Alert October 14, 2008

FRB Grants Exemption to Permit Bank Purchase of Affiliated Money Market Fund Assets

In a letter dated October 6, 2008 (the “Letter”), the FRB approved the request of a bank to purchase assets of an affiliated money market mutual fund in excess of the bank’s affiliate transaction limits under FRB Regulation W.  The bank made the request so that the funds could meet redemption requests without having to sell assets “into the currently fragile and illiquid money markets.”  The Letter made the approval subject to the following conditions:  (1) the bank only could purchase assets from registered 2a-7 funds; (2) the purchase would be limited to the lesser of the amount necessary to cover redemptions r a specified dollar amount; (3) the assets purchased would be externally rated by an NRSRO at A1/P1 or the equivalent; (4) the bank only could purchase the assets at fair market value as determined by a third-party pricing service; (5) the bank’s parent would reimburse the bank for any losses the bank incurred in connection with the purchase; (6) the parent and the bank would remain “well capitalized”; and (7) the purchases of assets from the funds would occur on or before a specified date.