Trying to level the playing field with national banks, Pennsylvania has given its state-chartered banks permission to sell annuities.
In a letter this month to state bankers, Secretary of Banking Richard E. Rishel said his decision was prompted by the U.S. Supreme Court's Valic decision last year, which found that national banks can sell annuities regardless of state prohibitions.
"The department is authorized to exercise its administrative discretion to assure that Pennsylvania state-chartered institutions remain competitive with each other and other financial organizations," Mr. Rishel said in the April 16 letter.
Pennsylvania is one of 20 states with "antiaffiliation" laws barring state banks from selling insurance products. Thirteen of the 20 states still prevent state-chartered banks from selling annuities.
Pennsylvania bank representatives cheered the decision as long overdue.
"We felt it was a little unfair for state-chartered banks not to have the same opportunities as national banks here," said Angela Yarbrough, a spokeswoman for the Pennsylvania Bankers Association.
Ellen Lamb, vice president of the Conference of State Bank Supervisors, said she expects this to be the first of many similar rulings by state banking commissioners. She noted that in addition to the Valic decision the Supreme Court ruled last month in the Barnett case that national banks can sell insurance from small towns, regardless of state laws.
"This is just the beginning of state initiatives to insure competitive equality for state-chartered banks in the wake of the Barnett decision," she said.
Also on the annuity front, the Illinois Department of Insurance ruled that First National Bank and Trust Co., Carbondale, Ill., need not register with the state when selling annuities.
In an April 17 letter, the department backed off its previous position that national banks' annuities sales should be regulated by the state; instead, it said the Office of the Comptroller of the Currency has sole jurisdiction over the bank's sales of the product.