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6000 - Bank Holding Company Act
{{2-28-97 p.6110.17}}
Subpart FLimitations on Nonbank Banks
§ 225.52 Limitation on overdrafts.
(a) Definitions. For purposes of this section--
(1) "Account" means a reserve account, clearing account, or
deposit account as defined in the Board's Regulation D
(12 CFR 204.2(a)(1)(i)), that is
maintained at a Federal Reserve bank or nonbank bank.
(2) "Cash item" means (i) a check other than a check
classified as a noncash item; or (ii) any other item payable on demand
and collectible at par that the Federal Reserve bank of the district in
which the item is payable is willing to accept as a cash item.
(3) "Discount window loan" means any credit extended by a
Federal Reserve bank to a nonbank bank or industrial bank pursuant to
the provisions of the Board's Regulation A (12 CFR Part 201).
(4) "Industrial bank" means an institution as defined in
section 2(c)(2)(H) of the BHC Act (12
U.S.C. 1841(c)(2)(H)).
(5) "Noncash item" means an item handled by a Reserve bank
as a noncash item under the Reserve bank's "Collection of Noncash
Items Operating Circular" (e.g., a maturing bankers'
acceptance or a maturing security, or a demand item, such as a check,
with special instructions or an item that has not been preprinted or
post-encoded).
(6) "Other nonelectronic transactions" include all other
transactions not included as funds transfers, book-entry securities
transfers, cash items, noncash items, automated clearing house
transactions, net settlement entries, and discount window loans
(e.g., original issue of securites or redemption of
securities).
(7) An "overdraft" in an account occurs whenever the
Federal Reserve bank, nonbank bank, or industrial bank holding an
account posts a transaction to the account of the nonbank bank,
industrial bank, or affiliate that exceeds the aggregate balance of the
accounts of the nonbank bank, industrial bank, or affiliate, as
determined by the posting rules set forth in paragraphs (d) and (e) of
this section and continues until the aggregate balance of the account
is zero or greater.
(8) "Transfer item" means an item as defined in subpart B
of Regulation J(12 CFR 210.25 et seq).
(b) Restriction on overdrafts.--(1)
Affiliates. Neither a nonbank bank nor an industrial bank
shall permit any affiliate to incur any overdraft in its account with
the nonbank bank or industrial bank.
(2) Nonbank banks or industrial banks. (i) No nonbank
or industrial bank shall incur any overdraft in its account at a
Federal Reserve bank on behalf of an affiliate.
(ii) An overdraft by a nonbank bank or industrial bank in its
account at a Federal Reserve bank shall be deemed to be on behalf of an
affiliate whenever:
(A) A nonbank bank or industrial bank holds an account for an
affiliate from which third-party payments can be made; and
(B) When the posting of an affiliate's transaction to the nonbank
bank's or industrial bank's account at a Reserve bank creates an
overdraft in its account at a Federal Reserve bank or increases the
amount of an existing overdraft in its account at a Federal Reserve
bank.
(c) Permissible overdrafts. The following are
permissible overdrafts not subject to paragraph (b) of this section:
(1) Inadvertent error. An overdraft in its account by
a nonbank bank or its affiliate, or an industrial bank or its
affiliate, that results from an inadvertent computer error or
inadvertent accounting error, that was not reasonably forseeable or
could not have been prevented through the maintenance of procedures
reasonably adopted by the nonbank bank or affiliate to avoid such
overdraft; and
(2) Fully secured primary dealer affiliate overdrafts.
(i) An overdraft incurred by an affiliate of a nonbank bank, which
affiliate is recognized as a primary dealer by the Federal Reserve Bank
of New York, in the affiliate's account at the nonbank bank, or an
overdraft incurred by a nonbank bank on behalf of its primary dealer
affiliate in the nonbank bank's
{{2-28-97 p.6110.18}}account at a Federal Reserve bank;
provided: the overdraft is fully secured by bonds, notes, or
other obligations which are direct obligations of the United States or
on which the principal and interest are fully guaranteed by the United
States or by securities and obligations eligible for settlement on the
Federal Reserve book-entry system.
(ii) An overdraft by a nonbank bank in its account at a Federal
Reserve bank that is on behalf of a primary dealer affiliate is fully
secured when that portion of its overdraft at the Federal Reserve bank
that corresponds to the transaction posted for an affiliate that caused
or increased the nonbank bank's overdraft is fully secured in
accordance with paragraph (c)(2)(iii) of this section.
(iii) An overdraft is fully secured under paragraph (c)(2)(i) when
the nonbank bank can demonstrate that the overdraft is secured, at all
times, by a perfected security interest in specific, identified
obligations described in paragraph (c)(2)(i) with a market value that,
in the judgment of the Reserve bank holding the nonbank bank's account,
is sufficiently in excess of the amount of the overdraft to provide a
margin of protection in a volatile market or in the event the
securities need to be liquidated quickly.
(d) Posting by Federal Reserve banks. For purposes of
determining the balance of an account under this section, payments and
transfers by nonbank banks and industrial banks processed by the
Federal Reserve banks shall be considered posted to their accounts at
Federal Reserve banks as follows:
(1) Funds transfers. Transfer items shall be posted:
(i) To the transferor's account at the time the transfer is
actually made by the transferor's Federal Reserve bank; and
(ii) To the transferee's account at the time the transferee's
Reserve bank sends the transfer item or sends or telephones the advice
of credit for the item to the transferee, whichever occurs first.
(2) Book-entry securities transfers against payment. A
book-entry securities transfer against payment shall be posted: (i) to
the transferor's account at the time the entry is made by the
transferor's Reserve bank; and (ii) to the transferee's account at the
time the entry is made by the transferee's Reserve bank.
(3) Discount window loans. Credit for a discount
window loan shall be posted to the account of a nonbank bank or
industrial bank at the close of business on the day that it is made or
such earlier time as may be specifically agreed to by the Federal
Reserve bank and the nonbank bank under the terms of the loan. Debit
for repayment of a discount window loan shall be posted to the account
of the nonbank bank or industrial bank as of the close of business on
the day of maturity of the loan or such earlier time as may be agreed
to by the Federal Reserve bank and the nonbank bank or required by the
Federal Reserve bank under the terms of the loan.
(4) Other transactions. Total aggregate credits for
automated clearing house transfers, cash items, noncash items, net
settlement entries, and other nonelectronic transactions shall be
posted to the account of the nonbank bank or industrial bank as of the
opening of business on settlement day. Total aggregate debits for these
transactions and entries shall be posted to the account of a nonbank
bank or industrial bank as of the close of business on settlement day.
(e) Posting by nonbank banks and industrial banks. For
purposes of determining the balance of an affiliate's account under
this section, payments and transfers through an affiliate's account at
a nonbank bank or industrial bank shall be posted as follows:
(1) Funds transfers. (i) Fedwire transfer items shall
be posted:
(A) To the transferor affiliate's account no later than the time
the transfer is actually made by the transferor's Federal Reserve bank;
and
(B) To the transferee affiliate's account no earlier than the
time the transferee's Reserve bank sends the transfer item, or sends or
telephones the advice of credit for the item to the transferee,
whichever occurs first.
(ii) For funds transfers not sent or received through Federal
Reserve banks, debits shall be posted to the transferor affiliate's
account not later than the time the nonbank bank or industrial bank
becomes obligated on the transfer. Credits shall not be posted to
the
{{2-28-97 p.6110.19}}transferee affiliate's account before
the nonbank bank or industrial bank has received actually and finally
collected funds for the transfer.
(2) Book-entry securities transfers against payment.
(i) A book-entry securities transfer against payment shall be posted:
(A) To the transferor affiliate's account not earlier than the
time the entry is made by the transferor's Reserve bank; and
(B) To the transferee affiliate's account not later than the time
the entry is made by the transferee's Reserve bank.
(ii) For book-entry securities transfers against payment that are
not sent or received through Federal Reserve banks, entries shall be
posted:
(A) To the buyer-affiliate's account not later than the time the
nonbank bank or industrial bank becomes obligated on the transfer; and
(B) To the seller-affiliate's account not before the nonbank bank
or industrial bank has received actually and finally collected funds
for the transfer.
(3) Other transactions.--(i) Credits.
Except as otherwise provided in this paragraph, credits for cash items,
noncash items, ACH transfers, net settlement entries, and all other
nonelectronic transactions shall be posted to an affiliate's account on
the day of the transaction (i.e., settlement day for ACH
transactions or the day of credit for check transactions), but no
earlier than the Federal Reserve bank's opening of business on that
day. Credit for cash items that are required by federal or state
statute or regulation to be made available to the depositor for
withdrawal prior to the posting time set forth in the preceding
paragraph shall be posted as of the required availability time.
(ii) Debits. Debits for cash items, noncash items, ACH
transfers, net settlement entries, and all other nonelectronic
transactions shall be posted to an affiliate's account on the day of
the transaction (e.g., settlement day for ACH transactions
or the day of presentment for check transactions), but no later than
the Federal Reserve bank's close of business on that day. If a check
drawn on an affiliate's account or an ACH debit transfer received by an
affiliate is returned timely by the nonbank bank or industrial bank in
accordance with applicable law and agreements, no entry need to be
posted to the affiliate's account for such item.
[Codified to 12 C.F.R. § 225.52]
[Source: Section 225.52 added at 53 Fed. Reg 37745, September 28,
1988, effective January 1, 1989]
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