For purposes of this part:
(a) Aggregate amount of covered transactions means the amount of
the covered transaction about to be engaged in added to the current
amount of all outstanding covered transactions.
(b) Appropriate
federal banking agency with respect to a member bank or other
depository institution has the same meaning as in section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813).
(c) Bank
holding company has the same meaning as in 12 CFR 225.2.
(d) Capital stock and surplus means the sum of:
(1) a member bank’s tier 1 and tier
2 capital under the capital rule of the appropriate Federal banking
agency, based on the member bank’s most recent consolidated Report
of Condition and Income filed under 12 U.S.C. 1817(a)(3);
(2) the balance of a member bank’s allowance
for loan and lease losses or adjusted allowance for credit losses,
as applicable, not included in its tier 2 capital under the capital
rule of the appropriate Federal banking agency, based on the member
bank’s most recent consolidated Report of Condition and Income filed
under 12 U.S.C. 1817(a)(3); and
(3) the amount of any investment by a member bank in a financial
subsidiary that counts as a covered transaction and is required to
be deducted from the member bank’s capital for regulatory capital
purposes.
(4) Notwithstanding paragraphs
(d)(1) through (3) of this section, for a qualifying community banking
organization (as defined in section 217.12 of this chapter) that is
subject to the community bank leverage ratio framework (as defined
in section 217.12 of this chapter), capital stock and surplus equals
tier 1 capital (as defined in section 217.12 of this chapter and calculated
in accordance with section 217.12(b) of this chapter) plus allowances
for loan and lease losses or adjusted allowance for credit losses,
as applicable.
(e) Carrying value with respect to a
security means (unless otherwise provided) the value of the security
on the financial statements of the member bank, determined in accordance
with GAAP.
(f) Company means a corporation, partnership,
limited-liability company, business trust, association, or similar
organization and, unless specifically excluded, includes a member
bank and a depository institution.
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(g) Control.
(1) In general. Control by a company
or shareholder over another company means that—
(i) the company or shareholder, directly
or indirectly, or acting through one or more other persons, owns,
controls, or has power to vote 25 percent or more of any class of
voting securities of the other company;
(ii) the company or shareholder controls
in any manner the election of a majority of the directors, trustees,
or general partners (or individuals exercising similar functions)
of the other company; or
(iii)
the Board determines, after notice and opportunity for hearing, that
the company or shareholder, directly or indirectly, exercises a controlling
influence over the management or policies of the other company.
(2) Ownership or control of shares as fiduciary. Notwithstanding any other provision of this regulation, no company
will be deemed to control another company by virtue of its ownership
or control of shares in a fiduciary capacity, except as provided in
paragraph (a)(3) of section 223.2 or if the company owning or controlling
the shares is a business trust.
(3) Ownership or control of securities
by subsidiary. A company controls securities, assets, or other
ownership interests owned or controlled, directly or indirectly, by
any subsidiary (including a subsidiary depository institution) of
the company.
(4) Ownership or control of convertible instruments. A company or shareholder that owns or controls instruments (including
options or warrants) that are convertible or exercisable, at the option
of the holder or owner, into securities, controls the securities,
unless the company or shareholder presents information to the Board
that demonstrates, to the Board’s satisfaction, that the company or
shareholder should not be deemed to control the securities.
(5) Ownership
or control of nonvoting securities. A company or shareholder
that owns or controls 25 percent or more of the equity capital of
another company controls the other company, unless the company or
shareholder presents information to the Board that demonstrates, to
the Board’s satisfaction, that the company or shareholder does not
control the other company.
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(h) Covered transaction with respect to an affiliate means—
(1) an extension of credit to the affiliate;
(2) a purchase of, or an investment
in, a security issued by the affiliate;
(3) a purchase of an asset from the affiliate,
including an asset subject to recourse or an agreement to repurchase,
except such purchases of real and personal property as may be specifically
exempted by the Board by order or regulation;
(4) the acceptance of a security issued
by the affiliate as collateral for an extension of credit to any person
or company; and
(5) the issuance
of a guarantee, acceptance, or letter of credit, including an endorsement
or standby letter of credit, on behalf of the affiliate, a confirmation
of a letter of credit issued by the affiliate, and a cross-affiliate
netting arrangement.
(i) Credit transaction with an affiliate means—
(1) an extension of credit to the affiliate;
(2) an issuance of a guarantee, acceptance,
or letter of credit, including an endorsement or standby letter of
credit, on behalf of the affiliate and a confirmation of a letter
of credit issued by the affiliate; and
(3) a cross-affiliate netting arrangement.
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(j) Cross-affiliate
netting arrangement means an arrangement among a member bank,
one or more affiliates of the member bank, and one or more nonaffiliates
of the member bank in which—
(1) a nonaffiliate is permitted to deduct any obligations of an affiliate
of the member bank to the nonaffiliate when settling the nonaffiliate’s
obligations to the member bank; or
(2) the member bank is permitted or required to add any obligations
of its affiliate to a nonaffiliate when determining the member bank’s
obligations to the nonaffiliate.
(k) Depository
institution means, unless otherwise noted, an insured depository
institution (as defined in section 3 of the Federal Deposit Insurance
Act (12 USC 1813)), but does not include any branch of a foreign bank.
For purposes of this definition, an operating subsidiary of a depository
institution is treated as part of the depository institution.
(l) Derivative transaction means any derivative contract
listed in sections III.E.1.a. through d. of appendix A to 12 CFR 225
and any similar derivative contract, including a credit derivative
contract.
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(m) Eligible affiliated mutual fund securities has the
meaning specified in paragraph (c)(2) of section 223.24.
(n) Equity capital means—
(1) with respect to a corporation, preferred stock, common stock,
capital surplus, retained earnings, and accumulated other comprehensive
income, less treasury stock, plus any other account that constitutes
equity of the corporation; and
(2)
with respect to a partnership, limited-liability company, or other
company, equity accounts similar to those described in paragraph (n)(1)
of this section.
(o) Extension of credit to
an affiliate means the making or renewal of a loan, the granting of
a line of credit, or the extending of credit in any manner whatsoever,
including on an intraday basis, to an affiliate. An extension of credit
to an affiliate includes, without limitation—
(1) an advance to an affiliate by means
of an overdraft, cash item, or otherwise;
(2) a sale of federal funds to an affiliate;
(3) a lease that is the functional
equivalent of an extension of credit to an affiliate;
(4) an acquisition by purchase, discount,
exchange, or otherwise of a note or other obligation, including commercial
paper or other debt securities, of an affiliate;
(5) any increase in the amount of, extension
of the maturity of, or adjustment to the interest-rate term or other
material term of, an extension of credit to an affiliate; and
(6) any other similar transaction as a
result of which an affiliate becomes obligated to pay money (or its
equivalent).
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(p) Financial subsidiary.
(1) In general. Except as provided in paragraph
(p)(2) of this section, the term financial subsidiary means
any subsidiary of a member bank that—
(i) engages, directly or indirectly,
in any activity that national banks are not permitted to engage in
directly or that is conducted under terms and conditions that differ
from those that govern the conduct of such activity by national banks;
and
(ii) is not a subsidiary
that a national bank is specifically authorized to own or control
by the express terms of a federal statute (other than 12 USC 24a),
and not by implication or interpretation.
(2) Exceptions. Financial subsidiary does not include—
(i) a subsidiary of a member bank that
is considered a financial subsidiary under paragraph (p)(1) of this
section solely because the subsidiary engages in the sale of insurance
as agent or broker in a manner that is not permitted for national
banks; and
(ii) a subsidiary
of a state bank (other than a subsidiary described in section 46(a) of the
Federal Deposit Insurance Act (12 USC 1831w(a))) that is considered
a financial subsidiary under paragraph (p)(1) of this section solely
because the subsidiary engages in one or more of the following activities:
(A) an activity that the
state bank may engage in directly under applicable federal and state
law and that is conducted under the same terms and conditions that
govern the conduct of the activity by the state bank; and
(B) an activity that the subsidiary was authorized
by applicable federal and state law to engage in prior to December
12, 2002, and that was lawfully engaged in by the subsidiary on that
date.
(3) Subsidiaries of financial subsidiaries. If a company is a financial subsidiary under paragraphs (p)(1) and
(p)(2) of this section, any subsidiary of such a company is also a
financial subsidiary.
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(q) Foreign bank and
an agency, branch, or commercial lending company of a foreign bank have the same meanings as in section 1(b) of the
International Banking Act of 1978 (12 USC 3101).
(r) GAAP means U.S. generally accepted accounting principles.
(s) General-purpose credit card has the meaning specified in paragraph
(c)(4)(ii) of section 223.16.
(t) In contemplation. A transaction between a member bank and a
nonaffiliate is presumed to be “in contemplation” of the nonaffiliate
becoming an affiliate of the member bank if the member bank enters
into the transaction with the nonaffiliate after the execution of,
or commencement of negotiations designed to result in, an agreement
under the terms of which the nonaffiliate would become an affiliate.
(u) Intraday extension of credit has the meaning specified
in paragraph (l)(2) of section 223.42.
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(v) Low-quality asset
means—
(1) an asset
(including a security) classified as “substandard,” “doubtful,” or
“loss,” or treated as “special mention” or “other transfer-risk problems,”
either in the most recent report of examination or inspection of an
affiliate prepared by either a federal or state supervisory agency
or in any internal classification system used by the member bank or
the affiliate (including an asset that receives a rating that is substantially
equivalent to “classified” or “special mention” in the internal system
of the member bank or affiliate);
(2) an asset in a nonaccrual status;
(3) an asset on which principal or interest payments are more than
30 days past due;
(4) an asset whose
terms have been renegotiated or compromised due to the deteriorating
financial condition of the obligor; and
(5) an asset acquired through foreclosure,
repossession, or otherwise in satisfaction of a debt previously contracted,
if the asset has not yet been reviewed in an examination or inspection.
(w) Member bank means any national bank, state
bank, banking association, or trust company that is a member of the
Federal Reserve System. For purposes of this definition, an operating
subsidiary of a member bank is treated as part of the member bank.
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(x) Municipal securities has the same meaning as in section
3(a)(29) of the Securities Exchange Act of 1934 (17 USC 78c(a)(29)).
(y) Nonaffiliate with respect to a member bank means any
person that is not an affiliate of the member bank.
(z) Obligations of, or fully guaranteed as to principal and interest
by, the United States or its agencies includes those obligations
listed in 12 CFR 201.108(b) and any additional obligations as determined
by the Board. The term does not include Federal Housing Administration
or Veterans Administration loans.
(aa) Operating subsidiary with respect to a member bank or other depository institution means
any subsidiary of the member bank or depository institution other
than a subsidiary described in paragraphs (b)(1)(i) through (v) of
section 223.2.
(bb) Person means an individual, company,
trust, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, or any other form of entity.
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(cc) Principal underwriter has the meaning specified in paragraph (c)(1) of section 223.53.
(dd) Purchase of an asset by a member bank from an affiliate
means the acquisition by a member bank of an asset from an affiliate
in exchange for cash or any other consideration, including an assumption
of liabilities. The merger of an affiliate into a member bank is a
purchase of assets by the member bank from an affiliate if the member
bank assumes any liabilities of the affiliate or pays any other form
of consideration in the transaction.
(ee) Riskless principal. A company is “acting exclusively as a riskless principal” if, after
receiving an order to buy (or sell) a security from a customer, the
company purchases (or sells) the security in the secondary market
for its own account to offset a contemporaneous sale to (or purchase
from) the customer.
(ff) Securities means stocks, bonds,
debentures, notes, or similar obligations (including commercial paper).
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(gg) Securities affiliate with respect to a member bank means—
(1) an affiliate of the member
bank that is registered with the Securities and Exchange Commission
as a broker or dealer; or
(2) any
other securities broker or dealer affiliate of a member bank that
is approved by the Board.
(hh) State bank has
the same meaning as in section 3 of the Federal Deposit Insurance
Act (12 USC 1813).
(ii) Subsidiary with respect to a
specified company means a company that is controlled by the specified
company.
(jj) Voting securities has the same meaning
as in 12 CFR 225.2.
(kk) Well capitalized has the same
meaning as in 12 CFR 225.2 and, in the case of any holding company
that is not a bank holding company, well capitalized means
that the holding company has and maintains at least the capital levels
required for a bank holding company to be well capitalized under 12
CFR 225.2.
(ll) Well managed has the same meaning
as in 12 CFR 225.2.
