How do sections 23A and 23B
apply to transactions in which a member bank purchases from one affiliate
an asset relating to another affiliate?
In
some situations in which a member bank purchases an asset from an
affiliate, the asset purchase qualifies for an exemption under this
part, 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 regulation). 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 sections 223.31(e),
223.41(a) through (d), and 223.42(e), (f), (i), (j), (k), and (m).
Examples 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 transaction under section 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 section 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).
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 section 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
section 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). 12 CFR 223.71.
