Related Organizations

Internal Corporate Reorganizations

Certain "internal corporate reorganizations" are exempted from the collateral requirements and quantitative limits of section 23A, but not from the low-quality-asset prohibition, the safety and soundness requirement, and section 23B. Several conditions must be satisfied in order for this exemption to be available. These conditions are:

• The transactions must be part of an internal corporate reorganization of a holding company involving the transfer of all or substantially all of the shares or assets of an affiliate or of a division of an affiliate;

• The bank must provide advance notice to the OCC and the FRB, including a description of the primary business of the affiliate and an indication of the proposed date of the transfer;

• The bank’s top-tier holding company must commit to the OCC and the FRB (and carry through on its commitment) to fully reimburse the bank on a quarterly basis with respect to any assets that become low-quality during the first two years after the transfer, either by making cash contributions to the bank or by purchasing the low-quality assets; ^[20]

• A majority of the bank’s board of directors must review and approve the transactions in advance;

• The value of the covered transaction, when aggregated with any other transactions undertaken pursuant to this internal corporate reorganization exemption during the previous 12 months, must represent less than 10 percent of the bank’s capital and surplus (if the OCC approves in advance, the value may represent up to 25 percent of the bank’s capital and surplus); and

• The holding company and all of its subsidiary member banks and depository institutions must be well capitalized and well managed both before and after consummation of the transfer.

Previous: Sister Bank and BMA Next: De Novo Banks