Bank Powers:

Bank Holding Company Securities Subsidiaries' Market Activities Update

GGD-91-131: Published: Sep 20, 1991. Publicly Released: Sep 20, 1991.

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Pursuant to a congressional request, GAO investigated bank holding company subsidiaries' bank-ineligible securities underwriting activities, focusing on: (1) the number of firms involved in such activities and the volume of their activities and their assets, revenues, and capital; and (2) regulatory revisions proposed by the Federal Reserve.

GAO found: (1) the Federal Reserve authorized 35 banking organizations to set up Section 20 firms to underwrite and deal in one or more of four types of bank-ineligible securities, and each had done so, but 4 firms ceased operations, 2 allowed their authority to lapse before beginning activities, and only 25 of the remaining 29 firms engaged in bank-ineligible activities; (2) at the end of 1990, the total revenues of Section 20 subsidiaries represented 11 percent of the securities industry's revenue, but revenues from bank-ineligible activities represented less than 5 percent of the Section 20 subsidiaries' total revenues; and (3) section 20 firms' capital amounted to about 6 percent of the security industry's capital, and 8 Section 20 firms were among the top 50 U.S. securities firms when ranked by capital. GAO also found that the Federal Reserve Board has proposed and issued modifications to: (1) ease the prohibition on director interlocks between Section 20 firms and insured depository affiliates; (2) ease the marketing activities restrictions by insured banks; (3) amend the restriction regarding a bank or thrift's purchase of financial assets from or sale of assets to an affiliated Section 20 firm; and (4) revise the restriction regarding investment advisory activities of bank holding companies.

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    Priority Open Recommendations:

    Department of the Treasury
    GAO-20-549PR: Published: Apr 23, 2020. Publicly Released: Apr 30, 2020.

Apr 27, 2020

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