The Federal Reserve Board has proposed new restrictions on bank subsidiaries despite pleas from other regulators to drop the project.

The proposal, issued Thursday, would apply sections 23a and 23b of the Federal Reserve Act to bank subsidiaries engaged in activities that their parents may not undertake. Comments are due Sept. 3.

Section 23a restricts bank investments in subsidiaries to 20% of the parent company's capital, with no single subsidiary getting more than 10% of capital. Section 23b requires that all deals be conducted at arm's length, which means the parent cannot provide discounted loans or other perks.

The Fed proposal would supersede similar rules issued by the Federal Deposit Insurance Corp., Office of Thrift Supervision, and Office of the Comptroller of the Currency. It came in response to the OCC's operating subsidiary rule, which may allow national banks to conduct activities in subsidiaries that they may not do directly. Such activities could include securities underwriting and real estate development.

Fed officials said their goal is to ensure all depository institutions are subject to the same capital rules. "It is important that these types of regulatory concerns are carried out uniformly," said Fed Governor Edward W. Kelley Jr. "This would be the clearest and quickest way to achieve that."

Fed Governor Laurence H. Meyer said Congress specifically authorized the Fed to apply these capital restrictions to bank subsidiaries when it amended the law in 1982. "It is our responsibility to carefully enforce sections 23a and 23b," he said.

Fed General Counsel J. Virgil Mattingly said the plan would affect only 60 state banks because the OCC has not yet acted on any operating- subsidiary applications. The Fed would not require these state banks to conform to the restrictions immediately, but new loans to or investments in subsidiaries would be covered.

OCC Chief Counsel Julie L. Williams urged the Fed in a letter Wednesday to refer the proposal to the Federal Financial Institutions Examination Council, the umbrella group for bank regulators.

FDIC and OTS officials also wrote the Fed last week, charging that the proposal infringed on their turfs. "We see no justification for increasing the regulatory burden on savings associations," OTS Chief Counsel Carolyn Buck wrote.

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