In a rare show of unity, six national banking associations have banded together to fight for banks' rights to sell annuities.
The six groups filed a friend-of-the-court brief calling for a rehearing of a decision by the U.S. Court of Appeals for the Fifth Circuit that limited banks' authority to sell annuities.
Joining in the push to reopen the so-called Valic case were the American Bankers Association, the Association of Banks in Insurance, The Bankers Roundtable, the Consumer Bankers Association, the Independent Bankers Association of America, and the Savings and Community Bankers of America.
Four state banking associations also joined in the motion.
Setback for Big Players
The Valic decision pitted the Variable Annuity Life Insurance Co. against the Office of the Comptroller of the Currency and NationsBank Corp. of North Carolina. In deciding the case in August, the court ruled that national banks may not sell annuity products except in towns with populations under 5,000.
The ruling was a setback to big banks, such as NationsBank, that want to use small-town banks as a base for wider sales of annuities.
But there is a question whether annuities, which are insurance contracts that invest in an underlying pool of securities, are subject to insurance or investment regulations.
In their brief, filed on Nov. 4, the banking associations argued that a panel of appellate judges "wrongly concluded, among other things, that annuities are |insurance' products for purposes of" the small-town insurance provision.
|Not Insurance Contracts'
An earlier Supreme Court decision affirms that point, according to the brief.
In 1959, the court held that "certain types of annuities are not insurance contracts but investment products for the purposes of federal law," counsel for the banking associations argued.
The bank groups also maintained that the panel's decision is inconsistent with the "incidental powers" provision of the National Bank Act, under which national banks are allowed to engage in activities considered incidental to the business of banking.
Furthermore, the associations argued, the Comptroller of the Currency authorized banks to sell annuities in 1985.