[Federal Register Volume 79, Number 220 (Friday, November 14, 2014)]
[Rules and Regulations]
[Pages 68095-68107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26747]
[[Page 68095]]
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FEDERAL RESERVE SYSTEM
12 CFR Part 251
[Regulation XX; Docket No. R-1489]
RIN 7100-AE 18
Concentration Limits on Large Financial Companies
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Final rule.
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SUMMARY: The Board is adopting a final rule (Regulation XX) to
implement section 622 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (amending the Bank Holding Company Act to add a new
section 14). Section 622 establishes a financial sector concentration
limit that generally prohibits a financial company from merging or
consolidating with, or acquiring, another company if the resulting
company's liabilities upon consummation would exceed 10 percent of the
aggregate liabilities of all financial companies. In addition, the
final rule establishes reporting requirements for financial companies
that do not otherwise report consolidated financial information to the
Board or other appropriate Federal banking agency to implement section
14 of the Bank Holding Company Act.
DATES: Effective January 1, 2015.
FOR FURTHER INFORMATION CONTACT: Laurie Schaffer, Associate General
Counsel, (202) 452-2272, Christine Graham, Counsel, (202) 452-3005, or
Joseph J. Carapiet, Senior Attorney, (202) 973-6957, Legal Division;
Felton C. Booker, Senior Supervisory Financial Analyst, (202) 912-4651,
or Sean Healey, Senior Financial Analyst, (202) 912-4611, Division of
Banking Supervision and Regulation; Dean Amel, Senior Economist, (202)
452-2911; Board of Governors of the Federal Reserve System, 20th and C
Streets NW., Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Overview of Comments
III. Financial Sector Concentration Limit
A. Calculating a Financial Company's Liabilities
1. U.S. Financial Companies
2. Foreign Financial Companies
B. Measuring Aggregate Financial Sector Liabilities
1. Methodology and Data
C. Applying the Concentration Limit
1. Measuring Liabilities Upon Consummation of a Covered
Acquisition
2. Transactions for Which a Notice or Application Is Not
Otherwise Required
3. Acquisitions by Nonfinancial Companies
D. Exceptions to the Concentration Limit
1. Exceptions to the Concentration Limit
a. Failing Insured Depository Institution and FDIC-Assisted
Transactions
b. De Minimis Transaction
c. Prior Written Consent of the Board
E. Other Provisions of Law
IV. Administrative Law Matters
A. Solicitation of Comments on the Use of Plain Language
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
I. Background
On May 8, 2014, the Board invited comment on a proposed rule to
implement section 622 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'') (amending the Bank Holding Company
Act to add a new section 14).\1\ Section 622 establishes a financial
sector concentration limit that prevents an insured depository
institution, a bank holding company, a foreign bank or company that is
treated as a bank holding company for purposes of the Bank Holding
Company Act, a savings and loan holding company, any other company that
controls an insured depository institution; or a nonbank financial
company designated by the Council for supervision by the Board
(``financial company'') from merging and consolidating with, acquiring
all or substantially all of the assets of, or otherwise acquiring
control of another company (``covered acquisition'') if the resulting
company's consolidated liabilities would exceed 10 percent of the
aggregate consolidated liabilities of all financial companies. The
concentration limit supplements the nationwide deposit cap in Federal
banking law by imposing an additional limit on liabilities of financial
companies.\2\
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\1\ 79 FR 27801 (May 15, 2014).
\2\ 12 U.S.C. 1467a(e)(2)(E), 1828(c), 1842(d)(2), 1843(i)(8).
The nationwide deposit cap generally prohibits the appropriate
Federal banking agency from approving an application by a bank
holding company, insured depository institution, or savings and loan
holding company to acquire an insured depository institution located
in a different home state than the acquiring company if the
acquiring company controls, or following the acquisition would
control, more than 10 percent of the total amount of deposits of
insured depository institutions in the United States.
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Section 622 provides that the concentration limit is ``subject to''
any recommendations made by the Financial Stability Oversight Council
(``Council'') that the Council determines would more effectively
implement section 622, and the Board is required to issue final
regulations implementing section 622 that ``reflect any recommendations
made by the Council.'' \3\
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\3\ See 12 U.S.C. 1852(e). As noted in the Senate report that
accompanied the Senate Banking Committee reported bill which became
the Dodd-Frank Act, ``[t]he intent [of this authority] is to have
the Council determine how to effectively implement the concentration
limit. . . .'' See S. Rep. 111-176 at 92 (Apr. 30, 2010).
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On January 18, 2011, the Council made three recommendations,\4\
including that the Board's regulations should:
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\4\ Study and Recommendations Regarding Concentration Limits on
Large Financial Companies (January 2011), available at: http://www.treasury.gov/initiatives/fsoc/studies-reports/Documents/Study%20on%20Concentration%20Limits%20on%20Large%20Firms%2001-17-11.pdf (Council study). See also 76 FR 6756 (Feb. 8, 2011). The
Council noted that it would review and, if appropriate, revise these
recommendations in light of the comments it received. As of the date
of this final rule, the Council had not revised any recommendation
made regarding the concentration limit and, as such, the final rule
reflects the recommendations set forth in the Council's last
publication in the Federal Register.
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Measure liabilities of financial companies not subject to
consolidated risk-based capital rules by using U.S. generally accepted
accounting principles (GAAP) or other applicable accounting standards,
use a two-year average in calculating aggregate financial
sector liabilities, and provide that the Board publish annually by July
1 the current aggregate financial sector liabilities, and
extend the ``failing bank exception'' to the acquisition
of any type of insured depository institution in default or in danger
of default, rather than only to the acquisition of banks in default or
danger of default.
Section 622 of the Dodd-Frank Act directs the Council to complete a
study of the extent to which the statutory concentration limit would
affect financial stability, moral hazard in the financial system, the
efficiency and competitiveness of U.S. financial firms and financial
markets, and the cost and availability of credit and other financial
services to households and businesses in the United States.\5\ In the
Council study, the Council expressed the view that the concentration
limit would have a positive impact on U.S. financial stability by
reducing the systemic risks created by increased financial sector
concentration arising from covered acquisitions involving the largest
U.S. financial companies.\6\ It concluded that the concentration limit
was likely to have little or no effect on moral hazard.\7\ With respect
to the impact of the concentration limit on competitiveness, the
Council expected the effect to be
[[Page 68096]]
positive generally, but expressed concern that the limit introduces the
potential for disparate treatment of covered acquisitions between the
largest U.S. and foreign firms, depending on which firm is the acquirer
or the target.\8\ The Council found that the concentration limit is
unlikely to have a significant effect on the cost and availability of
credit and other financial services.\9\
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\5\ See 12 U.S.C. 1852(e)(1).
\6\ Council study, p. 4.
\7\ Id., p. 10.
\8\ Id., p. 11. The Council also noted that the differences in
treatment between U.S. and foreign firms could increase the degree
to which the largest firms operating in the U.S. financial sector
are foreign-owned, and recommended that the Board continue to
monitor and report on the effect of the concentration limit on the
ability of U.S. firms to compete with foreign banking organizations.
The Council stated that it would make a recommendation to Congress
to address adverse competitive dynamics if the Council were to later
determine that there are any significant negative effects of the
concentration limit because of the disparate treatment of U.S. and
foreign firms. Id., p. 12.
\9\ Id., p. 13.
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Section 622 authorizes the Board to define terms, as necessary, and
to issue interpretations or guidance regarding application of the
concentration limit to an individual financial company or to financial
companies in general.\10\
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\10\ 12 U.S.C. 1852(d).
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II. Overview of Comments
The Board received 10 comments on the proposed rule from financial
trade associations, law firms, policy institutions, and individuals.
While commenters generally expressed support for the proposed rule,
some commenters recommended revisions to provisions of the proposed
rule. For instance, one commenter suggested that the Board measure
liabilities for purposes of the initial period between July 1, 2015,
and June 30, 2016, using data as of December 31, 2014. One commenter
requested that the Board publish more specific details of the
methodology used for calculating financial sector liabilities.
Commenters provided views on whether certain transactions should be
prohibited once a financial company's liabilities exceeded the
concentration limit and the appropriate level for a de minimis
exception. In addition, commenters suggested that the Board not
finalize either the proposed prior notice requirement applicable to
financial companies with liabilities that are close to the limit or the
proposed reporting requirement applicable to financial companies that
do not otherwise report consolidated liabilities to an applicable
Federal banking agency.
As discussed further in the preamble, the Board modified the final
rule as follows in response to these comments:
Provided that financial sector liabilities will be
calculated as of December 31, 2014, for purposes of the period
beginning July 1, 2015 and ending June 30, 2016, and the two-year
average will be adopted for each year thereafter;
Removed the prior notice requirement for acquisitions by
financial companies with total consolidated liabilities equal to or
greater than 8 percent of aggregate financial sector liabilities;
Provided prior consent for a covered acquisition that
would result in an increase in the liabilities of the financial company
that does not exceed $100 million, when aggregated with all other
covered acquisitions by the financial company during the twelve months
preceding the consummation of the transaction and set forth a process
and standard of review for de minimis transactions; and
Removed the exception for merchant banking investments and
added an exception for securitization transactions to the definition of
``covered acquisition.''
Provided more specific details of the methodology used for
calculating financial sector liabilities.
These changes, as well as the Board's other responses to the
comments received, are discussed in greater detail below.
III. Financial Sector Concentration Limit
Under section 622 of the Dodd-Frank Act, a financial company is
prohibited from consummating a covered acquisition if the ratio of the
resulting financial company's liabilities to the aggregate consolidated
liabilities of all financial companies exceeds 10 percent. Consistent
with section 622, the proposed rule defined a ``financial company'' as
a company that is an insured depository institution; a bank holding
company, a foreign bank or company that is treated as a bank holding
company for purposes of the Bank Holding Company Act, a savings and
loan holding company, any other company that controls an insured
depository institution, and a nonbank financial company designated by
the Council for supervision by the Board. The proposed rule defined an
insured depository institution as that term is defined in section
3(c)(2) of the Federal Deposit Insurance Act. Companies that are not
affiliated with an insured depository institution, such as stand-alone
broker-dealers or insurance companies, are not subject to the
concentration limit unless they have been designated by the Council for
supervision by the Board.
Commenters recommended that the Board modify the proposed
definition of ``financial company'' to exclude insured depository
institutions that are limited purpose savings associations and the
holding companies thereof. Another commenter suggested that companies
that control insured depository institutions but that are not subject
to risk-based capital requirements and that do not engage in bank-like
activities should not be included in the definition of a ``financial
company'' for purposes of section 622. Section 622 of the Dodd-Frank
Act defines a ``financial company'' to include an ``insured depository
institution'' and ``a company that controls an insured depository
institution.'' Because section 622 amends the Bank Holding Company Act,
the terms ``insured depository institution'' and ``control'' are
defined in section 2 of the Bank Holding Company Act.\11\ To the extent
a company is or controls an insured depository institution, it is
subject to the concentration limit by statute. Accordingly, the final
rule preserves the definition of ``insured depository institution,''
consistent with section 622.
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\11\ Specifically, section 2(n) of the Bank Holding Company Act
defines an ``insured depository institution'' with reference to
section 3 of the Federal Deposit Insurance Act which includes ``any
savings associations the deposits of which are insured'' by the
FDIC. 12 U.S.C. 1841(n). Section 2(a)(2) of the Bank Holding Company
Act provides that a company would ``control'' an insured depository
institution if the company (i) directly or indirectly, or acting
through one or more other persons, owned, controlled, or had power
to vote 25 percent or more of any class of voting securities of the
company; (ii) controlled in any manner the election of a majority of
the directors or trustees of the company; or (iii) directly or
indirectly exercised a controlling influence over the management or
policies of the company. 12 U.S.C. 1841(a)(2).
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A. Calculating a Financial Company's Liabilities
1. U.S. Financial Companies
Section 622 measures ``liabilities'' of a financial company as
total risk-weighted assets determined under the risk-based capital
rules applicable to bank holding companies minus regulatory capital as
calculated under the same rules.\12\ Currently, bank holding companies
and insured depository institutions are the only classes of financial
companies subject to these risk-based capital rules. For financial
companies not subject to consolidated risk-based capital rules (such as
nonbank companies that control savings associations and industrial loan
companies), the Council
[[Page 68097]]
recommended that the Board measure liabilities using GAAP or other
applicable accounting standards.\13\
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\12\ 12 U.S.C. 1852(a)(3).
\13\ Council study, p. 6.
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Pursuant to the statutory direction to adopt the Council's
recommendation, the proposed rule would have required a U.S. financial
company that is not subject to consolidated risk-based capital rules to
calculate its liabilities in accordance with applicable accounting
standards. ``Applicable accounting standards'' would have been defined
as GAAP, or such other accounting standard or method of estimation that
the Board determines is appropriate.\14\
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\14\ If a company does not calculate its total consolidated
assets or liabilities under GAAP for any regulatory purpose
(including compliance with applicable securities laws), the Board
may, in its discretion and subject to Board review and adjustment,
permit the company to provide estimated total consolidated
liabilities on an annual basis using this accounting standard or
method of estimation other than GAAP.
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Currently, U.S. savings and loan holding companies, nonbank
financial companies supervised by the Board, bank holding companies
with total consolidated assets of less than $500 million, and U.S.
depository institution holding companies that are not bank holding
companies or savings and loan holding companies are not subject to
consolidated risk-based capital rules, and thus will calculate their
liabilities in accordance with applicable accounting standards. Savings
and loan holding companies (other than those that are substantially
engaged in insurance or commercial activities) will become subject to
the risk-based capital rules beginning in 2015 and will be able to
calculate their liabilities for purposes of section 622 using the rules
applicable to bank holding companies, described below.\15\ The Board is
in the process of applying risk-based capital rules to nonbank
financial companies that are currently supervised by the Board.
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\15\ The Board is developing capital rules for savings and loan
holding companies that are insurance companies, have subsidiaries
engaged in insurance underwriting, or are substantially engaged in
commercial activities.
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Commenters were generally supportive of the proposed rule's
calculation methodology. One commenter noted that certain mutual and
fraternal insurance companies do not prepare consolidated GAAP
financial statements for any regulatory purpose and, instead, prepare
financial statements in accordance with statutory accounting principles
(``SAP''), as required by state insurance law. This commenter requested
that the Board clarify that SAP would automatically meet the definition
of ``applicable accounting standards,'' and that SAP-based calculations
of consolidated liabilities would be deemed sufficient for purposes of
section 622. Under the financial rule, a U.S. financial company that
files financial statements only in accordance with SAP and does not
report consolidated financial statements under GAAP would be permitted
to file an estimate of its consolidated liabilities. However, this
estimation is subject to the Board's review and adjustment.
One commenter suggested that certain liabilities such as commercial
paper of commercial and industrial companies, broker-dealers' customer
free credit balances, managed fund assets, and funds borrowed to
manufacture automobiles should be excluded from the calculation of
liabilities because in the commenter's view, these liabilities do not
affect U.S. financial stability. Excluding these types of liabilities
from the calculation would run counter to the Council's recommendation
to use liabilities as reported under GAAP or applicable accounting
standards. The Council, in making this recommendation, noted that for
the purpose of transparency, the liabilities calculation should use
financial information that is already publicly disclosed and that using
such information as reported would avoid the need to make a series of
assumptions that could undermine the integrity and transparency of the
calculation.\16\ The commenter's suggestion of excluding certain types
of liabilities would require adjustments to the publicly disclosed
financial figures and involve assumptions that could undermine the
transparency of the calculation. Accordingly, the final rule adopts the
proposed methodology without change.
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\16\ Council study, p. 20.
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Section 622 defines the term ``liabilities'' for nonbank financial
companies supervised by the Board to mean ``assets of the company as
the Board shall specify by rule, in order to provide for consistent and
equitable treatment of such companies.'' \17\ The final rule provides
for consistent and equitable treatment of nonbank financial companies
supervised by the Board by permitting each nonbank financial company to
calculate its liabilities using applicable accounting standards until
such companies are subject to risk-based capital requirements.
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\17\ See section 622 of the Dodd-Frank Act; 12 U.S.C.
1852(a)(3)(C).
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U.S. Financial Companies Subject to Consolidated Risk-Based Capital
Rules
The proposed rule would have calculated liabilities of a U.S.
financial company subject to consolidated risk-based capital rules--
currently, bank holding companies and insured depository institutions--
as the difference between its risk-weighted assets (as adjusted upward
to reflect amounts that are deducted from regulatory capital elements
pursuant to the agencies' risk-based capital rules) and its total
regulatory capital, as calculated under the applicable risk-based
capital rules.\18\ As discussed in the preamble to the proposed rule, a
bank holding company or insured depository institution will calculate
risk-weighted assets for purposes of the concentration limit using the
same methodology it uses to calculate risk-weighted assets under the
relevant risk-based capital rules.\19\
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\18\ The final rule refers to these amounts as ``deducted from
regulatory capital.'' See 12 CFR 3.22 (OCC); 12 CFR 217.22 (Board);
and 12 CFR 324.22 (FDIC).
\19\ The agencies' risk-based capital rules require an advanced
approaches banking organization (generally, a banking organization
with $250 billion or more in total consolidated assets or $10
billion or more in total on-balance sheet foreign exposure or a
subsidiary of such a banking organization) that has successfully
completed its parallel run to calculate each of its risk-based
capital ratios using the standardized approach and the advanced
approaches, and directs the banking organization to use the lower of
each ratio as its governing ratio. See 12 CFR 3.10 (OCC); 12 CFR
217.10 (Board); and 12 CFR 324.10 (FDIC).
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Section 622 provides that risk-weighted assets of a financial
company be ``adjusted to reflect exposures that are deducted from
regulatory capital.'' \20\ To reflect this adjustment, the proposed
rule would define liabilities of a U.S. financial company subject to
consolidated risk-based capital rules as: (i) The financial company's
risk-weighted assets, plus (ii) the amount of assets deducted from the
financial company's regulatory capital multiplied by an institution-
specific risk-weight, minus (iii) the financial company's total
regulatory capital. The proposed institution-specific risk-weight
applied to deducted exposures was equal to the inverse of the
institution's total capital ratio minus one.\21\ This approach
[[Page 68098]]
effectively adds back a risk-weighted amount for assets that have been
deducted from capital (which are generally considered risky) without
penalizing a firm for having a high amount of capital. Commenters were
generally supportive of the proposed methodology, and the final rule
adopts this methodology as proposed.
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\20\ See 12 U.S.C. 1852(a)(3)(A)(i) and (B)(i). Under the
Federal banking agencies' risk-based capital rules, bank holding
companies and insured depository institutions are required to deduct
fully certain assets from regulatory capital, such as goodwill,
certain mortgage servicing rights, deferred tax assets, and other
intangibles. See 12 CFR 3.22 (OCC); 12 CFR 217.22 (Board); and 12
CFR 324.22 (FDIC).
\21\ One is subtracted from the inverse of the total capital
ratio to account for the fact that amounts deducted from regulatory
capital are not added back into regulatory capital under section
622. To illustrate this method, if an institution's total capital
ratio were equal to 8 percent (the regulatory minimum), the
institution-specific factor would equal \1/.08\ - 1, or 12.5 - 1, or
11.5. If an institution's total capital ratio is equal to 16 percent
(twice the regulatory minimum), the institution-specific factor
would equal \1/.16\ - 1, or 6.25 - 1, or 5.25.
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2. Foreign Financial Companies
Section 622 provides that the liabilities of a ``foreign financial
company'' equal the risk-weighted assets and regulatory capital
attributable to the company's ``U.S. operations.'' A ``foreign
financial company'' includes a foreign banking organization that is a
bank holding company (i.e., owns a U.S. bank) or is treated as a bank
holding company (i.e., operates a U.S. branch or agency), a foreign
savings and loan holding company, a foreign company that controls a
U.S. insured depository institutions but is not treated as a bank
holding company (such as a company that controls an industrial loan
company or limited-purpose credit card bank), and a foreign nonbank
financial company designated by the Council for supervision by the
Board. The final rule would define ``U.S. operations'' of a foreign
financial company as the consolidated liabilities of all U.S. branches,
agencies, and subsidiaries (including depository institutions and non-
depository institutions) domiciled in the United States (including any
lower-tier subsidiary of the U.S. subsidiary, whether domestic or
foreign).
Because the U.S. operations of foreign financial companies may
include both entities that are subject to risk-weighted asset
calculation requirements and entities that are not, the final rule (as
did the proposed rule) computes U.S. liabilities using the risk-
weighted asset methodology for subsidiaries subject to risk-based
capital rules, and applicable accounting standards for all branches,
agencies, and nonbank subsidiaries. For foreign banking organizations,
the final rule computes liabilities for U.S. branches, agencies, and
nonbank subsidiaries using ``assets'' under GAAP or applicable
accounting standards because these operations are not required to hold
regulatory capital separate from their parent.
The final rule also requires a foreign banking organization to
adjust U.S. liabilities to reflect transactions with affiliates.
Specifically, the measure of liabilities must include any net amounts
that the branch, agency, or U.S. subsidiary has lent to the foreign
bank's non-U.S. offices or non-U.S. affiliates (other than those non-
U.S. affiliates owned by a U.S. subsidiary of the foreign banking
organization) because these balances represent exposures of the U.S.
branch, agency, or U.S. subsidiary to the non-U.S. affiliates. The
amount of GAAP assets excludes amounts corresponding to balances and
transactions between and among its U.S. branches, agencies, and U.S.
subsidiaries (including any non-U.S. lower-tier subsidiaries of such
U.S. subsidiaries) to the extent such items are not already eliminated
in consolidation, to avoid double counting of assets of U.S.
operations.\22\
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\22\ 79 FR 17240 (March 27, 2014).
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Under the enhanced prudential standards rule adopted by the Board
in February 2014, foreign banking organizations with $50 billion or
more in global total consolidated assets and $50 billion or more in
total non-branch U.S. assets must organize their U.S. subsidiaries
under a single top-tier U.S. intermediate holding company by July 1,
2016. A U.S. intermediate holding company will be subject to the same
risk-based capital requirements applicable to U.S. bank holding
companies, and will calculate its liabilities for purposes of the final
rule using the risk-weighted assets approach.
The U.S. assets of a foreign financial company that is not a
foreign banking organization are calculated in a similar manner to the
method described for foreign banking organizations, but the liabilities
of a U.S. subsidiary not subject to risk-based capital rules are
calculated based on the U.S. subsidiary's liabilities under applicable
accounting standards, rather than its assets. In addition, the foreign
financial company is permitted, but not required, to adjust the measure
of liabilities for transactions with affiliates.
As noted above, section 622 requires the Board to establish the
methodology for calculating the liabilities of a financial company that
is an insurance company or other nonbank financial company supervised
by the Board in order to provide for consistent and equitable treatment
of such companies. For the reasons stated above, the final rule
provides for consistent and equitable treatment of nonbank financial
companies supervised by the Board by permitting each nonbank financial
company to calculate its liabilities using applicable accounting
standards.
B. Measuring Aggregate Financial Sector Liabilities
1. Methodology and Data
Section 622 measures the total liabilities of each covered
financial company against the aggregate liabilities of all financial
companies in applying the 10 percent concentration limit. The aggregate
consolidated liabilities of all financial companies are equal to the
sum of individual financial company liabilities as calculated for each
financial company using the applicable methodology, as described above.
Consistent with the Council's recommendation, the proposed rule
would have measured aggregate financial sector liabilities for a given
year as the average of the financial sector liabilities as of December
31 of each of the preceding two calendar years. In order to calculate
the two year period for the initial period between July 1, 2015, and
June 30, 2016, the proposed rule would have required certain companies
(e.g., foreign banking organizations) who are not currently subject to
the reporting requirements of a Federal banking agency to calculate and
report their liabilities as of December 21, 2013. One commenter
suggested that the Board measure liabilities for purposes of the
initial period between July 1, 2015, and June 30, 2016, using only data
for one year (which would be liabilities as of December 31, 2014) and
not require all financial companies to report their liabilities as of
December 31, 2013. Foreign banking organizations were not otherwise
required to report their U.S. assets as of December 31, 2013, and may
not have data available to report their U.S. liabilities as of this
date.
To relieve burden on financial companies that do not currently
report to a Federal banking agency, the final rule incorporates the
commenters' recommendation to use a one-year initial period. As such,
pursuant to the final rule, the Board will calculated the denominator
using the aggregate financial sector liabilities as of December 31,
2014 for the initial period between July 1, 2015, and June 30, 2016.
For all subsequent periods, the Board will use the two-year average
recommended by the Council. As discussed in further detail below, the
final rule includes a new reporting requirement for financial companies
that have not reported consolidated financial information to the Board
or other appropriate Federal banking agency.
One commenter suggested that the Board reserve authority to adjust
the calculation methodology in the event
[[Page 68099]]
that future regulatory changes have destabilizing or distortive
effects. The Board will consider adjusting the calculation methodology,
if necessary because of future regulatory changes, within the limits of
the law.
The preamble to the proposed rule noted that, to the maximum extent
possible, the Board will calculate aggregate financial sector
liabilities using information already reported by financial companies.
For instance, bank holding companies report their risk-weighted assets,
regulatory deductions, and total capital on the Consolidated Financial
Statements for Holding Companies (FR Y-9C), and the Board will use this
information to calculate liabilities of these firms. For bank holding
companies with total consolidated assets of less than $500 million, the
Board will measure consolidated liabilities by taking the difference
between total consolidated assets minus the equity capital of such
company on a consolidated basis, which amounts are reported on the
Parent Company Only Financial Statements for Small Holding Companies
(FR Y-9SP). For foreign banking organizations, the Board will use
information reported on the Capital and Asset Report for Foreign
Banking Organizations (FR Y-7Q) to the extent possible. In 2013, the
Board amended the FR Y-7Q to require foreign banking organizations to
report a new item entitled ``Total combined assets of U.S. operations,
net of intercompany balances and transactions between U.S. domiciled
affiliates, branches, and agencies.'' Foreign banking organizations
began reporting this item as of March 31, 2014.\23\
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\23\ Some respondents will not report the new item on the FR Y-
7Q until December 2014.
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In order to collect data necessary to implement the concentration
limit, the proposed rule would have established a new reporting
requirement for financial companies that have not historically reported
consolidated financial information to the Board or other appropriate
Federal banking agency.\24\ The new reporting requirement, the
Financial Company Report of Consolidated Liabilities, would have
required financial companies domiciled in the United States to report
their total consolidated liabilities under applicable accounting
standards and would require financial companies domiciled in a country
other than the United States to report the sum of the total
consolidated liabilities of each top-tier U.S. subsidiary of the
financial company, as determined under applicable accounting
standards.\25\ The report is referred to as the FR XX-1 report because
it is being adopted pursuant to Regulation XX.\26\
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\24\ These institutions include savings and loan holding
companies where the top-tier holding company is an insurance company
that only prepares financial statements in accordance with SAP,
holding companies of industrial loan companies, limited-purpose
credit card banks, and limited-purpose trust banks, and currently,
nonbank financial companies supervised by the Board.
\25\ A parent holding company would have been permitted, but not
required, to reduce total liabilities by amounts corresponding to
balances and transactions between U.S. subsidiaries of the parent
holding company to the extent such items would not already be
eliminated in consolidation.
\26\ The proposal referred to this report as the FR Y-17 report.
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One commenter argued that requiring financial companies that are
not state member banks, bank holding companies, or subsidiaries of bank
holding companies to submit FR XX-1 exceeds the Board's authority. This
commenter also argued that requiring financial companies to submit the
FR XX-1 imposes a disproportionate burden on financial companies that
do not report liabilities to the Board, the estimated burden of 1 hour
per respondent was too low, and that the reporting form should have
been published in the Federal Register.
Section 622 provides that ``the Board shall issue regulations
implementing this section in accordance with the recommendations of the
Council.'' \27\ The proposed information collection is necessary for
the Board to calculate aggregate liabilities and is consistent with the
Board's statutory authority. With regard to the commenter's assertion
that the reporting form is unduly burdensome, the proposed reporting
form collects a single line item and collects the minimum information
necessary to calculate an institution's liabilities. However, after
taking into account the comment, the Board has adjusted the burden to
be 5 hours per respondent for the first year, and 2 hours per
respondent thereafter. The higher initial burden is intended to reflect
time needed to educate staff, develop an approval process for the
submitted report, and, for firms that seek to rely on accounting
standards other than GAAP, develop a method of estimation. After this
process is established, the aggregate burden to complete this form is
expected to be 2 hours per respondent per year. Finally, the preamble
to the proposed rule described the FR XX-1 in detail, and the form was
available on the Board's Web site for comment. The Board is adopting
the FR XX-1 as proposed. The Board will begin collecting the FR XX-1 as
of December 31, 2014, and the submission date is 90 calendar days after
the December 31 as-of-date.
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\27\ See 12 U.S.C. 1852(a)(3)(C).
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As discussed in the preamble to the proposed rule, information
contained in a FR XX-1 filing generally will be made available to the
public upon request. The Board proposed allowing a reporting holding
company to request confidential treatment for the report if the holding
company believed that disclosure of specific commercial or financial
information in the report would likely result in substantial harm to
its competitive position or that disclosure of the submitted
information would result in unwarranted invasion of personal privacy.
One commenter requested either that all reported information be treated
as confidential information or that financial companies be permitted to
make a one-time election for confidential treatment.
The Freedom of Information Act, 5 U.S.C. Sec. 552, (FOIA) requires
the Board to release information to the public unless a specific
exemption applies.\28\ Reporting companies may request confidentiality
but such requests must contain detailed justifications corresponding to
the claimed FOIA exemption. In such cases, the burden is on the
reporting company to demonstrate that the information falls within one
of the exemptions under the FOIA. Requests for confidentiality must be
evaluated on a case-by-case basis. If a reporting company requests
confidential treatment, the Board will review the request to determine
if the company has met the burden of demonstrating a particular FOIA
exemption applies.
---------------------------------------------------------------------------
\28\ 5 U.S.C. Sec. 552.
---------------------------------------------------------------------------
One commenter requested that the Board provide additional detail on
the methodology it uses to calculate aggregate financial sector
liabilities for U.S. bank holding companies and foreign banking
organizations. For U.S. bank holding companies, insured depository
institutions, and savings and loan holding companies, the Board intends
to rely on total risk-weighted assets, as reported on schedule HC-R,
Regulatory Capital, of the FR Y-9C, and adjust that amount for amounts
deducted from regulatory capital, as reported on schedule HC-R,
multiplied by the institution-specific risk weight. In calculating the
amounts deducted from regulatory capital, the Board will sum the total
adjustments and deductions for the categories of regulatory capital
(e.g., common equity tier 1 capital and additional tier 1 capital). For
foreign banking organizations, the Board generally intends to use the
item on the FR Y-7Q
[[Page 68100]]
entitled ``Total combined assets of U.S. operations, net of
intercompany balances and transactions between U.S. domiciled
affiliates, branches, and agencies'' and, to the extent that a foreign
banking organization has a U.S. bank holding company subsidiary,
subtract assets attributable to the U.S. bank holding company and
replace that amount with liabilities attributable to the U.S. bank
holding company (calculated in accordance with the risk-weighted asset
methodology, using data from the FR Y-9C). To the extent that the Board
uses different regulatory reporting sources to calculate liabilities,
it generally expects to describe the sources in connection with
publication of the financial sector liabilities figure.
One commenter asked that the Board set forth a specific schedule
for a review and ex post evaluation of the final rule. The Board
generally reviews its rules every five years in order to update
requirements, reduce unnecessary burden, and streamline regulatory
requirements based on the Board's experience in implementing a rule. As
such, the Board does not believe that a separate schedule for a review
and ex post evaluation of the final rule is necessary.
C. Applying the Concentration Limit
Section 622 prohibits a financial company from consummating a
covered acquisition if the liabilities of the resulting financial
company upon consummation of the covered acquisition would exceed 10
percent of aggregate financial sector liabilities.
1. Measuring Liabilities Upon Consummation of a Covered Acquisition
The proposed rule set forth a method for calculating liabilities
upon consummation of an acquisition subject to the concentration limit
(``covered acquisition''). As set forth in the proposed rule, where a
covered acquisition would involve a foreign acquirer and a foreign
target, the final rule would provide that liabilities immediately upon
consummation of the covered acquisition would equal the total
consolidated liabilities of the U.S. operations of the resulting
foreign financial company, but would not include liabilities of the
foreign operations of either the acquiring foreign bank or the target
foreign firm, except to the extent these foreign assets are controlled
by a U.S. subsidiary or branch of either foreign entity. Also in the
case of a cross-border covered acquisition involving a U.S. company,
the proposal rule would have included the liabilities of both the U.S.
and foreign subsidiaries of the U.S. company, regardless of whether the
U.S. company is the acquirer or target. The final rule adopts the
proposed methodology without change.
2. Transactions for Which a Notice or Application Is Not Otherwise
Required
Under the proposed rule, prior to consummating a covered
acquisition, a financial company that was not otherwise required to
file a prior notice or application with the Board would have been
required to provide written notice to the Board if the company's
liabilities immediately after consummation of the transaction would be
above 8 percent of the aggregate financial sector liabilities and the
covered acquisition would increase the liabilities of the resulting
financial company by more than $2 billion, when aggregated with all
other covered acquisitions during the twelve months preceding the
consummation of the transaction. This provision was proposed to provide
notification to the Board regarding covered financial firms that were
nearing the concentration limit.
Commenters suggested that the Board not adopt this requirement
because financial companies are well-placed to monitor their own
compliance with the limit and will have incentives to consult with the
Board should a transaction put the company at risk of exceeding the
limit, given that the statute prohibits transactions that exceed the
limit. One commenter argued that the imposition of a prior notice
requirement would add burden and create administrative difficulties for
financial companies without a corresponding benefit.
In light of commenters' views, the final rule does not include a
prior notice requirement. If a company consummates a covered
acquisition in violation of the limit, the company may be required to
divest any company or assets acquired in violation of the limit. In
order to ensure compliance with the concentration limit, a financial
company should have policies and procedures in place to monitor its
compliance with section 622. In addition, the Board will consider
compliance with the concentration limit in reviewing proposed
acquisitions or mergers under other laws such as the Bank Holding
Company Act. If the Board receives a notice or application related to a
covered acquisition, the Board will consider whether the transaction is
permissible under section 622.
3. Acquisitions by Nonfinancial Companies
Under the proposed rule, a covered acquisition between a financial
company and a company that is not a financial company under section
622, including those in which the nonfinancial company is the acquirer,
and becomes a financial company as a result of the transaction, would
be covered by the limit. The final rule adopts this approach
substantively as proposed.
D. Exceptions to the Concentration Limit
The statute exempts three types of acquisitions from the
concentration limit: (i) An acquisition of a bank in default or in
danger of default; (ii) an acquisition with respect to which the FDIC
provides assistance under section 13(c) of the Federal Deposit
Insurance Act; and (iii) an acquisition that would result only in a de
minimis increase in the liabilities of the financial company.\29\ Under
the statute, each of these types of transactions requires prior written
consent of the Board.\30\
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\29\ See 12 U.S.C. 1852(c).
\30\ Id.
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1. Exceptions to the Concentration Limit
a. Failing Insured Depository Institution and FDIC-Assisted
Transactions
The proposed rule provided that, with prior written consent of the
Board, the concentration limit would not apply to the acquisition of an
insured depository institution in default or in danger of default, as
determined by the appropriate Federal banking agency of the insured
depository institution, in consultation with the Board. The proposed
rule was consistent with the Council's recommendations to expand the
``failing bank exception'' to apply to the acquisition of any type of
insured depository institution in default or in danger of default.\31\
This would include savings associations and industrial loan
[[Page 68101]]
companies, for example. Similarly, the proposed rule would have
provided that, with prior written consent of the Board, the
concentration limit would not apply to a covered acquisition with
respect to which assistance is provided by the Federal Deposit
Insurance Corporation under section 13(c) of the Federal Deposit
Insurance Act (12 U.S.C. 1823(c)). The final rule adopts these proposed
exceptions without change.
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\31\ The Council noted that section 622 does not restrict an
acquisition of a ``bank'' (as that term is defined in the Bank
Holding Company Act) in default or in danger of default, subject to
the prior written consent of the Board; however, this exception
applies by its terms to a failing ``bank,'' rather than all types of
failing insured depository institutions, including savings
associations, industrial loan companies, and limited-purpose credit
card banks. According to the Council, ``the important policy that
supports the exception for the acquisition of failing banks--namely,
the strong public interest in limiting the costs to the Deposit
Insurance Fund that could arise if a bank were to fail, which might
be partly or wholly limited through acquisition of a failing bank by
another firm--applies equally to insured depository institutions
generally, and is not limited to ``banks'' as that term is defined
in the [Bank Holding Company Act].''
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b. De Minimis Transaction
The proposed rule would have defined a de minimis increase for
purposes of the concentration limit as an increase in the total
consolidated liabilities of a financial company that does not exceed $2
billion, when aggregated with all other acquisitions by the company
under the de minimis authority during the twelve months preceding the
date of the transaction. One commenter recommended that the Board raise
the amount from $2 billion to $5 billion and another urged the Board to
undertake further empirical analysis to determine the appropriate
limit.
The final rule maintains the $2 billion threshold. As the Council
noted, section 622 is intended, along with a number of other provisions
in the Dodd-Frank Act, to promote financial stability.\32\ Section 604
of the Dodd-Frank Act is another provision that, like section 622, is
designed to promote financial stability. It amended sections 3 and 4 of
the Bank Holding Company Act to require the Board to evaluate the risks
to the stability of the U.S. banking or financial system in reviewing
proposed acquisitions of banks and nonbanks by bank holding
companies.\33\ In approving the acquisition by Capital One Financial
Corporation of ING Bank, fsb, the Board offered three examples of
transactions it may presume, absent other evidence, not to present
financial stability concerns: (1) An acquisition of less than $2
billion of assets, (2) a transaction resulting in a firm with less than
$25 billion in total assets, or (3) a corporate reorganization.
Similarly, in the Board's view, a $2 billion threshold is appropriate
as a de minimis threshold in this rule because it would only permit
those covered acquisitions that would not likely, on their own,
increase risk to financial stability posed by concentration in the
financial sector.\34\
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\32\ Council study, p. 3.
\33\ 604(d) and (e) of the Dodd-Frank Act; 12 U.S.C. 1842(c)(7)
and 1843(j)(2)(A).
\34\ See, Capital One Financial Corporation, FRB Order No. 2012-
2 (Feb. 14, 2012).
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c. Prior Written Consent of the Board
Under the proposed rule, a financial company that sought to
consummate a covered acquisition that qualifies for an exception
described above must obtain the prior written consent of the Board, in
addition to any other regulatory notices or approvals otherwise
required for the covered acquisition. One commenter recommended that
the final rule set forth an explicit standard under which the Board
would review a proposed transaction--specifically, whether the
consummation of the proposed acquisition would create a level of
concentration in the financial sector that would pose a threat to
financial stability. In addition, the commenter requested that the
Board specify the process under which it will review a de minimis
acquisition.
In response to comments, the final rule provides additional detail
on the process and standard under which the Board will review a de
minimis acquisition. Under the final rule, a financial company that
seeks to make de minimis covered acquisition must file a request with
the Board prior to consummation of the proposed transaction that
describes the covered acquisition, the projected increase in the
company's liabilities resulting from the acquisition, the aggregate
increase in the company's liabilities from acquisitions during the
twelve months preceding the projected date of the acquisition, and any
additional information requested by the Board. The Board will act on
such a request within 90 calendar days after receipt of the complete
request, unless that time period is extended by the Board. To the
extent that a proposed transaction requires approval by, or prior
notice to, the Board under another statutory provision (for example,
under the Bank Holding Company Act) the Board intends to act on the
request for prior written consent under section 622 concurrently with
its action on the request for approval or notice under the other
statute.
In reviewing a proposed de minimis transaction, the Board will
consider whether the consummation of the covered acquisition could pose
a threat to financial stability. As noted by the Council in its study
on the concentration limit, this concentration limit is intended, along
with a number of other provisions in the Dodd-Frank Act, to promote
financial stability and address the perception that large financial
institutions are ``too big to fail.'' \35\ The final rule's standard
for reviewing exceptions to the concentration limit is intended to
further this statutory intent. Proposed de minimis transactions may
also require a separate consideration under another statute and may be
subject to a denial or objection pursuant to the standards under that
statute.
---------------------------------------------------------------------------
\35\ Council study, p. 3.
---------------------------------------------------------------------------
Commenters requested that the Board provide its general consent for
transactions for which the consideration paid is $100 million or less,
and for which the associated increase in liabilities is within the $2
billion de minimis cap, with only an after-the-fact notice.
Transactions that, in aggregate, result in an increase in the total
consolidated liabilities of a financial company of $100 million or less
are unlikely to affect materially the concentration of the financial
sector. As part of the final rule, the Board is providing general
consent for transactions that result in an increase in the total
consolidated liabilities of a financial company of less than $100
million, when aggregated with all other acquisitions by the company
under this general consent authority during the twelve months preceding
the date of the transaction. A company must provide a notice to the
Board no later than 10 days after consummating the covered acquisition
that describes the covered acquisition, the increase in the company's
liabilities resulting from the acquisition, and the aggregate increase
in the company's liabilities from acquisitions during the twelve months
preceding the date of the acquisition.
2. Organic Growth
Section 622 and the implementing final rule limit growth by the
largest, most interconnected financial companies through acquisitions
or mergers. The proposed rule would have identified certain activities
that would not be treated as a covered acquisition, including acquiring
shares in the ordinary course of collecting a debt previously
contracted (DPC), in a fiduciary capacity, in connection with
underwriting or market making, or merchant or investment banking or
insurance company investment activity. The proposed rule would have
also clarified that internal corporate reorganizations were not
``covered acquisitions'' for purposes of section 622.
One commenter requested that the Board reconsider the proposed
exceptions for merchant banking investments and the acquisition of DPC
assets. The commenter noted that Congress enumerated specific
exceptions from the statutory concentration limit, and chose not to
provide an exception for merchant
[[Page 68102]]
banking investments or acquisition of DPC assets. In this commenter's
view, Congress intended to enact a comprehensive limitation on growth
through acquisition, and the proposed exceptions for merchant banking
investments and acquisition of DPC assets would create a loophole that
could undermine the intent of the statute. The commenter expressed the
view that merchant banking investments and ownership of DPC assets
could lead to effective ownership and control of another company.
In the alternative, the commenter recommended that the Board
replace the exceptions for the acquisition of DPC assets and merchant
banking investments with an actual specified time period or definition
of control, which would exempt a brief ownership stake from triggering
section 622's limitations on acquisitions.\36\
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\36\ Specifically, the commenter requested that ``control'' be
defined as either majority ownership or substantial influence over
the business decisions of the company. In the alternative, the
commenter suggests that the Board exempt merchant banking
investments and acquisition of DPC assets only if held for less than
one year.
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In light of this comment, the Board has considered the language and
legislative intent of section 622, as well as the Council's study on
the effects of the concentration limit. Based on these considerations,
the Board is retaining the exception for acquisition of DPC assets, but
eliminating the exception for merchant banking investments. The
Council's study described the concentration limit as intended to
promote financial stability and address the perception that large
financial institutions are ``too big to fail.'' \37\ In its study, the
Council expressed the view that the concentration limit will reduce the
risks to U.S. financial stability created by increased concentration
arising from mergers, consolidations or acquisitions involving the
largest U.S. financial companies.\38\ It also expressed the view that
the concentration limit does not prevent firms from growing larger
through internal, organic growth.\39\
---------------------------------------------------------------------------
\37\ Council study, p. 10.
\38\ Council study, p. 10.
\39\ Council study, p. 5.
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In the Board's view, the acquisition of an interest in a company
during the regular course of securing or collecting a debt previously
contracted is integral to the business of lending, and should not be
constrained by the concentration limit. An acquisition of shares of a
company through a DPC acquisition results from a borrower defaulting on
a loan, rather than an intentional investment by a financial company.
These acquisitions protect the lender from loss, and typically require
a divestiture of the interests within five years.
In contrast to a DPC acquisition, engaging in a merchant banking
investment that results in control of a company is an intentional
investment decision by a financial company. A merchant banking
investment is solely for the purpose of acquiring an interest in a
nonfinancial company. As such, the Board has determined that merchant
banking investments that result in control of a company should not be
exempt. Merchant banking investments are fundamentally different from
the situation where a company must foreclose on shares of a company
held as collateral in order to recover the funds it has lent.
Therefore, to the extent that a merchant banking investment gives rise
to control under the Bank Holding Company Act, it will be treated as a
``covered acquisition'' for purposes of section 622. A financial
company whose liabilities exceeded the concentration limit could still
make merchant banking investments, provided that it did not acquire
control of the portfolio company.
Other commenters suggested several additional types of transactions
that should be exempt from the definition of covered acquisition
because they are ordinary business transactions. Among these
suggestions were the acquisition of a loan portfolio structured as an
acquisition of a special purpose vehicle instead of the purchase of
underlying loans, community development investments, investments in
small business investment companies, leases structured as an investment
in a company, the acquisition of securities in connection with
customer-driven hedging positions, securities repurchase financing
transactions, securities borrowing and lending transactions, and
investments by funds of which a financial company subsidiary serves as
a general partner.
In response to commenters' observation that the acquisition of
certain assets, such as a loan portfolio, may be structured as a legal
matter as an acquisition of a special purpose vehicle, the final rule
would include a new exception for securitization transactions.
Specifically, a ``covered acquisition'' would exclude an acquisition of
ownership or control of a company that is, or will be, an issuer of
asset-backed securities (as defined in section 3(a) of the Securities
and Exchange Act of 1934) so long as the financial company that retains
an ownership interest in the company complies with the credit risk
retention requirements in the regulations issued pursuant to section
15G of the Securities and Exchange Act of 1934. The credit risk
retention requirements are found in section 941 of the Dodd-Frank Act,
and the exception would permit a financial company to continue
sponsoring securitizations after the financial company's liabilities
exceed the concentration limit, consistent with the requirements of the
Dodd-Frank Act.\40\
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\40\ Section 941 of the Dodd-Frank Act, 15 U.S.C. 78o-11.
---------------------------------------------------------------------------
With respect to the commenter's suggestion that the Board exempt
small business and community development investments, leases structured
as investments, acquisition of securities in connection with customer-
driven hedging positions, investments by funds of which a financial
company subsidiary serves as a general partner, securities repurchase
financing transactions, and securities borrowing and lending
transactions, these investments would not be prohibited under the final
rule so long as they do not give rise to control over the investee
company.
Commenters requested clarification of the proposed exception for
fiduciary acquisitions, requesting that there be a complete,
unconditional exclusion of assets acquired by a financial company
acting in a fiduciary capacity. The final rule clarifies that the
fiduciary exception in section 622 would permit a financial company to
continue to engage in bona fide fiduciary activities in accordance with
applicable fiduciary law. As discussed below, the final rule contains
an anti-evasion provision applicable to all transactions that prohibits
a financial company from organizing or operating its business or
structuring any acquisition of, or merger or consolidation with,
another company in such a manner that would result in evasion of
application of the concentration limit.
E. Other Provisions of Law
Other provisions of the Dodd-Frank Act require the Board, in
evaluating applications or notices under section 3 or 4 of the Bank
Holding Company Act or under section 163 of the Dodd-Frank Act, to
consider the risks to financial stability posed by a merger or
acquisition by a financial company.\41\ These provisions may result in
more stringent limitations than the concentration limit for a
particular transaction or proposal, depending on the Board's analysis
of the effects of the proposal on financial stability.
[[Page 68103]]
Furthermore, other restrictions on acquisitions, such as the
competitive restrictions contained in the Bank Holding Company Act or
Federal antitrust laws, may also limit certain transactions by
financial companies.\42\
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\41\ See sections 163, 173, and 604(d), (e) and (f) of the Dodd-
Frank Act; 12 U.S.C. 1842(c), 1843(j)(2)(A), 1828(c)(5), 5363, and
5373.
\42\ See, e.g., 12 U.S.C. 1842(d) and 1843(j); 12 CFR
225.14(c)(5) and (6).
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III. Administrative Law Matters
A. Solicitation of Comments on the Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. No. 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809) requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The Board received no comments on these matters and
believes that the final rule is written plainly and clearly.
B. Paperwork Reduction Act Analysis
In accordance with section 3512 of the Paperwork Reduction Act of
1995 (44 U.S.C. Sec. 3501-3521) (PRA), the Board may not conduct or
sponsor, and a respondent is not required to respond to, an information
collection unless it displays a currently valid Office of Management
and Budget (OMB) control number. The Board will obtain an OMB control
number for this information collection. The Board reviewed the final
rule under the authority delegated to the Board by OMB.
The final rule contains requirements subject to the PRA. The
reporting requirements are found in sections 251.4(b), 251.4(c), and
251.6. To implement the reporting requirements set forth in 251.6, the
Board proposes to create a new reporting form, the Financial Company
Report of Consolidated Liabilities (FR XX-1). This information
collection requirement would implement section 622 of the Dodd-Frank
Act.
Of the comments received on the proposed rule, four specifically
referenced the PRA. In response to these comments, the Board modified
the final rule as follows (1) provided that financial sector
liabilities will be calculated as of December 31, 2014, for purposes of
the period beginning July 1, 2015 and ending June 30, 2016, and the
two-year average will be adopted for each year thereafter; (2) removed
the prior notice requirement for acquisitions by financial companies
with total consolidated liabilities equal to or greater than 8 percent
of aggregate financial sector liabilities; (3) provided prior consent
for a covered acquisition that would result in an increase in the
liabilities of the financial company that does not exceed $100 million,
when aggregated with all other covered acquisitions by the financial
company during the twelve months preceding the consummation of the
transaction and set forth a process and standard of review for de
minimis transactions. These changes, as well as the Board's other
responses to the comments received, are discussed in greater detail
above.
Proposed Information Collection
Title of Information Collection: Reporting Requirements Associated
with Regulation XX (Concentration Limit) (Reg XX); Financial Company
Report of Consolidated Liabilities (FR XX-1).
Frequency of Response: Reg XX: Annual, event generated; FR XX-1:
Annual.
Affected Public: Businesses or other for-profit.
Respondents: Reg XX: Insured depository institutions, bank holding
companies, foreign banking organizations, savings and loan holding
company, companies that control insured depository institutions, and
nonbank financial companies supervised by the Board; FR XX-1: U.S. and
foreign financial companies that do not otherwise report consolidated
financial information to the Board or other appropriate Federal banking
agency.
Abstract: Section 622 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, which adds a new section 14 to the Bank
Holding Company Act of 1956, as amended, establishes a financial sector
concentration limit that generally prohibits a financial company from
merging or consolidating with, or acquiring, another company if the
resulting company's liabilities upon consummation would exceed 10
percent of the aggregate liabilities of all financial companies as
calculated under that section. In addition, the rule requires certain
financial companies to report information necessary to calculate the
financial sector concentration limit.
Section 251.4(b) requires a financial company with liabilities in
excess of the concentration limit cap to request that the Board provide
prior written consent before consummates a transaction that is exempt
from the concentration limit. The request for prior written consent
must contain a description of the covered acquisition, the projected
increase in the company's liabilities resulting from the acquisition,
the projected aggregate increase in the company's liabilities from
acquisitions during the twelve months preceding the projected date of
the acquisition (if the request is made pursuant to paragraph (a)(3) of
this section); and any additional information requested by the Board.
Section 251.4(c) requires a financial company with liabilities in
excess of the concentration limit cap may provide after-the-fact notice
to the Board if a covered acquisition would result in an increase in
the liabilities of the financial company of less than $100 million,
when aggregated with all other covered acquisitions by the financial
company made pursuant to section 251.4(c) during the twelve months
preceding the date of the acquisition. A financial company that relies
on this provision must provide a notice to the Board within 10 days
after consummating the covered acquisition that describes the covered
acquisition, the increase in the company's liabilities resulting from
the acquisition, and the aggregate increase in the company's
liabilities from covered acquisitions during the twelve months
preceding the date of the acquisition.
Section 251.6 requires financial companies that do not report
consolidated financial information to the Board or other appropriate
Federal banking agency to report information on their total
liabilities. At present, many financial companies do not report
consolidated financial information to the Board or other appropriate
Federal banking agency. These institutions include savings and loan
holding companies where the top-tier holding company is an insurance
company that only prepares financial statements in accordance with SAP,
holding companies of industrial loan companies, limited-purpose credit
card bans, and limited-purpose trust banks. Because this information is
necessary to implement section 622, this rule creates a new report, the
Financial Company Report of Consolidated Liabilities (FR XX-1) on which
a financial company that does not otherwise report consolidated
financial information to the Board or other appropriate Federal banking
agency would be required to report information on their total
liabilities.
Because the Board is required to report a final calculation based
on data collected as of the end of each calendar year, this proposed
new report would be completed annually beginning with the report as of
December 31, 2014. The Board will collect the first report by March 31,
2015.
Specifically, with respect to a financial company domiciled in the
United States, the institution is required to report total consolidated
liabilities of the financial company under applicable
[[Page 68104]]
accounting standards.\43\ With respect to a financial company domiciled
in a country other than the United States, the financial company is
required to report the total consolidated liabilities of the combined
U.S. operations of the financial company as of December 31. ``Total
consolidated liabilities of the combined U.S. operations of the
financial company'' would mean the sum of the total consolidated
liabilities of each top-tier U.S. subsidiary of financial company, as
determined under GAAP. A parent holding company is permitted, but is
not required, to reduce ``total consolidated liabilities of the
combined U.S. operations of the parent holding company'' by amounts
corresponding to balances and transactions between U.S. subsidiaries of
the parent holding company to the extent such items would not already
be eliminated in consolidation.
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\43\ ``Applicable accounting standards'' are defined for
purposes of the proposed rule as GAAP, or such other accounting
standards applicable to the company that the Board determines are
appropriate. If a company does not calculate its total consolidated
assets or liabilities under GAAP for any regulatory purpose
(including compliance with applicable securities laws), the company
may submit a request to the Board that it use an accounting standard
or method of estimation other than GAAP to calculate its liabilities
for purposes of this subpart. The Board may, in its discretion and
subject to Board review and adjustment, permit the company to
provide estimated total consolidated liabilities on an annual basis
using this accounting standard or method of estimation.
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Information contained in this report generally will be made
available to the public upon request. However, a reporting holding
company may request confidential treatment for the report if the
holding company is of the opinion that disclosure of specific
commercial or financial information in the report would likely result
in substantial harm to its competitive position, or that disclosure of
the submitted information would result in unwarranted invasion of
personal privacy.
Estimated Burden per Response: Reg XX: Section 251.4(b), 10 hours;
Section 251.4(c), 10 hours; FR XX-1: 2 hours; one-time implementation:
5 hours.
Number of Respondents: Reg XX: Section 251.4(b), 1; Section
251.4(c), 1; FR XX-1: 40.
Total Estimated Annual Burden: Reg XX: 20 hours; FR XX-1: 80 hours;
one-time implementation: 200.
C. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA),
generally requires that an agency prepare and make available for public
comment an initial regulatory flexibility analysis in connection with a
notice of proposed rulemaking.\44\ The regulatory flexibility analysis
otherwise required under section 604 of the RFA is not required if an
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities and publishes its
certification and a short, explanatory statement in the Federal
Register along with its rule.
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\44\ See 5 U.S.C. 603(a).
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The agencies solicited public comment on the rule in a notice of
proposed rulemaking. The agencies did not receive any comments
regarding burden to small banking organizations.
The Board adding Regulation XX (12 CFR 251 et seq.) to implement
section 14 of the Bank Holding Company Act (added by section 622 of the
Dodd-Frank Act), reflecting the recommendations of the Council.\45\
Section 622 establishes a financial sector concentration limit that
generally prohibits a financial company from merging or consolidating
with, or acquiring, another company if the resulting company's
liabilities upon consummation would exceed 10 percent of the aggregate
liabilities of all financial companies as calculated under that
section.
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\45\ See 12 U.S.C. 5365 and 5366.
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Under regulations issued by the Small Business Administration
(SBA), a ``small entity'' includes those firms within the ``Finance and
Insurance'' sector with asset sizes that vary from $35.5 million or
less in assets to $550 million or less in assets.\46\ The Finance and
Insurance sector constitutes a reasonable universe of firms for these
purposes because such firms generally engage in actives that are
financial in nature. Consequently, bank holding companies or nonbank
financial companies with assets sizes of $550 million or less are small
entities for purposes of the RFA.
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\46\ 13 CFR 121.201.
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As discussed in the Supplementary Information, the final rule
prohibits a financial company from merging or consolidating with, or
acquiring, another company if the resulting company's liabilities upon
consummation would exceed 10 percent of the aggregate liabilities of
all financial companies as calculated under that section, unless the
transaction would qualify for an exception to the prohibition. For
instance, transactions that involve only a de minimis increase in the
liabilities of a financial company would not be subject to the
concentration limit. A de minimis increase would be defined as an
increase of $2 billion, when aggregated with all other acquisitions by
the company under the de minimis authority during the twelve months
preceding the date of the acquisition.
A company with $550 million or less in assets will not, in
practice, be affected by the final rule, which limits covered
acquisitions only by firms whose liabilities will exceed ten percent of
the aggregate financial sector liabilities. As noted in the preamble to
the proposed rule, as of December 31, 2013, under the estimated
proposed method, financial sector liabilities is approximately $18
trillion. Furthermore, the reporting requirement for financial
companies that do not otherwise report consolidated financial
information to the Board or other appropriate Federal banking agency is
anticipated to result in an aggregate annual burden of only 25 hours.
As noted above, because the rule is not likely to apply to any
company with assets of $550 million or less, it is not expected to
apply to any small entity for purposes of the RFA. The Board does not
believe that the rule duplicates, overlaps, or conflicts with any other
Federal rules. In light of the foregoing, the Board does not believe
that the rule would have a significant economic impact on a substantial
number of small entities supervised.
List of Subjects in 12 CFR Part 251
Administrative practice and procedure, Banks, Banking,
Concentration Limit, Federal Reserve System, Holding companies,
Reporting and recordkeeping requirements, Securities.
Authority and Issuance
For the reasons stated in the Supplementary Information, the Board
of Governors of the Federal Reserve System is adding part 251 to read
as follows:
PART 251--CONCENTRATION LIMIT (REGULATION XX)
Sec.
251.1 Authority, purpose, and other authorities.
251.2 Definitions.
251.3 Concentration limit.
251.4 Exceptions to the concentration limit.
251.5 No evasion.
251.6 Reporting requirements.
Authority: 12 U.S.C. 1818, 1844(b), 1852, 3101 et seq.
Sec. 251.1 Authority, purpose, and other authorities.
(a) Authority. This part is issued by the Board of Governors of the
Federal Reserve System under sections 5 and 14 of the Bank Holding
Company Act of 1956, as amended (12 U.S.C. 1844 and
[[Page 68105]]
1852); section 8 of the Federal Deposit Insurance Act, as amended (12
U.S.C. 1818); the International Banking Act of 1978, as amended (12
U.S.C. 3101 et seq.); and the recommendations of the Financial
Stability Oversight Council (76 Federal Register 6756) (February 8,
2011).
(b) Purpose. This subpart implements section 14 of the Bank Holding
Company Act, which generally prohibits a financial company from merging
or consolidating with, acquiring all or substantially all of the assets
of, or otherwise acquiring control of, another company if the resulting
company's consolidated liabilities would exceed 10 percent of the
aggregate consolidated liabilities of all financial companies.
(c) Other authorities. Nothing in this part limits the authority of
the Board under any other provision of law or regulation to prohibit or
limit a financial company from merging or consolidating with, acquiring
all or substantially all of the assets of, or otherwise acquiring
control of, another company.
Sec. 251.2 Definitions.
Unless otherwise specified, for the purposes of this part:
(a) Applicable accounting standards means, with respect to a
company, U.S. generally accepted accounting principles (GAAP), or such
other accounting standard or method of estimation that the Board
determines is appropriate pursuant to Sec. 251.3(e).
(b) Applicable risk-based capital rules means consolidated risk-
based capital rules established by an appropriate Federal banking
agency that are applicable to a financial company.
(c) Appropriate Federal banking agency has the same meaning as in
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
(d) Control has the same meaning as in Sec. 225.2(e) of the
Board's Regulation Y (12 CFR 225.2(e)).
(e) Council means the Financial Stability Oversight Council
established by section 111 of the Dodd-Frank Act (12 U.S.C. 5321).
(f) Covered acquisition means a transaction in which a company
directly or indirectly merges or consolidates with, acquires all or
substantially all of the assets of, or otherwise acquires control of
another company. A covered acquisition does not include an acquisition
of ownership or control of a company:
(1) In the ordinary course of collecting a debt previously
contracted in good faith if the acquired securities or assets are
divested within the time period permitted by the appropriate Federal
banking agency (including extensions) or, if the financial company does
not have an appropriate Federal banking agency, five years;
(2) In a fiduciary capacity in good faith under applicable
fiduciary law if the acquired securities or assets are held in the
ordinary course of business and not acquired for the benefit of the
company or its shareholders, employees, or subsidiaries;
(3) In connection with bona fide underwriting or market-making
activities;
(4) Solely in connection with a corporate reorganization and the
companies involved are lawfully controlled and operated by the
financial company both before and following the reorganization; and
(5) That is, or will be, an issuer of asset back securities (as
defined in Section 3(a) of the Securities and Exchange Act of 1934) so
long as the financial company that retains an ownership interest in the
company complies with the credit risk retention requirements in the
regulations issued pursuant to section 15G of the Securities and
Exchange Act of 1934.
(g) Financial company includes:
(1) An insured depository institution;
(2) A bank holding company;
(3) A savings and loan holding company;
(4) A company that controls an insured depository institution;
(5) A nonbank financial company supervised by the Board, and
(6) A foreign bank or company that is treated as a bank holding
company for purposes of the Bank Holding Company Act.
(h) Foreign financial company means a financial company that is
incorporated or organized in a country other than the United States.
(i) Insured depository institution has the same meaning as in
section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1813(c)(2)).
(j) Nonbank financial company supervised by the Board means any
nonbank financial company that the Council has determined under section
113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be supervised by the
Board and for which such determination is still in effect.
(k) State means any state, commonwealth, territory, or possession
of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of the Northern Mariana Islands, American
Samoa, Guam, or the United States Virgin Islands.
(l) U.S. agency has the same meaning as the term ``agency'' in
Sec. 211.21(b) of the Board's Regulation K (12 CFR 211.21(b)).
(m) Total regulatory capital has the same meaning as the term
``total capital'' as defined under the applicable risk-based capital
rules.
(n) Total risk-based capital ratio means the ``total capital
ratio'' as calculated under the applicable risk-based capital rules.
(o) Total risk-weighted assets means the measure of consolidated
risk-weighted assets that a financial company uses to calculate its
risk-based capital ratios under the applicable risk-based capital
rules.
(p) U.S. branch has the same meaning as the term ``branch'' in
Sec. 211.21(e) of the Board's Regulation K (12 CFR 211.21(e)).
(q) U.S. company means a company that is incorporated in or
organized under the laws of the United States or any State.
(r) U.S. financial company means a financial company that is a U.S.
company.
(s) U.S. subsidiary means any subsidiary, as defined in Sec.
225.2(o) of Regulation Y (12 CFR 225.2(o)), that is a U.S. company.
Sec. 251.3 Concentration limit.
(a) In general. (1) Except as otherwise provided in Sec. 251.4, a
company may not consummate a covered acquisition if upon consummation
of the transaction, the liabilities of the resulting company would
exceed 10 percent of the financial sector liabilities, and the company
is or would become a financial company.
(2) Financial sector liabilities. (i) Subject to paragraph
(a)(2)(ii) of this section, as of July 1 of a given year, financial
sector liabilities are equal to the average of the year-end financial
sector liabilities figure for the preceding two calendar years. The
measure of financial sector liabilities will be in effect until June 30
of the following calendar year.
(ii) For the period beginning July 1, 2015, and ending June 30,
2016, financial sector liabilities are equal to the year-end financial
sector liabilities figure as of December 31, 2014.
(iii) The year-end financial sector liabilities figure equals the
sum of the total consolidated liabilities of all top-tier U.S.
financial companies (as calculated under paragraph (b) of this section)
and the U.S. liabilities of all top-tier foreign financial companies
(as calculated under paragraph (c) of this section) as of December 31
of that year.
(iv) On an annual basis and no later than July 1 of any calendar
year, the Board will calculate and publish the financial sector
liabilities for the preceding calendar year and the average
[[Page 68106]]
of the financial sector liabilities for the preceding two calendar
years.
(b) Calculating total consolidated liabilities. For purposes of
paragraph (a) of this section:
(1) Covered acquisition by a U.S. company. For a covered
acquisition in which a U.S. company would acquire a U.S. company or a
foreign company, liabilities of the resulting U.S. financial company
equal the consolidated liabilities of the resulting U.S. financial
company, calculated on a pro forma basis in accordance with paragraph
(c) of this section.
(2) Covered acquisition by a foreign company of another foreign
company. For a covered acquisition in which a foreign company would
acquire another foreign company, liabilities of the resulting foreign
financial company equal the U.S. liabilities of the resulting financial
company, calculated on a pro forma basis in accordance with paragraph
(d) of this section.
(3) Covered acquisition by a foreign company of a U.S. company. For
a covered acquisition in which a foreign company would acquire a U.S.
company, liabilities of the resulting foreign financial company equal
the sum of: (i) The U.S. liabilities of the foreign company immediately
preceding the transaction (calculated in accordance with paragraph (d)
of this section) and (ii) the consolidated liabilities of the U.S.
company immediately preceding the transaction (calculated in accordance
with paragraph (c) of this section), reduced by the amount
corresponding to any balances and transactions that would be eliminated
in consolidation upon consummation of the transaction.
(c) Liabilities of a U.S. company--(1) U.S. company subject to
applicable risk-based capital rules. For a U.S. company subject to
applicable-risk based capital rules, consolidated liabilities are equal
to:
(i) Total risk-weighted assets of the company; plus
(ii) The amount of assets that are deducted from the company's
regulatory capital elements under the applicable risk-based capital
rules, times a multiplier that is equal to the inverse of the company's
total risk-based capital ratio minus one; minus
(iii) Total regulatory capital of the company.
(2) U.S. company not subject to applicable risk-based capital
rules. For a U.S. company that is not subject to applicable risk-based
capital rules, consolidated liabilities are equal to the total
liabilities of such company on a consolidated basis, as determined
under applicable accounting standards.
(d) Liabilities of a foreign company--(1) Foreign banking
organization. For a foreign banking organization, U.S. liabilities are
equal to:
(i) The total consolidated assets of each U.S. branch or U.S.
agency of the foreign banking organization, calculated in accordance
with applicable accounting standards; plus
(ii) The total consolidated liabilities of each top-tier U.S.
subsidiary that is subject to applicable risk-based capital rules (or
reports information to the Board regarding its capital under risk-based
capital rules applicable to bank holding companies), calculated as:
(A) Total consolidated risk-weighted assets of the subsidiary; plus
(B) The amount of assets that are deducted from the subsidiary's
regulatory capital elements under the applicable risk-based capital
rules, times a multiplier that is equal to the inverse of the
subsidiary's total risk-based capital ratio minus one; minus
(C) Total consolidated regulatory capital of the subsidiary; plus
(iii) The total consolidated assets of each top-tier U.S.
subsidiary that is not subject to applicable risk-based capital rules
and does not report information regarding its capital under risk-based
capital rules applicable to bank holding companies, calculated in
accordance with applicable accounting standards.
(2) Foreign financial company that is not a foreign banking
organization. For a foreign company that is not a foreign banking
organization, U.S. liabilities are equal to:
(i) The total consolidated liabilities of each top-tier U.S.
subsidiary that is subject to applicable risk-based capital rules (or
reports information to the Board regarding its capital under risk-based
capital rules applicable to bank holding companies), calculated as:
(A) Total consolidated risk-weighted assets of the subsidiary; plus
(B) The amount of assets that are deducted from the subsidiary's
regulatory capital elements under the applicable risk-based capital
rules, times a multiplier that is equal to the inverse of the company's
total risk-based capital ratio minus one; minus
(C) Total regulatory capital of the subsidiary; plus
(ii) The total consolidated liabilities of each top-tier U.S.
subsidiary that is not subject to applicable risk-based capital rules,
calculated in accordance with applicable accounting standards.
(3) Intercompany balances and transactions--(i) Foreign banking
organization. A foreign banking organization must reduce the amount of
consolidated liabilities of its U.S. operations calculated pursuant to
this paragraph (d) by amounts corresponding to intercompany balances
and intercompany transactions between the foreign banking
organization's U.S. domiciled affiliates, branches or agencies to the
extent such items are not eliminated in consolidation, and increase
consolidated liabilities by net intercompany balances and intercompany
transactions between a non-U.S. domiciled affiliate and a U.S.
domiciled affiliate, branch, or agency of the foreign banking
organization, to the extent such items are not reflected in the measure
of liabilities.
(ii) Foreign financial company. A foreign company that is not a
foreign banking organization may reduce the amount of consolidated
liabilities of its U.S. operations calculated pursuant to this
paragraph (d) by amounts corresponding to intercompany balances and
intercompany transactions between the foreign organization's U.S.
domiciled affiliates to the extent such items are not already
eliminated in consolidation; provided that it increases consolidated
liabilities by net intercompany balances and intercompany transactions
between a non-U.S. domiciled affiliate and a U.S. domiciled affiliate,
to the extent such items are not already reflected in the measure of
liabilities.
(e) Applicable accounting standard. If a company does not calculate
its total consolidated assets or liabilities under GAAP for any
regulatory purpose (including compliance with applicable securities
laws), the company may submit a request to the Board that the company
use an accounting standard or method of estimation other than GAAP to
calculate its liabilities for purposes of this part. The Board may, in
its discretion and subject to Board review and adjustment, permit the
company to provide estimated total consolidated liabilities on an
annual basis using this accounting standard or method of estimation.
Sec. 251.4 Exceptions to the concentration limit.
(a) General. With the prior written consent of the Board, the
concentration limit under Sec. 251.3 shall not apply to:
(1) A covered acquisition of an insured depository institution that
is in default or in danger of default (as determined by the appropriate
Federal banking agency of the insured depository institution, in
consultation with the Board);
(2) A covered acquisition with respect to which assistance is
provided by the Federal Deposit Insurance Corporation under section
13(c) of the Federal
[[Page 68107]]
Deposit Insurance Act (12 U.S.C. 1823(c)); or
(3) A covered acquisition that would result in an increase in the
liabilities of the financial company that does not exceed $2 billion,
when aggregated with all other acquisitions by the financial company
made pursuant to this paragraph (a)(3) during the twelve months
preceding the projected date of the acquisition.
(b) Prior written consent--(1) General. Except as provided in
paragraph (c) of this section, a financial company must request that
the Board provide prior written consent before the financial company
consummates a transaction described in paragraph (a) of this section.
(2) Contents of request. (i) A request for prior written consent
under paragraph (a) of this section must contain:
(A) A description of the covered acquisition;
(B) The projected increase in the company's liabilities resulting
from the acquisition;
(C) If the request is made pursuant to paragraph (a)(3) of this
section, the projected aggregate increase in the company's liabilities
from acquisitions during the twelve months preceding the projected date
of the acquisition; and
(D) Any additional information requested by the Board.
(ii) A financial company may satisfy the requirements of this
paragraph (b) if:
(A) The proposed transaction otherwise requires approval by, or
prior notice to, the Board under the Change in Bank Control Act, Bank
Holding Company Act, Home Owners' Loan Act, International Banking Act,
or any other applicable statute, and any regulation thereunder; and
(B) The financial company includes the information required in
paragraph (b)(2) of this section in the notice or request for prior
approval described in paragraph (b)(2)(ii)(A) of this section.
(3) Procedures for providing written consent. (i) The Board will
act on a request for prior written consent filed under this paragraph
(b) within 90 calendar days after the receipt of a complete request,
unless that time period is extended by the Board. To the extent that a
proposed transaction otherwise requires approval from, or prior notice
to, the Board under another provision of law, the Board will act on
that request for prior written consent concurrently with its action on
the request for approval or notice.
(ii) In acting on a request under this paragraph (b), the Board
will consider whether the consummation of the covered acquisition could
pose a threat to financial stability.
(c) General consent. The Board grants prior written consent for a
covered acquisition that would result in an increase in the liabilities
of the financial company that does not exceed $100 million, when
aggregated with all other covered acquisitions by the financial company
made pursuant to this paragraph (c) during the twelve months preceding
the date of the acquisition. A financial company that relies on prior
written consent pursuant to this paragraph (c) must provide a notice to
the Board within 10 days after consummating the covered acquisition
that describes the covered acquisition, the increase in the company's
liabilities resulting from the acquisition, and the aggregate increase
in the company's liabilities from covered acquisitions during the
twelve months preceding the date of the acquisition.
Sec. 251.5 No evasion.
A financial company may not organize or operate its business or
structure any acquisition of or merger or consolidation with another
company in such a manner that results in evasion of the concentration
limit established by section 14 of the Bank Holding Company Act or this
part.
Sec. 251.6 Reporting requirements.
By March 31 of each year:
(a) A U.S. financial company (other than a U.S. financial company
that is required to file the Bank Consolidated Reports of Condition and
Income (Call Report), the Consolidated Financial Statements for Holding
Companies (FR Y-9C), the Parent Company Only Financial Statements for
Small Holding Companies (FR Y-9SP), or the Parent Company Only
Financial Statements for Large Holding Companies (FR Y-9LP), or is
required to report consolidated total liabilities on the Quarterly
Savings and Loan Holding Company Report (FR 2320)) must report to the
Board its consolidated liabilities as of the previous calendar year-end
in the manner and form prescribed by the Board; and
(b) A foreign financial company (other than a foreign financial
company that is required to file a FR Y-7) must report to the Board its
U.S. liabilities as of the previous calendar year-end in the manner and
form prescribed by the Board.
By order of the Board of Governors of the Federal Reserve
System, November 4, 2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-26747 Filed 11-13-14; 8:45 am]
BILLING CODE 6210-01-P