Subsidiaries and Equity Investments Booklet

COMPTROLLER’S LICENSING MANUAL

SUBSIDIARIES AND
EQUITY
INVESTMENTS
FEBRUARY 2022

Contents
Introduction ......................................................................................................................1
Key Policies.......................................................................................................................2
Common Types of Subsidiaries and Equity Investments................................................ 2
Examination and Supervision ....................................................................................... 4
Offshore Subsidiaries ................................................................................................... 5
Undercapitalized Banks................................................................................................ 6
Application Process...........................................................................................................7
Provisions Applicable to Subsidiary and Equity Filings Generally ................................. 7
Operating Subsidiaries—National Bank and FSA.......................................................... 9
Operating Subsidiaries—National Bank ...................................................................... 10
Operating Subsidiaries—FSA..................................................................................... 14
Service Corporations—FSA ....................................................................................... 16
Redesignation—FSA.................................................................................................. 18
Bank Service Company—National Bank and FSA ...................................................... 18
Financial Subsidiaries—National Bank ....................................................................... 20
Equity Investments—National Bank ........................................................................... 24
Non-controlling Equity Investments—National Bank .................................................. 26
Pass-Through Investments—FSA ............................................................................... 28
Other Equity Investments—FSA ................................................................................ 30
Appendix A: Operating Subsidiary Guidelines—National Banks..................................31
Introduction ............................................................................................................... 31
Operating Subsidiary Activities—National Banks [5.34(f)(5)] ..................................... 31
Appendix B: Non-controlling Investment Guidelines—National Banks ........................66
Introduction ............................................................................................................... 66
Non-controlling Investment Activities ........................................................................ 66
Appendix C: Operating Subsidiary Guidelines—FSAs ..................................................79
Introduction ............................................................................................................... 79
Operating Subsidiary Activities—FSAs [12 CFR 5.38(f)(5)] ....................................... 79
Appendix D: Service Corporation Guidelines—FSAs ....................................................90
Introduction ............................................................................................................... 90
Service Corporation Activities—FSAs [12 CFR 5.59(f)] ............................................. 90
Appendix E: Pass-Through Investments Guidelines—FSAs ..........................................96
Glossary ..........................................................................................................................98
Abbreviations................................................................................................................101

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References.....................................................................................................................102
Table of Updates ...........................................................................................................107

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Introduction
This booklet of the Comptroller’s Licensing Manual provides guidance concerning the
licensing procedures of the Office of the Comptroller of the Currency (OCC) concerning
subsidiaries and equity investments. The requirements referred to in this guidance document
reflect provisions in existing statutes and regulations. The relevant statutes and regulations
are listed at the end of this booklet or referenced as applicable throughout the document. 1
National banks and federal savings associations (FSA) develop and offer, through various
subsidiaries and other business entities, a wide range of products and services designed to
increase profitability, improve service to customers, and respond to technological innovations
and competition. For national banks, these entities include operating subsidiaries, financial
subsidiaries, and bank service companies. For FSAs, these include operating subsidiaries,
service corporations, and bank service companies. National banks and FSAs may also make
equity investments in other business entities that perform bank-permissible activities.
National banks may make these investments through their other equity investment authority,
and FSAs may do so through their pass-through investment authority. Throughout this
booklet, national banks and FSAs are referred to collectively as banks or bank, except when
it is necessary to distinguish between the two.
This booklet
•
•
•
•
•

describes the various types of subsidiaries and other business entities that banks may
establish or acquire and the activities in which such entities may engage.
describes the various equity investments that banks can make.
provides detailed guidance on permissible and incidental activities,2 and conditions for
establishing and operating these entities or investments.
provides information on the statutory and regulatory factors that the OCC considers when
reviewing and processing applications or notices.
provides guidance on specific requirements for insurance, electronic, and fiduciary
activities.

This booklet provides a glossary and hyperlinks to filing samples and other booklets in the
Comptroller’s Licensing Manual, as well as other information filers may use in order to file
to establish various subsidiaries or make an equity investment.

This booklet also may include procedures that banks must follow in connection with the filing of applications
and notices with the OCC. Such procedures are not substantive rules that establish decision criteria. Rather, they
are steps a bank must take to allow the OCC to assess whether a bank has met the substantive requirements for
the application or notice in existing statutes and regulations. Consistent with the Administrative Procedure Act,
the OCC may issue guidance concerning licensing that contains binding procedural steps a bank must take to
allow the OCC to assess a bank’s application or notice. See 5 USC 553(b)(A).

1

Appendixes A and B set out precedent for national banks. Appendixes C, D, and E set out precedents for
FSAs. Permissible activities for national banks and FSAs can differ because the statutory and regulatory
frameworks authorizing and implementing activities for these institutions are different.

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Key Policies

Key Policies
Common Types of Subsidiaries and Equity Investments
Operating Subsidiaries
Banks may establish or acquire operating subsidiaries or commence a new activity in an
existing operating subsidiary. Operating subsidiaries may only conduct activities that the
parent bank may conduct. Operating subsidiaries in which banks may invest include
corporations, limited liability companies (LLC), limited partnerships, and similar entities if
all the following conditions apply:
•

•

•

The bank has the ability to control the management and operations of the subsidiary, and
no other person or entity has the ability to exercise effective control or influence over the
management or operations of the subsidiary to an extent equal to or greater than that of
the bank or an operating subsidiary thereof.
The parent bank owns and controls more than 50 percent of the voting (or similar type of
controlling) interest of the operating subsidiary, or otherwise controls the subsidiary, and
no party controls a percentage of the voting (or similar) interest of the operating
subsidiary greater than the bank’s interest.
The operating subsidiary is consolidated with the bank under U.S. generally accepted
accounting principles (GAAP).

The OCC may at any time limit a bank’s investment in an operating subsidiary or may limit
or refuse to permit any activities in an operating subsidiary for supervisory, legal, or safety
and soundness reasons.
To establish or acquire an operating subsidiary, or to engage in an additional activity in an
existing operating subsidiary, a national bank generally must file an application or an afterthe-fact notice with the OCC. An FSA generally must file an application or notice; the afterthe-fact notice procedure is not available to FSAs.

Service Corporations
FSAs may establish or acquire service corporations and conduct new activities in existing
service corporation subsidiaries pursuant to 12 USC 1464(c)(4)(B). A service corporation
may be organized as a corporation or may be organized in any other form that provides the
same protections as the corporate form of organization, including limited liability. An FSA
need not have any minimum percentage ownership interest or control of a service corporation
to designate an entity as a service corporation.
Service corporations may engage in a broader range of activities than FSAs may conduct
directly. The list of activities previously found permissible for service corporations is in
12 CFR 5.59(f). In addition, an FSA may request OCC approval for a service corporation to
engage in any other activity reasonably related to the activities of financial institutions. An
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FSA’s aggregate investment in service corporations is limited, as described in the “Service
Corporations—FSA” section of this booklet. There are also limitations regarding the state in
which a first-tier service corporation may be located and regarding the entities that may
invest in a first-tier service corporation.
The OCC may at any time limit an FSA’s investment in a service corporation or may limit or
refuse to permit any activities in a service corporation for supervisory, legal, or safety and
soundness reasons.
An FSA generally must submit a filing with the OCC to acquire or establish a service
corporation or to commence a new activity in an existing service corporation the FSA
controls.

Bank Service Companies
Banks may establish or acquire bank service companies. A bank service company is a
corporation or LLC organized to provide services authorized by the Bank Service Company
Act (12 USC 1861 et seq.). All the stockholders or members of a bank service company must
be insured depository institutions.
The OCC may at any time limit a bank’s investment in a bank service company or may limit
or refuse to permit any activities in any bank service company for which a bank is the
principal investor for supervisory, legal, or safety and soundness reasons.
A bank generally is required to submit a notice to, and receive prior approval from, the OCC
to invest in the equity of a bank service company or to perform new activities in an existing
bank service company. A bank is not required, however, to submit a notice or application
under the bank service company regulation to invest in a bank service company if the
company will provide only the services listed in 12 CFR 5.35(f)(3) and will provide services
only for depository institutions. Also, a bank may, with the approval of the Board of
Governors of the Federal Reserve System (Federal Reserve Board), invest in the equity of a
bank service company that provides other services that the Federal Reserve Board has
determined to be permissible for a bank holding company under 12 USC 1843(c)(8).

Financial Subsidiaries
A national bank may acquire a financial subsidiary or engage in certain activities through a
financial subsidiary. A financial subsidiary is any company that is controlled by one or more
insured depository institutions, other than a subsidiary that (1) engages solely in activities
that national banks may engage in directly and that are conducted subject to the same terms
and conditions that govern the conduct of these activities by national banks; or (2) a national
bank is specifically authorized to control by the express terms of a federal statute (other than
section 5136A of the Revised Statutes) and not by implication or interpretation, such as by
section 25 of the Federal Reserve Act (12 USC 601–604a), section 25A of the Federal
Reserve Act (12 USC 611–631), or the Bank Service Company Act (12 USC 1861 et seq.).

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Non-controlling Investments
National banks may make non-controlling equity investments directly or through an
operating subsidiary in certain types of entities when the investment is part of, or incidental
to, the business of banking. Investments of this type are permitted pursuant to a national
bank’s powers under 12 USC 24(Seventh) and 12 CFR 5.36(e). A national bank may not
make a non-controlling investment if it is unable to make certain representations and
certifications described in more detail in the “Non-controlling Equity Investments—National
Bank” section of this booklet. A national bank generally must file an application to make a
non-controlling investment or file an after-the-fact notice regarding the investment,
depending on the condition of the national bank and the nature of the activity.

Pass-Through Investments
Pursuant to 12 CFR 160.32, FSAs are permitted to make pass-through investments directly or
through an operating subsidiary in entities that engage only in activities in which an FSA
may engage, subject to the requirements and filing procedures of 12 CFR 5.58. An FSA may
not make a pass-through investment through a service corporation. The investment may be in
a corporation, LLC, limited partnership, trust, or similar business entity. An FSA may not
make a pass-through investment if it is unable to make certain representations and
certifications described in more detail in the “Pass-Through Investments—FSA” section of
this booklet.
An FSA generally must file an application or an after-the-fact notice to make a pass-through
investment. Under certain circumstances, however, an FSA may make a pass-through
investment without providing an application or an after-the-fact notice.

Examination and Supervision
Operating subsidiaries and service corporations are subject to OCC examination and
supervision to the same extent as the parent bank, except when federal law or regulation
specifically provides otherwise, such as when the activity is subject to functional regulation
limitations and requirements. The Gramm–Leach–Bliley Act (GLBA) codified the concept of
“functional regulation,” which recognizes the roles of the U.S. Securities and Exchange
Commission (SEC), the Commodities Futures Trading Commission (CFTC), and state
insurance commissioners as the regulators of certain securities, commodities, and insurance
activities, respectively.
Bank service companies are subject to examination and supervision by the federal banking
agency that supervises the insured depository institution that is the principal investor in the
company.3 Additionally, a bank service company’s services are subject to examination and
supervision to the same extent as if the depository institution itself performed the services on
its own premises. The services may be subject to functional regulation limitations and
The appropriate federal banking agency of the principal investor may authorize any other federal banking
agency that supervises any other investor to make such an examination (12 USC 1867(a)).

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requirements to the extent that the bank service company performing the services meets the
GLBA definition of a functionally regulated affiliate or subsidiary.
The GLBA imposes limits on the OCC’s authority to examine, require reports from, impose
capital requirements on, require funds from, and take direct or indirect actions against
functionally regulated affiliates and subsidiaries. The Dodd–Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd–Frank Act) modified or removed many, but not all,
of these limits, restoring much of the authority the OCC had over functionally regulated
affiliates and subsidiaries before the GLBA. 4 Refer to the “Retail Nondeposit Investment
Products” and the “Bank Supervision Process” booklets of the Comptroller’s Handbook for
further discussion on functional regulation.
Financial subsidiaries of national banks are also subject to examination and supervision by
the OCC, subject to the limitations and requirements of section 45 of the Federal Deposit
Insurance Act and section 115 of the GLBA.
The OCC may direct the bank or other entity to take appropriate remedial action if the
agency determines that the creation or operation of the subsidiary violates a law, regulation,
or written condition; is unsafe or unsound; or threatens the safety and soundness of the bank.
Such action may include disposing of, or liquidating all or part of, the entity or discontinuing
specific activities. National banks may refer to the “Related Organizations” booklet of the
Comptroller’s Handbook, and FSAs may refer to section 730, “Related Organizations,” of
the Office of Thrift Supervision (OTS) Examination Handbook for further discussion of the
OCC’s examination and supervision of subsidiaries and other related organizations.

Offshore Subsidiaries
An offshore subsidiary is a subsidiary that maintains records offshore, or that is organized
under laws other than those of the 50 states in the United States, the District of Columbia, or
any other U.S. territory or possession. Foreign law may limit OCC supervisory authority over
offshore subsidiaries of banks. Banks that establish or acquire an offshore subsidiary through
the filing process are asked to make certain representations or commitments to ensure that the
OCC has access to those subsidiaries’ books and records and the authority to examine,
supervise, and regulate those subsidiaries. The representations may include the following:
•

•

4

The subsidiaries’ books and records (or duplicate copies of any books and records the
originals of which are required to be maintained in [name of country] under applicable
law) will be maintained at facilities of the bank in the United States, and the bank and the
subsidiaries will ensure that the OCC has prompt access to all books and records.
If the OCC is unable to access the subsidiaries’ books and records, or examine, supervise,
or regulate the subsidiaries to its satisfaction, resulting in an OCC bank directive to cease
operations through the subsidiary, the bank will do so within the time period specified by
the OCC.

See Dodd–Frank Act, Public Law 11-203, 124 Stat. 1376 (2010); 12 USC 1844; 12 USC 1831v.

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A filer that cannot make any of these representations or commitments should contact the
appropriate director for District Licensing for further guidance.

Undercapitalized Banks
Although undercapitalized banks generally are not encouraged to engage in any type of
expansionary activities, the OCC may approve an application from an undercapitalized bank
to establish a subsidiary or make an investment, or approve the entity to engage in a new
activity, if the OCC determines that
•
•
•

the bank has submitted an acceptable capital restoration plan, as required by
12 USC 1831o(e)(2).
the bank is implementing the plan.
the proposed filing is consistent with and will further the plan’s achievement.

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Application Process
Provisions Applicable to Subsidiary and Equity Filings Generally
Multiple Transactions
The OCC does not require a separate application for operating subsidiaries, service
corporations, financial subsidiaries, bank service companies, non-controlling investments, or
pass-through investments when the entity is
•
•

retained in a merging or converting institution.
established together with an application for a new national bank or FSA charter. (See the
“Charters” booklet of the Comptroller’s Licensing Manual for more information.)

In these situations, the OCC considers the entity or investment along with the primary filing
and, if appropriate, may request a legal opinion on the relevant entity’s activities. The review
period runs concurrently with the OCC’s processing and decision on the merger, conversion,
or charter application. The OCC includes its decision on the filing and any appropriate
conditions in the decision letter for the merger, conversion, or charter.

Publication
Generally, the OCC does not require public notice for filings covered by this booklet unless
the application presents significant and novel policy, supervisory, or legal issues and a public
notice is beneficial. (See the “Public Notice and Comments” booklet of the Comptroller’s
Licensing Manual, “Additional Public Notice” section, for more information.)

Published Precedents
To locate published precedents of OCC action, see the OCC’s monthly publication
“Interpretations & Actions” on occ.gov, or the Commerce Clearing House (CCH) Federal
Banking Law Reporter.

Insurance Activities
Banks may conduct certain insurance activities in the bank through a subsidiary or through
certain investments. National banks may sell general forms of insurance as an agent, engage
in certain title insurance activities, sell credit-related insurance as an agent, or provide as
principal (underwrite or reinsure) credit-related insurance. An operating subsidiary may
reinsure private mortgage insurance on loans originated, purchased, or serviced by the bank,
its subsidiaries, or its affiliates. Insurance sales activities should be conducted in accordance
with the operational standards and customer safeguards described in OCC issuances.
(National banks should see the “Insurance Activities” booklet of the Comptroller’s
Handbook, and FSAs should see section 720, “Insurance,” of the OTS Examination

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Handbook. National banks and FSAs should also see the “Retail Nondeposit Investment
Products” booklet of the Comptroller’s Handbook and 12 CFR 14.)
FSAs and their operating subsidiaries may sell credit-related insurance on an agency basis
without geographic restriction. FSAs may underwrite credit insurance through operating
subsidiaries, if such insurance is issued in connection with loans made by the FSAs or their
subsidiaries. FSAs may conduct such activities through service corporations. FSAs may sell
title insurance on an agency basis, make pass-through investments in title insurance agencies,
and engage in title insurance brokerage or agency through service corporations. FSAs may
reinsure credit insurance through operating subsidiaries and service corporations. FSA
service corporations may, with prior OCC approval, engage in mortgage reinsurance
activities. Also, FSA service corporations may, with prior OCC approval, perform insurance
brokerage or agency for liability, casualty, automobile, life, health, accident, or title
insurance.
If an application addressed by this booklet relates to the initial affiliation of a bank with a
company engaged in insurance activities (including a broker-dealer selling annuities
considered insurance products under state law), the bank should describe the type of
insurance activity in which the company is engaged and has present plans to conduct. The
bank must list for each state the lines of business for which the company holds, or will hold,
an insurance license, indicating the state in which the company holds a resident license or
charter, as applicable.

Hart–Scott–Rodino Antitrust Improvements Act of 1976
Based on interpretations of the Federal Trade Commission (FTC) and U.S. Department of
Justice (DOJ), acquisition transactions, including those of certain subsidiaries, may be
subject to notification and waiting-period requirements under the Hart–Scott–Rodino
Antitrust Improvements Act (HSR) if the transactions exceed certain threshold tests. These
include the acquisition of financial subsidiaries, whether on a stand-alone basis or as part of a
Bank Merger Act (BMA) application. Transactions involving operating subsidiary, service
corporation, or bank service company acquisitions that are part of a BMA application are
exempt from the HSR provided that the entities acquired are already held by the target bank.
An acquisition of an operating subsidiary, service corporation, or bank service company
triggering the threshold tests of the HSR is subject to the HSR unless it is exempt under any
of the relevant statutes specified in the HSR.
When acquiring a subsidiary, the bank must determine the HSR’s applicability to the
proposed transaction and, if required, submit a notification to the FTC and the DOJ at least
30 days before the planned consummation date. The HSR authorizes the assessment of civil
money penalties for failure to comply with its provisions.

Conditions
The OCC may conditionally approve an application or certain notices after reviewing the
filing and considering the relevant factors, and impose conditions for the activities of
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subsidiaries or entities in which an investment is made. These conditions are considered
conditions imposed in writing under 12 USC 1818. The OCC may impose conditions to
protect the safety and soundness of the bank, prevent conflicts of interest, provide customer
protection, or provide for other supervisory or policy considerations.

Operating Subsidiaries—National Bank and FSA
OCC regulations state that banks may invest in qualifying operating subsidiaries. Qualifying
operating subsidiaries include a corporation, LLC, limited partnership, or similar entity if all
the following apply:
•
•
•

•

The bank has the ability to control the management and operations of the operating
subsidiary.
No other party has the ability to exercise effective control or influence over the
management or operations of the subsidiary to an extent equal to or greater than the bank
or an operating subsidiary of the bank.
The bank owns and controls more than 50 percent of the voting interest of the operating
subsidiary (or the parent bank otherwise controls the operating subsidiary, and no other
party controls a percentage of the voting interest of the operating subsidiary greater than
the bank’s interest).
The operating subsidiary is consolidated with the bank under GAAP.

An operating subsidiary may only conduct activities that the bank has the authority to engage
in directly.

Decision Criteria
In considering whether to approve a bank’s investment in an operating subsidiary, the OCC
considers whether
•
•
•
•

the operating subsidiary’s proposed activity is legally permissible under federal banking
laws.
the bank has the ability to control the management and operations of the operating
subsidiary, and no other person or entity has the ability to control the management or
operations.
the activity of the operating subsidiary is consistent with safe and sound banking
practices and does not endanger the safety and soundness of the parent bank.
the bank’s performance of the activity through the operating subsidiary is not in
contravention of OCC policy.

The OCC’s approval expires if the bank has not established or acquired the operating
subsidiary, or commenced the new activity in an existing operating subsidiary, within
12 months after the date of approval, unless the OCC shortens or extends the time period.

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Consolidated Financial Statements
Consolidated financial statements combine the assets, liabilities, revenues, and expenses of
the operating subsidiary with those of the reporting bank. Banks should account for
ownership interests in accordance with GAAP. National banks may refer to the “Accounting”
section in the “Related Organizations” booklet of the Comptroller’s Handbook and FSAs
may refer to section 730, “Related Organizations,” of the OTS Examination Handbook for
more information.
Generally, the bank combines pertinent financial data of the parent bank and its operating
subsidiaries to conform to applicable statutory limitations, unless otherwise provided by
statute or regulation. For example, the combined exposure of the bank and all of its operating
subsidiaries to a single borrower may not exceed the bank’s lending limit. Exceptions apply,
however, and banks should review the applicable statutes or regulations regarding when and
if consolidated financial statements are required.

Applicability of Law
All laws and regulations apply to bank operating subsidiaries just as they apply to the parent
bank, unless otherwise specifically provided for by federal statute (including 12 USC 25b
and 1465 with respect to the application of state law), regulation, or published OCC policy.

Grandfathered Operating Subsidiaries
Notwithstanding the requirements for a qualifying operating subsidiary under
12 CFR 5.34(e)(2) and 5.38(e)(2), and unless otherwise notified by the OCC with respect to a
particular operating subsidiary, an entity that a bank lawfully acquired or established as an
operating subsidiary before April 24, 2008, (for national banks) or May 18, 2015, (for FSAs),
may continue to operate as an operating subsidiary under 12 CFR 5.34 and 5.38, respectively,
if the bank and the operating subsidiary were, and continue to be, conducting authorized
activities in compliance with the standards and requirements applicable when the bank
established or acquired the subsidiary.

Operating Subsidiaries—National Bank
Application
Except as described in the “After-the-Fact Notice” and “No Filing Required” sections on the
following pages, a national bank must first submit an application to, and receive prior
approval from, the OCC to establish or acquire an operating subsidiary, or to perform a new
activity in an existing operating subsidiary. 5 The OCC may require the filer to submit a legal
analysis if the proposal is novel or unusually complex, or if it raises substantial unresolved
legal issues. In such cases, the OCC encourages filers to arrange a prefiling meeting with the
5

See 12 CFR 5.34(f)(1).

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appropriate director for District Licensing. Additionally, any national bank subject to
supervisory concerns should provide financial information to support the proposed
transaction (for example, capital or strategic plan, cost projections, business plan, and
pro forma financial projections).
When filing an application, the national bank should provide the information included on the
Operating Subsidiary Application form.

After-the-Fact Notice
A national bank meeting certain criteria may file an after-the-fact notice for specific activities
listed in the “activities eligible for notice” section of 12 CFR 5.34(f)(5). The after-the-fact
notice category contains commonly accepted banking-related activities that the OCC has
approved previously for operating subsidiaries. Under this process, a national bank files a
written notice with the OCC before, or within 10 days after, establishing or acquiring the
operating subsidiary or commencing a new activity in an existing operating subsidiary and
need not seek prior OCC approval. The OCC’s published guidelines for operating
subsidiaries (see appendix A) list those activities eligible for the after-the-fact notice and
describe the requirements and limitations for activities eligible for the notice process.
To qualify for the notice process, the national bank, or operating subsidiary as applicable,
must
•
•
•
•
•

be well capitalized and well managed (see Glossary),
be establishing or acquiring an operating subsidiary, or commencing a new activity in an
existing operating subsidiary that is a corporation, LLC, limited partnership, or trust, 6
have the ability to control the management and operations of the subsidiary,
hold more than 50 percent of the voting, or equivalent, interests in the subsidiary, and
be required under GAAP to consolidate its financial statements with those of the
subsidiary.

Any national bank filing an after-the-fact notice under this section is deemed to have
represented that the operating subsidiary will conduct the activity in a manner consistent with
OCC guidance and under the same terms and conditions as would be applicable if the activity
were conducted directly by the national bank.
When filing an after-the-fact notice, the national bank should provide the information
included on the Operating Subsidiary After the Fact Notice form.

No Filing Required
The OCC does not require a filing for a national bank to acquire or establish an operating
subsidiary, or perform a new activity in an existing operating subsidiary, provided that the
A trust formed to securitize assets held by the bank as part of the business of banking is not considered an
operating subsidiary. 12 CFR 5.34(e)(2)(ii)(C).
6

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national bank is well capitalized and well managed (see Glossary) and all the following
requirements are met: 7
•
•
•

•
•

•
•

Activities of the new subsidiary are limited to those activities previously reported by the
national bank in connection with the prior establishment or acquisition of a prior
operating subsidiary.
Activities in which the new subsidiary will engage continue to be legally permissible for
the subsidiary.
Activities of the new subsidiary will be conducted in accordance with any conditions
imposed by the OCC in approving the conduct of these activities for any prior operating
subsidiary of the national bank and according to the OCC’s published guidelines for
operating subsidiaries (see appendix A).
The entity is a corporation, LLC, limited partnership, or trust.
The bank or an operating subsidiary thereof has the ability to control the management and
operations of the subsidiary, and no other person or entity has the ability to exercise
effective control or influence over the management or operations of the subsidiary to an
extent equal to or greater than that of the bank and operating subsidiary thereof.
The bank or operating subsidiary thereof holds more than 50 percent of the voting, or
equivalent, interests in the subsidiary.
The subsidiary is consolidated with the national bank or operating subsidiary thereof
under GAAP.

Partnership or Joint Venture
A national bank’s operating subsidiary may be a general or limited partner in a partnership or
a member of a joint venture. If a national bank proposes to enter into such an arrangement
through an operating subsidiary, with the operating subsidiary being either a limited or
general partner or member, the national bank must file with the OCC and receive approval
for the operating subsidiary’s activity. The operating subsidiary must be operated
appropriately to minimize the risk of liability passing through the operating subsidiary to the
national bank.
Whenever an operating subsidiary joins a partnership or joint venture, the operating
subsidiary should control the conduct of the business, possess a veto power, or be able to
withdraw from the transaction to ensure that the partnership or joint venture will perform
only activities that are authorized for the bank.

Fiduciary Powers
If an operating subsidiary of a national bank proposes to accept traditional fiduciary
appointments for which fiduciary powers are needed, such as acting as a trustee or an
executor, then both the national bank and the operating subsidiary must have fiduciary
powers. Operating subsidiaries that engage in fiduciary activities generally are either a
national bank limited to the activities of a trust company or a state trust company. If a limited
7

12 CFR 5.34(f)(6).

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purpose national bank is proposed, the OCC processes the charter application together with
the operating subsidiary application.
If an operating subsidiary of a national bank proposes to exercise investment discretion on
behalf of its customers or provide investment advice for a fee, the operating subsidiary need
not have fiduciary powers if the operating subsidiary
•
•

is registered under the Investment Advisers Act of 1940 (Advisers Act), or
is registered or has filed a notice under the applicable provisions of the Securities
Exchange Act of 1934 as a broker, dealer, municipal securities dealer, government
securities broker, or government securities dealer; and the operating subsidiary’s
performance of investment advisory services is solely incidental to the conduct of its
business as broker or dealer, and no special compensation is made to the operating
subsidiary for those advisory services. To determine whether the operating subsidiary’s
performance of investment advisory services is solely incidental to the conduct of its
business as a broker or dealer, and no special compensation is made to the operating
subsidiary for those advisory services, the OCC considers the commission structure and
other specific facts. National banks should refer to OCC Interpretive Letter No. 769
(January 28, 1997).

Electronic Activities
A national bank or its operating subsidiary may conduct certain activities using electronic
technologies, provided the activities are part of, or incidental to, the business of banking.
To determine whether an electronic activity is part of the business of banking, the OCC
considers whether the activity
•
•
•
•

is the functional equivalent or logical outgrowth of a recognized banking activity.
strengthens the national bank by benefiting its customers or business.
involves the types of risks similar to those already assumed by national banks.
is authorized for state-chartered banks or savings associations.

To determine whether an electronic activity is incidental to the business of banking, the OCC
considers whether the activity
•
•
•
•

facilitates the production or delivery of a national bank’s products or services.
enhances the national bank’s ability to sell or market its products or services.
improves the effectiveness or efficiency of the national bank’s operations in light of risks
presented, innovations, strategies, techniques, and new technologies for producing and
delivering financial products and services.
enables the national bank to use capacity acquired for its banking operations or otherwise
avoid economic waste or loss.

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The weight accorded each of the factors considered in determining whether an electronic
activity is part of, or incidental to, the business of banking depends on the facts and
circumstances of each case.
The national bank, or its operating subsidiary, should conduct these electronic activities in a
manner consistent with safety and soundness standards and OCC guidance. In addition, the
OCC may require the national bank or its operating subsidiary to notify all potential
technology-related vendors in writing of the OCC’s examination and regulatory authority.
The OCC also may require that all final technology-related vendor contracts stipulate that the
performance of services provided by the vendors to the operating subsidiary is subject to the
OCC’s examination and regulatory authority.

Locations
A national bank proposing to establish, acquire, or operate an operating subsidiary at a
location at which the operating subsidiary will perform branching functions may need
approval for a branch office at that location if it has not already been authorized as a branch.
A separate application is not necessary, but a request for branch authorization should
accompany the operating subsidiary application. There are no geographical restrictions for
operating subsidiaries performing permissible activities other than core branching functions.
(See the “Branches and Relocations” booklet of the Comptroller’s Licensing Manual for
more information on branching functions.)

Operating Subsidiaries—FSA
Application
An FSA generally must first submit an application to the OCC to establish or acquire an
operating subsidiary, or to perform a new activity in an existing operating subsidiary.8 The
OCC may require the filer to submit a legal analysis if the proposal is novel or unusually
complex, or if it raises substantial unresolved legal issues. In such cases, the OCC
encourages filers to arrange a prefiling meeting with the appropriate director for District
Licensing. Additionally, any FSA subject to supervisory concerns should provide financial
information to support the proposed transaction (for example, capital or strategic plan, cost
projections, business plan, and pro forma financial projections).
When filing an application, the FSA should provide the information included on the
Operating Subsidiary Application form.

Expedited Review
An application is eligible for the expedited review process if all the following requirements
are met:
8

See 12 CFR 5.38.

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•
•
•

•

•
•

The FSA owning the operating subsidiary is well capitalized and well managed (see
Glossary).
The proposed or existing operating subsidiary is a corporation, LLC, limited partnership,
or trust. 9
The FSA or an operating subsidiary thereof has the ability to control the management and
operations of the subsidiary, and no other person or entity has the ability to exercise
effective control or influence over the management or operations of the subsidiary to an
extent equal to or greater than that of the FSA or an operating subsidiary thereof.
The FSA holds more than 50 percent of the voting or equivalent interests in the operating
subsidiary, and in the case of an LLC or limited partnership, the FSA and operating
subsidiary thereof is the sole general partner or sole managing member, provided that no
other partners or members have the ability to bind the partnership or LLC.
The FSA is required under GAAP to consolidate its financial statements with those of the
operating subsidiary.
The proposed activity is listed in the “activities eligible for expedited review section” of
12 CFR 5.38(f)(5) or is substantively the same as a previously approved activity and the
activity will be conducted in accordance with the same terms and conditions applicable to
the previously approved activity.

Under this process, an FSA’s application to establish or acquire the operating subsidiary, or
commence a new activity in an existing operating subsidiary, that meets the requirements
listed above is deemed approved as of the 30th day after the OCC receives the filing, unless
the OCC notifies the FSA that the filing is not eligible for expedited review or extends the
review period under 12 CFR 5.13(a)(2). Appendix C discusses in more detail those operating
subsidiary activities eligible for the expedited review process. Any FSA filing for expedited
review under this section is deemed to have represented that the operating subsidiary will
conduct the activity in a manner consistent with OCC guidance and under the same terms and
conditions as would be applicable if the activity were conducted directly by the FSA.

Standard Review
If an application does not qualify for expedited review, the filing is processed under the
standard review process and the application must receive prior written approval from the
OCC to establish or acquire an operating subsidiary, or to perform a new activity in an
existing operating subsidiary.

Exceptions
The regulation requires an FSA to file an operating subsidiary application only when such a
filing is required by 12 USC 1828(m). The statute provides that the filing requirement does
not apply to any federal savings bank that was chartered before October 15, 1982, as a
savings bank under state law, or a savings association that acquired its principal assets from
an institution that was chartered before October 15, 1982, as a savings bank under state law.
A trust formed to securitize assets held by the savings association as part of its business is not considered an
operating subsidiary subject to 12 CFR 5.38. 12 CFR 5.38(e)(2)(iii)(C).
9

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In addition, the filing requirement under 12 USC 1828(m) does not apply when an FSA
proposes to establish or acquire an insured depository institution.

Fiduciary Powers
If an operating subsidiary of an FSA proposes to accept traditional fiduciary appointments
for which fiduciary powers are needed, such as acting as a trustee or an executor, then both
the FSA and the operating subsidiary must have fiduciary powers. Operating subsidiaries that
engage in fiduciary activities generally are either a national bank limited to the activities of a
trust company or a state trust company. If a limited purpose national bank is proposed, the
OCC processes the charter application together with the operating subsidiary application.
If an operating subsidiary of an FSA proposes to exercise investment discretion on behalf of
its customers or provide investment advice for a fee, but not accept traditional fiduciary
appointments, the operating subsidiary is not required to have fiduciary powers, but the FSA
must have OCC approval to exercise fiduciary powers, unless the operating subsidiary is
registered under the Advisers Act.

Service Corporations—FSA
Section 5(c)(4)(B) of the Home Owners’ Loan Act (HOLA) authorizes FSAs to invest in
service corporations. There is no similar authority for national banks. Service corporations
may engage in any of the permissible activities listed in 12 CFR 5.59(f). In addition, an FSA
may request OCC approval for a service corporation to engage in any other activity
reasonably related to the activities of financial institutions. The OCC may require the filer to
submit a legal analysis if the proposal is novel or unusually complex, or if the proposal raises
substantial unresolved legal issues. In such cases, the OCC encourages the filer to arrange a
prefiling meeting with the appropriate director for District Licensing. Additionally, any FSA
subject to supervisory concerns should provide financial information to support the proposed
transaction (for example, capital or strategic plan, cost projections, business plan, and
pro forma financial projections).
A service corporation may be organized as a corporation, LLC, limited partnership, or any
other form that provides the same protections as the corporate form of organization.
Although an FSA’s investment in service corporations is subject to certain limits, the assets
of an FSA’s service corporation are not subject to the investment limitations applicable under
section 5(c) of the HOLA. An FSA is not required to have any minimum percentage
ownership interest or have control of a service corporation in order to designate an entity as a
service corporation.
Generally, an FSA may invest up to 3 percent of its assets in the capital stock, obligations,
and other securities of service corporations. Any investment that would cause an FSA’s
investment in service corporations, in the aggregate, to exceed 2 percent of assets, or any
investment made while the FSA’s investments in service corporations exceeds 2 percent of
assets, must serve primarily community, inner city, or community and economic

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development or public welfare purposes consistent with 12 CFR 24. An FSA must designate
the investments serving those purposes.
In accordance with 12 USC 1467a(m)(5) (the Qualified Thrift Lender Test), an FSA may
decide whether to consolidate the assets of a particular service corporation for purposes of
calculating qualified thrift investments. If a service corporation’s assets are not consolidated
with the assets of the FSA for that purpose, the FSA’s investment in the service corporation
is considered in calculating the FSA’s qualified thrift investments.
In considering whether to approve an FSA’s investment in a service corporation, the OCC
considers whether
•
•
•
•

•

the service corporation’s proposed activity is legally permissible.
the service corporation’s proposed activity is consistent with safe and sound banking
practices and does not endanger the safety and soundness of the parent FSA.
the FSA’s aggregate outstanding investments in service corporations are within the limits
set forth in 12 CFR 5.59(g).
investments in the capital stock, obligations, or other securities of a first-tier service
corporation are available only to savings associations located in the same state in which
the FSA has its home office; these restrictions do not apply to lower-tier service
corporations.
the FSA’s performance of the activity through the service corporation is not in
contravention of OCC policy.

Failure to Comply
If a service corporation fails to comply with any of the requirements of 12 CFR 5.59, the
FSA must notify the appropriate director for District Licensing. If the FSA is unable to
comply with the requirements within 90 days of failing to meet such requirements, it must
dispose of its investment in the service corporation unless the OCC otherwise advises.

Application
An FSA generally must first submit an application to establish or acquire a service
corporation, or to perform a new activity in an existing service corporation. 10 When filing an
application, the FSA should provide the information included in the Service Corporation
Application form.

Expedited Review
To qualify for the expedited review process, the FSA that is filing the service corporation
application must be well capitalized and well managed (see Glossary) and the service
corporation must engage only in one or more of the activities listed in 12 CFR 5.59(f).
10

See 12 CFR 5.59.

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Under this process, an FSA’s application to establish or acquire a service corporation, or
commence a new activity in an existing service corporation, that meets the requirements is
deemed approved as of the 30th day after the OCC receives the filing, unless the OCC
notifies the FSA that the filing is not eligible for expedited review or extends the review
period under 12 CFR 5.13(a)(2). Appendix D discusses in more detail those service
corporation activities eligible for the expedited review process. Any FSA filing for expedited
review under this section is deemed to have represented that the service corporation will
conduct the activity in a manner consistent with OCC guidance and under the same terms and
conditions as would be applicable if the activity were conducted directly by the FSA.

Standard Review
If an application does not qualify for expedited review, the filing is processed under the
standard review process and the application must receive prior written approval from the
OCC to establish or acquire a service corporation, or to perform a new activity in an existing
service corporation.

Exceptions
The regulation requires an FSA to file a service corporation application only when such a
filing is required by 12 USC 1828(m). The statute provides that the filing requirement does
not apply to any federal savings bank that was chartered prior to October 15, 1982, as a
savings bank under state law, or a savings association that acquired its principal assets from
an institution that was chartered prior to October 15, 1982, as a savings bank under state law.
In addition, the filing requirement under 12 USC 1828(m) does not apply when an FSA
proposes to establish or acquire an insured depository institution.

Redesignation—FSA
An FSA that proposes to redesignate a service corporation as an operating subsidiary, or an
operating subsidiary as a service corporation, must submit a notification to the OCC at least
30 days before the redesignation date.11 The FSA should file the Subsidiary Redesignation
Notice form.
The OCC may require an application if the redesignation presents policy, supervisory, or
legal issues. If the OCC requires an application, the OCC’s standard operating subsidiary or
service corporation application review process applies.

Bank Service Company—National Bank and FSA
A bank service company is a corporation whose capital stock is owned by one or more
insured depository institutions or by an LLC whose members are insured depository
11

12 CFR 5.38(f)(6), 5.59(h)(4).

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institutions. The Bank Service Company Act authorizes banks and savings associations to
invest in bank service companies. If the bank service company has both national and statechartered insured depository institution shareholders or members, the activities conducted
must be permissible for each investing institution. When two or more banks wish to invest in
the same bank service company, one filing on behalf of all the individual investors may be
made as long as the other banks are identified. If there is more than one investing bank, the
bank with the largest dollar amount invested is deemed to be the principal investor (see
Glossary). A bank may not invest more than 10 percent of its paid-in and unimpaired capital
and unimpaired surplus in any bank service company, and the bank’s total investment in all
bank service companies may not exceed 5 percent of the bank’s total assets.
A bank intending to make an investment in a bank service company, or to perform a new
activity in a bank service company, generally must submit a notice to, and receive approval
from, the OCC. A bank that intends to invest in a bank service company that provides only
certain clerical or data-processing services only for depository institutions, however, is not
required to provide notice to the OCC. 12 The OCC does not require a filing if a bank invests
in the capital stock or equity of a bank service company that provides any service (other than
deposit taking) at any geographical location that the Federal Reserve Board has determined
by regulation to be permissible for a bank holding company. In such cases, however, the
bank must obtain the Federal Reserve Board’s approval.

Filing Process
A bank that files a notice seeking OCC approval to make an investment in a bank service
company, or to perform a new activity in a bank service company, should provide the
information included on the Bank Service Company Notice form.
Expedited Review
To qualify for the expedited review process, a bank making an investment must be well
capitalized and well managed (see Glossary) and the bank service company must engage
only in activities that are permissible for the bank service company. The permissible
activities are in 12 USC 1864, and the implementing regulation is in 12 CFR 5.35(f)(2).
Under this process, a notice that meets the requirements is deemed approved as of the 30th
day after the OCC receives the filing, unless the OCC notifies the bank that the filing is not
eligible for expedited review or extends the review period under 12 CFR 5.13(a)(2). Any
bank making an investment under the expedited review process is deemed to have agreed that
the bank service company will conduct the activity in a manner consistent with OCC
guidance.

Notwithstanding this exception from the bank service company filing requirement, an FSA that proposes to
own 25 percent or more of the stock of a such bank service company must file a notice with the OCC, pursuant
to 12 USC 1828(m).

12

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Standard Review
If a notice does not qualify for expedited review, the filing will be processed under the
standard review process and the OCC will make a final decision regarding the proposed
investment within 60 days of the date it receives the filing. If the OCC fails to make a
decision within that time, the investment is deemed to be approved, unless the OCC notifies
the bank of significant supervisory or compliance concerns or legal or policy issues.
No Notice Required
No filing is required for a bank service company that provides the following services only for
depository institutions: 13
•
•
•
•

Check and deposit posting and sorting.
Computation and posting of interest and other credits and charges.
Preparation and mailing of checks, statements, notices, and similar items.
Any other clerical, bookkeeping, accounting, statistical, or similar function.

Decision Criteria
In considering whether to grant approval for the investment in a bank service company, the
OCC considers whether
•
•
•

the proposed activity is legally permissible.
the activity is consistent with safe and sound banking practices.
the bank’s performance of the activity is not in contravention of OCC policy.

The OCC may, at any time, limit a bank’s investment in a bank service company or may
limit or refuse to permit any activities in any bank service company for which a bank is the
principal investor for supervisory, legal, or safety and soundness reasons.

Financial Subsidiaries—National Bank
A national bank may, directly or indirectly, acquire control of or hold an equity interest in a
financial subsidiary, or commence a new activity in an existing financial subsidiary upon
application to the OCC. As authorized by the GLBA, a financial subsidiary is a corporation,
LLC, or similar entity controlled by one or more insured depository institutions. A financial
subsidiary may conduct activities that are permissible for national banks in addition to those
that are “financial in nature” or incidental to financial activities. Financial subsidiaries are
national bank subsidiaries that are not operating subsidiaries (that is, operating subsidiaries
engage only in activities the national bank may engage in directly under the same terms and
conditions applicable to national banks) or subsidiaries that national banks otherwise are
specifically authorized to control by the express terms of a federal statute. For a national
bank to own an interest in a financial subsidiary, the bank and the financial subsidiary must
13

FSAs may be required to file under 12 USC 1828(m). Refer to 12 CFR 5.(f)(3).

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meet certain requirements and comply with specified safeguards. There is no similar
authority for FSAs.

Qualifications
A national bank may control or hold an interest in a financial subsidiary only if
•
•

•

•

the national bank and each depository institution affiliate of the national bank, which
includes any uninsured national trust bank, are well capitalized and well managed (see
Glossary).
the national bank and each insured depository institution affiliate received a rating of
“satisfactory” or better at its most recent Community Reinvestment Act (CRA)
examination. A national bank may not apply to commence any additional expanded
financial activity, or to directly or indirectly acquire control of a company engaged in
such activity, if it or any of its insured depository institution affiliates received a less than
“satisfactory” CRA rating on its most recent CRA examination before the national bank
would file its notice. National banks that have not yet received a CRA rating or special
purpose national banks that are not CRA-rated may submit a notice if they meet all other
qualifications and safeguards.
the aggregate consolidated total assets of all financial subsidiaries of the national bank do
not exceed the lesser of 45 percent of the consolidated total assets of the parent bank or
$50 billion (or such greater amount as is determined according to an indexing mechanism
jointly established by regulation by the Secretary of the Treasury and the Federal Reserve
Board).
the national bank has at least one issue of outstanding eligible debt (see Glossary) that
meets such standards of creditworthiness or other criteria as the Secretary of the Treasury
and the Federal Reserve Board may jointly establish if the national bank is one of the 100
largest insured banks. The eligible debt requirement does not apply if the financial
subsidiary is engaged solely in activities in an agency capacity.

Activities
A financial subsidiary may engage in the following:
•
•
•
•
•

Lending, exchanging, transferring, investing for others, or safeguarding money or
securities.
Engaging as agent or broker in any state to insure, guarantee, or indemnify against loss,
harm, damage, illness, disability, death, or defects in title, or to provide annuities as agent
or broker.
Providing financial, investment, or economic advisory services, including advising an
investment company as defined in section 3 of the Investment Company Act,
15 USC 80a-3.
Issuing or selling instruments representing interests in pools of assets permissible for a
bank to hold directly.
Underwriting, dealing in, or making a market in securities.

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•

•

•
•

Engaging in any activity the Federal Reserve Board has determined, by order or
regulation in effect on November 12, 1999, to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto (subject to the same
terms and conditions in the order or regulation, unless the order or regulation is modified
by the Federal Reserve Board).
Engaging in the United States in any activity that a bank holding company may engage in
outside the United States and that the Federal Reserve Board has determined, under
regulations prescribed or interpretations issued pursuant to the Bank Holding Company
Act (BHCA) as in effect on November 11, 1999, to be usual for the transaction of
banking or other financial operations abroad.
Activities that the Secretary of the Treasury, in consultation with the Federal Reserve
Board, determines to be financial in nature or incidental to a financial activity.
Activities that may be conducted by an operating subsidiary pursuant to 12 CFR 5.34.

Exceptions
There are certain activities a financial subsidiary cannot engage in as principal: 14
•

•
•

Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability or
death, or defects in title, except to the extent permitted under the GLBA (certain types of
insurance underwriting and reinsurance the OCC permitted before January 1, 1999, are
grandfathered), or providing or issuing annuities the income of which is subject to tax
treatment under section 72 of the Internal Revenue Code.
Real estate development or real estate investment, unless otherwise expressly authorized
by law.
Activities authorized for bank holding companies by section 4(k)(4)(H) or (I) of the
BHCA (certain merchant banking investments), 12 USC 1843(k)(4)(H) or (I).

Safeguards
A national bank is required to meet certain safety and soundness requirements when
engaging in activities through a financial subsidiary. Specifically, a national bank
establishing a financial subsidiary must do the following: 15
•

•
•

For regulatory capital purposes, deduct the aggregate amount of its outstanding equity
investment, including retained earnings, in its financial subsidiaries from its total assets
and tangible equity and deduct such investment from its regulatory capital as provided by
12 CFR 3.22(a)(7).
Not consolidate its assets and liabilities with those of its financial subsidiary or
subsidiaries.
Ensure that any published financial statements of the national bank, in addition to
providing information prepared in accordance with GAAP, separately present financial

14

12 CFR 5.39(f).

15

12 CFR 5.39(h).

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•
•
•

•

information for the national bank in a manner reflecting the capital adjustments
previously described.
Have reasonable policies and procedures to preserve the separate corporate identity and
limited liability of the national bank and its financial subsidiaries.
Have procedures for identifying and managing operational and financial risk within the
national bank and the financial subsidiary that adequately protect the national bank from
those risks.
Except for certain insurance subsidiaries, apply sections 23A and 23B of the Federal
Reserve Act, as implemented by Regulation W (12 CFR 223), to transactions with a
financial subsidiary in the following manner:
− A financial subsidiary is deemed to be an affiliate and is not deemed to be a
subsidiary of the national bank.
− The purchase of or investment in a security issued by a financial subsidiary must be
valued at the greater of: (1) the total amount of consideration given (including
liabilities assumed) by the bank, reduced to reflect amortization of the security to the
extent consistent with GAAP, or (2) the carrying value of the security (adjusted so as
not to reflect the bank’s pro rata portion of any earnings retained or losses incurred by
the financial subsidiary after the bank’s acquisition of the security).
− Any purchase of, or investment in, the securities of a financial subsidiary of a national
bank by an affiliate of the national bank is considered to be a purchase of, or
investment in, such securities by the national bank.
− Any extension of credit by an affiliate of a national bank to a financial subsidiary of
the national bank is considered an extension of credit by the national bank to the
financial subsidiary if the extension of credit is treated as capital of the financial
subsidiary under applicable law.
− Any other extension of credit by an affiliate of the national bank to its financial
subsidiary is considered an extension of credit by the national bank to the financial
subsidiary if the Federal Reserve Board determines that such treatment is necessary or
appropriate to prevent evasions of the Federal Reserve Act or the GLBA.
Deem the financial subsidiary a subsidiary of a bank holding company and not a
subsidiary of the national bank for purposes of the anti-tying prohibitions.16

Failure to Continue to Meet Qualifications
The national bank and its affiliated depository institutions must continue to satisfy the
qualification requirements and safeguards following the national bank’s acquisition of,
control of, or acquisition of an interest in a financial subsidiary. A national bank failing to
continue to satisfy these requirements is subject to the following procedures and
requirements:
•

16

The OCC must give written notice to the national bank (and, in the case of an affiliated
depository institution, to that depository institution’s appropriate federal banking agency)
outlining how or why the national bank or its affiliated depository institution does not

12 USC 1971 et seq.

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•
•
•

continue to meet the qualification and safeguard requirements. The national bank is
deemed to have received the notice three business days after the OCC mails the letter.
The national bank must execute an agreement, no later than 45 days after the receipt of
the notice, with the OCC to comply with the qualification and safeguard requirements,
unless the OCC grants the national bank additional time.
The OCC may impose limitations on the conduct or activities of the national bank or any
subsidiary of the national bank as the OCC determines appropriate under the
circumstances.
The OCC may require the national bank to divest control of a financial subsidiary if the
national bank does not correct the conditions within 180 days after receipt of the letter.

A national bank no longer meeting the eligible debt qualification, if applicable, may not
directly or through a subsidiary purchase or acquire any additional equity capital of any
financial subsidiary until the national bank again meets the qualification.

Filing Process
The GLBA requires OCC approval of financial subsidiaries to be based only on specific
statutory factors. The OCC considers financial subsidiary applications to be approved upon
receipt of the national bank’s submission of an application with the appropriate certifications
that it meets the required criteria. There are two options for submitting an application to
acquire control of, or hold an interest in, a financial subsidiary, or to start a new activity in an
existing financial subsidiary.
Certification With Subsequent Application
The national bank should provide the information included on the Financial Subsidiary
Certification form. After completing the formal certification, whenever the national bank
seeks OCC approval to acquire or hold an interest in any financial subsidiary, the national
bank must file a written Financial Subsidiary Notice with the appropriate director for District
Licensing when the financial subsidiary commences operations.
Combined Certification and Application
As a second option, a national bank may provide the information included on the combined
Application form, Financial Subsidiary Certification and Notice, with the appropriate director
for District Licensing at least five business days before acquiring control of, or an interest in,
a financial subsidiary, or before commencing a new activity in an existing financial
subsidiary.

Equity Investments—National Bank
Pursuant to 12 USC 24(Seventh) and other statutes, national banks are permitted to make
various types of equity investments. The OCC may review such investments on a case-bycase basis. Equity investments must comply with 12 CFR 44 (the Volcker rule), as
applicable.
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Other Statutory Subsidiaries
A national bank may make a controlling or non-controlling equity investment in the
following statutory subsidiaries without prior approval from the OCC:
•

•
•
•
•
•
•

•
•

An agricultural credit corporation. A national bank may purchase stock of a corporation
organized to make loans to farmers and ranchers for agricultural purposes for its own
account. Such equity investments in agricultural credit corporations are authorized under
12 USC 24(Seventh) and are limited to 20 percent of the unimpaired capital and surplus
of the bank unless it owns at least 80 percent of the stock of the agricultural credit
corporation. This requires an after-the-fact notice.
A savings association eligible to be acquired under section 13 of the Federal Deposit
Insurance Act, 12 USC 1823.
A bankers’ bank. A national bank may invest up to 10 percent of its capital and surplus in
an insured bankers’ bank or in the holding company of such a bank, provided that it does
not own more than 5 percent of any class of voting securities.
A safe deposit corporation. Investment in a safe deposit corporation organized under state
law may not exceed 15 percent of the national bank’s unimpaired, paid-in capital and
15 percent of its unimpaired surplus.
A corporation authorized to be created by Title IX of the Housing and Urban
Development Act of 1968, 42 USC 3931 et seq.
A partnership, limited partnership, or joint venture formed pursuant to section 907(a) or
907(c) of the Housing and Urban Development Act of 1968, 42 USC 3937(a) or 3937(c).
A state housing corporation. A national bank may make an equity investment in any state
housing corporation incorporated in the state in which the bank is located, provided that
its investments do not exceed 5 percent of its unimpaired, paid-in capital stock plus
5 percent of its unimpaired surplus fund.
A small business investment company (SBIC). A national bank may purchase SBIC stock
provided that the aggregate amount of such investments does not exceed 5 percent of the
bank’s capital and surplus.
A community development corporation or other community and economic development
entity. A national bank may make investments directly or indirectly, each of which is
designed primarily to promote the public welfare, including the welfare of low- and
moderate-income communities or families, or other areas targeted by a government entity
for redevelopment, or would be considered a qualified “community development
investment” activity for the purposes of the CRA (12 CFR 25). Such equity and debt
investments are authorized under 12 USC 24(Eleventh) and the implementing regulation,
12 CFR 24. A bank may not make an investment that would expose the bank to unlimited
liability. In no case may a bank’s aggregate outstanding public welfare investments
exceed 15 percent of its capital and surplus. Generally, an eligible bank, with aggregate
public welfare investments less than 5 percent of its capital and surplus, may provide an
after-the-fact notice to the Deputy Comptroller for Community Affairs. All other bank
investments require the OCC’s prior written approval. See the OCC’s Public Welfare
Investments Resource Directory, and contact the Community Affairs Division at (202)
649-6420 or [email protected] for more information.

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•

•
•

A bank premises corporation. A national bank may invest in its bank premises or in a
corporation holding the national bank’s premises. Such equity investments in bank
premises corporations have been characterized as statutory subsidiaries and not operating
subsidiaries. These equity investments do not require prior approval unless they exceed
the limitation for investing in bank premises. See the “Bank Premises and Equipment”
booklet of the Comptroller’s Handbook.
A rural business investment company (RBIC). A national bank may invest in an RBIC
provided that the investments do not exceed 5 percent of the bank’s capital and surplus,
pursuant to 7 USC 2009cc-9. This requires an after-the-fact notice.
Any other equity investment that may be authorized by statute after February 12, 1990, if
not covered by other applicable OCC regulation. This requires an after-the-fact notice.

Filing Process
Generally, a national bank must provide a written notice to the appropriate director for
District Licensing within 10 days of making an equity investment in a statutory subsidiary.
The written notice must include a description and the amount of the national bank’s
investment. The OCC reserves the right to require additional information as necessary.

Non-controlling Equity Investments—National Bank
National banks also may make non-controlling equity investments directly or through an
operating subsidiary in certain types of entities when the investment is part of, or incidental
to, the business of banking. Investments of this type are permitted under a national bank’s
powers under 12 USC 24(Seventh) and 12 CFR 5.36. Refer to appendix B of this booklet for
a summary of non-controlling investments approved by published OCC precedent.
A national bank may not make a non-controlling investment if it is unable to make the
following representations and certifications:
•
•
•
•

Provide a description of the structure of the investment and activities conducted by the
enterprise in which the bank is investing.
The national bank is able to prevent the enterprise from engaging in activities not set
forth in 12 CFR 5.34(f)(5) or in published OCC precedent for previously approved
activities or is able to withdraw its investment.
The investment is convenient or useful to the national bank in carrying out its business
and not a mere passive investment unrelated to the national bank’s banking business.
The national bank’s loss exposure is limited, as a legal matter, and the bank does not have
unlimited liability for the obligations of the enterprise.

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Filing Process
After-the-Fact Notice
A qualifying national bank may submit an after-the-fact notice for the non-controlling
investment. A qualifying national bank is one that is well managed and well capitalized (see
Glossary) at the time of the investment. As set forth in 12 CFR 5.36(e), the entities’ proposed
activity must be listed under 12 CFR 5.34(f)(5) or an activity that is substantively the same as
a previously approved activity, provided it will be conducted under the same terms and
conditions as stated in the precedent. In its written notice, the national bank must include the
information, representations, and certifications detailed in 12 CFR 5.36(e)(1)-(7).
The notice may be filed with the appropriate director for District Licensing no later than
10 days after making the investment. The OCC considers these notices to be approved upon
receipt of the national bank’s submission. The national bank should submit the information
included on the Other Equity or Pass-Through Investments After the Fact Notice form.
Application
The national bank must submit a non-controlling investment application and receive prior
approval for the investment if any of the following apply: (1) the national bank is not well
managed and well capitalized at the time of the investment; (2) the proposed activity is not
listed in 12 CFR 5.34(f)(5) or substantially the same as a previously approved activity; or (3)
the national bank cannot certify that the enterprise the national bank is investing in agrees to
be subject to OCC supervision and examination. The national bank should submit the
information included on the Other Equity or Pass-Through Investments Application form.
Under expedited review,17 an application is considered approved by the OCC as of the 10th
day after receipt if (1) the national bank states which paragraphs of 12 CFR 5.34(f)(5)
describe the activity or that the activity is substantively the same as a previously approved
activity (among other things); (2) the national bank certifies that it is well capitalized and
well managed; (3) the book value of the national bank’s non-controlling investment for
which the application is being submitted is no more than 1 percent of the bank’s capital and
surplus; (4) no more than 50 percent of the enterprise is owned or controlled by banks or
savings associations subject to examination by an appropriate federal banking agency or
credit unions insured by the National Credit Union Association (NCUA); and (5) the OCC
has not notified the national bank that the application has been removed from expedited
review or that the expedited review process is extended.

17

12 CFR 5.36(f)(2).

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No Filing Required
A national bank may make a non-controlling investment without a filing 18 if all the following
requirements or conditions are met:
• The activities of the entity are limited to those activities previously reported by the
national bank in connection with making or acquiring a non-controlling investment.
• The activities continue to be legally permissible for a national bank.
• The non-controlling investment will be made in accordance with any conditions imposed
by the OCC in approving any prior non-controlling investment conducting these
activities.
• The national bank is able to make the representations and certifications specified in 12
CFR 5.36(e)(3)–(e)(7).

Pass-Through Investments—FSA
Pursuant to 12 CFR 160.32, FSAs are permitted to make pass-through investments directly or
through an operating subsidiary in entities that engage only in activities in which an FSA
may engage, subject to the requirements and filing procedures of 12 CFR 5.58. The
investment may be in a corporation, LLC, partnership, trust, or similar business entity.
Appendix E lists pass-through investments that have been approved by published precedent
issued by predecessor regulators of FSAs. 19
An FSA may not make a pass-through investment if it is unable to make the following
representations and certifications:
•
•
•
•

Provide a description of the structure of the investment and the activities conducted by
the enterprise in which the bank is investing.
The FSA is able to prevent the enterprise from engaging in activities not set forth in 12
CFR 5.38(f)(5) or in published OCC precedent for previously approved activities or is
able to withdraw its investment.
The investment is convenient or useful to the FSA in carrying out its business and not a
mere passive investment unrelated to the banking business.
The FSA’s loss exposure is limited, as a legal matter, and the FSA does not have
unlimited liability for the obligations of the enterprise.

Filing Process
After-the-Fact Notice
A qualifying FSA may submit an after-the-fact notice for the pass-through investment. A
qualifying FSA is one that is well managed and well capitalized (see Glossary) at the time of
the investment. As set forth in 12 CFR 5.58(e), the entity’s proposed activity must be an
12 CFR 5.36(g)
The predecessor regulators of FSAs were the Office of Thrift Supervision (OTS) and its predecessor, the
Federal Home Loan Bank Board (FHLBB).

18
19

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activity listed under 12 CFR 5.38(f)(5) or an activity that is substantively the same as a
previously approved activity, provided it will be conducted under the same terms and
conditions as stated in the precedent. Refer to appendix E of this booklet for a summary of
pass-through investments approved by published precedent. In its written notice, the FSA
must include the information, representations, and certifications detailed in 12 CFR
5.58(e)(1)-(7).
The notice may be filed with the appropriate director for District Licensing no later than
10 days after making the investment. The OCC considers these notices to be approved upon
receipt of the bank’s submission. The bank should provide the information included on the
Other Equity or Pass-Through Investments After the Fact Notice form.
Application
The FSA must submit a pass-through investment application and receive prior approval for
the investment if any of the following apply: (1) the FSA is not well managed or well
capitalized at the time of the investment; (2) the proposed activity is not listed in 12 CFR
5.38(f)(5) or substantively the same as a previously approved activity; or (3) the FSA cannot
certify that the enterprise the FSA is investing in agrees to be subject to OCC supervision and
examination.. The FSA should provide the information included on the Pass-Through
Investments Application.
An application processed under expedited review by an FSA is considered approved by the
OCC on the 10th day after receipt if the FSA can make the representation required by 12
CFR 5.58(e)(2) and the certification required by 12 CFR 5.58(e)(3); the book value of the
FSA’s pass-through investment is no more than 1 percent of the FSA’s capital and surplus;
no more than 50 percent of the entity is owned or controlled by banks or savings associations
subject to examination by an appropriate federal banking agency or credit unions insured by
the NCUA; and the FSA has not been notified by the OCC that the application has been
removed from expedited review or that the expedited review process is extended.
No Filing Required
An FSA may make a pass-through investment without a filing if all the following
requirements or conditions are met:
•
•
•
•
•

The activities of the entity are limited to those activities previously reported by the FSA
in connection with making or acquiring a pass-through investment.
The activities continue to be legally permissible for an FSA.
The pass-through investment will be made in accordance with any conditions imposed by
the OCC or the OTS in approving any prior pass-through investment conducting these
activities.
The FSA is able to make the representations and certifications specified in 12 CFR
5.38(e)(3)–(e)(7).
The enterprise will not be a subsidiary for the purpose of 12 USC 1828(m).

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An FSA may also make a pass-through investment without a filing if all the following
conditions are met:
•
•
•
•
•

The investment is in an investment company the portfolio of which consists exclusively
of assets the FSA may hold directly.
The investment does not result in more than 10 percent of the FSA’s total capital being
invested in one company.
The book value of the FSA’s aggregate pass-through investments does not exceed
25 percent of its total capital after making the investment.
The investment would not give the FSA direct or indirect control of the company.
The FSA’s liability is limited to the amount of the investment.

12 USC 1828(m) Investments
With limited exceptions, 12 USC 1828(m) requires an FSA to submit an application or
provide notice to the OCC before it establishes or acquires any subsidiary or engages in a
new activity through an existing subsidiary. The filing requirements for operating
subsidiaries and service corporations (12 CFR 5.38 and 5.59, respectively) address the
12 USC 1828(m) filing requirements in most cases. There are circumstances, however, under
which an FSA may establish or acquire a subsidiary that does not meet the definition of
either an operating subsidiary or service corporation. 20 In such situations, the FSA must
submit an application under 12 USC 1828(m) at least 30 days before making the investment
and obtain prior OCC approval. 21
When filing an application, the FSA should provide the information included on the
12 USC 1828(m) Investment Application form.

Other Equity Investments—FSA
FSAs are authorized to make additional types of investments under the HOLA. For example,
section 5(c)(3)(A) authorizes FSAs to make certain investments related to community
development. 22

20

For example, under 12 CFR 5.58, an FSA may acquire a controlling interest in a pass-through investment.

21

12 CFR 5.58(f)(3).

22

Refer to OTS Opinion of the Chief Counsel (May 10, 1995).

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Appendix A

Appendix A: Operating Subsidiary Guidelines—
National Banks
Introduction
These guidelines describe activities of national banks that the OCC has determined may be
performed in an operating subsidiary under the after-the-fact notice available in the OCC’s
operating subsidiary regulations. 23 The citations given in the guidelines for each of the
activities listed provide examples of OCC approvals. 24 Such activities must comply with 12
CFR 44 (the Volcker rule). An operating subsidiary must conduct these activities pursuant to
the same authorization, terms, and conditions that apply to the conduct of such activities by
its parent national bank, unless otherwise specifically provided by statute, regulation, or
published OCC policy. 25 For example, these activities must be conducted in accordance with
other applicable statutes and regulations, including, but not limited to, the federal securities
laws and the Volcker rule, unless the national bank and its operating subsidiary are otherwise
exempt from the Volcker rule. 26 The Volcker rule generally prohibits, subject to certain
exceptions, a banking entity from engaging in proprietary trading and from acquiring or
retaining an ownership interest in, sponsoring, or having certain relationships with a hedge
fund or private equity fund.

Operating Subsidiary Activities—National Banks [5.34(f)(5)]
(A) Holding and managing assets acquired by the parent bank, including
investment assets and property acquired by the bank through foreclosure or
otherwise in good faith to compromise a doubtful claim, or in the ordinary
course of collecting a debt previously contracted.
National banks and their operating subsidiaries may hold and manage assets acquired by the
parent bank or operating subsidiary, including investment assets and property acquired in
satisfaction of debts previously contracted (DPC).

23

12 CFR 5.34(f)(2) and (5).

The “Application Process” section of this booklet provides further information on the requirements governing
the use of the after-the-fact notice procedure or expedited review. With respect to offshore subsidiaries, see the
“Offshore Subsidiaries” section of this booklet.

24

25

12 CFR 5.34(e)(3).

See 12 USC 1851(h)(1) (exempting certain institutions from the Volcker rule, including institutions that do
not have and are not controlled by a company that has (i) more than $10 billion in total consolidated assets; and
(ii) total trading assets and trading liabilities, as reported on the most recent applicable regulatory filing by the
institution, that are more than 5 percent of total consolidated assets).
26

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Investment Assets
National banks and their operating subsidiaries may own, hold, and manage all or part of the
parent bank’s investment securities portfolio in accordance with the bank’s investment
guidelines. Such activity is permissible as part of, or incidental to, the business of banking.
Moreover, a national bank or its operating subsidiary “may purchase for its own account
investment securities under such limitations and restrictions as the OCC may by regulation
prescribe.” 27 The OCC’s Investment Securities Regulations at 12 CFR 1 prescribe limitations
and restrictions on the purchase of an investment security by a national bank for its own
account. These restrictions similarly apply to a national bank’s operating subsidiary. Limits
on securities activities in 12 CFR 1 generally are applied to the bank and the operating
subsidiary combined.
DPC Property
12 USC 29 governs the treatment of real property taken in satisfaction of DPC. National
banks should consult 12 CFR 34, subpart E, “Other Real Estate Owned,” for specific
information on the treatment of DPC real estate. In addition, national banks are authorized to
take other property in satisfaction of DPC under 12 USC 24(Seventh) for sale to reduce the
bank’s losses on the underlying debts. A national bank may take appropriate steps to preserve
the property’s value for sale. For example, if a national bank takes corporate stock in
satisfaction of DPC, it has the implied power to operate the corporation’s business,
particularly when the resale value depends on its uninterrupted operation, provided that the
purpose of operating the corporation’s business is not to speculate on its future value.
Generally, real property must be disposed of within five years and cannot be used for
speculation. Transfer of the DPC assets to the operating subsidiary does not alter the
limitations on the bank’s holding period for that asset. The property need not have been
collateral for the loan in question. The OCC may extend that period up to five additional
years if the bank has made a good faith attempt to dispose of the real estate within the fiveyear period or its disposal within that period would be detrimental to the bank.
A national bank also may hold securities in satisfaction of DPC for five years. This holding
period also may be extended up to an additional five years upon a clearly convincing
demonstration of why an additional holding period is needed.28
Operating subsidiaries established by the notice procedure to engage in DPC activity also
may enter into arrangements as a general or limited partner with depository or nondepository
co-lenders to engage in the orderly acquisition, management, and disposition of DPC assets

27

12 USC 24(Seventh).

12 CFR 1.7 clarifies how a national bank must treat securities held in satisfaction of DPC and provides for the
five-year holding period with limited extensions. It also requires national banks to account for those holdings in
accordance with GAAP and states that they may not be taken for speculative purposes.

28

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stemming from the parent bank’s loans.29 DPC partnership activity must be conducted as
follows:
1. The partnership must be limited to the acquisition, management, and disposition of the
DPC assets;
2. Partners are limited to co-lenders and their agents;
3. DPC assets must be disposed of promptly within the previously described guidelines; and
4. The bank must maintain at its headquarters office and make available to OCC examiners
current information on all DPC assets activities of its operating subsidiary, including the
name and location of each operating subsidiary, each partnership and relevant agreement,
and each DPC asset being held pending disposition.
National banks establishing operating subsidiaries that will engage in debt-equity swap
transactions 30 must follow the standard processing procedures in 12 CFR 5.34.
(B) Providing services to or for the bank or its affiliates, including accounting,
auditing, appraising, advertising and public relations, and financial advice and
consulting.
National banks and their operating subsidiaries may provide internal operational services for
the parent bank, its holding company, and their subsidiaries. 31 These services generally relate
to the day-to-day operations of those entities. Real estate appraisal services are covered under
12 CFR 5.34(f)(5)(xxii).
National banks and their operating subsidiaries may provide advice, opinions, research,
analyses, reports, and other information and opinion on any financial matter to any affiliate
of the operating subsidiary.
(C) Making loans or other extensions of credit, and selling money orders,
savings bonds, and traveler’s checks.
Making Loans or Other Extensions of Credit
National banks and their operating subsidiaries possess broad authority to engage in lending
and lending-related activities. Subject to safety and soundness guidelines, they may originate
loans (including asset-based lending) or other extensions of credit for the bank’s or operating
subsidiary’s account. These activities are permitted for any type of loan, or interest therein,
including consumer loans, accounts receivable, credit card loans, commercial loans,
Interpretive Letter No. 397 (September 15, 1987), reprinted in [1988–89 Transfer Binder] Federal Banking
Law Reporter (Fed. Banking L. Rep.) (Commerce Clearing House [CCH]) ¶ 85,621.
29

No Objection Letter No. 87-10 (November 27, 1987), reprinted in [1988–89 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 84,039; No Objection Letter No. 88-7 (May 20, 1988), reprinted in [1988–89 Transfer Binder]
Fed. Banking L. Rep. (CCH) ¶ 84,047.

30

Interpretive Letter No. 811 (December 18, 1997); Interpretive Letter No. 513 (June 18, 1990), reprinted in
[1990–91 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,215.

31

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residential mortgage loans, and commercial real estate loans. For purposes of this section,
however, only lending activities that (1) are well-established activities previously approved
by the OCC; and (2) do not raise significant policy or supervisory issues qualify for after-thefact notice filings under 12 CFR 5. For example, derivatives transactions, including credit
derivatives that are extensions of credit under 12 CFR 32.2(q), generally do not qualify for
the after-the-fact notice procedure. 32 Also, any bank that considers establishing a real estate
investment trust (REIT) as an operating subsidiary is strongly encouraged to consult first
with the OCC to determine whether an application is required.
Lending may be subject to geographic restrictions under the McFadden Act. Real estate loans
and certain other types of loans are also subject to certain additional restrictions, discussed as
follows.
Personal and Commercial Loans
National banks and their operating subsidiaries are authorized expressly to lend money on
personal security.33 They may also discount, purchase, and negotiate drafts, bills of
exchange, and other evidences of debt. The general power to make personal and commercial
loans essentially is unrestricted.
Real Estate Loans and Related Activities
National banks may make real estate loans pursuant to 12 USC 371. The standards for real
estate-related lending and associated activities for national banks are provided in 12 CFR 34.
Real estate lending may be performed for the account of the bank, or the operating
subsidiary. 34 National banks and their operating subsidiaries may make (or participate in),
arrange, purchase, or sell loans or extensions of credit (or interests therein) secured by liens
or interests in residential or commercial real estate (including acquisition, development, and
construction loans) without any special quantitative limit aside from the general lending
limit, subject to applicable restrictions and requirements of the OCC’s regulations in
12 CFR 34. National banks and their operating subsidiaries may also perform various
activities that are closely related to the lending function, such as gathering census tract
information, auditing loan portfolios, preparing loan documentation, performing flood
insurance services, and inspecting real property.35
The authority to make such loans includes structuring them as “participating loans,” when a
portion of the interest, but not the principal, is contingent on the success of the borrower’s
enterprise. The lender, however, may not take an ownership interest in the underlying real
32

Certain derivative transactions are subject to notice requirements under 12 CFR 7.1030.

33

12 USC 24(Seventh).

Interpretive Letter No. 389 (July 7, 1987), reprinted in [1988–89 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,613.

34

35

See, e.g., Conditional Approval No. 322 (July 30, 1999); Conditional Approval No. 276 (May 8, 1998).

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estate. 36 Certain permissible services (including lending, functions involved in loan
brokerage, preparation of loan documentation, performing flood insurance services,
inspecting real property, and others) qualify as “settlement services” under the Real Estate
Settlement Procedures Act (RESPA). Referrals of these services among the bank and its
lending affiliates are subject to the restrictions relating to “affiliated business arrangements”
(ABA) as defined in RESPA. For additional information and guidance, refer to section (V) of
this appendix, “Providing real estate settlement, closing, escrow, and related services; and
real estate appraisal services for the operating subsidiary, parent bank, or other financial
institutions.”
Other Lending-Related Activities
In addition to direct lending activities, national banks and their operating subsidiaries also
may engage in lending-related activities on behalf of third parties that are part of or
incidental to banking, such as conducting a general mortgage banking business and providing
loan brokerage services. For example, national banks and their operating subsidiaries may
provide real estate asset management and advisory services, furnish debt collection services,
set fees, offer credit reporting services, arrange for the placement of equity interests in
commercial real estate between borrowers and investors,37 market and sell mortgage loans in
the secondary market, provide customer service support for a credit card business, negotiate
and close loans for third-party lenders, arrange loan commitments from third parties, act as
document custodians of residential mortgage loan documents for third parties, assist state and
local governments in placing funds made available through mortgage revenue bonds, and
engage in merchant processing activities. 38 Activities undertaken for third parties, such as
brokerage or servicing activities, may be conducted at any location without regard to
branching restrictions.
Selling Money Orders, Savings Bonds, or Traveler’s Checks
National banks and their operating subsidiaries generally may sell these instruments without
regard to where the bank’s branch offices are or could be located. In addition,
12 CFR 7.1014, allows bonded agents to sell money orders on behalf of the bank or its
operating subsidiary at nonbanking locations. See section (Y) of this appendix.
12 CFR 7.1006; Interpretive Letter No. 620 (July 15, 1992), reprinted in [1993–94 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 83,502; Interpretive Letter No. 389, supra; Interpretive Letter No. 244 (January 26,
1982), reprinted in [1983–84 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,408; Interpretive Letter No.
204 (June 17, 1981), reprinted in [1981–82 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,285.

36

Subject to the conditions in Interpretive Letter No. 271, reprinted in [1983–84 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 85,408.

37

Interpretive Letter No. 389, supra; Interpretive Letter No. 387 (June 22, 1987), reprinted in [1988–89
Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,611; Interpretive Letter No. 271, supra; S. rep. No. 536,
97th Cong., 2d Sess. 60 (1982); Interpretive Letter No. 944 (August 12, 2002). See also Letter from J. Michael
Shepherd, Senior Deputy Comptroller (November 19, 1990); Letter from Karen J. Wilson, Deputy Comptroller
(March 13, 1990); Letter from Karen J. Wilson, Deputy Comptroller (November 29, 1989); Letter from Emory
W. Rushton, Acting Deputy Comptroller (December 19, 1986).

38

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(D) Purchasing, selling, servicing, or warehousing loans or other extensions of
credit, or interests therein.
National banks and their operating subsidiaries may, subject to safety and soundness
considerations, engage in purchasing (including factoring), selling, servicing, or warehousing
loans or other extensions of credit for the national bank’s or operating subsidiary’s account or
for the account of others. These activities are permitted for any type of loan, or interest
therein, including consumer loans, accounts receivable, credit card loans, commercial loans,
residential mortgage loans, and commercial real estate loans. Most such loans and activities
are subject to the same general authorities and limitations as apply to the origination of loans.
See section (C) of this appendix.
The OCC interprets the general lending authority of 12 USC 24(Seventh) as permitting
national banks and their operating subsidiaries to act as agent in selling, warehousing, or
servicing mortgage and other loans. 39 Warehousing loans generally involves holding loans
that are closed and awaiting sale or delivery to an investor. National banks and their
operating subsidiaries may engage in mortgage collateral warehousing for third parties,
which involves the receipt, verification, and storage of loan documentation for lenders.40 In
addition, they may provide warehousing services to extend credit to the loan originator in
exchange for an assignment of the loans.
(E) Providing courier services between financial institutions.
National banks and their operating subsidiaries may transport items pertaining to banking
operations between (1) the offices of the bank, the bank, and its affiliated financial
institutions; (2) the bank and nonaffiliated financial institutions; (3) offices of nonaffiliated
financial institutions; (4) offices of noncustomers of the bank; and (5) noncustomers of the
bank and their financial institutions. 41 National banks may provide courier services for
financial institutions under the following circumstances:
•

For the bank itself: transportation of items related solely to the internal operations of the
bank. 42 This includes transportation of cash between bank offices or for restocking the
bank’s automated teller machines (ATM). 43

Conditional Approval No. 338 (November 10, 1999); Conditional Approval No. 264 (December 29, 1997);
Conditional Approval No. 243 (May 9, 1997).

39

40

Letter from Michael Patriarca, Deputy Comptroller (May 28, 1986).

41

Corporate Decision No. 2003-9 (June 25, 2003).

42

Letter from Peter Liebesman, Assistant Director, Legal Advisory Services Division (March 7, 1983).

12 CFR 5.34(f)(5)(v); Corporate Decision No. 2003-9 (June 25, 2003); Interpretive Letter No. 513 (June 18,
1990), reprinted in [1990–91 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,215; No Objection Letter No.
89-04 (July 11, 1989), reprinted in [1989–90 Transfer Binder] Fed. Banking Law. Rep. (CCH) ¶ 83,061; Letter
from Richard V. Fitzgerald, Director, Legal Advisory Services Division (May 22, 1981).

43

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•
•

For the bank itself and for its affiliated financial institutions: transportation of items
related to banking transactions, such as checks, data-processing materials, and interoffice
mail. 44
For the bank and affiliated and nonaffiliated financial institutions: transportation of cash
and documents related to banking, such as checks, commercial paper, nonnegotiable
instruments, audit and accounting media, and other business records.45

A courier service performing the previously mentioned functions pursuant to the after-thefact notice procedure must not constitute a branch of any bank—that is, the service must not
constitute branching transactions (the receipt of deposits, payment of withdrawals, or
disbursement of loan proceeds) with its customers. If the service does constitute a branch,
branching approval must be sought under the procedures set forth in 12 CFR 5.30.
(F) Providing management consulting, operational advice, and services for
other financial institutions.
National banks and their operating subsidiaries may gather information and provide advice to
any unaffiliated depository institution in the form of information or opinions about its
management and operation, and provide other services tailored to the management and
operational needs of a depository institution customer. National banks traditionally have
performed those activities in their correspondent relationships, under which they act on
behalf of other banks in conducting the banking business. See also section (S) of this
appendix, “Offering correspondent services to the extent permitted by published OCC
precedent for national banks.” Operating subsidiaries may provide a broad range of services
to other depository institutions under this authority.46 Services offered pursuant to this
authority must be those that reflect and incorporate the unique nature of the banking
business. 47
Any actions taken or decisions made by a depository institution customer, based on services
provided by the operating subsidiary, must be a function of the management or board of
directors of the customer, with the operating subsidiary refraining from engaging in a
management role or exercising any form of operating control over the customer.48
44

Letter from Thomas G. DeShazo, Deputy Comptroller (April 26, 1974).

Corporate Decision No. 2003-9 (June 25, 2003); Interpretive Letter No. 513 (June 18, 1990), reprinted in
[1990–91 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,215; No Objection Letter No. 89-04 (July 11,
1989), reprinted in [1989–90 Transfer Binder] Fed. Banking Law. Rep. (CCH) ¶ 83,061; Letter from Richard
V. Fitzgerald, Director, Legal Advisory Services Division (May 22, 1981).

45

Interpretive Letter No. 811, supra; Letter from Emory Rushton, Deputy Comptroller (February 16, 1988);
Interpretive Letter No. 137 (December 27, 1979), reprinted in [1981–82 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,218; Letter from John Shockey, Deputy Chief Counsel (April 12, 1976); Letter from H. Joe Selby,
Deputy Comptroller (October 2, 1975); Letter from Thomas G. DeShazo, Deputy Comptroller (August 22,
1975).

46

47

Interpretive Letter No. 137, supra.

48

Letter from Emory Rushton, Deputy Comptroller (February 16, 1988).

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(G) Providing check guaranty, verification, and payment services.
National banks and their operating subsidiaries may agree to “guarantee” or “verify” the
checks that will be drawn on the bank by its customers. 49 In essence, the national bank or
operating subsidiary agrees with its customers to extend credit, if necessary, to honor the
checks. They may also provide check-cashing services to the general public without regard to
where the national bank’s branch offices are or could be located.
(H) For the bank or its affiliates, providing data-processing, data warehousing
and data transmission products, services, and related activities and facilities,
including associated equipment and technology.
National banks and their operating subsidiaries may collect, process, transcribe, analyze, and
store banking, financial, or economic data, and other types of data if the derivative or
resultant product is banking, financial, or economic data for themselves and their customers
as part of the business of banking. 50 Permissible processing of eligible data includes
provision of data-processing services, data transmission services, facilities (including
equipment, technology, and personnel), databases, and advice. It also includes providing
access to such services, facilities, databases, and advice. Economic data include anything of
value in banking and financial decisions. 51
In addition to the processing of banking, financial, or economic data, national banks and their
subsidiaries may, as activities incidental to the business of banking, provide limited amounts
of nonfinancial information processing to their customers to enhance marketability or use of
a banking service. 52 For example, a national bank selling home banking services can also
provide customers with access to nonbanking services “to increase the customer base for and
the usage of” the home banking service.53 Banks and their subsidiaries that engage in
financial or nonfinancial data processing are expected to be familiar with all applicable
supervisory standards and guidance.54
49

12 USC 24(Seventh).

12 CFR 7.5006(a); Interpretive Letter No. 928, (December 24, 2001); Corporate Decision No. 2000-08 (June
1, 2000); Interpretive Letter No. 811, supra; Letter from Emory Rushton, Deputy Comptroller (February 16,
1988); Interpretive Letter No. 137, supra.

50

12 CFR 7.5006(a); Interpretive Letter No. 928, supra; Corporate Decision No. 2000-08, supra; Conditional
Approval No. 361 (March 3, 2000); Interpretive Letter No. 856 (March 5, 1999).

51

Conditional Approval No. 369 (February 25, 2000); Interpretive Letter No. 742, (August 19, 1996), reprinted
in [1996–97 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81-106.

52

Interpretive Letter No. 611, (November 23, 1992), reprinted in [1992–93 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 83,449.

53

For example, OCC Alert 2001-04, “Network Security Vulnerabilities”; OCC Bulletin 2000-14,
“Infrastructure Threats—Intrusion Risks: Message to Bankers and Examiners”; Federal Financial Institutions
Examination Council (FFIEC) Information Technology Examination Handbook, “Outsourcing Technology
Services” booklet.
54

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(I) Acting as investment adviser (including an adviser with investment
discretion) or financial adviser or counselor to governmental entities or
instrumentalities, businesses, or individuals, including advising registered
investment companies and mortgage or real estate investment trusts,
furnishing economic forecasts or other economic information, providing
investment advice related to futures and options on futures, and providing
consumer financial counseling.
National banks and their operating subsidiaries may provide investment and financial
advisory services and financial counseling as part of banking powers authorized under
12 USC 24(Seventh) or, in the case of activities that are fiduciary in nature, pursuant to their
fiduciary powers under 12 USC 92a. 55
Advisory activities may be provided to individuals, corporations, institutional investors,
correspondent financial institutions, pension and other retirement plans, and others. 56 Those
activities include individualized investment advice, business advisory services, financial
advice, financial planning, investment recommendations, and analyses of economic trends. 57
Various administrative and shareholder functions also are incidental to the provision of
advisory services, including, but not limited to, record keeping, accounting, and other
services. 58 Operating subsidiaries seeking to engage in different advisory activities should
review the applicable sections of this booklet for discussion of the scope of permissible
activities. Any bank with an operating subsidiary engaging in these activities should do so in
accordance with safe and sound banking practices. For more information, refer to the “Retail
Nondeposit Investment Products” and “Asset Management” booklets of the Comptroller’s
Handbook.
Depending on the advisory services offered, the operating subsidiary may need to register
with the SEC as an investment adviser under the Advisers Act and comply with any

12 CFR 9.2(e); Interpretive Letter No. 769 (January 28, 1997), reprinted in [1996–97 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 81-133; Interpretive Letter No. 648 (May 4, 1994), reprinted in [1994 Transfer
Binder] Fed. Banking L. Rep. (CCH) ¶ 83,557; Interpretive Letter No. 367 (August 19, 1986), reprinted in
[1985–87 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,537; Interpretive Letter No. 329 (March 4, 1985),
reprinted in [1985–87 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,499; Decision of the Comptroller of
the Currency Concerning an Application by American National Bank of Austin, Texas, to Establish an
Operating Subsidiary to Provide Investment Advice (American National Decision) (September 23, 1983),
reprinted in [1983–84 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 99,732.
55

Interpretive Letter No. 298 (July 23, 1984), reprinted in [1985–87 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,468; American National Decision, supra.

56

Interpretive Letter No. 516 (July 12, 1990), reprinted in [1990–91 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,220; Interpretive Letter No. 367, supra; Letter from Judith A. Walter, Senior Deputy Comptroller
for National Operations, dated July 17, 1986; American National Decision, supra.

57

Interpretive Letter No. 647 (April 15, 1994), reprinted in [1994 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,558; Interpretive Letter No. 386 (June 19, 1987), reprinted in [1988–89 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,610.

58

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applicable state laws. 59 Banks are excluded specifically from the definition of investment
adviser under the Advisers Act, unless they advise registered investment companies. Bank
operating subsidiaries are fully subject to the Advisers Act. 60
Adviser With Investment Discretion
Investment discretion means, with respect to an account, the sole or shared authority
(whether or not that authority is exercised) to determine what securities or other assets to
purchase or sell on behalf of the account. A bank that delegates its authority over investments
and a bank that receives delegated authority over investments are both deemed to have
investment discretion.61 If an operating subsidiary proposes to accept fiduciary appointments
for which fiduciary powers are required, such as acting as trustee or executor, then the
national bank must have fiduciary powers under 12 USC 92a and the subsidiary also must
have its own fiduciary powers under the law applicable to the subsidiary. 62 Unless the
subsidiary is a registered investment adviser, if an operating subsidiary proposes to exercise
investment discretion on behalf of customers or provide investment advice for a fee, the
national bank must have prior OCC approval to exercise fiduciary powers pursuant to
12 CFR 5.26 and 12 CFR 9. 63
Financial Adviser or Counselor to Governmental Entities or Instrumentalities,
Businesses, or Individuals
To Governmental Entities or Instrumentalities
National banks and their operating subsidiaries may advise state, local, and foreign
governments on financing projects and help them market their securities. National banks may
provide such advice pursuant to their incidental powers.64

Interpretive Letter No. 403 (December 9, 1987), reprinted in [1988–89 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 85,627; Interpretive Letter No. 367, supra.

59

60

15 USC 80b-2(a)(11).

61

12 CFR 9.2(i); Interpretive Letter No. 850 (January 27, 1999).

62

12 CFR 5.34(f)(7)(i).

63

12 CFR 5.34(f)(7)(ii). See also 12 CFR 9.101; Interpretive Letter No. 769, supra.

12 USC 24(Seventh); Interpretive Letter No. 122 (August 1, 1979), reprinted in [1981–82 Transfer Binder]
Fed. Banking L. Rep. (CCH) ¶ 85,203. See also The Bank of Tokyo, Ltd., 76 Federal Reserve Bulletin 654
(1990); The Bank of Nova Scotia, 74 Federal Reserve Bulletin 249 (1988).

64

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To Businesses or Individuals
National banks and their operating subsidiaries may provide financial advice, financial
planning, and counseling to businesses and consumers in a variety of contexts, 65 including
advice and counseling on employee benefits and human resources66 and financial planning. 67
Financial planning services generally include collecting and analyzing a customer’s financial
data; identifying a customer’s financial goals and objectives; preparing a comprehensive
financial plan consisting of recommendations on how to achieve the identified financial goals
and objectives; and evaluating personal, banking, financial, and related economic data and
implementation of the financial plan, that is, purchasing the relevant products or services.68 A
comprehensive financial plan may contain tax planning and financial advice and may
recommend the purchase or sale of specific investments or securities.69 A national bank
financial planner may also use financial plans to make other recommendations, such as the
consolidation of loans and purchase of life insurance. 70
Advising Registered Investment Companies
National banks and their operating subsidiaries may act as an investment adviser to an
investment company as part of banking powers authorized under 12 USC 24(Seventh), or
pursuant to their fiduciary powers under 12 USC 92a. 71 Various administrative and
shareholder functions may be provided in connection with the provision of investment
advisory services, including, but not limited to, record-keeping, accounting, and other

65

Interpretive Letter No. 769, supra.

Conditional Approval No. 384 (April 25, 2000); Corporate Decision No. 99-43 (November 29, 1999);
Corporate Decision No. 98-51 (November 30, 1998); Corporate Decision No. 98-13 (February 9, 1998).

66

Interpretive Letter No. 677 (June 28, 1995), reprinted in [1994–95 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,625; Interpretive Letter No. 611, supra; Interpretive Letter No. 403, supra; Interpretive Letter
No. 386, supra; Interpretive Letter No. 353 (July 30, 1985), reprinted in [1985–87 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,523.

67

See Interpretive Letter No. 653 (December 22, 1994), reprinted in [1994–95 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 83,601; Interpretive Letter No. 516, supra; No Objection Letter No. 90-1 (February 16 1990),
reprinted in [1989–90 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,095; Interpretive Letter No. 386,
supra; Letter from Justin T. Watson, Deputy Comptroller of the Currency (January 15, 1975).

68

Interpretive Letter No. 367, supra; American National Decision, supra; Letter from David H. Baris, Regional
Counsel (February 11, 1980); Interpretive Letter No. 137, supra; Letter from Justin T. Watson, Deputy
Comptroller of the Currency (January 15, 1975).

69

70

See, e.g., Interpretive Letter No. 386, supra; Interpretive Letter No. 367, supra.

Conditional Approval No. 270 (January 21, 1998); Conditional Approval Letter No. 164 (December 9, 1994);
Interpretive Letter No. 648, supra; Interpretive Letter No. 647, supra; Interpretive Letter No. 622
(April 9, 1993), reprinted in [1993–94 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,504; Interpretive
Letter No. 403, supra; Board of Governors of the Federal Reserve System v. Investment Company Institute,
450 U.S. 46 (1981); Securities Industry Association v. Board of Governors of the Federal Reserve System,
821 F.2d 810 (D.C. Cir. 1987), cert. denied, 484 U.S. 1005 (1988).

71

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services. 72 Further, operating subsidiaries may sponsor, organize, manage, and act as
investment advisers to closed-end investment companies. 73 Banks and their operating
subsidiaries advising registered investment companies must comply with the restrictions in
sections 23A and 23B of the Federal Reserve Act, 12 USC 371c and 371c-1.74
The Investment Company Act of 1940 governs the formation, operation, and registration
with the SEC of investment companies.75 Serving as an investment adviser to an investment
company is defined in section 2(a)(20) of the Investment Company Act of 1940 and includes
furnishing advice to the investment company on the desirability of investing in, purchasing,
or selling securities. 76
Investment advisers to investment companies must register with the SEC under the Advisers
Act, unless an exemption is available. 77 Banks specifically are excluded from the definition
of investment adviser under the Advisers Act, unless they advise registered investment
companies. Bank operating subsidiaries are fully subject to the Advisers Act. 78 Operating
subsidiaries also must comply with any applicable state laws.
Advising Mortgage or Real Estate Investment Trusts
National banks and their operating subsidiaries may provide investment advice and manage a
portfolio of real estate loans and equity investments held or proposed to be held by a
mortgage trust or REIT. Furnishing real estate asset management and advisory services,
including servicing, advice, and recommendations for loan participations and mortgages and
for real estate held, falls under the financial and investment advisory authority of banks in
12 USC 24(Seventh), and a national bank may act as an advisory company for a mortgage
trust or REIT. 79

Interpretive Letter No. 647, supra; Interpretive Letter No. 386, supra; Interpretive Letter No. 332
(March 8, 1985), reprinted in [1985–87 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,502.

72

73

Conditional Approval Letter No. 164 (December 9, 1994); 12 CFR 225.28(b)(6)(i).

74

12 CFR 223.2(a)(6) (Regulation W).

75

15 USC 80a-1 et seq.

76

15 USC 80a-2(a)(20).

77

15 USC 80b-1 et seq.

78

15 USC 80b-2(a)(11).

79

Interpretive Letter No. 389, supra.

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Furnishing Economic Information
National banks and their operating subsidiaries may provide advisory services about financial
and investment planning and advice on general economic, business, and financial outlooks
and general trends in the stock and bond markets. 80
Providing Investment Advice Related to Futures and Options
National banks and their operating subsidiaries may advise customers in transactions
involving financial and commodity futures.81 Operating subsidiaries also may provide advice
on futures and options on futures contracts as an introducing broker or a commodity trading
advisor (CTA). An operating subsidiary, acting as an introducing broker, is engaged in
soliciting or accepting orders (in more than a clerical capacity) to purchase and sell any
commodities futures or options.
An introducing broker does not extend credit or accept any money, securities, or property to
margin, guarantee, or secure any trades or contracts that result or may result from the
solicitation or acceptance of orders. Alternatively, an operating subsidiary, acting as a CTA,
advises others, through publications, writings, electronic media, or other direct
communication or by the regular issuance of analyses and reports, on the value or
advisability of trading in any contract on commodities futures or options on commodities
futures. 82 An operating subsidiary, acting as a futures commission merchant (FCM), also
may provide advice in connection with its FCM activities.
Providing Consumer Financial Counseling
National banks and their operating subsidiaries may provide financial advice to individuals
directly or through the use of written materials, computer programs, seminars, or other
methods. Providing financial advice includes advising persons on financial matters and
marketing by-products of the bank’s financial advisory capabilities.83
Letter from Michael A. Mancusi, Senior Deputy Comptroller (May 30, 1985); Letter from David L. Chew,
Senior Deputy Comptroller (August 7, 1984); American National Decision, supra.

80

See, e.g., Interpretive Letter No. 365 (August 11, 1986). “Financial futures” include those futures contracts
and options on futures contracts relating to assets that a national bank may purchase for its own account; that is,
U.S. securities and U.S. government agency securities; domestic and Eurodollar money market instruments;
bank certificates of deposit; foreign currencies; and gold, silver, platinum, and palladium. “Commodity futures”
include futures contracts and options on futures contracts for all other financial equities and nonfinancial assets
(agricultural, petroleum, and metals).

81

Interpretive Letter No. 507 (May 5, 1990), reprinted in [1990–91 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,205; Interpretive Letter No. 494 (December 20, 1989), reprinted in [1989–90 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 83,083; Interpretive Letter No. 422 (April 11, 1988), reprinted in [1988–89 Transfer
Binder] Fed. Banking L. Rep. (CCH) ¶ 85,646; Interpretive Letter No. 380 (December 29, 1986), reprinted in
[1988–89 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,604; Interpretive Letter No. 365 (August 11,
1986), reprinted in [1985–87 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,535.

82

See “Activities Permissible for National Banks and Federal Savings Associations,” Consulting and Financial
Advice, (2017 edition); Interpretive Letter No. 137, supra; Interpretive Letter No. 367, supra.

83

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(J) Providing tax planning and preparation services.
National banks and their operating subsidiaries may assist customers in tax planning and
preparing and filing their tax returns, including by electronic means, either gratuitously or for
a reasonable fee.84 They are not restricted to serving only their existing customers for other
services. 85 As a logical extension of these activities, national banks and their operating
subsidiaries may refer customers to a service that represents taxpayers before the Internal
Revenue Service. 86 They may also provide tax planning services to other banks as a
correspondent service. 87 However, they may not engage in the practice of law. 88
(K) Providing financial and transactional advice and assistance, including
advice and assistance for customers in structuring, arranging, and executing
mergers and acquisitions, divestitures, joint ventures, leveraged buyouts,
swaps, foreign exchange, derivative transactions, coin and bullion, and capital
restructurings.
Mergers, Acquisitions, Divestitures, Joint Ventures, Leveraged Buyouts, and
Capital Restructurings
National banks and their operating subsidiaries may furnish advice on financing the sale,
acquisition, or capitalization of a business and other merchant banking transactions and the
related activity of acting as an intermediary to arrange third-party financing through loans or
the private placement of debt or equity interests. Acting as agent for a customer in the private
placement of the customer’s securities is permitted under 12 USC 24(Seventh). In conducting
private placement activity, the operating subsidiary must comply with applicable securities
laws. 89

12 CFR 7.1008; Interpretive Letter No. 545 (March 6, 1991), [1990–91 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 83,257; Interpretive Letter No. 611, supra.

84

85

Letter from Alan Priest, Senior Attorney, Legal Advisory Services Division (October 24, 1984).

Interpretive Letter No. 437 (July 27, 1988), reprinted in [1988–89 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,661.

86

87

Letter from David H. Baris, Regional Counsel (February 11, 1980).

88

Letter from David H. Baris, supra.

See, e.g., 15 USC 78c(a)(4)(B)(vii); Corporate Decision No. 2000-02 (February 25, 2000); Trust
Interpretation No. 256 (July 9, 1990), reprinted in [1990–91 Transfer Binder] Fed. Banking L. Rep. (CCH)
¶ 83,227; Letter from J. Michael Shepherd, Senior Deputy Comptroller (June 20, 1988); No Objection Letter
No. 87-4 (May 19, 1987), reprinted in [1988–89 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 84,033;
Securities Industry Assn. v. Board of Governors of the Federal Reserve System, 807 F.2d 1052 (D.C. Cir 1987),
cert. denied, 483 U.S. 1005 (1987).

89

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Providing Advice and Assistance in Structuring, Arranging, and Executing
Exchange, Coin, and Bullion Transactions, and Derivatives
Exchange, Coin, and Bullion Transactions
National banks are expressly authorized to engage in the business of “buying and selling
exchange, coin, and bullion.”90 Pursuant to this authority, a national bank and its operating
subsidiary may buy and sell physical metal in the form of exchange, coin, or bullion;
however, a national bank and its operating subsidiary may not deal or invest in a metal (or
alloy), including copper, in a form primarily suited to industrial or commercial use (industrial
or commercial metal). 91 National banks and their operating subsidiaries may also provide
customers advice and assistance in structuring, arranging, and executing exchange, coin, and
bullion transactions.92
Derivatives
National banks and their operating subsidiaries may engage in a wide variety of derivative
transactions. However, the range of operating subsidiary derivative activities that are eligible
for notice procedures (rather than application procedures) is limited to: (1) derivatives
transactions with payments based on underlyings a national bank is permitted to purchase
directly as an investment; (2) derivatives transactions with any underlying to hedge the risks
arising from bank-permissible activities; (3) derivatives transactions as a financial
intermediary with any underlying that are customer-driven, cash-settled, and either perfectly
matched or portfolio-hedged; (4) derivative transactions as a financial intermediary with any
underlying that are customer-driven, physically settled by transitory title transfer, and either
perfectly matched or portfolio-hedged; and (5) derivatives transactions as a financial
intermediary with any underlying that are customer-driven, physically hedged, and either
portfolio-hedged or hedged on a transaction-by-transaction basis, and provided that certain
conditions are met. 93
Generally, national banks may trade, deal in, and purchase and sell for their own accounts
derivative instruments whose reference rates, instruments, and commodities are themselves
permissible investments for national banks.94 Bank-permissible derivatives may reference,
for example, interest rates, U.S. Treasury securities, mortgage-backed securities guaranteed
90

12 USC 24(Seventh).

12 CFR 7.1022; OCC, “Industrial and Commercial Metals,” 81 Fed. Reg. 96353 (December 30, 2016) (final
rule); Interpretive Letter No. 693 (November 14, 1995), reprinted in [1995–96 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 81-008 (superseded by 81 Fed. Reg. 96353, supra).

91

See, e.g., Interpretive Letter No. 494 (December 20, 1989), reprinted in [1989–90 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 83,083.

92

93

12 CFR 7.1030(c).

See, e.g., Interpretive Letter No. 693 (November 14, 1995), reprinted in [1995–96 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 81-008; Interpretive Letter No. 494, supra.
94

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by the U.S. government, domestic and Eurodollar money market instruments, bank
certificates of deposit, foreign currencies, and various metals. 95
National banks and their operating subsidiaries may also engage in certain customer-driven
derivative transactions (for example, perfectly matched swaps) as part of a financial
intermediation business, provided they meet certain conditions and have controls in place to
conduct the activity on a safe and sound basis.96 Prior to engaging in a derivatives financial
intermediation business for a reference asset that is addressed in prior OCC interpretive
letters, the bank should: (1) provide written notification to its examiner-in-charge; and (2)
evaluate the risks posed by the activities to ensure that it can identify, measure, monitor, and
control the associated risks. Additionally, the bank should monitor the risks of its derivatives
activities on an ongoing basis to ensure that each activity is conducted in a safe and sound
manner. 97
Under notice procedures, operating subsidiary derivative activities in this section (K) are
limited to derivative transactions provided in 12 CFR 7.1030(c). To conduct broader
derivative activities in an operating subsidiary, a national bank generally must file an
application under 12 CFR 5.34. National banks should consult with the OCC, however, to
determine whether a notice procedure may still be available when a proposed operating
subsidiary will engage in derivative activities only as an incident to activities conducted by
the proposed operating subsidiary that are eligible for notice procedures under 12 CFR 5.34
(for example, hedging risk in connection with mortgage operations otherwise eligible for
notice procedures).
Derivative activities must comply with applicable regulations, including the Volcker rule and
regulations issued under Title VII of the Dodd–Frank Act. Title VII sets forth a
comprehensive regulatory regime for swaps markets, including enhanced requirements for
registered market intermediaries such as swap dealers.
Arranging Commercial Real Estate Equity Financing
National banks and their operating subsidiaries may act as an intermediary to arrange for the
placement of equity interests in commercial or investment real estate, generally on behalf of
owners and developers, to finance the development of the property under the lending and
financing authority of national banks in 12 USC 371 and 12 USC 24(Seventh) and their
authority to arrange for private placements of all types of investments pursuant to the
95

Ibid.

See, e.g., Interpretive Letter No. 1081 (May 15, 2007), reprinted in [2007–08 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 81-613 (property indices); Interpretive Letter No. 1079 (April 19, 2007), reprinted in [Current
Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81-611 (inflation indices); Interpretive Letter No. 1073
(October 19, 2006); Interpretive Letter No. 1065 (July 24, 2006) (petroleum products, agricultural oils, grains
and grain derivatives, seeds, fibers, foodstuffs, livestock and meat products, metals, wood products, plastics and
fertilizer).

96

See Interpretive Letter No. 1160, supra. Refer to 12 CFR 7.1030(d) for information that must be included in
the notification.

97

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incidental powers of a national bank to carry on the business of banking granted in
12 USC 24(Seventh).98
Neither the operating subsidiary nor any affiliate should acquire an equity interest in any
project financed by the private placement or to have a role in the development, management,
or syndication of the project. The fee received by the operating subsidiary may not be based
on the profits earned from the project. The operating subsidiary may not become a general
real estate broker, nor list or advertise properties for sale. The operating subsidiary should
deal solely with sophisticated institutional investors. If the operating subsidiary or parent
national bank engages in any lending for this activity, it should be limited to traditional debt
financing, but may include taking interests as permitted by 12 CFR 7.1006.
(L) Underwriting and reinsuring credit-related insurance to the extent
permitted under section 302 of the GLBA (15 USC 6712).
National banks and their operating subsidiaries may continue to underwrite and reinsure any
credit-related insurance products being provided by national banks as of January 1, 1999, or
that were authorized in writing by the OCC as of that date. 99
Credit-related insurance products guarantee or secure payment of an outstanding obligation
in a credit transaction in the event that the borrower is unable to pay. Credit-related insurance
products often are sold in conjunction with installment loans, automobile loans, credit cards,
and residential mortgages. There are various types of credit-related products, including credit
life insurance, credit disability insurance (also known as credit accident and health
insurance), and mortgage life and disability insurance.100 For example, a credit life insurance
product on a relatively small decreasing balance installment loan typically will pay off the
balance due on the loan if the borrower dies before the loan is repaid. Similarly, if an insured
debtor becomes disabled or is killed accidentally, a credit accident and health insurance
product policy may pay the policy premiums during the period of disability, pay off the loan,
or both. The precise terms of credit-related insurance products may vary based on the terms
and conditions of a particular loan. 101
Credit-related insurance products provide benefits for both the borrower and the lender by
easing the financial burden on each in the event of unforeseen circumstances, such as death,
disability, or unemployment. Credit-related insurance exists as a unique kind of insurance
product that is an integral part of certain credit transactions. Hence, underwriting credit-risk
insurance products serves as a risk management tool linked to the credit function of lending
institutions.
98

Interpretive Letter No. 271, supra; Interpretive Letter No. 387, supra.

See 15 USC 6712; Corporate Decision No. 2001-10 (April 23, 2001); Corporate Decision No. 2000-16
(August 29, 2000); Interpretive Letter No. 886 (March 27, 2000).

99

100

See 12 CFR 2.2(b).

Certain other insurance arrangements could be considered credit-related when the existence of the insurance
is integral to the borrower’s ability to repay a loan if specified events occur.

101

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The OCC has established the authority of national banks and their subsidiaries to sell as
agent and underwrite credit-related insurance products as part of, or incidental to, the
business of banking through a long line of precedents.102 The OCC has concluded that
national banks and their subsidiaries may underwrite credit-related insurance products in
connection with loans by the bank itself and by lenders other than the bank. 103
Before January 1, 1999, the OCC had “determined in writing” that national banks and their
subsidiaries may provide credit-related insurance products as principal in connection with
loans made by a financial institution lender other than the bank itself.104
(M) Leasing of personal property and acting as an agent or adviser in leases
for others.
This activity includes
•
•
•

leases in which the bank may invest pursuant to 12 USC 24(Seventh).
leases in which the bank may invest pursuant to 12 USC 24(Tenth).
acting as agent, broker, or adviser in leases for others.

The notice process for any leasing activity under this paragraph is not available if the notice
involves the direct or indirect acquisition by the bank of any low-quality asset from an
affiliate in connection with a transaction subject to this section. For purposes of this section
(M), the terms “low-quality asset” and “affiliate” have the same meaning as provided in
section 23A of the Federal Reserve Act, 12 USC 371c.
Pursuant to 12 USC 24(Seventh) and 12 USC 24(Tenth), national banks and their operating
subsidiaries may act as lessors and engage in the financing of full-payout, net leases for
personal property, subject to the requirements of 12 CFR 23. Section 24(Seventh) leases have
long been authorized on the grounds that they are the functional equivalent of loans.
Section 24(Seventh) leases are permitted for both tangible and intangible personal property
and are subject to specific restrictions set forth in subparts A and C of 12 CFR 23, including
See, e.g., Corporate Decision No. 98-28 (May 11, 1998); Corporate Decision No. 97-92 (October 17, 1997);
Interpretive Letter No. 283 (March 16, 1984), reprinted in [1983–84 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,447; Interpretive Letter No. 277 (December 21, 1983), reprinted in [1983–84 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,441; 12 CFR 2; IBAA v. Heimann, 613 F.2d 1164 (D.C. Cir. 1979), cert. denied,
449 U.S. 823 (1980). See also Interpretive Letter No. 338 (May 2, 1985), reprinted in [1985–87 Transfer
Binder] Fed. Banking L. Rep. (CCH) ¶ 85,508; American Insurance Association v. Clarke, 656 F. Supp. 404
(D.D.C. 1987), aff’d, 865 F.2d 278 (D.C. Cir. 1989).

102

103

Corporate Decision No. 97-92 (October 17, 1997).

Before January 1, 1999, the OCC had also determined in writing that national banks and their subsidiaries
may provide as principal other insurance products, including safe deposit box liability insurance and selfinsurance of business risks. See Corporate Decision No. 97-92 (October 17, 1997); Interpretive Letter No. 845
(October 20, 1998), reprinted in [1998–99 Transfer Binder] Fed. Banking. L Rep. (CCH) ¶ 81-300.
Underwriting and reinsuring credit-related insurance, however, are the only insurance underwriting activities
that qualify for the notice procedures under 12 CFR 5.34(f)(5)(xii).
104

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a limitation on reliance on residual value. Part 23 requires national banks and their
subsidiaries to receive prior OCC approval for certain activities and should be consulted to
determine whether a separate filing under that part is needed.
Section 24(Tenth) leases are authorized pursuant to express statutory authority and are
subject to specific restrictions set forth in subparts A and B of 12 CFR 23, including a
10 percent-of-assets limitation on the aggregate book value of section 24(Tenth) leases and a
minimum lease term of 90 days.
In addition, the authority conferred by section 24(Tenth) is limited to the leasing of tangible
personal property. Tangible personal property includes such items as vehicles, manufactured
homes, machinery, equipment, and furniture. Unlike section 24(Seventh) leases,
section 24(Tenth) leases are not viewed as a form of lending. Whether property is considered
personal property depends on state law. Both types of leases are also subject to lending limits
and affiliate-transactions restrictions.
National banks and their subsidiaries generally have not been authorized to engage in the
lease financing of real property, 105 but may do so when the real estate lease is incidental to a
personal property leasing transaction. 106 They may, however, engage in the “placement of
real estate lease transactions, specifically, locating investors as potential lessors to a potential
lessee and brokering the debt portion of any such lease.” 107
To establish a leasing relationship with a lessee, banks and subsidiaries may acquire property
to be leased by purchasing specific property based on a legally binding commitment to lease
or a legally binding written agreement, indemnifying the bank against loss from the
acquisition of the leased property. Banks and their subsidiaries may also acquire property to
be leased in the absence of a commitment to lease or indemnification agreement if the bank
satisfies certain conditions (set forth in 12 CFR 23.4), demonstrating that the acquisition of
property is not speculative. Finally, banks may acquire leases by purchasing them from
another lessor, but in the case of section 24(Seventh) leases, the residual value requirement
must be met at the time of the lease purchase(s). Thus, if a national bank or its operating
subsidiary purchases an existing section 24(Seventh) lease, that lease must be a “conforming
lease” (as defined in 12 CFR 23) at the time of its acquisition.
National banks and their operating subsidiaries may also provide certain lease-related
services to third parties to the extent that they are incidental to the business of banking.
National banks are expressly authorized to act as finder or similar agent or broker. 108 In
Interpretive Letter No. 556 (August 6, 1991), reprinted in [1991–92 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,306; Letter from Frank Maguire, Acting Senior Deputy Comptroller (May 20, 1993).

105

12 CFR 23; see also Interpretive Letter No. 770 (February 10, 1997), reprinted in [1996–97 Transfer Binder]
Fed. Banking L. Rep. (CCH) ¶ 81-134; Conditional Approval No. 295 (December 3, 1998); Corporate Decision
No. 98-35 (June 10, 1998).

106

107

Letter from Wallace S. Nathan, District Counsel (October 28, 1985).

108

12 CFR 7.1002; see also Letter from Sue E. Auerbach, Senior Attorney (August 19, 1996).

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addition, the OCC has concluded that national banks and their operating subsidiaries may
provide lease consulting services (including financial advice); management, brokerage, and
finder services; and lease servicing for third parties.109
National banks and their operating subsidiaries may purchase or construct municipal
buildings, such as schools or similar public facilities, for lease to a municipality or other
public authority. 110
Upon expiration of the lease, the lessee must become the owner of the building or facility.
The bank lessor must be repaid entirely by the payments from the lessee.
(N) Providing securities brokerage or acting as a futures commission
merchant and providing related credit and other related services.
Providing Securities Brokerage
National banks and their operating subsidiaries may provide brokerage services, related
securities credit, advisory services, and administrative services as part of or incidental to the
business of banking. The specific language of 12 USC 24(Seventh) recognizes that a national
bank may purchase and sell “securities and stock without recourse, solely upon the order, and
for the account of, customers, and in no case for its own account.” Such activities must
comply with applicable law, including the broker-dealer registration requirement in the
federal securities laws. 111
Securities brokerage services involve buying and selling a wide variety of financial
investment products as agent upon the order and for the account of customers. Such
investment products include annuities, shares of mutual funds, units in unit investment trusts,
and equity and fixed income securities, sold on an agency basis. In addition, an integral part
of the brokerage business is advertising and marketing services and products to attract
customers. 112

Interpretive Letter No. 567 (October 29, 1991) reprinted in [1991–92 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,337; Letter from Wallace Nathan, District Counsel (October 28, 1985); Letter from Peter
Liebesman, Assistant Director, Legal Advisory Services Division (June 15, 1981).

109

Interpretive Letter No. 847 (October 28, 1998), reprinted in [1998–99 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 81-302.
110

The Securities Exchange Act of 1934 imposes rules and registration requirements on entities that act as
securities broker-dealers. The GLBA amended the Securities Exchange Act by replacing what had been a
blanket exemption for banks from broker-dealer registration requirements with specific exceptions. These
exceptions authorize banks to engage in limited securities activities without being considered broker-dealers.
The GLBA’s specific securities activities registration exceptions apply only to bank activities. Bank subsidiaries
that are broker-dealers must register with the SEC. See 15 USC 78c(a)(4)-(6).

111

Conditional Approval Letter No. 164 (December 9, 1994); Interpretive Letter No. 648, supra; Interpretive
Letter No. 647, supra; Interpretive Letter No. 622, supra; Securities Industry Association v. Board of Governors
of the Federal Reserve System, 468 U.S. 207 (1984); Securities Industry Association v. Comptroller of the

112

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Brokerage services include buying and selling securities in the secondary market as “riskless
principal.” A riskless principal transaction involves the operating subsidiary purchasing or
selling a security upon the order of a customer, while conducting a simultaneous offsetting
sale or purchase of a security upon the order of another customer. 113 Operating subsidiaries
also may act as agent for a customer in the private placement of the customer’s securities as
described more fully under section (K) of this appendix.
Related securities credit offered by an operating subsidiary as part of its securities brokerage
services involves the extension or maintenance of credit to customers for the purchase or
carrying of securities. This activity must be consistent with 12 USC 36 and
12 CFR 7.1004.114
The Federal Reserve Board’s regulations on margin stock are applicable to banks and other
non-broker-dealer operating subsidiaries of banks under Regulation U 115 and to brokers
under Regulation T. 116 Operating subsidiaries providing securities brokerage services may
furnish other related activities, including investment advisory and administrative services.
Various administrative and shareholder functions are incidental to the provision of the
brokerage services, including, but not limited to, record keeping, accounting, and other
services. 117
Operating subsidiaries established to engage in these activities may conduct them in a
partnership structure. For example, an operating subsidiary of a national bank may enter into
a general partnership arrangement or joint venture with one or more subsidiaries or affiliates
of an investment bank, provided that certain conditions relating to partnership issues are
met. 118
Banks with operating subsidiaries that engage in these activities should do so in accordance
with safe and sound banking practices, which are discussed in the “Retail Nondeposit
Currency, 577 F. Supp. 252 (D.D.C. 1983), aff’d per curiam, 758. F.2d 739 (D.C. Cir. 1985), cert. denied,
474 U.S. 1054 (1986) (brokerage issue).
Interpretive Letter No. 626 (July 7, 1993), reprinted in [1993–94 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 83,508; Interpretive Letter No. 371 (June 13, 1986), reprinted in [1985–87 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,541.

113

Clarke v. Securities Industry Assn., 479 U.S. 388 (1987) (branching issue); Interpretive Letter No. 403,
supra; American National Decision, supra.

114

115

12 CFR 221.

116

12 CFR 220.

Interpretive Letter No. 647, supra; Interpretive Letter No. 386, supra; Interpretive Letter No. 332 (March 8,
1985), reprinted in [1985–87 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,502.

117

Interpretive Letter No. 889 (April 24, 2000); Interpretive Letter No. 622, supra; Interpretive Letter No. 516,
supra; Interpretive Letter No. 411 (January 20, 1988), reprinted in [1988–89 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 85,635; Interpretive Letter No. 289 (May 15, 1984), reprinted in [1983–84 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,453.

118

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Investment Products” booklet of the Comptroller’s Handbook. Banks and their operating
subsidiaries advising registered investment companies must comply with the restrictions in
sections 23A and 23B of the Federal Reserve Act and Regulation W.
Acting as Futures Commission Merchant
National banks and their operating subsidiaries may act as FCMs. 119 An FCM operating
subsidiary typically solicits or accepts orders to purchase or sell financial or agricultural
futures contracts and options on such contracts on major exchanges and may also solicit or
accept orders to purchase or sell swaps and options on swaps.120 An FCM may extend credit
or accept any money, securities, or property to margin, guarantee, or secure any trades or
contracts resulting from the solicitation or acceptance of orders. An FCM may act as
intermediary between a customer and exchange members that execute or clear trades.
Alternatively, an FCM may be a member of an exchange and serve as a clearing member.
Operating subsidiaries may also offer advisory services, including financial and market
analysis, strategy development, research, and discretionary funds management in connection
with their FCM activities. 121
National bank operating subsidiaries that join futures exchanges and clearinghouses may file
a notice to engage in these activities if they can comply with certain restrictions.122 A
national bank’s FCM may not join any exchange or clearing association under notice
procedures that requires the bank or any other of its subsidiaries to guarantee or otherwise
become liable for trades executed or cleared by the FCM, other than those trades executed or
cleared by the bank and any of its affiliates or other operating subsidiaries. Moreover, a
national bank’s FCM may not become a clearing member of any exchange or clearing
association that requires the bank to also become a member of that exchange or clearing
association, unless the bank obtains a waiver of that requirement. Finally, a national bank
may not guarantee or assume responsibility for any liability of its FCM other than those
trades executed and/or cleared for and on behalf of the bank and any of its affiliates or other
operating subsidiaries.
A national bank establishing an operating subsidiary to engage in the activities described in
this section may file a notice only if its loans to, and investments in, its FCM (and its
partnership interests) in the aggregate do not exceed its legal lending limit at the time of the
loan or investment. A national bank may not make investments of equity capital in its FCM
119

See, e.g., Interpretive Letter No. 356 (January 7, 1986); Interpretive Letter No. 357 (February 26, 1986).

“Financial futures” include those futures contracts and options on futures contracts relating to assets that a
national bank may purchase for its own account; that is, U.S. securities and U.S. government agency securities;
domestic and Eurodollar money market instruments; bank certificates of deposit, foreign currencies; and gold,
silver, platinum and palladium. “Commodity futures” include futures contracts and options on futures contracts
for all other financial equities and nonfinancial (agricultural, petroleum, and metals) assets.

120

Interpretive Letter No. 507, supra; Interpretive Letter No. 494, supra; Interpretive Letter No. 422, supra;
Interpretive Letter No. 380, supra; Interpretive Letter No. 365, supra.

121

122

Interpretive Letter No. 929, supra.

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(or its partnership interest) that exceed the lending limit without the OCC’s prior written
consent. To calculate the lending limit, a national bank’s investment in its FCM is deemed
unsecured. A national bank may, however, lend its FCM (and its partnership interest) in the
aggregate an additional 10 percent of its unimpaired capital and surplus, if secured by readily
marketable collateral as provided in 12 USC 84.
(O) Underwriting and dealing, including making a market, in bank-permissible
securities and purchasing and selling asset-backed obligations as principal.
National banks and their operating subsidiaries may underwrite and deal in Type I and
Type II securities, subject to safety and soundness considerations and, in the case of Type II
securities, certain investment limits. 123
Specifically, they may underwrite and deal in Type I securities, which include (1) obligations
of the United States, a department or agency of the United States, and general obligations of
states and their political subdivisions; (2) obligations of certain quasi-governmental
corporations, such as the Federal National Mortgage Association (Fannie Mae) and the
Government National Mortgage Association (Ginnie Mae); (3) other obligations (such as
qualified Canadian government obligations) specifically listed in 12 USC 24(Seventh); and
(4) other securities the OCC determines to be eligible Type I securities under 12 USC
24(Seventh). There is no investment limit for national banks underwriting and dealing in
these securities. 124 A well-capitalized national bank may underwrite and deal in municipal
revenue bonds without limit. 125
National banks and their operating subsidiaries also may underwrite and deal in Type II
securities, which include (1) obligations of certain international and multilateral development
banks, such as the International Bank for Reconstruction and Development (World Bank);
(2) obligations issued by any state or political subdivision for housing, university, or
dormitory purposes; (3) other obligations listed specifically in 12 USC 24(Seventh); and (4)
other securities the OCC determines to be eligible as Type II securities, subject to a limitation
that the obligations of any single issuer may not exceed 10 percent of the bank’s capital and
surplus. 126
National banks and their operating subsidiaries may securitize and sell assets that they hold
as part of their banking business. The amount of securitized loans and obligations that may
be sold is not limited to a specific percentage of the bank’s capital and surplus.127

See 12 CFR 1.3; 12 CFR 1.5. See also footnote 111, supra, regarding broker-dealer registration requirements
in the federal securities laws.

123

124

12 USC 24(Seventh); 12 CFR 1.2(j); and 12 CFR 1.3(a).

125

12 USC 24(Seventh); 12 CFR 1.2(j)(4).

126

12 USC 24(Seventh); 12 CFR 1.2(k); 12 CFR 1.3(b); and 12 CFR 1.3(d).

127

12 CFR 1.3(g). Asset securitization must comply with 12 CFR 43, as applicable.

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The operating subsidiary should provide the OCC with evidence that it has developed
suitable policies and internal controls to permit the safe and sound conduct of the proposed
activity. The operating subsidiary also should coordinate its trading positions with those of
the bank itself. 128
(P) Acting as an insurance agent or broker, including title insurance to the
extent permitted under section 303 of the GLBA (15 USC 6713).
Sales Pursuant to 12 USC 92
National banks generally may sell insurance pursuant to 12 USC 92 (section 92) in the same
nationwide market as is generally available to licensed insurance agencies in the state where
the bank agency operates. 129 National banks may sell insurance to customers wherever the
customers are located.130 National banks may sell insurance directly or through an operating
subsidiary if the national bank is located and doing business in a place of 5,000 or less in
population. 131 Any area designated by the U.S. Census Bureau as a “place” is a place of
5,000 for purposes of section 92. 132 National banks and their subsidiaries with insurance
agencies may rely on OCC opinions to establish satellite offices outside the place of 5,000
(including satellite offices in states outside the state where the insurance business is located)
to solicit and sell insurance in the same manner generally permissible for state insurance
agencies. 133 National trust companies may sell insurance from a trust office that is located in
a place of 5,000 if the office performs core fiduciary functions (accepting fiduciary
appointments, executing trust documents, and making decisions regarding the investment and
distribution of fiduciary assets).134
Sales of Credit-Related Insurance as Agent Under 12 USC 24(Seventh)
National banks and their subsidiaries may engage in various credit-related insurance agency
activities under 12 USC 24(Seventh). This law authorizes national banks to engage in the
“business of banking” and to exercise “all such incidental powers as shall be necessary to
128

Letter from Jimmy F. Barton, Deputy Comptroller (July 25, 1991).

103 Interpretive Letter No. 753 (November 4, 1996), reprinted in [1996–97 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 81,107.

129

See NBD Bank, N.A. v. Bennett, 67 F.3d 629 (7th Cir. 1995); Independent Insurance Agents of America, Inc.
v. Ludwig, 997 F.2d 958 (D.C. Cir. 1993); Shawmut Bank Connecticut v. Googins, 965 F. Supp. 304 (D. Conn.
1997).

130

12 USC 92; Conditional Approval No. 384 (April 25, 2000); Corporate Decision No. 99-44 (September 10,
1999); Corporate Decision No. 97-24 (April 15, 1997). See Interpretive Letter No. 819 (January 20, 1998).

131

132

Interpretive Letter No. 823 (February 27, 1998).

Interpretive Letter No. 882 (February 22, 2000); Interpretive Letter No. 864 (May 19, 1999); Interpretive
Letter No. 873 (December 1, 1999); Interpretive Letter No. 844 (October 20, 1998).

133

134

Interpretive Letter No. 877 (December 13, 1999).

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carry on the business of banking.” Although an insurance product sold under this authority
could also be sold under 12 USC 92, there are no geographic “place of 5,000” limits under
12 USC 24(Seventh).
Pursuant to 12 USC 24(Seventh), national banks and their subsidiaries may sell credit-related
insurance products, including the following:
•
•
•
•
•

Credit life insurance (as defined in 12 CFR 2.2(b)). 135
Involuntary employment insurance (protects the bank if the borrower becomes
involuntarily unemployed). 136
Vendors single interest insurance137 and vendors double interest insurance138 (insures the
bank or the bank and the borrower, respectively, against loss or damage to personal
property pledged as loan collateral).
Mechanical breakdown insurance (protects a loan customer against most major
mechanical failures of collateral securing a loan during the loan’s life). 139
Vehicle service contracts (protect the value of loan collateral from mechanical
breakdown for term of the contract). 140
Title Insurance

A national bank may not underwrite or sell title insurance unless the national bank falls
within one of the following exceptions:
(1) National banks and their operating subsidiaries may sell title insurance as agents in a state
to the same extent as permitted for state banks. 141
(2) A national bank and its operating subsidiaries may continue to conduct title insurance
activities, including underwriting, in which the national bank or operating subsidiary were

See Interpretive Letter No. 283 (March 16, 1984), reprinted in [1983–84 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 85,447; 12 CFR 2; IBAA v. Heimann, 613 F.2d 1164 (D.C. Cir. 1979), cert. denied, 449 U.S. 823
(1980).

135

136

See Interpretive Letter No. 283, supra.

137

See Interpretive Letter No. 283, supra.

138

Letter from William B. Glidden, Assistant Director, Legal Advisory Services Division (June 3, 1986).

139

Letter from William B. Glidden, Assistant Director, Legal Advisory Services Division (June 17, 1993).

140
Interpretive Letter No. 724 (April 22, 1996), reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81,039; Interpretive Letter No. 671 (July 10, 1995), reprinted in [1994–95 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 83,619.
141

15 USC 6713.

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lawfully engaged before November 12, 1999, subject to some exceptions if affiliates are
providing insurance as principal.142
If, however, a state law in effect before November 12, 1999, prohibits all persons in a state
from selling or underwriting title insurance, a national bank may not sell title insurance.
(Q) Reinsuring mortgage insurance on loans originated, purchased, or
serviced by the bank, its subsidiaries, or its affiliates, provided that if the
operating subsidiary enters into a quota share agreement, the operating
subsidiary assumes less than 50 percent of the aggregate insured risk
covered by the quota share agreement.
National banks may reinsure mortgage insurance on loans originated, purchased, or serviced
by the national bank, its subsidiaries, or its affiliates. 143 Mortgage insurance protects an
investor holding a mortgage loan against default by the mortgagor.
Under an “excess loss” arrangement, the primary insurer pays, and is solely responsible for,
claims arising out of a given book of business up to a predetermined percentage, after which
the reinsurer is obligated to reimburse the primary insurer’s claims up to another
predetermined percentage. Thereafter, the primary insurer is solely responsible for claims in
excess of the reinsurer’s tier of losses on a given book. A quota share agreement is an
agreement under which the reinsurer is liable to the primary insurance underwriter for an
agreed-upon percentage of every claim arising out of the covered book of business ceded by
the primary insurance underwriter to the reinsurer. Quota share arrangements have involved
the assumption of less than 50 percent of the aggregate insured risk covered by the quota
share agreement.
A national bank’s captive mortgage reinsurance subsidiary may enter into a mortgage
reinsurance agreement with a Cayman Island segregated portfolio company to reinsure
private mortgage insurance on loans originated or purchased by the bank or one of its
affiliates. 144 National banks may participate in a mortgage reinsurance exchange in which the
exchange will provide for the reinsurance of private mortgage insurance on loans originated
or purchased by participating lenders. 145

142

15 USC 6713.

Corporate Decision No. 99-37 (October 29, 1999); Corporate Decision No. 99-36 (October 29, 1999);
Corporate Decision No. 99-32 (September 20, 1999); Corporate Decision No. 99-26 (September 2, 1999).

143

144

Interpretive Letter No. 862 (June 7, 1999).

145

Interpretive Letter No. 828 (April 6, 1998).

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(R) Acting as a finder pursuant to 12 CFR 7.1002 to the extent permitted by
published OCC precedent.
General
The OCC has long recognized the finder function as a permissible banking activity that
includes identifying potential parties, making inquiries as to interest, introducing or arranging
contacts or meetings between interested parties, acting as an intermediary between interested
parties, and bringing the parties together for transactions that the parties themselves negotiate
and consummate. 146 As a finder, national banks and their operating subsidiaries may convey
information about available products or services to potential markets for them, 147 arrange for
third-party providers to offer reduced rates to those customers referred by the bank, 148
communicate to the seller an offer to purchase or a request for information, 149 provide certain
administrative, clerical, and record-keeping functions,150 supply financial information to one
party about the other, and act as a conduit in conveying information from one party to
another. 151
Acting as a Website Host
The OCC has determined that website hosting is a form of finder activity. A national bank
may establish, register, and host a commercially enabled website in the name of the
retailer. 152 The bank may store the data representing the retailer’s online catalog and provide
periodic reports to the retailer of site-related activities.153 The bank may also provide
associated payments and deposit services resulting from web-based transactions.154 A
national bank also may host a website for a government agency, where the site will allow the

12 CFR 7.1002(b); Conditional Approval No. 221 (December 4, 1996); Interpretive Letter No. 741, reprinted
in [1996–97 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81-105; Interpretive Letter No. 653, supra.

146

Interpretive Letter No. 741, supra; Interpretive Letter No. 630, reprinted in [1993–94 Transfer Binder] Fed.
Banking Law. Rep. (CCH) ¶ 83,513.

147

148

Conditional Approval No. 347 (January 29, 2000).

Interpretive Letter No. 824 (February 27, 1998); Letter from James M. Kane, District Counsel (October 24,
1985); Letter from F.H. Ellis, Chief National Bank Examiner (October 6, 1970).

149

Interpretive Letter No. 850, supra; Corporate Decision No. 98-13 (February 9, 1998); Interpretive Letter
No. 607, reprinted in [1992–93 Transfer Binder] Fed. Banking L. Rep. ¶ 83,445.

150

Letter from Elizabeth H. Corey, Attorney (May 18, 1989); Letter from John M. Miller, Acting Deputy Chief
Counsel (July 26, 1977).

151

152

12 CFR 7.5002(a)(1)(i).

153

Corporate Decision No. 2001-18 (July 3, 2001); Corporate Decision No. 2000-08 (June 1, 2000).

154

Interpretive Letter No. 875, supra; Interpretive Letter No. 856, supra.

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public, consumers, and other agencies to access or purchase services, information forums,
and products from the agency. 155
A national bank, in the exercise of the finder authority, may establish hyperlinks between its
home page and the internet home pages of third-party providers so that bank customers will
be able to access those nonbank websites from the bank site. 156 The OCC also has permitted
national banks, as a form of finder activity, to operate a “virtual mall.” A virtual mall
provides a collection of links to websites of third-party vendors. The collection of links,
organized by product type and made available to bank customers, enables the customers to
shop for a range of financial and nonfinancial products and services via the links.157
In addition, the OCC has determined that, as a finder, a national bank may establish an
internet site that will function as an electronic central facility enabling businesses to negotiate
and organize among themselves aggregate buying, selling, or financing efforts, and for other
collaborative efforts. 158
Incidental to its offering of commercially engaged website hosting, a national bank may
provide web design services to its merchant customers.159
Acting as Finder for Insurance
National banks and their operating subsidiaries may provide finder services in connection
with insurance products and services. To identify permissible national bank finder activities
in the insurance context (as an alternative to 12 USC 92 authority), the OCC considers (1) the
scope of the proposed activities; (2) the existence or absence of another insurance agent or
broker in the arrangement; (3) whether the bank has a contractual relationship with an
insurance company for selling its products, and if so, the nature of the relationship; and
(4) the bank’s compensation arrangement for the proposed activities. For example, national
banks may participate in sharing arrangements with other banks whereby they combine their
efforts to use the services of a group of independent agencies that would solicit and sell
insurance services to bank customers on site, sharing pro rata in referred business.160

155

Conditional Approval No. 361 (March 3, 2000); 12 CFR 7.5002(a)(1)(iv)(B).

156

12 CFR 7.5002(a)(1)(iii); Conditional Approval No. 347, supra; Conditional Approval No. 221, supra.

157

12 CFR 7.5002(a)(1)(ii); Conditional Approval No. 369 (February 25, 2000); Interpretive Letter No. 875, supra.

158

12 CFR 7.5002(a)(1)(v); Conditional Approval No. 369, supra.

159

Interpretive Letter No. 875, supra.

160

Interpretive Letter No. 824, supra; Conditional Approval No. 99-38 (October 29, 1999).

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Acting as Finder for Investment Advisory Services
National banks and their operating subsidiaries may act as finder by referring bank customers
to investment advisors.161
Acting as Finder for Marketing of Trust Services
National banks and their operating subsidiaries, as well as other individuals and institutions,
including registered investment advisors, savings associations, savings banks, credit unions,
financial planners, benefit consultants, independent insurance agents and brokers, certified
public accountants, and attorneys, may refer trust business to a national bank pursuant to
written agreements. 162
(S) Offering correspondent services to the extent permitted by published OCC
precedent for national banks.
National banks have traditionally performed for their affiliates and other financial institutions
an array of activities called correspondent services. The OCC has long permitted national
banks and their operating subsidiaries to offer these correspondent services as part of the
business of banking. 163 A national bank may perform as a correspondent service for its
affiliates and other financial institutions any service it may perform for itself. 164 Examples of
correspondent services include providing computer networking packages and related
hardware; data processing services and the sale of software that performs data processing
functions; document control and record keeping; financial and consulting services; flood
hazard determinations; security consulting services; loan collection and repossession
services; and vault cash.
(T) Acting as agent in the sale of fixed or variable annuities.
National banks and their operating subsidiaries may sell as agent fixed and variable annuities
without regard to the geographic “place of 5,000” restriction in 12 USC 92 on the sale of

161

Interpretive Letter No. 850, supra.

162

Interpretive Letter No. 607, supra.

Interpretive Letter No. 875, supra; Interpretive Letter No 811, supra; Corporate Decision No. 97-79
(July 11, 1997).

163

12 CFR 7.5007; Interpretive Letter No. 868 (August 16, 1999); Interpretive Letter No. 854 (February 25,
1999); Interpretive Letter No. 467, reprinted in [1988–89 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶
85,691.
164

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insurance products.165 Variable annuities are securities subject to requirements under the
federal securities laws. 166
(U) Offering debt cancellation or debt suspension agreements.
National banks and their operating subsidiaries are authorized to enter into debt cancellation
agreements under which a bank agrees to cancel all or part of a customer’s obligation to
repay an extension of credit from that bank upon the occurrence of a specified event under
the standards set forth in OCC regulations. 167 Under those regulations, a national bank and its
operating subsidiaries also are authorized to enter into debt suspension agreements under
which a bank agrees to suspend all or part of a customer’s obligation to repay an extension of
credit from that bank upon the occurrence of a specified event. The agreement may be
separate from or part of other loan documents. Debt suspension agreements do not include
loan payment deferral arrangements in which the triggering event is the borrower’s unilateral
election to defer repayment or the bank’s unilateral decision to allow a deferral of
repayment. 168
(V) Providing real estate settlement, closing, escrow, and related services; and
real estate appraisal services for the operating subsidiary, parent bank, or
other financial institutions.
Closing, Escrow, and Related Services
National banks and their operating subsidiaries may conduct loan closing, settlement, and
escrow services for themselves and other lenders. 169 Such services may include receipt and
assembly of real estate settlement and loan documents, obtaining signatures for such
documents, receipt as escrow agent of loan funds, payoff of prior mortgages and liens,
payment of prorated taxes and utility bills, disbursement of net loan proceeds to the seller,
and recording of mortgage deeds and other documents.
Closing and escrow services for loans made by the bank and its subsidiaries should be
conducted in accordance with OCC rules regarding the origination and making of loans at

See 15 USC 78c(a)(4); Texas Bankers Ass’n v. Bomer, 1997 U.S. Dist. LEXIS 13422 (W.D. Tex. August 7,
1997); Nationsbank v. Variable Annuity Life Insurance Co., 513 U.S. 251 (1995). See Conditional Approval
No. 311 (April 29, 1999); Interpretive Letter No. 749 (September 13, 1996).
165

See SEC v. Variable Life Ins. Co., 359 U.S. 65 (1959) (holding that variable rate annuities are securities for
purposes of the Securities Act of 1933); 15 USC 77b(a)(1) (definition of the term “security” in the Securities
Act of 1933).

166

12 CFR 37.2(g); Interpretive Letter No. 640 (January 7, 1994), reprinted in [1993–94 Transfer Binder] Fed.
Banking. L. Rep. (CCH) ¶ 83,527.

167

168

12 CFR 37; Interpretive Letter No. 827 (April 3, 1998).

See, e.g., Conditional Approval No. 322, supra; Corporate Decision No. 99-06 (January 29, 1999);
Conditional Approval No. 276, supra.

169

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banking and other than banking offices.170 In particular, when services include the
disbursement of loan proceeds, closings should occur either at a main or branch office of the
bank or at the office of an unaffiliated entity, such as a lawyer’s office or other location that
is not owned by the bank or any of its affiliates.
Appraisal and Evaluation Services
Federally regulated institutions must obtain appraisals prepared by a certified or licensed
appraiser in connection with federally related transactions. A federally related transaction is
any real estate-related financial transaction made on or after August 9, 1990, by a regulated
institution that requires the services of an appraiser.
Title 12 CFR 34, subpart C, sets forth when appraisals are required and the standards that
appraisals must meet. Certain real estate-related financial transactions are exempt from the
appraisal requirements of 12 CFR 34 but require an evaluation to be prepared in accordance
with safe and sound banking practices, which are discussed in the “Frequently Asked
Questions on the Appraisal Regulations and the Interagency Appraisal and Evaluation
Guidelines” 171 and the “Interagency Appraisal and Evaluation Guidelines.”172 Banks and
operating subsidiaries should consult the guidelines for specific information about the
expectations for appraisals and evaluations. National banks and their operating subsidiaries
may offer appraisal and evaluation services for the subsidiary, parent bank, or other financial
institutions. 173
Affiliated Business Arrangements and Compliance With RESPA
Some permissible services qualify as settlement services under RESPA, which prohibits
persons from giving or receiving any fee, kickback, or thing of value for the referral of real
estate settlement services. 174 RESPA, however, permits persons or entities to enter into
ABAs and share in the income of the ABA in proportion to their ownership interest in it
under specified conditions. ABAs may include operating subsidiaries that provide such
services and otherwise meet the ABA requirements. Banks and ABAs should ensure that they
comply with all the requirements of RESPA. There are requirements that apply specifically
to the ABA relationship, including that no lender may require a consumer to purchase
settlement services from a particular provider as a condition of obtaining a loan, except as
otherwise provided; the party making the referral must make certain disclosures; and the
compensation restrictions must be followed (i.e., the only thing of value that is received from

170

12 CFR 7.1003 and 7.1004.

171

OCC Bulletin 2018-39, “Appraisals and Evaluation of Real Estate: Frequently Asked Questions.”

OCC Bulletin 2010-42, “Sound Practices for Appraisals and Evaluations: Interagency Appraisal and
Evaluation Guidelines.”
172

173

Conditional Approval No. 276, supra; Interpretive Letter No. 467, supra.

174

12 USC 2607(a).

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the arrangement, other than payments separately permitted by RESPA, is a return on the
ownership interest or franchise relationship).175
There are guidelines for determining whether an ABA is a bona fide provider of settlement
services and thus is not a sham or shell entity organized to circumvent RESPA’s restrictions
on payment of fees or other compensation for the referral of real estate settlement services
business. 176 These guidelines list a variety of factors that are to be considered in determining
whether an ABA is bona fide. The factors are weighed in light of the specific facts, and any
one factor may not be determinative. The factors include (1) the adequacy of the entity’s
initial capital and net worth; (2) whether the entity is staffed by its own employees; (3)
whether the entity manages its own business affairs; (4) whether it has its own office separate
from an office of one of its parents or, if not, whether it pays a general market value rent for
the facility; (5) whether it provides substantial services and incurs the risks and rewards of
any comparable enterprise, or whether it contracts work out; (6) whether it competes in the
marketplace for business; and (7) whether it sends business exclusively to one of the
settlement service providers that created it, or to a number of entities. A full discussion and
explanation of these guidelines is in the U.S. Department of Housing and Urban
Development’s (HUD) “RESPA Statement of Policy 1996-2 Regarding Sham Controlled
Business Arrangements,” 61 Fed. Reg. 29258 (June 7, 1996). See also OCC Bulletin 200527, “Real Estate Settlement Procedures Act: Sham Controlled Business Arrangements.”
(W) Acting as a transfer or fiscal agent.
National banks may act as transfer agents. A transfer agent acts on behalf of an issuer of
securities or on behalf of itself as an issuer of securities and performs the following
functions: (1) countersigning securities upon issuance; (2) monitoring the issuance of
securities to prevent unauthorized issuance; (3) registering the transfer of securities;
(4) exchanging or converting securities; and/or (5) transferring record ownership of securities
by bookkeeping entry without physical issuance of securities certificates. A national bank or
national bank operating subsidiary must register with the OCC if it performs transfer agent
functions for any security registered under section 12 of the Exchange Act or any security
that would be required to be registered under section 12 of the Exchange Act except for the
exemption from registration for registered investment company securities and certain
insurance company securities.177 National banks without trust powers may perform transfer
agent functions only for their own securities or for securities of affiliates.

175

12 USC 2607(c)(4); 12 CFR 1024.15(b).

The guidelines were issued by the U.S. Department of Housing and Urban Development (HUD) in a 1996
policy statement. Although interpretive authority has transferred from HUD to the Consumer Financial
Protection Bureau (CFPB), pursuant to the Dodd–Frank Act, the CFPB continues to apply the guidelines. See
76 Fed. Reg. 43569-70 (July 21, 2011).

176

177

See Securities Exchange Act 17A(c); 12 CFR 9.20(a).

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National banks and operating subsidiaries may act as fiscal agents for the collection and
remittance of funds as part of the business of banking. 178
(X) Acting as a digital certification authority to the extent permitted by
published OCC precedent for national banks, subject to the terms and
conditions in that precedent.
National banks and their operating subsidiaries may act as a digital certification authority
(CA), issuing digital certificates and acting as a repository of public keys and certificate
information.179 In addition, they may hold in escrow keys that are used for encryption. 180
Such certification and escrow activities do not require trust powers under 12 USC 92a.
National banks and their operating subsidiaries engaging in these activities may also provide
connected data-processing services and may sell or rent equipment, including specialized,
limited-purpose software and hardware to be used in connection with the CA and repository
services and other digital signature or data security systems. They may also provide and sell
software generating public/private key pairs for subscribers and software enabling
subscribers to create or receive messages with digital signatures, verify digital signatures
with public keys, and confirm that the messages were properly signed. They may also
provide consulting or advisory services, and correspondent services, to help customers,
including other banks, to implement digital signature systems. 181
CA activities must be undertaken in conformity with OCC precedent.182 The OCC has also
published guidance intended to help bankers to make informed decisions about whether and
how to become involved in CA activities. 183
(Y) Providing or selling public transportation tickets, event and attraction
tickets, gift certificates, prepaid phone cards, promotional and advertising
material, postage stamps, and electronic benefits transfer (EBT) script, and
similar media, to the extent permitted by published OCC precedent for national
banks, subject to the terms and conditions in that precedent.
National banks and their operating subsidiaries may provide or sell a variety of alternate
media, including public transportation tickets or passes, event and attraction tickets, merchant
See Interpretive Letter No. 731 (July 1, 1996), reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-048; Conditional Approval No. 361 (March 3, 2000); Conditional Approval No. 324
(August 17, 1999).

178

12 CFR 7.5005; Conditional Approval Letter No. 339 (November 16, 1999); Conditional Approval Letter
No. 267 (January 12, 1998).

179

180

Ibid.

12 CFR 7.5007; Conditional Approval Letter No. 339, supra; Conditional Approval Letter No. 267, supra.
To date, OCC precedent has addressed the use of digital certificates in closed systems only, i.e., proprietary
networks not connected to the internet.

181
182

183

See OCC Bulletin 1999-20, “Certification Authority Systems: Guidance for Bankers and Examiners.”

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gift certificates, prepaid telephone cards, and EBT script. 184 Because they have also long
been permitted to provide or sell through traditional means advertising and promotional
material, 185 postage stamps, 186 traveler’s checks,187 money orders,188 and credit and debit
cards, 189 these items may also be provided electronically, such as through ATMs. 190 For any
items that are sold through an ATM, a printed receipt complying with the requirements of the
Consumer Finance Protection Bureau’s (CFPB) Regulation E, 12 CFR 1005, must be
provided. 191
(Z) Providing data-processing and data-transmission services, facilities
(including equipment, technology, and personnel), databases, advice and
access to such services, facilities, databases, and advice, for the parent bank
and for others, pursuant to 12 CFR 7.5006 to the extent permitted by published
OCC precedent for national banks.
National banks and their operating subsidiaries may provide or sell electronic dataprocessing and data-transmission services, databases, and facilities. 192 They may also provide
advice and consulting services for such activities and facilities, pursuant to 12 CFR 7.5006
and consistent with published OCC precedent. 193

12 CFR 5.34(f)(5)(xxv); Interpretive Letter No. 718 (March 14, 1996), reprinted in [1995–96 Transfer
Binder] Fed. Banking L. Rep. (CCH) ¶ 81-033; Conditional Approval No. 285 (August 14, 1998); Interpretive
Letter No. 854, supra; Interpretive Letter No. 890 (May 15, 2000).

184

Interpretive Letter No. 316 (December 4, 1984), reprinted in [1985–87 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 85,486.

185

186

12 CFR 7.1010; Interpretive Letter No. 890, supra.

Letter of John G. Heimann, Comptroller of the Currency (November 10, 1977), reprinted in [1978–79
Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 85,067; Interpretive Letter No. 890, supra; see No Objection
Letter No. 89-02 (April 17, 1989), reprinted in [1989–90 Transfer Binder] Fed. Banking L. Rep. (CCH)
¶ 83,014; Arnold Tours, Inc. v. Camp, 472 F.2d 427, 438 (1st Cir. 1972). See also section (C) in this appendix.

187

188

12 CFR 7.1014; Interpretive Letter No. 890, supra. See also section (C) in this appendix.

189

Former Interpretive Ruling 7.7378, 12 CFR 7.7378; Interpretive Letter No. 718, supra.

190

Interpretive Letter No. 718, supra.

191

Ibid.

192

Corporate Decision No. 2003-6 (March 17, 2003); Interpretive Letter No. 516, supra.

193

12 CFR 7.5006; Corporate Decision No. 2002-11 (June 28, 2002).

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(AA) Providing bill presentment, billing, collection, and claims processing
services.
National banks and their operating subsidiaries may provide bill presentment, billing, 194
collection, 195 and claims processing services.196
(BB) Providing safekeeping for personal information or valuable confidential
trade or business information, such as encryption keys, to the extent
permitted by published OCC precedent for national banks. 197
(CC) Providing payroll processing. 198
(DD) Providing branch management services. 199
(EE) Providing merchant processing services except when the activity
involves the use of third parties to solicit or underwrite merchants. 200
(FF) Performing administrative tasks involved in benefits administration. 201

Corporate Decision No. 2005-02, supra; Interpretive Letter No. 928, supra; Interpretive Letter No. 712
(February 29, 1996), reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81-027.

194

195

Interpretive Letter No. 731, supra; Corporate Decision No. 98-13, supra.

196

Corporate Decision No. 98-13, supra; Interpretive Letter No. 712, supra.

12 CFR 7.5002(a)(4); Interpretive Letter No. 928, supra; Conditional Approval No. 479 (July 27, 2001);
Conditional Approval No. 267, supra; see Corporate Decision No. 97-92, supra.

197

Corporate Decision No. 2002-02 (January 9, 2002); Conditional Approval No. 435 (December 18, 2000);
Conditional Approval No. 384, supra.

198

199

12 CFR 5.34(f)(5)(xxx).

12 CFR 5.34(f)(5)(xxxi); Corporate Decision No. 99-35 (October 20, 1999); Interpretive Letter No. 856,
supra; Interpretive Letter No. 689 (August 9, 1995), reprinted in [1995–96 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 81-004; see Letter of Chief Counsel Julie L. Williams (July 6, 1997).

200

12 CFR 5.34(f)(5)(xxxii); Corporate Decision No. 2002-02, supra; Conditional Approval No. 435, supra;
Conditional Approval No. 384, supra.

201

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Appendix B: Non-controlling Investment
Guidelines—National Banks
Introduction
National banks and their operating subsidiaries are permitted to make a non-controlling
investment or hold a minority interest in certain enterprises. The OCC regulation provides for
an after-the-fact notice process if the enterprise is engaged in an activity permissible for
after-the-fact notice under the OCC’s operating subsidiary regulation or if the activity is
substantively the same as that in published OCC precedent on non-controlling
investments. 202 The activities of the enterprise must generally be conducted pursuant to the
same authorization, terms, and conditions that apply to the conduct of such activities by a
national bank, unless otherwise specifically provided by statute, regulation, or published
OCC policy. 203
The following is a summary of non-controlling investments or minority interests approved by
published OCC precedent.204

Non-controlling Investment Activities
Lending
•
•
•
•

Appraisal services: Providing appraisals of the value of collateral before creditors make
a mortgage loan. 205
Automobile loans: Providing automobile loans.206
Commercial real estate loans: Originating and selling commercial real estate loans. 207
Credit card banking: Making, purchasing, selling, servicing, or warehousing credit card
accounts. 208

202

12 CFR 5.36(e).

203

See 12 CFR 5.34(e)(3) and 5.36(e).

The narrative section of this booklet provides further information on the requirements governing the use of
the after-the-fact notice procedure. The “Operating Subsidiary Guidelines—National Banks” (appendix A to
this booklet) provide information on activities permissible for after-the-fact notice under the operating
subsidiary regulation. 12 CFR 5.34(f)(5).

204

205

Conditional Approval No. 276 (May 8, 1998).

206

Conditional Approval No. 321 (July 28, 1999).

207

Conditional Approval No. 215 (September 11, 1996).

208

Interpretive Letter No. 852 (December 11, 1998); Conditional Approval No. 269 (January 13, 1998).

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•
•
•

•
•

Credit reporting: Engaging in credit reporting activities, including operation of a credit
reporting bureau. 209
Credit reporting services: Providing credit reporting services in connection with the
origination of loans. 210
Data processing for mortgage rights: Providing data-processing services that facilitate
the transfer of mortgage servicing rights, mortgage ownership, and the release of
mortgage rights through an electronic “book-entry” system to register and track mortgage
rights. 211
Escrow services: Engaging in escrow services. 212
Home equity lines of credit: Loans for personal, family, or household purposes (for
example, consumer loans). Providing home equity lines of credit, such as home
improvement loans secured by second liens on family homes.213

Loan Closing Activities
•

•
•

Loan closing services:
− Conducting loan closing services for both the bank and for other lenders. Loan
closing services may include the disbursement of loan proceeds.214
− Conducting loan closing services as an ABA as defined by, and in accordance with,
RESPA. 215
Loan document preparation: Preparing loan documents that describe the rights and
duties of the creditor and the borrower.216
Loan origination and servicing activities:
− Engaging in loan origination and servicing activities, as well as commercial mortgage
loan brokerage services.217

209

Conditional Approval No. 322 (July 30, 1999).

210

Conditional Approval No. 336 (November 2, 1999).

211

Conditional Approval No. 333 (October 19, 1999).

212

Conditional Approval No. 308 (April 8, 1999).

Interpretive Letter No. 694 (December 13, 1995), reprinted in [1995–96 Transfer Binder] Fed. Banking L.
Rep, (CCH) ¶ 81-009; Conditional Approval No. 264 (December 29, 1997).
213

214

Conditional Approval No. 322 (July 30, 1999).

Conditional Approval No. 243 (May 9, 1997). The ABA’s structure, operating agreement, and activities
must be consistent with HUD guidelines. See also section (V) of appendix A of this booklet, “Providing real
estate settlement, closing, escrow, and related services; and real estate appraisal services for the subsidiary,
parent bank, or other financial institutions.”

215

216

Conditional Approval No. 276 (May 8, 1998); Conditional Approval No. 322 (July 30, 1999).

217

Conditional Approval No. 293 (November 24, 1998).

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•
•
•

•
•

− Engaging in loan origination and servicing activities that qualify the bank to receive a
share of the new markets tax credits awarded to the entity in which the bank is
investing. 218
Loans secured by residential real estate: Originating and selling residential real estate
mortgage loans. 219
Mortgage banking activities: Buying, selling, and otherwise dealing in mortgages. 220
Real estate tax services: Providing complete real estate tax services, including procuring
state and local tax bills, reporting such information to the servicers in time for
establishing escrow accounts and paying tax bills, and data processing and administration
services for escrows, taxes, and delinquencies. 221
Real property conveyed as security for DPC: Acquiring, managing, and selling real
property conveyed to the bank as security for or in satisfaction of DPC. 222
Student loans: Originating and marketing student loans. 223

Leasing
•
•
•
•

Equipment and personal property leasing: Engaging in equipment and personal
property leasing, including aircraft leasing. 224
Leasing/selling excess capacity: Providing back-up call answering for a hotline to
persons who are not bank customers if there is good faith excess capacity.225
Point-of-sale terminals: Leasing point-of-sale terminals.226
Prime auto leasing: Engaging in the origination, purchase, and securitization of prime
auto leases. 227

Interpretive Letter No. 996 (July 6, 2004), reprinted in [2003–04 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-522.

218

219

Interpretive Letter No. 853 (February 16, 1999); Conditional Approval No. 225 (November 25, 1996).

Interpretive Letter No. 711 (February 23, 1996), reprinted in [1995–96 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 81-026; Conditional Approval No. 338 (November 10, 1999); Conditional Approval No. 243
(May 9, 1997); Conditional Approval No. 241 (May 1, 1997); Conditional Approval No. 318 (July 21, 1999).

220

221

Conditional Approval No. 276 (May 8, 1998).

Interpretive Letter No. 735 (July 15, 1996), reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-052; Interpretive Letter No. 657 (March 31, 1995), reprinted in [1994–95 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 83,605.

222

223

Conditional Approval No. 216 (September 11, 1996); Interpretive Letter No. 692, supra.

Interpretive Letter No. 887 (April 30, 2000). See also Conditional Approval No. 316 (June 30, 1999); M&M
Leasing Corp. v. Seattle First Nat’l Bank, 563 F.2d 1377, 1382-83 (9th Cir. 1977), cert. denied, 436 U.S. 956
(1978); OCC Corporate Decision No. 97-54 (June 26, 1997); Conditional Approval No. 281 (July 30, 1998);
Conditional Approval No. 295 (December 3, 1998).

224

225

Conditional Approval No. 361 (March 3, 2000).

226

Conditional Approval No. 269 (January 13, 1998).

227

Interpretive Letter No. 898 (July 14, 1998).

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Payment Services
•
•
•

Cash management: Providing cash management services.228
Check cashing and processing: Engaging in check cashing through sales and leases of
check cashing machines to third parties. 229
Check certification: Providing check guarantee and verification services.230

Data Processing and Correspondent Services
•
•
•
•
•

•

Analyzing customer information: Analyzing customer information to determine
potential needs and including brochures in statements about the availability of
nonbanking products from vendors. 231
Electronic imaging services: Providing electronic imaging services to financial
institutions. Electronic imaging systems use digital technology to capture, index, store,
and retrieve electronic images of paper documents. 232
Internet merchant hosting services: Providing internet merchant hosting services to
other financial institutions for resale to their merchants. 233
Medical claims processing: Engaging in medical claims processing, including using
electronic data interchange facilities, billing, and facilitating payment through funds
transfer and credit card processing. 234
Merchant processing services: Providing merchant credit and debit card processing
services. Merchant processing generally involves verifying credit and debit card
authorizations at the time of purchase, processing card transactions, settlement of card
transactions, and depositing funds in merchants’ accounts. 235
Payment and information processing services: Providing payment and information
processing services. The entity may provide electronic data processing and data

Interpretive Letter No. 756 (November 5, 1996), reprinted in [1996–97 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 81-120. See also Conditional Approval No. 324 (August 17, 1999).

228

229

Conditional Approval No. 307 (March 19, 1999).

230

Conditional Approval No. 287 (September 4, 1998).

231

Conditional Approval No. 265 (December 29, 1997).

232

Interpretive Letter No. 805 (October 9, 1997). See also Conditional Approval No. 658 (October 13, 2004).

233

Interpretive Letter No. 875 (October 31, 1999).

Interpretive Letter No. 836 (March 12, 1996), reprinted in [1998–99 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-290.

234

Interpretive Letter No. 813 (October 14, 1997). See also Conditional Approval No. 289 (October 2, 1998);
Conditional Approval No. 248 (June 27, 1997); Interpretive Letter No. 720 (January 26, 1996), reprinted in
[1995–96 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81,035; Interpretive Letter No. 731 (July 1, 1996),
reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81,048; Interpretive Letter No. 689
(August 9, 1995), reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81,004; Conditional
Approval No. 265 (December 29, 1997); Conditional Approval No. 255 (September 25, 1997).

235

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•

•

interchange facilities to assist health-care providers in communicating billing and
payment-related information to insurance carriers responsible for providing medical
benefits. Non-controlling investments also may provide lockbox services. In addition,
non-controlling investments may provide ATM and point-of-sale-related services to
depository institutions.236
Payroll processing services: Offering payroll processing services by traditional as well
as electronic means to commercial customers. Payroll processing services may include
payroll computations, deductions and tax escrow account management, and processing
salary payments to employees either by direct deposit or by check preparation.237
Processing of banking, financial, or economic data: Collecting, transcribing,
processing, analyzing, and storing banking, financial, or related economic data for
customers as part of the business of banking. 238

Consulting and Financial Advice
•
•

Consumer financial advice: Providing financial advice to bank consumers, including
advice regarding acquisitions and dispositions of businesses.239
Investment advice: Providing investment advice as part of or incidental to the business
of banking. 240

Finder Activities
•
•

Acting as finder for government agencies: Hosting websites for government agencies
and providing an electronic communications pathway for product ordering and payment
as a finder activity. 241
Acting as finder for insurance activities: Bringing together a potential purchaser of
insurance and the seller of insurance by making inquiries as to interest, introducing or
arranging meetings of interested parties, and otherwise bringing parties together for a
transaction that the parties themselves negotiate and consummate.242

Conditional Approval No. 282 (July 31, 1998); Interpretive Letter No. 705 (October 25, 1995), reprinted in
[1995–96 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81-020.

236

Interpretive Letter No. 771 (February 24, 1997), reprinted in [1996–97 Transfer Binder] Fed. Banking
L. Rep. (CCH) ¶ 81-135.

237

Conditional Approval No. 361 (March 3, 2000); Interpretive Letter No. 516 (July 12, 1990), reprinted in
[1990–91 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,220.

238

239

Interpretive Letter No. 871 (October 14, 1999).

Interpretive Letter No. 871, supra. See also Interpretive Letter No. 851 (December 8, 1998); Conditional
Approval No. 270 (January 21, 1998); Conditional Approval No. 300 (January 13, 1999); Conditional Approval
No. 241 (May 1, 1997).

240

241

Interpretive Letter No. 883 (March 3, 2000).

242

Conditional Approval No. 612 (November 21, 2003).

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•
•
•
•

Acting as finder for internet vendors: Providing bank customers links to nonbanking,
third-party vendors’ websites.243
Acting as finder for like-kind exchanges: Providing finder services for the owners of
investment property. 244
Acting as finder for merchants through the internet: Hosting merchants’ commercial
websites, bringing potential customers and merchants together for a transaction that the
parties themselves negotiate and consummate.245
Acting as finder for real estate transactions: Acting as a finder and bringing together
parties wishing to finance the purchase, construction, development, or placement of real
estate equity interests, and securities related to real estate. 246

Real Estate-Related Activities
•
•

•

•

Appraisal services: Performing real estate appraisals for the bank and other lenders. 247
Property for bank premises: Acquiring property for bank premises if (1) the aggregate
amount of the investment is less than or equal to the national bank’s capital stock; or
(2) the aggregate amount of the investment is less than or equal to 150 percent of the
national bank’s capital and surplus, and the national bank is well capitalized (see
Glossary) and has a CAMELS rating of 1 or 2, provided that the bank provides the OCC
with notice 30 days after this investment. 248 Prior OCC approval is required for
investments in bank premises that do not meet the above criteria.249
Real estate tax and management services: Engaging in real estate reporting and
management services in connection with certain loans made by the bank or its lending
affiliates. A national bank also may hold a non-controlling interest in an entity that
provides real estate tax services that ensure that real estate taxes are paid on time. 250
Title abstracting services: Engaging in residential and commercial title abstracting
services; that is, the preparation of reports of chains of title drawn from public records,

Conditional Approval No. 221 (December 4, 1996). See also Conditional Approval No. 361
(March 3, 2000); Conditional Approval No. 369 (February 25, 2000).

243

244

Conditional Approval No. 322 (July 30, 1999).

245

Interpretive Letter No. 875, supra; Conditional Approval No. 369, supra.

246

Conditional Approval No. 241 (May 1, 1997).

247

Conditional Approval No. 322 (July 30, 1999).

A bank’s composite rating under the Uniform Financial Institutions Rating System, or CAMELS, integrates
ratings from six areas: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to
market risk. Evaluations of these take into consideration the bank’s size and sophistication, the nature and
complexity of its activities, and its risk profile.
248

249

Conditional Approval No. 298 (December 15, 1998).

250

Conditional Approval No. 317 (July 19, 1999); Conditional Approval No. 276 (May 8, 1998).

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•

but without interpretations, conclusions, or expressions of opinion as to the validity of
title. 251
Title insurance and loan closing services: Providing title insurance and engaging in
loan closing management activities. 252

Support Services
•
•
•

Agent for deposit placement: Acting as agent and placing customers’ funds in foreign
currency time deposits with foreign banks.253
Employee benefit and payroll services: Providing employee benefit services and
payroll services to financial institutions and nonfinancial companies.254
Professional employer organization: Marketing human resources and employee-related
administrative services to small and medium-sized customers. 255

Fiduciary Activities
•

Trust bank stock: Holding interests in trust banks. 256

Insurance and Annuities Activities
•
•

251

Insurance agency: Holding an interest in a general insurance agency.257
Insurance company products and investment funds hedging: Holding interests
through subsidiaries in various insurance company products and investment funds
containing bank-ineligible securities to hedge, on a dollar-for-dollar basis, the
subsidiary’s obligations to make payments to employees under nonqualified deferred
compensation plans.258

Conditional Approval No. 308 (April 8, 1999).

Conditional Approval No. 327 (September 14, 1999); Interpretive Letter No. 842 (September 28, 1998);
Conditional Approval No. 276 (May 8, 1998).

252

253

Interpretive Letter No. 778 (March 20, 1997).

254

Interpretive Letter No. 909 (May 2, 2001); Interpretive Letter No. 994 (June 14, 2004).

255

Conditional Approval No. 456 (March 10, 2001).

Interpretive Letter No. 697 (November 15, 1995), reprinted in [1995–96 Transfer Binder] Fed. Banking L.
Rep. (CCH) ¶ 81-016. See also Interpretive Letter No. 815 (December 2, 1997); Interpretive Letter No. 831
(June 8, 1998).

256

257

Interpretive Letter No. 819 (January 20, 1998); Conditional Approval No. 236 (April 3, 1997).

258

Interpretive Letter No. 878 (December 22, 1999).

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•
•

•
•
•
•
•
•

Marketing and consulting services to insurance agencies: Providing marketing and
consulting services to insurance agencies.259
Place of 5,000 satellite offices: An insurance agency located in a “place of 5,000” may
solicit and sell insurance in the same manner permissible for state-licensed insurance
agencies generally and as authorized by the agency’s state insurance license. In
particular, an insurance agency may sell insurance through satellite offices, in addition to
the agency’s “place of 5,000” location, as permitted under state law. 260
Scope of market: Holding an interest in an LLC that does business as an insurance
agency or broker, including acting as agent in the sale of disability and life insurance. 261
Title insurance: Selling title insurance as agent. 262
Title insurance and annuity sales: Acting as insurance agent, owning an interest in a
title insurance agency, and engaging in annuity sales as an agent. 263
Reinsurance of credit life, credit accidental death, and credit disability insurance:
Reinsuring mortgage life, mortgage accidental death, and mortgage disability insurance
on loans originated by lenders with an ownership interest in the investment entity. 264
Reinsurance of private mortgage insurance: Reinsuring mortgage insurance on loans
originated, purchased, or serviced by lenders with an ownership interest in the investment
entity. 265
Professional liability insurance: Incidental purchase of securities by a bank of an
insurance carrier when purchase of the securities is necessary to obtain professional
liability insurance. 266

Securities Activities
•

259

Business trusts: Having interests in certificates of participation in business trusts created
to hold and manage a substantial portion of the bank’s investment securities portfolio.267

Conditional Approval No. 302 (January 21, 1999).

See Interpretive Letter No. 873 (December 1, 1999). See also Interpretive Letter No. 882 (February 22, 2000);
Interpretive Letter No. 864 (May 19, 1999); Interpretive Letter No. 844 (October 20, 1998).

260

261

Conditional Approval No. 242 (May 7, 1997). See also Conditional Approval No. 303 (February 16, 1999).

262

Conditional Approval No. 371 (March 20, 2000).

263

Conditional Approval No. 574 (January 27, 2003).

264

Interpretive Letter No. 835 (July 31, 1998).

265

Interpretive Letter No. 985 (January 14, 2004).

266

Interpretive Letter No. 965 (February 24, 2003).

Interpretive Letter No. 745 (August 27, 1996), reprinted in [1996–97 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-110.

267

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•
•
•
•
•
•
•
•
•
•
•

Clearinghouse membership: Purchasing a share in a clearinghouse to enable
participation in permissible exchange and clearinghouse activities.268
Investment funds management: Holding limited equity interests in certain private
investment funds for which a national bank serves as investment manager. 269
Investment portfolio management: Providing investment portfolio management. 270
Investment advisory company: Providing investment advisory services through a
company that owns limited equity interests in investment funds to which it provides
services. 271
Principal in bank-eligible securities: Investing and trading as principal in bank-eligible
securities. 272
Private placement of securities: Arranging private placements of debt and equity
securities for bank customers. 273
Riskless principal: Buying and selling securities on an agency or riskless principal
basis. 274
Rural business investment companies: Having an interest in, or making loans to, an
RBIC that will engage in activities permissible under 7 USC 2009cc-9.
Securities brokerage: Providing full-service securities brokerage services (investment
advisory and brokerage services) to the bank’s customers.275
Small business investment companies: Having an interest in, and making loans to, an
SBIC that will make loans and invest in securities permissible under the Small Business
Investment Company Act of 1958. 276
Warrants for common stock: Having an interest in a subsidiary that holds warrants of
acquired shares of common stock.277

268

Interpretive Letter No. 929 (February 11, 2002).

269

Interpretive Letter No. 940 (May 24, 2002).

270

Conditional Approval No. 289 (October 2, 1998).
Interpretive Letter No. 897 (October 23, 2000).

271

Interpretive Letter No. 889, supra; Interpretive Letter No. 652 (September 13, 1994), reprinted in [1994
Transfer Binder] Fed. Banking L. Reg. (CCH) ¶ 83,600.

272

273

Interpretive Letter No. 871, supra.

Interpretive Letter No. 889, supra; Interpretive Letter No. 622 (April 9, 1993), reprinted in [1993–94
Transfer Binder] Fed. Banking L. Reg. (CCH) ¶ 83,504; Interpretive Letter No. 626 (July 7, 1993), reprinted in
[1993–94 Transfer Binder] Fed. Banking L. Reg. (CCH) ¶ 83,508; Interpretive Letter No. 371 (June 13, 1986),
reprinted in [1984–87 Transfer Binder] Fed. Banking L. Reg. (CCH) ¶ 85,541.

274

Interpretive Letter No. 871, supra; Securities Industry Association v. Comptroller of the Currency, 577 F.
Supp. 252 (D.D.C. 1983), aff’d. 758 F.2d 739 (D.C. Cir. 1985), cert. denied, 474 U.S. 1054 (1986); Securities
Industry Association v. Board of Governors of the Federal Reserve System, 468 U.S. 207 (1984). See also
Conditional Approval No. 303 (February 16, 1999).

275

276

Conditional Approval No. 305 (March 15, 1999). See also Interpretive Letter No. 832 (June 18, 1998).

277

Conditional Approval No. 319 (July 26, 1999).

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Technology and Electronic Activities
•
•

•
•
•
•

•

Internet banking powers: Offering internet home banking services.278
Commercial website hosting services: Providing a package of internet-based services
that include hosting merchants’ websites on its server; providing an electronic pathway
for product ordering and payment; maintaining merchants’ data associated with the
websites on its server; providing reports on transactions, website hits, and sales data; and
payment processing. 279
Hyperlinks between bank websites and third-party sites: Establishing hyperlinks
between the bank’s home pages and the internet pages of third-party providers so bank
customers can access those nonbank sites from the bank site. 280
Research and development: Engaging in research and development to establish identity
certification services.281
Trade finance: Facilitating trade financing between U.S. exporters and Latin American
importers by arranging financing, obtaining credit insurance, and acting as escrow
agent. 282
Virtual malls: Operating a virtual mall that provides a collection of links to websites of
third-party vendors and merchants organized by product type and made available to bank
customers. The virtual mall allows bank customers to shop for a range of financial and
nonfinancial products and services via the links to the sites and can electronically confirm
payment authorization before shipping goods.283
Web design and development services: Providing web design and development services
to the bank’s merchant customers.284

Electronic Bill Payments
•
•

Electronic bill payment and presentment services: Offering electronic bill payment
and presentment services over the internet.285
Electronic interbank switch: Holding an interest in a switch to support electronic bill

278

Conditional Approval No. 289 (October 2, 1998).

279

Conditional Approval No. 361 (March 3, 2000).

280

Conditional Approval No. 221 (December 4, 1996).

281

Conditional Approval No. 301 (January 15, 1999).

282

Conditional Approval No. 436 (December 19, 2000).

283

Interpretive Letter No. 875, supra.

Interpretive Letter No. 875, supra. See also Interpretive Letter No. 883, supra; Conditional Approval No. 220
(December 2, 1996); Corporate Decision No. 98-39 (March 27, 1998).

284

285

Conditional Approval No. 304 (March 5, 1999). See also Conditional Approval No. 289 (October 2, 1998).

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•
•

presentment services over the internet. 286
Electronic bill payment, money transfer, and related data processing: Holding an
interest in an LLC that offers electronic bill payment, transfer of money, and related data
processing for these services.287

Stored Value
•
•
•

Stored value card systems: Designing, installing, and supporting stored value card
systems at universities and other institutions. 288
Creation, sale, and redemption of stored value cards: Providing closed stored value
card systems and engaging in the development, marketing, delivery, and maintenance of
stored value and information systems. 289
Stored value system: Providing an electronic payments system that enables nondepositor
customers to store prepaid value on a card but is maintained in a central database.290

Electronic Data Interchange (EDI) Services
•
•

•
•

Dispensing prepaid alternative media: Dispensing alternative media through ATMs,
including event tickets, vouchers, and gift certificates.291
EDI services: Holding interests in companies that allow businesses to send and receive
payments, invoices, and orders worldwide. Specifically, these companies may design and
develop a network for electronic transfer of funds and financial information, along with
the development and marketing of related software.292
Electronic funds transfer (EFT) network: Engaging in a broad range of EFT-related
activities, including operating the networks, data processing, and providing consulting
services to depository institutions. 293
Operation of an electronic toll collection system: Using modern technology in serving
as a government fiscal agent. 294

286

Conditional Approval No. 332 (October 18, 1999).

287

Conditional Approval No. 389 (May 19, 2000).

Interpretive Letter No. 737 (August 19, 1996), reprinted in [1996–97 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-101.

288

289

Interpretive Letter No. 855 (March 1, 1999).

290

Conditional Approval No. 568 (December 31, 2002).

291

Conditional Approval No. 285 (August 14, 1998).

Interpretive Letter No. 732 (May 10, 1996), reprinted in [1995–96 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 81-049.

292

Interpretive Letter No. 854 (February 25, 1999); Interpretive Letter No. 890 (May 15, 2000); Interpretive
Letter No. 993 (May 16, 1997); CRA Decision Letter No. 122 (June 23, 2004).

293

294

Conditional Approval No. 361 (March 3, 2000).

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Digital Certification
•
•

Digital certification: Acting as a CA to enable subscribers to generate digital signatures
that verify the identity of a sender of an electronic message.295
Multiple bank certification authority network system: Establishing an entity to
support a multiple-bank CA network system. The central entity acts as the root CA for
the sub-CA banks and establishes business rules so that customers of any sub-CAs can
quickly and easily obtain verification of a certificate issued by any other CA bank in the
system. 296

Internet Access Service
•
•

Internet access service: Establishing and operating an electronic distribution channel for
providing electronic financial services to customers of participating financial
institutions. 297
Internet access and sale of excess capacity: Providing back-up call answering for a
hotline to persons who are not bank customers if there is good faith excess capacity.298

Software Development and Production
•

Software development, distribution, and support: Providing services and technology
to facilitate secure electronic payments over the internet.299

Other
•
•

Interest in airplane: Owning a non-controlling interest in an LLC that owns and
operates a single small airplane for use in the conduct of the bank’s business.300
ATM sales/leases to third parties: Selling and leasing ATMs, as well as their
proprietary software and hardware, to enable check cashing services. 301

Conditional Approval No. 339 (November 16, 1999); Conditional Approval No. 301 (January 15, 1999);
CRA Decision Letter No. 122 (June 23, 2004); Corporate Decision No. 2002-4 (February 18, 2002).

295

296

Conditional Approval No. 339 (November 16, 1999).

297

Conditional Approval No. 221 (December 4, 1996).

298

Conditional Approval No. 361 (March 3, 2000).

Interpretive Letter No. 868 (August 16, 1999); Interpretive Letter No. 677 (June 28, 1995), reprinted in
[1994-95 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,625. See also Interpretive Letter No. 756, supra;
Conditional Approval No. 254 (August 21, 1997); Conditional Approval No. 289 (October 2, 1998).

299

300

Interpretive Letter No. 943 (July 24, 2002).

301

Conditional Approval No. 307 (March 19, 1999).

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•

302

Interest in a bankers’ bank: Owning a non-controlling interest in an institution
organized as a bankers’ bank, not otherwise authorized under 12 USC 27(b).302

Interpretive Letter No. 970 (June 25, 2003).

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Appendix C: Operating Subsidiary Guidelines—
FSAs
Introduction
These guidelines describe activities of FSAs that the OCC or a predecessor regulator of FSAs
has determined may be performed in an operating subsidiary under the expedited review
procedures available in the OCC’s operating subsidiary regulations, provided the activity is
conducted pursuant to the same terms and conditions as would be applicable if the activity
were conducted directly by an FSA. 303 Activities recognized in these guidelines as
permissible for FSA subsidiaries under applicable OCC or predecessor regulator precedent
must also be conducted in accordance with other applicable statutes and regulations,
including, but not limited to, the federal securities laws and the Volcker rule, 12 CFR 44,
unless the FSA and its operating subsidiary are otherwise exempt from the Volcker rule. 304
The Volcker rule generally prohibits, subject to certain exceptions, a banking entity from
engaging in proprietary trading and from acquiring or retaining an ownership interest in,
sponsoring, or having certain relationships with a hedge fund or private equity fund.

Operating Subsidiary Activities—FSAs [12 CFR 5.38(f)(5)]
(A) Holding and managing assets acquired by the parent FSA or its operating
subsidiaries, including investment assets and property acquired through
foreclosure or otherwise in good faith to compromise a doubtful claim, or in
the ordinary course of collecting a DPC.
FSAs and their operating subsidiaries may hold and manage assets acquired by the parent
FSA or the operating subsidiary, including investment assets and property acquired in
satisfaction of DPCs.
An operating subsidiary of an FSA, subject to conditions, may manage the parent savings
association’s securities investment portfolio, including holding legal title to assets in the
portfolio in the United States. 305

303

12 CFR 5.38.

See 12 USC 1851(h)(1) (exempting certain institutions from the Volcker rule, including institutions that do
not have and are not controlled by a company that has (i) more than $10 billion in total consolidated assets; and
(ii) total trading assets and trading liabilities, as reported on the most recent applicable regulatory filing by the
institution, that are more than 5 percent of total consolidated assets).
304

305

OTS Opinion of the Acting Chief Counsel No. 94-15 (July 6, 1994).

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An FSA’s foreign operating subsidiary may hold financial assets that its parent is authorized
to invest in directly and may manage the association’s investment portfolio, subject to
conditions. 306
FSAs and their operating subsidiaries may invest in and hold mortgage loans and mortgagebacked securities.307
FSAs and their operating subsidiaries may hold assets consisting of federal funds, federal
agency securities, and mortgage-backed securities. 308
FSAs and their operating subsidiaries may hold investment-grade corporate bonds and
municipal bonds, automobile loans, and securities of an affiliate.309
FSAs and their operating subsidiaries may purchase auction rate securities (ARS), including
municipal ARSs and student loan-backed ARSs, and auction rate preferred securities, from
current and former customers and hold them for up to 120 days from the date of purchase,
subject to conditions. 310
First-tier operating subsidiaries of an FSA may hold the stock of second-tier subsidiaries, and
second-tier operating subsidiaries may engage in mortgage loan origination and servicing
activities, which are permissible activities for FSAs. 311 A second-tier subsidiary may hold a
subordinated interest in a pool of securitized mortgage loans, which is a permissible activity
for FSAs. 312
An operating subsidiary of an FSA may facilitate the securitization of automobile loans held
by the parent FSA. 313

OTS Order No. 2001-01 (January 5, 2001); OTS Order No. 2000-11 (February 4, 2000); OTS Memorandum
of the Chief Counsel (January 14, 2000); OTS Opinion of the Acting Chief Counsel (July 6, 1994). The
conditions related to, among other things, consenting to U.S. jurisdiction and the applicability of U.S. laws,
termination of operations, and documenting adequate oversight and internal controls.

306

12 USC 1464(c)(1); 12 CFR 160.30; OCC Conditional Approval #1029 (May 2012); OTS Order No. 200240 (September 6, 2002).

307

308

12 USC 1464(c)(1); 12 CFR 160.30; OTS Order No. 2002-06 (February 20, 2002).

12 USC 1464(c)(1), (c)(2)(D), (c)(3)(B); 12 CFR 160.30; 12 CFR 160.40; 12 CFR 160.42; OTS Order No.
2010-58 (September 20, 2010).

309

310

OCC Interpretive Letter No. 1135 (January 20, 2012).

311

OTS Order No. 2004-19 (April 22, 2004).

312

OTS Order No. 2004-23 (April 30, 2004).

313

OTS Order No. 2001-71 (November 19, 2001).

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(B) Providing services to or for the FSA or its affiliates, including accounting,
auditing, appraising, advertising and public relations, and financial advice and
consulting.
FSAs and their operating subsidiaries may provide payroll processing services if the services
are performed primarily for the savings association, other depository institutions, or persons
with whom the association or subsidiary has an established relationship.314
FSAs and their operating subsidiaries may provide messenger services to facilitate customer
transactions. 315
FSAs and their operating subsidiaries may service credit cards for the association and an
affiliated financial institution.316
Operating subsidiaries of FSAs may oversee and manage service operations, such as
customer service support for retail banking and call center support, that are integral to the
parent FSA’s operations. 317
FSAs and their operating subsidiaries may engage in back-office processing of mortgage
documents; development and execution of marketing campaigns; ordering relevant
documents such as appraisals and credit reports; preparing loan packages for underwriting
and decision making by the lender; and delivering loan closing packages to the escrow or
closing agent. 318
FSAs and their operating subsidiaries may provide correspondent services.319
(C) Making loans or other extensions of credit and selling money orders and
traveler’s checks.
FSAs and their operating subsidiaries possess broad authority to engage in lending and
lending-related activities. Under the HOLA, 320 and subject to certain statutory limits and
safety and soundness guidelines, FSAs and their operating subsidiaries may originate loans
and extensions of credit, or interests therein, including, but not limited to, residential real

314

OTS Opinion of the Chief Counsel (October 1, 1998).

315

OTS Memorandum of the Deputy Chief Counsel (November 20, 1992).

316

OTS Order No. 2006-13 (March 30, 2006).

317

OTS Order No. 2008-11 (April 28, 2008).

318

OTS Order No. 2005-31 (August 24, 2005).

319

FHLBB Letter from Deputy General Counsel (January 13, 1984).

320

12 USC 1461 et seq.

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estate loans; 321 nonresidential real estate loans;322 commercial loans, including loans for
corporate, business or agricultural purposes; 323 consumer loans; 324 credit card loans; 325
education loans; 326 home improvement loans and manufactured home loans; 327 construction
loans; 328 loans to business development credit corporations; 329 and account loans.330
FSAs and their operating subsidiaries may make unlimited residential real property loans and
may also make, subject to aggregate limits, nonresidential real property loans pursuant to
12 USC 1464. The standards for real estate lending by FSAs and their operating subsidiaries
are set forth at 12 CFR 160.100 and 160.101. FSAs and their operating subsidiaries may
make, participate in, arrange, purchase, or sell loans or extensions of credit secured by liens
or interests in residential or commercial real estate.
FSAs and their operating subsidiaries may engage in mortgage loan origination activities. 331
FSAs and their operating subsidiaries may engage in the activities of residential mortgage
lending and home equity lines of credit and may hold mortgage lending licenses.332 FSAs
and their operating subsidiaries may engage in structured lending as part of their authority
under the HOLA to engage in mortgage lending and secured and unsecured lending. 333
FSAs and their operating subsidiaries may make loans to financial institutions, brokers, and
dealers, provided the loans are secured by assets in which an FSA may invest directly.334

321

12 USC 1464(c)(1)(B).

322

12 USC 1464(c)(2)(B).

323

12 USC 1464(c)(2)(A).

324

12 USC 1464(c)(2)(D).

325

12 USC 1464(c)(1)(T); OTS Order No. 96-88 (August 29, 1996).

326

12 USC 1464(c)(1)(U).

327

12 USC 1464(c)(1)(J).

328

12 USC 1646(c)(3)(C).

329

12 USC 1464(c)(4)(A).

12 USC 1464(c)(1)(A) (loans on the security of the FSA’s savings accounts and loans related to transaction
accounts).

330

OTS Order No. 2004-33 (June 15, 2004); OTS Order No. 2004-23 (April 30, 2004); OTS Order No. 2004-19
(April 22, 2004).

331

332

OTS Order No. 2009-54 (October 21, 2009).

333

OTS Order No. 2007-22 (May 29, 2007).

334

12 USC 1464(c)(1)(L).

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FSAs and their operating subsidiaries may make commercial and consumer loans. 335 FSAs
and their operating subsidiaries may underwrite, fund, and service automobile loans for other
financial institutions.336
An FSA’s wholly owned operating subsidiary that is a federally chartered, insured depository
institution may operate as a credit card bank and may also, on a limited basis, make
community development loans other than credit card loans to benefit low- and moderateincome borrowers.337
FSAs and their operating subsidiaries may engage in funds transfer services; issue, collect,
and process cashier’s checks; 338 and issue traveler’s checks.339
(D) Purchasing, selling, servicing, or warehousing loans or other extensions of
credit, or interests therein.
FSAs and their operating subsidiaries may engage in mortgage loan servicing activities. 340
(E) Providing management consulting, operational advice, and services for
other financial institutions.
FSAs and their operating subsidiaries may provide ministerial, nondiscretionary support
services as agent for a trust company without obtaining prior approval to exercise trust
powers. 341
FSAs and their operating subsidiaries may underwrite, fund, and service automobile loans for
other financial institutions. 342

12 USC 1464(c)(2)(A), (c)(2)(D); OTS Order No. 2002-47 (October 24, 2002) (short-term commercial and
consumer loans to businesses and individuals to purchase insurance).

335

336

OTS Order No. 2003-40 (August 26, 2003).

337

OTS Order No. 2005-52 (November 28, 2005).

338

12 CFR 145.17; FHLBB Opinion of the General Counsel (July 29, 1981).

FHLBB Opinions of the Deputy General Counsel (March 16, 1988 and February 1, 1982) and FHLBB
Opinion of the General Counsel (November 24, 1965).

339

340

OTS Order No. 2004-19 (April 22, 2004).

341

OTS Opinion of the Chief Counsel (October 17, 1995).

342

OTS Order No. 2003-40 (August 26, 2003).

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(F) Providing check payment services.
FSAs and their operating subsidiaries may engage in check cashing and activities that are
incidental to check cashing. 343
FSAs and their operating subsidiaries may provide funds transfer services.344
(G) Acting as investment adviser (including an adviser with investment
discretion) or financial adviser or counselor to governmental entities or
instrumentalities, businesses, or individuals, including advising registered
investment companies and mortgage or REITs.
FSAs and their operating subsidiaries may provide investment advisory services, financial
advisory services, and financial counseling services.345 FSAs and their operating subsidiaries
that are authorized by the OCC to engage in fiduciary activities may also act as investment
advisers or provide investment advice to customers through trust department operations.346
Operating subsidiaries may need to register with the SEC as an investment adviser and
comply with applicable state laws depending on the nature of the investment activities
conducted. FSAs are excluded from the definition of investment adviser under the Advisers
Act unless they advise registered investment companies.347
(H) Providing financial and transactional advice and assistance for customers
in structuring, arranging, and executing mergers and acquisitions,
divestitures, joint ventures, leveraged buyouts, swaps, foreign exchange,
derivative transactions, coin and bullion, and capital restructurings.
FSAs and their subsidiaries may engage in financial consulting and advisory services for
other financial institutions and the general public.348 Depending on the nature of the activity,
operating subsidiaries may be required to register under the Advisers Act.

343

OTS Order No. 2004-39 (July 30, 2004).

344

12 CFR 145.17.

345

12 CFR 5.38(f)(5)(vii); OCC Conditional Approval #1198 (July 2018).

12 USC 1464(n); 12 CFR 150.30(j); OTS Opinion of the Acting Chief Counsel (December 30, 1993); OTS
Order No. 2011-31 (April 21, 2011); OTS Order No. 2004-61 (December 27, 2004); OTS Order No. 2002-10
(March 19, 2002).

346

347

15 USC 80b-2(a)(11).

348

OTS Opinion of the Chief Counsel (May 10, 1995).

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FSAs and their operating subsidiaries may provide foreign currency exchange services to
customers. 349 FSAs and their operating subsidiaries may also act as principal in providing
foreign exchange forward contracts to commercial customers. 350
FSAs and their operating subsidiaries may also provide customers with advice and assistance
in structuring, arranging, and executing exchange, coin, and bullion transactions.351
FSAs and their operating subsidiaries are authorized to invest in derivatives to the extent they
are authorized to invest in the underlying assets. 352
Derivative activities must comply with applicable regulations, including the Volcker rule and
regulations issued under Title VII of the Dodd–Frank Act.
(I) Underwriting and reinsuring credit life and disability insurance.
FSAs and their operating subsidiaries may underwrite or reinsure credit insurance, provided
that such insurance is issued in connection with loans made by the FSA or the FSA’s
subsidiaries or serviced by the FSA. 353 FSAs generally conduct insurance activities through a
subsidiary for safety and soundness reasons rather than directly in the FSA. 354 FSAs and their
operating subsidiaries should consult with legal counsel regarding the application of state
insurance law.
(J) Leasing of personal property.
Finance Leasing
FSAs and their operating subsidiaries may engage in finance leasing activities that are the
functional equivalent of loans made under their general lending authorities, including
residential, commercial, business, corporate, or agricultural loans, and nonresidential real
estate loans and consumer loans. 355 Such financing leases are subject to the same investment
limitations as loans made under those authorities and other conditions set forth in OCC
regulations. 356
349

OTS Opinion of the Chief Counsel (April 3, 2000); OTS Opinion of the Chief Counsel (August 11, 1995).

350

OTS Opinion of the Chief Counsel (April 3, 2000).

351

See, e.g., OTS Opinion of the Chief Counsel (March 6, 2006).

352

12 CFR 163.172.

353

OTS Opinion of the Chief Counsel (January 10, 1995); OTS Order No. 2002-24 (June 14, 2002).

FSAs may also conduct underwriting and reinsurance activities through service corporations, subject to the
prior approval of the OCC.

354

355

12 USC 1464(c)(1)(B), (c)(2)(A), (c)(2)(B) and (c)(2)(D); see also 12 CFR 160.30 and 160.41.

356

12 CFR 160.41.

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General Leasing
FSAs and their operating subsidiaries may also invest in tangible personal property,
including vehicles, manufactured homes, machinery, equipment, or furniture for the purpose
of leasing such property. Investments in tangible personal property for general leasing
purposes are subject to a limit of 10 percent of the assets of the association. 357 Leases made
under the general leasing authority are not required to be the functional equivalent of loans.
(K) Providing securities brokerage.
FSAs and their operating subsidiaries may provide securities brokerage services to
customers. 358 FSAs and their operating subsidiaries may provide clearing and related
services, including settlement services, custodial services, and margin lending. 359
FSAs may perform securities brokerage activities without registering as brokers or dealers
with the SEC on the same terms and under the same conditions that national banks are
exempted from registration. 360 However, FSA subsidiaries are required to register with the
SEC as broker-dealers.
(L) Underwriting and dealing, including making a market, in savings
association-permissible securities and purchasing and selling as principal
asset-backed obligations.
FSAs and their operating subsidiaries may underwrite and deal in (including brokerage or
warehousing) securities that are permissible for the savings association to invest in under
section 5(c) of the HOLA, and may purchase and sell as principal other permissible assetbacked obligations.361
FSAs and their operating subsidiaries may underwrite and deal in, without limitation,
obligations of the U.S. government or obligations fully guaranteed as to principal and interest
by the United States. 362

357

12 USC 1464(c)(2)(C); 12 CFR 160.30 and 160.41.

358

12 CFR 5.38(f)(5)(xi); OTS Order No. 2009-10 (February 9, 2009).

359

OTS Opinion of the Chief Counsel (November 28, 2006); OTS Order No. 2006-45 (November 28, 2006).

360

15 USC 78c(a)(4)-(6).

12 USC 1464(c); 12 CFR 5.38(f)(5)(xii); OTS Order No. 2006-23 (June 1, 2006); OTS Order No. 2001-01
(January 5, 2001); OTS Order No. 2000-11 (February 4, 2000).

361

12 USC 1464(c)(1)(C); 12 CFR 160.30. The OCC may establish limits on investments if the association’s
concentration in an investment presents safety and soundness concerns.

362

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FSAs and their operating subsidiaries may underwrite and deal in, without limitation, Federal
Home Loan Bank stock and bonds or in the stock of Fannie Mae. 363
FSAs and their operating subsidiaries may underwrite and deal in, without limitation,
investments in Federal Home Loan Mortgage Corporation (Freddie Mac) instruments.364
FSAs and their operating subsidiaries may underwrite and deal in, without limitation,
obligations or securities issued, or fully guaranteed as to principal and interest, by Fannie
Mae, Ginnie Mae, or any agency of the United States. 365
FSAs and their operating subsidiaries may without limitation underwrite and deal in
securities issued by states and their political subdivisions: (1) general obligation bonds; (2)
municipal revenue bonds; and (3) municipal notes.366 FSAs and their subsidiaries may not
invest more than 10 percent of capital in state or municipal nongeneral obligation securities
of any one issuer.367
FSAs and their operating subsidiaries may own, sell, underwrite, and deal in mortgagebacked securities and other permissible asset-backed securities.368 Eligibility to invest and
the aggregate limit on investments depend on the type of asset securitized. There is no
aggregate limit for mortgage-backed securities.369
FSAs and their operating subsidiaries may underwrite and deal in commercial paper subject
to certain requirements and limits. 370 These investments are subject to the aggregate limit of
35 percent of total assets, which applies to investments in commercial paper, corporate debt
securities, and consumer loans. Amounts in excess of 30 percent are subject to additional
conditions. 371
Total investments in the commercial paper and corporate debt securities of any one issuer or
issued by any one person or entity affiliated with the issuer, together with loans, must not
exceed the lending limit. 372

363

12 USC 1464(c)(1)(D); 12 CFR 160.30.

364

12 USC 1464(c)(1)(E); 12 CFR 160.30.

365

12 USC 1464(c)(1)(F); 12 CFR 160.30.

366

12 USC 1464(c)(1)(H).

367

12 USC 1464(c)(1)(H); 12 CFR 160.30; OTS Opinion of the Chief Counsel (October 29, 2001).

368

OTS Opinion of the Chief Counsel (September 14, 2004); OTS Order No. 2002-06 (February 20, 2002).

369

12 USC 1464(c)(1)(R); OTS Opinion of the Chief Counsel (September 14, 2004); 12 CFR 160.30.

370

12 USC 1464(c)(1)(D); 12 CFR 160.30 and 12 CFR 160.40.

371

12 USC 1464(c)(1)(D).

372

12 CFR 160.43(a)(3).

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(M) Acting as an insurance agent or broker for credit life, disability, and
unemployment insurance; single property interest insurance; and title
insurance.
FSAs and their operating subsidiaries may engage in certain insurance agency activities or
provide brokerage services for various types of credit-related insurance. 373
FSAs and their operating subsidiaries may sell credit-related insurance, on an agency basis,
without geographic restriction. 374 FSAs and their operating subsidiaries may sell creditrelated insurance that includes death and disability, unemployment, single property interest,
and title insurance. FSAs and their operating subsidiaries must comply with applicable state
insurance laws.
(N) Offering correspondent services to the extent permitted by published OCC
precedent for FSAs.
FSAs and their operating subsidiaries may provide correspondent services to other
institutions. Generally, an FSA is permitted to provide any service that it would be authorized
to generate in-house for itself in the course of its regular business, including check clearing,
help with bill collections, participation in large loans, legal advice, help in building securities
portfolios, counseling as to personnel policies, staff training, help in site selection, auditing,
and the provision of electronic data processing. 375
(O) Acting as agent or broker in the sale of fixed annuities.
FSAs and their operating subsidiaries may sell fixed annuities on an agency basis without
geographic restriction. FSAs and operating subsidiaries selling insurance are subject to
applicable state insurance laws. 376
(P) Offering debt cancellation or debt suspension agreements.
FSAs and their operating subsidiaries may enter into agreements that result in cancellation of
debt upon the death, disability, or other loss experienced by a borrower.377

373

12 CFR 5.38(f)(5)(xiii).

See, e.g., OTS Opinion of the Chief Counsel (February 12, 1996); OTS Opinion of the Chief Counsel
(October 17, 1994).

374

375

See 47 Fed. Reg. 17468 (April 23, 1982).

OTS Opinion of the Chief Counsel (October 17, 1994) and OTS Opinion of the Acting Chief Counsel
(September 15, 1993).

376

377

OTS Opinion of the Chief Counsel (December 18, 1995).

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(Q) Providing escrow services.
FSAs and their operating subsidiaries may provide escrow services in connection with real
estate loans and real estate transactions. 378
FSAs and their operating subsidiaries may establish commercial escrow accounts.379
FSAs and their operating subsidiaries may also act as document custodian of residential
mortgage loan documents for third parties without obtaining authorization to perform trust
services. 380
(R) Acting as a transfer agent.
FSAs and their operating subsidiaries may act as transfer agents. A transfer agent acts on
behalf of an issuer of securities, or on behalf of itself as an issuer of securities, and performs
the following functions: (1) countersigning securities upon issuance; (2) monitoring the
issuance of securities to prevent unauthorized issuance; (3) registering the transfer of
securities; (4) exchanging or converting securities; or (5) transferring record ownership of
securities by bookkeeping entry without physical issuance of securities certificates. 381
An FSA or operating subsidiary must register with the OCC if it performs transfer agent
functions for any security registered under section 12 of the Exchange Act or any security
that would be required to be registered under section 12 of the Exchange Act except for the
exemption from registration for registered investment company securities and certain
insurance company securities.382
(S) Providing or selling postage stamps.
FSAs and their operating subsidiaries may offer postal services from their retail offices and
may receive income from such operations. Permissible activities include the following: (1)
selling stamps and other postal supplies; (2) accepting matter for mailing; (3) selling related
insurance; (4) accepting registered mail; and (5) issuing money orders. An FSA or operating
subsidiary offering postal services must observe the appropriate rules and regulations of the
U.S. Postal Service. 383

378

61 Fed. Reg. 50951 (September 30, 1996).

379

OTS Opinion of the Chief Counsel (August 19, 1998).

380

OTS Opinion of the Chief Counsel (January 31, 1994).

381

See 15 USC 78c(a)(25).

382

12 USC 78q-1(c); 12 CFR 9.20(a).

383

12 CFR 7.1010; OTS Opinion of the Acting Chief Counsel (March 25, 1994).

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Appendix D: Service Corporation Guidelines—FSAs
Introduction
These guidelines describe activities of FSAs that the OCC has determined may be performed
in a service corporation in accordance with the OCC’s service corporation regulations. 384
FSAs may invest up to 3 percent of assets in service corporations, provided that any amount
exceeding 2 percent of assets must serve primarily community, inner-city, or community
development purposes.
An FSA’s direct investment in a service corporation is subject to geographic and ownership
restrictions. If any institution wants to directly invest in an entity under service corporation
authority, the entity must be incorporated in the state of the home office of the investing
institution. Also, no entity other than a savings association may invest in the service
corporation. This is commonly referred to as a “first-tier” service corporation investment.
These ownership and geographic restrictions do not apply to lower-tier entities (such as joint
ventures, corporations, or partnerships) that may be owned by service corporations.385
Subject to the prior filing guidelines, and as detailed under the provisions of 12 CFR 5.59(h),
a service corporation may engage in a specified listing of activities. From time to time, the
predecessor regulators of FSAs codified decisions and determinations in interpretive
opinions, or otherwise, regarding the permissibility of activities that had been made in
response to applications. 386 This regulation, and its predecessor regulations,387 reflect such
codifications. In addition to the authorized activities designated in the regulation, an FSA
may request OCC approval for a service corporation to engage in any other activity
reasonably related to the activities of financial institutions. The activities listed below are not
intended to be an exhaustive account of activities deemed permissible for service
corporations.

Service Corporation Activities—FSAs [12 CFR 5.59(f)]
(1) Any activity that all FSAs may conduct directly.
(2) Business and professional services if limited to financial documents,
financial clients, or generally finance-related:
(i)

Accounting or internal audit;

384

12 CFR 5.59.

385

See, e.g., FHLBB Opinion of the Associate General Counsel (July 15, 1983).

The OTS described this process of periodically reviewing and updating the list of authorized activities for
service corporations in the preamble to a proposed rule in 1996. See Subsidiaries and Equity Investments,
61 Fed. Reg. 29976 (June 13, 1996).

386

387

See 12 CFR 559.4 (1996) and 12 CFR 545.74(c)(1995).

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(ii) Advertising, market research and other marketing;
(iii) Clerical;
(iv) Consulting;
(v) Courier;
(vi) Data processing;
(vii) Data storage facilities operation and related services;
(viii) Office supplies, furniture, and equipment purchasing and distribution;
(ix) Personnel benefit program development or administration;
(x) Printing and selling forms that require magnetic ink character recognition (MICR)
encoding;
(xi) Relocation of personnel;
(xii) Research studies and surveys;
(xiii) Software development and systems integration; and
(xiv) Remote service unit operation, leasing, ownership, or establishment.
(3) Credit-related activities
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

Abstracting;
Acquiring and leasing personal property;
Appraising;
Collection agency;
Credit analysis;
Check or credit card guaranty and verification;
Escrow agent or trustee (under deeds of trust, including executing and delivery of
conveyances, reconveyances, and transfers of title); and
(viii) Loan inspection.
(4) Consumer services
(i) Financial advice or consulting;
(ii) Foreign currency exchange;
(iii) Home ownership consulting;
(iv) Income tax preparation;
(v) Postal services;
(vi) Stored value instrument sales;
(vii) Welfare benefit distribution;
(viii) Check printing and related services; and
(ix) Remote service unit operation, leasing, ownership, or establishment.
A service corporation of an FSA may (1) provide risk management services, which involves
consulting with clients about financial subjects, in connection with its insurance agency and
brokerage business, and (2) consult in the areas of employee and executive benefits and
retirement and estate planning, because these areas are finance-related and involve planning
with respect to income and expenditures, including taxes.388

388

OTS Order No. 2003-57 (November 21, 2003).

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FSA service corporations may sell medical discount cards issued by a third party to
customers of the association and others, engage in the processing of account receivables and
payables for medical service providers, and engage in certain collection activities.389
(5) Real estate-related services
(i) Acquiring real estate for prompt development or subdivision, for construction or
improvements, for resale or leasing to others for such construction, or for use as
manufactured home sites, in accordance with a prudent program of property development;
(ii) Acquiring improved real estate or manufactured homes to be held for rental or resale, for
remodeling, renovating, or demolishing and rebuilding for resale or rental, or to be used for
offices and related facilities of a stockholder of the service corporation;
(iii) Maintaining and managing real estate; and
(iv) Real estate brokerage for property owned by a savings association that owns capital
stock of the service corporation, or a lower-tier service corporation in which the service
corporation invests.
A service corporation of an FSA may engage in mortgage loan origination and title insurance
services. 390
(6) Securities activities, liquidity management, and coins
(i) Execution of transactions in securities on an agency or riskless principal basis solely upon
the order and for the account of the customer or the provision of investment advice. The
service corporation must register with the SEC and state securities regulators, as required by
applicable federal and state law and regulations;
(ii) Liquidity management;
(iii) Issuing notes, bonds, debentures, or other obligations or securities; and
(iv) Purchase or sale of coins issued by the U.S. Treasury.
A service corporation of an FSA may engage in securities activities on an agency or riskless
principal basis and provide investment advice.391 A riskless principal transaction occurs
when a dealer receives an order on behalf of a customer and contemporaneously sells the
security to a customer. The service corporation must comply with any federal or state laws
requiring registration for securities activities.
FSA service corporations may engage in securities brokerage and activities incident thereto,
margin lending, and options trading activities not conducted on an “as principal” basis.392
389

OTS Order No. 2002-15 (June 3, 2002).

390

OTS Order No. 2002-61 (December 10, 2002).

391

12 CFR 5.59(f)(6); OTS Order No. 96-107 (November 12, 1996).

OTS Order No. 2007-53 (November 7, 2007); OTS Order No. 2003-53 (October 17, 2003); OTS Order
No. 96-107 (November 12, 1996).

392

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FSA service corporations may engage in securities brokerage, dealing, and underwriting
activities, and also may engage in dealing in whole loans, certificates of deposits, and interest
rate futures. 393
FSA service corporations may underwrite investment grade corporate debt securities and
establish a corporate bond trading desk to provide new issue and secondary investment grade
corporate debt securities to institutional investors. 394
FSA service corporations may engage in investment advisory services.395
A service corporation of an FSA may issue notes, bonds, debentures, or other obligations or
securities. 396 FSA service corporations may underwrite and deal in municipal securities. 397
A service corporation of an FSA may purchase or sell coins issued by the U.S. Treasury.398
(7) Investments
(i) Tax-exempt bonds used to finance residential real property for family units;
(ii) Tax-exempt obligations of public housing agencies used to finance housing projects with
rental assistance subsidies;
(iii) SBICs and new market venture capital companies licensed by the U.S. Small Business
Administration;
(iv) RBICs licensed by the U.S. Department of Agriculture; and
(v) Investing in savings accounts of an investing thrift.
FSA service corporations are authorized to invest in tax-exempt bonds and tax-exempt
obligations of public housing agencies to finance residential housing projects.399
FSA service corporations are authorized to invest in SBICs and RBICs. 400 An SBIC is a type
of privately owned investment company that is licensed by the Small Business
Administration to help meet the financing needs of small businesses. An RBIC is a type of
privately owned investment company that is licensed by the U.S. Department of Agriculture
to help meet the business and development needs of rural communities.
393

OTS Order No. 2001-66 (October 29, 2001).

394

OTS Order No. 2003-31 (August 1, 2003).

395

OTS Order No. 2000-32 (March 27, 2000).

396

12 CFR 5.59(f)(6).

397

OTS Opinion of the Chief Counsel (June 19, 2001).

398

12 CFR 5.59(f)(6).

399

12 CFR 5.59(f)(7).

400

OTS Order No. 2000-24 (February 28, 2000).

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(8) Community development investments. Community and economic
development or public welfare investments that are permissible under
12 CFR 24.
FSA service corporations are authorized to make certain community development and public
welfare investments. 401 An FSA’s investments in community development organizations
(e.g., community development corporations and community development financial
institutions) may qualify as service corporation investments if those entities are engaged in
activities permissible for service corporations and meet geographic and ownership
restrictions. The geographic and ownership restrictions do not apply to lower-tier entities
owned by service corporations.
FSA service corporations may conduct certain community development activities identified
in former regulation 12 CFR 563e.12(g)(1)–(4) (2001).402
FSA service corporations may make investments in community development financial
institutions. 403
(9) Charitable activities. Establishing or acquiring a corporation that is
recognized by the Internal Revenue Service as organized for charitable
purposes under 26 USC 501(c)(3) of the Internal Revenue Code.
FSA service corporations may make reasonable charitable contributions, either directly or
through charitable foundations established by the service corporations. 404 The service
corporation must be exclusively engaged in activities designed to promote the well-being of
the communities in which the owners of the service corporation operate.
(10) Activities conducted as agent. Activities conducted on behalf of a
customer on other than an “as principal” basis.
A service corporation of an FSA may engage in insurance agency activities for casualty,
automobile, life, health, and accident insurance. 405

401

12 CFR 5.59(f)(8); see, e.g., OTS Opinion of the Chief Counsel (December 26, 1991).

OTS Order No. 2001-70 (November 2, 2001). The activities identified in the predecessor regulation were
affordable housing; community services targeted to low- or moderate-income persons; activities that promote
economic development by financing businesses or farms that meet the Small Business Administration’s size
eligibility standards or have gross annual revenue of $1 million or less; and activities that revitalize or stabilize
low- or moderate-income geographies.

402

403

OTS Order No. 96-101 (October 18, 1996) and OTS Order No. 96-73 (June 24, 1996).

404

12 CFR 5.59(f)(9); see, e.g., OTS Opinion of the Chief Counsel (November 12, 1992).

405

OTS Order No. 2003-21 (June 6, 2003).

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(11) Incidental activities. Activities reasonably incidental to those listed in
paragraphs (f)(1)–(f)(10) of this section if the service corporation engages in
those activities.
An FSA may request OCC approval for a service corporation to engage in any other activity
reasonably related to the activities of financial institutions.406
A service corporation of an FSA may engage in insurance claims adjustment, including thirdparty administration for self-insured clients, because these activities are similar to activities
that savings associations regularly engage in. 407
A service corporation of an FSA also may reinsure private mortgage insurance issued by
third parties for loans originated or purchased by the association, its mortgage lending
subsidiaries, or its mortgage lending affiliates.408
A service corporation of an FSA may reinsure life and disability insurance underwritten in
connection with loans originated by the savings association. 409
A service corporation of an FSA may engage in structured settlements as an activity that is
reasonably related to the activities of financial institutions such as making loans, providing
liquidity, and serving as a financial intermediary. 410
FSA service corporations may engage in the business of viatical financing as reasonably
related to the activities of financial institutions.411

406

12 CFR 5.59(e)(3).

407

OTS Order No. 2003-57 (November 21, 2003).

See, e.g., OTS Order No. 2004-14 (April 6, 2004); OTS Order No. 2003-10 (April 4, 2003); OTS Order No.
2002-48 (October 24, 2002); OTS Order No. 2002-29 (August 5, 2002).

408

409

OTS Order No. 2002-12 (April 8, 2002).

410

OTS Order No. 2009-19 (April 8, 2009).

411

OTS Order No. 97-49 (May 20, 1997).

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Appendix E: Pass-Through Investments
Guidelines—FSAs
FSAs and their operating subsidiaries are permitted to make pass-through investments in an
entity that engages only in activities that an FSA may conduct directly, provided the
investment meets certain requirements. 412 When making such an investment, the FSA must
comply with all the statutes and regulations that would apply if the savings association were
engaging in the activity directly. Pass-through investments are subject to certain requirements
and filing procedures. An OCC regulation 413 provides for a notice procedure if the entity in
which the investment is being made is engaged in an activity that is eligible for expedited
review under the OCC’s FSA operating subsidiary regulation 414 or if the activity is
substantively the same as a previously approved activity. In addition, under the notice
procedure, the FSA is required to provide certain certifications and descriptions.415 Passthrough investments that do not qualify for the notice procedure require an application. 416
Certain pass-through investments do not require a filing under 12 CFR 5.58(g) or (i).
The authority of FSAs to make pass-through investments in entities that engage only in
activities that are permissible for FSAs was codified in 1996.417 Examples of some FSA
pass-through investments that have been permitted subsequent to the 1996 codification
follow. 418
An FSA may make a pass-through investment in a mortgage banking company.419
An FSA may make a pass-through investment in an association captive insurance company
that provides reinsurance of private mortgage guaranty insurance on residential mortgage
loans originated or purchased by participating lenders and their mortgage banking
subsidiaries and affiliates. 420
412

See 12 CFR 160.32.

413

12 CFR 5.58(e).

414

12 CFR 5.38(f)(5).

415

12 CFR 5.58(e).

416

12 CFR 5.58(f).

61 Fed. Reg. 66561 (December 18, 1996), codified as 12 CFR 560.32. Prior to such codification, legal
opinions were issued by predecessor regulators of FSAs authorizing particular types of pass-through
investments. See, e.g., OTS Opinion of the Chief Counsel (September 15, 1995) and OTS Opinion of the Chief
Counsel (December 13, 1993).

417

The original regulation contained a “safe harbor” provision; only investments that did not meet the safe
harbor conditions were required to file a notice or application.

418

419

OTS Order No. 2007-35 (August 15, 2007).

420

OTS Opinion of the Chief Counsel (May 13, 2004).

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Appendix E

An FSA may make a pass-through investment in a title insurance agency because the
association has incidental authority to sell, as agent or broker, title insurance.421

421

OTS Opinion of the Chief Counsel (June 23, 2006).

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Glossary

Glossary
Bank service company: A corporation, an LLC, or similar entity organized to provide
services authorized by the Bank Service Company Act, 12 USC 1861–1867, all of whose
capital stock is owned by one or more insured depository institutions in the case of a
corporation, or all of the members of which are one or more insured depository institutions in
the case of an LLC.
Depository institution: Any bank or savings association. For bank service company
purposes, a depository institution is defined as an insured bank, a savings association, a
financial institution subject to examination by the appropriate federal banking regulator or
the NCUA Board, or a financial institution whose accounts or deposits are insured or
guaranteed under state law and eligible to be insured by the FDIC or the NCUA Board.
Depository institution affiliate: For purposes of investing in a financial subsidiary, any
bank or savings association that qualifies as an affiliate under section 2 of the BHCA,
12 USC 1841.
Eligible debt for a financial subsidiary: Unsecured long-term debt that is (1) not supported
by any form of credit enhancement, including a guaranty or standby letter of credit; and (2)
not held in whole or in any significant part by any affiliate, officer, director, principal
shareholder, or employee of the bank or any other person acting on behalf of or with funds
from the bank or an affiliate of the bank.
Financial subsidiary: A corporation, LLC, or similar entity, controlled by one or more
insured depository institutions, conducting activities that are financial in nature or incidental
to financial activities. Financial subsidiaries do not include operating subsidiaries, bank
service companies, or statutory subsidiaries.
Functionally regulated affiliate (FRA): A bank affiliate, including a bank subsidiary,
whose primary regulator is the SEC, state insurance commissioners, or the CFTC. An FRA
does not include a depository institution’s holding company. FRAs include SEC-registered
securities broker-dealers, SEC- or state-registered investment advisers, SEC-registered
investment companies, state-supervised insurance companies and agencies, and entities
subject to regulation by, or registration with, the CFTC.
Insured depository institution: Any bank or savings association, the deposits of which are
insured by the FDIC.
Investing: Investing in a bank service company includes making any advance of funds to a
bank service company, whether by the purchase of stock, the making of a loan, or otherwise,
except a payment for rent earned, goods sold and delivered, or services rendered before the
payment was made.

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Glossary

Limited liability company or similar entity: An unincorporated business entity organized
under state law, providing its members limited liability. It does not include a limited
partnership.
Long-term debt for a financial subsidiary: Any debt obligation with an initial maturity of
360 days or more.
Non-controlling investment: An equity investment made pursuant to 12 USC 24 (Seventh)
that is not governed by procedures prescribed by another OCC rule. It does not include a
national bank holding interests in a trust formed for the purposes of securitizing assets held
by the bank as part of its banking business or for the purposes of holding multiple legal titles
of motor vehicles or equipment in conjunction with lease financing transactions.
Offshore subsidiary: A subsidiary that will maintain records offshore, or that is organized
under laws other than those of the 50 states in the United States, the District of Columbia, or
any other territory or possession of the United States.
Operating subsidiary: A separate corporation, LLC, or similar entity, in which a bank
maintains more than a 50 percent voting or similar type of controlling interest, or otherwise
controls the subsidiary, and no other party controls more than 50 percent of the voting (or
similar type of controlling) interest of the subsidiary. An operating subsidiary of a national
bank may engage in activities that are part of, or incidental to, the business of banking, or are
otherwise authorized for a national bank, under 12 USC 24(Seventh), or in other activities
authorized for national banks or their subsidiaries under other statutes. (An operating
subsidiary does not include statutory subsidiaries, a subsidiary in which the bank acquired
shares, in good faith, through foreclosure on collateral, by compromise of a doubtful claim,
or to avoid a loss in connection with a DPC, or a trust formed for purposes of securitizing
assets held by the bank as part of its banking business.)
Pass-through investment: An investment authorized under 12 CFR 160.32(a). It does not
include an FSA holding interests in a trust formed for the purposes of securitizing assets held
by the FSA as part of its business or for the purposes of holding multiple legal titles of motor
vehicles or equipment in conjunction with lease financing transactions.
Previously approved activity: In the case of a national bank, any activity approved in
published OCC precedent for a national bank, an operating subsidiary of a national bank, or a
non-controlling investment of a national bank. In the case of an FSA, any activity approved
in published OCC or OTS precedent for an FSA, an operating subsidiary of an FSA, or a
pass-through investment of an FSA.
Principal investor: The principal investor of a bank service company is the insured
depository institution that has made the largest equity investment. When two or more insured
depository institutions have equal amounts invested, the bank service company must
designate one of them as its principal investor.
Undercapitalized bank: A bank that has capital at the levels described in 12 CFR 6.4(b)(3).

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Glossary

Well-capitalized bank: A bank that has capital at the levels described in 12 CFR 6.4(b)(1).
Well-managed bank: Unless otherwise determined in writing by the OCC, a bank that has a
composite CAMELS rating of 1 or 2, and at least a management rating of 2; or if it has not
been examined, a bank that has and uses managerial resources that OCC Bank Supervision
staff determines to be satisfactory.

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Abbreviations

Abbreviations
ABA
ARS
ATM
BHCA
BMA
CA
CCH
CFPB
CFR
CFTC
CRA
CTA
DOJ
DPC
EBT
EDI
EFT
FCM
FHLBB
FRA
FSA
FTC
GAAP
GLBA
HOLA
HSR
HUD
LLC
NB
NCUA
OCC
OTS
RBIC
REIT
RESPA
SBIC
SEC
USC

affiliated business arrangement
auction rate securities
automated teller machine
Bank Holding Company Act
Bank Merger Act
certification authority
Commerce Clearing House
Consumer Financial Protection Bureau
Code of Federal Regulations
Commodities Futures Trading Commission
Community Reinvestment Act
commodity trading advisor
Department of Justice
debt previously contracted
electronic benefits transfer
electronic data interchange
electronic funds transfer
futures commission merchant
Federal Home Loan Bank Board
functionally regulated affiliate
federal savings association
Federal Trade Commission
U.S. generally accepted accounting principles
Gramm–Leach–Bliley Act
Home Owners’ Loan Act
Hart–Scott–Rodino Antitrust Improvements Act
U.S. Department of Housing and Urban Development
limited liability company
national bank
National Credit Union Administration
Office of the Comptroller of the Currency
Office of Thrift Supervision
rural business investment company
real estate investment trust
Real Estate Settlement Procedures Act
small business investment company
Securities and Exchange Commission
U.S. Code

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References

References
In this section, “NB” denotes that the referenced law, regulation, or issuance applies to
national banks, and “FSA” denotes that the reference applies to federal savings associations.
If there is no designation, the reference applies to both national banks and federal savings
associations.
Affiliate Transactions, Sections 23A and 23B of the Federal Reserve Act
Law
12 USC 371c, 371c-1 (NB)
12 USC 1468 (FSA)
Regulation
12 CFR 223
Comptroller’s Handbook, “Related Organizations” (NB)
OTS Examination Handbook, section 730, “Related Organizations” (FSA)
Agricultural Credit Corporations
Law

12 USC 24(Seventh) (NB)

Bank Holding Company Act of 1956
Law

12 USC 1841–1850

Bank Merger Act
Law

12 USC 1828(c)

Bank Ownership of Property
Law
Regulation

12 USC 29 (NB)
12 CFR 7.1024

Bank Service Company
Law
Regulation

12 USC 1861–1867
12 CFR 5.35, 12 CFR 225, subpart C

Branches
Law

12 USC 36 (NB)
12 USC 1464(m), 1464(r) (FSA)
12 CFR 5.30 (NB)
12 CFR 5.31 (FSA)

Regulation
Business of Banking
Law
Capital
Law
Regulation

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12 USC 24(Seventh) (NB)
12 USC 51a–60, 1464(s), 1464(t), 3907
12 CFR 3, 6

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References

Community Development Corporation or Other Community and
Economic Development Entity
Law
12 USC 24(Eleventh) (NB)
12 USC 1464(c)(3)(A) (FSA)
Regulation
12 CFR 24 (NB)
12 CFR 5.59, 160.30 and 160.36 (FSA)
Data Processing
Law
Regulation

12 USC 1863
12 CFR 7.5006

Debt Cancellation Contracts
Regulation

12 CFR 37

Decisions
Regulation
Dodd–Frank Act
Law

12 CFR 5.13
Public Law 11-203, 124 Stat. 1376 (2010)
(codified at scattered sections of the USC)

Electronic Banking Activities
Regulation

12 CFR 7.5000–7.5010 (NB)
12 CFR 155 (FSA)
FFIEC Information Technology Examination Handbook
Eligible Activities—Notice Procedures (NB)
Regulation

12 CFR 5.34(f)(5), 5.36(e)

Eligible Activities—Expedited Review (FSA)
Regulation

12 CFR 5.38(f)(5), 5.58(e)

Examination Authority
Law
12 USC 481, 484, 1463, 1464(d), 1820(a), 1820(b), 1831v, 1867(c)
Regulation
12 CFR 7.4000
Exchange, Coin, and Bullion
Law
Regulation

12 USC 24(Seventh) (NB)
12 CFR 7.1022 (NB)
12 CFR 7.1023 (FSA)

Federal Deposit Insurance Act
Law

12 USC 1811 et seq.

Fees
Regulation

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12 CFR 8

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References

Fiduciary Powers
Law

12 USC 92a (NB)
12 USC 1464(n) (FSA)
12 CFR 5.26, 9 (NB)
12 CFR 5.26, 150 (FSA)

Regulation
Financial Activities
Law
Regulation

12 USC 24a (NB)
12 CFR 5.39 (NB)

Financial Subsidiaries
Law
Regulation

12 USC 24a (NB)
12 CFR 5.39 (NB)

Finder
Regulation

12 CFR 7.1002

Freedom of Information Act Request
Law
Regulation
Gramm–Leach–Bliley Act
Law

5 USC 552
12 CFR 4, subpart B
12 USC 24a (section 121)
12 USC 1820a (section 115)
15 USC 78c(a)(4) (section 201)
15 USC 78c(a)(5) (section 202)
15 USC 6712 (section 302)
15 USC 6713 (section 303)
15 USC 6801–6803 (sections 501–503)

Hart–Scott–Rodino Antitrust Improvements Act of 1976
Law
Home Owners’ Loan Act
Law

15 USC 18a

12 USC 1464 et seq. (FSA)

Insurance
Law

12 USC 92 (NB)
15 USC 6712, 6713 (NB)
Regulation
12 CFR 2 (NB), 12 CFR 14
Comptroller’s Handbook, “Insurance Activities” (NB)
OTS Examination Handbook, section 720, “Insurance” (FSA)
Investment Advisers Act of 1940
Law

15 USC 80b-1–21

Investment Company Act
Law

15 USC 80a-1–64

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References

Investment Discretion
Regulation

12 CFR 9.2(i) (NB)
12 CFR 150.40 (FSA)
Comptroller’s Handbook, “Retail Nondeposit Investment Products” and Asset
Management series
Investment in Bank Premises
Law
Regulation

12 USC 371d (NB)
12 CFR 5.37, 7.1000

Leasing
Law

12 USC 24(Tenth) (NB)
12 USC 1464(c)(2)(C) (FSA)
12 CFR 23 (NB), 160.41 (FSA)

Regulation
Legal Lending Limit
Law

12 USC 84 (NB)
12 USC 1464(u) (FSA)
12 CFR 32

Regulation
Operating Subsidiaries
Law

12 USC 24(Seventh) (NB)
12 USC 1828(m) (FSA)
Regulation
12 CFR 5.34 (NB)
12 CFR 5.38 (FSA)
Comptroller’s Handbook, “Related Organizations” (NB)
OTS Examination Handbook, section 730, “Related Organizations” (FSA)
Other Equity Investments
Law

12 USC 24(Seventh) (NB)
12 USC 1464(c) (FSA)
Regulation
12 CFR 5.36 (NB), 5.58 (FSA)
Comptroller’s Handbook, “Related Organizations” (NB)
Nonconforming Assets
Law

12 USC 35 (NB)

Pass-Through Investments (FSA)
Law
Regulation

12 USC 1464(c)
12 CFR 5.58, 160.32(a) and (b)

Privacy
Law
Regulation

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15 USC 6801–6827
12 CFR 30, appendix B

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References

Real Estate Settlement Procedures Act
Law

12 USC 2601 et seq.

Related Organizations
Comptroller’s Handbook, “Related Organizations” (NB)
OTS Examination Handbook, section 730, “Related Organizations” (FSA)
Safe Deposit Subsidiary
Law

12 USC 24(Seventh) (NB)

Savings Association Eligible to Be Acquired
Law
Regulation
Securities Exchange Act of 1934
Law

12 USC 1823
12 CFR 5.36
15 USC 78a–78mm

Self-Dealing
Law
12 USC 375a, 375b, 376, 1828(z)
Regulation
12 CFR 9, 31 (NB), 215, 12 CFR 150 (FSA)
Comptroller’s Handbook, “Insider Activities” and “Conflicts of Interest”
Service Corporations
Law
12 USC 1464(c)(4)(B) (FSA)
Regulation
12 CFR 5.59 (FSA)
OTS Examination Handbook, section 730, “Related Organizations” (FSA)
Small Business Investment Company
Law
Regulation

15 USC 682(b)
12 CFR 7.1015 (NB)
13 CFR 107

State Law
Regulation

12 CFR 7.4010

Transactions with Affiliates, Sections 23A and 23B of the Federal Reserve Act
Law
12 USC 371c, 371c-1 (NB)
12 USC 1468 (FSA)
Regulation
12 CFR 223
Comptroller’s Handbook, “Related Organizations” (NB)
OTS Examination Handbook, section 730, “Related Organizations” (FSA)
Volcker Rule
Law
Regulation

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12 USC 1851
12 CFR 44

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Table of Updates Since Publication

Table of Updates
Date of Last Publication: January 2019
Reason

Affected pages

Updated to reflect changes to Part 5

Various

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