FDIC Permissible Activities for Insured State Banks and Savings Associations

When Congress created federal deposit insurance in 1933, it gave the FDIC broad authority over what activities insured depository institutions can engage in. 12 CFR Part 362 — the FDIC's regulations implementing sections 24 and 46 of the Federal Deposit Insurance Act — establishes the outer limits on equity investments, financial subsidiaries, and other activities that insured state-chartered banks and savings associations may conduct. The core principle: insured institutions can take risks with their own capital, but the federal deposit insurance fund limits the universe of risks the FDIC will implicitly subsidize through its guarantee.

Legal Authority

• 12 U.S.C. § 1831a — Section 24 of the Federal Deposit Insurance Act: prohibits FDIC-insured state-chartered banks from engaging as principal in any activity not permissible for a national bank, unless the FDIC determines the activity poses no significant risk to the deposit insurance fund and is conducted in a safe and sound manner; this "parity" principle is the statutory foundation for 12 CFR Part 362
• 12 U.S.C. § 1816 and 12 U.S.C. § 1828 — FDIC insurance approval factors and safety-and-soundness authority: empower the FDIC to impose conditions restricting the activities of insured institutions to protect the insurance fund
• 12 CFR Part 362 — FDIC regulations implementing the Section 24 parity principle; restricts equity investments, financial subsidiaries, and activity scope for insured state-chartered banks and savings associations

Key Mechanics

Under the "parity" principle codified in 12 U.S.C. § 1831a, an FDIC-insured state-chartered bank may not engage as principal in any equity investment or activity that a nationally chartered bank (OCC-regulated) cannot conduct — unless the FDIC specifically approves it. This prevents states from using their chartering authority to grant their banks a competitive advantage that the federal deposit insurance guarantee would implicitly subsidize. Part 362 implements the rule across three institution types: insured state (non-member) banks (Subpart A), insured state savings associations (Subpart B), and financial subsidiaries of insured state banks under the Gramm-Leach-Bliley framework (Subpart D). For any proposed activity beyond what a national bank can do, the state institution must submit a notice or application under 12 CFR Part 303 Subpart G, demonstrating the activity is safe, sound, and does not pose undue risk to the insurance fund.

Current Rule (2026)

What This Rule Does

Part 362 implements the "parity" principle in federal banking law: FDIC-insured state banks may not, as a general rule, engage in activities or equity investments that are not permissible for a federally chartered national bank, unless the FDIC specifically approves the activity or investment. This rule prevents state-chartered banks from using their state charters to access a broader range of activities than national banks (which are regulated by the OCC), while still maintaining federal deposit insurance — a combination that would constitute an unfair competitive advantage and would expand the risks covered by the deposit insurance fund without a corresponding risk assessment.

The rule covers three distinct classes of institutions:

Insured state (non-member) banks: State-chartered banks that are FDIC-insured but are not members of the Federal Reserve System. These banks are supervised by the FDIC at the federal level and by their state banking department. Part 362 Subpart A restricts their equity investments and financial subsidiary activities to those permissible for national banks (OCC-regulated) unless the FDIC grants a specific exemption through the Part 303 application process.

Insured state savings associations: State-chartered savings institutions (thrifts, S&Ls, savings banks) that hold FDIC insurance. These institutions are subject to a parallel framework under Subpart B, which similarly restricts equity investments and activities to those permissible for a federally chartered savings association under OTS/OCC standards.

Financial subsidiaries of insured state banks: Following the Gramm-Leach-Bliley Act (1999), national banks and bank holding companies gained the ability to engage in expanded financial activities through financial subsidiaries — subsidiaries that conduct activities like securities underwriting, insurance underwriting, and merchant banking. Subpart D of Part 362 governs whether insured state banks may conduct these same expanded activities through financial subsidiaries.

Key Provisions

Subpart A — Insured State Banks (§§ 362.1–362.9):

• § 362.2 — Definitions: "as principal" means acting for one's own account, taking on direct financial risk — as opposed to acting as agent; the "as principal" restriction is the core of the equity investment limitation; banks may broker or advise on investments without triggering Part 362, but cannot take equity positions themselves without FDIC approval
• § 362.3 — Activities of insured state banks: an insured state bank may not, as principal, directly or indirectly acquire or retain any equity investment that is not permissible for a national bank; the prohibition covers equity investments in corporate stock, limited partnership interests, limited liability company interests, and similar equity-like instruments; certain equity investments are carved out as permissible (e.g., investments in bank premises corporations, certain community development investments, and investments in subsidiaries conducting activities that national banks may conduct directly)
• § 362.4 — Activities of subsidiaries of insured state banks: subsidiaries of insured state banks may not engage in any activity that national bank subsidiaries are not permitted to conduct, unless the FDIC consents; this parallel restriction prevents insured state banks from using subsidiaries as vehicles for activities the parent bank could not directly conduct
• § 362.5 — Procedure for obtaining FDIC consent: for activities not permissible for national banks, the state bank must submit a notice or application under 12 CFR Part 303 Subpart G; the FDIC evaluates the safety-and-soundness implications of the proposed activity, the adequacy of capital, and whether the activity would place the deposit insurance fund at undue risk; consent is activity-specific and may be conditioned on capital requirements or other safeguards

Subpart B — Insured State Savings Associations (§§ 362.10–362.13):

• § 362.11 — Activities of insured state savings associations: insured state savings associations face the same basic restriction as state banks — equity investments that are not permissible for a federal savings association (regulated by OCC) require FDIC consent; the specific activities permissible for federal savings associations are set out in the Home Owners' Loan Act (HOLA) as interpreted by OCC — activities like residential mortgage lending, consumer lending, small business lending, and certain investment securities are generally permissible; venture capital investments, equity investments in commercial enterprises, and other bank-impermissible activities require FDIC approval
• § 362.12 — Service corporations: a service corporation of an insured state savings association may not engage in any activity not permissible for service corporations of federal savings associations; the service corporation vehicle (a subsidiary that provides auxiliary services) cannot be used to conduct activities the parent institution could not conduct directly

Subpart C — Savings Association Prior Notice for Subsidiaries (§§ 362.14–362.15):

• § 362.14–362.15 — Insured state savings associations must give FDIC prior notice before establishing or acquiring a subsidiary or conducting new activities through an existing subsidiary; the notice must describe the proposed subsidiary's activities and demonstrate that the activities would be permissible; this pre-acquisition notice requirement distinguishes state savings associations from state banks, which must seek prior consent rather than just notice for subsidiary activities

Subpart D — Financial Subsidiaries of Insured State Banks (§§ 362.16–362.18):

• § 362.16–362.17 — Financial subsidiaries defined: following Gramm-Leach-Bliley, a "financial subsidiary" is a subsidiary of a bank that conducts expanded financial activities — securities underwriting, insurance underwriting, merchant banking, real estate investment — that the bank itself cannot conduct; national banks may establish financial subsidiaries with OCC approval; insured state banks may establish financial subsidiaries only if they meet the same qualification standards as national banks (well-capitalized, well-managed, no outstanding enforcement orders) and if the proposed financial activities are permissible for national bank financial subsidiaries
• § 362.18 — "As principal" activities in financial subsidiaries: an insured state bank financial subsidiary may not engage in insurance underwriting as principal, real estate development and investment as principal, or merchant banking (equity investments in commercial enterprises) as principal — these are the activities that Congress specifically reserved for holding companies rather than banks, even after Gramm-Leach-Bliley expanded what holding companies could do

How It Affects You

If you operate or work at an insured state-chartered bank: Part 362 is the key federal constraint on your bank's permissible investment and activity universe. The practical starting point is: what can a national bank (OCC-regulated) do? Whatever a national bank can do as principal, your institution can generally do without FDIC consent. For activities beyond that baseline — certain equity investments, startup investing, insurance underwriting, real estate investment — you need to go through Part 303 Subpart G notice or application. Your state charter gives you state law flexibility, but federal deposit insurance comes with federal constraints through Part 362. Your FDIC regional office is the primary contact for Part 303 applications; FDIC's Division of Risk Management Supervision provides informal guidance on whether a proposed activity requires an application.

If you are a bank regulatory attorney or compliance officer: The core analytical framework is comparative: identify the activity or investment, determine whether it is permissible for a national bank as principal, and if not, determine whether any exception in § 362.3 applies or whether FDIC consent has been obtained. For financial subsidiaries (Subpart D), the qualification criteria from Gramm-Leach-Bliley apply — the parent bank must be well-capitalized and well-managed, and the financial subsidiary must be properly capitalized. The OCC's interpretive letters and FDIC's consent orders (both publicly available) provide the clearest indication of where the line falls for specific activities. Activities that state law authorizes but federal law restricts do not become permissible simply because state examiners have approved them — FDIC regulation preempts in the event of conflict.

If you are a state banking regulator: Part 362 creates a federal floor on permissible state bank activities that limits your ability to grant state-law authority beyond national bank parity. States can grant narrower authority but cannot use state law to expand insured state bank activities beyond what federal law permits without FDIC consent. The interplay between your state charter authority and Part 362 defines the effective regulatory space for state-chartered insured institutions.

Statutory Authority

This rule implements:

• 12 U.S.C. § 1831a (Section 24, Federal Deposit Insurance Act) — activities and investments of insured state banks; parity with national banks; consent procedures
• 12 U.S.C. § 1828(m) (Section 18(m)) — prior notice requirements for insured savings associations establishing subsidiaries
• 12 U.S.C. § 1828(j) (Section 18(j)) — authority for FDIC to limit or prohibit activities that present undue risk to the deposit insurance fund
• 12 U.S.C. § 1816 — general factors for FDIC to consider in insuring deposits and regulating activities

Recent Rulemakings

No major standalone amendments to Part 362 in recent years. The foundational Gramm-Leach-Bliley Act amendments that added Subpart D (financial subsidiaries) were incorporated in the early 2000s. The ongoing practical development in this area happens through FDIC consent orders and Part 303 application approvals rather than regulatory text changes — FDIC's public enforcement actions and consent orders represent the body of interpretive authority on specific activity questions.

Pending Action