Even if the investment were deducted from the capital of the bank, the subsidy inherent in the transfer would remain. A second protection is examination of the bank holding company, including the effect of securities activities on insured depository institution subsidiaries.
The Federal Reserve as holding company regulator monitors compliance with sections 23A and 23B and other aspects of the relationship between a bank and its section 20 affiliate. In its supervision of bank holding companies, the Board increasingly pays attention to risk management systems and policies that are centralized at the holding company level and govern both the bank and its section 20 affiliate.