Information About Depository Institutions' Ancillary Activities Is Not Adequate for Policy Purposes

GGD-82-57: Published: Jun 1, 1982. Publicly Released: Jun 1, 1982.

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Arthur R. Goldbeck
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GAO reviewed the adequacy of information on the ancillary activities of the Nation's banks, savings and loan associations and their related holding companies, and on commercial firms' growing involvement in traditional banking activities. U.S. banking policy and regulations have long maintained a separation of banking and commerce. However, in recent years a number of changes have blurred the distinctions between banking and commerce and have fostered an industry structure quite different from that which existed previously.

GAO found that banks and savings and loan associations conduct a wide range of ancillary activities which are outside the scope of their deposit and lending activities. Banks and savings and loan holding companies frequently engage in nonbanking activities. In contrast to the limited activities authorized for bank holding companies, savings and loan holding companies owning only one savings and loan association are not restricted in the type of business they may conduct. Commercial firms have captured a significant share of the financial services market and are continuing to actively expand their market shares through the provision of more bank-like services. Commercial banks and savings and loan associations are exploring and finding new ways to broaden the financial services they can offer to answer the challenge of their competitors. Overall, 16 percent of the holding companies with nonbanking subsidiaries were experiencing problems, while only about 6 percent of the companies without nonbanking subsidiaries were experiencing problems. Adequate data to evaluate the impact of ancillary and nonbanking activities are not readily available to Federal policymakers and regulatory officials. The banking regulators currently require depository institutions and holding companies to report their activities and the results of their operations. However, these reports do not provide adequate information on the nature and scope of their activities.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Council has substantially completed the revision of the instrument and anticipates considering further data collection improvements in the bank holding company area. As a reult, no further action is planned. The Federal Reserve is in the process of revising their bank holding company data collection instrument. GAO does not anticipate any need for further followup of this recommendation.

    Recommendation: The Federal Financial Institutions Examination Council should identify the needs for information about ancillary activities and design, test, and implement a collection instrument that would efficiently capture only the minimal amount of information that is necessary and useful, thus minimizing respondents' paperwork burdens.

    Agency Affected: Federal Financial Institutions Examination Council


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