[Federal Register: December 12, 2002 (Volume 67, Number 239)]
[Rules and Regulations]
[Page 76620-76622]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12de02-9]
[[Page 76620]]
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FEDERAL RESERVE SYSTEM
12 CFR Part 250
[Miscellaneous Interpretations]
Transactions Between Member Banks and Their Affiliates
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: Sections 23A and 23B of the Federal Reserve Act restrict the
ability of a member bank to engage in certain transactions with an
affiliate. Since its initial passage in 1933, the Board and its staff
have issued numerous formal and informal interpretations of section
23A. On October 31, 2002, the Board adopted a new Regulation W, which
implements sections 23A and 23B and incorporates most of these
interpretations. Accordingly, the Board is rescinding most of its
formal interpretations of section 23A and removing these
interpretations, as well as most staff opinions relating to section
23A, from the Federal Reserve Regulatory Service. With the adoption of
Regulation W, most of the Board's previous section 23A interpretations
are outdated or unnecessary, and the Board believes that reliance on
the new Regulation W will eliminate confusion and simplify compliance
with sections 23A and 23B.
EFFECTIVE DATE: April 1, 2003.
FOR FURTHER INFORMATION CONTACT: Pamela G. Nardolilli, Senior Counsel
(202/452-3289), or Mark E. Van Der Weide, Counsel (202/452-2263), Legal
Division; Board of Governors of the Federal Reserve System, 20th and C
Streets, NW., Washington, DC 20551.
SUPPLEMENTARY INFORMATION: Sections 23A and 23B of the Federal Reserve
Act are two of the most important statutory protections against a bank
suffering losses because of its transactions with affiliates and,
correspondingly, are two of the most effective means of limiting the
ability of a bank to transfer to its affiliates the subsidy arising
from the bank's access to the Federal safety net. Although sections 23A
and 23B each explicitly grant the Board broad authority to issue
regulations to administer these sections,\1\ the Board never issued a
regulation fully implementing either section. Instead, banks seeking
guidance on how to comply with sections 23A and 23B have relied on a
series of Board interpretations and informal staff guidance. Some of
these Board interpretations are codified in part 250 of title 12 of the
Code of Federal Regulations. Many of the staff interpretations are
publicly available, and the summaries of the interpretations can be
found in the Board's loose-leaf service, the Federal Reserve Regulatory
Service.
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\1\ 12 U.S.C. 371c(f), 371c-1(e).
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On October 31, 2002, the Board adopted Regulation W, which
comprehensively implements sections 23A and 23B. In order to avoid
confusion and simplify compliance with sections 23A and 23B, the Board
is deleting the section 23A interpretations that are codified in part
250 of title 12 of the Code of Federal Regulations. In addition, the
Board is deleting most of the summaries of staff interpretations of
section 23A that are published in the Federal Reserve Regulatory
Service.
Below is a chart of the interpretations of sections 23A and 23B
found in the Federal Reserve Regulatory Service along with an
indication of whether each summary will be retained in the Federal
Reserve Regulatory Service or removed. For those summaries that will be
removed, the chart identifies the provision of Regulation W or an
appropriate statute that renders the summary unnecessary or
inconsistent with current law. The Board believes that a few existing
interpretations of section 23A would provide helpful guidance to
banking organizations, but are too fact-specific to include in
Regulation W; the summaries of these interpretations will remain in the
Federal Reserve Regulatory Service. All new Board interpretations of
sections 23A and 23B will be codified under part 223 instead of the
Miscellaneous Interpretations found in part 250, and will be available
on the Board's public Web site, http://www.federalreserve.gov. Persons
desiring older written interpretations will be able to obtain them by
filing a request pursuant to the Freedom of Information Act.
Deletions From the Federal Reserve Regulatory Service
[Board Interpretations]
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FRRS No. Subject 12 CFR reference
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3-1118, 12 CFR 250.242........ Definition of Capital Sec. 223.3(d).
Stock and Surplus.
3-1120, 1934 Fed. Res. Bull. Collateral--Paper Sec.
391. Eligible for 223.14(b)(1).
Rediscount or
Purchase by Federal
Reserve Banks.
3-1121, 1935 Fed. Res. Bull. Collateral--Stock..... Sec.
395. 223.14(b)(1)(iv
).
3-1125, 1936 Fed. Res. Bull. Exemptions--Indebtedne No exemption
324. ss for Unpaid available.
Balances Due on
Purchased Assets.
3-1126, S-285, 10/24/41....... Exemptions--Relationsh Sec.
ips Arising Out of 223.2(b)(5).
Bona Fide Debt
Previously Contracted.
3-1127, 12 CFR 250.240........ Exemptions--Loan to Sec. Sec.
Bank Operations 223.2(b) & (2).
Subsidiary.
3-1128, 12 CFR 250.241........ Exemptions--Transactio Sec.
ns Subject to Review 223.42(j).
Under the Bank Merger
Act.
3-1128.1, 12 CFR 250.245...... Exemptions--Loans and Sec.
Extensions of Credit 223.16(c)(3).
by Member Bank to
Third Party.
3-1128.2, 12 CFR 250.246...... Exemptions--Purchase Sec.
of Security by 223.42(f).
Insured Depository
Institution from an
Affiliate.
3-1130, 1934 Fed. Res. Bull. Extension of Credit-- Retained.
391. Loan on Note Bearing
Endorsement by
Affiliate.
3-1131, 1951 Fed. Res. Bull. Extension of Credit-- Sec.
960. Purchase of 223.3(o)(4).
Affiliate's Notes.
3-1132, 12 CFR 250.160(b)..... Extension of Credit-- Sec. 223.3(o).
Federal Funds
Transaction.
3-1133, 12 CFR 250.250........ Extension of Credit-- Sec.
Purchase of Mortgage 223.42(k).
Note or Participation
from Nonbank
Affiliates.
3-1135, 1933 Fed. Res. Bull. Loans & Investments See Preamble For
501. Made Before June 16, Grandfathering.
1933.
3-1136, 1934 Fed. Res. Bull. Limitations on Amount-- Sec.
391. Loans Secured by 223.14(b)(1)(C)
Paper Eligible for .
Rediscount by Federal
Reserve Bank.
3-1137, 12 CFR 250.247........ Market Terms Sec. 223.33.
Requirement--Derivati
ves.
[[Page 76621]]
3-1137.1, 12 CFR 250.248...... Market Terms Sec.
Requirement--Intraday 223.42(l).
Extensions of Credit
by Insured Depository
Institutions to Their
Affiliates.
3-1140........................ Affiliates to Which Sec. 223.2(b).
Applicable--Cotrustee
or Coexecutor of
Corporation.
3-1141........................ Affiliates to Which Retained.
Applicable.
3-1142........................ Affiliates to Which Sec.
Applicable--Small 223.2(a)(2).
Business Subsidiary
of Bank Holding
Company.
3-1143........................ Affiliate to Which Sec.
Applicable--Joint 223.2(b)(1)(iii
Venture in Which ).
Subsidiary Has 50%
Interest.
3-1144........................ Affiliates to Which Sec.
Applicable--Corporati 223.3(p)(1)(ii)
on with Stock Held as .
Collateral.
3-1145........................ Affiliates to Which Sec.
Applicable--Corporati 223.3(p)(1)(ii)
on Owned by Affiliate .
Edge Corporation.
3-1146........................ Affiliates to Which Retained.
Applicable--Trust.
3-1146.1...................... Affiliates to Which Sec.
Applicable--Foreign 223.2(a)(2).
Affiliate of Domestic
Bank Holding Company.
3-1146.2...................... Affiliates to Which Sec.
Applicable--Less Than 223.2(a)(3).
25 Percent Control.
3-1146.3...................... Affiliates to Which Sec.
Applicable--Agricultu 223.2(b)(1)(iii
ral Credit ).
Corporation.
3-1146.4...................... Affiliates to Which Sec.
Applicable--Bank 223.2(b)(1).
Subsidiaries of Bank
Holding Company.
3-1146.5...................... Affiliates to Which Sec. 223.16.
Applicable--Purchaser
of Subsidiary Banks.
3-1146.6...................... Affiliates to Which Retained.
Applicable--Common
Shareholders.
3-1146.61..................... Affiliates to Which Retained.
Applicable--Partnersh
ip & Association.
3-1146.7...................... Affiliates to Which Retained.
Applicable--Foreign
Exchange Fund.
3-1150........................ Bank--Savings Loan.... 12 U.S.C. 1468.
3-1151........................ Bank--Bank Whose 12 U.S.C.
Deposits Are Insured 1828(j).
by the FDIC.
3-1152........................ Bank--Foreign Bank.... 12 U.S.C.
371c(b)(5) &
Sec. 223.18.
3-1152.1...................... Bank--Domestic Branch 12
of a Foreign Bank. U.S.C.371c(b)(5
) & Sec.
223.3(k).
3-1152.2...................... Bank--National Bank 12 U.S.C.
Subsidiary. 371c(b)(5).
3-1155........................ Collateral--Automobile Sec.
Rental Contracts. 223.14(b)(1)(iv
).
3-1156........................ Collateral--Stock..... Sec. 223.24.
3-1157........................ Collateral--``Secured Sec. 223.14.
by''.
3-1158........................ Collateral--Stock in Sec. 223.14.
Wholly Owned
Subsidiary.
3-1160........................ Collateral--FHA Sec. 223.3(y).
Mortgages.
3-1161........................ Collateral--U.S. Sec. 223.14.
Government Securities.
3-1162........................ Collateral--Stock Retained
Valuation.
3-1163........................ Collateral--Stock Retained.
Valuation.
3-1164........................ Collateral--Stock Retained.
Valuation.
3-1164.1...................... Collateral--Stock of a Sec.
Subsidiary Bank. 223.14(c)(2).
3-1164.2...................... Collateral--Real Sec.
Estate. 223.14(b)(l)(iv
).
3-1164.3...................... Collateral--Mortgage Sec.
Servicing Rights. 223.14(c)(4).
3-1167........................ Covered Transactions-- Sec.
Purchase of 223.3(h)(2).
Affiliate's
Securities.
3-1167.1...................... Covered Transactions-- Retained.
Purchase of Assets.
3-1167.2...................... Covered Transactions-- Sec.
Purchase of Assets. 223.42(k).
3-1167.3...................... Covered Transactions-- Retained.
Acceptance of
Securities.
3-1167.4...................... Covered Transactions-- Retained.
Issuance of Guarantee.
3-1167.5...................... Covered Transactions-- Sec. 223.42(k)
Purchase of Leases. & Subpart F.
3-1170........................ Exemptions--Indebtedne Sec. 223.3(h).
ss for Unpaid
Balances Due on
Purchased Assets.
3-1171........................ Exemptions--Corporatio Sec.
n Holding Premises of 223.2(b)(2).
Bank.
3-1172........................ Exemptions--Investment Sec. 223.2.
in Agricultural
Credit Corporation.
3-1173........................ Exemptions--Sale of Sec.
Assets on Credit. 223.3(h)(1).
3-1174........................ Exemptions--Trust..... Sec. 223.2.
3-1175........................ Exemptions--Loans to Sec.
Subsidiary Bank 223.2(b)(2).
Premises.
3-1176........................ Exemptions--Corporatio Sec.
n Holding Premises of 223.2(b)(2).
Bank.
3-1177........................ Exemptions--Bank Sec.
Operations Subsidiary. 223.2(b)(1).
3-1177.1...................... Exemptions--Bank Sec. Sec.
Controlled by Same 223.41(b) &
Company. 223.3(k) & (v).
3-1177.2...................... Exemptions--Bank Sec.
Premises Subsidiary. 223.2(a)(3) &
(b)(2).
3-1177.3...................... Exemptions--Privately Retained.
Issued Collateralized
Mortgage Obligations.
3-1177.4...................... Exemptions--Bank Sec.
Controlled by Same 223.41(b).
Company That Is Not
Bank Holding Company.
3-1180........................ Extension of Credit-- Sec.
Nonrecourse 223.3(o)(4).
Acquisition of
Promissory Note.
3-1181........................ Extension of Credit-- Sec. Sec.
Transaction with Bank 223.3(o) &
Holding Company. 223.42(h).
3-1182........................ Extension of Credit-- Sec. 225.3(o).
Guaranteed Debt of
Holding Company.
3-1183........................ Extension of Credit-- Deleted.
Participation in
Assets Pool.
3-1184........................ Extension of Credit-- Sec.
Purchase of Mortgage 223.42(k).
Note or Participation
from Nonbank
Affiliate.
3-1185........................ Extension of Credit-- Retained.
GNMA Certificate of
Guarantee.
3-1186........................ Extension of Credit-- Sec. 223.3(o).
Paid Letter of Credit.
3-1187........................ Extension of Credit-- Retained.
Equipment Lease
Agreement.
3-1188........................ Extension of Credit-- Sec.
Participation in 223.42(k).
Mortgage Loan Pool.
[[Page 76622]]
3-1189........................ Extension of Credit-- Sec.
Finance Company Loan 223.42(k).
Participation.
3-1189.1...................... Extension of Credit-- Sec. Sec.
Transactions 223.3(h)(1) &
Involving Funding, 223.3(h)(5).
Letters of Credit &
Bankers Acceptance.
3-1189.2...................... Extension of Credit-- Sec. 223.3(h).
Contingency,
Negotiating or
Accepting Letters of
Credit.
3-1195........................ Limitations on Amount-- See Preamble
Loans & Investments Grandfathering.
Made Before June 16,
1933.
3-1196........................ Limitations on Amount-- Sec.
Loan Secured by Paper 223.14(b)(i)(C)
Eligible for .
Rediscount or
Purchase by Federal
Reserve Bank.
3-1197........................ Limitations on Amount-- Sec.
Capital Stock. 223.3(h)(2).
3-1198........................ Limitations on Amount-- Sec. Sec.
Stockholder Ownership 223.3(h) &
& Capital 223.7(c)
Expenditures.
3-1199........................ Limitations on Amount-- Sec.
Valuation of 223.24(b).
Transactions.
3-1199.5...................... Low-Quality Asset-- Retained.
Open-End Credit Card
Account.
3-1199.51..................... Low-Quality Assets-- Sec.
Renewal of a Loan. 223.15(b).
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Regulatory Flexibility Act
In accordance with section 3(a) of the Regulatory Flexibility Act
(5 U.S.C. 603(a)), the Board is not required to publish a regulatory
flexibility analysis with this rulemaking.
Administrative Procedure Act
Pursuant to 5 U.S.C. 553, the Board is issuing this deletion of the
Board and staff's existing section 23A interpretations as a final rule.
Most of the interpretations in question are staff opinions, which were
not subject to public comment pursuant to 5 U.S.C. 553(b)(2)(A). The
deletion of the Board interpretations from the Code of Federal
Regulations is part of the implementation of Regulation W, which the
Board issued for public notice and comment on May 11, 2001, and thus
further public comment on the deletions is unnecessary. A review of the
public comments on Regulation W can be found in the preamble to
Regulation W, 67 FR (2002).
Paperwork Reduction Act
The Board has determined that the removal of the interpretations
from the Code of Federal Regulations will not involve a collection of
information pursuant to the provisions of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.).
List of Subjects in 12 CFR part 250
Federal Reserve System.
For reasons set out in the preamble, the Board amends 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), 371c(f) and 371c-1(e).
Sec. 250.160 [Amended]
2. In Sec. 250.160, remove paragraph (b).
Sec. Sec. 250.240, 250.248 and Sec. 250.250 [Removed]
3. Sections 250.240, 250.241, 250.242, 250.243, 250.244, 250.245,
250.246, 250.247, 250.248, and 250.250 are removed.
By order of the Board of Governors of the Federal Reserve
System, November 27, 2002.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 02-30636 Filed 12-11-02; 8:45 am]
BILLING CODE 6210-01-P