Financial Subsidiary Law and Legal Definition

According to 12 CFR 208.77 [Title 12 -- Banks and Banking; Chapter II -- Federal Reserve System; Subchapter A -- Board of Governors of the Federal Reserve System; Part 208 -- Membership of State Banking Institutions in the Federal Reserve System (Regulation H); Subpart G -- Financial Subsidiaries of State Member Banks], financial subsidiary means “(1) In general, any company that is controlled by one or more insured depository institutions other than:

(i) A subsidiary that engages only in activities that the state member bank is permitted to engage in directly and that are conducted on the same terms and conditions that govern the conduct of the activities by the state member bank; or

(ii) A subsidiary that the state member bank is specifically authorized by the express terms of a Federal statute (other than section 9 of the Federal Reserve Act (12 U.S.C. 335)), and not by implication or interpretation, to control, such as by section 25 or 25A of the Federal Reserve Act (12 U.S.C. 601-604a, 611-631) or the Bank Service Company Act (12 U.S.C. 1861 et seq.).

(2) Subsidiaries of financial subsidiaries. A financial subsidiary includes any company that is directly or indirectly controlled by the financial subsidiary.