What is Section 23B?

Section 23B protects a bank by requiring that transactions between the bank and its affiliates occur on market terms.

What is considered a covered transaction under section 23A because of the attribution rule?

Under the attribution rule in section 23A(a)(2), any transaction by a bank with a third party is deemed to be a transaction with an affiliate to the extent that “the proceeds of that transaction are used for the benefit of or transferred to the affiliate.”

On what form are Section 23A transactions reported?

Bank Holding Company Report of Insured Depository Institutions
Reporting Form FR Y-8 The Bank Holding Company Report of Insured Depository Institutions’ Section 23A Transactions with Affiliates – FEDERAL RESERVE BANK of NEW YORK.

What is the market terms requirement of section 23B?

Under section 23B, banks may engage in derivatives transactions with affiliates only on terms and under circumstances that are at least as favorable to the bank as those prevailing at the time for comparable transactions with nonaffiliates.

Who does regulation W apply?

Regulation W restricts certain kinds of transactions between banks and their affiliates. The rules that banks must follow to comply with Regulation W were tightened by post-2008 financial reforms. The Dodd-Frank Act expanded the definition of a bank affiliate and the types of transactions Regulation W covers.

What is the purpose of FR Y 8 reporting?

The FR Y-8 comprises a cover page and two pages collecting data on covered transactions and derivatives. Purpose: The information is used to enhance the Federal Reserve’s ability to monitor bank exposures to affiliates and to ensure compliance with section 23A of the Federal Reserve Act.

Who does Reg W protect?

How does Section 23A protect the bank?

Section 23A prohibits a bank from entering into a “covered transaction” with an affiliate if, after the transaction, (1) the aggregate amount of the bank’s covered transactions with that particular affiliate would exceed 10% of the bank’s capital stock and surplus, or (2) the aggregate amount of the bank’s covered …

What are 23A transactions?

Section 23A requires all covered transactions between a bank and its affiliate to be on terms and conditions consistent with safe and sound banking practices (Safety and Soundness Requirement ), subject to certain exemptions discussed below in Special Rules and Exemptions under Regulation W, and prohibits a bank from …

What is Reg W 23A?

Section 23A is the primary statute governing transactions between a bank and its affiliates. Subject to certain conditions, Regulation W prohibits a bank from initiating certain transactions (extensions of credit, derivatives transactions, investments in securities, asset purchases, issuances of guarantees, etc.)

What is considered a bank affiliate?

1 The term “affiliate” encompasses any company that controls, is controlled by, or is under common control with another company. Therefore, a subsidiary controlled by a non- member bank, whether wholly owned or not, is considered an “affiliate” of the bank2 for purposes of the FDI Act.

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