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Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions

Surety Activities By Subsidiary of State Nonmember Bank


August 15, 1990

Pamela E.F. LeCren, Counsel

The following is in response to your inquiry as to whether or not ***, a state savings association, may lawfully, under the FDIC's regulations, retain its wholly-owned subsidiary, *** and ***, which in turn wholly-owns *** and ***, if *** converts to a state nonmember bank. In particular you ask whether or not section 332.1 of the FDIC's regulations which prohibits state chartered nonmember banks from acting as surety prevents a bona fide subsidiary of a state nonmember bank from doing so.

Please be advised that it has been the FDIC's position that section 332 of the FDIC's regulations applies solely to the activities of a state nonmember bank and does not extend to the activities conducted by its subsidiaries. A bona fide subsidiary of *** could, therefore, engage in surety activities without violating section 332.1.

We have not had occasion to define what constitutes a bona fide subsidiary in the context of surety operations and section 332. You can expect, however, that the FDIC would in all likelihood apply a definition substantially the same, if not the same as, the definition set out in section 337.4 of the FDIC's regulations concerning securities activities of subsidiaries of insured nonmember banks. That definition basically draws upon the case law concerning the circumstances in which the corporate veil between two corporations will be pierced.

In closing let me apologize for the FDIC's delay in responding to the original inquiry regarding *** from *** of your law firm. Unfortunately, the correspondence he directed to the Atlanta regional office, which in turn was forwarded to the Washington office, was either never received or was misplaced.

We hope that this letter is responsive to your request. If you have any questions, or need further information, please do not hesitate to contact me.

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