Section 24 of the Federal Deposit Insurance Act (F.D.I. Act), 12 U.S.C. 1831a, limits investments and other activities in which state banks may engage as principal to those permissible for national banks and those approved by FDIC under procedures set forth in Part 362 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 362. For a list of activities and investments which are permissible for national banks, see the Office of the Comptroller of the Currency (OCC), 2011 Activities Permissible for a National Bank - PDF(PDF help). See also Appendices to OCC Investment in Subsidiaries and Equities - PDF(PDF help)
The FDIC has prepared this list of Decisions on Bank Applications decided by the FDIC since Section 24 of the F.D.I. Act was enacted in 1991. Due to the large volume, applications requesting permission to invest in life insurance are excluded from the list, except for those noted under "Insurance." Also, because of their routine nature, not all applications for consent or approval by the FDIC for permission to invest in money market preferred or dutch auction rate stock have been included.
Please note that Section 24 of the Federal Deposit Insurance Act, 12 U.S.C. 1831a, makes it unlawful, subject to certain exceptions, for an insured state bank to engage directly or indirectly through a subsidiary as principal in any activity not permissible for a national bank unless the FDIC determines that the activity will not pose a significant risk to the deposit insurance fund and the bank is in compliance with applicable capital standards. The regulation establishes a four tiered approach.
First, Part 362 permits state banks to engage in certain activities and make certain investments without the need to file any notice or application whatsoever. For example, subject to certain limitations, without filing any notice or application, a state bank may hold stock in insured depository institutions or invest up to 15 % of its tier one capital in money market preferred stock.
Second, Part 362 provides a quick-turn-around notice procedure for certain real estate investments and activities. Subject to meeting specified conditions, the Part 362 notice procedure allows an institution to quickly gain nonobjection to engage in real estate activities
Third, Part 362 establishes an application process for institutions to request permission to invest in and engage in still other activities. Application procedures may also apply if the FDIC, in its sole discretion, determines that a request should be taken off of the notice track. The application procedures are set out in Part 303 of the FDIC’s Rules and Regulations, 12 C.F.R. Part 303.
Fourth, Subpart E of Part 362 implements the provisions of the Gramm-Leach-Bliley Act (GLBA) governing the conduct of certain financial activities by insured state nonmember bank subsidiaries.
Subpart E establishes a separate notice procedure for state nonmember banks that wish to establish a financial subsidiary. A financial subsidiary for purposes of Subpart E is defined as a subsidiary that is controlled by a state nonmember bank and engages in activities as principal which may be conducted by a national bank only through a financial subsidiary. Section 103 of GLBA lists the activities considered "financial in nature" that may only be conducted in a financial subsidiary.
The FDIC permits insured state banks and their subsidiaries to undertake only safe and sound activities and to make investments that do not present a significant risk to the deposit insurance funds and that are consistent with the purposes of federal deposit insurance and other applicable law. In the first instance state law determines what investments or activities state banks and their subsidiaries may undertake. If state law authorizes the investment or activity, then the FDIC considers whether to permit it under section 24. The facts and circumstances presented in the application largely drive the decisions that are made and the conditions that are imposed. For that reason, the fact that a particular activity or investment has received FDIC approval in the past does not affect the obligation of another institution to seek permission from the FDIC to engage in the same or similar activity. Additionally, the fact that a particular investment or activity has been approved in the past does not restrict the FDIC's review of future requests to engage in similar activities nor our ability to impose prudential standards on the conduct of that activity.
The activities and investments approved by the FDIC are typically subject to various restrictions or conditions.The more noteworthy conditions are shown on the list. Hard copies of the list can be obtained by calling the FDIC's Public Information Center at (800) 276-6003 or (202) 416-6940. Finally, it should be borne in mind that since the time any particular application was approved, key statutory or regulatory changes may have taken place, which might impact how the issues would be treated today.