Separate capitalization required for certain subsidiaries

(A) In general In determining compliance with capital standards prescribed under paragraph (1), all of a savings association’s investments in and extensions of credit to any subsidiary engaged in activities not permissible for a national bank shall be deducted from the savings association’s capital.

(B) Exception for agency activities Subparagraph (A) shall not apply with respect to a subsidiary engaged, solely as agent for its customers, in activities not permissible for a national bank unless the appropriate Federal banking agency, in the sole discretion of the appropriate Federal banking agency, determines that, in the interests of safety and soundness, this subparagraph should cease to apply to that subsidiary.

(C) Other exceptions Subparagraph (A) shall not apply with respect to any of the following: (i) Mortgage banking subsidiaries A savings association’s investments in and extensions of credit to a subsidiary engaged solely in mortgage-banking activities. (ii) Subsidiary insured depository institutions A savings association’s investments in and extensions of credit to a subsidiary— (I) that is itself an insured depository institution or a company the sole investment of which is an insured depository institution, and (II) that was acquired by the parent insured depository institution prior to May 1, 1989 . (iii) Certain Federal savings banks Any Federal savings association existing as a Federal savings association on August 9, 1989 — (I) that was chartered prior to October 15, 1982 , as a savings bank or a cooperative bank under State law; or (II) that acquired its principal assets from an association that was chartered prior to October 15, 1982 , as a savings bank or a cooperative bank under State law.

(D) Repealed. Pub. L. 111–203, title III, § 369(5)(L)(iii)(II) , July 21, 2010 , 124 Stat. 1562

(E) Consolidation of subsidiaries not separately capitalized In determining compliance with capital standards prescribed under paragraph (1), the assets and liabilities of each of a savings association’s subsidiaries (other than any subsidiary described in subparagraph (C)(ii)) shall be consolidated with the savings association’s assets and liabilities, unless all of the savings association’s investments in and extensions of credit to the subsidiary are deducted from the savings association’s capital pursuant to subparagraph (A).