Eased Rules for Banking Proposed

The Comptroller of the Currency proposed bank regulations Monday that could allow bank subsidiaries to underwrite non-government securities for the first time since the Depression.

The rule, one of many changes the Comptroller’s Office said would lighten banks’ regulatory burden, would let banks’ subsidiaries apply to engage in activities--such as underwriting non-government securities or developing real estate--that banks cannot. Although current bank regulations do not address the activities of subsidiaries, subsidiaries have adhered to the same rules that their parent banks are subject to.

“What we’re trying to do is go through all the regulations that have been on the books” to clarify and update them, Julie Williams, chief counsel at the Comptroller’s Office, said Monday. The agency has been reviewing regulations for more than a year, she said.

Other regulations proposed Monday would make it easier for banks to set up automatic teller machines, apply to open new branches and apply to operate securities brokerages or other activities. The proposed changes would “cut bank costs, which in turn will benefit bank customers,” said Comptroller of the Currency Eugene A. Ludwig.

The proposed regulations were to be published today in the Federal Register; the Comptroller’s Office will accept public comment on them until the end of January. The rules would apply only to banks the agency regulates, or about 3,200 of the nation’s roughly 10,000 banks.

Currently, only subsidiaries of a bank’s parent company--not a subsidiary of a bank itself--can underwrite securities, and they may do so only under tight restrictions.

Under the proposed regulations, a bank would be permitted to apply to operate a real estate agency, a travel agency or a finance company through an operating subsidiary, said Karen Shaw, president of ISD/Shaw Inc., a consulting firm that tracks banking regulation. The bank subsidiary’s income would go to the bank, rather than to the bank’s parent.

Other provisions proposed rules would streamline application procedures for better management of banks.

For example, if a well managed bank sought to open a branch, it would be approved after 30 days unless the Comptroller’s Office raised concerns. Williams said 80% to 90% of the banks regulated by the agency would qualify.