What Makes Thrift Charter Attractive For Insurers?

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AFTER GRAMM-LEACH-BLILEY ACT IS ENACTED, WHAT STILL MAKES FEDERAL THRIFT CHARTER ATTRACTIVE FOR INSURERS ?

According to Mr. Hawke of Treasury Department, no less than 75% of commercial banks are actually engaged only in the activites permissible for federal-chartered thrifts. Since thrifts had some advantages over commercial banks, thrifts are still attractive for insurers even after the enactment of Gramm-Leach-Bliley Act of 1999.

PROS CONS

Can be engaged in activities incidental to financial services through their service corporations (not subject to the requirements for financial subsidiaries of national banks).

Have certain limits in commercial loans, consumer loans, CP, commercial or agricultural mortgage-back loan, etc. (expanded on Sep 96)

Can be engaged in any financial activities under unitary thrift holding company, as long as it is safe & sound and does not aim to avoid compliances (not subject to the requirements for financial holding companies).

Subject to QTL test that require thrifts to allocate more than 65% of assets to QTL qualified investments. (expanded on Sep 96)

Can enjoy favorable federal rules by OTS with broader preemption over state rules than those by OCC.(ex. Public hearing not required).

Not allowed explicitly to have foreign branches, therefore not engaged in activities permissible in foreign countries through foreign branches.

Can establish interstate branches, not only by acquiring but also by establishing, even in case state laws prohibit it explicitly.

Have certain limits in foreign exchange- related activities, such as speculative transactions.

OTS supervision over THC may have less potential conflicts with regulation on other affiliates, compared with FRB regulations over BHC. For example, OTS would not impose capital requirements on UTHCs.

Must do activites not permissible for thrifts themselves, through their service corporations, while national banks can directly engage in activities such as securities brokerage, investment advice, certain municipal bonds underwriting, or insurance sales (in the places of 5000 thru operating subsidiaries, and without geographic restriction thru financial subsidiaries).

Note: The information above in not intended to be legal advice and might be inaccurate. Besides, no consensus has been reached yet. For example, there might be different opinions about preemptions. Besides, OTS clarified that it would not intend to preempt state consumer laws. Foreign branch restriction is also ambiguous. Although OTS has not allowed it, it has not prohibited it, either.

HOW HAVE S.900/H.R.10 CHANGED IN THE CONGRESS?

Although the elimination of unitary thrift holding company's broad power is included in the House and Senate versions of H.R.10, the existing power would be grandfathered although there are some differences among the versions of the financial reform bills.

Gramm-Leach-Bliley Act (Signed by the President, November 12,1999) HR10 (Approved by House, July 1,1999) HR10 (Approved by House Commerce Committee, June 10,1999) Senate Bill (Approved by Senate, May 6,1999) Senate Bill (Approved by Senate Banking Committee, March 4,1999)

New unitary thrift holding companies after May 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

New unitary thrift holding companies after March 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

New unitary thrift holding companies after May 27, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

New unitary thrift holding companies after May 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

New unitary thrift holding companies after February 28, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

Existing UTHCs as of May 4 1999, as well as the new UTHCs filed on or prior to May 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Existing UTHCs as of March 4 1999, as well as the new UTHCs filed on or prior to March 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Existing UTHCs as of May 27 1999, as well as the new UTHCs filed on or prior to May 27 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Existing UTHCs as of May 4 1999, as well as the new UTHCs filed on or prior to May 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Existing UTHCs as of February 28 1999, as well as the new UTHCs filed on or prior to February 28 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Prohibit the sale of existing UTHCs to nonfinancial entities.

Permit the sale of existing UTHCs to nonfinancial entities, as long as FRB and OTS approve.

Prohibit the sale of existing UTHCs to nonfinancial entities. FRB and OTS shall conduct study of the effect of allowing commercial companies to continue acquiring grandfathered UTHCs.

Prohibit the sale of existing UTHCs to nonfinancial entities.

No provision

No provision.

No provision.

No provision.

No provision.

No provision.

Eliminates the need for the establishment of a SAIF special reserves.

No provision.

Eliminates the need for the establishment of a SAIF special reserves.

Eliminates the need for the establishment of a SAIF special reserves. Eliminates unequal FICO sharing.

Eliminates the need for the establishment of a SAIF special reserves. Extend three year unequal FICO sharing.

HR10 (Approved by House Banking Committee, March 11,1999) HR665 (introduced by Rep. LaFalce) HR10 (introduced by Rep. Leach, January 6,1999) HR10 (Approved by Senate Banking Committee, 1998) HR10 (Approved by House, 1998)

New unitary thrift holding companies after March 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

No provision

New unitary thrift holding companies after October 7, 1998 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

New unitary thrift holding companies after September 3, 1998 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

New unitary thrift holding companies after May 31, 1998 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.

Existing UTHCs as of March 4 1999, as well as the new UTHCs filed on or prior to March 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

No provision

Existing UTHCs as of October 7 1998, as well as the new UTHCs filed on or prior to October 7 1998, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Existing UTHCs as of September 3 1998, as well as the new UTHCs filed on or prior to September 3 1998, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.

Existing UTHCs as of May 31 1998, the new UTHCs filed on or prior to May 31 1998, as well as any companies aquiring those companies would be grandfathered.

Permit the sale of existing UTHCs to commercial entities.

No provision

Prohibit the sale of existing UTHCs to nonfinancial entities.

Prohibit the sale of existing UTHCs to nonfinancial entities.

No restriction on the sale of existing UTHCs.

No provision.

No provision.

Require OTS to publish in the Federal Register notices of intent when preempting state laws regarding consumer protection at least 30 days to submit written comments.

No provision.

No provision.

Eliminates the need for the establishment of a SAIF special reserves.

No provision.

Eliminates the need for the establishment of a SAIF special reserves.

No provision.

No provision.

Created and maintained by Makoto Okubo

Reproduction without my prior authorization is prohibited.

This page is created with the help of free-backgrounds.com.

Note: This is merely a tentative comparison, done by a very quick review of the summaries and bills.
I do not guarantee the accuracy of the contents and am not liable for any consequences. I am not an attorney and this is not intended for legal advice.
Reproduction or translation of this page is not allowed without my prior consent. If you are interested in citing this table for publication, please let me know in advance....
If you find inaccurate descriptions or additional important provisions, or you have your own comparison to be posted, I appreciate if you let me know.

PROS	CONS
Can be engaged in activities incidental to financial services through their service corporations (not subject to the requirements for financial subsidiaries of national banks).	Have certain limits in commercial loans, consumer loans, CP, commercial or agricultural mortgage-back loan, etc. (expanded on Sep 96)
Can be engaged in any financial activities under unitary thrift holding company, as long as it is safe & sound and does not aim to avoid compliances (not subject to the requirements for financial holding companies).	Subject to QTL test that require thrifts to allocate more than 65% of assets to QTL qualified investments. (expanded on Sep 96)
Can enjoy favorable federal rules by OTS with broader preemption over state rules than those by OCC.(ex. Public hearing not required).	Not allowed explicitly to have foreign branches, therefore not engaged in activities permissible in foreign countries through foreign branches.
Can establish interstate branches, not only by acquiring but also by establishing, even in case state laws prohibit it explicitly.	Have certain limits in foreign exchange- related activities, such as speculative transactions.
OTS supervision over THC may have less potential conflicts with regulation on other affiliates, compared with FRB regulations over BHC. For example, OTS would not impose capital requirements on UTHCs.	Must do activites not permissible for thrifts themselves, through their service corporations, while national banks can directly engage in activities such as securities brokerage, investment advice, certain municipal bonds underwriting, or insurance sales (in the places of 5000 thru operating subsidiaries, and without geographic restriction thru financial subsidiaries).

Gramm-Leach-Bliley Act (Signed by the President, November 12,1999)	HR10 (Approved by House, July 1,1999)	HR10 (Approved by House Commerce Committee, June 10,1999)	Senate Bill (Approved by Senate, May 6,1999)	Senate Bill (Approved by Senate Banking Committee, March 4,1999)
New unitary thrift holding companies after May 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	New unitary thrift holding companies after March 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	New unitary thrift holding companies after May 27, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	New unitary thrift holding companies after May 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	New unitary thrift holding companies after February 28, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.
Existing UTHCs as of May 4 1999, as well as the new UTHCs filed on or prior to May 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	Existing UTHCs as of March 4 1999, as well as the new UTHCs filed on or prior to March 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	Existing UTHCs as of May 27 1999, as well as the new UTHCs filed on or prior to May 27 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	Existing UTHCs as of May 4 1999, as well as the new UTHCs filed on or prior to May 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	Existing UTHCs as of February 28 1999, as well as the new UTHCs filed on or prior to February 28 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.
Prohibit the sale of existing UTHCs to nonfinancial entities.	Permit the sale of existing UTHCs to nonfinancial entities, as long as FRB and OTS approve.	Prohibit the sale of existing UTHCs to nonfinancial entities. FRB and OTS shall conduct study of the effect of allowing commercial companies to continue acquiring grandfathered UTHCs.	Prohibit the sale of existing UTHCs to nonfinancial entities.	No provision
No provision.	No provision.	No provision.	No provision.	No provision.
Eliminates the need for the establishment of a SAIF special reserves.	No provision.	Eliminates the need for the establishment of a SAIF special reserves.	Eliminates the need for the establishment of a SAIF special reserves. Eliminates unequal FICO sharing.	Eliminates the need for the establishment of a SAIF special reserves. Extend three year unequal FICO sharing.

HR10 (Approved by House Banking Committee, March 11,1999)	HR665 (introduced by Rep. LaFalce)	HR10 (introduced by Rep. Leach, January 6,1999)	HR10 (Approved by Senate Banking Committee, 1998)	HR10 (Approved by House, 1998)
New unitary thrift holding companies after March 4, 1999 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	No provision	New unitary thrift holding companies after October 7, 1998 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	New unitary thrift holding companies after September 3, 1998 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.	New unitary thrift holding companies after May 31, 1998 could engage in banking, securities and insurance activities, but be prohibited from engaging in nonfinancial activities.
Existing UTHCs as of March 4 1999, as well as the new UTHCs filed on or prior to March 4 1999, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	No provision	Existing UTHCs as of October 7 1998, as well as the new UTHCs filed on or prior to October 7 1998, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	Existing UTHCs as of September 3 1998, as well as the new UTHCs filed on or prior to September 3 1998, would be grandfathered, and therefore be permitted to engage in banking, securities, insurance and commercial activities.	Existing UTHCs as of May 31 1998, the new UTHCs filed on or prior to May 31 1998, as well as any companies aquiring those companies would be grandfathered.
Permit the sale of existing UTHCs to commercial entities.	No provision	Prohibit the sale of existing UTHCs to nonfinancial entities.	Prohibit the sale of existing UTHCs to nonfinancial entities.	No restriction on the sale of existing UTHCs.
No provision.	No provision.	Require OTS to publish in the Federal Register notices of intent when preempting state laws regarding consumer protection at least 30 days to submit written comments.	No provision.	No provision.
Eliminates the need for the establishment of a SAIF special reserves.	No provision.	Eliminates the need for the establishment of a SAIF special reserves.	No provision.	No provision.