What is a Reg W affiliate?

Regulation W: Definition of an Affiliate

Regulation W, a regulation enforced by the Federal Reserve, defines an affiliate as any company that controls, is controlled by, or is under common control with a member bank. Control, in this context, generally refers to ownership, control of voting securities, or the ability to direct a company’s management or policies.

Covered Transactions

Regulation W imposes restrictions on covered transactions between member banks and their affiliates. Covered transactions include loans, asset purchases, asset sales, guarantees, letters of credit, and other types of transactions.

Quantitative Limits

Regulation W establishes quantitative limits on covered transactions between member banks and their affiliates. These limits are based on a percentage of the member bank’s capital and surplus.

Collateral Requirements

Regulation W requires collateral for certain covered transactions between member banks and their affiliates. The collateral must meet specific requirements outlined in the regulation.

Exceptions

There are several exceptions to the general rules of Regulation W. These exceptions include transactions between member banks and their subsidiaries, transactions between member banks and their affiliates that are well-capitalized and well-managed, and transactions that are exempt under other federal regulations.

Implications for Member Banks

Regulation W has several implications for member banks. Member banks must be aware of the definition of an affiliate and the restrictions on covered transactions. They must also ensure that they have adequate collateral for covered transactions and that they comply with the quantitative limits. Failure to comply with Regulation W can result in penalties, including fines and enforcement actions.

Sources

FAQs

What is a Reg W affiliate?

A Reg W affiliate is any company that controls, is controlled by, or is under common control with a member bank.

What is the purpose of Reg W?

Reg W imposes restrictions on covered transactions between member banks and their affiliates to prevent conflicts of interest and protect the safety and soundness of the banking system.

What are covered transactions under Reg W?

Covered transactions include loans, asset purchases, asset sales, guarantees, letters of credit, and other types of transactions between member banks and their affiliates.

What are the quantitative limits under Reg W?

Reg W sets quantitative limits on covered transactions between member banks and their affiliates. These limits are based on a percentage of the member bank’s capital and surplus.

What are the collateral requirements under Reg W?

Reg W requires collateral for certain covered transactions between member banks and their affiliates. The collateral must meet specific requirements outlined in the regulation.

Are there any exceptions to Reg W?

Yes, there are several exceptions to Reg W, including transactions between member banks and their subsidiaries, transactions between member banks and their affiliates that are well-capitalized and well-managed, and transactions that are exempt under other federal regulations.

What are the penalties for violating Reg W?

Failure to comply with Reg W can result in penalties, including fines and enforcement actions.

Where can I find more information about Reg W?