• Client Alert: Federal Reserve Board Amends "Small Bank Holding Company Policy Statement" to Cover BHCs and SLHCs with Total Consolidated Assets of Less Than $1 Billion
  • May 18, 2015 | Author: Brandt T. Bowman
  • Law Firm: Rhoads & Sinon LLP - Harrisburg Office
  • On April 9, 2015, the Federal Reserve Board (the “Board”) adopted a final rule (the “Final Rule”) amending its Small Bank Holding Company Policy Statement (the “Policy Statement”), contained in Appendix C of the Board’s Regulation Y. The Final Rule raises the maximum amount of consolidated assets a bank holding company (“BHC”) may hold while still qualifying as a “small bank holding company” for purposes of the Policy Statement from $500 million to $1 billion in total consolidated assets. Additionally, the Final Rule extends the application of the Policy Statement to savings and loan holding companies (“SLHCs”) with less than $1 billion in total consolidated assets.

    As a result of the Final Rule, more community BHCs, and now SLHCs, should qualify for the benefits of being a “small bank holding company.” In particular, small bank holding companies are exempt from the Board’s capital adequacy requirements contained in the Board’s Regulation Q. Note, however, that subsidiary depository institutions of small bank holding companies continue to be subject to minimum capital requirements.

    In addition to falling under the new $1 billion total consolidated assets threshold provided by the Final Rule, BHCs and SLHCs must comply with the three qualitative requirements contained in the Policy Statement in order to qualify as a small bank holding company. Importantly, the Final Rule does not alter these qualitative requirements. Thus, in order to qualify as a small bank holding company under the Policy Statement, as amended by the Final Rule, a BHC or SLHC must have fewer than $1 billion in total consolidated assets and cannot: (i) engage in significant nonbanking activities either directly or through a nonbank subsidiary; (ii) conduct significant off-balance sheet activities (including securitization and asset management or administration) either directly or through a nonbank subsidiary; or (iii) have a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the Securities and Exchange Commission.

    The Final Rule also provides for conforming revisions to Regulation Y and Regulation LL, the Board’s regulations governing the operations and activities of BHCs and SLHCs, respectively, and Regulation Q, the Board’s regulatory capital rules. The Final Rule takes effect on May 15, 2015.