B of A Files to Set Up Unit for Insurance
Bank of America Corp. filed documents with federal regulators to establish a new type of insurance brokerage unit, making the biggest U.S. bank the first to claim expanded powers offered under a new bank law.
Charlotte, N.C.-based B of A sought to convert its existing insurance sales unit into a new “financial subsidiary” authorized within a sweeping overhaul of banking law that was enacted last month to permit banks, insurers and securities firms to freely enter each others’ businesses.
B of A, in seeking regulators’ approval for the move, said it doesn’t plan any new activities for now. The unit, Banc of America Insurance Services Inc., will continue to sell policies for life, health, credit, property and casualty, and other coverage. The new legal entity would let the company expand into more non-banking activities in the future.
The conversion will “give them more flexibility in what they can do,” said David L. Glass, senior bank regulatory attorney at Rogers & Wells in New York. The bank law expert emphasized that he isn’t familiar with B of A’s plans.
Executives at B of A offices in Charlotte, Atlanta and San Francisco were unavailable for comment.
The new law permits national banks’ financial subsidiaries to own securities brokerages, provide investment advice and engage in other businesses deemed “financial in nature,” according to a summary of the legislation by CCH Inc., a business and legal publisher.
As under existing law, the new financial overhaul legislation doesn’t allow the banks to underwrite insurance policies directly or within subsidiaries, although banks gained the option of affiliating with insurers and securities firms under a common holding company. The new law, seeking to quarantine the riskiest activities to safeguard against bank failures, contains similar restrictions on investing in insurance portfolios, developing real estate and--for a period of five years--merchant banking.
B of A sells insurance in 40 states because of an exemption in earlier law that permits national banks to operate insurance brokerages in towns with fewer than 5,000 people.
