WASHINGTON -- Arkansas Bank and Trust forfeited its right to operate an insurance company when it allowed a multibank holding company to acquire it, the state's Supreme Court ruled late last month.
The high court acknowledged that the insurance business of some institutions, such as Arkansas Bank and Trust, had been grandfathered, or exempted from a law banning such practices.
But the justices ruled the grandfather rights did not pass to First Commercial Corp. when the multibank holding company bought Arkansas Bank and Trust in 1990.
They said Commercial, though a holding company, acts as a bank, meaning a provision of the law preventing a bank from passing on a grandfathered right to another bank comes into play.
First Commercial had argued the law preventing transfers should not apply to holding companies.
The bank must therefore divest itself of the insurance company that it has operated since 1907, the justices ruled.
Arkansas Supreme Court Justice Robert L. Brown dissented from the opinion, saying the bank's interpretation of the law is correct. He wrote that First Commercial is not a bank and thus the court should not remove the grandfathered right.
