Are you a well capitalized, well-managed state chartered bank with a satisfactory CRA rating? Well if you are, did you know that you may conduct agency activities without the FDIC’s approval? All of these agency activities were originally made possible with the passage of the Federal Deposit Insurance Corporation Improvement Act of 1991, commonly referred to as FDICIA. The passage of the Act allowed state chartered banks to engage in all activities permitted for national banks if state law also provided for them. Two such activities, securities brokerage services and insurance sales have become commonplace for many banks since those agency activities were made possible for state chartered banks via Commissioner Rules and Regulations in 1994 and 1997, respectively. But did you know there are also many other activities that are now possible under a state charter such as real estate brokerage and travel agency services, among others, without the FDIC’s approval?

Current debate in Washington focuses on one such agency activity available to state chartered banks in Wyoming – real estate brokerage services. As the Federal Reserve Board, Treasury, and now Congress debate whether a financial holding company should be allowed to broker real estate, the Wyoming Legislature has already laid the ground rules for allowing a state chartered banks to engage in this activity. Although not expressly authorized in the statutes, real estate brokerage is possible in one of two ways: incidental bank powers, or the expanded parity statute. Either way, a state chartered bank wanting to engage in real estate brokerage is not restricted from doing so under state law.

How was this made possible? Two years ago, in anticipation of the passage of federal legislation, now known as Gramm-Leach-Bliley, the Wyoming Legislature granted the Commissioner the authority to allow state chartered banks to engage in any activity available to any federally insured depository institution or any activity considered incidental to banking. This means that Wyoming state chartered banks have all the powers of national banks and thrifts, except for interstate de novo branching. Since real estate brokerage is a permissible activity for thrifts, it would be viewed as an activity that is incidental to the business of banking and could also be authorized under the state banks’ parity statute. State banks would be allowed to engage in this activity and others as long as the condition of the bank is not adversely affected. The only requirement is that a bank submit a description of the activity, a business plan, management qualifications, and the manner in which the bank will conduct the activity. If the activity is found to be an acceptable practice for the bank, the bank will be notified within 10 business days. As with any other widespread activity, the Commissioner may find it necessary to write rules to control an activity.

Did you also know that state nonmember banks may also take advantage (as principal) of expanded powers not permissible for national banks under Section 24 of the FDI Act? With an application to the Commissioner and to the FDIC, a state nonmember bank may be able to conduct activities not allowed for national banks, if the Commissioner and the FDIC determines the activity does not present a threat to the safety and soundness of the bank or the deposit insurance fund. Although state nonmember banks are not required to conduct expanded powers in an operating subsidiary, bank management may want to consider utilizing an operating subsidiary to segregate any activity that may jeopardize the safety and soundness of the bank or deposit insurance fund. State member banks and banks in a holding company structure may be subject to other regulations imposed by the new section 4(k) of the Bank Holding Company Act that addresses activities that are "financial in nature or incidental to such financial activities."

For more information regarding state chartered banks’ powers and activities, please contact Jeff Vogel at the Wyoming Division of Banking at (307) 777-6998.