{"id":608,"date":"2026-10-08T11:25:49","date_gmt":"2026-10-08T15:25:49","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/bankinglaw\/?p=608"},"modified":"2026-10-08T11:25:50","modified_gmt":"2026-10-08T15:25:50","slug":"holding-company-indemnification-of-the-subsidiary-bank-not-a-covered-transaction-generally","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/bankinglaw\/2026\/10\/08\/holding-company-indemnification-of-the-subsidiary-bank-not-a-covered-transaction-generally\/","title":{"rendered":"Holding Company Indemnification of the Subsidiary Bank &#8211; Not a Covered Transaction (generally)"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">We previously discussed a scenario where a bank indemnifies its parent holding company to determine if it becomes a &#8220;covered transaction&#8221; under Regulation W.   However, the opposite scenario is equally important: if a holding company indemnifies its subsidiary bank in a service contract for bank losses caused by the negligence or willful misconduct of the holding company, this also <span style=\"text-decoration: underline\">does not<\/span> create a covered transaction.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This makes intuitive sense. When the holding company indemnifies the bank, the bank is the beneficiary, not the one at risk. Section 23A of the Federal Reserve Act and Regulation W are designed to <span style=\"text-decoration: underline\">protect the bank<\/span> from transactions that expose it to affiliate risk, not to restrict arrangements where the affiliate compensates the bank for the affiliate&#8217;s own wrongdoing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, banks should be careful about the scope and direction of indemnification. The non-covered-transaction treatment applies <em>specifically<\/em> where the indemnifying party is agreeing to cover losses it caused. <strong>If an indemnification clause were structured so that the bank effectively guarantees the holding company&#8217;s performance to third parties, that could constitute a guarantee on behalf of an affiliate, which is a covered transaction<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The distinction turns on who benefits and who bears the risk. If the bank receives protection from the affiliate&#8217;s misconduct, there is no covered transaction. If the bank provides protection to or on behalf of the affiliate, that analysis changes entirely.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>DM Tip: <\/strong>Review all intercompany service agreements to ensure indemnification clauses are properly scoped to cover only losses caused by the indemnifying party&#8217;s own conduct. Flag any clause where the bank appears to be assuming risk for affiliate-caused losses, as that may require Regulation W treatment.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>We previously discussed a scenario where a bank indemnifies its parent holding company to determine if it becomes a &#8220;covered transaction&#8221; under Regulation W. However, the opposite scenario is equally important: if a holding company indemnifies its subsidiary bank in a service contract for bank losses caused by the negligence or willful misconduct of the &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/blogs.duanemorris.com\/bankinglaw\/2026\/10\/08\/holding-company-indemnification-of-the-subsidiary-bank-not-a-covered-transaction-generally\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Holding Company Indemnification of the Subsidiary Bank &#8211; Not a Covered Transaction (generally)&#8221;<\/span><\/a><\/p>\n","protected":false},"author":693,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"ppma_author":[502],"class_list":["post-608","post","type-post","status-publish","format-standard","hentry","category-general"],"authors":[{"term_id":502,"user_id":693,"is_guest":0,"slug":"jsilvia","display_name":"Joseph E. Silvia","avatar_url":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-content\/uploads\/sites\/14\/2024\/09\/silviajoseph-100x100.jpg","author_category":"","last_name":"Silvia","first_name":"Joseph E.","job_title":"","user_url":"https:\/\/www.duanemorris.com\/attorneys\/josephsilvia.html","description":"<a href=\"https:\/\/www.duanemorris.com\/attorneys\/josephsilvia.html\">Read Joseph's bio.<\/a>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts\/608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/users\/693"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/comments?post=608"}],"version-history":[{"count":1,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts\/608\/revisions"}],"predecessor-version":[{"id":609,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts\/608\/revisions\/609"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/media?parent=608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/categories?post=608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/tags?post=608"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/ppma_author?post=608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}