a matter of convenience to borrowers under the Regulation. In order to make it clear that interested parties may request an opportunity for a hearing on the proposal, the Board of Governors has issued the following notice: T he Board o f G overnors published in the Federal Register on A ugust 8 , 1974 (3 9 F .R . 2 8 5 3 6 ), notice of the B oard’s proposal to amend § 2 2 5 .4 (a ) of its R egulation Y to clarify the boundaries for the conduct of insurance activities, with respect to “ convenience” insurance, which the B oard has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. T o aid in its consideration of this matter, the B oard invited interested persons to submit relevant data, views, comments, or argument. In accordance with the provisions o f § 4 ( c ) ( 8 ) of the Bank H old in g C om pany A ct, as amended, this solicitation was intended to include requests for hearing on the proposal. In order to make clear that interested parties may request an opportunity fo r a hearing with respect to this proposal, the A ugust 8 , 1974 notice (3 9 F .R . 2 8536) is hereby revised to offer interested parties w h o so desire, an opportunity to submit requests fo r a hearing. A n y such requests should be accom panied by a statement summarizing the evidence the person requesting the hearing proposes to submit or to elicit at the hearing and a statement o f the reasons w hy this matter should not be resolved without a hearing. Such requests and statements should be submitted in w riting to the Secretary, B oard of G overnors o f the F e d eral R eserve System, W ashington, D. C. 20551, to be received not later than O ctober 18, 1974. For your convenience, reprinted below is the text of the proposed amendment to Regulation Y . Written requests for a hearing on the proposal should be submitted by October 18 and may be sent to our Domestic Banking Applications Department. A lfred H a y e s , President. (Reg. Y ) BANK HOLDING COMPANIES Nonbanking Activities Pursuant to its authority under § 4 ( c ) ( 8 ) o f 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 ) of 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 m anaging 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 or broker in offices at w hich the holding company ( over) or its subsidiaries are otherwise engaged in business with respect t o : any insurance fo r the holding com pany and its su bsidiaries; any insurance that is directly re lated to an extension of credit or provision o f 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 other wise sold as a matter of convenience to the purchaser so long as the premium income from such convenience insurance does not constitute a significant portion o f the aggregate insurance premium incom e o f the holding com pany from insurance sold pursuant to subdivision ( i i ) o f § 2 2 5 .4 (a ) ( 9 ) . T he Board 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 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 of a bank holding com pany as well as retain the exist ing standard on the aggregate amount of such insurance that cou ld be sold by the holding com pany system. Thus, in addition to limiting a bank holding com pany to d e 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 would limit the amount o f convenience insurance sold by each insurance-selling subsidiary office to less than 5 per cent o f that office’s total insurance premium income. T he 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 2 2 5 .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 he follow in g 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 th e reto : * * * ( 9 ) acting as insurance agent or broker . . . with respect to the follow in g types of insurance: ( i i ) A n y insurance that . . . (c ) is otherwise sold as a matter of convenience to the purchaser, provided that the premium in com e derived by each insurance-selling office o f a bank holding com pany from sales p er 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 pu r suant to this subdivision ( i i ) ; . . .
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