What are 23A covered transactions?

What are 23A covered transactions?

The definition of covered transaction in section 23A includes both a loan or extension of credit by a bank to an affiliate and a bank’s purchase of or investment in securities issued by an affiliate.

At what point must a transaction with a non affiliate that later becomes an affiliate be treated as a covered transaction?

(i) In general. A credit transaction with a nonaffiliate becomes a covered transaction at the time that the nonaffiliate becomes an affiliate of the member bank.

What is an affiliate under Reg W?

Regulation W defines a bank’s affiliates quite broadly including any company that the bank directly or indirectly controls or that is sponsored and advised by a bank, as well as subsidiaries of the bank.

What is the purpose of Section 23 A’s collateral requirements?

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 a Reg W covered transaction?

Covered transactions include loans and other extensions of credit to an affiliate, investments in the securities of an affiliate, purchases of assets from an affiliate, and certain other transactions that expose the bank to the risks of its affiliates.

What is considered an affiliate based on Reg W?

Under Regulation W, transactions with any affiliate must total no more than 10% of a financial institution’s capital, and transactions with all affiliates combined must total no more than 20% of an institution’s capital. The transaction must also be done on market terms and conditions.

What is the Reg W attribution rule?

A1: The attribution rule of Regulation W states that any transaction between a member bank and a person is deemed to be a transaction between the member bank and an affiliate to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, the affiliate.

What is acceptable collateral for Reg W purposes?

A credit transaction must be secured by collateral having a market value equal to at least: • 100 percent of the amount of the transaction if the collateral is: • obligations of the United States or its agencies; • obligations fully guaranteed by the United States or its agencies as to principal and interest; • notes.

What is section 23A and 23B of the Federal Reserve Act?

Sections 23A and 23B of the Federal Reserve Act are intended to limit the risks to an insured depository institution (“institution”) from transactions with its affiliates. [ 1] Sections 23A and 23B also limit the ability of an institution to transfer to its affiliates the subsidy arising from the institution’s access to the Federal safety net.

What is the market terms requirement for section 23B?

The market terms requirement of section 23B applies to any covered transaction (as defined in section 23A) with an affiliate as well as a broad range of other transactions, such as a sale of securities or other assets to an affiliate and a contract for the payment of money or furnishing of services to an affiliate.

What is section 23A and 23B of the Affordable Care Act?

Sections 23A and 23B also limit the ability of an institution to transfer to its affiliates the subsidy arising from the institution’s access to the Federal safety net. Section 23A achieves these goals in three major ways.

What are covered transactions under Section 23A of GLB?

As noted above, the GLB Act requires the Board to address as covered transactions under section 23A the credit exposure arising from intraday extensions of credit by insured depository institutions to their affiliates.