§5367 — Title 12 Banks and Banking | U.S. Code

Summary

The Federal Reserve can make a nonbank company it supervises put its financial businesses into an intermediate holding company. If the Fed decides a supervised nonbank is doing activities that are financial under section 1843(k), it may order the company to move some or all of those activities into an intermediate holding company within 90 days (or a longer time the Fed allows) after giving notice. The Fed must order an intermediate holding company if doing so is needed to properly supervise the financial activities or to make sure its supervision does not reach the company’s commercial businesses. Internal finance jobs, like in-house treasury, investment, and employee benefit work, are not counted as those financial activities. If a company did such internal work with outside firms in the year before July 21, 2010, it may keep doing it so long as at least 2/3 of the activity’s assets or revenue come from the company or its affiliate, and the Fed can review whether this creates undue risk. A parent that controls an intermediate holding company must act as a “source of strength” for that holding company. The Fed can demand sworn reports from the parent or its officers to check compliance and can enforce these rules under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) as if the parent were a bank holding company. The Fed must write rules saying when an intermediate holding company is required and may set limits on transactions with affiliates to prevent unsafe practices, but it cannot stop a real sale or lease by an unrelated buyer.

Title 12, §5367

Banks and Banking — Source: USLM XML via OLRC

(a)Nothing in this part shall be construed to require a nonbank financial company supervised by the Board of Governors, or a company that controls a nonbank financial company supervised by the Board of Governors, to conform the activities thereof to the requirements of section 1843 of this title.

(b)(1)(A)If a nonbank financial company supervised by the Board of Governors conducts activities other than those that are determined to be financial in nature or incidental thereto under section 1843(k) of this title, the Board of Governors may require such company to establish and conduct all or a portion of such activities that are determined to be financial in nature or incidental thereto in or through an intermediate holding company established pursuant to regulation of the Board of Governors, not later than 90 days (or such longer period as the Board of Governors may deem appropriate) after the date on which the nonbank financial company supervised by the Board of Governors is notified of the determination of the Board of Governors under this section.

(B)Notwithstanding subparagraph (A), the Board of Governors shall require a nonbank financial company supervised by the Board of Governors to establish an intermediate holding company if the Board of Governors makes a determination that the establishment of such intermediate holding company is necessary to—

(i)appropriately supervise activities that are determined to be financial in nature or incidental thereto; or

(ii)to 11 So in original. The word “to” probably should not appear. ensure that supervision by the Board of Governors does not extend to the commercial activities of such nonbank financial company.

(2)For purposes of this subsection, activities that are determined to be financial in nature or incidental thereto under section 1843(k) of this title, as described in paragraph (1), shall not include internal financial activities, including internal treasury, investment, and employee benefit functions. With respect to any internal financial activity engaged in for the company or an affiliate and a non-affiliate of such company during the year prior to July 21, 2010, such company (or an affiliate that is not an intermediate holding company or subsidiary of an intermediate holding company) may continue to engage in such activity, as long as not less than 2/3 of the assets or 2/3 of the revenues generated from the activity are from or attributable to such company or an affiliate, subject to review by the Board of Governors, to determine whether engaging in such activity presents undue risk to such company or to the financial stability of the United States.

(3)A company that directly or indirectly controls an intermediate holding company established under this section shall serve as a source of strength to its subsidiary intermediate holding company.

(4)The Board of Governors may, from time to time, require reports under oath from a company that controls an intermediate holding company, and from the appropriate officers or directors of such company, solely for purposes of ensuring compliance with the provisions of this section, including assessing the ability of the company to serve as a source of strength to its subsidiary intermediate holding company pursuant to paragraph (3) and enforcing such compliance.

(5)(A)In addition to any other authority of the Board of Governors, the Board of Governors may enforce compliance with the provisions of this subsection that are applicable to any company described in paragraph (1) that controls an intermediate holding company under section 8 of the Federal Deposit Insurance Act [12 U.S.C. 1818], and such company shall be subject to such section (solely for such purposes) in the same manner and to the same extent as if such company were a bank holding company.

(B)Any violation of this subsection by any company that controls an intermediate holding company may also be treated as a violation of the Federal Deposit Insurance Act [12 U.S.C. 1811 et seq.] for purposes of subparagraph (A).

(C)No provision of this paragraph shall be construed as limiting any authority of the Board of Governors or any other Federal agency under any other provision of law.

(c)The Board of Governors—

(1)shall promulgate regulations to establish the criteria for determining whether to require a nonbank financial company supervised by the Board of Governors to establish an intermediate holding company under subsection (b); and

(2)may promulgate regulations to establish any restrictions or limitations on transactions between an intermediate holding company or a nonbank financial company supervised by the Board of Governors and its affiliates, as necessary to prevent unsafe and unsound practices in connection with transactions between such company, or any subsidiary thereof, and its parent company or affiliates that are not subsidiaries of such company, except that such regulations shall not restrict or limit any transaction in connection with the bona fide acquisition or lease by an unaffiliated person of assets, goods, or services.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This part, referred to in subsec. (a), was in the original “this subtitle”, meaning subtitle C (§§ 161–176) of title I of Pub. L. 111–203, July 21, 2010, 124 Stat. 1420, which is classified principally to this part. For complete classification of subtitle C to the Code, see Tables. The Federal Deposit Insurance Act, referred to in subsec. (b)(5)(B), is act Sept. 21, 1950, ch. 967, § 2, 64 Stat. 873, which is classified generally to chapter 16 (§ 1811 et seq.) of this title. For complete classification of this Act to the Code, see

Short Title

note set out under section 1811 of this title and Tables.

§5367 Affiliations