WASHINGTON - While generally happy with a proposed rule on their financial subsidiaries, bankers are asking the Office of the Comptroller of the Currency to ease some of the requirements.
The agency's plan implements provisions of the Gramm-Leach-Bliley Act of 1999, which expanded the activities banks may do directly in financial subsidiaries.
Banks among the nation's 100 largest must issue highly-rated long-term debt in order to operate a financial subsidiary. In comment letters on the proposal, several bankers objected to the relatively high cost of floating such debt, and asked that a bank be allowed to fulfill the requirement by having a rating agency certify that if the bank issued such debt, it would be highly rated.
"There seems to be little justification for forcing a bank to issue or refrain from retiring debt simply to enable it to engage in expanded financial activities," Michael E. Bleier, general counsel at Mellon Bank, wrote in one of the 27 comment letters filed on the proposal. Getting opinions from rating agencies would "achieve the policy goals of the debt rating requirement without forcing any bank to issue debt when it has no inclination to do so."
The OCC proposal also would provide expedited or after-the-fact approval of investments banks make in subsidiaries that they control. But it would require greater scrutiny of other investments.
Richard M. Whiting, executive director and general counsel of the Financial Services Roundtable, said this would place "unnecessarily burdens" on national banks. He urged the agency to expand the relaxed requirements to all investments in bank subsidiaries.
Community groups and fair-housing activists objected to banks being allowed to give after-the-fact notice of new activities. They urged the Comptroller's Office to require advance notice of new activities and to allow for a public comment period. A possible compromise suggested that only banks with low Community Reinvestment Act ratings be required to give advance notice.
The OCC plans to issue a final rule on financial subsidiaries by March 13 when new rules on financial holding company powers are due from the Federal Reserve Board.