Capital Briefs: Fed Grants Section 20 Powers to KeyCorp

The Federal Reserve Board has given KeyCorp permission to establish a section 20 subsidiary to buy and sell bank-ineligible securities.

KeyCorp is the 41st bank to set up a section 20 subsidiary since the Fed started approving the units in 1987.

"We are obviously delighted to receive approval," KeyCorp spokesman Bill Murschel said. "Section 20 powers expand our tool box, allowing us to assist our corporate client base with capital, risk management, and investment needs."

The bank, which has spent two years preparing for section 20 powers, expects to have the unit fully operational within two weeks, Mr. Murschel said.

The Fed said KeyCorp can underwrite and deal in municipal revenue bonds, act as an agent in the private placement of securities, trade for its own accounts, give investment advice, and provide foreign exchange services. Under Fed rules, the new securities activities may not make up more than 10% of the section 20 subsidiary's total revenues. A proposal is pending at the central bank that would re-calculate this revenue limit, giving banks more breathing room.

KeyCorp, a Cleveland-based holding company with $68 billion in assets, received a bit more power than most other banks with section 20 units. It can offer bids and solicit quotes for all stocks, even if they are not traded on a stock exchange or the Nasdaq.

Christopher J. Bellini, a lawyer at the Washington office of Gibson, Dunn & Crutcher, said this is the third time the Fed has granted a holding company this authority.

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