[Federal Register Volume 62, Number 135 (Tuesday, July 15, 1997)]
[Proposed Rules]
[Pages 37744-37747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18526]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 62, No. 135 / Tuesday, July 15, 1997 /
Proposed Rules
[[Page 37744]]
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FEDERAL RESERVE SYSTEM
12 CFR Part 250
[Miscellaneous Interpretations; Docket R-0977]
Applicability of Sections 23A and 23B of the Federal Reserve Act
to Transactions Between a Member Bank and Its Subsidiaries
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
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SUMMARY: Sections 23A and 23B of the Federal Reserve Act restrict the
ability of a member bank to fund an affiliate through direct
investment, loans, or other transactions. The Board is proposing to
apply sections 23A and 23B to transactions between a member bank and
any subsidiary that engages in activities that are impermissible for
the bank itself and that Congress has not previously exempted from
coverage by section 23A. The proposed treatment is largely consistent
with the existing treatment of these subsidiaries by the other banking
agencies, which have applied sections 23A and 23B in some form to
transactions between a bank and such subsidiaries.
DATES: Comments must be submitted on or before September 3, 1997.
ADDRESSES: Comments, which should refer to Docket No. R-0977, may be
mailed to Mr. William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W.,
Washington, D.C. 20551. Comments addressed to Mr. Wiles also may be
delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m. and
to the security control room outside of those hours. Both the mail room
and the security control room are accessible from the courtyard
entrance on 20th Street between Constitution Avenue and C Street, N.W.
Comments may be inspected in Room MP-500 between 9:00 a.m. and 5:00
p.m. weekdays, except as provided in Sec. 261.8 of the Board's Rules
Regarding Availability of Information, 12 CFR 261.8.
FOR FURTHER INFORMATION CONTACT: Gregory Baer, Managing Senior Counsel
(202/452-3236), Pamela G. Nardolilli, Senior Attorney (202/452-3289),
or Deborah M. Awai, Senior Attorney (202/452-3594), Legal Division or
Roger T. Cole, Deputy Associate Director (202/452-2618), Banking
Supervision and Regulation or Molly S. Wassom, Assistant Director,
Banking Supervision and Regulation (202/452-2305), Board of Governors
of the Federal Reserve System. For the hearing impaired only,
Telecommunications Device of the Deaf (TDD), Diane Jenkins (202/452-
3254).
SUPPLEMENTARY INFORMATION:
Background
Restrictions of Sections 23A and 23B
Sections 23A and 23B of the Federal Reserve Act are designed to
protect a member bank from loss in transactions with its
affiliates.1 Although sections 23A and 23B originally
applied only to member banks, Congress has since applied these sections
to insured nonmember banks and savings associations in the same manner
as they apply to member banks.2 Section 23A protects these
institutions in three major ways. First, the statute limits ``covered
transactions'' with any single affiliate to no more than 10 percent of
the bank's capital and surplus, and aggregate transactions with all
affiliates to no more than 20 percent of capital and
surplus.3 Covered transactions include extensions of credit,
investments, and other transactions exposing the member bank to risk.
Second, all transactions between a member bank and its affiliate must
be on terms and conditions consistent with safe and sound banking
practices, and, in particular, a bank may not purchase low-quality
assets from the bank's affiliate. Finally, the statute requires that
all credit exposures to an affiliate be secured by a statutorily
defined amount of collateral.
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\1\ 12 U.S.C. 371c, 371c-1.
\2\ 12 U.S.C. 1828(j); 12 U.S.C. 1468.
\3\ ``Capital and surplus'' has been defined by the Board as
tier 1 and tier 2 capital plus the balance of an institution's
allowance for loan and lease losses not included in tier 2 capital.
12 CFR 250.242.
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Section 23B of the Federal Reserve Act requires a member bank to
engage in transactions with its affiliates only on terms and under
circumstances that are substantially the same or at least as favorable
as those prevailing at the time for comparable transactions with
unaffiliated companies.4 Section 23B applies this
restriction to any covered transaction as defined by section 23A, as
well as other transactions, such as a sale of securities or other
assets to an affiliate and the payment of money or the furnishing of
services to an affiliate.
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\4\ 12 U.S.C. 371c-1(a)(1). Section 23B also contains other
provisions that apply in limited cases.
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Coverage of Subsidiaries of Banks
Section 23A defines an ``affiliate'' of a member bank to include
any company that controls the member bank and any company that is under
common control with the member bank.5 (The definition is
applied to insured nonmember banks and savings associations in the same
way as member banks.) Section 23A excludes from the definition of
``affiliate'' any subsidiary of the bank, unless the Board determines
by regulation or order that the subsidiary should be considered an
affiliate. The statute also excludes from the definition of
``affiliate'' companies engaged solely in certain specified activities:
holding the premises of the member bank, conducting a safe deposit
business, or holding obligations issued or guaranteed by the United
States or its agencies.6
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\5\ 12 U.S.C. 371c(b)(1). The definition also includes other
entities as an affiliate, including a bank subsidiary of a member
bank.
\6\ 12 U.S.C. 371c(b)(2). The statute temporarily excludes
companies where control of the company results from the exercise of
rights arising out of a bona fide debt previously contracted. The
exception generally lasts for two years.
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When section 23A was originally enacted as part of the Banking Act
of 1933, a majority-owned subsidiary of a member bank was included as
an affiliate of the member bank.7 In its 1982 redrafting of
section 23A, Congress, at the Board's urging, amended the definition of
``affiliate'' in section 23A to exclude nonbank
subsidiaries.8 This statutory amendment was consistent with
the law as it had developed since 1933. The 1933 version of section 23A
already exempted from the definition of ``affiliate'' Edge Act
subsidiaries, Agreement corporations, companies holding bank premises,
companies
[[Page 37745]]
conducting a safe deposit business, and certain other member bank
subsidiaries that Congress had authorized. In 1970, the Board issued an
interpretation that also excluded from section 23A any transaction
between a member bank and its ``operations subsidiary,'' defined as ``a
separately incorporated department of the bank, performing, at
locations at which the bank is authorized to engage in business,
functions that the bank is empowered to perform directly.''
9 Thus, in recommending that Congress exempt subsidiaries in
1982, the Board stated, ``It should be noted that this liberalization
is much more limited than it might first appear * * *. [M]ember banks
are generally prohibited from purchasing stock, and of the few types of
companies whose stock is exempt from this prohibition, several are
already exempt from the restriction of Section 23A.'' 10
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\7\ Banking Act of 1933, Pub. L. 73-66, section 13, 48 Stat.
162, 183 (1933).
\8\ Banking Affiliates Act of 1982, Pub. L. 97-320, section 410,
96 Stat. 1469, 1515 (1982) (codified at 12 U.S.C. 371c(b)(2)(A)).
\9\ 12 CFR 250.240 (1997).
\10\ A Discussion of Amendments to Section 23A of the Federal
Reserve Act Proposed by the Board of Governors of the Federal
Reserve System 15 (September 1981) (hereafter, Board's 23A Proposal)
(attached as appendix to correspondence from Chairman Paul Volcker
to the Chairman and Ranking Members of the House and Senate
Committees on Banking, Housing and Urban Affairs, October 2, 1981).
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Although Congress generally exempted transactions with a subsidiary
from section 23A, it expressly granted the Board authority to reimpose
sections 23A and 23B on any subsidiary that has ``a relationship with
the member bank or any subsidiary or affiliate of the member bank, such
that covered transactions by the member bank or its subsidiary with
that company may be affected by the relationship to the detriment of
the member bank or its subsidiary.'' 11 The Board has had
few occasions to exercise this authority, as subsidiaries of banks
generally have continued to be limited in their activities to those on
which the 1982 amendments were premised.12
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\11\ 12 U.S.C. 371c(b)(1)(E).
\12\ In one case, the Board concluded that transactions between
a bank and a subsidiary that engaged in underwriting life insurance
abroad should be limited by section 23A. Citibank Overseas
Investment Corporation, 70 Fed. Res. Bull. 68 (1984). In another
case, the Board determined that certain investment advisory
subsidiaries of a national bank should be treated as affiliates of
the bank. Wells Fargo & Company, 76 Fed. Res. Bull. 465,466 (1990).
In addition, in 1987, the Board solicited comment on a proposal
regarding the real estate investment and development activities of
subsidiaries of banks owned by bank holding companies. 52 FR 42301
(1987). As part of its rulemaking, the Board sought comment on
whether to apply sections 23A and 23B to the subsidiaries of banks
engaged in real estate activities. The Board never issued a final
rule, as market conditions caused banks to curtail their real estate
activities and thereby made such action unnecessary.
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Expansion of Subsidiary Activities
Increasingly, however, operating subsidiaries are being authorized
to engage in activities impermissible for the bank. The Board recently
expressed its belief that Congress did not intend, in the National Bank
Act or elsewhere, to allow national banks to engage through
subsidiaries in activities prohibited to the national bank
itself.13 Indeed, as noted above, the 1982 amendments to
section 23A were based on the assumption that such activities were
impermissible. However, Congress has allowed state banks and federal
savings associations to engage through a subsidiary in some activities
impermissible to the state bank or thrift itself. Thus, the issue of
how a subsidiary engaged in activities impermissible for its parent
institution should be treated for purposes of sections 23A and 23B
arises regardless of the permissibility of those activities for
national banks.
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\13\ See, e.g., Comment Letter from Board to Comptroller of the
Currency on Docket Numbers 97-06 and 97-07, May 5, 1997 (commenting
on a national bank's proposal to engage in real estate development
and leasing through a subsidiary).
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For example, as amended in 1991, section 24 of the Federal Deposit
Insurance Act (FDI Act), although generally prohibiting insured state
banks from engaging as principal through a subsidiary in an activity
that is not permissible for a subsidiary of a national bank, allows a
state bank to engage in such an activity provided certain conditions
are met: The activity must be authorized by the bank's state chartering
authority, the bank must meet relevant capital requirements, and the
Federal Deposit Insurance Corporation (FDIC) must determine that the
activity will not pose a significant risk to the deposit insurance
fund.14 Acting under that authority, the FDIC recently
allowed by order some state chartered banks to invest in real estate
through majority-owned subsidiaries as authorized by state law, and has
issued a proposed rulemaking that would allow such activity by
regulation when authorized by state law, subject to certain
restrictions.15
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\14\ 12 U.S.C. 1831a.
\15\ 61 FR 43486 (1996).
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As drafted, the FDIC's proposed rule would require the bank to
comply with sections 23A and 23B in its transactions with a real estate
subsidiary to the same extent as if the subsidiary were an affiliate,
except that a bank's loan to finance the sale of real estate by the
subsidiary to a third party would not be subject to the limits of
section 23A provided that it complied with section 23B.16
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\16\ Id. at 43499. If such credit were extended to a third party
to purchase property from an affiliate, the credit would be subject
to the ``attribution rule'' of sections 23A and 23B, whereby any
transaction where the proceeds are used for the benefit of, or
transferred to, an affiliate is considered a transaction with the
affiliate. 12 U.S.C. 371c(a)(2), 371c-1(a)(3).
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The FDIC also has promulgated a rule establishing parameters
pursuant to which state nonmember banks may, if authorized by their
state chartering authority, underwrite and deal in securities. The FDIC
generally applies the restrictions of section 23A of the Federal
Reserve Act to extensions of credit to such a subsidiary, but does not
include investments in the subsidiary toward the 23A limit and does not
apply the attribution rule of section 23A. However, very few, if any,
state nonmember banks have established a securities subsidiary pursuant
to this rule.17
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\17\ See General Accounting Office, Banks' Securities
Activities: Oversight Differs Depending on Activity and Regulator 65
(1995) (sampling found no state nonmember banks engaged in
underwriting and dealing in bank-ineligible securities). FDIC staff
is currently aware of only one such subsidiary.
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With respect to thrifts, section 5(c)(4)(B) of the Home Owners'
Loan Act (HOLA) allows a savings association to invest up to three
percent of its assets in the capital stock, obligations, and other
securities of a ``service corporation.'' 18 Under Office of
Thrift Supervision (OTS) rules, a service corporation may conduct any
activity ``reasonably related'' to the activities of financial
institutions, even if that activity is not permitted to the parent
savings association.19 Pursuant to OTS rules, extensions of
credit by a savings association to a majority-owned service corporation
generally are not subject to funding restrictions akin to sections 23A
and 23B, although other restrictions are applied by statute and
regulation.
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\18\ 12 U.S.C. 1464(c)(4)(B).
\19\ 12 CFR 559.4. The OTS distinguishes service corporations
from ``operating subsidiaries,'' which by definition may engage only
in activities the savings association may conduct directly.
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Finally, as noted above, the Office of the Comptroller of the
Currency (OCC) recently amended its rules to allow a national bank to
engage through an operating subsidiary in activities prohibited to the
national bank. The OCC rule would subject transactions between national
banks and such subsidiaries to sections 23A and 23B.20
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\20\ 61 FR 60342 (1996) (codified at 5 CFR 5.34 (f)(3)(ii)).
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[[Page 37746]]
Proposal
Coverage of Transactions Between Member Banks and Their Subsidiaries
The Board is proposing to designate a subsidiary of a member bank
as an affiliate of the member bank if the subsidiary engages in
functions that the member bank is not empowered to perform directly and
that Congress has not previously exempted from sections 23A and 23B.
Covered activities could include real estate development and
underwriting and dealing in bank-ineligible securities. The Board
believes, and proposes to find under the standard set forth in section
23A(b)(1)(E), that the relationship of such a subsidiary to its parent
institution could result in funding of the subsidiary to the detriment
of the bank.
Absent application of sections 23A and 23B, a bank would have a
strong incentive to use its resources to prevent the failure of a
subsidiary or affiliate. Such efforts could include lending below
market rates, lending more than is prudent, or purchasing low quality
assets from the subsidiary or affiliate. Indeed, the risks to an
insured depository institution from a subsidiary (as well as the
rewards) appear to be greater than those present when nonbanking
activities are conducted in a holding company affiliate of the
institution. Under generally accepted accounting principles and
regulatory capital rules, losses of the subsidiary would generally be
consolidated with the parent bank, thereby adversely affecting the
capital position of the bank from both a market and regulatory
perspective. Furthermore, because the bank owns and controls the
management and operation of the subsidiary, its reputational stake is
greater. Thus, in the Board's view, the incentive of bank management to
prevent or defer losses through easy credit and other transactions is
that much stronger.
The Board is also concerned that imposition of sections 23A and 23B
on an ad hoc basis by different agencies could result in
inconsistencies that would create confusion or competitive advantage by
charter or structure. The Board believes that it was this result that
Congress sought to avoid by authorizing the Board to write the
regulations in this area.
Finally, the Board believes that imposition of sections 23A and 23B
could help to ensure corporate separateness. The requirement of section
23B that transactions be on market terms, in particular, could help to
prevent piercing of the bank's corporate veil. Nonetheless, the Board
recognizes that in this area, and with respect to other safety and
soundness concerns, imposition of sections 23A and 23B is not itself
sufficient. Ensuring that banks observe appropriate principles of
corporate separateness in dealing with their subsidiaries, and that the
relationship of a subsidiary to its parent bank does not otherwise
endanger the bank, will remain the responsibility of the bank's
appropriate Federal banking agency, as would primary responsibility for
monitoring compliance with sections 23A and 23B to the extent that they
were applied.
The Board is not proposing to alter the statutory exemption from
sections 23A and 23B for two types of subsidiaries. First, the Board's
proposal would not affect the statutory exemption for subsidiaries that
are engaged solely in activities in which the member bank could engage
directly. Although concerns about imprudent funding by a bank exist
with respect to these subsidiaries as well, they have traditionally
been exempt from sections 23A and 23B, and it is these subsidiaries
that Congress understood it was exempting in the 1982 amendments. More
practically speaking, covering these subsidiaries could result in the
activities simply being transferred back to the bank, thereby imposing
costs with no corresponding benefit. Thus, the Board is not proposing
to apply sections 23A and 23B to such subsidiaries.
The proposal also would not cover subsidiaries that Congress
previously had exempted from sections 23A and 23B when those statutes
generally applied to subsidiaries. In effect, Congress has determined
that the benefits of allowing banks to assume financial exposure to
these types of subsidiaries exceed the potential costs.
The proposed rule addresses such subsidiaries in two ways. As
noted, the 1933 version of section 23A exempted subsidiaries engaged in
certain specified activities from coverage by sections 23A and 23B. One
group of activities could be performed by either an affiliate or a
subsidiary; although these activities no longer required an exemption
if performed in a subsidiary after 1982, section 23A continued to
exempt them if performed in an affiliate.21 These activities
include conducting a safe deposit business or holding bank premises.
Although the proposed rule would now treat a subsidiary conducting such
activities as an affiliate under sections 23A and 23B, the subsidiary
would also qualify for the exception that applies when such activities
are conducted in an affiliate.22 Thus, no language in the
proposed rule is necessary to exclude this group of companies from
coverage as subsidiaries by sections 23A and 23B.
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\21\ There were two other types of companies that could operate
as either a subsidiary or an affiliate and that were exempt from the
pre-1982 section 23A: agricultural credit corporations and livestock
loan companies. However, on the Board's recommendation, Congress
discontinued the affiliate exemption for these companies. Board's
23A Proposal at 26.
\22\ 12 U.S.C. 371c(b)(2)(B-D).
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The second group of subsidiaries exempt under the 1933 Act were
Edge Act subsidiaries and Agreement corporations. Because those
companies were almost always subsidiaries of a bank, Congress did not
retain a specific exception for them after the 1982 amendments (because
they, like all other subsidiaries, were already exempt). Similarly,
when member banks were first authorized to invest directly in the stock
of foreign banks in 1966, Congress specifically authorized the Board to
exempt transactions with such foreign bank subsidiaries from section
23A.23 The Board did so between 1967 and 1982, but
discontinued the exemption as unnecessary after 1982. Thus, the
proposed rule needs to contain specific language exempting these
subsidiaries.
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\23\ 12 U.S.C. 601 (Third).
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Application of Sections 23A and 23B to Insured Nonmember Banks and
Savings Associations
As noted above, if the Board were to apply sections 23A and 23B to
transactions between a member bank and its subsidiaries, then by
operation of law such application would also extend to transactions
between an insured nonmember bank and a subsidiary engaged in
activities impermissible for its parent, and to transactions between a
savings association and a subsidiary engaged in activities
impermissible for its parent. However, especially in the savings
association context, application of sections 23A and 23B raises certain
policy issues. For example, in section 5 of the HOLA, Congress has
expressly permitted a savings association to invest up to 3 percent of
its assets in a service corporation--an amount greater than section 23A
would allow.24 The Board believes that if section 23A were
applied to service corporations, any investment in a subsidiary
expressly permitted by section 5 of the HOLA therefore should be
exempt. Furthermore, section 11(a)(1) of the
[[Page 37747]]
HOLA prohibits a savings association from making a loan or extension of
credit to an affiliate if the affiliate is engaged in impermissible
bank holding company activities. If the Board were to designate a
subsidiary as an ``affiliate'' for purposes of sections 23A and 23B,
then this lending prohibition arguably would be applied to savings
associations subsidiaries. Subsidiaries of member banks are not subject
to such a prohibition. Accordingly, the Board seeks comment on whether
sections 23A and 23B should be applied to transactions between savings
associations and their subsidiaries and, if so, in what manner.
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\24\ At least one-half of the investment in excess of one
percent of a savings association's assets must be primarily used for
community, inner-city and community development purposes. 12 U.S.C.
1464(c)(4)(B).
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Similarly, section 302(b) of the Small Business Investment Act of
1958 25 allows member banks and non-member insured banks to
invest up to 5 percent of their capital and surplus in small business
investment companies. The Board does not propose to include any
investment by a member or nonmember insured bank in a subsidiary that
qualifies as a small business investment company towards the
limitations of section 23A, and seeks comment on whether any additional
transactions should be covered.
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\25\ 15 U.S.C. 682(b).
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Transactions Between a Subsidiary and an Affiliate
Pursuant to sections 23A and 23B, transactions between a subsidiary
of a bank and an affiliate of the bank are treated as if they are
transactions between the parent bank and the affiliate. For example, a
loan by a subsidiary of a bank to an affiliate of the bank is subject
to the collateral and other qualitative restrictions of sections 23A
and 23B, and the amount of the loan is counted toward the bank's
quantitative limits. This treatment is consistent with such
subsidiaries being considered departments of the bank.
However, when such subsidiaries engage in activities not permitted
to the bank, and the bank would be limited by the proposed rule in its
ability to fund such subsidiaries, this restriction may no longer be
appropriate. If a subsidiary is no longer treated as a part of the bank
when it borrows, it could be argued that the subsidiary should not be
treated as part of the bank when lending to other affiliates.
Accordingly, the Board seeks comment on whether transactions between a
bank subsidiary and an affiliate of the bank should be exempt from
section 23A or 23B when the subsidiary is limited by sections 23A and
23B in the funding it can receive from its parent bank.
Remaining Issues
The Board recognizes that application of sections 23A and 23B to
bank subsidiaries may raise interpretive issues that the current
application to affiliates has not. For example, under Generally
Accepted Accounting Principles, retained earnings of a subsidiary are
considered an investment in the subsidiary by its parent bank and would
therefore be considered a covered transaction for purposes of sections
23A and 23B.26 The Board seeks comment on whether additional
interpretive issues should be addressed in the final rule.
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\26\ 12 U.S.C. 371c(b)(7)(B).
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Regulatory Flexibility Act Analysis
This proposal is not expected to have a significant economic impact
on a substantial number of small business entities within the meaning
of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) because a
substantial number of small insured depository institutions do not
operate subsidiaries that are subject to the regulation. The Board
recognizes that some small state banks have established subsidiaries
engaged in real estate activities pursuant to section 24 of the FDI
Act, and the proposal would apply sections 23A and 23B to transactions
between the state banks and these subsidiaries. However, in its orders
approving such subsidiaries, the FDIC generally has required compliance
with sections 23A and 23B. The Board seeks comment on whether the
proposal would impose any additional burden on these entities, and what
relief would be appropriate.
Paperwork Reduction Act
No collection of information pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) is contained in this
notice.
List of Subjects in 12 CFR Part 250
Banks, banking, Federal Reserve System.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 250 as follows:
PART 250--MISCELLANEOUS INTERPRETATIONS
1. The authority citation for part 250 continues to read as
follows:
Authority: 12 U.S.C. 78, 248(i) and 371c(e).
2. Section 250.243 is added to read as follows:
Sec. 250.243 Applicability of sections 23A and 23B of the Federal
Reserve Act to transactions between a member bank and its subsidiaries.
(a) Covered transactions between an insured depository institution
and its subsidiary--(1) In general. For purposes of sections 23A(b)(1)
and 23B(d)(1) of the Federal Reserve Act (12 U.S.C. 371c(b)(1) and
371c-1(d)(1)), ``affiliate'' with respect to a member bank includes any
subsidiary of the member bank that engages, directly or through a
subsidiary, in any activity in which its parent bank may not engage
directly.
(2) Exception for certain subsidiaries. The following subsidiaries
shall not be considered an affiliate for purposes of paragraph (a)(1)
of this section:
(i) A corporation organized and operating under section 25A of the
Federal Reserve Act (12 U.S.C. 611-631), and any subsidiary thereof;
(ii) A corporation operating under section 25 of the Federal
Reserve Act (12 U.S.C. 601), and any subsidiary thereof; and
(iii) A foreign bank held under authority of section 25 of the
Federal Reserve Act (12 U.S.C. 601), and any subsidiary thereof.
(3) Exception for certain investments. An investment in a small
business investment company pursuant to section 302(b) of the Small
Business Investment Act of 1958 (15 U.S.C. 682(b)) shall not be subject
to the lending limit of section 23A(a)(1)(A) and shall not count
towards the aggregate lending limit of section 23A(a)(1)(B) (12 U.S.C.
371c (a)(1)(A) and (a)(1)(B)).
(b) Covered transactions between a subsidiary of an insured
depository institution and an affiliate of the institution. For
purposes of sections 23A(a)(1), 23A(c), and 23B(a)-(c) of the Federal
Reserve Act (12 U.S.C. 371c(a)(1), 371c(c), and 371c-1(a)-(c)), a
subsidiary of a member bank shall not include any subsidiary that is
considered an affiliate for purposes of paragraph (a)(1) of this
section.
By order of the Board of Governors of the Federal Reserve
System, July 3, 1997.
William W. Wiles,
Secretary of the Board.
[FR Doc. 97-18526 Filed 7-14-97; 8:45 am]
BILLING CODE 6210-01-P