Circular
Section 20 Subsidiaries of Bank Holding Companies
February 6, 1997
Circular No. 10922

Increase -- from 10% to 25% -- in Revenue Derivable from
Underwriting and Dealing in Securities, Effective March 6

To All Bank Holding Companies and Others Concerned in the Second Federal Reserve District:

The following is from a statement issued by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has announced an increase in the amount of revenue that a section 20 subsidiary may derive from underwriting and dealing in securities, from 10 percent to 25 percent of its total revenue.

The increase is effective March 6, 1997. Section 20 subsidiaries will therefore be allowed to employ the 25 percent limit for the first quarter of 1997.

The revenue limit is designed to ensure that a section 20 subsidiary will not be engaged principally in underwriting and dealing in securities in violation of section 20 of the Glass-Steagall Act.

Based on its experience supervising these subsidiaries and developments in the securities markets since the revenue limitation was adopted in 1987, the Board concluded that a company earning 25 percent or less of its revenue from underwriting and dealing would not be engaged principally in that activity for purposes of section 20.

The text of the Board's official notice,as printed in the Federal Register of December 30, 1996 is available as a (pdf) file. Questions on this matter may be directed, at this Bank, to Jim Keogh, Supervising Examiner of this Bank's Advisory and Technical Services Department.