1301:1-3-10 Operating subsidiaries.

(A) A bank may exercise all powers, other than deposit taking, that the bank may exercise pursuant to section 1109.02 of the Revised Code by means of an operating subsidiary. An operating subsidiary in which a bank may invest includes a corporation, limited liability company, limited partnership, or similar entity. In order to qualify as an operating subsidiary, the parent bank must have the ability to control the management and operations of the subsidiary; the parent bank must own more than fifty per cent of the voting stock, or an equivalent equity interest with limited liability, of the entity; and the operating subsidiary must be consolidated with the bank under generally accepted accounting principles..

An operating subsidiary is not a bank subsidiary corporation as described in division (C)(1) of section 1109.44 of the Revised Code, and the acquisition, establishment, or performance of new activities in an operating subsidiary is not an investment in a bank subsidiary corporation pursuant to division (A) of section 1109.44 of the Revised Code. Investments in and extensions of credit to operating subsidiaries shall not be subject to section 1109.22, 1109.47, 1109.54, or 1109.55 of the Revised Code, but shall continue to be subject to other provisions of law applicable to loans and investments in stocks, bonds, debentures, and other obligations by banks.

(B) A bank that intends to acquire, establish, or perform new activities in an operating subsidiary shall submit a letter of notification to the superintendent of financial institutions. The letter must detail the proposed activities of the operating subsidiary and state whether any activity of the operating subsidiary will be conducted at some location other than a previously approved banking office of the bank. Letters of notification must be hand delivered or mailed, return receipt requested, to the superintendent's office.

(C) The bank may establish, acquire, or perform new activities in an operating subsidiary after thirty days from the date the superintendent receives the bank's letter of notification, unless notified to the contrary, or in less than thirty days if so notified by the superintendent. The superintendent will utilize the thirty-day period to review the bank's proposal to determine if the proposed activities are legally permissible for an operating subsidiary, to ensure that the proposal is consistent with safe and sound banking practices, and to determine whether the bank's proposal is consistent with prudent banking principles and the policies of the division of financial institutions and does not endanger the safety or soundness of the parent bank. The thirty-day period may be extended upon notice to the bank if the bank's letter raises issues that require additional information from the bank or time for analysis by the superintendent. If the thirty-day period is extended, the bank may establish, acquire, or perform new activities in the operating subsidiary only upon written notification by the superintendent.

The superintendent reserves the right to grant written approval of a bank's proposal to establish, acquire, or perform new activities in an operating subsidiary subject to conditions when there are legal or supervisory concerns.

(D) A bank may establish or acquire an operating subsidiary without notifying the superintendent, provided:

(1) The activities of the new operating subsidiary are limited to those activities previously reported by the bank pursuant to this rule in connection with the establishment or acquisition of a prior operating subsidiary;

(2) The establishment or acquisition of the prior operating subsidiary was considered permissible by the superintendent;

(3) The activities in which the new operating subsidiary will engage continue to be considered legally permissible by the superintendent; and

(4) The activities will be conducted in accordance with any conditions imposed by the superintendent in approving the conduct of these activities for any prior operating subsidiary of the bank.

(E) Unless otherwise provided by statute or rule, all provisions of state banking statutes and rules applicable to the operations of the parent bank shall be equally applicable to the operations of its operating subsidiaries.

(F) Unless otherwise provided by statute or rule, pertinent book figures of the parent bank and its operating subsidiaries shall be consolidated for the purpose of applying applicable statutory limitations, such as sections 1109.22, 1109.23, 1109.24, 1109.31, 1109.32, 1109.39, 1109.40, and 1109.44 of the Revised Code.

(G) Each operating subsidiary shall be subject to examination and supervision by the superintendent in the same manner and to the same extent as the parent bank. If, upon examination, the superintendent ascertains that the operating subsidiary was created or is being operated in violation of a law or rule, that the manner of operation is unsafe or unsound or that the operating subsidiary otherwise threatens the safety or soundness of the bank, the superintendent shall direct the bank to take appropriate remedial action, which may include discontinuing specified activities or disposing of all or part of the operating subsidiary.

Effective: 8/6/2015
Five Year Review (FYR) Dates: 05/20/2015 and 08/06/2020
Promulgated Under: 119.03
Statutory Authority: 1121.03
Rule Amplifies: 1109.02
Prior Effective Dates: 9/9/88, 7/24/92, 4/6/00, 2/3/07