Common use of Restrictions on Transactions with Affiliates Clause in Contracts

Restrictions on Transactions with Affiliates. (1) A member bank and its subsidiaries may engage in a covered transaction with an affiliate only if— (A) in the case of any affiliate, the aggregate amount of covered transactions of the member bank and its subsidiaries will not exceed 10 per centum of the capital stock and surplus of the member bank; and (B) in the case of all affiliates, the aggregate amount of covered transactions of the member bank and its subsidiaries will not exceed 20 per centum of the capital stock and surplus of the member bank. (2) For the purpose of this section, any trans- action by a member bank with any person shall be deemed to be a transaction with an affiliate to the extent that the proceeds of the trans- action are used for the benefit of, or transferred to, that affiliate. (3) A member bank and its subsidiaries may not purchase a low-quality asset from an affili- ate unless the bank or such subsidiary, pursuant to an independent credit evaluation, committed itself to purchase such asset prior to the time such asset was acquired by the affiliate. (4) Any covered transactions and any trans- actions exempt under subsection (d) of this sec- tion between a member bank and an affiliate shall be on terms and conditions that are con- sistent with safe and sound banking practices.