Magazine article American Banker

Fed, Citing 'Consistency' with Law, Approves Five Nonbanks

Magazine article American Banker

Fed, Citing 'Consistency' with Law, Approves Five Nonbanks

Article excerpt

WASHINGTON -- The Federal Reserve Board last week announced that it has reluctantly granted approval to five more limited-purpose banks.

The announcement came as Comptroller of the Currency C.T. Conover gave preliminary approval last Thursday to 29 additional so-called nonbank banks, to be operated by 13 bank holding companies and located in nine states.

Fed Chairman Paul A. Volcker, in a letter to the House and Senate Banking committees on Thursday, said a majority of the board voted to approve the applications because they were "technically consistent with current law." But he said the board as a whole favors prompt congressional action that would block the formation of nonbank banks.

Fed governors Emmett J. Rice and Henry C. Wallich dissented from the approvals.

Limited-service banks have been widely criticized, and many believe them to be the result solely of a loophole in federal law that permits bank holding companies to conduct interstate activities and permits nonbanking firms to enter banking. Those nonbank banks approved by the Fed last week would escape federal restrictions by limiting their business to accepting demand deposits and making consumer loans but not commercial loans.

Exact figures were unavailable Friday, but the Fed is believed to have approved about 20 applications for nonbank banks since 1981.

The chairmen of the House and Senate Banking committees have vowed to consider banking legislation early next year that would close the loophole and, in some cases where the nonbank banks are operating, require divestitures. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.