The following transactions are
not subject to the quantitative limits of sections 223.11 and 223.12,
the collateral requirements of section 223.14, or the prohibition
on the purchase of a low-quality asset of section 223.15. The transactions
are, however, subject to the safety-and-soundness requirement of section
223.13.
(a) Making correspondent
banking deposits. Making a deposit in an affiliated depository
institution (as defined in section 3 of the Federal Deposit Insurance
Act (12 USC 1813)) or affiliated foreign bank that represents an ongoing,
working balance maintained in the ordinary course of correspondent
business.
(b) Giving
credit for uncollected items. Giving immediate credit to an affiliate
for uncollected items received in the ordinary course of business.
(c) Transactions secured
by cash or U.S. government securities.
(1) In general. Engaging in a credit transaction with an affiliate to the extent
that the transaction is and remains secured by—
(i) obligations
of the United States or its agencies;
(ii) obligations fully guaranteed by
the United States or its agencies as to principal and interest; or
(iii) a segregated,
earmarked deposit account with the member bank that is for the sole
purpose of securing credit transactions between the member bank and
its affiliates and is identified as such.
(2) Example. A member bank makes a $100 non-amortizing term loan
to an affiliate secured by U.S. Treasury securities with a market
value of $50 and real estate with a market value of $75. The value
of the covered transaction is $50. If the market value of the U.S.
Treasury securities falls to $45 during the life of the loan, the
value of the covered transaction would increase to $55.
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(d) Purchasing securities of
a servicing affiliate. Purchasing a security issued by any company
engaged solely in providing services described in section 4(c)(1)
of the Bank Holding Company Act (12 USC 1843(c)(1)).
(e) Purchasing certain liquid assets. Purchasing an asset having a readily identifiable and publicly available
market quotation and purchased at or below the asset’s current market
quotation. An asset has a readily identifiable and publicly available
market quotation if the asset’s price is quoted routinely in a widely
disseminated publication that is readily available to the general
public.
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(f) Purchasing certain
marketable securities. Purchasing a security from a securities
affiliate, if—
(1) the security has a “ready market,”
as defined in 17 CFR 240.15c3-1(c)(11)(i);
(2) the security is eligible for a state
member bank to purchase directly, subject to the same terms and conditions
that govern the investment activities of a state member bank, and
the member bank records the transaction as a purchase of a security
for purposes of its call report, consistent with the requirements
for a state member bank;
(3) the security is not a low-quality asset;
(4) the member bank does not purchase the
security during an underwriting, or within 30 days of an underwriting,
if an affiliate is an underwriter of the security, unless the security
is purchased as part of an issue of obligations of, or obligations
fully guaranteed as to principal and interest by, the United States
or its agencies;
(5)
the security’s price is quoted routinely on an unaffiliated electronic
service that provides indicative data from real-time financial networks,
provided that—
(i) the price paid by the member bank
is at
or below the current market quotation for the security; and
(ii) the size of the transaction
executed by the member bank does not cast material doubt on the appropriateness
of relying on the current market quotation for the security; and
(6) the member
bank maintains, for a period of two years, records and supporting
information that are sufficient to enable the appropriate federal
banking agency to ensure the member bank’s compliance with the terms
of this exemption.
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(g) Purchasing municipal securities. Purchasing
a municipal security from a securities affiliate if—
(1) the security is rated by a nationally
recognized statistical rating organization or is part of an issue
of securities that does not exceed $25 million;
(2) the security is eligible for purchase
by a state member bank, subject to the same terms and conditions that
govern the investment activities of a state member bank, and the member
bank records the transaction as a purchase of a security for purposes
of its call report, consistent with the requirements for a state member
bank; and
(3) (i) the security’s price is
quoted routinely on an unaffiliated electronic service that provides
indicative data from real-time financial networks, provided that—
(A) the price paid by the member bank is at or below the current
market quotation for the security; and
(B) the size of the transaction executed by
the member bank does not cast material doubt on the appropriateness
of relying on the current market quotation for the security; or
(ii)
the price paid for the security can be verified by reference to two
or more actual, current price quotes from unaffiliated broker-dealers
on the exact security to be purchased or a security comparable to
the security to be purchased, where—
(A) the price quotes obtained
from the unaffiliated broker-dealers are based on a transaction similar
in size to the transaction that is actually executed; and
(B) the price paid is no higher
than the average of the price quotes; or
(iii) the price paid for
the security can be verified by reference to the written summary provided
by the syndicate manager to syndicate members that discloses the aggregate
par values and prices of all bonds sold from the syndicate account,
if the member bank—
(A) purchases the municipal security during
the underwriting period at a price that is at or below that indicated
in the summary; and
(B)
obtains a copy of the summary from its securities affiliate and retains
the summary for three years.
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(h) Purchasing an extension
of credit subject to a repurchase agreement. Purchasing from
an affiliate an extension of credit that was originated by the member
bank and sold to the affiliate subject to a repurchase agreement or
with recourse.
(i) Asset
purchases by a newly formed member bank. The purchase of an asset
from an affiliate by a newly formed member bank, if the appropriate
federal banking agency for the member bank has approved the asset
purchase in writing in connection with its review of the formation
of the member bank.
(j) Transactions approved under the Bank Merger Act. Any merger
or consolidation between a member bank and an affiliated depository
institution or U.S. branch or agency of a foreign bank, or any acquisition
of assets or assumption of deposit liabilities by a member bank from
an affiliated depository institution or U.S. branch or agency of a
foreign bank, if the transaction has been approved by the responsible
federal banking agency pursuant to the Bank Merger Act (12 USC 1828(c)).
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(k) Purchasing an extension
of credit from an affiliate. Purchasing from an affiliate, on
a nonrecourse basis, an extension of credit, if—
(1) the extension of credit was originated
by the affiliate;
(2)
the member bank makes an independent evaluation of the creditworthiness
of the borrower before the affiliate makes or commits to make the
extension of credit;
(3) the member bank commits to purchase the extension of credit before
the affiliate makes or commits to make the extension of credit;
(4) the member bank does
not make a blanket advance commitment to purchase extensions of credit
from the affiliate; and
(5) the dollar amount of the extension of credit, when aggregated
with the dollar amount of all other extensions of credit purchased
from the affiliate during the preceding 12 calendar months by the
member bank and its depository institution affiliates, does not represent
more than 50 percent (or such lower percent as is imposed by the member
bank’s appropriate federal banking agency) of the dollar amount of
extensions of credit originated by the affiliate during the preceding
12 calendar months.
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(l) Intraday extensions of credit.
(1) In general. An intraday extension of credit to an affiliate, if the member bank—
(i) has established and maintains policies and procedures reasonably
designed to manage the credit exposure arising from the member bank’s
intraday extensions of credit to affiliates in a safe and sound manner,
including policies and procedures for—
(A) monitoring and controlling
the credit exposure arising at any one time from the member bank’s
intraday extensions of credit to each affiliate and all affiliates
in the aggregate; and
(B) ensuring that any intraday extension of credit by the member
bank to an affiliate complies with the market-terms requirement of
section 223.51;
(ii) has no reason to believe that the
affiliate will have difficulty repaying the extension of credit in
accordance with its terms; and
(iii) ceases to treat any such extension
of credit (regardless of jurisdiction) as an intraday extension of
credit at the end of the member bank’s business day in the United
States.
(2) Definition. Intraday extension
of credit by a member bank to an affiliate means an extension
of credit by a member bank to an affiliate that the member bank expects
to be repaid, sold, or terminated, or to qualify for a complete exemption
under this regulation, by the end of its business day in the United
States.
(m) Riskless-principal transactions. Purchasing a security from
a securities affiliate of the member bank if—
(1) the member bank or the securities affiliate
is acting exclusively as a riskless principal in the transaction;
and
(2) the security
purchased is not issued, underwritten, or sold as principal (other
than as riskless principal) by any affiliate of the member bank.
(n) Securities
financing transactions.
(1) From September 15, 2008, until October
30, 2009 (unless further extended by the Board), securities financing
transactions with an affiliate, if:
(i) the security or other
asset financed by the member bank in the transaction is of a type
that the affiliate financed in the U.S. triparty repurchase agreement
market at any time during the week of September 8-12, 2008;
(ii) the transaction is
marked to market daily and subject to daily margin-maintenance requirements,
and the member bank is at least as overcollateralized in the transaction
as the affiliate’s clearing bank was overcollateralized in comparable
transactions with the affiliate in the U.S. triparty repurchase agreement
market on September 12, 2008;
(iii) the aggregate risk profile of
the securities financing transactions under this exemption is no greater
than the aggregate risk profile of the securities financing transactions
of the affiliate in the U.S. triparty repurchase agreement market
on September 12, 2008;
(iv) the member bank’s top-tier holding company guarantees the obligations
of the affiliate under the securities financing transactions (or provides
other security to the bank that is acceptable to the Board); and
(v) the member bank
has not been specifically informed by the Board, after consultation
with the member bank’s appropriate federal banking agency, that the
member bank may not use this exemption.
(2) For purposes of this exemption:
(i) Securities financing transaction means:
(A) a purchase
by a member bank from an affiliate of a security or other asset, subject
to an agreement by the affiliate to repurchase the asset from the
member bank;
(B) a borrowing
of a security by a member bank from an affiliate on a collateralized
basis; or
(C) a secured
extension of credit by a member bank to an affiliate.
(ii) U.S. triparty
repurchase agreement market means the U.S. market for securities
financing transactions in which the counterparties use custodial arrangements
provided by JPMorgan Chase Bank or Bank of New York or another financial
institution approved by the Board.
(o) Purchases of certain asset-backed
commercial paper. Purchases of asset-backed commercial paper
from an affiliated SEC-registered open-end investment company that
holds itself out as a money market mutual fund under SEC Rule 2a-7
(17 CFR 270.2a-7), if the member bank:
(1) Purchases the asset-backed commercial
paper on or after September 19, 2008;
(2) Pledges the asset-backed commercial
paper to a Federal Reserve Bank to secure financing from the asset-backed
commercial paper lending facility (AMLF) established by the Board
on September 19, 2008; and
(3) Has not been specifically informed
by the Board, after consultation with the member bank’s appropriate
federal banking agency, that the member bank may not use this exemption.
