U.S. Court Backs Bank Units' Right To Sell Insurance
NEW YORK -- A federal appeals court upheld the right of bank holding companies to sell insurance through their bank subsidiaries in states that allow such sales.</br></br>The decision, which upholds a Federal Reserve Board order, will allow bank holding companies to get around strict federal regulations on the sale of insurance. Bank holding companies are prohibited from owning insurance subsidiaries or selling insurance through other subsidiaries that aren't banks.</br></br>But earlier this year the Federal Reserve said those U.S. retrictions don't apply to bank subsidiaries. Independent insurance agents took the matter to court, claiming that the Federal Reserve order had opened a loophole for bank holding companies to get around the federal restrictions.</br></br>A three-judge panel of the U.S. Second Circuit Court of Appeals ruled that the Fed "made a reasonable interpretation" in deciding that the nonbanking prohibitions of U.S. bank holding company law don't apply to bank subsidiaries.</br></br>Independent insurance agents, however, say the decision contradicts the intent of Congress. Jonathan B. Sallet, a lawyer for the insurance trade groups that brought the lawsuit against the Federal Reserve, said the insurance groups plan to appeal the decision further.