[Federal Register Volume 79, Number 13 (Tuesday, January 21, 2014)]
[Proposed Rules]
[Pages 3329-3336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00996]


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FEDERAL RESERVE SYSTEM

12 CFR Chapter II

[Docket No. R-1479]
RIN 7100 AE-10


Complementary Activities, Merchant Banking Activities, and Other 
Activities of Financial Holding Companies Related to Physical 
Commodities

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is issuing this advance notice of proposed rulemaking (ANPR) inviting 
public comment on various issues related to physical commodity 
activities conducted by financial holding companies and the 
restrictions imposed on these activities to ensure they are conducted 
in a safe and sound manner and consistent with applicable law. The 
activities under review include physical commodities activities that 
have been found to be ``complementary to a financial activity'' under 
section 4(k)(1)(B) of the Bank Holding Company Act (BHC Act), 
investment activity under section 4(k)(4)(H) of the BHC Act, and 
physical commodity activities grandfathered under section 4(o) of the 
BHC Act. The Board is inviting public comment as part of a review of 
these activities for the reasons explained in the ANPR, including the 
unique and significant risks that physical commodities activities may 
pose to financial holding companies, their insured depository 
institution affiliates, and U.S. financial stability.

DATES: Comments must be received no later than March 17, 2014.

ADDRESSES: You may submit comments, identified by Docket No. 1479 AND 
RIN 7100 AE-10 by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include the 
docket number and RIN number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452- 3102.
     Mail: Address to Robert deV. Frierson, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue NW., Washington, DC 20551.
    All public comments will be made available on the Board's Web site 
at http://www.federalreserve.gov/apps/foia/proposedregs.aspx as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets NW.) between 
9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Laurie Schaffer, Associate General 
Counsel, (202) 452-2272, Michael Waldron, Special Counsel, (202) 452-
2798; Benjamin McDonough, Senior Counsel, (202) 452-2036, April Snyder, 
Senior Counsel, (202) 452-3099, or Will Giles, Counsel, (202) 452-3351, 
Legal Division; or Mark Van Der Weide, Deputy Director, (202) 452-2263, 
Timothy Clark, Senior Associate Director, (202) 452-5264, Todd 
Vermilyea, Senior Associate Director, (202) 912-4310, or Robert Brooks, 
Senior Supervisory Financial Analyst, (202) 452-3103, Division of 
Banking Supervision and Regulation. Board of Governors of the Federal 
Reserve System, 20th and C Streets NW., Washington, DC 20551. 
Telecommunications Device for the Deaf (TDD) users may contact (202-
263-4869).

SUPPLEMENTARY INFORMATION:

I. Background

    Bank holding companies (BHCs) and their subsidiaries engage in 
certain types of physical commodities activities under a variety of 
authorities. As explained below, financial holding companies (FHCs) are 
permitted to engage in a limited amount of physical commodity trading 
activity that the Board has determined to be complementary to various 
financial activities in accordance with section 4(k)(1)(B) of the Bank 
Holding Company Act (BHC Act). In addition, section 4(k)(4)(H) 
authorizes BHCs to make merchant banking investments in any type of 
nonfinancial company, including a company engaged in activities 
involving physical commodities. In the Gramm-Leach-Bliley Act (GLB 
Act), Congress also authorized several companies to continue to engage 
in a broad range of physical commodity activities under specific 
grandfathering authority after these firms became BHCs.\1\
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    \1\ In addition, national banks owned by BHCs may engage in 
certain limited types of physical commodity activities under 
authority granted under the National Bank Act. State-chartered banks 
also may be authorized to engage in the same activities under state 
statutes.
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    In the past several years, BHCs have expanded their reliance on 
these authorities to increase their activities involving physical 
commodity trading and some securities firms that engaged in substantial 
physical commodity activities were acquired by or became BHCs. During 
the same period, there have been a variety of events and developments 
involving physical commodity activities that suggest that the risks of 
conducting these activities are changing and the steps that firms

[[Page 3330]]

may take to limit these risks are more limited.
    In light of these developments and because of the risks associated 
with various physical commodity activities, the Board has determined to 
review the scope of the activities that it has authorized under section 
4(k)(1)(B) of the BHC Act to ensure that they continue to be consistent 
with the statutory requirements that the activities be complementary to 
a financial activity and not pose substantial risks to the safety and 
soundness of depository institutions or the financial system generally. 
The Board is also reviewing whether it is appropriate to impose 
limitations or conditions on the conduct of physical commodity 
activities by BHCs and their subsidiaries under authority granted under 
the BHC Act to ensure these activities are conducted in a manner that 
is consistent with safety and soundness and financial stability.
    This advance notice of proposed rulemaking (ANPR) is designed to 
elicit views from the public on the risks and benefits of allowing FHCs 
to conduct physical commodity activities under the various provisions 
of the BHC Act, whether risks to the safety and soundness of a FHC and 
its affiliated insured depository institutions (IDIs) and to the 
financial system warrant Board action to impose limitations on the 
scope of authorized activities and/or the manner in which those 
activities are conducted, and if so, what those limits should be. Once 
the Board has completed its review of this information, it will 
consider what further actions, including a rulemaking, are warranted.

II. Complementary Authority

A. Background

    The GLB Act amended the BHC Act to, among other things, allow FHCs 
to engage in activities, and acquire and retain shares of any company 
engaged in activities, that the Board determines to be complementary to 
a financial activity and not to pose a substantial risk to the safety 
and soundness of depository institutions or the financial system 
generally (complementary activities).\2\ This authority was limited to 
BHCs that meet the higher capital and other requirements to qualify as 
a FHC. The purpose of this provision was to allow the Board to permit 
FHCs to engage in an activity that appears to be commercial rather than 
financial in nature, but that is meaningfully connected to a financial 
activity such that it complements the financial activity. In this way, 
FHCs would not be disadvantaged by market developments if commercial 
activities evolve into financial activities or nonbank competitors find 
innovative ways to combine financial and nonfinancial activities.
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    \2\ Gramm-Leach-Bliley Act Sec.  103, 12 U.S.C. 1843(k)(1)(B).
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    As part of the finding of complementarity, the Board must find that 
the activity does not pose a substantial risk to the safety and 
soundness of depository institutions or the financial system generally. 
In addition, in connection with any proposal by a FHC to engage in a 
complementary activity, the Board must consider whether performance of 
the activity by the FHC may reasonably be expected to produce benefits 
to the public, such as greater convenience, increased competition, or 
gains in efficiency, that outweigh possible adverse effects, such as 
undue concentration of resources, decreased or unfair competition, 
conflicts of interests, unsound banking practices, or risk to the 
stability of the United States banking or financial system.\3\
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    \3\ 12 U.S.C. 1843(j).
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    Under this authority, the Board has approved requests by FHCs to 
engage in three types of complementary activities (1) physical 
commodity trading involving the purchase and sale of commodities in the 
spot market, and taking and making delivery of physical commodities to 
settle commodity derivatives (Physical Commodity Trading); (2) paying 
power plant owners fixed periodic payments that compensate the owner 
for its fixed costs in exchange for the right to all or part of the 
plant's power output (Energy Tolling); \4\ and (3) providing 
transactions and advisory services to power plant owners (Energy 
Management Services). Together, these three activities are referred to 
as Complementary Commodities Activities.
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    \4\ Under Energy Tolling, the toller provides (or pays for) the 
fuel needed to produce the power that it directs the owner to 
produce. See, e.g., The Royal Bank of Scotland Group plc, 94 Fed. 
Res. Bull. C60 (2008) (2008 RBS Order). The agreements also 
generally provide that the owner will receive a marginal payment for 
each megawatt hour produced by the plant to cover the owner's 
variable costs plus a profit margin. Id. The plant owner, however, 
retains control over the day-to-day operations of the plant and 
physical plant assets at all times. Id.
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    Limits on Physical Commodity Activities. The Board placed certain 
restrictions on each Complementary Commodities Activity to protect 
against the risks the activity posed to the safety and soundness of the 
FHC, its subsidiary IDI, and the U.S. financial system. For example, 
consistent with general safety and soundness principles, FHCs are 
required to limit the aggregate market value of commodities held as a 
result of Physical Commodity Trading to no more than 5 percent of the 
FHC's consolidated tier 1 capital.\5\ To ensure that Physical Commodity 
Trading remained complementary to the financial activity of commodity 
derivatives activities permitted under Regulation Y and to help protect 
against additional risks associated with dealing in illiquid goods, 
Physical Commodity Trading also has been limited to physical 
commodities approved by the Commodity Futures Trading Commission (CFTC) 
for trading on a U.S. futures exchange (unless specifically excluded by 
the Board) or commodities the Board otherwise approves.\6\
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    \5\ See, e.g., 2008 RBS Order; Citigroup Inc., 89 Fed. Res. 
Bull. 508 (2003) (2003 Citi Order). See also 145 Cong. Rec. H 11529 
(daily ed. Nov. 4, 1999) (Statement of Chairman Leach) (``It is 
expected that complementary activities would not be significant 
relative to the overall financial activities of the 
organization.'').
    \6\ See 2003 Citi Order. In limited cases, the Board has 
permitted FHCs to take and make physical delivery of non-CFTC-
approved commodities if the FHC demonstrated that there is a market 
in financially settled contracts on those commodities, the commodity 
is fungible, the commodity is liquid, and the FHC has in place 
trading limits that address concentration risk and overall exposure. 
See, e.g., 2008 RBS Order.
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    The Board also determined not to permit FHCs to own, operate, or 
invest in facilities for the extraction, transportation, storage, or 
distribution of commodities, or to process, refine, or otherwise alter 
commodities. In addition, FHCs committed to take steps to address the 
risks resulting from Physical Commodity Trading activities that involve 
environmentally sensitive products, such as oil or natural gas. These 
steps have included obtaining insurance and establishing policies and 
procedures that are intended to prevent and respond to oil spills and 
similar incidents.\7\
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    \7\ In addition, certain FHCs also require that third parties 
that transport oil for the FHC be a member of a protection and 
indemnity club, carry the maximum insurance for oil pollution 
available from the club and have substantial amounts of additional 
oil pollution insurance from creditworthy insurance companies, use 
vessels of less than a certain age, use vessels approved by a major 
international oil company, and use vessels that have appropriate oil 
spill response plans and equipment. See, e.g., 2003 Citi Order at 
510.
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    To limit the safety and soundness risks of Energy Tolling, a FHC 
engaging in Energy Tolling must limit the present value of its future 
committed capacity payment under an energy tolling agreement to an 
aggregate of not more than 5 percent of the FHC's consolidated tier 1 
capital (after taking account of any investment in commodities held by 
the FHC under its

[[Page 3331]]

Physical Commodity Trading authority).\8\ Similarly, a FHC must limit 
the revenues attributable to its Energy Management Services to 5 
percent of the FHC's total consolidated operating revenue.\9\ The Board 
has limited the scope of Energy Management Services to ensure FHCs only 
take risks consistent with the agency nature of such services.\10\
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    \8\ See, e.g., 2008 RBS Order.
    \9\ Fortis S.A./N.V., 94 Fed. Res. Bull. C20 (2008).
    \10\ Id. Specifically, the Board has required that (1) the owner 
of the power plant retain the right to market and sell power 
directly to third parties, which may be subject to the energy 
manager's right of first refusal; (2) the owner retain the right to 
determine the level at which the facility will operate (i.e., to 
dictate the power output of the facility at any given time); (3) 
neither the energy manager nor its affiliates guarantee the 
financial performance of the facility; and (4) neither the energy 
manager nor its affiliates bear any risk of loss if the facility is 
not profitable. Id.
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B. Recent Events

    Environmental catastrophes. Recent disasters involving physical 
commodities demonstrate that the risks associated with these activities 
are unique in type, scope and size. In particular, catastrophes 
involving environmentally sensitive commodities may cause fatalities 
and economic damages well in excess of the market value of the 
commodities involved or the committed capital and insurance policies of 
market participants.
    As an illustration, the oil spill involving the Deepwater Horizon 
mobile offshore drilling unit caused 11 deaths, numerous personal 
injuries, and various claims for environmental and economic damages 
against numerous parties involved in the incident.\11\ BP p.l.c. and 
certain of its subsidiaries have funded the $20 billion Deepwater 
Horizon Oil Spill Trust and agreed to pay approximately $4.5 billion to 
resolve federal criminal claims and federal securities law claims 
arising from the incident.\12\ BP has recognized cumulative losses of 
$42.2 billion as of December 31, 2012, as a result of the incident and 
has recognized that the incident could continue to have a material 
adverse impact on BP.\13\ Other companies involved in the incident, 
including the lessor of the Deepwater Horizon drilling unit, a service 
provider for BP, and minority owners of the well exploration rights and 
co-lessees of the drilling unit, have incurred billions of dollars in 
losses.\14\ Moreover, litigation involving the disaster is ongoing and 
the parties are unable to estimate the full impact of the incident on 
the companies.\15\
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    \11\ See, e.g., In re: Oil Spill Rig ``Deepwater Horizon'' in 
the Gulf of Mexico, on April 20, 2010; Applies to: B1 Mater 
Complaint, 808 F. Supp. 2d 943 (E.D. La. 2011).
    \12\ BP, Annual Report and Form 20-F, 59 (Mar. 6, 2013) (BP 
Annual Report). BP Exploration and Production Inc., a subsidiary of 
BP, was the lease operator of the Macondo oil well and Deepwater 
Horizon oil rig. Id. at 163.
    \13\ Id. at 38, 61.
    \14\ Transocean Inc., Form 10-K (Feb 26, 2013) (Transocean 
Annual Report); Halliburton Company, Form 10-K (Feb. 11, 2013) 
(Halliburton Annual Report).
    \15\ BP Annual Report at 173, Transocean Annual Report at 110, 
Halliburton Annual Report at 17.
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    Similarly, on September 9, 2010, a natural gas transmission 
pipeline owned and operated by the Pacific Gas and Electric Company 
(PG&E) ruptured in San Bruno, California, leading to eight deaths and 
the destruction or damage of 100 homes.\16\ PG&E expects to pay a total 
of $565 million for third-party claims for personal injury, property 
damage, and damage to infrastructure related to the San Bruno 
incident,\17\ has invested approximately $1 billion in safety 
activities since the incident, and may be required to pay over $1 
billion in penalties associated with the incident.\18\ On February 7, 
2010, a natural gas-fueled power plant in Middletown, Connecticut, 
experienced a catastrophic natural gas explosion that killed six and 
injured at least 50 people.\19\ The Occupational Safety and Health 
Administration fined 17 companies involved in the incident a total of 
$16.6 million \20\ and individuals have filed claims for damages in 
related lawsuits.\21\ Moreover, three similar natural gas explosions at 
power plants occurred in the United States between 2001 and 2009.\22\
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    \16\ Press Release, California Public Utilities Commission, 
Consumer Protection & Safety Division, September 9, 2010 PG&E 
Pipeline Rupture in San Bruno, California (Jan. 12, 2012) available 
at http://www.cpuc.ca.gov/NR/rdonlyres/C71CF8F3-5643-4BC8-8FA3-EA2C81B7A444/0/79PGESB011212.pdf.
    \17\ PG&E, Form 8-K (Sept. 6, 2013).
    \18\ Press Release, California Public Utilities Commission, CPUC 
Staff Recommend $2.25 Billion Total Penalty Against PG&E for San 
Bruno Pipeline Rupture; Penalty would be Largest of its Kind 
Assessed in Nation (May 6, 2013) available at http://www.cpuc.ca.gov/PUC/sanbrunoreport.htm.
    \19\ U.S. Chemical and Safety Hazard Investigation Board, Final 
Report: Kleen Energy (2010) available at http://www.csb.gov/assets/1/19/KleenUrgentRec.pdf.
    \20\ Press Release, OSHA, U.S. Labor Department's OSHA proposes 
$16.6 million in fines in connection with fatal Connecticut natural 
gas explosion (Aug. 5, 2010).
    \21\ See, e.g., Russ Buettner, $16.6 Million in Fines After 
Fatal Blast at a Connecticut Plant, N.Y. Times (Aug. 5, 2010).
    \22\ Id.
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    In 2011, the Tohoku earthquake and tsunami caused a severe nuclear 
incident at the Fukushima Daiichi nuclear power plant that rose to the 
highest level of severity on the International Nuclear Event Scale.\23\ 
Over 100,000 people were evacuated in response to the incident. In 
2013, the operator of the power plant announced that a significant 
quantity of highly radioactive water had leaked from the reactor, 
causing the Japanese government to take significant containment 
measures.\24\ More recently, a cargo train carrying crude oil derailed 
in Lac M[eacute]gantic, Quebec, Canada, killing 47 people and causing 
substantial additional damage. The disaster caused the bankruptcy of 
the U.S. and Canadian affiliates of the railroad company carrying the 
oil.\25\ Moreover, the Transportation Safety Board of Canada stated 
that the level of hazard posed by the oil transported was not 
accurately documented, which was a responsibility of the shipper of the 
oil under the agency's regulations.\26\ The risks of catastrophic 
events continue, as demonstrated most recently by the collision of a 
train carrying crude oil with a train carrying grain near an ethanol 
plant in North Dakota.\27\
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    \23\ The National Diet of Japan, The Official Report of the 
Fukushima Nuclear Accident Independent Investigation Commission 12 
(2012).
    \24\ Ministry of Economy, Trade, and Industry, factsheet 
overview provided to the International Atomic Energy Agency, (Sept. 
6, 2013), available at http://www.iaea.org/newscenter/news/2013/fact-sheet.pdf.
    \25\ Press Release, Montreal, Maine & Atlantic Corp., Montreal, 
Maine & Atlantic Files for Bankruptcy in Canada & the U.S. (Aug. 7, 
2013), available at http://www.mmarail.com/mma_news.php.
    \26\ Press Release, Transportation Safety Board of Canada, TSB 
calls on Canadian and U.S. regulators to ensure properties of 
dangerous goods are accurately determined and documented for safe 
transportation (Sept. 11, 2013) available at http://www.tsb.gc.ca/eng/medias-media/communiques/rail/2013/r13d0054-20130911.asp.
    \27\ See, e.g., Russell Gold and Lynn Cook, Crude Oil Impurities 
are Probed in Rail Blasts, Wall St. J. (Jan. 1, 2014) available at 
http://online.wsj.com/news/articles/SB10001424052702303640604579294794222692778.
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    Catastrophic events involving commodities also occurred prior to 
the enactment of the GLB Act, including the oil spill involving the 
Exxon Valdez (1989), the nuclear incident on Three Mile Island in 
Pennsylvania (1979), and the incident at the Midway-Sunset Oil Field in 
California (1910). However, the recent catastrophes accent that the 
costs of preventing accidents are high and the costs and liability 
related to physical commodity activities can be difficult to limit and 
higher than expected.
    Financial Crisis. The financial crisis demonstrated the effects of 
market contagion and highlighted the danger of underappreciated tail 
risks associated with certain activities. Congress enacted the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank

[[Page 3332]]

Act) to help address risks to financial stability including by 
requiring the Board to take steps to develop and impose prudential 
supervisory standards that would mitigate risks posed by large 
financial firms to the financial system.\28\ The Board has taken a 
number of steps to address these risks. For example, the Board is 
developing enhanced standards under section 165 of the Dodd-Frank Act 
``to prevent or mitigate risks to the financial stability of the United 
States.'' \29\ The Board also recently adopted a revised capital 
framework for banking organizations supervised by the Federal Reserve 
that increases the overall quantity and quality of capital in the 
banking system.\30\
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    \28\ See, e.g., sections 165, 166, 604, and 622 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 
111-203, 124 Stat. 1376-2223.
    \29\ See 77 FR 76628 (Dec. 28, 2012); 77 FR 594 (Jan. 5, 2012).
    \30\ See 12 CFR part 217.
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    Currently, 11 of the 12 FHCs that are authorized to engage in one 
or more Complementary Commodities Activities are also designated as 
global systemically important banks (G-SIBs), and two G-SIBs conduct 
commodities activities pursuant to section 4(o) of the BHC Act. The 
involvement of FHCs in physical commodities activities has 
substantially increased since 2007, primarily as a result of mergers 
and acquisitions and securities firms becoming BHCs, adding to the 
potential that a tail risk event affecting a G-SIB as a result of 
physical commodity activities could lead to market contagion. 
Consistent with its actions under the Dodd-Frank Act to address 
systemic risk, the Board is issuing this ANPR to seek additional 
information regarding the conduct of physical commodities activities 
and is considering what additional actions are necessary to mitigate 
such risk posed by those activities.

C. Potential Inadequacies of Current Safeguards and Safety and 
Soundness Considerations

    While the Board has placed limitations on physical commodities 
activities that were designed to reduce safety and soundness risks,\31\ 
recent incidents suggest that review of these limits is prudent to 
determine their adequacy in protecting safety and soundness and 
financial stability. In addition, ownership of physical commodities 
that are part of a catastrophic event could suddenly and severely 
undermine public confidence in the FHC or its insured depository 
institution and undermine their access to funding markets until the 
extent of the liability of the FHC can be assessed by the market. 
Moreover, certain current management techniques designed to mitigate 
risks, such as frequent monitoring of risk, requirements to restrict 
the age of transport vessels, and review of disaster plans of third 
party transporters, may have the unintended effect of increasing the 
potential that the FHC may become enmeshed in or liable to some degree 
from a catastrophic event. Accordingly, the Board is reviewing whether 
the safeguards it has imposed adequately protect against risks to 
safety and soundness and U.S. financial stability in light of the size 
and scope of the potential damage associated with a catastrophic event 
involving a physical commodity. The Board is also reviewing whether to 
impose additional prudential safeguards on, or further restrict FHCs' 
authority to engage in, Complementary Commodities Activities.
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    \31\ For example, FHCs may not store, transport, or refine 
physical commodities, or operate a power plant--and FHCs must use 
prudent risk management techniques in conducting permissible 
physical commodity activities--such as separate corporate vehicles, 
agency agreements, insurance and limitations on the size of 
investments. See 2003 Citi Order.
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    Prohibition on Ownership and Operation. FHCs may not own, operate, 
or invest in facilities for the extraction, transportation, storage, or 
distribution of commodities, or to process, refine, or otherwise alter 
commodities under complementary authority. However, liability may 
attach to FHCs that own physical commodities involved in catastrophic 
events even if the FHCs hire third parties to store and transport the 
commodities. For example, FHCs engaging in Complementary Commodities 
Activities may lease and monitor facilities and vessels that hold and 
transport FHCs' oil. FHCs could face liability under the Oil Pollution 
Act,\32\ Clean Water Act,\33\ and the Comprehensive Environmental 
Response, Compensation, and Liability Act (CERCLA) \34\ if their 
relationship with the third party contractor were deemed to constitute 
the ownership or operation of transportation or storage facilities 
under those laws.\35\ Moreover, parties not liable as owners or 
operators under relevant federal law may be held liable under common 
law,\36\ including liability arising from the actions of the third 
parties hired to store and transport commodities.\37\
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    \32\ See 33 U.S.C. 2701(32), 2702.
    \33\ Id. at Sec.  1321.
    \34\ 42 U.S.C. 9607(a); see also U.S. Envtl. Prot. Agency, Pub. 
No. 9345.1-07, Hazard Ranking System Guidance Manual 19 (1992).
    \35\ See, e.g., Commander Oil Co. v. Barlo Equip. Corp., 215 
F.3d 321, 329-32 (2nd Cir. 2000) (discussing instances in which 
lessees had been and may be found to be ``owners'' under CERCLA); 
Phillips 66 Pipeline LLC v. Rogers Cartage Co., No. 11-cv-497-DRH-
DGW, 2013 U.S. Dist. LEXIS 11388, at *19-*37 (S.D. Ill. 2013) 
(determining whether a company would be considered an ``operator'' 
under CERCLA based on a review of the facts and circumstances, 
including the defendant company's past acts and business 
relationships). Owners and operators of such facilities and vessels 
also may be liable for damages caused from a catastrophic event 
involving the facility or vessel under maritime and state common 
law. See, e.g., Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008); 
Int'l Paper Co. v. Ouellette, 479 U.S. 481 (1987); In re: Oil Spill 
Rig ``Deepwater Horizon'' in the Gulf of Mexico, on April 20, 2010; 
Applies to: B1 Mater Complaint, 808 F. Supp. 2d 943 (E.D. La. 2011).
    \36\ See, e.g., In re: Oil Spill Rig ``Deepwater Horizon'' in 
the Gulf of Mexico, on April 20, 2010; Applies to: B1 Mater 
Complaint, 808 F. Supp. 2d 943 (E.D. La. 2011).
    \37\ Restatement (Second) Torts, ch. 15.
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    Safety Policies and Procedures. FHCs have provided commitments to 
the Board to help ensure environmentally sensitive commodities are 
safely stored and transported, including age limits on vessels, 
approval of vessels by a major international oil company, inspection 
and monitoring of vessels, and backup plans for oil spill responses. As 
noted, the oil spill involving the Deepwater Horizon drilling unit 
suggests that current industry safety policies and procedures may not 
prevent a major environmental disaster and may call into question the 
effectiveness of such procedures.\38\
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    \38\ For example, regarding the age limits on vessels, the 
Deepwater Horizon drilling unit was approximately 10 years old and 
``was seen as an outstanding rig in Transocean's fleet,'' a company 
that is ``the world's largest contractor of offshore drilling 
rigs.'' National Commission on the Deepwater Horizon Oil Spill and 
Offshore Drilling, Deep Water: The Gulf Oil Disaster and the Future 
of Offshore Drilling, ch. 1, p. 2 (Jan. 2011) (final report to the 
President). Regarding the approval of vessels by a major 
international oil company, the final report of the National 
Commission on the BP Deepwater Horizon Oil Spill and Offshore 
Drilling (``Oil Spill Commission'') criticized BP's earlier 
accidents and safety culture. Id. at ch. 8. The incident also may 
call into question the effectiveness of hiring inspectors to monitor 
the loading and discharging of vessels; the Oil Spill Commission's 
report also states that two contractors, Transocean and Halliburton, 
also were extensively involved in the mistakes that caused the well 
blowout and discussed a general ``absence of adequate safety culture 
in the Offshore U.S. Oil and Gas Industry.'' Id. at ch. 8, p. 224. 
Moreover, the unsuccessful attempts of expert contractors to remedy 
and contain the Deepwater Horizon oil spill may bring into question 
the effectiveness of a FHC's backup response to an environmental 
disaster. See, e.g., id. at ch. 5.
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    Capital and Insurance Requirements. The capital and insurance that 
FHCs hold for their Complementary Commodities Activities, and the 
insurance that FHCs require their oil vessel operators to hold, may not 
adequately protect FHCs from the degree and types of costs associated

[[Page 3333]]

with all commodity-related environmental disasters. Liability arising 
from a catastrophic event associated with physical commodities could 
well exceed a FHC's liability insurance and capital allocated to the 
activity.\39\ Moreover, certain types of significant costs, such as 
those associated with clean-up, may be expressly excluded from the 
insurance policies.\40\ In addition, it may be difficult or impossible 
to determine the extent to which the insurance policies will cover the 
costs of an environmental disaster before litigation regarding the 
scope of insurance coverage for the incident is complete.\41\
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    \39\ Pollution insurance policies typically have maximum payouts 
that are well below the amount of damage that an environmental 
disaster may cause.
    \40\ See, e.g., Barry R. Ostrager and Thomas R. Newman, Handbook 
on Insurance Coverage Disputes Sec.  23.03[a] (6th ed. 2012).
    \41\ Cf. AES Corp. v. Steadfast Ins. Co., 725 SE.2d 532 (Va. 
2012) (holding that an energy company's commercial general liability 
policy did not cover climate change injuries).
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    Corporate Structure. FHCs typically conduct Complementary 
Commodities Activities through nonbanking subsidiaries. However, such a 
corporate structure may not sufficiently reduce the risk that the 
parent FHC would be responsible for legal liability arising from the 
actions of its subsidiary's activities. Although parent corporations 
generally are not liable for the actions of their subsidiaries, parent 
companies may incur such liability in a variety of circumstances for a 
variety of reasons.\42\ Considering the diverse set of circumstances 
under which the corporate veil may be pierced,\43\ the Board and FHCs 
may not be able to accurately predict whether courts would respect the 
corporate veil between a top-tier FHC and its subsidiary when the 
subsidiary is liable for extensive damages caused by its Complementary 
Commodities Activities.
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    \42\ United States v. Bestfoods, 524 U.S. 51, 61-63 (1998). The 
Court has held that the corporate veil also may be pierced in 
litigation involving violations of federal statutes. Id. at 63. See 
also United States v. Kayser-Roth Corp., 103 F. Supp. 2d 74, 84 (D. 
RI 2000) (``The doctrine of piercing the corporate veil is one of 
the most amorphous doctrines in the law because it is multifaceted 
and serves a variety of purposes that vary from case to case.'').
    \43\ As noted below, courts may consider a variety of factors in 
determining whether to pierce the corporate veil, including adequate 
capitalization, separation of assets, and domination of finances, 
policies and practices. See infra fns. 65-68 and corresponding text.
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    Moreover, several recent events suggest that, even without direct 
ownership or operational control of an entity that has suffered a 
catastrophe, the public confidence of a holding company that was 
engaged in a physical commodity activity with a third party could 
suddenly and severely be undermined, as could the confidence in the 
company's subsidiary insured depository institution or their access to 
funding markets, until the extent of the liability of the holding 
company could be assessed by the markets. Financial firms, and in 
particular holding companies of IDIs, are particularly vulnerable to 
reputational damage to their banking operations. Although the 
likelihood of a catastrophic event is small in the short term, 
catastrophes involving physical commodities continue to occur, and the 
resultant damages are very difficult to measure, even after the event 
has occurred, and may be extremely large.\44\ The fact that a FHC has 
not been involved in such an event to date does not reduce the 
probability that such an event may occur or that the event could have a 
material adverse impact on the financial condition of the FHC. In fact, 
the absence of such an experience may hinder FHCs' ability to assess 
the efficacy of their safeguards.
---------------------------------------------------------------------------

    \44\ See supra fns. 13-15 and corresponding text (discussing 
inability of companies involved in the BP oil spill to measure the 
full extent of legal liability).
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    To help the Board assess the risks of physical commodities 
activities and the adequacy of the safeguards and limitations already 
in place, the Board invites public comment on those activities, risks 
and limitations. In particular, the Board invites comment on the 
following questions:
    Question 1. What criteria should the Board look to when determining 
whether a physical commodity poses an undue risk to the safety and 
soundness of a FHC?
    Question 2. What additional conditions, if any, should the Board 
impose on Complementary Commodities Activities? For example, are the 
risks of these activities adequately addressed by imposing one or more 
of the following requirements: (i) Enhanced capital requirements for 
Complementary Commodities Activities, (ii) increased insurance 
requirements for Complementary Commodities Activities, and (iii) 
reductions in the amount of assets and revenue attributable to 
Complementary Commodities Activities, including absolute dollar limits 
and caps based on a percentage of the FHC's regulatory capital or 
revenue?
    Question 3. What additional conditions on Complementary Commodities 
Activities should the Board impose to provide meaningful protections 
against the legal, reputational and environmental risks associated with 
physical commodities and how effective would such conditions be?
    Question 4. To what extent does the commitment that a FHC will only 
hold physical commodities for which a futures contract has been 
approved by the CFTC or for which the Board has specifically authorized 
the FHC to hold adequately ensure that physical commodities positions 
of FHCs are sufficiently liquid? What modifications to this commitment, 
including additional conditions, should the Board consider to ensure 
that a FHC maintains adequate liquidity in its commodity positions?
    Question 5. What additional commitments or restrictions are 
necessary to ensure FHCs engaging in Complementary Commodities 
Activities do not develop unsafe or unsound concentrations in physical 
commodities?
    Question 6. Should the type and scope of limitations on 
Complementary Commodities Activities differ based on whether the 
underlying physical commodity may be associated with catastrophic 
risks? If so, how should limitations differ, and what specific 
limitations could reduce liability from potential catastrophic events?
    Question 7. Does the commitment not to own, operate or invest in 
facilities for the extraction, transportation, storage, or distribution 
of commodities adequately insulate a FHC from risks associated with 
such facilities, including financial risk, storage risk, transportation 
risk, reputation risk, and legal and environmental risks? If not, what 
restrictions should the Board impose to ensure that such extraction, 
transportation, storage or distribution facilities do not pose safety 
and soundness risks?
    Question 8. Do Complementary Commodities Activities pose risks or 
raise concerns other than those described in this ANPR, and if so, how 
should those risks or concerns be addressed?
    Question 9. What negative effects, if any, would a FHC's subsidiary 
depository institution experience if the parent FHC was not able to 
engage in Complementary Commodities Activities?
    Question 10. How effective is the current value-at-risk capital 
framework in addressing the risk arising from holdings of physical 
commodities? Would additional or different capital requirements better 
address the potential risks associated with Complementary Commodities 
Activities?

[[Page 3334]]

    Question 11. What are the similarities and differences between the 
risks posed to FHCs by physical commodities activities, as described in 
this ANPR, and the risks posed to nonbank financial companies 
supervised by the Board (``nonbank SIFIs'')? How do the safety and 
soundness and financial stability risks posed by physical commodities 
activities differ, if at all, based on whether the nonbank SIFI 
controls an IDI?
    Question 12. What are the similarities and differences between the 
risks posed to FHCs by physical commodities activities, as described in 
the ANPR, and the risks posed to savings and loan holding companies 
that may conduct such activities? How do the safety and soundness and 
financial stability risks posed by physical commodities activities 
differ, if at all, based on whether the savings and loan holding 
company is or is not affiliated with an insurance company?

D. Complementarity of Current Activities

    It has been ten years since the Board first determined that 
physical commodities activities were complementary to financial 
activities for purposes of section 4(k)(1)(B) of the BHC Act. Since 
that time, the Board has received notices from fewer than 20 FHCs 
seeking authority to conduct one or more Complementary Commodities 
Activities. Two of the 12 FHCs that currently conduct physical 
commodities activities under complementary authority recently have 
publicly reported that they intend to cease such activities while 
continuing to engage in related financial activities, including 
commodities derivatives activities.\45\ Another FHC that conducts 
physical commodities activities pursuant to section 4(o) of the BHC 
Act, which is a separate statutory authority discussed below,\46\ has 
recently agreed to sell the global oil merchanting unit of its 
commodities division to a foreign oil and gas company and is in the 
process of selling other physical commodities units.\47\
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    \45\ Press Release, Deustche Bank refocuses its commodities 
business (Dec. 5, 2103) available at https://www.db.com/ir/en/content/ir_releases_2013_4413.htm; Press Release, JPMorgan Chase 
& Co., J.P. Morgan to Explore Strategic Alternatives for its 
Physical Commodities Business (July 26, 2013) available at http://investor.shareholder.com/jpmorganchase/releasedetail.cfm?ReleaseID=780681.
    \46\ See infra section IV (discussing section 4(o) of the BHC 
Act).
    \47\ Press Release, Morgan Stanley, Morgan Stanley to Sell 
Global Oil Merchanting Business to Rosneft (Dec. 20, 2013) available 
at http://www.morganstanley.com/about/press/articles/00ddb583-1c3c-4dd9-b27f-6023c884aae3.html.
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    Although market developments such as these may be caused by a 
variety of factors, the developments may indicate that Complementary 
Commodities Activities are not necessary to ensure competitive equity 
between FHCs and competitors conducting commodities derivatives or 
other financial activities. Moreover, these developments, including a 
FHC's sale of a physical commodities business to a nonfinancial firm, 
may suggest that the relationship between commodities derivatives and 
physical commodities markets (or the relationship between participants 
in such markets) may not be as close as previously claimed or expected. 
Because complementary activities should be ``meaningfully connected'' 
to a financial activity such that it ``complements'' the financial 
activity, the Board is reexamining whether each Complementary 
Commodities Activity can continue to fulfill this statutory 
requirement.\48\ The Board is also evaluating the potential costs and 
other burdens (to FHCs and the public generally) associated with 
narrowing or eliminating the authority to engage in Complementary 
Commodities Activities.
---------------------------------------------------------------------------

    \48\ See, e.g., 2003 Citi Order.
---------------------------------------------------------------------------

    Question 13. In what ways are non-BHC participants in the physical 
commodities markets combining financial and nonfinancial products or 
services in such markets?
    Question 14. What are the complementarities or synergies between 
Complementary Commodities Activities and the financial activities of 
FHCs? How have these complementarities or synergies changed over time?
    Question 15. What are the competitive effects on commodities 
markets of FHC engagement in Complementary Commodities Activities?
    Question 16. Does permitting FHCs to engage in Complementary 
Commodities Activities create material conflicts of interest that are 
not addressed by existing law? If so, describe such material conflicts 
and how they may be addressed.
    Question 17. What are the potential adverse effects and public 
benefits of FHCs engaging in Complementary Commodities Activities? Do 
the potential adverse effects of FHCs engaging in Complementary 
Commodities Activities, such as undue concentration of resources, 
decreased or unfair competition, conflicts of interest, unsound banking 
practices, or risk to the stability of the United States banking or 
financial system, outweigh the public benefits, such as greater 
convenience, increased competition, or gains in efficiency?
    Question 18. In what ways would FHCs be disadvantaged if they did 
not have authority to engage in Complementary Commodities Activities? 
How might elimination of the authority affect FHC customers and the 
relevant markets?

III. Merchant Banking Authority

A. Background

    The GLB Act amended the BHC Act to allow FHCs to engage in merchant 
banking activities. Under section 4(k)(4)(H) of the BHC Act, FHCs may 
make investments in nonfinancial companies as part of a bona fide 
securities underwriting or merchant or investment banking activity.\49\ 
These investments may be made in any type of ownership interest in any 
type of nonfinancial entity (portfolio company).\50\ The statute grants 
similar authority to insurance companies that are FHCs or subsidiaries 
of FHCs.\51\
---------------------------------------------------------------------------

    \49\ 12 U.S.C. 1843(k)(4)(H).
    \50\ Id.
    \51\ Id. at Sec.  1843(k)(4)(I).
---------------------------------------------------------------------------

    The GLB Act imposed conditions on the merchant banking investments 
of FHCs that further the fundamental purposes of the BHC Act--to help 
maintain the separation of banking and commerce and promote safety and 
soundness.\52\ First, the investment must be part of ``a bona fide 
underwriting or merchant or investment banking activity'' and may not 
be held by an IDI or its subsidiary.\53\ Second, FHCs making merchant 
banking investments must own or control a securities affiliate or a 
registered investment adviser that advises an affiliated insurance 
company.\54\ Third, merchant banking investments must be held only 
``for a period of time to enable the sale or disposition thereof on a 
reasonable basis consistent with the financial viability of the 
activities.'' \55\ Regulation Y interprets the statutory holding period 
restriction to prohibit FHCs in most cases from holding investments 
made under merchant banking authority for more than 10 years (or for 
more than 15 years for investments held under a qualifying private 
equity fund).\56\
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    \52\ See 66 FR 8466 (Jan. 31, 2001).
    \53\ 12 U.S.C. 1843(k)(4)(H)(i).
    \54\ Id. at Sec.  1843(k)(4)(H)(ii).
    \55\ Id. at Sec.  1843(k)(4)(H)(iii).
    \56\ 12 CFR 225.172-.173.
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    Finally, FHCs may not ``routinely manage or operate such company or 
entity except as may be necessary or required to obtain a reasonable 
return on investment upon resale or

[[Page 3335]]

disposition.'' \57\ The Board's Regulation Y limits the duration of 
management activities to a period ``as may be necessary to address the 
cause of the [FHC]'s involvement, to obtain suitable alternative 
management arrangements, to dispose of the investment, or to otherwise 
obtain a reasonable return upon the resale or disposition of the 
investment and imposes documentation requirements on these 
extraordinary management activities.'' \58\
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    \57\ 12 U.S.C. 1843(k)(4)(H)(iv).
    \58\ 12 CFR 225.171(e).
---------------------------------------------------------------------------

    The Board's rules state that routine management includes executive 
officer interlocks between the FHC and portfolio company and 
contractual arrangements that restrict the portfolio company's ability 
to make routine business decisions.\59\ Regulation Y also makes clear 
that certain relationships with the portfolio company are not 
considered routine management: Director representation at the portfolio 
company and contractual restrictions related to portfolio company 
actions taken outside the ordinary course are not deemed to be routine 
management.\60\ FHCs also may meet with officers or employees of the 
portfolio company to monitor and provide advice with respect to the 
portfolio company's performance and activities and to provide 
financial, investment, and management consulting services to the 
portfolio company.\61\
---------------------------------------------------------------------------

    \59\ Id. at 225.171(b).
    \60\ Id. at 225.171(d).
    \61\ Id.
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    The Board's rules impose certain prudential requirements on FHCs' 
merchant banking activities to encourage them to be done in a safe and 
sound manner. Regulation Y requires the FHC to establish risk 
management policies and procedures for its merchant banking activities, 
including policies and procedures designed to ensure the maintenance of 
corporate separateness between the FHC and its companies held under 
merchant banking authority and to protect the FHC and its subsidiary 
IDIs from legal liability from the operations and financial obligations 
of its portfolio companies and private equity funds.\62\ In addition, 
the Board's capital adequacy guidelines currently require that a FHC 
deduct its merchant banking and other nonfinancial investments from its 
tier 1 capital.\63\ The Board's revised capital framework (Regulation 
Q) eliminates this specific deduction for nonfinancial investments; 
merchant banking investments instead is addressed through risk-
weighting in the equity framework.\64\
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    \62\ Id. at 225.175(b).
    \63\ 12 CFR part 225, Appendix A. The Board previously limited 
FHCs' merchant banking investments to 30 percent of its tier 1 
capital (or 20 percent after excluding interests in private equity 
funds). 12 CFR 225.174.
    \64\ 12 CFR 217.52-.53 and 217.153-.154.
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B. Tail-Risks of Merchant Banking Investments

    The doctrine of corporate separateness and limited liability is an 
important premise for the safe and sound conduct of merchant banking 
activities. The corporate law doctrine of veil piercing allows parent 
companies to be legally liable for the operations of their subsidiaries 
in a variety of circumstances. For example, courts may pierce the 
corporate veil when the subsidiary corporation is not treated as an 
independent entity.\65\ Factors courts consider under this analysis 
include whether the subsidiary is adequately capitalized, holds 
separate director and shareholder meetings, or keeps assets 
separate.\66\ Courts also have pierced the corporate veil where the 
parent dominated the finances, policies, and practices of the 
subsidiary so that the company is used as a mere agency or 
instrumentality of the parent.\67\ Veil piercing also has been used to 
prevent fraud or other inequitable results.\68\
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    \65\ See, e.g., United States v. Northeastern Pharm. & Chem. 
Co., 810 F.2d 726, 744 (8th Cir. 1987).
    \66\ See, e.g., United States v. Kayser-Roth Corp., 103 F. Supp. 
2d 74, 84 (DC R.I. 2000) (citing 1 William Meade Fletcher et al., 
Fletcher Cyclopedia of the Law of Private Corporations Sec.  41.30 
(perm .ed. rev. vol. 1999)).
    \67\ See, e.g., United States v. Bestfoods, 524 U.S. 51, 62 
(1998); Miller v. Dixon Indus. Corp., 513 A.2d 597, 604 (R.I. 1986).
    \68\ See, e.g., R&B Elec. Co. AMCO Constr. Co., 471 A.2d 1351, 
1354 (R.I. 1984).
---------------------------------------------------------------------------

    As discussed previously, certain physical commodities activities 
may cause catastrophic events that could subject the involved companies 
to substantial legal, environmental, and reputational risk. Other 
commercial activities may pose the same or similar types of risks in 
amounts that greatly exceed the company's equity. For example, owners 
or operators of factories that use substances that are hazardous to 
public health or the environment face significant legal, operational, 
and reputational risk.
    Merchant banking investments also pose a number of other risks to 
FHCs, including market, credit, and concentration risks. FHCs are 
required to identify and manage such risks. However, recent events 
(including the financial crisis) demonstrate that low probability 
events can pose a danger to large organizations as well as to the 
financial stability of the United States. Accordingly, the Board is 
reconsidering whether its current merchant banking regulations 
appropriately address the concerns described above.

C. Potential Board Actions Regarding Merchant Banking Investments

    The Board is considering a number of actions to address the 
potential risks associated with merchant banking investments. These 
actions could include (i) more restrictive merchant banking investment 
holding periods; (ii) additional restrictions on the routine management 
of merchant banking investments; (iii) additional capital requirements 
on some or all merchant banking investments; and (iv) enhanced 
reporting to the Federal Reserve or public disclosures regarding 
merchant banking investments.
    Question 19. Should the Board's merchant banking rules regarding 
holding periods, routine management, or prudential requirements be more 
restrictive for investments in portfolio companies that pose 
significantly greater risks to the safety and soundness of the 
investing FHC or its subsidiary depository institution(s)? How could 
the Board evaluate the types and degrees of risks posed by individual 
portfolio companies or commercial industries?
    Question 20. Do the Board's current routine management restrictions 
and risk management requirements sufficiently protect against a court 
piercing the corporate veil of a FHC's portfolio company? If not, what 
additional restrictions or requirements would better ensure against 
successful veil piercing actions?
    Question 21. What are the advantages and disadvantages of the Board 
raising capital requirements on merchant banking investments or placing 
limits on the total amount of merchant banking investments made by a 
FHC? How should the Board formulate any such capital requirements or 
limits?
    Question 22. What are the similarities and differences between the 
risks described above regarding merchant banking investments and the 
risks regarding investments made under section 4(k)(4)(I) of the BHC 
Act, which allows insurance companies to make controlling investments 
in nonfinancial companies (subject to certain restrictions)?

IV. Section 4(o) Grandfather Authority

    Certain BHCs may engage in a broad range of activities involving 
physical commodities pursuant to other provisions of the BHC Act. Under 
section 4(o) of the BHC Act, a company that was not a BHC and becomes a 
FHC after November 12, 1999, may continue to engage in activities 
related to the trading, sale, or investment in

[[Page 3336]]

commodities that were not permissible for BHCs as of September 30, 
1997, if the company was engaged in the United States in such 
activities as of September 30, 1997.\69\ This statutory provision 
limits these grandfathered activities to no more than 5 percent of the 
FHC's total consolidated assets and prohibits the FHC from cross-
marketing the services of its subsidiary depository institution(s) and 
its subsidiary(ies) engaged in activities authorized under section 
4(o).\70\ In contrast to complementary authority, this authority is 
automatic; no approval by or notice to the Board is required for a 
company to rely on this authority for its commodity activities. Only 
two FHCs currently engage in activities under these grandfather rights.
---------------------------------------------------------------------------

    \69\ 12 U.S.C. 1843(o).
    \70\ This limit permits these FHCs to hold significantly larger 
positions in commodities than those FHCs that conduct commodities 
activity under complementary authority, which limits their 
commodities holdings to 5 percent of tier 1 capital.
---------------------------------------------------------------------------

    The statutory grandfathering authority in section 4(o) of the BHC 
Act permits certain BHCs to engage in a potentially broader set of 
physical commodity activities than FHCs may conduct under the 
complementary authority discussed above, and without the limitations on 
duration and control contained in merchant banking authority. At the 
same time, grandfathered physical commodity activities may pose risks 
to safety and soundness of the grandfathered FHCs and to financial 
stability. As a result, the Board is seeking comment on whether 
additional prudential requirements could help ensure that activities 
conducted under section 4(o) of the BHC Act do not pose undue risks to 
the safety and soundness of the BHC or its subsidiary depository 
institutions, or to financial stability. The Board is also considering 
how to address the potential risks to safety and soundness and 
financial stability that may be presented by activities authorized 
under section 4(o). In addition to comment on these general questions, 
the Board invites comments on the following:
    Question 23. What are the advantages and disadvantages of the Board 
instituting additional safety and soundness, capital, liquidity, 
reporting, or disclosure requirements for BHCs engaging in activities 
or investments under section 4(o) of the BHC Act? How should the Board 
formulate such requirements?
    Question 24. Does section 4(o) of the BHC Act create competitive 
equity or other issues or authorize activities that cannot be conducted 
in a safe and sound manner by an FHC? If so, describe such issues or 
activities.

V. Conclusion

    The Board is seeking information on all aspects of physical 
commodities activities of BHCs and banks and invites comments on the 
risks and benefits of allowing FHCs to conduct these activities as well 
as ways in which risks to the safety and soundness of a FHC and its 
affiliated IDIs and to the financial system can be contained or 
limited. In addition, the Board invites comment on all of the questions 
set forth in this ANPR. The Board will carefully review all comments 
submitted and information provided as well as information regarding 
physical commodities activities derived from the Board's regulatory and 
supervisory activities. Once the Board has completed its review of this 
information, it will consider what further actions, including a 
rulemaking, regarding these activities are needed.

    By order of the Board of Governors of the Federal Reserve 
System, January 14, 2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-00996 Filed 1-17-14; 8:45 am]
BILLING CODE 6210-01-P