Understanding Commonly Controlled Correspondent: A Legal Overview

Q: How do I know if my bank is a commonly controlled correspondent?

Check the ownership structure to see if at least 25 percent of voting securities are shared with another bank.

Q: What are the implications of being a commonly controlled correspondent?

There may be liabilities under the Federal Deposit Insurance Act that need to be managed carefully.

Definition & Meaning

A commonly controlled correspondent refers to a financial institution that shares ownership with a bank, leading to certain liabilities under federal law. Specifically, this term describes a correspondent bank that is under common control with another bank, meaning that:

At least 25 percent of any class of voting securities of both the bank and the correspondent are owned by the same entity or individual, or
One bank owns at least 25 percent of the voting securities of the other bank.

Table of content

Legal Use & context

This term is primarily used in banking and financial law, particularly in the context of regulations governing inter-bank liabilities. Understanding commonly controlled correspondents is crucial for banks and financial institutions to ensure compliance with federal regulations, particularly the Federal Deposit Insurance Act. Users may need to manage forms related to bank ownership and control structures, which can be facilitated through legal templates provided by US Legal Forms.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: Bank A and Bank B are both owned by the same holding company, which holds 30 percent of their voting securities. Thus, they are considered commonly controlled correspondents.

Example 2: If Bank C owns 40 percent of Bank D's voting securities, while Bank D owns 10 percent of Bank C's, they also qualify as commonly controlled correspondents. (hypothetical example)

Relevant laws & statutes

The primary statute governing commonly controlled correspondents is the Federal Deposit Insurance Act, specifically section 5(e). This law outlines the liabilities and regulatory requirements for banks that are commonly controlled.

Comparison with related terms

Term	Definition	Difference
Correspondent Bank	A financial institution that provides services on behalf of another bank.	Commonly controlled correspondents share ownership, while correspondent banks may not.
Affiliated Bank	A bank that is part of a larger banking organization.	Affiliated banks may not meet the 25 percent ownership threshold required for commonly controlled correspondents.

Common misunderstandings

What to do if this term applies to you

If you believe your bank or financial institution may be a commonly controlled correspondent, it's important to review your ownership structure. You can utilize legal templates from US Legal Forms to help manage necessary documentation. If the situation is complex, consider consulting a legal professional for tailored advice.

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Quick facts

Ownership threshold: 25 percent
Relevant statute: Federal Deposit Insurance Act, section 5(e)
Potential liabilities: Inter-bank liabilities under federal law

Key takeaways

Frequently asked questions

What is a commonly controlled correspondent?

It is a bank that shares ownership with another bank, leading to specific regulatory liabilities.