12 U.S.C. § 371b–2: Interbank liabilities

Summary

The Board must make rules that limit how much one insured bank can be tied to any other depository institution. The goal is to reduce the harm a failure of a large depository institution — even if that institution is not insured — could cause to insured banks. The Board can create exceptions when those exceptions serve the public interest. The Board may issue the definitions and orders it needs to carry out these rules, and the appropriate Federal banking agency will enforce them under section 1818. "Exposure" means things like loans and deposits, repurchase agreements, guarantees or letters of credit, purchases or investments in the other institution’s securities, taking its securities as collateral, and other similar transactions the Board says count. A transaction is treated as exposure if its proceeds are used for the benefit of another depository institution. "Insured depository institution" has the meaning given in section 1813.

Title 12, §371b–2

Banks and Banking, Source: USLM XML via OLRC

(a)Purpose

The purpose of this section is to limit the risks that the failure of a large depository institution (whether or not that institution is an insured depository institution) would pose to insured depository institutions.

(b)Aggregate limits on insured depository institutions’ exposure to other depository institutions

The Board shall, by regulation or order, prescribe standards that have the effect of limiting the risks posed by an insured depository institution’s exposure to any other depository institution.

(c)“Exposure” defined

(1)In general

For purposes of subsection (b), an insured depository institution’s “exposure” to another depository institution means—

(A)all extensions of credit to the other depository institution, regardless of name or description, including—

(i)all deposits at the other depository institution;

(ii)all purchases of securities or other assets from the other depository institution subject to an agreement to repurchase; and

(iii)all guarantees, acceptances, or letters of credit (including endorsements or standby letters of credit) on behalf of the other depository institution;

(B)all purchases of or investments in securities issued by the other depository institution;

(C)all securities issued by the other depository institution accepted as collateral for an extension of credit to any person; and

(D)all similar transactions that the Board by regulation determines to be exposure for purposes of this section.

(2)Exemptions

The Board may, at its discretion, by regulation or order, exempt transactions from the definition of “exposure” if it finds the exemptions to be in the public interest and consistent with the purpose of this section.

(3)Attribution rule

For purposes of this section, any transaction by an insured depository institution with any person is a transaction with another depository institution to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, that other depository institution.

(d)Insured depository institution

For purposes of this section, the term “insured depository institution” has the same meaning as in section 1813 of this title.

(e)Rulemaking authority; enforcement

The Board may issue such regulations and orders, including definitions consistent with this section, as may be necessary to administer and carry out the purpose of this section. The appropriate Federal banking agency shall enforce compliance with those regulations under section 1818 of this title.

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 102–242, title III, § 308(c), Dec. 19, 1991, 105 Stat. 2363, provided that: “The amendment made by this section [enacting this section] shall become effective 1 year after the date of enactment of this Act [Dec. 19, 1991].”

Regulations

Pub. L. 102–242, title III, § 308(b), Dec. 19, 1991, 105 Stat. 2362, provided that: “The Board shall prescribe reasonable transition rules to facilitate compliance with section 23 of the Federal Reserve Act [12 U.S.C. 371b–2] (as added by subsection (a)).”

§371b–2 Interbank Liabilities