[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: 12CFR250.240]

[Page 680]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 250--MISCELLANEOUS INTERPRETATIONS--Table of Contents
 
Sec. 250.240  Applicability of section 23A of the Federal Reserve Act to transactions between a member State bank and its ``operations subsidiary''.

    (a) The Board of Governors has recently considered whether section 
23A of the Federal Reserve Act (12 U.S.C. 371c) applies to extensions of 
credit by a member State bank to its operations subsidiary.
    (b) Section 23A imposes limitations (in terms of security and 
amount) on a federally insured bank's loans to and investments in its 
affiliates. The principal purpose of section 23A is to safeguard the 
resources of a bank against misuse for the benefit of organizations 
under common control with the bank. It was designed to prevent a bank 
from risking too large an amount in affiliated enterprises and to assure 
that extensions of credit to affiliates will be repaid--out of 
marketable collateral, if necessary.
    (c) Since 1968 the Board has permitted member banks to establish and 
own operations subsidiaries--that is, organizations designed to serve, 
in effect, as separately incorporated departments of the bank, 
performing, at locations at which the bank is authorized to engage in 
business, functions that the bank is empowered to perform directly (12 
CFR 250.141). Since an operations subsidiary is in effect a part of, and 
subject to the same restrictions as, its parent bank, there appears to 
be no reason to limit transactions between the bank and such subsidiary 
any more than transactions between departments of a bank.
    (d) Accordingly, the Board has concluded that a credit transaction 
by a member State bank with its operations subsidiary (the authority for 
which is based on the 1968 ruling) is not a ``loan or * * * extension of 
credit'' of the kind intended to be restricted and regulated by section 
23A and is, therefore, outside the purview of that section.

[35 FR 10201, June 23, 1970]

    Effective Date Note: At 67 FR 76622, Dec. 12, 2002, Sec. 250.240 was 
removed, effective Apr. 1, 2003.