Developments of Note
Electing Financial Holding Company Status: A Cautionary Note
The FRB recently published its interim rules governing the procedures for bank holding companies ("BHCs") and foreign banks with United States offices to elect to be financial holding companies ("FHCs") under the Gramm-Leach-Bliley Act (the "the Act"). An election made by February 15 may become effective as early as March 13, 2000. As a result, BHCs should now be considering whether an FHC election is appropriate. The procedure to make the election was discussed in last week's Alert.
The benefits of electing FHC status, including the power to engage in securities activities, insurance underwriting, and merchant banking, have been widely discussed. Moreover, even if a BHC does not desire to engage in any of the new activities permitted to FHCs, a BHC also often can engage in more traditional BHC activities (such as establishing or acquiring a lending subsidiary) more quickly as a FHC. Certain
