Related Organizations

Attribution Rule

Section 23A provides that any covered transaction between a bank and an unaffiliated third party generally must be attributed to any affiliate that receives the proceeds or direct benefit of that transaction. For example, if a bank makes a loan to its customer for the purpose of making a purchase from the bank’s retail affiliate or for the purpose of purchasing securities from an affiliated mutual fund or broker-dealer, the loan is generally treated as if it was made directly to the affiliate.

Regulation W provides a specific exception to the attribution rule for certain agency transactions. If a bank extends credit to an unaffiliated third party that uses the credit to purchase an asset through an affiliate of the bank, the bank is not considered to have extended credit to the affiliate under the attribution rule, provided that the affiliate is acting exclusively as an agent or broker in the transaction and the asset purchased is not issued, underwritten, or sold as principal by any affiliate of the bank.^[15]

Certain other transactions, while treated as transactions with an affiliate under the attribution rule, nonetheless receive an exemption from the quantitative limits and the collateral requirements (described below). These exempted transactions include:

An affiliate’s retention of a portion of the proceeds of an extension of credit as a brokerage commission, agency fee, or riskless principal markup, if such commission, fee, or markup is substantially the same as (or lower than) those prevailing at the time for comparable transactions with or involving nonaffiliates, in accordance with section 23B’s market-terms requirements.
An extension of credit by a bank to an unaffiliated third party to purchase a security through a securities affiliate of the bank, provided that the securities affiliate is acting exclusively as a riskless principal in the transaction, the security is not issued, underwritten, or sold as principal (other than as riskless principal) by any affiliate of the bank, and any compensation received by the affiliate from the proceeds of the extension of credit meets the market-terms standard in section 23B, as implemented by Regulation W.
An extension of credit by a bank to an unaffiliated third party to purchase a security from or through a securities affiliate of the bank, if the extension of credit is made in accordance with a pre-existing line of credit that was not established in contemplation of the purchase of securities from or through an affiliate.
An extension of credit by a bank to an unaffiliated third party to purchase a product or service from an affiliate using a "general purpose credit card" issued by the bank.

These exempted transactions remain subject to the safety and soundness requirements and market-terms requirements.

15.

Any agency fee, brokerage commission, or other compensation retained by the affiliate from the proceeds of the extension of credit would be treated as an extension of credit to the affiliate. However, the receipt of such compensation may qualify for the exemption for brokerage commissions described below.

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