The Federal Reserve Board said Thursday it has reached joint findings with the Office of the Comptroller of the Currency that are required for the OCC to approve Morgan Stanley Bank, N.A.'s request for an exemption under section 23A of the Federal Reserve Act. The bank, chartered in Salt Lake City, Utah, applied to pursue an internal corporate reorganization involving its affiliate Morgan Stanley Europe SE, headquartered in Frankfurt am Main, Germany.
Section 23A of the Federal Reserve Act sets quantitative limits and imposes other requirements on transactions between a bank and its affiliates. The exemption granted would allow Morgan Stanley Bank to acquire Morgan Stanley Europe SE (MSESE) and MSESE's wholly owned German subsidiary bank, Morgan Stanley Bank AG, as part of a single, one-time internal reorganization.
The covered transaction tied to the reorganization is valued at billions of dollars as of September 30, 2025, and exceeds the quantitative thresholds in section 23A for transactions with both a single affiliate and with all affiliates in the aggregate. That numerical scale is central to the need for the exemption, because without it the proposed acquisition would breach the statutory caps that limit affiliate exposures.
The announcement notes recent regulatory actions in Europe that set the stage for the transaction. On January 16, 2026, the European Central Bank authorized Morgan Stanley Europe SE to convert into a European-licensed bank and granted a change-in-control approval that would allow MSESE to become a subsidiary of Morgan Stanley Bank. MSESE completed that conversion on January 19, 2026 and is now a foreign bank. MSESE's principal activities include sales and trading of fixed income and equity products, investment banking, capital markets services, and research.
In its decision, the Board concluded that the requested exemption is in the public interest and consistent with the purposes of section 23A. The Board noted that Morgan Stanley Bank is well capitalized under applicable regulatory standards and that it would remain so after the acquisition. The bank also provided commitments intended to shield it from losses if the quality of the assets it acquires were to deteriorate following the reorganization.
Not all Board members agreed. Four members dissented from the decision. Vice Chair Philip N. Jefferson indicated he would have preferred that the Board consider the exemption request through a rulemaking process of general applicability rather than via a specific exemption. Governor Michael S. Barr expressed concern that the exemption allows foreign trading and other nonbank activities to be funded with FDIC-insured deposits and warned that it "invites over $1.5 trillion in foreign nonbank activity to come within the federal safety net from large banks who might also take advantage of such an exemption."
The Federal Reserve's findings make possible OCC approval of the exemption requested by Morgan Stanley Bank. If and when the OCC acts on the bank's filing, the one-time internal reorganization could proceed, bringing the European-licensed operations more directly under the U.S. bank's ownership as described in the exemption request.
Contextual note: The reorganization and its regulatory approvals, as described above, involve actions and authorizations concluded through the dates and authorities specified. The valuation described relates to the covered transaction as of September 30, 2025.