RegW_20151113_omb

Supporting Statement for the
Notice Requirements in Connection with Regulation W
(Transactions Between Member Banks and Their Affiliates)
(Reg W; OMB No. 7100-0304)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget (OMB), proposes to extend for three years, without
revision,1 the Notice Requirements in Connection with Regulation W (Transactions Between
Member Banks and Their Affiliates) (Reg W; OMB No. 7100-0304), which implements
sections 23A and 23B of the Federal Reserve Act. The Paperwork Reduction Act (PRA)
classifies reporting, recordkeeping, or disclosure requirements of a regulation as an information
collection.2 The PRA requires the Federal Reserve to renew authority for information collections
every three years.
This information collection pursuant to Regulation W is triggered by specific events, and
there are no required reporting forms associated with the transactions captured in this
information collection. The potential respondents are all insured depository institutions and
uninsured member banks, but only those institutions that take advantage of the exemptions need
to file any documentation. The quarterly Bank Holding Company Report of Insured Depository
Institutions’ Section 23A Transactions with Affiliates (FR Y-8; OMB No. 7100-0126), which
collects information on transactions between an insured depository institution and its affiliates
that are subject to section 23A of the Federal Reserve Act, is not included in this information
collection and is being renewed separately. The total estimated annual burden for the estimated
four respondents is 24 hours.
Background and Justification
Sections 23A and 23B of the Federal Reserve Act are statutory provisions designed to
protect against a depository institution suffering losses in transactions with affiliates. 3 They also
limit the ability of an insured depository institution to transfer to its affiliates the subsidy arising
from the institution’s access to the federal safety net. Sections 23A and 23B apply, by their
terms, to banks that are members of the Federal Reserve System (member banks). Other federal
law subjects insured nonmember banks and insured thrifts to sections 23A and 23B in the same
manner and to the same extent as if they were member banks.
On December 12, 2002, the Federal Reserve published a Federal Register notice4
adopting Regulation W to implement sections 23A and 23B. The regulation was effective
April 1, 2003. The Board issued Regulation W for several reasons. First, the regulatory
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Although Regulation W will be revised in the near future to incorporate amendments required by section 608 of
the Dodd-Frank Act, the extension of the information collection for three years is necessary to ensure that
institutions comply with the notice requirements in the current Regulation W.
2
See 44 U.S.C. § 3501 et seq.
3
See 12 U.S.C. §§ 371c and 371c-1.
4
See 67 Federal Register 76603.

framework established by the Gramm-Leach-Bliley Act5 emphasizes the importance of
sections 23A and 23B as a means to protect depository institutions from losses in transactions
with affiliates. Second, adoption of a comprehensive rule simplified the interpretation and
application of sections 23A and 23B, ensured that the statute is consistently interpreted and
applied, and minimized the burden on banking organizations to the extent consistent with the
statute’s goals. Third, issuing a comprehensive rule allowed the public an opportunity to
comment on Federal Reserve interpretations of sections 23A and 23B.
Description of Information Collection
The information collection requirements in Regulation W are found in
12 C.F.R. 223.15(b)(4), 223.31(d)(4), 223.41(d)(2), and 223.43(b). This information is required
to evidence compliance with sections 23A and 23B of the Federal Reserve Act (12 U.S.C. §§
371c(f) and 371c-1(e)) or to request an exemption from the Board. The notice requirements
associated with Regulation W are described below.
Loan Participation Renewal notice (12 C.F.R. 223.15(b)(4)) is a condition to an
exemption for renewals of loan participations involving problem loans. The participating
depository institution must provide its appropriate federal banking agency with written notice of
the renewal of, or the extension of additional credit in connection with, a low-quality asset not
later than 20 days after consummation.
Acquisition notice (12 C.F.R. 223.31(d)(4)) is a condition to an exemption for a
depository institution’s acquisition of an affiliate that becomes an operating subsidiary of
the institution after the acquisition. The institution must provide the appropriate federal
banking agency and the Federal Reserve Board with written notice of its intention to acquire the
company at or before the time that the company becomes an affiliate of the institution. The
notice also must describe the primary business activities of the company.
Internal-corporate-reorganization Transactions notice (12 C.F.R. 223.41(d)(2)) is a
condition to an exemption for internal corporate reorganization transactions. The
depository institution must provide the appropriate federal banking agency and the Federal
Reserve Board with written notice of the transaction before consummation. The notice must
describe the primary business activities of the affiliate and indicate the proposed date of the asset
purchase.
Section 23A Additional Exemption notice (12 C.F.R. 223.43(b)) provides procedures
for requesting additional exemptions from the requirements of section 23A and Regulation
W. The insured depository institution must submit a written request to the general counsel of the
Federal Reserve Board. The request must describe in detail the transaction or relationship for
which the institution seeks an exemption, explain why the Board should exempt the transaction
or relationship, and explain how the exemption would be in the public interest and consistent
with the purposes of section 23A.

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See Pub. L. No. 106-102, 113 Stat. 1338 (1999).

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Time Schedule for Information Collection
These notifications are event-generated and must be provided to the appropriate federal
banking agency and, if applicable, the Federal Reserve Board within the time periods established
by the law and regulation as discussed above.
Legal Status
The Board’s Legal Division has determined that sections 23A and 23B of the Federal
Reserve Act authorize the Board to issue regulations to carry out the provisions of that Act. (12
U.S.C. §§ 371c and 3c-1). Respondents are required to file the one or more of the Regulation W
notices in order to obtain the benefits noted above. The Board’s Legal Division also determined
that confidential and proprietary information collected for the purposes of the Loan Participation
Renewal notice (12 C.F.R. 223.15(b)(4)) may be protected under the authority of the Freedom of
Information Act (FOIA) (5 U.S.C. § 552(b)(4)). Section (b)(4) of FOIA exempts information
deemed competitively sensitive from disclosure. However, respondents who desire that the
information on these notices be kept confidential in accordance with section (b)(4) can request
confidential treatment under the Board’s rules regarding confidential treatment of information at
12 C.F.R. 261.15. In addition, information that is obtained as part of an examination or
supervision of a bank is exempt from disclosure under section (b)(8) of FOIA as examination
material. (5 U.S.C. § 552(b)(8)).
Consultation Outside the Agency
On May 27, 2015, the Federal Reserve published a notice in the Federal Register (80 FR
30248) requesting public comment for 60 days on Reg W. The comment period for this notice
expired on July 27, 2015. The Federal Reserve did not receive any comments. On August 28,
2015, the Federal Reserve published a final notice in the Federal Register (80 FR 52279). The
information collection will be extended for three years, without revision, as proposed.
Estimate of Respondent Burden
The estimated total annual burden for the notice requirements of this information
collection is 24 hours, as shown in the table below. The number of respondents is estimated
based on the annual number of notices submitted the Federal Reserve Board during 2012, 2013,
and 2014. The notice requirements in Reg W represent less than 1 percent of the total Federal
Reserve System paperwork burden.

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Number of
respondents

Reg W

12 C.F.R. 223.15(b)(4)
12 C.F.R. 223.31(d)(4)
12 C.F.R. 223.41(d)(2)
12 C.F.R. 223.43(b)

Estimated
Estimated
Annual
average hours annual burden
frequency
per response
hours

1
1
1
1

1
1
1
1

Total

2
6
6
10

2
6
6
10
24

The total cost to the public is estimated to be $1,242.6
Sensitive Questions
This information collection contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System to process these notifications is negligible.

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Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$63, 15% Lawyers at $64, and 10% Chief Executives at $87). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2014, published March 25, 2015, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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