In a recent Supervisory Letter, the Federal Reserve Board clarified its expectations concerning confidentiality agreements between a banking organization and its counterparties and other third parties. The Fed stated that applicable regulations and policies prohibit provisions in confidentiality agreements that would in any way restrict a banking organization from providing Fed supervisory staff with information, require or permit, without prior Fed approval, disclosure to a counterparty or third party that information will be or was provided to the Fed or that would require or permit, without prior Fed approval, a banking organization to inform a counterparty or third party of a current or upcoming Fed examination or other nonpulic supervisory initiative or action.
In light of the Fed's position, consideration should be given to including in confidentiality agreements provisions that expressly allow a banking organization to provide supervisory staff access to the agreement and related information provided by a counterparty or third party and expressly relieve the banking organization of any obligation to inform the other party when the banking organization is asked to or has furnished such information to supervisory staff.
A copy of the Fed's letter is available at http://www.federalreserve.gov/boarddocs/srletters/2007/SR0179.htm.
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