Supreme Court Rules Federal Preemption Standards Apply to National Bank Operating Subsidiaries

GuidanceOffice of the Comptroller of the Currency (OCC)Risk Management

In its decision today in the Watters vs. Wachovia Bank case, the Supreme Court held that federal preemption standards applicable to national banks extend to activities conducted through their operating subsidiaries. Specifically, the Court held that a national bank’s mortgage business, whether conducted by the bank itself or through the bank’s operating subsidiary, is subject to the OCC’s supervision and regulation, and not to state licensing, reporting, and visitorial regimes. We are pleased that the Court’s decision supports the ability of national banks to continue to conduct business activities in their operating subsidiaries as they are now doing.

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