[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR223.71]

[Page 78-79]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 223--TRANSACTIONS BETWEEN MEMBER BANKS AND THEIR AFFILIATES (REGULATION W)--Table of Contents
 
                Subpart H--Miscellaneous Interpretations
 
Sec. 223.71  How do sections 23A and 23B apply to transactions in which a member bank purchases from one affiliate an asset relating to another affiliate?


    (a) In general. In some situations in which a member bank purchases 
an asset from an affiliate, the asset purchase qualifies for an 
exemption under this regulation, but the member bank's resulting 
ownership of the purchased asset also represents a covered transaction 
(which may or may not qualify for an exemption under this part). In 
these situations, the transaction engaged in by the member bank would 
qualify as two different types of covered transaction. Although an asset 
purchase exemption may suffice to exempt the member bank's asset 
purchase from the first affiliate, the asset purchase exemption does not 
exempt the member bank's resulting covered transaction with the second 
affiliate. The exemptions subject to this interpretation include 
Secs. 223.31(e), 223.41(a) through (d), and 223.42(e), (f), (i), (j), 
(k), and (m).
    (b) Examples. (1) The (d)(6) exemption. A member bank purchases from 
Affiliate A securities issued by Affiliate B in a purchase that 
qualifies for the (d)(6) exemption in section 23A. The member bank's 
asset purchase from Affiliate A would be an exempt covered

[[Page 79]]

transaction under Sec. 223.42(e); but the member bank also would have 
acquired an investment in securities issued by Affiliate B, which would 
be a covered transaction between the member bank and Affiliate B under 
Sec. 223.3(h)(2) that does not qualify for the (d)(6) exemption. The 
(d)(6) exemption, by its terms, only exempts asset purchases by a member 
bank from an affiliate; hence, the (d)(6) exemption cannot exempt a 
member bank's investment in securities issued by an affiliate (even if 
the securities would qualify for the (d)(6) exemption).
    (2) The sister-bank exemption. A member bank purchases from Sister-
Bank Affiliate A a loan to Affiliate B in a purchase that qualifies for 
the sister-bank exemption in section 23A. The member bank's asset 
purchase from Sister-Bank Affiliate A would be an exempt covered 
transaction under Sec. 223.41(b); but the member bank also would have 
acquired an extension of credit to Affiliate B, which would be a covered 
transaction between the member bank and Affiliate B under 
Sec. 223.3(h)(1) that does not qualify for the sister-bank exemption. 
The sister-bank exemption, by its terms, only exempts transactions by a 
member bank with a sister-bank affiliate; hence, the sister-bank 
exemption cannot exempt a member bank's extension of credit to an 
affiliate that is not a sister bank (even if the extension of credit was 
purchased from a sister bank).