Transactions Between a Member and its Subsidiaries
July 24, 1997
Circular No. 10967

Proposal on Applicability of Sections 23A and 23B of Feseral Reserve Act

To All Depository Institutions in the Second Federal Reserve District:

The following is from a statement issued by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has requested comment on a proposal to apply sections 23A and 23B of the Federal Reserve Act to transactions between a member bank and any subsidiary that engages in activities that are impermissible for the bank itself and that Congress has not previously exempted from coverage by section 23A.

Sections 23A and 23B restrict the ability of a member bank to fund an affiliate through direct investment, loans, or other transactions that might expose the member bank to risk.

Comment is requested by September 3, 1997.

The proposed treatment is largely consistent with the existing treatment of these subsidiaries by the other banking agencies, which have applied sections 23A and 23B in some form to transactions between a bank and such subsidiaries.

Printed on the following pages is the Board's proposal, as published in the Federal Register of July 15 is available as a file (pdf - 36kb). Comments should be submitted to the Board by September 3, 1997, as specified in the notice. Questions on this matter may be directed, at this Bank, to Jim Keogh, Supervising Examiner, Advisory and Technical Services Department.