The Office of the Comptroller of the Currency last month gave national banks in Louisiana the green light to sell insurance from offices in big cities.
The ruling marks the first time the agency has explicitly ruled that banks may open insurance agency offices outside of small towns and it gives banks in other states a window to ask for similar powers.
In an Oct. 20 letter to Louisiana banking attorney J. Michael Cutshaw, the OCC clarified the powers awarded to national banks in its landmark 1997 First Union letter, which let banks sell insurance statewide as long as the insurance subsidiary was based in a place with 5,000 or fewer residents.
By specifically approving the right for the insurance subsidiary to open offices anywhere in the state, the October letter addresses a point that had been missing from the First Union letter, said David W. Roderer, a lawyer at the Goodwin, Procter & Hoar law firm in Washington.
Mr. Roderer said the OCC based its ruling on a Louisiana law that specifically granted bank insurance affiliates the same rights as other insurance agencies. This reference to Louisiana law means that the ruling does not automatically apply to banks in other states, he said.
The ruling "is not as sweeping as the industry might want," Mr. Roderer said.
Still, the ruling is significant. Kathleen W. Collins, Washington counsel to the Financial Institutions Insurance Association, said most states have laws permitting insurance agencies to branch statewide. The OCC, if asked, should rule that these laws also apply to bank insurance subsidiaries, she said.
Bankers in Louisiana said state law already gave them the power to open these branches. "The OCC has simply confirmed what we believed to be the case all along," said Gary L. Ryan, senior vice president and corporate counsel for Hibernia National Bank in New Orleans.
A spokesman for the OCC, which has not made the letter public, declined to comment.
An insurance industry spokesman blasted the decision. "This letter blows away any restrictions on banks and allows them to set up insurance operations anywhere they feel they want to," said Jeffrey A. Myers, spokesman for the Independent Insurance Agents of America.
Mr. Cutshaw, a former general counsel to the Louisiana Bankers Association, made the appeal on behalf of Deposit Guaranty National Bank, Mississippi, which has since been acquired by First American National Bank, Tennessee. First American has subsidiaries in Louisiana and plans to sell insurance in that state, Mr. Cutshaw said.