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12 U.S.C. § 1831w — Safety and soundness firewalls applicable to financial subsidiaries of banks

Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 1831w — Safety and soundness firewalls applicable to financial subsidiaries of banks

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Stable record: federal_law:legal_authorities:record_usc_d2c1843d5d2e192b99a6a17a
Source file: Laws/federal/codes/united-states-code/title-12/section-1831w-safety-and-soundness-firewalls-applicable-to-financial-subsidiaries-of-b--a82beddb1e.md
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Source location: Title 12, Chapter 16, § 1831w; chapter-016-federal-deposit-insurance-corporation.md

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**(a) In general** An insured State bank may control or hold an interest in a subsidiary that engages in activities as principal that would only be permissible for a national bank to conduct through a financial subsidiary if— (1) the State bank and each insured depository institution affiliate of the State bank are well capitalized (after the capital deduction required by paragraph (2)); (2) the State bank complies with the capital deduction and financial statement disclosure requirements in [section 24a(c) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section24a/c&num=0&edition=prelim); (3) the State bank complies with the financial and operational safeguards required by [section 24a(d) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section24a/d&num=0&edition=prelim); and (4) the State bank complies with the amendments to sections 23A and 23B of the Federal Reserve Act [[12 U.S.C. 371c](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section371c&num=0&edition=prelim) and 371c–1] made by section 121(b) of the Gramm-Leach-Bliley Act. **(b) Preservation of existing subsidiaries** Notwithstanding subsection (a), an insured State bank may retain control of a subsidiary, or retain an interest in a subsidiary, that the State bank lawfully controlled or acquired before November 12, 1999, and conduct through such subsidiary any activities lawfully conducted in such subsidiary as of such date. **(c) Definitions** For purposes of this section, the following definitions shall apply: (1) **Subsidiary** — The term “subsidiary” means any company that is a subsidiary (as defined in [section 1813(w)(4) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section1813/w/4&num=0&edition=prelim)) of 1 or more insured banks. (2) **Financial subsidiary** — The term “financial subsidiary” has the meaning given the term in [section 24a(g) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section24a/g&num=0&edition=prelim). **(d) Preservation of authority** (1) **This chapter** — No provision of this section shall be construed as superseding the authority of the Federal Deposit Insurance Corporation to review subsidiary activities under [section 1831a of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section1831a&num=0&edition=prelim). (2) **Federal Reserve Act** — No provision of this section shall be construed as affecting the applicability of the 20th undesignated paragraph of section 9 of the Federal Reserve Act [[12 U.S.C. 335](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section335&num=0&edition=prelim)].

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 1831a — Activities of insured State banks

**(a) Permissible activities** (1) **In general** — After the end of the 1-year period beginning on December 19, 1991, an insured State bank may not engage as principal in any type of activity that is not permissible for a national bank unless— (A) the Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund; and (B) the State bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency. (2) **Processing period** (A) *In general* — The Corporation shall make a determination under paragraph (1)(A) not later than 60 days after receipt of a completed application that may be required under this subsection. (B) *Extension of time period* — The Corporation may extend the 60-day period referred to in subparagraph (A) for not more than 30 additional days, and shall notify the applicant of any such extension. **(b) Insurance underwriting** (1) **In general** — Notwithstanding subsection (a), an insured State bank may not engage in insurance underwriting except to the extent that activity is permissible for national banks. (2) **Exception for certain federally reinsured crop insurance** — Notwithstanding any other provision of law, an insured State bank or any of its subsidiaries that provided insurance on or before September 30, 1991, which was reinsured in whole or in part by the Federal Crop Insurance Corporation may continue to provide such insurance. **(c) Equity investments by insured State banks** (1) **In general** — An insured State bank may not, directly or indirectly, acquire or retain any equity investment of a type that is not permissible for a national bank. (2) **Exception for certain subsidiaries** — Paragraph (1) shall not pro

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 371c — Banking affiliates

**(a) Restrictions on transactions with affiliates** (1) A member bank and its subsidiaries may engage in a covered transaction with an affiliate only if— (A) in the case of any affiliate, the aggregate amount of covered transactions of the member bank and its subsidiaries will not exceed 10 per centum of the capital stock and surplus of the member bank; and (B) in the case of all affiliates, the aggregate amount of covered transactions of the member bank and its subsidiaries will not exceed 20 per centum of the capital stock and surplus of the member bank. (2) For the purpose of this section, any transaction by a member bank with any person shall be deemed to be a transaction with an affiliate to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, that affiliate. (3) A member bank and its subsidiaries may not purchase a low-quality asset from an affiliate unless the bank or such subsidiary, pursuant to an independent credit evaluation, committed itself to purchase such asset prior to the time such asset was acquired by the affiliate. (4) Any covered transactions and any transactions exempt under subsection (d) between a member bank and an affiliate shall be on terms and conditions that are consistent with safe and sound banking practices. **(b) Definitions** For the purpose of this section— (1) the term “affiliate” with respect to a member bank means— (A) any company that controls the member bank and any other company that is controlled by the company that controls the member bank; (B) a bank subsidiary of the member bank; (C) any company— (i) that is controlled directly or indirectly, by a trust or otherwise, by or for the benefit of shareholders who beneficially or otherwise control, directly or in

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 24 — Corporate powers of associations

Upon duly making and filing articles of association and an organization certificate a national banking association shall become, as from the date of the execution of its organization certificate, a body corporate, and as such, and in the name designated in the organization certificate, it shall have power—

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 335 — Dealing in investment securities; limitations and conditions

State member banks shall be subject to the same limitations and conditions with respect to the purchasing, selling, underwriting, and holding of investment securities and stock as are applicable in the case of national banks under paragraph “Seventh” of [section 24 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section24&num=0&edition=prelim). This section shall not apply to any interest held by a State member bank in accordance with [section 24a of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section24a&num=0&edition=prelim) and subject to the same conditions and limitations provided in such section.

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 1831w — Safety and soundness firewalls applica-

Page 1194 TITLE 12—BANKS AND BANKING § 1831w have to take direct or indirect action with re- spect to holding companies and their function- ally regulated subsidiaries; shall also limit whatever authority that a Fed- eral banking agency might otherwise have under any statute or regulation to require reports, make examinations, impose capital require- ments, or take any other direct or indirect ac- tion with respect to any functionally regulated affiliate of a depository institution, subject to the same standards and requirements as are ap- plicable to the Board under those provisions. (b) Certain exemption authorized No provision of this section shall be construed as preventing the Corporation, if the Corpora- tion finds it necessary to determine the condi- tion of a depository institution for insurance purposes, from examining an affiliate of any de- pository institution, pursuant to section 1820(b)(4) of this title, as may be necessary to disclose fully the relationship between the de- pository institution and the affiliate, and the ef- fect of such relationship on the depository insti- tution. (c) Definitions For purposes of this section, the following definitions shall apply: (1) Functionally regulated subsidiary The term ‘‘functionally regulated sub- sidiary’’ has the meaning given the term in section 1844(c)(5) of this title. (2) Functionally regulated affiliate The term ‘‘functionally regulated affiliate’’ means, with respect to any depository institu- tion, any affiliate of such depository institu- tion that is— (A) not a depository institution holding company; and (B) a company described in any clause of section 1844(c)(5)(B) of this title. (Sept. 21, 1950, ch. 967, § 2[45], as added Pub. L. 106–102, title I, § 112(b), Nov. 12,

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 335 — Dealing in investment securities; limita-

Page 118 TITLE 12—BANKS AND BANKING § 335 (Dec. 23, 1913, ch. 6, § 9 (pars.), as added June 16, 1933, ch. 89, § 5(c), 48 Stat. 165; amended Aug. 23, 1935, ch. 614, title II, § 203(a), 49 Stat. 704; Pub. L. 89–485, § 13(f), July 1, 1966, 80 Stat. 243.) Editorial Notes REFERENCES IN TEXT This subchapter, referred to in text, was in the origi- nal ‘‘this section’’, meaning section 9 of act Dec. 23, 1913, which is classified generally to this subchapter (§ 321 et seq.). CODIFICATION Section is comprised of the seventeenth to nineteenth pars. of act Dec. 23, 1913, as amended. These pars. con- stituted pars. fifteen to seventeen of section 9 in 1933 (48 Stat. 165), became pars. sixteen to eighteen in 1935 (49 Stat. 704), and became pars. seventeen to nineteen in 1950 (64 Stat. 458). For further details, see Codifica- tion notes set out under sections 321 and 329a of this title. AMENDMENTS 1966—Pub. L. 89–485 struck out last sentence of third par. stating that term ‘‘affiliate’’ shall include holding company affiliates as well as other affiliates for the purposes of such par. and preceding two pars. Statutory Notes and Related Subsidiaries CHANGE OF NAME Section 203(a) of act Aug. 23, 1935, changed name of Federal Reserve Board to Board of Governors of the Federal Reserve System. § 335. Dealing in investment securities; limita- tions and conditions State member banks shall be subject to the same limitations and conditions with respect to the purchasing, selling, underwriting, and hold- ing of investment securities and stock as are ap- plicable in the case of national banks under paragraph ‘‘Seventh’’ of section 24 of this title. This section shall not apply to any interest held by a State member bank in accordance with sec- tion 24a of this title

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Federal law — U.S. Code and appendices · legal_authorities

12 U.S.C. § 371c — Banking affiliates

Page 141 TITLE 12—BANKS AND BANKING § 371c (b) Aggregate limits on insured depository insti- tutions’ exposure to other depository institu- tions The Board shall, by regulation or order, pre- scribe standards that have the effect of limiting the risks posed by an insured depository institu- tion’s exposure to any other depository institu- tion. (c) ‘‘Exposure’’ defined (1) In general For purposes of subsection (b), an insured de- pository institution’s ‘‘exposure’’ to another depository institution means— (A) all extensions of credit to the other de- pository institution, regardless of name or description, including— (i) all deposits at the other depository institution; (ii) all purchases of securities or other assets from the other depository institu- tion subject to an agreement to repur- chase; and (iii) all guarantees, acceptances, or let- ters of credit (including endorsements or standby letters of credit) on behalf of the other depository institution; (B) all purchases of or investments in secu- rities issued by the other depository institu- tion; (C) all securities issued by the other depos- itory institution accepted as collateral for an extension of credit to any person; and (D) all similar transactions that the Board by regulation determines to be exposure for purposes of this section. (2) Exemptions The Board may, at its discretion, by regula- tion or order, exempt transactions from the definition of ‘‘exposure’’ if it finds the exemp- tions to be in the public interest and con- sistent with the purpose of this section. (3) Attribution rule For purposes of this section, any transaction by an insured depository institution with any person is a transaction with another deposi- tory institution to the extent that the pro- ceeds of the t

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