Magazine article American Banker

High Court Will Rule on Bank Sales of Annuities

Magazine article American Banker

High Court Will Rule on Bank Sales of Annuities

Article excerpt

In an encouraging sign for banks, the Supreme Court agreed Monday to consider whether banks should have the right to sell annuities.

Annuities -- tax-sheltered retirement investments -- have been increasingly popular at banks. But banks in the business have been hampered by an array of conflicting state and federal laws. A favorable ruling by the high court could put that confusion to rest.

Last year, a federal appeals court in New Orleans concluded that annuities were insurance products, which national banks can sell only from small towns. Acting on behalf of the Office of the Comptroller of the Currency, the Department of Justice appealed to the Supreme Court.

'A Good Sign'

Legal experts said the Supreme Court may well side with the industry.

The high-court justices "would not have agreed to hear the case if they uniformly agreed" with the New Orleans ruling, said Melanie Fein, partner at Arnold & Porter, Washington. "It's a good sign they might overturn" the lower court's decision.

Eugene A. Ludwig, comptroller of the currency, swiftly praised the Supreme Court's move.

"The ability to sell annuities, along with the fee income collected from these activities, is of great importance to the continuing health of the national banking system," he said.

Annuity sales have grown steadily over the past few years, with banks counting for a larger and larger share. Total sales were $72 billion last year, up from $53.6 billion in 1990, according to the Association of Banks in Insurance. Banks posted $14.5 billion of last year's volume, the trade group said, up from less than $10 billion a few years before.

Gap in the Product Line

The court's decision will affect all national banks by defining their power to sell fixed-and variable-income annuities. Without this power, lawyers say, there would be a gap in banks' retail product lines. …

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