Magazine article American Banker

FDIC Weighs Plan to Limit New Activities; Proposal Would Restrict Underwriting, Expansion

Magazine article American Banker

FDIC Weighs Plan to Limit New Activities; Proposal Would Restrict Underwriting, Expansion

Article excerpt

WASHINGTON -- The Federal Deposit Insurance Corp. is considering a plan to restrict the involvement of insured banks in nontraditional areas, such as the underwriting of insurance and real estate.

The agency was scheduled to send out recommendations for public comment, but the matter was tabled on Tuesday at the request of Chairman William M. Isaac, who expressed concern about a few aspects of the proposal recommended by FDIC staff. The matter could be considered by the board as early as next week.

The restrictions are under consideration by the agency to protect banks that engage in a host of new activities authorized under state law or otherwise acquired. An FDIC ruling could run into opposition from the insurance and real estate industries and others who want, not a curtailment, but a total ban on bank involvement in nontraditional areas.

The Federal Reserve Board also has frowned upon efforts by institutions to seek regulatory approval for broadened powers.

The potential ruling comes at a time when Congress has debated, but not yet agreed upon, expanded powers for banking institutions.

According to a copy of the draft proposal that was to have been considered Tuesday, the FDIC could propose to require insured banks engaging in specific activities to do so through subsidiaries, which also would be subject to agency standards.

These activities would be: the underwriting of casualty, property, life, and other insurance, with the exception of credit life insurance; reinsurance; the underwriting or developing of real estate; insuring, guaranteeing, or certifying titles to real estate; guaranteeing or becoming surety upon the obligations of others; insuring the fidelity of others, or conducting a surety business.

Also, the draft proposal would limit an insured bank's "direct and indirect" investment in one or more subsidiaries that engage in the listed insurance activities to no more than 20% of the bank's "primary capital," as defined under FDIC rules. …

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