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Federal R eserve Bank
OF DALLAS
W ILLIA M
H. WALLACE
DALLAS. TEXAS 75222
FIRST V IC E PR ESID ENT
AND CH IEF O PER ATING OFFICER
November 19, 1987
Circular 87-81
TO:
The Chief Executive Officer of all
state member banks, bank holding
companies, and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Request for public comment on Regulations H (Membership of State
Banking Institutions in the Federal Reserve System) and Y (Bank Holding
Conpanies and Change in Bank Control)
DETAILS
The Board of Governors of the Federal Reserve System has requested
public comment on proposals affecting real estate investment and development
activities in a holding company framework.
Comments should be addressed to Mr. William W. Wiles, Secretary,
Board of Governors of the Federal Reserve System, Washington, D. C. 20551.
All correspondence should refer to Docket No. R-0616 and must be received by
December 4, 1987.
ATTACHMENTS
The Board's press release and the material as published in the
Federal Register are attached.
MORE INFORMATION
For further information, please contact Dean A. Pankonien of this
Bank's Legal Department at (214) 651-6228.
Sincerely yours
For additional copies of any c ircular please conta c t the Public Affairs D ep artm en t at (214) 651 -6 28 9 . Banks and others are
encouraged to use the follow ing incom ing W A TS numbers in contacting this Bank (800) 4 4 2 -7 1 4 0 (intrastate) and (800)
5 2 7 -9 2 0 0 (interstate).
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
FEDERALRESERVEpressrelease
For immediate release
November 2, 1987
The Federal Reserve Board today requested comment on proposals
affecting real estate investment and development activities in a holdinq
company framework.
Comment is requested by December 4 on whether the Board, in
evaluating bank holding company proposals, should prohibit banks and savings
banks in a holdinq company from enqaging in real estate and development
activities and whether these activities should be confined to nonbank
subsidiaries of bank holding companies.
The Board also requests comment on whether (1) member banks, not in a
holding company system, should be subject to Interaffiliate lending restrictions
and (2) it should impose special capital requirements on real estate subsidiaries
of holding company banks.
In an earlier proposal issued in December 1986, the Board sought
comment on proposed rulemaking under the Bank Holding Company Act that would
permit bank holding companies to engage in real estate investment activities
under specific conditions that were designed to ensure that the conduct of the
activity did not result in unsafe or unsound banking practices, unfair competition,
conflicts of interest, or other adverse effects.
The Board's notice on today's proposal 1s attached.
-0 -
Attachment
Federal Register / Vol. 52, No. 213 / Wednesday, November 4, 1987 / Proposed Rules_____ 42301
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
f Regulation Y; Regulation H; Docket R0616]
Regulations Regarding Real Estate
Investment and Development
Activities of Subsidiaries of Holding
Company Banks
Board of Governors of the
Federal Reserve System.
ACTION: Solicitation of public comments.
agency:
The Federal Reserve Board is
soliciting comment regarding w hether
the financial risks to a bank holding
company system associated with real
estate investment and development
activities conducted by subsidiary
banks are such that the Board, in acting
on applications under the Bank Holding
Company Act by bank holding
companies to acquire banks or FDIC
insured savings banks, should require as
a condition of a favorable finding
regarding the financial resources and
future prospects of the banks involved,
that the banks not engage in such
activities directly or through a
subsidiary. The Board also requests
comment on w hether nonbank
subsidiaries of banks engaged in real
SUMMARY:
estate investment and development
activities, as well as real estate projects
in which the subsidiary invests, and
under certain circumstances, partners or
co-venturers w ith such subsidiaries,
should be considered "affiliates” of the
bank for purposes of the restrictions on
transactions betw een a bank and its
affiliates contained in sections 23A and
23B of the Federal Reserve Act. 12
U.S.C. 371c and 371c-l. Finally, the
Board requests comment regarding
w hether it should establish special
capital requirem ents for real estate
subsidiaries of holding company banks
pursuant to the International Lending
Supervision A ct of 1982.
d a t e : Comments must be received by
December 4,1987.
ADDRESSES: All comments, which
should refer to Docket No. R-0616,
should be mailed to W illiam W. Wiles,
Secretary, Board of Governors of the
Federal Reserve System, W ashington,
DC 20551, or delivered to Room B-2223,
20th & Constitution Avenue, NW.,
W ashington, DC, betw een 8:45 a.m. and
5:15 p.m. w eekdays. Comments m ay be
inspected in Room B-1122 betw een 8:45
a.m. and 5:15 p.m. w eekdays.
FOR FURTHER INFORMATION CONTACT: J.
Virgil Mattingly, Deputy General
Counsel (202/452-3430), Scott G.
Alvarez, Senior Counsel (202/452-3583),
Legal Division; Roger Cole, M anager
(202/452-2618), Division of Banking
Supervision and Regulation: or Myron
Kwast, Chief, Financial Studies Section,
Division of Research and Statistics (202/
452-2909), Board of Governors of the
Federal Reserve System, W ashington,
DC 20551. For the hearing im paired only,
Telecommunications Service for the
Deaf, Earnestine Hill or Dorothea
Thompson, (202/452-3544).
SUPPLEMENTARY INFORMATION
I. Introduction
The Board currently h as under
consideration a proposal under section
4(c)(8) of the Bank Holding Company
Act (“BHC A ct”) that would authorize
bank holding com panies and their
nonbank subsidiaries, including
nonbank subsidiaries of holding
com pany banks w here perm itted under
state law, to engage in real estate
investment a n d development activities
within certain prudential limits. (52 FR
543 (1987)). Alternatively, the Board has
asked for comment on a proposal to
continue to prohibit such activities for
bank holding companies and to modify
its existing regulations (12 CFR
225.22(d)(2)) so that this prohibition
would apply also to nonbank
subsidiaries of holding company banks.
As the Board has previously stated,
the Board is concerned that real estate
investment and development activities
involve a significant degree of risk
beyond the risks of other activities
conducted by banks and bank holding
companies. Investm ents in real estate
are often characterized by considerable
variations in economic value, returns
and cash flow. In addition, real estate
investments are generally illiquid,
particularly during periods that involve
economic stress on the banking system.
To the extent that the profitability of a
particular real estate investm ent rests
upon hopes for capital appreciation
rather than on established operating
profits, the risks of the investment
become even greater.
In light of these significant risks
associated with real estate investment
and development activities, the Board
has proposed a framework of prudential
limitations for the conduct by bank
holding com panies of real estate
activities. The Board is evaluating the
public comments received regarding the
appropriateness of those limits.
Several of the prudential limits
outlined by the Board in its real estate
proposal are designed to insulate banks
owned by holding companies from the
risks associated w ith real estate
investment and development activities
conducted by affiliates of the bank. In
its proposal, the Board questioned
w hether a bank m ay be adequately
insulated from the risks associated with
such activities conducted by nonbank
subsidiaries of the bank, particularly
where those nonbank subsidiaries
operate w ith management and
employees of the bank. In light of the
Board’s concerns that it m ay not be
feasible to insulate a bank from the risks
associated w ith real estate investment
and development activities conducted
through nonbank subsidiaries of the
bank, the Board requested comment in
its real estate proposal regarding
w hether the Board should modify its
existing regulation (12 CFR 225.22(d)(2))
to prohibit nonbank subsidiaries of
holding company banks from conducting
real estate investment and development
activities and should require that all real
estate investment and development
activities, if permitted, be conducted
only through a nonbank subsidiary held
by the bank holding company and not
by a subsidiary of a bank. Under the
Board's existing regulation, a nonbank
subsidiary of a state bank owned by a
bank holding com pany may, without the
Board’s approval under the Act, conduct
any activity that the state bank may
conduct directly subject to the limits
42302
Federal Register / Vol. 52, No. 213 / Wednesday, November 4, 1967 / Proposed Rules
imposed by state law on the bank. 12
CFR 225.22(d)(2).
The Board's current’proposal under
section 4 of the BHC Act does not affect
real estate activities conducted directly
by banks ow ned by holding companies.
The Board has, however, asked for
comment on a proposal to establish
special capital requirem ents for bank
holding companies that control such
banks to reflect the increased risk to the
b ank holding company system from such
activities.
II. Savings Banks Under the Competitive
Equality Banking Act
Recently, the Board h as considered a
num ber of applications to form bank
holding companies under section 3 of
the BHC Act that involve banks and
savings banks permitted under state law
to engage directly and through
subsidiaries in various real estate
investm ent a nd development activities.
In these cases, the A pplicants have
agreed to limit the real estate activities
of the banks and their nonbank
subsidiaries, to comply with special,
enhanced capital requirements, and to
conform their activities to the results of
the Board's proposed rulemaking. In
these cases, the Board has also taken
into account the type and amount of real
estate exposure of the bank or
subsidiary of the bank engaged in real
estate investm ent and development
activities in evaluating the financial
factors the Board is required to consider
under section 3 of the BHC Act.
The Competitive Equality Banking Act
of 1987 (“CEBA") recently enacted by
Congress contains certain provisions
regarding the nonbanking activities of
savings banks. Pub. L. 100-86,101 Stat.
552. In particular, section 101(d)
provides that “a qualified savings b an k ”
that becomes a subsidiary of a savings
bank holding company (defined as a
bank holding company 70 percent or
more of the assets of which are
represented by savings banks) may
continue to engage in any activity, either
directly or through a subsidiary of the
savings bank, that the savings bank is
perm itted under state law to conduct as
a state savings bank. 101 Stat. a t 561
562 (to be codified at 12 U.S.C. 1842(f)).
The provisions of CEBA do not,
however, affect the Board's existing
authority, in connection w ith its analysis
of an application under section 3 of the
BHC Act, to evaluate the financial and
m anagerial resources and future
prospects of the bank holding company
and bank involved. In this regard, the
Board notes that the Senate Report on
CEBA states that, while section 101(d)
w as intended to allow qualified savings
bank s to engage in state authorized
activities, “[t]he Board w ould, however,
be authorized under its general
supervisory authority over bank holding
com panies and their subsidiaries to
prevent unsafe or unsound activities; or
to require the bank holding company to
m aintain higher levels of capital to
support such activities." S. Rep. No. 1001 9 ,100th Cong., 1st Sess. 36 (1987).
Accordingly, the Board requests
comment regarding whether, and under
w h at circumstances, the Board should,
in acting on applications by bank
holding com panies to acquire banks or
savings banks under section 3 of the
BHC Act, limit real estate investment
and development activities of holding
com pany b anks and their nonbank
subsidiaries as a m atter of safe and
sound banking practice. For example,
the Board requests comment on w hether
to require, as a condition of a favorable
finding regarding the financial resources
and future prospects of the banks
involved in an application under section
3 of the BHC Act, that the real estate
developm ent activities be conducted
through a n onbank subsidiary of the
bank holding com pany rather than
through a subsidiary of the bank or
savings bank. The Board seeks comment
on w hether this requirem ent would
enhance the safety and soundness of the
bank holding company organization by
insulating the ban k more effectively
from the risks associated w ith real
estate investm ent and development
activities.
As noted, the Board h as asked for
comment on w hether to establish
special capital requirem ents for bank
holding com panies that control banks
engaged in real estate investm ent and
development activities. The Board seeks
comment on w hether the Board should
provide that a bank holding com pany
not make any additional real estate
investm ents through its bank subsidiary
in the event the bank holding com pany’s
capital falls below the minimum level
set forth in the Board's Capital
A dequacy Guidelines or, as discussed
below, such special capital levels
required by the Board under the
International Lending Supervision Act
("ILSA").
III. Sections 23A and 23B of the Federal
Reserve Act
The Board also seeks comment
regarding whether, in the event the
Board decides not to limit the conduct of
real estate development activities
through nonbank subsidiaries of holding
com pany banks or savings banks, the
Board should apply the restrictions of
sections 23A an d 23B of the Federal
Reserve Act to transactions betw een
banks, including savings banks, and
such subsidiaries. The Board also
requests comment on w hether these
restrictions should be applied to banks
that are not in a holding company
system and thus w ould not be subject to
any rules the Board m ay adopt pursuant
to the Bank Holding Company A ct to
limit the conduct of real estate
development activities by nonbank
subsidiaries of holding company banks.
In this regard, the Board seeks
comment on w hether a nonbank
subsidiary of a bank th at engages in real
estate activities as well as real estate
projects in which these subsidiaries
invest, should be deemed "affiliates” of
the bank for purposes of sections 23A
an d 23B of the Federal Reserve Act. (12
U.S.C. 371c and 371 c-1). Section 23A of
the Federal Reserve A ct provides that
the term “affiliate” in that section
includes any com pany that the Board
determines by regulation or order to
have a relationship with a bank such
that transactions betw een the bank and
that com pany m ay be affected by the
relationship to the detriment of the
bank. 12 U.S.C. 371c(b)(l)(E). In the
event the Board determines that such a
subsidiary is an ‘‘affiliate’’ of the bank
for purposes of sections 23A and 23B,
covered transactions betw een the bank
and the subsidiary w ould be limited to
10 percent of the b ank ’s capital and such
transactions would be required to be on
terms and under circumstances,
including credit standards, that are
substantially the same, or at least as
favorable to such bank, as those
prevailing at the time for com parable
transactions w ith or involving
nonaffiliated companies. A covered
transaction includes an extension of
credit by the bank to or for the benefit of
an affiliate as well as the purchase by a
bank of assets from or for the benefit of
an affiliate. 12 U.S.C. 371c(b)(7).
The Board is aw are that banks that
ow n real estate investment subsidiaries
routinely m ake extensions of credit to
real estate subsidiaries and to projects
ow ned by these real estate subsidiaries
of the bank. T hese transactions would
be “covered transactions” for purposes
of sections 23A and 23B if the real estate
subsidiary and project w ere deemed to
be “affiliates” o f the bank. The terms or
availability of credit from the b ank to
these real estate subsidiaries and
projects may be directly a nd
substantially affected by the
relationship of the real estate subsidiary
w ith the bank to the detriment of the
bank. Consequently, the Board is
considering w hether these subsidiaries
and the real estate projects in w hich
they invest should b e deemed
Federal Register / Vol. 52, No. 213 / W ednesday, November 4, 1987 / Proposed Rules
"affiliates” of the bank for purposes of
sections 23A and 23B.
The Board notes that prior regulatory
experience in evaluating the relationship
betw een banks and real estate
investment trusts in the 1970s and real
estate investm ents m ade by thrifts
suggests that the ownership of an equity
interest in a real estate project often
provides a powerful incentive to
depository institutions to provide credit
to support their real estate projects,
particularly at times w hen credit is not
available to the project from other
sources due to financial or other
difficulties experienced by the project.
In this situation, the existence of an
equity relationship betw een the bank or
thrift could affect the terms and
availability of covered transactions
betw een the b ank or thrift and the real
estate project to the detriment of the
depository institution.
The Board also seeks comment on
whether partners, joint venturers and
other companies associated with a bank
or its real estate subsidiary in a real
estate project should be deem ed to be
affiliates of the bank if these business
associates use the proceeds of
transactions w ith the bank to finance a
real estate project or the com pany’s
participation in a real estate project in
which the bank has an equity interest.
Under this proposal, these business
associates in the bank’s real estate
activities would not be deem ed an
affiliate of the b ank w here transactions
with these business associates are
limited to transactions that the bank
adequately documents are on an armslength basis and are for a purpose other
than use in a real estate project in which
the bank has an equity interest.
T ransactions with com panies
associated w ith the bank in a real estate
project m ay be m ade in order to support
a partner or contractor that is
experiencing financial or other
difficulties that m ay jeopardize the
completion of a real estate project in
which the bank has an equity interest.
These transactions may involve terms
that are more favorable than otherwise
available and m ay be m ade w hen credit
is not available to the partner or
contractor from another source. These
transactions could, under these
circumstances, be substantially affected
by the b ank’s relationship w ith the
partner or contractor in the real estate
project to the detriment of the bank.
Moreover, one of the primary
incentives to the bank in entering into a
financing or similar transaction with a
partner or contractor associated with
the bank in a real estate project may be
to benefit the real estate project. Section
(a)(2) of section 23A deems any
transaction by a member bank with any
person to be a "covered transaction” for
purposes of section 23A to the extent
that the proceeds of the transaction are
used for the benefit of, or transferred to,
an affiliate of the bank. 12 U.S.C.
371c(a)(2). The Board requests
comments on whether, and under w hat
circumstances, these transactions
should be subject to the terms of
sections 23A and 23B of the Federal
Reserve Act in order to protect the
integrity of the bank and its credit
decisions.
In addition, the Board seeks comment
on w hether to exclude "covered
transactions” betw een a b ank and any
real estate subsidiary of the bank and
partners, joint venturers or other
companies associated w ith the real
estate subsidiary in a real estate project
from the provisions of § 250.250 of the
Board’s regulations. (12 CFR 250.250).
The Board also requests comment on
the appropriate period of time to allow
banks to conform existing covered
transactions w ith their subsidiaries and
real estate partners to sections 23A and
23B, in the event the Board adopts the
proposals discussed above.
The Board notes that its determination
with respect to mem ber banks under
sections 23A and 23B w ould apply to
subsidiaries of nonm em ber banks by
virtue of the provisions of the Federal
Deposit Insurance Act. 12 U.S.C.
1828(j)(l).
IV. International Lending Supervision
Act
The Board h as already requested
comment, in connection with its current
real estate investment rulemaking under
section 4(c)(8) of the BHC Act, on a
proposal that would exclude real estate
investm ents as well as related
extensions of credit from the calculation
of the bank holding com pany’s capital
for purposes of applying the Board’s
Capital A dequacy Guidelines. This
would apply to real estate investm ents
made by a real estate subsidiary of the
bank holding company or directly by a
bank or its subsidiaries, w hether the
activities are funded from capital
provided by the bank holding company
or from borrowings by the real estate
subsidiaries. The Board h as previously
asked for comment on w hether an
adjustm ent to the bank holding
com pany’s capital b ased on the amount
of real estate investment and
development activities conducted by
subsidiaries of a bank holding company
is appropriate in order to address the
added risks to the holding company
organization from those real estate
investment and development activities.
42303
The Board now requests comment
regarding whether, in order to address
the risks associated with real estate
activities conducted in a subsidiary of a
holding company bank, the Board
should, under the International Lending
Supervision Act, impose a specific
capital requirem ent directly on nonbank
subsidiaries of holding company banks
engaged in real estate investment and
development activities. The Board also
seeks comment on w hether it should
impose a specific capital requirement on
subsidiaries of holding company banks
as an alternative to the proposal
discussed above to condition Board
approval under section 3 of the BHC Act
on termination of real estate activities
by subsidiaries of banks that are
subsequently acquired by bank holding
companies.
In this regard, the International
Lending Supervision Act provides that
the appropriate federal banking agency
may impose specific capital
requirem ents on any affiliate of an
insured bank, w here the federal banking
agency is the appropriate federal
banking agency for that affiliate. 12
U.S.C. 3909(a)(2). The International
Lending Supervision Act provides that
the Board is the appropriate federal
banking agency for b ank holding
companies and all nonbank subsidiaries
of the holding company. 12 U.S.C. 3902.
The Board solicits public comment on
the appropriate levels of capital that
such subsidiaries should maintain,
consistent w ith industry norms and the
safety a nd soundness of its affiliate
banks. The Board also requests
comment on w hether the leverage and
capital requirem ents proposed in its
December, 1986 real estate development
proposal should be applied to these
subsidiaries. 52 FR 543, 546-547 (January
7,1987).
V. Comment Period
The Board has proposed a 30-day
comment period on these matters
because the issues raised here
supplement m atters on w hich the Board
has already received extensive public
comment in connection with its
rulemaking proceeding regarding real
estate investment and development
activities of bank holding companies.
The Board expects that it will be able to
act on its real estate rulemaking a nd the
m atters raised in this request for
comment promptly after the close of the
comment period on the m atters raised in
this notice.
VI. Regulatory Flexibility Act Analysis
This proposal is not expected to have
a significant economic impact on a
Federal Register / Vol. 52, No. 213 / W ednesday, November 4, 1987 / Proposed Rules
42304
substantial num ber of small business
entities within the meaning of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.). The Board believes that there
are not a significant num ber of small
bank holding com panies engaged in real
estate investm ent a n d development
activities at this time. As noted, bank
holding com panies have not previously
been permitted to engage in real estate
investment and development activities
and, while legislation to permit state
banks to engage in these activities has
been considered in a num ber of states,
these initiatives have b een taken only
recently. The Board will consider any
comment regarding w hether, and to
w h at extent, the proposals outlined in
this notice w ould have an im pact on
small business entities within the
meaning of the Regulatory Flexibility
Act.
List of Subjects in 12 CFR Parts 208 and
225
Banks, banking, Federal reserve
system, Holding companies, Reporting
and recordkeeping requirements.
For the reasons set out in this notice,
and pursuant to the Board's authority
under section 5(b) of the Bank Holding
Company A ct of 1956, as am ended (12
U.S.C. 1844(b)), and section 371c(e) of
the Federal Reserve A ct (12 U.S.C.
371c(e)), the Board proposes to am end
12 CFR Part 225 and 12 CFR Part 208 as
follows:
PART 225—I AMENDED]
1. The authority citation for Part 225
continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818,
1843(c)(8), 1844(b), 3106, 3108, 3907 and 3909.
2. The Board proposes to am end
§ 225.13(b)(1) by adding the following a t
the end of that section:
§ 225.13 Factors considered in acting on
bank applications.
*
*
*
*
*
(6) * * *
(1) * * * In light of the risks associated
w ith real estate investment and
developm ent activities, the Board will,
in acting on any application by a bank
holding com pany under section 3 of the
BHC Act, require, as a condition of its
finding that the banks involved have
satisfactory financial resources and
future prospects, that real estate
investm ent and development activities
not be conducted by any of such banks
directly or through a subsidiary, and
that such activities be conducted only in
a nonbank subsidiary of the bank
holding company in accordance w ith the
prudential limitations set forth in
§ 225.25(b)(25) of this subpart.
*
*
*
*
*
3. The Board proposes to am end
A ppendix A to 12 CFR Part 225 by
adding the following at the end of the
Appendix:
Appendix A—Capital Adequacy
Guidelines for Bank Holding Companies
and State Member Banks
*
*
*
*
*
Treatment of Investments in Real Estate
Investment and Development Activities for
the Purpose of Determining the Capital
Adequacy of Bank Holding Companies
The Board believes that real estate
investm ent a n d developm ent activities
involve a significant degree of risk beyond
other activities conducted by banks and bank
holding companies. These risks result from
the illiquid nature of real estate: the
considerable variation in econom ic value,
returns a n d cash flow that often characterize
investm ents in real estate: a n d the greater
risks associated w ith an equity investm ent as
com pared to a traditional bank loan.
Based on these supervisory concerns, the
Board believes that the am ount of real estate
investm ent activities conducted by a bank
holding com pany a n d any of its direct or
indirect bank and nonbank subsidiaries must
be considered in evaluating the capital
adequacy of the bank holding company. In
this regard, the Board believes th at a
nonbank subsidiary of a holding company
bank that is engaged in real estate
investm ent and developm ent activities must
be adequately capitalized in order to lessen
the risk to the bank holding company
organization from the risks of the subsidiary's
real e state investm ent a n d developm ent
activities. The Board believes that a real
e state subsidiary of a holding com pany bank
should m eet the sam e capital and leverage
requirem ents that the Board has proposed for
direct nonbank subsidiaries of a bank holding
com pany that engage in real estate
investm ent and developm ent activities. For
purposes of these calculations, real estate
investm ent activities, including related
extensions of credit, shall be defined as in
section 25(b)(25) of this part.
PART 208—(AMENDED]
4. The authority citation for Part 208 is
revised to read as follows:
Authority: 12 U.S.C. 248, 321-338, 371c,
371c-l, 486,1814, 3907, 3909, unless otherw ise
noted.
5. The Board proposes to am end Part
208 by adding a new § 208.15 under the
undesignated center heading
“Regulations” to read as follows:
§ 208.15 Affiliates under section 23A and
B (12 U.S.C. 371c and 371c-1).
(a) For purposes of sections 23A and
23B of the Federal Reserve Act, an
affiliate of a member bank includes a
com pany that is:
(1) A subsidiary of such m em ber bank
if the subsidiary engages directly or
indirectly in real estate investm ent or
development activities as defined in
§ 225.25(b)(25) of Regulation Y (12 CFR
225.25(b)(25)); and
(2) A partner, joint-venturer or other
company otherw ise associated in a
business relationship w ith such
subsidiary in a real estate investment or
development activity as described in
§ 225.25(b) (25) of Regulation Y. to the
extent that the proceeds of any covered
transaction betw een the m em ber bank
or its subsidiaries w ith the partner,
joint-venturer or other com pany are
used to finance such real estate
investment or development project or
the com pany’s participation in such
project.
(b) The exemptions provided in the
Board’s interpretation at § 250.250 of
this chapter shall not apply to covered
transactions betw een a member bank
and an affiliate defined in paragraph (a)
of this section.
(c) A mem ber bank and its
subsidiaries shall h ave six months from
the effective date of this section to
conform covered transactions betw een
it and a company that becomes an
affiliate as a result of this regulation to
the requirem ents of sections 23A and
23B of the Federal Reserve Act.
(d) The terms “subsidiary”, “bank”,
“com pany”, an d "covered transaction”
used in this section shall have the
meanings given in section 23A of the
Federal Reserve Act. 12 U.S.C. 371c(b).
Board of Governors of the Federal Reserve
System, O ctober 30,1987.
William W. Wiles,
Secretary of the Board.
[FR Doc. 87-25576 Filed 11-3-87; 8:45 am]
BILLING CODE 6210-01-M
@FedFRASER