Related Organizations
Types of Related Organizations
This section briefly describes the various related organizations covered by this booklet. These related organizations include affiliates; operating, financial, and statutory subsidiaries; bank holding companies; chain banking organizations; parallel-owned banking organizations; foreign branches and subsidiaries; community development corporations; noncontrolling equity investments; and companies owned or controlled by principal shareholders.
Related organizations are organized under and subject to various laws and regulations. Regardless of the legal structure of a bank’s related organizations, an essential element of the bank’s safe and sound operation is the properly documented and well-supervised relationship between the bank and these organizations.
The following chart reflects the laws and regulations commonly applicable to a bank’s investment in and transactions with its subsidiaries and affiliates:
| Law or Regulation | General Purpose [1] |
| 12 USC 24(Seventh) | Authorizes and limits a bank’s investment in subsidiaries other than financial subsidiaries. |
| 12 USC 24(Eleventh) | Authorizes and limits a bank’s public welfare investments, including purchasing equity interests in entities engaged in making investments designed primarily to promote the public welfare. |
| 12 USC 24a | Authorizes a bank to conduct in financial subsidiaries certain activities that are financial in nature but not otherwise authorized for the bank itself. |
| 12 USC 221a | Defines “affiliate” except where otherwise specifically provided. |
| Section 23A of the Federal Reserve Act (12 USC 371c) | Defines “affiliate” for purposes of restrictions on transactions with affiliates. Restricts the amount of a bank’s “covered” transactions with its affiliates and requires collateral that secures certain transactions to meet quantitative and qualitative standards. Requires all transactions with affiliates to be consistent with safe and sound banking practices. |
| Section 23B of the Federal Reserve Act (12 USC 371c-1) | Requires a bank’s transactions with its affiliates to be at arm’s length. |
| Regulation W (12 CFR 223) | Implements sections 23A and 23B, incorporating new GLBA requirements with years of guidelines and interpretations issued by the Federal Reserve Board into one rule. |
| 12 CFR 5.34–5.39 | Sets forth authorized activities and notice or application procedures for banks engaging in activities through certain subsidiaries and noncontrolling investments. |
| 12 CFR 24 | Implements 12 USC 24(Eleventh) and sets forth notice and application procedures for banks engaging in public welfare investments. |
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