what is regulation w 
regulation w is a u s federal reserve system frs regulation that limits certain transactions between depository institutions such as banks and their affiliates in particular it sets quantitative limits on covered transactions and requires collateral for certain transactions the regulation applies to banks that are members of the fed insured state non member banks and insured savings associations regulation w was introduced to consolidate several decades of interpretations and rulemaking under sections 23a and 23b of the federal reserve act understanding regulation wregulation w the rule that implements sections 23a and 23b of the federal reserve act was published on dec 12 2002 and came into effect on april 1 2003 1sections 23a and 23b regulation w limits the risks to a bank from transactions between the bank and its affiliates they also limit the ability of a depository institution to transfer to its affiliates the subsidy arising from the institution s access to the federal safety net which offers benefits such as lower cost insured deposits and the discount window these objectives are accomplished by imposing quantitative and qualitative limits on the ability of a bank to extend credit to an affiliate or engage in certain other transactions with it 1the fed noted in january 2003 that regulation w included 70 years worth of interpretive guidance concerning statutory requirements that are fairly brief but extremely complex in application regulation w is comprehensive in its scope resolving as many as nine significant issues including derivative transactions intraday credit and financial subsidiaries 2complying with regulation wbecause most large u s banks exist within a diversified holding company structure the possibility that bank funds may finance somewhat risky purposes exists regulation w seeks to limit this risk and is conceptually straightforward although implementation is not easy compliance with regulation w is a particular challenge for some banks that are dealing with issues such as rapid growth in capital market activities or integration of previous acquisitions complying with regulation w was complex even before the regulatory reforms that were instituted in the wake of the 2008 financial crisis the dodd frank wall street reform and consumer protection act which has been criticized by some as being overly burdensome further tightened regulation w s requirements 3because exemptions to regulation w rules widely provided emergency liquidity to affiliates during the financial crisis the fed s ability to grant exemptions on its sole authority was curbed under the new rules for example the federal deposit insurance corporation fdic now has 60 days to determine whether an exemption is justified or whether it might pose an unacceptable risk to its deposit insurance fund and raise any objections 3modifications to regulation w have also expanded the concept of what an affiliate is and what constitutes a covered transaction under the law banking regulators now expect greater transparency from banks in complying with regulation w 3regulation w aims to protect banks and federal deposit insurance funds from undue financial risk 