To All Bank Holding Companies, and Others Concerned, in the Second Federal Reserve District:
The following is from a statement issued by the Board of Governors of the Federal Reserve System:
The Federal Reserve Board has announced amendments to ease or eliminate three of the prudential limitations, or firewalls, imposed on the operations of section 20 subsidiaries of bank holding companies authorized to underwrite and deal in securities.
The amendments, which are effective January 7, 1997, will:
- modify the prohibition on director, officer and employee interlocks between a section 20 subsidiary and its affiliated banks or thrifts (the interlocks restriction);
- eliminate the restriction on a bank or thrift acting as agent for, or engaging in marketing activities on behalf of, an affiliated section 20 subsidiary (the cross-marketing restriction); and
- ease the restriction on the purchase and sale of financial assets between a section 20 subsidiary and its affiliated bank or thrift (the financial assets restriction).
With respect to interlocks, the Board is (1) eliminating a blanket prohibition on employee interlocks, (2) replacing a blanket prohibition on director interlocks with one limited to a majority of the board of a section 20 subsidiary and an affiliated bank, and (3) replacing a blanket prohibition on officer interlocks with one limited to the chief executive officer of each company.
The Board is expanding an exception to the financial assets restriction for the purchase and sale of government securities to include any asset having a readily identifiable and publicly available market quotation and purchased at that quotation.
The text of the Board's official notice, as published in the Federal Register of November 7. Questions on this matter may be directed to Brian Peters, Examining Officer.