Magazine article American Banker

Mutual Fund Proposals to Make Rounds Again

Magazine article American Banker

Mutual Fund Proposals to Make Rounds Again

Article excerpt

IT WILL BE DEJA VU all over again for followers of bank mutual fund legislation when Congress starts up on Jan. 25.

Making return appearances are closely watched initiatives that would give banks the power to convert common trust funds into mutual funds without triggering taxes for investors.

As things now stand, trust customers must pay taxes on any gains in their portfolios at the time of the conversion. By doing away with the tax bite, banks would have a shot at getting more mutual fund assets under their belts. This would help them build the economies of scale they need to make their mutual fund operations profitable.

The proposal appears to presents plenty of opportunity. Some 473 financial institutions oversee 1,770 common trust funds with $136.7 billion of assets, according to the Federal Financial Institutions Examination Council.

House Offers a Pair of Proposals

Members of the House Ways and Means Committee introduced two versions of the measure late last year.

One version, sponsored by Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., and approved by that panel, would allow the conversion into a single fund. The measure is part of HR 3419, a technical corrections bill.

The second -- HR 3631 -- is a stand-alone proposal introduced by Rep. William Coyne, D-Pa., that would allow conversions into more than one mutual fund.

The common trust conversion proposal first appeared in 1991, and racked up a history of association with ill-fated bills. …

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