Related Organizations

Transfers of Low-Quality Assets

A bank’s purchase of low-quality assets from an affiliate is generally prohibited (although the prohibition does not apply (1) if the bank had committed to purchase the asset, pursuant to an independent credit evaluation, before the asset was acquired by the affiliate, or (2) to certain renewals of loan participations). An affiliate may

donate

a low-quality asset to a bank so long as the bank does not provide consideration (payment or liabilities assumed). The term "low-quality asset" in regulation W includes:

An asset (including a security) classified as "substandard," "doubtful," or "loss," or treated as "other assets especially mentioned" or "other transfer risk problems"; ^[17]
An asset in nonaccrual status;
An asset 30 days past due; or
An asset whose terms have been renegotiated or compromised because the obligor’s financial condition has deteriorated.
An asset acquired in satisfaction of a debt previously contracted and not yet reviewed in an examination or inspection.

17.

The asset can be classified either in the most recent report of examination of an affiliate or in any internal classification system, and classifications include ratings substantially equivalent to the classification categories used in Regulation W.

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