In Brief: Fed OKs Bank Subsidiary Partial Ownership

WASHINGTON - The Federal Reserve Board has ruled that banks under its supervision may purchase a partial ownership in a subsidiary.

The ruling set two conditions on such purchases: The bank must own a controlling interest in the acquired company, and which may only engage in business that the bank itself can conduct.

The ruling Wednesday came in response to a request for clarification from Chase Manhattan Corp., which informed the Fed that it is considering the purchase of between 50% and 100% equity in an unspecified company. The Gramm-Leach-Bliley Act of 1999 broke down many of the barriers to bank ownership of subsidiaries, but did not specifically allow partial ownership.

A staff memo presented to the Fed board Wednesday argued that the transaction is permissible under the law and should be allowed. Additionally, the memo said, the staff would present recommended revisions of Fed Regulations Y and H to reflect the finding "in the near future."

Chase did not return calls requesting comment on the ruling.

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