YOU ARE HERE: LAT HomeCollections

Fed OKs Broader Services by Bank Firms

June 26, 1986|KATHLEEN DAY | The Washington Post

WASHINGTON — Bank holding companies will be able to sell for the first time a handful of services ranging from consumer financial and tax counseling to debt collection and credit checks, under rules adopted Wednesday by the Federal Reserve Board of Governors.

The Fed's decision is the first extension in years of the banking regulators' list of permissible non-banking activities for bank holding companies. It means that these companies, through non-bank subsidiaries, may charge for services that before now they were barred from providing or could only offer free.

A bank holding company is any company that owns a controlling interest in one or more banks.

The American Bankers Assn. applauded the decision but said the Fed did not go far enough. "Until the commercial banking industry is brought to full equality with its non-bank competitors, we're prevented from providing the full array of services our customers need," said Edward Yingling, ABA executive director for government relations.

In a separate action, the Fed clarified existing law on the types of insurance that bank holding companies can sell. In general, the insurance they are permitted to offer must be related to bank-generated loans.

Bank holding companies have pushed for years to expand the kind of services that they can offer for a fee, ultimately hoping to gain a foothold in financial services ranging from underwriting of corporate securities to a full line of insurance.

Expanded fee income is necessary, the companies argue, as deregulation and technology make banking more competitive and squeeze profit margins on traditional services such as taking deposits and making loans.

The Fed's new rules come with many restrictions, though. For example, a bank holding company cannot sell financial counseling to consumers from the same subsidiary that sells discount stock brokerage services.

A bank holding company also must tell customers it counsels that they need not purchase suggested services from the company's other subsidiaries, and any credit bureau subsidiary must treat all customers equally, regardless of their relationship to the company's other subsidiaries.

Los Angeles Times Articles