April 24, 1991
TO: BOARD OF GOVERNORS NO. 26-91
RE: INSTITUTE TESTIMONY ON ADMINISTRATION'S FINANCIAL SERVICES
RESTRUCTURING BILL
__________________________________________________________
On Thursday, April 18, the Institute testified before the
Subcommittee on Financial Institutions Supervision, Regulation
and Insurance of the House Committee on Banking, Finance and
Urban Affairs on the Bush Administration's legislative proposal
to restructure the financial industry. This was the Institute's
first testimony on the Administration's bill. (Copies of the
legislation were previously sent to you. See Memorandum to Board
of Governors No. 20-91, dated March 28, 1991.)
The Institute's testimony expressed general support for the
Administration's bill. The Institute noted that the bill
provided for a full two-way competitive street under which all
securities firms, including those with insurance and commercial
affiliates, could become affiliated with banks, since it would
remove the prohibition on commercial firms being affiliated with
bank holding companies. In addition, the bill would permit
interstate banking, which the Institute has said is necessary in
order to achieve competitive equality.
The Institute's testimony also supported those provisions
of the bill that would require most bank securities activities,
including mutual fund activities, to be carried out by separate
holding company affiliates, and that would subject these
activities to full SEC regulation. The Institute also endorsed
the narrowing of the exemption under the securities laws for bank
common trust funds, which would remove the possibility of banks
using this exemption to publicly offer the functional equivalent
of mutual funds free from SEC regulation. With respect to the
SEC study of the regulation of bank collective funds for
retirement plans, which would be mandated by the bill, the
Institute stated that it supported the goal of the study -- to
regulate all pooled funds on an equal basis -- but believed the
simplest way to achieve that goal would be to repeal, or at least
narrow the scope of, the current exemption.
The Institute's testimony also stated that, although the
bill contains certain amendments to the Investment Company Act to
protect against possible abuses arising from the sponsorship of
mutual funds by bank affiliates, it does not go far enough in
this regard. The Institute stated that the bill should be
revised to include additional provisions, many of which have been
endorsed by the SEC.
Copies of the Institute's written and oral testimony are
attached.
Craig S. Tyle
Associate General Counsel
Attachment