RegW.20090521.omb

Supporting Statement for the
Notice Requirements in Connection with Regulation W
(12 CFR Part 223 Transactions Between Member Banks and Their Affiliates)
(Reg W; OMB No. 7100- 0304)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority
from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the notice requirements in connection with Regulation W, which
implements comprehensively sections 23A and 23B of the Federal Reserve Act (OMB
No. 7100-0304). The Paperwork Reduction Act (PRA) classifies reporting,
recordkeeping, or disclosure requirements of a regulation as an information collection. 1
The PRA requires the Federal Reserve to renew authority for information collections
every three years.
The information collection pursuant to Regulation W is triggered by specific
events, and there are no required reporting forms associated with these transactions. The
respondents are all insured depository institutions and uninsured member banks. The
total estimated annual burden for the 28 respondents is 220 hours.
Background and Justification
Sections 23A and 23B of the Federal Reserve Act are statutory provisions
designed to protect against a depository institution suffering losses in transactions with
affiliates. 2 They also limit the ability of an insured depository institution to transfer to its
affiliates the subsidy arising from the institution’s access to the federal safety net.
Sections 23A and 23B apply, by their terms, to banks that are members of the Federal
Reserve System (member banks). Other federal law subjects insured nonmember banks
and insured thrifts to sections 23A and 23B in the same manner and to the same extent as
if they were member banks.
On December 12, 2002, the Federal Reserve published a Federal Register notice 3
adopting Reg W to implement sections 23A and 23B. The Regulation was effective
April 1, 2003. The Board issued Reg W for several reasons. First, the regulatory
framework established by the Gramm-Leach-Bliley Act 4 emphasizes the importance of
sections 23A and 23B as a means to protect depository institutions from losses in
transactions with affiliates. Second, adoption of a comprehensive rule simplified the
interpretation and application of sections 23A and 23B, ensured that the statute is
consistently interpreted and applied, and minimized burden on banking organizations to
the extent consistent with the statute’s goals. Third, issuing a comprehensive rule
allowed the public an opportunity to comment on Federal Reserve interpretations of
sections 23A and 23B.
1

44 U.S.C. § 3501 et seq
12 U.S.C. §§ 371c and 371c-1
3
(67 FR 76603)
4
Pub. L. No. 106-102, 113 Stat. 1338 (1999).
2

Description of Information Collection
The information collection requirements in Regulation W are found in
12 CFR 223.15(b)(4), 223.31(d)(4), 223.41(d)(2), and 223.43(b). This information is
required to evidence compliance with sections 23A and 23B of the Federal Reserve Act
(12 U.S.C. 371c(f) and 371c-1(e)) or to request an exemption from the Board. The notice
requirements associated with Regulation W are described below.
Loan Participation Renewal notice (12 CFR 223.15(b)(4)) is a condition to an
exemption for renewals of loan participations involving problem loans. The
participating depository institution must provide its appropriate federal banking agency
with written notice of the renewal of, or the extension of additional credit in connection
with, a low-quality asset not later than 20 days after consummation.
Acquisition notice (12 CFR 223.31(d)(4)) is a condition to an exemption for a
depository institution’s acquisition of an affiliate that becomes an operating
subsidiary of the institution after the acquisition. The institution must provide the
appropriate federal banking agency and the Federal Reserve Board with written notice of
its intention to acquire the company at or before the time that the company becomes an
affiliate of the institution. The notice also must describe the primary business activities
of the company.
Internal Corporate Reorganization Transactions notice (12 CFR
223.41(d)(2)) is a condition to an exemption for internal corporate reorganization
transactions. The depository institution must provide the appropriate federal banking
agency and the Federal Reserve Board with written notice of the transaction before
consummation. The notice must describe the primary business activities of the affiliate
and indicate the proposed date of the reorganization.
Section 23A Additional Exemption notice (12 CFR 223.43(b)) provides
procedures for requesting additional exemptions from the requirements of section
23A. The insured depository institution must submit a written request to the General
Counsel of the Federal Reserve Board. The request must describe in detail the
transaction or relationship for which the institution seeks an exemption, explain why the
Board should exempt the transaction or relationship, and explain how the exemption
would be in the public interest and consistent with the purposes of section 23A.
Time Schedule for Information Collection
These notifications are event-generated and must be provided to the appropriate
federal banking agency and, if applicable, the Federal Reserve Board within the time
periods established by the law and regulation as discussed above. This information
collection is required.

2

Legal Status
The Board’s Legal Division has determined that sections 23A and 23B of the
Federal Reserve Act authorize the Board to issue regulations to carry out the provisions
of that Act. 12 U.S.C. §§ 371c and 371c-1. The Board's Legal Division also determined
that confidential and proprietary information collected for the purposes of the Loan
Participation Renewal notice 12 CFR 223.15(b)(4) may be protected under the authority
of the Freedom of Information Act (FOIA) [5 U.S.C. § 552(b)(4)]. Section (b)(4) of
FOIA exempts information deemed competitively sensitive from disclosure. However,
respondents who desire that the information on these notices be kept confidential in
accordance with section (b)(4) can request confidential treatment under the Board’s rules
at 12 C.F.R. § 261.15. In addition, information that is obtained as part of an examination
or supervision of a bank is exempt from disclosure under FOIA exemption (b)(8), for
examination material. 5 U.S.C. § 552(b)(8).
Estimate of Respondent Burden
The estimated total annual burden for the notice requirements of this information
collection is 220 hours, as shown in the table below. The number of respondents is
estimated based on notices submitted the Federal Reserve Board during 2008. The
burden represents less than 1 percent of the total Federal Reserve System paperwork
burden.

Regulation W notice
requirements

Estimated
number
of
respondents

Estimated
annual
frequency

Estimated
response
time

Estimated
annual
burden hours

12 CFR 223.15(b)(4)
12 CFR 223.31(d)(4)
12 CFR 223.41(d)(2)
12 CFR 223.43(b)

1
1
12
14

1
1
1
1

2 hours
6 hours
6 hours
10 hours

2
6
72
140

Total

28

220

The total cost to the public is estimated to be $13,563. 5
Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System to process these notifications is
negligible.

5

Total cost to the public was estimated using the following formula. Percent of staff time, multiplied by annual
burden hours, multiplied by hourly rate: 30% Administrative or Junior Analyst @ $25, 45% Managerial or Technical
@ $55, 15% Senior Management @ $100, and 10% Legal Counsel @ $144. Hourly rate estimates for each
occupational group are averages using data from the Bureau of Labor and Statistics (BLS), Occupational Employment
and Wages 2007, http://www.bls.gov/news.release/ocwage.nr0.htm Occupations are defined using the BLS
Occupational Classification System. http://www.bls.gov/soc/

3

Consultation Outside of the Agency and Discussion of Public Comment
On March 4, 2009, the Federal Reserve published a notice in the Federal Register
(74 FR 9401) requesting public comment for 60 days on the Reg W information
collection. The comment period for this notice expired on May 4, 2009. The Federal
Reserve did not receive any comments. On May 15, 2009, the Federal Reserve published
a final notice in the Federal Register (74 FR 22928).
Sensitive Questions
This information collection contains no questions of a sensitive nature, as defined
by OMB guidelines.

4