Does the department/line of business or the line’s client(s)
have the capability ... Yes no
1 to make credit transactions (including loans, overdrafts, advances, etc.)? ❑ ❑
2 to purchase assets (including loans as assets)? ❑ ❑
3 to purchase or invest in securities? ❑ ❑
4 to use securities as collateral for a credit transaction? ❑ ❑
5 to sell securities or other assets (including loans as assets)? ❑ ❑
6 to pay money to an affiliate? ❑ ❑
7 to provide services to an affiliate? ❑ ❑
8 to act as an agent/broker or in a service capacity and receive a fee for such service? ❑ ❑
9 to offer derivatives/swap transactions? ❑ ❑
10 to enter into contracts with third parties including contractors, vendors, or business partners? ❑ ❑
11 to publish advertising material ❑ ❑
12 to purchase, as a fiduciary, any securities or assets? ❑ ❑
13 to purchase or acquire, as principal, securities during underwriting or selling syndicate? ❑ ❑
14 to purchase or acquire, as fiduciary, securities during underwriting or selling syndicate? ❑ ❑
Is the department/line of business or the line’s client ...
an affiliate that could participate in transactions or have a
financial interest in transactions between the bank and a
2 an affiliate that receives intraday (during the day) credit?
To begin the sorting, share this survey with the bank’s departments
or lines of business to help determine whether they deal with
intercompany transactions that may have Reg. W applicability.
Many questions in the survey purposely do not include the term
“affiliate” as one of the parties. In answering these basic questions
about the ability to conduct different types of transactions, the
departments or lines may check “Yes” when their initial reaction
to Reg. W or intercompany transactions is “We don’t have any of
those.” However, if the department or line of business can conduct
the type of transaction, there’s a chance the department could
conduct that transaction with an affiliate. Another important
component of this survey is that it asks whether the department
or line’s client has the ability to conduct the transaction, as Reg.
W may apply to transactions the client conducts as well (if both
the bank and an affiliate are involved).
This survey does not assume that every “Yes” answer indicates
the line is definitely involved in intercompany transactions; it just
notes the potential for a Reg. W transaction. Perhaps a consumer
department has the ability to conduct some of the various credit
transactions, but with individual consumers only (not with entities).
In that case, affiliates will not be involved in the transactions, and
Reg. W will not be triggered. However, the broader the departments’
capabilities, the greater the likelihood that Reg. W could be triggered. For instance, a line may have no dealings with commercial
entities when dealing with their clients (and the bank’s affiliates are
all commercial entities), but if any employees in the department or
line perform their own marketing or have the capacity to execute
contracts, they need to be aware of Reg. W and its implications.
a bit of a maze, and therefore the role of designating affiliates
may best be managed by compliance or legal Reg. W experts.
Centralizing this task will ensure that lists of affiliates and banks
are maintained and consistent, and will allow the departments or
lines of business to focus on the identification (not the designation) of affiliates as they enter into intercompany transactions.
As mentioned, affiliate awareness for employees throughout
various areas of the bank is a key foundation to ensure compliance
with Reg. W. Ideally, if affiliates and banks are already designated,
then bankers’ roles should be less tedious, as they only have to
identify an affiliate when entering into a transaction. However,
many institutions have a multitude of both banks and affiliates,
and the regulation is triggered if any one of the banks is doing
business with any one of the affiliates. Additionally, many banks,
large and small, keep the family of related entities under the bank
umbrella by using one name or brand, which only adds to the
difficulty of training employees on the importance of recognizing which entity is involved in a transaction. Fighting against the
family branding? No wonder Reg. W intimidates! Yet even if we
have to label each tag separately, keep reading, for we can still sort
out the regulation’s piles.
Now that we’ve established the importance of intercompany and
affiliate awareness and offered a survey to assist in determining
whether and where the bank deals with Reg. W transactions, the
next step is determining which requirements and limitations apply
to transactions. This chart (page 19) was designed to provide a
high-level view of the Reg. W applicability foundation and will
perhaps alleviate some of Reg. W’s complexity. The chart, perhaps
used in conjunction with the survey, may help bankers understand
all of the different types of transactions that could trigger Reg. W.
From this vantage point bankers can then make an educated call
to their Reg. W experts if they need more specific details about
the applicable requirements.
The left column of the Intercompany Transactions and Requirements Chart shows the varying types of intercompany transactions.
Covered transactions are broadly defined by the regulation and
include credit transactions—the most common type of Reg. W
transaction for most banks. The chart separates credit transactions
from other types of covered transactions, because each of the
primary Reg. W requirements applies to the credit transactions
(see the “Requirements” column on the right side of the chart).