A banking organization may wish to involve some of its affiliates as participants in a particular transaction, but may find itself hindered by a U.S. statute that restricts and in some cases prohibits a U.S. bank from engaging in a transaction with its non-U.S. affiliate. This month’s column will provide a brief overview of these restrictions and prohibitions, known as Regulation W, focusing on those aspects more relevant to non-U.S. banks.
Legal Authority
Regulation W1 is derived from sections 23A and 23B of the U.S. Federal Reserve Act,2 which imposes quantitative and qualitative restrictions on a U.S. bank’s ability to do business with its affiliates. “Bank” in this context (and as used in this column) refers to a bank with insured deposits, any other institution that is a member of the Federal Reserve System (such as an uninsured national trust company) and, for limited purposes, U.S. branches and agencies of non-U.S. banks. The legislative intent was to protect the bank from losses arising from its transactions with its affiliates.
