March 17, 2020

[ ] 

Dear [ ]: 

Pursuant to this letter, [ ] (“Bank”), 

[ ] has been granted an exemption from section 23A of the 

Federal Reserve Act and the Board’s Regulation W to allow Bank to purchase 

certain assets from affiliated money market mutual funds (the “Funds”). 

 Section 23A and Regulation W limit the aggregate amount of 

“covered transactions” between a bank and any single affiliate to 10 percent of the 

bank’s capital stock and surplus, and limit the aggregate amount of covered 

transactions between a bank and all its affiliates to 20 percent of the bank’s capital 

stock and surplus.1 “Covered transactions” include the purchase of assets by a 

bank from an affiliate, the extension of credit by a bank to an affiliate, the issuance 

of a guarantee by a bank on behalf of an affiliate, and certain other transactions.2 

The statute and regulation also require a bank to secure its extensions of credit to, 

and guarantees on behalf of, affiliates with prescribed amounts of collateral.3

A purchase of assets by Bank from the Funds would be covered 

transactions under section 23A and Regulation W. The Funds are affiliates of the 

Bank for purposes of section 23A and Regulation W because they are investment 

funds with respect to which Bank or an affiliate of Bank is the investment 

adviser. 

 

1

 12 U.S.C. § 371c(a)(1); 12 CFR 223.11 and 223.12. 

2

 12 U.S.C. § 371c(b)(7); 12 CFR 223.3(h). 

3

 12 U.S.C. § 371c(c); 12 CFR 223.14. 
- 2 - 

Section 23A specifically authorizes the Board to exclude, by order, 

from the definition of “covered transaction” the purchase of certain assets from a 

member bank’s affiliated money market mutual fund, subject to the limitations and 

conditions described below.4 

The exemption from the quantitative limits of section 23A and 

Regulation W would be subject to the following limits and conditions: 

 Bank may only purchase assets from Funds that are SEC-registered openend investment companies that operate pursuant to SEC Rule 2a-7 under the 

Investment Company Act of 1940 (17 CFR 270.2a-7); 

 Bank’s purchases of assets from the Funds would be limited to the amount 

necessary to cover net redemptions in the Funds, up to an aggregate 

maximum of 200 percent of Bank’s capital stock and surplus;

 The assets purchased by Bank from the Funds must be “investment grade,” 

as defined in the Board’s Regulation Q, 12 CFR 217.2; 

 Bank must purchase the assets at fair market value as determined by a 

reliable third-party pricing service; 

 Bank’s ultimate parent holding company must agree to reimburse Bank 

promptly for any losses sustained by Bank in connection with the purchased 

assets; 

 Bank and its ultimate parent bank holding company must remain 

“well capitalized” as defined in the Board’s Regulations H and Y, 

respectively (12 CFR 208.43(b)(1) and 12 CFR 225.2(r)); and 

 The exemption would expire six months from the date of this letter. After 

that date, any assets purchased by Bank pursuant to this exemption could 

remain with Bank and would not count towards Bank’s 23A quantitative 

limits. 

In light of these considerations, the exemption for the proposed 

covered transactions between Bank and the Funds appears to be consistent with the 

purposes of section 23A and in the public interest. Accordingly, the exemption is 

hereby issued, subject to the conditions and limits discussed above. 

 

4

 12 U.S.C. § 371c(b)(7)(C). 
- 3 - 

 This exemption is specifically conditioned on compliance by 

[ ] and Bank with all the conditions in this letter. Noncompliance 

with these conditions may result in revocation of the exemption. 

Very truly yours, 

(Signed) Ann E. Misback 

Ann E. Misback 

Secretary of the Board 

cc: Ricardo Delfin, Director, Division of Complex Institution Supervision & 

Resolution, Federal Deposit Insurance Corporation 

Nicholas Podsiadly, General Counsel, Federal Deposit Insurance 

Corporation