Understanding the Subsidiary Exception [Banks & Banking]: A Comprehensive Guide
Definition & meaning
The subsidiary exception in banking refers to a regulatory provision that allows a new financial institution to be recognized as established if it meets certain criteria related to its ownership. Specifically, it applies to institutions that are wholly owned subsidiaries of either a bank holding company or an eligible depository institution. This exception is significant as it helps streamline the establishment process for new banks and savings associations under federal regulations.
Legal use & context
This term is primarily used in the context of banking and financial regulation. It is relevant for bank holding companies and savings associations looking to establish new subsidiaries. Understanding the subsidiary exception is crucial for compliance with federal regulations, particularly under the Bank Holding Company Act and the Home Owners' Loan Act. Users can utilize legal templates from US Legal Forms to navigate the establishment process effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A bank holding company that has operated for over five years decides to establish a new bank as a wholly owned subsidiary. Since it meets the eligibility criteria, the new bank can be recognized as established under the subsidiary exception.
Example 2: A savings association that has been chartered for six years creates a new subsidiary bank. This new bank qualifies under the subsidiary exception because the parent institution meets all necessary requirements. (hypothetical example)
Relevant laws & statutes
The primary regulations governing the subsidiary exception are found in:
- 12 CFR 327.8 - Regulations of the Federal Deposit Insurance Corporation.
- Bank Holding Company Act of 1956.
- Home Owners' Loan Act.