Circular
Proposed Interpretation of Anti-Tying Restrictions and Amendment to Regulation Y
August 26, 2003
Circular No. 11538

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

In a press release, the Federal Reserve Board requested public comment on an official interpretation of the anti-tying restrictions in section 106 of the Bank Holding Company Act Amendments of 1970 and related supervisory guidance.

Section 106 generally prohibits a bank from conditioning the availability or price of one product on a requirement that the customer also obtain another product from the bank or an affiliate. The Board's proposed interpretation of section 106 provides banking organizations and their customers a comprehensive guide to the special anti-tying restrictions applicable to banks under section 106.

The Board also proposed to adopt an exception, under section 106, that would treat financial subsidiaries of state nonmember banks, like financial subsidiaries of national and state member banks under current law, as an affiliate (and not a subsidiary) of the parent bank for purposes of section 106.

The proposed interpretation, supervisory guidance and financial subsidiary exception will be published in the Federal Register.

Comments should be submitted by September 30, 2003. Details on where to send the comments are given in the notice.

The Board’s notices relating to these actions are attached [1] [2].

Questions on this matter may be directed, at this Bank, to Ivan J. Hurwitz, Counsel and Assistant Vice President, Legal Department, or James V. Keogh, Examining Officer, Legal and Compliance Risk Department.