The Federal Reserve Board on Wednesday proposed to eliminate its Regulation R, which prevents banks from sharing personnel with securities firms.
Fed officials said recent interpretations of these rules, which implement the Glass-Steagall Act's interlock restrictions, have limited their scope so much that they are no longer needed.
"This was a no-brainer for us," said a Fed attorney. "We don't need to repeat what statutes already say."
The proposal, approved without discussion at Monday's governors meeting, is expected to be published shortly, with comments due a month later.
Regulation R covers Section 32 of the Glass-Steagall law. This prohibits banks from sharing any level of employee, from director to teller, with firms "primarily engaged" in selling and underwriting securities.
However, the scope of the rule has been narrowed over time. In approving various applications, the Fed has said Regulation R doesn't apply to banks given permission to open an affiliate that underwrites securities - a so- called section 20 subsidiary.
The rules also have no effect on banks involved with firms that deal in only those securities that banks are allowed to underwrite. These interpretations made Regulation R an easy candidate to be eliminated, the Fed said.
General restrictions remain barring banks from sharing officers with unaffiliated securities firms.
