|
[Main Tabs]
[Table of Contents - 4000]
[Index]
[Previous Page]
[Next Page]
[Search]
4000 - Advisory Opinions
Whether a State Nonmember Bank May Use FHLMC and FNMA Mortgage
Pass-Through Securities as the Underlying Security for Repurchase
Agreements the Bank Issues to Customers
March 7, 2000
FDIC--00--1
Jamey Basham, Counsel
I am responding to your letter dated February 25, 2000. You ask
whether a state nonmember bank may use FHLMC and FNMA mortgage
pass-through securities as the underlying security for repurchase
agreements the bank issues to its customers.
Since you will be purchasing and selling securities to bank
customers as part of the repurchase transactions, you must comply with
the FDIC's securities confirmation and recordkeeping rules at
12 C.F.R. Part 344. If you
retain custody of these securities during the term of the repurchase
agreement, you must also comply with confirmation and custody
requirements stated in regulations issued under the Government
Securities Act, located at 17
C.F.R. Part 400. In either case, you should also make
appropriate antifraud disclosures to your repo customers, since the
transactions are covered by the antifraud provisions of section 17(b)
of the Securities Act of 1933 and
section 10(b) of the Securities
Exchange Act of 1934.
If you so desire, you may issue these repurchase agreements with
maturities of less than seven days. This would include overnight repos
used in connection with a demand deposit sweep arrangement, in which
demand deposits are actually transferred into bank-issued repurchase
agreements on an overnight basis. The FDIC would not consider this to
be the payment of interest on a demand deposit for purposes of
12 C.F.R. Part 329 for a
variety of reasons, the simplest of which is section 329.3.
Section 329.3 makes the
prohibitions of Part 329 inapplicable to payments to remuneration
allowable for member banks under the regulations of the Board of
Governors of the Federal Reserve System ("FRB") at Regulation D
(12 C.F.R. Part 204) and
Regulation Q (12 C.F.R. Part
217). Regulation D and Regulation Q are construed by the FRB as
allowing member banks to issue repurchase agreements with maturities of
less than seven days using FNMA and FHLMC pass-through securities as
the underlying. FRRS 2--305.5. Finally, since Regulation D and
Regulation Q would permit this for a member bank, which includes a
national bank, you will not be required to submit an application under
section 24 of the Federal Deposit Insurance Act
(12 U.S.C.
§ 1831a).
[Main Tabs]
[Table of Contents - 4000]
[Index]
[Previous Page]
[Next Page]
[Search]
|
