[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR204.127]

[Page 148]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 204--RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS (REGULATION D)--Table of Contents
 
Sec. 204.127  Nondepository participation in ``Federal funds'' market.

    (a) The Board has considered whether the use of interdepository 
institution loan participations (IDLPs) which involve participation by 
third parties other than depository institutions in Federal funds 
transactions, comes within the exemption from deposit classification for 
certain obligations owed by a depository institution to an institution 
exempt in Sec. 204.2(a)(1)(vii)(A) of Regulation D. An IDLP transaction 
is one through which an institution that has sold Federal funds to a 
depository institution, subsequently sells or participates out that 
obligation to a nondepository third party without notifying the 
obligated institution.
    (b) The Board's interpretation regarding Federal funds transactions 
(12 CFR 204.126) clarified that a depository institutions's liability 
must be issued to an exempt institution described in 
Sec. 204.2(a)(1)(vii)(A) of Regulation D for its own account in order to 
come within the nondeposit exemption for interdepository liabilities. 
The Board regards transactions which result in third parties gaining 
access to the Federal funds market as contrary to the exemption 
contained in Sec. 204.2(a)(1)(vii)(A) of Regulation D regardless of 
whether the nondepository institution third party is a party to the 
initial transaction or thereafter becomes a participant in the 
transaction through purchase of all or part of the obligation held by 
the selling depository institution.
    (c) The Board regards the notice requirements set out in 12 CFR 
204.126 as applicable to IDLP-type transactions as described herein so 
that a depository institution selling Federal funds must provide to the 
purchaser--
    (1) Notice of its intention, at the time of the initial transaction, 
to sell or participate out its loan contract to a nondepository third 
party, and
    (2) Full and prompt notice whenever it (the selling depository 
institution) subsequently sells or participates out its loan contract to 
a non-depository third party.

[52 FR 47695, Dec. 16, 1987]