A Federal savings association (``you'') that meets the requirements of this section, as detailed in the following chart, may establish, or obtain an interest in an operating subsidiary or a service corporation. For ease of reference, this section cross-references other regulations in this chapter affecting operating subsidiaries and service corporations. You should refer to those regulations for the details of how they apply. The chart also discusses the regulations that may apply to lower-tier entities in which you have an indirect ownership interest through your operating subsidiary or service corporation. The chart follows: ------------------------------------------------------------------------
(a) How may a Federal (1) You must file a (2) You must file a
savings association notice, with the notice, with the
(``you'') establish an appropriate OCC appropriate OCC
operating subsidiary or a licensing office, licensing office,
service corporation? satisfying Sec. satisfying Sec.
159.11. Any finance 159.11. Depending
subsidiary that upon your condition
existed on January and the activities
1, 1997 is deemed in which the
an operating service corporation
subsidiary without will engage, Sec.
further action on 159.3(e)(2) may
your part. require you to file
an application.(b) Who may be an owner? (1) Anyone may have (2) Only Federal or
an ownership state chartered
interest in an savings
operating associations with
subsidiary. home offices in the
state where you
have your home
office may have an
ownership interest
in any service
corporation in
which you invest.(c) What ownership (1) You must own, (2) You are not
requirements apply? directly or required to have
indirectly, more any particular
than 50% of the percentage
voting shares of ownership interest
the operating and need not have
subsidiary. No one control of the
else may exercise service
effective operating corporation.
control.(d) What geographic (1) An operating (2) A service
restrictions apply? subsidiary may be corporation must be
organized in any organized in the
geographic state where your
location. home office is
located.(e) What activities are (1) After you have (2)(i) If you are
permissible? notified the OCC in eligible for
accordance with expedited treatment
Sec. 159.11, an under Sec. 116.5
operating of this chapter,
subsidiary may and notify the OCC
engage in any as required by Sec.
activity that you 159.11, your
may conduct service corporation
directly. You may may engage in the
hold another preapproved
insured depository activities listed
institution as an in Sec. 159.4. You
operating may request OCC
subsidiary. approval for your
service corporation
to engage in any
other activity
reasonably related
to the activities
of financial
institutions by
filing an
application in
accordance with
standard treatment
processing
procedures at part
116, subparts A and
E of this chapter.
(ii) If you are
subject to standard
treatment under
Sec. 116.5 of this
chapter, and notify
the OCC as required
by Sec. 159.11,
your service
corporation may
engage in any
activity that you
may conduct
directly except
taking deposits.
You may request OCC
approval for your
service corporation
to engage in any
other activity
reasonably related
to the activities
of financial
institutions,
including the
activities set
forth in Sec.
159.4(b)-(j), by
filing an
application in
accordance with
standard treatment
processing
procedures at part
116, subparts A and
E of this chapter.(f) May the operating (1)(i) An operating (2) A service
subsidiary or service subsidiary may corporation may
corporation invest in lower- itself hold an invest in all types
tier entities? operating of lower-tier
subsidiary. Part entities as long as
159 applies equally the lower-tier
to a lower-tier entity is engaged
operating solely in
subsidiary. In activities that are
applying the permissible for a
regulations in this service
part, the investing corporation. All of
operating the requirements of
subsidiary should this part apply to
substitute such entities
``investing except for
operating paragraphs (b)(2)
subsidiary'' and (d)(2) of this
wherever the part section.
uses ``you'' or
``savings
association.''
(ii) An operating
subsidiary may also
invest in other
types of lower-tier
entities. These
entities must
comply with all of
the requirements of
this part 159 that
apply to service
corporations except
for paragraphs
(b)(2) and (d)(2)
(2) and (d)(2)
of this section.(g) How much may a Federal (1) There are no (2) Section 159.5
savings association invest? limits on the limits your
amount you may aggregate
invest in your investments in
operating service
subsidiaries, corporations and
either separately indicates when your
or in the investments (both
aggregate. debt and equity) in
lower-tier entities
must be aggregated
with your
investments in
service
corporations.(h) Do Federal statutes and (1) Unless otherwise (2)(i) If the
regulations that apply to specifically Federal statute or
the savings association provided by regulation
apply? statute, specifically refers
regulation, or OCC to ``service
policy, all Federal corporation,'' it
statutes and applies to all
regulations apply service
to operating corporations, even
subsidiaries in the if you do not
same manner as they control the service
apply to you. You corporation or it
and your operating is not a GAAP-
subsidiary are consolidated
generally subsidiary.
consolidated and (ii) If the Federal
treated as a unit statute or
for statutory and regulation refers
regulatory to ``subsidiary,''
purposes. it applies only to
service
corporations that
you directly or
(i) Do the investment limits (1) Your assets and (2) Your service
that apply to Federal those of your corporation's
savings associations (HOLA operating assets are not
section 5(c) and part 160 subsidiary are subject to the same
of this chapter) apply? aggregated when investment
calculating limitations that
investment apply to you. The
limitations. investment
activities of your
service corporation
are governed by
paragraph (e)(2) of
this section and
Sec. 159.4.(j) How does the capital (1) Your assets and (2) The capital
regulation 12 CFR part 3 or those of your treatment of a
part 167, as applicable operating service corporation
apply? subsidiary are depends upon
consolidated for whether it is an
all capital includable
purposes. subsidiary. That
determination is
based upon factors
set forth in 12 CFR
part 3 or part 167,
as applicable,
including your
percentage
ownership of the
service corporation
and the activities
in which the
service corporation
engages. Both debt
and equity
investments in
service
corporations that
are GAAP-
consolidated
subsidiaries are
considered
investments in
subsidiaries for
purposes of the
capital regulation,
regardless of the
authority under
which they are
made.
(k) How does the loans-to- (1) The LTOB (2) The LTOB
one-borrower (LTOB) regulation does not regulation does not
regulation (12 CFR part 32) apply to loans from apply to loans from
apply? you to your you to your GAAP-
operating consolidated
subsidiary or loans service corporation
from your operating or from your GAAP-
subsidiary to you. consolidated
Other loans made by service corporation
your operating to you. However,
subsidiary are part 32 imposes
aggregated with restrictions on the
your loans for LTOB amount of loans you
purposes. may make to non-
consolidated
service
corporations. Loans
made by a GAAP-
consolidated
service corporation
are aggregated with
your loans for LTOB
purposes.(l) How do the transactions (1) Board rules (2) Board rules
with affiliates (TWA) explain how TWA explain how TWA
regulations of the Board of applies. Generally, applies. Generally,
Governors of the Federal an operating a service
Reserve System (Board) subsidiary is not corporation is not
apply? an affiliate, an affiliate,
unless it is a unless it is a
depository depository
institution; is institution; is
directly controlled directly controlled
by another by another
affiliate of the affiliate of the
savings association savings association
or by shareholders or by shareholders
that control the that control the
savings savings
association; or is association; or is
an employee stock an employee stock
option plan, trust, option plan, trust,
or similar or similar
organization that organization that
exists for the exists for the
benefit of benefit of
shareholders, shareholders,
partners, members, partners, members,
or employees of the or employees of the
savings association savings association
or an affiliate. A or an affiliate. If
non-affiliate a savings
operating association
subsidiary is directly or
treated as a part indirectly controls
of the savings a service
association and its corporation and the
transactions with service corporation
affiliates of the is not otherwise an
savings association affiliate under
are aggregated with Board rules, the
those of the service corporation
savings association is treated as a
part of the savings
association and its
transactions with
affiliates of the
savings association
are aggregated with
those of the
savings
association.(m) How does the Qualified (1) Under 12 U.S.C. (2) Under 12 U.S.C.
Thrift Lender (QTL) (12 1467a(m)(5), you 1467a(m)(5), you
U.S.C. 1467a(m)) test may determine may determine
apply? whether to whether to
consolidate the consolidate the
assets of a assets of a
particular particular service
operating corporation for
subsidiary for purposes of
purposes of calculating your
calculating your qualified thrift
qualified thrift investments. If a
investments. If the service
operating corporation's
subsidiary's assets assets are not
are not consolidated with
consolidated with yours for that
yours for that purpose, your
purpose, your investment in the
investment in the service corporation
operating will be considered
subsidiary will be in calculating your
considered in qualified thrift
calculating your investments.
qualified thrift
investments.(n) Does state law apply? (1) State law (2) State law
applies to applies to service
operating corporations
subsidiaries regardless of
regardless of whether it applies
whether it applies to you.
to you.(o) May the OCC conduct (1) An operating (2) A service
examinations? subsidiary is corporation is
subject to subject to
examination by the examination by the
OCC. OCC.(p) What must be done to (1) Before (2) Before
redesignate an operating redesignating an redesignating a
subsidiary as a service operating service corporation
corporation or a service subsidiary as a as an operating
corporation as an operating service subsidiary, you
subsidiary? corporation, you should consult with
should consult with the OCC licensing
the OCC licensing office in the
office in the district in which
district in which your home office is
your home office is located. You must
located. You must maintain adequate
maintain adequate internal records,
internal records, available for
available for examination by the
examination by the OCC, demonstrating
OCC, demonstrating that the
that the redesignated
redesignated operating
service corporation subsidiary meets
meets all of the all of the
applicable applicable
requirements of requirements of
this part and that this part and that
your board of your board of
directors has directors has
approved the approved the
redesignation. redesignation.
(q) What are the (1) If an operating (2) If a service
consequences of failing to subsidiary, or any corporation, or any
comply with the lower-tier entity lower-tier entity
requirements of this part? in which the in which the
operating service corporation
subsidiary invests invests pursuant to
pursuant to paragraph (f)(2) of
paragraph (f)(1) of this section, fails
this section fails to meet any of the
to meet any of the requirements of
requirements of this section, you
this section, you must notify the
must notify the appropriate OCC
appropriate OCC licensing office.
licensing office. Unless otherwise
Unless otherwise advised by the OCC,
advised by the OCC, if the company
if the company cannot comply
cannot comply within 90 days with
within 90 days with all of the
all of the requirements for
requirements for either an operating
either an operating subsidiary or a
subsidiary or a service corporation
service corporation under this section,
under this section, or any other
or any other investment
investment authorized by 12
authorized by 12 U.S.C. 1464(c) or
U.S.C. 1464(c) or part 160 of this
part 160 of this chapter, you must
chapter, you must promptly dispose of
promptly dispose of your investment.
your investment.------------------------------------------------------------------------ [76 FR 49025, Aug. 9, 2011,, as amended at 77 FR 37282, June 21, 2012; 78 FR 37946, June 25, 2013; 79 FR 11313, Feb. 28, 2014]