NU Online News Service, Aug. 14, 3:35 p.m. – The Federal Reserve Board has approved a final rule permitting state banks to establish financial subsidiaries. The Fed set down the rule in compliance with the Gramm-Leach-Bliley Act of 1999, which allows banks to establish subsidiaries for such activities as selling insurance and underwriting and selling securities–activities that were previously off-limits to banks in the United States.
Among other requirements, the rules specify that financial subsidiaries must show they are fiscally sound and that their total assets my not exceed 45% of their bank’s total assets, or $50 billion, whichever is less. The rule also clarifies one provision of the act, by stating that GLB prohibits financial subsidiaries from underwriting insurance or annuities.
Consumer and industry groups expressed no opposition to the final rule, the board reports.