The Federal Reserve board has given the public an extra month to comment on a controversial proposal to impose funding restrictions on bank operating subsidiaries.

Comments now are due Oct. 3 on the plan, which would apply sections 23a and 23b of the Federal Reserve Act to transactions between banks and subsidiaries engaged in activities that their parents may not undertake.

Section 23a restricts investments in subsidiaries to 20% of the holding company's capital, with no single subsidiary receiving more than 10% of capital. Section 23b requires all deals be done at arm's length, which means the parent cannot provide discounted loans or other perks. The other banking and thrift agencies have criticized the Fed, saying the proposal infringes upon their turf and duplicates existing safeguards.

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