Two leading trade groups urged the Federal Reserve on Monday to let bank holding company subsidiaries earn at least 25% of their revenue from the underwriting of commercial securities.
The Bankers Roundtable and the Institute of International Bankers, which together represent almost every bank holding company with an active securities underwriting business, said the current 10% revenue limit is too low. U.S. securities markets will suffer if banks can't compete for business, the groups said.
"An increase in the limit will serve to minimize and avoid the risk that the U.S. capital markets will experience an unnecessary loss of business and jobs," the groups wrote in a letter to Fed Chairman Alan Greenspan.
The two groups also urged the Fed to adopt a dual approach to calculating the limit.
Holding company affiliates should be allowed to derive at least 25% of their revenue from underwriting activities, the groups wrote, or they should be permitted to underwrite a set percentage of their assets. The groups did not say what that percentage should be.
Currently, a holding company's so-called Section 20 affiliate can earn only 10% of its revenue from commercial underwriting activities.
Finally, the groups asked the Fed to drop restrictions on the types of securities a bank can buy from a Section 20 affiliate.