Regulatory Alerts2003-07-16
Extensions of Credit to Bank Subsidiary
The Pennsylvania Department of Banking issued a determination clarifying that state-chartered banks are exempt from statutory lending limits and interaffiliate transaction restrictions when extending credit to subsidiaries in which they hold a controlling ownership interest. This position aligns Pennsylvania banks with national bank parity by excluding such subsidiaries from the definitions of 'affiliate' under Sections 23A and 23B of the Federal Reserve Act and the lending limits of Section 306(a) of the Banking Code. The Department concluded that the specific line of credit proposed for a mortgage subsidiary is not subject to these limits, provided the subsidiary does not fall under specific regulatory exceptions and the bank obtains prior approval for the acquisition.