(a) In general. A member bank must treat any of its transactions
with any person as a transaction with an affiliate to the extent that
the proceeds of the transaction are used for the benefit of, or transferred
to, an affiliate.
(b) Certain agency transactions.
(1) Except to the extent described in paragraph
(b)(2) of this section, an extension of credit by a member bank to
a nonaffiliate is not treated as an extension of credit to an affiliate
under paragraph (a) of this section if—
(i) the proceeds of
the extension of credit are used to purchase an asset through an affiliate
of the member bank, and the affiliate is acting exclusively as an
agent or broker in the transaction; and
(ii) the asset purchased by the nonaffiliate
is not issued, underwritten, or sold as principal by any affiliate
of the member bank.
(2) The interpretation set forth in paragraph
(b)(1) of this section does not apply to the extent of any agency
fee, brokerage commission, or other compensation received by an affiliate
from the proceeds of the extension of credit. The receipt of such
compensation may qualify, however, for the exemption contained in
paragraph (c)(2) of this section.
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(c) Exemptions. Notwithstanding paragraph (a)
of this section, the following transactions are not subject to the
quantitative limits of section 223.11 and 223.12 or the collateral
requirements of section 223.14. The transactions are, however, subject
to the safety-and-soundness requirement of section 223.13 and the
market-terms requirement and other provisions of subpart F (implementing
section 23B).
(1) Certain riskless-principal
transactions. An extension of credit by a member bank to a nonaffiliate,
if—
(i) the proceeds of the extension of
credit are used to purchase a security through a securities affiliate
of the member bank, and the securities affiliate is acting exclusively
as a riskless principal in the transaction;
(ii) the security purchased by the nonaffiliate
is not issued, underwritten, or sold as principal (other than as riskless
principal) by any affiliate of the member bank; and
(iii) any riskless-principal markup
or other compensation received by the securities affiliate from the
proceeds of the extension of credit meets the market-terms standard
set forth in paragraph (c)(2) of this section.
(2) Brokerage commissions, agency fees, and riskless-principal markups. An affiliate’s retention of a portion of the proceeds of an extension
of credit described in paragraph (b) or (c)(1) of this section as a brokerage
commission, agency fee, or riskless-principal markup, if that commission,
fee, or markup is substantially the same as, or lower than, those
prevailing at the same time for comparable transactions with or involving
other nonaffiliates, in accordance with the market-terms requirement
of section 223.51.
(3) Preexisting
lines of credit. An extension of credit by a member bank to a
nonaffiliate, if—
(i) the proceeds of the extension of
credit are used to purchase a security from or through a securities
affiliate of the member bank; and
(ii) the extension of credit is made
pursuant to, and consistent with any conditions imposed in, a preexisting
line of credit that was not established in contemplation of the purchase
of securities from or through an affiliate of the member bank.
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(4) General-purpose credit card transactions.
(i) In general. An extension of credit by a
member bank to a nonaffiliate, if—
(A) the proceeds of the extension
of credit are used by the nonaffiliate to purchase a product or service
from an affiliate of the member bank; and
(B) the extension of credit is made pursuant
to, and consistent with any conditions imposed in, a general-purpose
credit card issued by the member bank to the nonaffiliate.
(ii) Definition. General-purpose credit card means a credit card issued by a member bank that is widely accepted
by merchants that are not affiliates of the member bank for the purchase
of products or services, if—
(A) less than 25 percent of the
total value of products and services purchased with the card by all
cardholders are purchases of products and services from one or more
affiliates of the member bank;
(B) all affiliates of the member bank would
be permissible for a financial holding company (as defined in 12 USC
1841) under section 4 of the Bank Holding Company Act (12 USC 1843),
and the member bank has no reason to believe that 25 percent or more
of the total value of products and services purchased with the card
by all cardholders are or would be purchases of products and services
from one or more affiliates of the member bank; or
(C) the member bank presents information to
the Board that demonstrates, to the Board’s satisfaction, that less
than 25 percent of the total value of products and services purchased
with the card by all cardholders are and would be purchases of products
and services from one or more affiliates of the member bank.
(iii) Calculating compliance. To determine whether
a credit card qualifies as a general-purpose credit card under the
standard set forth in paragraph (c)(4)(ii)(A) of this section, a member
bank must compute compliance on a monthly basis, based on cardholder
purchases that were financed by the credit card during the preceding
12 calendar months. If a credit card has qualified as a general-purpose
credit card for 3 consecutive months but then ceases to qualify in
the following month, the member bank may continue to treat the credit
card as a general-purpose credit card for such month and 3 additional
months (or such longer period as may be permitted by the Board).
(iv) Example of calculating compliance with the 25
percent test. A member bank seeks to qualify a credit card as
a general-purpose credit card under paragraph (c)(4)(ii)(A) of this
section. The member bank assesses its compliance under paragraph (c)(4)(iii)
of this section on the 15th day of every month (for the preceding
12 calendar months). The credit card qualifies as a general-purpose
credit card for at least 3 consecutive months. On June 15, 2005, however,
the member
bank determines that, for the 12-calendar-month period from June 1,
2004, through May 31, 2005, 27 percent of the total value of products
and services purchased with the card by all cardholders were purchases
of products and services from an affiliate of the member bank. Unless
the credit card returns to compliance with the 25 percent limit by
the 12-calendar-month period ending August 31, 2005, the card will
cease to qualify as a general-purpose credit card as of September
1, 2005. Any outstanding extensions of credit under the credit card
that were used to purchase products or services from an affiliate
of the member bank would become covered transactions at such time.
