[Federal Register Volume 85, Number 106 (Tuesday, June 2, 2020)]
[Notices]
[Pages 33669-33670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11771]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

[Docket No. OP-1719]


Announcement of Financial Sector Liabilities

    Section 622 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, implemented by the Board's Regulation XX, prohibits a 
merger or acquisition that would result in a financial company that 
controls more than 10 percent of the aggregate consolidated liabilities 
of all financial companies (aggregate financial sector liabilities). 
Specifically, an insured depository institution, a bank holding 
company, a savings and loan holding company, a foreign banking 
organization, any other company that controls an insured depository 
institution, and a nonbank financial company designated by the 
Financial Stability Oversight Council (each, a ``financial company'') 
is prohibited from merging or consolidating with, acquiring all or 
substantially all of the assets of, or acquiring control of, another 
company if the resulting company's consolidated liabilities would 
exceed 10 percent of the aggregate financial sector liabilities.\1\
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 1852(a)(2), (b).
---------------------------------------------------------------------------

    Pursuant to Regulation XX, the Federal Reserve will publish the 
aggregate financial sector liabilities by July 1 of each year. 
Aggregate financial sector liabilities equals the average of the year-
end financial sector liabilities figure (as of December 31) of each of 
the preceding two calendar years.

FOR FURTHER INFORMATION CONTACT: Lesley Chao, Lead Financial 
Institution Policy Analyst, (202) 974-7063; Sean Healey, Lead Financial 
Institution Policy Analyst, (202) 912-4611; Laura Bain, Counsel, (202) 
736-5546; for the hearing impaired, TTY (202) 263-4869.

Aggregate Financial Sector Liabilities

    Aggregate financial sector liabilities is equal to 
$21,229,884,414,000.\2\ This measure is in effect from July 1, 2020 
through June 30, 2021.
---------------------------------------------------------------------------

    \2\ This number reflects the average of the financial sector 
liabilities figure for the year ending December 31, 2018 
($20,841,478,070,000) and the year ending December 31, 2019 
($21,618,290,757,000).
---------------------------------------------------------------------------

Calculation Methodology

    Aggregate financial sector liabilities equals the average of the 
year-end financial sector liabilities figure (as of December 31) of 
each of the preceding two calendar years. The year-end financial sector 
liabilities figure equals the sum of the total consolidated liabilities 
of all top-tier U.S. financial companies and the U.S. liabilities of 
all top-tier foreign financial companies, calculated using the 
applicable methodology for each financial company, as set forth in 
Regulation XX and summarized below.
    Consolidated liabilities of a U.S. financial company that was 
subject to consolidated risk-based capital rules as of December 31 of 
the year being measured, equal the difference between its risk-weighted 
assets (as adjusted upward to reflect amounts that are deducted from 
regulatory capital elements pursuant to the Federal banking agencies' 
risk-based capital rules) and total regulatory capital, as calculated 
under the applicable risk-based capital rules. Companies in this 
category include (with certain exceptions listed below) bank holding 
companies, savings and loan holding companies, and insured depository 
institutions. The Federal Reserve used information collected on the 
Consolidated Financial Statements for Holding Companies (FR Y-9C) and 
the Bank Consolidated Reports of Condition and Income (Call Report) to 
calculate liabilities of these institutions.
    Consolidated liabilities of a U.S. financial company not subject to 
consolidated risk-based capital rules as of December 31 of the year 
being measured, equal liabilities calculated in accordance with 
applicable accounting standards. Companies in this category include 
nonbank financial companies supervised by the Board, bank holding 
companies and savings and loan holding companies subject to the Federal 
Reserve's Small Bank Holding Company Policy Statement, savings and loan 
holding companies substantially engaged in insurance underwriting or 
commercial activities, and U.S. companies that control insured 
depository institutions but are not bank holding companies or savings 
and loan holding companies. ``Applicable accounting standards'' is 
defined as Generally Accepted Accounting Principles (GAAP), or such 
other accounting standard or method of estimation that the Board 
determines is appropriate.\3\ The Federal Reserve used information 
collected on the FR Y-9C, the Parent Company Only Financial Statements 
for Small Holding Companies (FR Y-9SP), and the Financial Company 
Report of Consolidated Liabilities (FR XX-1) to calculate liabilities 
of these institutions.
---------------------------------------------------------------------------

    \3\ A financial company may request to use an accounting 
standard or method of estimation other than GAAP if it does not 
calculate its total consolidated assets or liabilities under GAAP 
for any regulatory purpose (including compliance with applicable 
securities laws). 12 CFR 251.3(e). In previous years, the Board 
received and approved requests from eleven financial companies to 
use an accounting standard or method of estimation other than GAAP 
to calculate liabilities. Ten of the companies are insurance 
companies that report financial information under Statutory 
Accounting Principles (SAP), and one is a foreign company that 
controls a U.S. industrial loan company that reports financial 
information under International Financial Reporting Standards 
(IFRS). For the insurance companies, the Board approved a method of 
estimation that was based on line items from SAP-based reports, with 
adjustments to reflect certain differences in accounting treatment 
between GAAP and SAP. For the foreign company, the Board approved 
the use of IFRS. Such companies that continue to be subject to 
Regulation XX continue to use the previously approved methods. The 
Board did not receive any new requests this year.
---------------------------------------------------------------------------

    Section 622 provides that the U.S. liabilities of a ``foreign 
financial company'' equal the risk-weighted assets and regulatory 
capital attributable to the company's ``U.S. operations.'' Under 
Regulation XX, liabilities of a foreign banking organization's U.S. 
operations are calculated using the risk-weighted asset methodology for 
subsidiaries subject to the risk-based capital rule, plus the assets of 
all branches, agencies, and nonbank subsidiaries, calculated in 
accordance with applicable accounting standards. Liabilities 
attributable to the U.S. operations 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 
liabilities of a U.S. subsidiary not subject to the risk-based capital 
rule are calculated based on the U.S. subsidiary's liabilities under 
applicable accounting standards. The Federal Reserve used information 
collected on the Capital and Asset Report for Foreign Banking 
Organizations (FR Y-7Q), the FR Y-9C, and the FR XX-1 to calculate 
liabilities of these institutions.
    By order of the Board of Governors of the Federal Reserve System, 
acting through the Director of Supervision and

[[Page 33670]]

Regulation under delegated authority, May 27, 2020.

Ann Misback,
Secretary of the Board.
[FR Doc. 2020-11771 Filed 6-1-20; 8:45 am]
BILLING CODE P