Bankers won a major victory this week when the Supreme Court ruled that banks in midsize and large cities can sell annuities.
The justices reversed a lower court's ruling that had called annuities a form of insurance that could not be sold by banks in cities of more than 5,000 residents.The court agreed with the Comptroller of the Currency, a national bank regulatory agency, that said banks should be allowed to sell annuities because the investment products are incidental to banking and not a type of insurance.
Annuities, often marketed as a tax-sheltered way of saving for retirement, provide payments to the purchaser when the contract matures. Fixed annuities pay a guaranteed interest rate, while variable annuities provide a range of options for investing and paying back the purchaser's money.
"We respect as reasonable the comptroller's conclusion that brokerage of annuities is an `incidental power necessary to carry on the business of banking,"' Justice Ruth Bader Ginsburg wrote for the court.
The decision clears the way for national and some state-chartered banks to offer customers annuities and opens the door for banks to market other products that might be considered a form of insurance.
Banking groups applauded the court's action.