I. INTRODUCTION
The Gramm-Leach-Bliley Financial Modernization Act of 1999 (“GLB”), signed into law on November 12, 1999, is the federal financial law that revised the way the U.S. banking, securities and insurance industries may provide various financial services to customers. GLB authorized the combination of banking, securities and insurance companies in the same corporate structure, removing “Depression Era” barriers, in the following manner:
II. REGULATION Y AND FINANCIAL HOLDING COMPANIES (FHCs)
The Federal Reserve Board (FRB) adopted amendments to Regulation Y that list activities newly permitted by GLB, spelling out when a FHC must provide notice to the FRB concerning acquisitions and commencement of new activities.
Pursuant to GLB, qualifying bank holding companies, referred to as FHCs, are permitted to conduct activities that are “financial in nature” or “incidental” to such financial activities. Regulation Y contains an initial list of activities that are financial in nature. In addition, the FRB, in conjunction with the Secretary of the Treasury, is authorized to add activities to the list based on a determination that the activities are “financial in nature.”
Regulation Y also establishes the procedures a FHC must follow in order to engage in listed financial activities, as well as activities that are complementary to a financial activity and allows a FHC or other interested party to request that the FRB determine that activities not listed in the GLB are permissible for a FHC.
A. Engaging in a Financial Activity - § 225.85
In most cases, a FHC may, without providing prior notice to or obtaining prior approval from the FRB, conduct an activity that is “financial in nature” or “incidental” to a financial activity (a “financial activity”). A FHC may conduct a financial activity by engaging directly in the activity or by acquiring and retaining the shares of any company that is engaged exclusively in one or more financial activities.
A FHC may control or acquire more than 5% of the voting shares of a company that is not engaged exclusively in financial activities that are permissible for a FHC. If a FHC acquires control or shares of a company that, in addition to financial activities, engages in other activities permissible for the acquiring FHC, it must comply with any approval, notice or other requirement that governs the other activities.
The FHC may also acquire a financial company engaged in limited non-financial activities if three requirements are met: (1) the acquired company must be engaged substantially in financial activities and other activities permissible for the FHC; (2) in the post-commencement notice provided by the FHC to the FRB regarding the acquisition, the FHC must commit to terminate or divest the impermissible activities, and the company must complete the divestiture or termination within two years of the acquisition; and (3) after being acquired by a FHC, the company engaged in impermissible activities may not engage in or acquire a company engaged in any activity that is not permissible for the FHC.
There are two circumstances under which FRB approval is still required to engage in financial activities. First, prior approval of the FRB must be obtained before acquiring control of more than 5% of the voting shares of a savings association. Second, the FRB may also, in the exercise of its supervisory authority, require a FHC to provide prior notice to or obtain prior approval from the FRB if circumstances warrant.
B. Permissible Activities for a FHC - § 225.86
A FHC may engage in any activity that the FRB had determined by regulation prior to November 12, 1999, to be so closely related to banking as to be a proper incident thereto. A listing of the relevant activities previously approved is contained in § 225.28 of Regulation Y.
Regulation Y also lists the following activities that have been found by FRB order to be closely related to banking, but not otherwise included in the statutory list of permissible financial activities:
In addition, a FHC may conduct the following activities that are usual in connection with the transaction of banking or other financial operations abroad:
Finally, any activity permitted under § 4(k)(4) of the Bank Holding Company Act (any activity defined to be financial in nature) may be conducted by a FHC. These activities include activities that previously have not been permissible for bank holding companies, such as acting as principal, agent, or broker for purposes of ensuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, and issuing annuity products. Permissible insurance activities as principal include reinsuring insurance products. A FHC acting under that section may conduct insurance activities without regard to the restrictions on the insurance activities imposed on bank holding companies under § 4(c)(8).
Also authorized is underwriting, dealing in, and making a market in securities without regard to whether such securities may be sold by a bank. This activity includes underwriting or distributing shares of open-end investment companies, commonly referred to as mutual funds. Securities underwriting activities conducted under § 4(k)(4)(E) rather than § 4(c)(8) may be conducted without regard to the 25% revenue limitation that is applicable to § 20 subsidiaries of bank holding companies that engage in securities underwriting and dealing under § 4(c)(8). In addition, dealing may be done without regard to the 5% limitation on ownership of voting securities.
In cases where a FHC already has approval under § 4(c)(8) to engage in an activity now available in an expanded scope under § 4(k), the company must provide the FRB with a post-commencement notice informing the FRB that the company has expanded the scope of the activity in accordance with § 4(k).
Bank holding companies that are not financial holding companies may continue to seek approval to engage in any activity that the FRB determined by regulation or order in effect on November 12, 1999, to be closely related to banking. These bank holding companies must continue to use the prior notice and approval procedures listed at §225.22 to 225.24 of Regulation Y.
C. Post Commencement Notice - § 225.87 A FHC engaging in activities and making acquisitions listed in § 225.86 need only provide a simple written notice to the appropriate Federal Reserve Bank within 30 days after commencing the activity or making the acquisition. The notice must describe, as relevant: (1) the activity commenced and the identity of each subsidiary engaged in the activity; or (2) the identity of the company acquired and the activities conducted by the company.
D. Requesting FRB Determination that an Activity is Financial in Nature or Incidental to a Financial Activity - § 225.88
The GLB provides that the FRB may determine that activities are financial in nature or incidental to financial activities after consulting with the Secretary of the Treasury. Requests for a determination that a new activity is a financial activity may be made by a FHC or by any other interested party. A request for a determination that an activity is financial in nature or incidental to a financial activity must be in writing and must:
Upon receipt of a request, the FRB must provide the Secretary of the Treasury with a copy of the request and consult with the Secretary in accordance with § 4(k)(2) of the Bank Holding Company Act. The FRB may, as appropriate and after consultation with the Secretary, request public comment on the proposal and is to endeavor to act on all requests for a determination within 60 days of completion of the consultative process and the close of the public comment period, if applicable.
The interim rule also establishes a procedure by which financial holding companies may request an advisory opinion from the FRB concerning whether a specific proposed activity falls within the scope of an activity that is permissible for a FHC (“financial in nature” or “incidental” to a financial activity). Such requests must be submitted in writing and must contain:
E. Requesting Approval to Engage in an Activity that is Complementary to a Financial Activity - § 225.89
The GLB provides that a FHC may engage in an activity that the FRB determines to be complementary to a financial activity. A FHC that seeks to engage in or acquire a company engaged in an activity that the FHC believes is complementary to a financial activity must obtain prior approval from the FRB in accordance with § 4(j) of the Bank Holding Company Act.
The notice must be in writing and must:
In evaluating a notice to engage in a complementary activity, the FRB must consider whether:
III. FINANCIAL SUBSIDIARIES (FSs) AND NATIONAL BANKS
A. Background
The purpose of this portion of the article is to highlight the “financial activities” authorized for national bank subsidiaries pursuant to GLB.
The Office of the Comptroller of Currency (OCC) issued a rule that amended previously existing provisions regarding operating subsidiaries of national banks and added provisions governing financial subsidiaries of national banks. Under the rule, effective March 11, 2000, qualifying bank holding companies can become “financial holding companies” (FHCs) eligible to engage in a new range of “financial” activities. Qualifying banks are eligible to establish “financial subsidiaries” to carry on most of the “financial” activities.
NOTE: The FRB and the Federal Deposit Insurance Corporation (FDIC) each adopted similar rules applicable to state member banks and state non-member banks.
GLB authorizes national banks to invest in a new type of subsidiary called a “financial subsidiary” (FS). A FS is defined as a company that is controlled by one or more insured depository institutions, other than a subsidiary that engages solely in activities that national banks may engage in directly (under the same terms and conditions that govern the conduct of these activities by national banks) or a subsidiary that a national bank is specifically authorized to control by the express terms of a federal statute. Under § 121 of GLB, a FS may engage in specified activities that are “financial in nature” and in activities that are “incidental” to financial activities if the bank and the subsidiary meet certain requirements and comply with stated safeguards. The OCC rule incorporates these requirements and establishes alternative procedures for banks to obtain OCC approval to acquire control of, or an interest in, a financial subsidiary.
B. Permissible Activities
The OCC rule describes activities that are permissible and impermissible for a FS. A FS may engage only in activities that are “financial in nature” or “incidental” to a financial activity that are not permissible for a national bank to conduct directly, (expanded financial activities) as well as activities that may be conducted by an operating subsidiary (activities that are part of, or incidental to the business of banking that are permissible for national banks to conduct directly).
The OCC rule outlines a list of activities in which financial subsidiaries are authorized to engage, including:
i. Lending, exchanging, transferring, investing for others or safeguarding money or securities;
ii. Engaging as agent or broker in any state for purposes of insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, death, defects in title or providing annuities as agent or broker;
iii. Providing financial, investment, or economic advisory services, including advising an investment company as defined in § 3 of the Investment Company Act;
iv. Issuing or selling annuities representing interests in pools of assets permissible for a bank to hold directly;
v. Underwriting, dealing in or making a market in securities;
vi. Engaging in activities that the FRB has determined under § 4(c)(8) of the Bank Holding Company Act (BHCA) to be so closely related to banking or managing or controlling banks as to be a proper incident thereto;
vii. Activities that the Board has found under § 4(c)(13) of the BHCA to be usual in connection with the transaction of banking or other financial operations abroad;
viii. Additional activities that the Secretary of the Treasury (in consultation with the Board of Governors of the Federal Reserve) determines to be financial in nature or incidental to a financial activity
ix. Activities that may be conducted by an operating subsidiary.
C. Impermissible Activities
Activities that are specifically described as impermissible for financial subsidiaries include providing annuities and certain types of insurance as principal, real estate development or real estate investment (unless otherwise expressly authorized by law), and certain activities authorized for FHCs by §§ 4(k)(4)(H) or (I) of the BHCA. At the end of the five-year period beginning on November 12, 1999, however, the FRB and the Secretary of Treasury may find by regulation that the activities authorized under § 4 (k)(4)(H) of the BHCA are permissible for financial subsidiaries.
D. Prerequisites to Controlling or Holding an Interest in a FS
In order for a national bank to acquire control of or hold an interest in a FS, it must meet each of the following conditions: (1) the national bank and each of its depository institution affiliates must be “well capitalized” and “well managed”; (2) the aggregate consolidated total assets of all financial subsidiaries of the national bank may not exceed the lesser of 45% of the consolidated total assets of the parent bank or $50 billion; and (3) the national bank that is one of the 100 largest insured banks, is determined by the bank's consolidated total assets at the end of the calendar year, must have at least one issue of outstanding “eligible debt” that is rated in one of the three highest investment grade rating categories by a nationally recognized statistical rating organization. If the national bank is one of the second 50 largest insured banks, the OCC rule permits the bank to satisfy the “eligible debt” requirement if it meets alternative criteria to be set jointly through regulation by the Secretary of the Treasury and the FRB. The “eligible debt” requirement does not apply, however, if a bank intends to acquire control of or hold an interest in, a FS that engages solely in activities in an agency capacity.
E. Safeguards
The following six conditions apply, on an on-going basis, to a national bank that establishes or maintains a FS: (1) prior to determining the adequacy of regulatory capital, the national bank must deduct the aggregate amount of its outstanding equity investment, including retained earnings, in its financial subsidiaries from its total assets and tangible equity and deduct such investment from its total risk-based capital (a bank may not consolidate its assets and liabilities with those of its FS for purposes of determining compliance with regulatory capital requirements); (2) a national bank providing published financial statements must separately present its financial information in a manner that “eliminates” the FS from the bank’s assets, liabilities and capital; (3) a national bank must have reasonable policies and procedures to preserve separate corporate identity and limited liability of the bank and the FSs of the bank; (4) a national bank must have procedures for identifying and managing financial and operational risks within the bank and the FS to adequately protect the national bank from related financial and operational risks; (5) The restrictions in §§ 23a and 23b of the Federal Reserve Act (transactions with affiliates) will generally apply to FSs of banks. This treatment contrasts with that provided for operating subsidiaries and other types of bank subsidiaries which have been and will continue to be exempt from the requirement of arm’s length terms for all related-party transactions and which have also been exempt from restrictions on the total dollar amount of transactions between related parties. The total dollar amount of transactions between a bank and its FS will not be subject to § 23(a)(1)(A) (cumulative limit of 10% of bank capital and surplus with respect to any one affiliate); but § 23(a)(1)(B) (cumulative limit of 20% of bank capital and surplus with respect to all transactions with all affiliates) will apply. Any purchase of or investment in the securities of a FS of a bank by an affiliate of the bank will be considered to be a purchase of or investment in the FS and a loan by any bank affiliate to the FS may be considered an extension of credit by the bank to the FS; (6) a FS is deemed a subsidiary of a bank holding company and not a subsidiary of the bank for purposes of anti-tying prohibitions.
F. Procedures to Engage in Activities Through a FS
Alternative streamlined procedures have been established for national banks seeking OCC approval to acquire control of or hold an interest in a FS or to commence an expanded financial activity in an existing FS.
1. FS Certification
Under the first alternative, a national bank may file a “FS Certification” with the OCC listing the bank’s depository institution affiliates and certifying that the bank and each of those affiliates is well capitalized and well managed. Thereafter, at such time as the bank seeks OCC approval to acquire control of, or hold an interest in, a new FS, or commence an additional expanded financial activity in an existing FS, the bank must file a written notice with the appropriate district office. The written notice has to be labeled “FS Notice” and must: (a) state that the bank’s Certification remains valid; (b) describe the activity or activities to be conducted by the FS to the extent the notice relates to the initial affiliation of the bank with a company engaged in insurance activities, the bank must describe the type of insurance activity that the company is engaged in and has present plans to conduct. The bank must also list for each state the lines of business for which the company holds, or will hold, an insurance license, indicating the state where the company holds a resident license for charter, as applicable; (c) cite the specific authority permitting the activity to be conducted by the FS; (d) certify that the bank would be well capitalized after making the necessary capital adjustments; (e) demonstrate the aggregate consolidated total assets of all financial subsidiaries of the national bank do not exceed the lesser of 45% of the bank’s consolidated total assets or $50 billion; and (f) if applicable, certify that the bank meets the “eligible debt” requirement.
2. Combined Certification and Notification
Alternatively, a bank may choose to seek approval by filing a combined certification and notification with the appropriate OCC district office at least 5 business days prior to acquiring control of, or an interest in, a FS, or commencing a new expanded financial activity in an existing FS. This type of notice would combine the information from the certification and notice described above, and should be labeled “FS certification and notice.”
When a national bank operates through a FS, and the bank or one of its insured depository institution affiliates subsequently receives a CRA rating of less than “satisfactory record of meeting community credit needs,” on its most recent CRA examination prior to filing notice, certain restrictions apply. The bank may not start up an additional financial activity that may only be conducted by a national bank through a FS, nor may it directly or indirectly acquire control of or establish an additional FS or acquire all or substantially all of the assets of an additional company that is or would be a FS, even if the FS to be established or acquired is engaged in the same activities as the existing FS.
G. Failure to Continue to Meet Certain Requirements
A national bank and its affiliated depository institutions must continue to satisfy the well managed, well capitalized and asset size requirements applicable to its FSs and the safeguards set forth above after the bank acquires control of or an interest in a FS. A national bank that fails to continue to satisfy these requirements will be subject to the following procedures and requirements:
1. The OCC must give notice to the national bank and, in the case of an affiliated depository institution to that depository institution’s appropriate federal banking agency, promptly upon determining that the national bank, or, as applicable, its affiliated depository institution, does not continue to meet the well capitalized, well managed and aggregate consolidated total asset requirements or the applicable safeguards. The bank is deemed to have received such notice three business days after mailing of the letter by the OCC;
2. Not later than 45 days after receipt of the foregoing notice, or any additional time as the OCC may permit, the national bank shall execute an agreement with the OCC to apply with the well capitalized, well managed, aggregate consolidated assets requirements and applicable safeguards;
3. The OCC may impose limitations on the conduct or activities of the national bank or any subsidiary of the national bank as the OCC determines appropriate under the circumstances; and
4. The OCC may require a national bank to divest control of a FS if a national bank does not correct the conditions giving rise to the notice within 180 days after receipt of the foregoing notice.
H. Existing Operating Subsidiaries
National banks are authorized to engage through operating subsidiaries in activities that are part of, or incidental to, the business of banking. A national bank must file a notice or application to acquire or establish an operating subsidiary, or to commence a new activity in an existing operating subsidiary. Activities conducted by an operating subsidiary are subject to the same authorization, terms and conditions that apply to the conduct of such activities by its parent national bank.
The national bank’s operating subsidiary may be a corporation, limited liability company, or other similar entity. The parent bank must own more than 50% of the voting stock of the business (or must have a similar controlling interest) or the parent bank must otherwise control the operating subsidiary with no other party controlling more than 50% of the voting interests of the operating subsidiary.
1. Permissible Activities
An operating subsidiary may engage in activities that are permissible for a national bank to engage in directly. Therefore, the activity must either be part of, or incidental to, the business of banking as determined by the OCC. A complete list of the activities determined to be part of, or incidental to, the business of banking is included in the "Activities Permissible For National Banks: OCC Guide" article found in the Nondeposit Products section of the NBA Compliance Handbook.
2. Procedures for Utilizing Operating Subsidiaries
Procedurally, it is quite simple for a national bank to utilize operating subsidiaries. Depending upon the facts of the situation, a national bank wishing to utilize an operating subsidiary must follow one of the three following sets of procedures:
a. Application Required Except as provided in §§ 2(b) and 2(c) below, a national bank must submit an application to the OCC and receive prior approval to acquire or establish an operating subsidiary or to perform a new activity in an existing subsidiary. The application must include a complete description of the bank’s investment in the subsidiary, the proposed activities of the subsidiary, the organizational structure and management of the subsidiary, the relations between the bank and the subsidiary, and other information necessary to adequately describe the proposal. To the extent the application relates to the initial affiliation of the bank with a company engaged in insurance activities, the bank must describe the type of insurance activity that the company is engaged in and has present plans to conduct. The bank must also list for each state the lines of business for which the company holds, or will hold, an insurance license, indicate the state where the company holds a resident license or charter, as applicable. The application must further state whether the operating subsidiary will conduct any activity at a location other than the main office or previously approved branch of the bank.
b. Provide Notice After Engaging in Activities A national bank that is “well capitalized” and “well managed” may acquire or establish an operating subsidiary, or perform a new activity in an existing operating subsidiary, by providing the appropriate district office written notice within 10 days after acquiring or establishing the subsidiary, or commencing the activity, if the new activity is part of, or incidental to, the business of banking. The required written notice must include a complete description of the bank's investment in the subsidiary and of the activity conducted and a representation and undertaking that the activity will be conducted in accordance with OCC policies contained in guidance issued by the OCC regarding the activity. The requirements set forth above in Section B(2)(a) for a bank that is initially affiliating with an insurance company are applicable.
c. No Application or Notice Required A national bank may acquire or establish an operating subsidiary without filing an application or providing notice to the OCC, if the bank is adequately capitalized or well capitalized and the (a) activities of the new subsidiary are limited to those activities previously reported by the bank in connection with the establishment or acquisition of a prior operating subsidiary; (b) activities in which the new subsidiary will engage continue to be legally permissible for the subsidiary; and (c) activities of the new subsidiary will be conducted in accordance with any conditions imposed by the OCC in approving the conduct of these activities for any prior operating subsidiary of the bank.
IV. STATE BANK SUBSIDIARIES
State banks also have expanded authority to invest in or own subsidiaries. Neb.Rev.Stat. § 8-148.06 authorizes a state bank to own or invest in one or more bank subsidiary corporations. The aggregate of all bank investments in bank subsidiaries may not exceed 35% of its paid-up capital stock, surplus, undivided profits, capital reserves and capital notes and debentures, unless approved by the Director of the Department of Banking and Finance. Such a bank subsidiary corporation may only engage in activities (1) which are part of the business of banking or incidental to such business except for the receipt of deposits or (2) that its bank shareholder is authorized to perform under the laws of this state. Nebraska also has a state bank “wild-card” statute and Neb.Rev.Stat. § 8-1,140 allows state-chartered banks to exercise all rights, powers, privileges, benefits and immunities enjoyed by national banks and as applicable to them. The “wild card” extends to bank subsidiaries, including the ability of state-chartered banks to exercise the powers and activities allowed for FSs of nationally chartered banks. Therefore, a state bank subsidiary should be able to undertake any of the financial activities discussed above for national bank subsidiaries. A full discussion of the Nebraska bank “wild card” provisions is found in “‘Wild Card’ Powers for State-Chartered Banks and Savings & Loans”, NBA Compliance Handbook, Volume I, Bank Structure tab.
As a result, both state and federal laws will likely govern a state bank’s investment in a subsidiary. The following federal rules apply to state member banks and non-member bank subsidiaries.
A. State Member Banks
GLB permits qualifying state member banks to control or hold an interest in a “FS.” As with national banks, a FS means any company controlled by one or more insured depository institutions, but does not include (a) a subsidiary that the state member bank is specifically authorized to hold by the express terms of federal law; or (b) a subsidiary that engages only in activities that the parent bank could conduct directly and that are conducted on the same terms and conditions that govern the conduct of the activity by the state member bank. FRB Regulation H sets forth the criteria that state member banks must meet to own or control a FS. The FRB rule for state member banks parallels that adopted by the OCC discussed above.
A FS may engage in activities that have been determined to be “financial in nature” or “incidental to” financial activities under the GLB, including general insurance agency activities in any location and travel agency activities. In addition, a FS may engage in underwriting, dealing in and making a market in all types of securities--activities previously prohibited for subsidiaries of state member banks by the Glass-Steagall Act. A FS also may conduct any activity that the state member bank is permitted to conduct directly.
2. Impermissible Activities
The GLB prohibits FSs from engaging in certain types of activities. As a general matter, a FS may not engage as principal in underwriting insurance, providing or issuing annuities, real estate development or real estate investment, and merchant banking.
3. Procedures for Establishing Financial Subsidiaries
The rule establishes a notice procedure for state member banks to receive approval to acquire a FS or engage in a newly authorized financial activity through an existing FS. The list of permissible financial activities is the same for state member banks and national banks.
A state member bank may not acquire control of, or an interest in, a FS unless it files a notice (in letter form with enclosures) with the appropriate federal reserve bank. The notice is not required for a FS to engage in any additional activity that the parent state member bank is permitted to conduct directly. The required notice must provide: (a) the name and head office address of the subsidiary; (b) a description of the current and proposed activities of the FS and the specific authority permitting the activity; (c) a certification that the bank and each of its depository institution affiliates, was well capitalized at the close of the previous calendar quarter, and remains well capitalized as of the date the bank files its notice; (d) a certification that the bank and each of its depository institution affiliate is well managed as of the date the bank files its notice; (e) if applicable, a certification that the bank meets the debt requirement; and (f) certification that the bank and its financial subsidiaries are in compliance with asset limits both before the proposal and on a pro-forma basis. If the notice relates to the initial affiliation with an insurance company by the bank, the additional requirements set forth in Section B(2)(A) above are applicable.
B. State Non-Member Banks
The FDIC has issued a rule providing that an insured state non-member bank may control or hold an interest in a subsidiary that engages as “principal” in activities that would be permissible for a national bank to conduct only through a “FS,” subject to certain conditions.
The GLB permits a FS to engage in specified, newly authorized activities, that are “financial in nature” and in activities that are “incidental” to financial activities, if the bank and the subsidiary meet certain requirements and comply with stated safeguards. A FS may also combine these FS activities with activities that are permissible for national banks to engage in directly. The FDIC rule is narrower in scope than the other agencies' rules set forth above. The FDIC rule will apply only to financial subsidiaries engaged in activities as a “principal.” As a result, financial subsidiaries engaged only in “agency” activities are not subject to the rule. Examples of agency activities include:
Prior to the adoption of the GLB, a state bank seeking to engage as principal in a FS activity when the activities were impermissible for a national bank were reviewed by the FDIC under Section 24 of the Federal Deposit Insurance Act as implemented in Part 362 of the FDIC Rules and Regulations.. Section 24 provides that a state bank subsidiary may not engage as principal in activities which are not permissible for a subsidiary of a national bank, unless the state bank meets its applicable capital requirements and the FDIC determines that the activity does not pose a significant risk to the appropriate deposit insurance fund.
Certain activities which the FDIC has addressed under Part 362, Subpart A, e.g., general securities underwriting, are now authorized for a FS of a national bank. This means that such activities will no longer be analyzed under Part 362, Subpart A. Where federal law specifically prohibits FSs from engaging in certain activities as principal, e.g., real estate development or investment, these activities will continue to be dealt with under § 24 and Part 362, Subpart A.
2. Procedures for Establishing FSs
Prior to conducting activities as principal through a subsidiary, if those activities must be conducted by a national bank in a FS, the state non-member bank must file notice with the FDIC thirty days prior to commencing such activities. If the FDIC does not object, the bank’s subsidiary may commence the activity. This 30-day advance notice is designed to allow the FDIC time to review the activity and consider whether safety and soundness considerations make it prudent that additional conditions be placed on the conduct of the activity.
3. Restrictions on FS Activities
Generally, like national banks, state non-member banks must satisfy certain conditions to engage as principal in a FS activities: