James M. Mataya, Esq.
America's Community Bankers
900 19th Street, N.W., Suite 400
Washington, D.C. 20006

Dear Mr. Mataya:

This is in response to your letter requesting an interpretation of several issues concerning the Board's Regulation O (12 C.F.R. Part 215). It is my understanding that, after discussing the issues raised by your letter with my office, you request a written interpretation only with respect to the scope of the reporting and disclosure requirements of sections 215.22 and 215.23 of Regulation O.

Subpart B of Regulation O, which includes sections 215.22 and 215.23, implements the reporting and disclosure requirements of Title VIII of the Financial Institutions Regulatory and Interest Rate Control Act of 1978, as amended by the Garn-St. Germain Depository Institutions Act of 1982 (12 U.S.C. � 1972(2)(G)). Section 215.22 requires an executive officer or principal shareholder of a bank to report to the board of directors of his or her bank any extension of credit outstanding during the preceding calendar year from a correspondent bank to the executive officer or principal shareholder or any related interest of the executive officer or principal shareholder. Section 215.23 requires the bank, upon written request from the public, to disclose the name of each executive officer or principal shareholder for whom such loans in the aggregate equaled or exceeded 5 percent of the bank's capital and unimpaired surplus or $500,000, whichever is less. You have asked whether extensions of credit made by a subsidiary of a correspondent bank also are subject to these reporting and disclosure requirements.

The definition of "member bank" in Subpart A of Regulation O expressly includes a subsidiary of a member bank. See 12 C.F.R. 215.2(j). In addition, Board staff has long considered an extension of credit by a subsidiary of a member bank to have been made by the parent bank itself. See Interpretive Letter to James R. Smith, Esq. (dated April 1, 1969); see also 44 Federal Register 12,962 (March 19, 1979). By contrast, the definition of "bank" in subpart B of Regulation O does not have such a provision. See 12 C.F.R. 215.21(a). The definition in subpart B indicates in other ways, however, that an extension of credit by a subsidiary of a correspondent bank is subject to the provisions of subpart B.

The definition of "bank" in subpart B refers to the definition in 12 U.S.C. � 1971.¹ This definition refers in turn to the definition in the Bank Holding Company Act. The definition in the BHC Act does not directly address the relationship between a bank and its subsidiaries. The Board and the courts have held, however, that a bank and its subsidiaries should be supervised as a single entity under the BHC Act. For example, the Board's Regulation Y provides that a bank holding company may not, without prior Board approval, engage in any activity through a subsidiary of a subsidiary state bank that the subsidiary state bank may not engage in directly at the identical location. See 12 C.F.R. 225.22(e)(2)(ii).² The use of the BHC Act definition of "bank" in subpart B of Regulation O suggests, therefore, that a correspondent bank and its subsidiaries also should be supervised as a single entity under that subpart.

It is my view, therefore, that the difference in the definition of "bank" between subpart A and subpart B of Regulation O does not require or indicate that there should be any difference between the subparts in the treatment of extensions of credit made by a subsidiary of a member bank, and that an extension of credit by a subsidiary of a correspondent bank is subject to the reporting and disclosure requirements of sections 215.22 and 215.23 of Regulation O to the same extent as if the extension of credit was made directly by the subsidiary's parent bank.

Please do not hesitate to contact Gordon Miller of my staff at 202/452-2534 if you have any additional questions concerning this matter. I hope this response is useful to you.

Sincerely,

(Signed) J. Virgil Mattingly

J. Virgil Mattingly

1. The definition in subpart B also refers to 12 U.S.C. � 1972, which includes a mutual savings bank within the definition of "bank." Return to text

2. As amended, effective April 21, 1997. See previously 12 C.F.R. 225.22(d)(2)(ii). Return to text