[Code of Federal Regulations]
[Title 12, Volume 1]
[Revised as of January 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR31 App A]

[Page 372]

                       TITLE 12--BANKS AND BANKING

   CHAPTER I--COMPTROLLER OF THE CURRENCY, DEPARTMENT OF THE TREASURY

PART 31_EXTENSIONS OF CREDIT TO INSIDERS AND TRANSACTIONS WITH AFFILIATES--Table of Contents

               Sec. Appendix A to Part 31--Interpretations

    Section 1. Loans Secured by Stock or Obligations of an Affiliate

    A bank that makes a loan to an unaffiliated third party may take a
security interest in securities of an affiliate as collateral for the
loan without the loan being deemed a ``covered transaction'' under
section 23A of the Federal Reserve Act (12 U.S.C. 371c) if:
    a. The borrower provides additional collateral that, taken alone,
meets or exceeds the collateral requirements specified in section 23A(c)
(12 U.S.C. 371c(c)); and
    b. The loan proceeds:
    1. Are not used to purchase the bank affiliate's securities that
serve as collateral; and
    2. Are not otherwise used for the benefit of, or transferred to, any
affiliate.

              Section 2. Deposits Between Affiliated Banks

    a. General rule. The OCC considers a deposit made by a bank in an
affiliated bank to be a loan or extension of credit to the affiliate
under 12 U.S.C. 371c. These deposits must be secured in accordance with
12 U.S.C. 371c(c). However, a national bank may not pledge assets to
secure private deposits unless otherwise permitted by law (see, e.g., 12
U.S.C. 90 (permitting collateralization of deposits of public funds); 12
U.S.C. 92a (trust funds); and 25 U.S.C. 156 and 162a (Native American
funds)). Thus, unless one of the exceptions to 12 U.S.C. 371c noted in
paragraph b. of this interpretation applies or unless another exception
applies that enables a bank to meet the collateral requirements of 12
U.S.C. 371c(c), a national bank may not:
    1. Make a deposit in an affiliated national bank;
    2. Make a deposit in an affiliated State-chartered bank unless the
affiliated State- chartered bank can legally offer collateral for the
deposit in conformance with applicable State law and 12 U.S.C. 371c; or
    3. Receive deposits from an affiliated bank.
    b. Exceptions. The restrictions of 12 U.S.C. 371c (other than 12
U.S.C. 371c(a)(4), which requires affiliate transactions to be
consistent with safe and sound banking practices) do not apply to
deposits:
    1. Made in the ordinary course of correspondent business; or
    2. Made in an affiliate that qualifies as a ``sister bank'' under 12
U.S.C. 371c(d)(1).

[61 FR 54536, Oct. 21, 1996]