• Fed Increases Asset Threshold and Applicability of Its Small Bank Holding Company Policy Statement
  • April 30, 2015 | Author: Eric J. Dyas
  • Law Firm: Jones Walker LLP - Mobile Office
  • In order to implement the requirements of legislation enacted on November 18, 2014 (Pub. L. 113-250), on April 15, 2015, the Federal Reserve published in the Federal Register a final rule amending its Small Bank Holding Company Policy Statement contained in Appendix C of the Federal Reserve's Regulation Y (the "Policy Statement"). The effect of the rule is to amend the Policy Statement to (i) increase the consolidated asset threshold for holding companies to qualify for the Policy Statement from $500 million to $1 billion and (ii) extend the application of the Policy Statement to certain savings and loan holding companies.

    Prior to its amendment, the Policy Statement applied only to bank holding companies with consolidated assets of less than $500 million and that met the following qualitative requirements: (a) were not engaged in significant nonbanking activities; (b) did not conduct significant off-balance sheet activities; and (c) did not have a material amount of debt or equity securities outstanding registered with the Securities Exchange Commission. In recognition of small bank holding companies' more limited access to equity financing, the Policy Statement, issued originally in 1980, permitted the formation and expansion of small bank holding companies with debt levels higher than would be permitted for their larger bank holding company counterparts. More specifically, bank holding companies to which the Policy Statement was applicable were permitted to use debt to finance up to 75 percent of the purchase price of an acquisition provided certain ongoing requirements relating to the reduction of debt, the payment of dividends, and the capitalization of insured depository institution subsidiaries were met.

    Though the final rule increased the asset threshold to $1 billion and extended the application of the Policy Statement to savings and loan holding companies, it retained the aforementioned qualitative requirements without change.