
                         THE VIRGINIAN-PILOT
                 Copyright (c) 1994, Landmark Communications, Inc.

DATE: TUESDAY, June 7, 1994                    TAG: 9406070367 
SECTION: BUSINESS                     PAGE: F2    EDITION: FINAL  
SOURCE: BY LINDA GREENHOUSE, THE NEW YORK TIMES 
DATELINE: 940607                                 LENGTH: WASHINGTON

HIGH COURT TO DECIDE IF REGULATED NATIONAL BANKS CAN SELL ANNUITIES

{LEAD} The Supreme Court agreed Monday to resolve one of the most contentious issues in banking law - whether federally regulated banks can sell annuities, an investment usually sold by insurance companies.

The case is an appeal by Comptroller of the Currency Eugene Ludwig and NationsBank of North Carolina. In 1990, Ludwig authorized the bank to act as a sales agent for a variety of annuities.

{REST} In a ruling last year, the federal appeals court in New Orleans invalidated as contrary to federal law a 1985 decision by the comptroller's office that selling annuities was appropriate for national banks as an activity ``incidental'' to the business of banking.

Banks' entry into the multibillion-dollar market for annuities, investments that are attractive to many customers as alternatives to low-interest certificates of deposit, has split the federal courts and provoked a counterattack from the insurance industry.

The case is the result of a lawsuit by a Houston-based insurance company, Variable Annuity Life Insurance Co.

Adding to the ferment over the issue, New York state bank regulators have permitted state-chartered banks to sell annuities in a decision that was upheld in March by the state's highest court. About half the banks in New York, including Chemical Bank, have state charters, while other leading banks, including Citibank and Chase Manhattan, are nationally chartered.

The American Bankers Association, the Conference of State Bank Supervisors and the New York Clearing House, representing 11 big commercial banks, all urged the Supreme Court to hear the case.

The New York Clearing House said in its brief that the underlying question in the case was ``the extent to which national banks may continue to respond to the needs of their customers in the rapidly changing marketplace for financial products.''

The economic stakes in the outcome are considerable. In 1992, the last full year for which the comptroller's office has statistics, banks sold annuities worth $12.2 billion, representing about 20 percent of the national market.

Annuities are similar to individual retirement accounts, which banks offer, because taxes on the interest earned can be deferred until the customer retires. But they are not subject to the $2,000 maximum annual contribution limit on IRAs. The case is NationsBank of North Carolina vs. Variable Annuity Life Insurance Co., No. 93-1612.

{KEYWORDS} NATIONSBANK ANNUITIES U.S. SUPREME COURT APPEAL LAWSUIT by CNB