NU Online News Service, Sept. 30, 2003, 5:59 p.m. EDT — Washington
The Federal Reserve Board should state explicitly that financial subsidiaries of banks that are involved in the business of insurance must comply with all applicable state insurance laws, including anti-rebate laws, two major insurance agent groups say.
In joint comments filed with the Fed, the Independent Insurance Agents and Brokers of America, Alexandria, Va., and National Association of Insurance and Financial Advisors, Falls Church, Va., say the Gramm-Leach-Bliley Financial Services Modernization Act preserves the right of states to regulate the insurance activities of all persons.
The issue involves a proposed interpretation of the anti-tying provisions in the Bank Holding Company Act by the Fed. Under Section 106 of the Bank Holding Company Act, banks are barred from tying the sale of a product to the extension of credit.
However, in its proposed interpretation, the Fed says that a financial subsidiary of a bank will be treated as an affiliate of the bank, not a subsidiary. Thus, the Fed says, it would not be subject to the anti-tying restrictions of Section 106.
The agent groups say that if the Fed does adopt this interpretation, it should nonetheless make clear that state insurance laws remain applicable to financial subsidiaries.
GLB, the agent groups say, imposes only one restriction on state authority to regulate insurance sales activities by banks. That restriction, they say, is that a state law may not prevent or significantly interfere with a bank's ability to engage in insurance sales.
"State anti-rebating laws unequivocally do not prevent or significantly interfere with insurance sales, solicitations or cross-marketing activities undertaken by depository institutions," the agent groups say.
