Banks and Insurance: An Update

Since the enactment of the Bank Holding Company Act in 1956, the Federal Reserve Board has determined consistently that bank holding companies (BHC) may engage in insurance activities. An amendment to the Board's regulation Y in 1986 clarified the scope of permissible insurance powers for BHCs under the Garn-St Germain Act. The Board's amended insurance regulation parallels each of the exemptions contained in the Garn-St Germain Act, and it attempts to clarify the activities permitted under each of the 7 exemptions. For national banks wishing to sell insurance to their customers, the interaction between federal statutes 12 US Code (USC) Section 92 and 12 USC Section 24 (Seventh) has been a source of frustration, but recent regulatory and judicial decisions have been encouraging. To keep national banks competitive, the Office of the Comptroller of the Currency may need to authorize the sale and underwriting of insurance to purchasers who are not seeking other banking services.