Securities Activities of Banks in the GLB Era - Cleary Gottlieb Steen ...

intraday extension of credit at the end of the bank’s
U.S. business day.
(iii) Satisfaction of the requirements for exemption from
Section 23A of certain derivative transactions -- other
than derivative transactions which are essentially
equivalent to a loan -- by a bank with its affiliate (12
C.F.R. § 223.33) that the bank establish and maintain
policies and procedures reasonably designed to
manage the credit exposure rising from its derivative
transactions with affiliates in a safe and sound manner,
which, at a minimum, provide for (A) monitoring and
controlling the credit exposure arising from such
transactions with each affiliate and with all affiliates in
the aggregate (including imposing appropriate credit
limits, mark-to-mark requirements and collateral
requirements), and (B) ensuring that the bank’s
derivative transactions with affiliates comply with the
Market Terms Requirement.
(iv) The application of the “attribution rule” (i.e., a
transaction by a bank with any person is deemed to be
a transaction with an affiliate “to the extent that the
proceeds of the transaction are used for the benefit of,
or transferred to, that affiliate”).
(v) Expansive reading of the scope of “covered
transactions” to include bank securities borrowing
transactions from affiliates. 32
(vi) Application of Sections 23A/23B in the context of the
“rebuttable presumption” (12 C.F.R. § 223.2(a)(9)) in
the merchant banking context that a portfolio company
is an “affiliate” of a bank if an FHC that controls the
bank owns or controls 15% or more of the equity
capital of the portfolio company.
32 See Board Letter to Bank of America, dated June 7, 2005.
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