FED Proposes to Simplify Rules to Determine Control of Banking Entity
FED proposed to simplify and increase the transparency of its rules for determining control of a banking organization. If a company has control over a banking organization, the company generally becomes subject to FED rules and regulations. The proposal would set forth a comprehensive regulatory framework for control determinations and request comments on the framework until 60 days after the publication of this proposal in the Federal Register.
Over time, FED has issued public and private interpretations on the topic of control, but banking organizations and their investors often remain uncertain about whether a proposed investment is controlling. The proposal lays out several factors and thresholds that FED will use to determine if a company has control over a bank. The key factors include the company's total voting and non-voting equity investment in the bank; director, officer, and employee overlaps between the company and the bank; and the scope of business relationships between the company and the bank. The proposal clearly describes what combination of those factors would and would not trigger control.
By codifying the presumptions in Regulation Y and Regulation LL, the rules of FED would provide substantial additional transparency on the types of relationships that the FED would view as supporting a determination that one company controls another company. The proposed presumptions generally would be consistent with the historical practice of FED with respect to the types of relationships that raise, or do not raise, significant controlling influence concerns. Several of the proposed presumptions, however, would represent targeted adjustments relative to the historical practice of FED. Finally, the proposal would include various definitions and ancillary rules to ensure that the application of the proposed presumptions is clear, transparent, and consistent.
The proposal would reduce complexity and burden for banking organizations and their investors; it is also expected to make it easier for banks, particularly community banks, to raise capital to support lending and investment. FED also published a chart that shows how different combinations of the factors would or would not result in control.
Related Links
Comment Due Date: FR + 60 Days
Keywords: Americas, US, Banking, Control of Banking Organization, Regulation Y, Regulation II, Community Banks, FED
Previous Article
FINMA Consults on Regime for Small Banks in SwitzerlandRelated Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.