Capital Briefs: FDIC Urges New Powers for Subsidiaries

Congress should let subsidiaries of banks and holding companies enter new businesses, Federal Deposit Insurance Corp. Vice Chairman Andrew C. Hove said Thursday.

"Insured institutions must have the ability to compete with other financial services providers," Mr. Hove told the American Institute of Certified Public Accountants.

But he warned that new activities, such as securities underwriting, should not put the deposit insurance funds at risk. Also, he said banks should not use low-cost, insured deposits to finance these new operations.

"We must be sure access to deposit insurance doesn't provide a material subsidy for these activities," Mr. Hove said. "Insured institutions may take greater risks than they otherwise would in high-risk, high-return investments that enable institutions and managers to win if investments pay off and cause the insurance fund to lose if they go south."

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