Related Organizations

Quantitative Limits

Except for transactions with financial subsidiaries, a bank’s covered transactions with any single affiliate may not exceed 10 percent of the bank’s capital and surplus. [16] The aggregate of covered transactions with all affiliates (including financial subsidiaries) may not exceed 20 percent of the bank’s capital and surplus. A bank’s transactions with its financial subsidiaries are not subject to the 10 percent limit for a single affiliate, but are included in the 20 percent aggregate limit for all affiliates.

In general, unless an exemption is available (see Exemptions) a bank must observe the quantitative limits when engaging in a covered transaction with a nonbank affiliate. Thus, a bank’s purchase of assets from its holding company, or a subsidiary of that holding company, usually may not exceed 10 percent of the bank’s capital and surplus.

16.
Capital and surplus is defined in 12 CFR 223.3(d) as Tier 1 and Tier 2 capital included in the bank’s risk-based capital plus the balance of the allowance for loan and lease losses not included in Tier 2 capital for the purposes of calculating risk-based capital. It also includes the amount of any investment by a member bank in a financial subsidiary that counts as a covered transaction and is required to be deducted from the bank’s capital for regulatory capital purposes.
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