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Federal Register / Vol. 79, No. 220 / Friday, November 14, 2014 / Rules and Regulations
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

FEDERAL RESERVE SYSTEM
12 CFR Part 251
[Regulation XX; Docket No. R–1489]
RIN 7100–AE 18

Concentration Limits on Large
Financial Companies
Board of Governors of the
Federal Reserve System (Board).
ACTION: Final rule.
AGENCY:

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:
SUMMARY:

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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

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I. Background
On May 8, 2014, the Board invited
comment on a proposed rule to
implement section 622 of the DoddFrank 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
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
1 79

FR 27801 (May 15, 2014).
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.
2 12

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recommendations made by the
Council.’’ 3
On January 18, 2011, the Council
made three recommendations,4
including that the Board’s regulations
should:
• 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
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 DoddFrank 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).
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%20
on%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.
5 See 12 U.S.C. 1852(e)(1).
6 Council study, p. 4.
7 Id., p. 10.

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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
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
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:

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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.
10 12 U.S.C. 1852(d).

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• 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 standalone broker-dealers or insurance
companies, are not subject to the
concentration limit unless they have

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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 DoddFrank 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.
A. Calculating a Financial Company’s
Liabilities
1. U.S. Financial Companies
Section 622 measures ‘‘liabilities’’ of
a financial company as total riskweighted 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
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).
12 12 U.S.C. 1852(a)(3).

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Federal Register / Vol. 79, No. 220 / Friday, November 14, 2014 / Rules and Regulations
recommended that the Board measure
liabilities using GAAP or other
applicable accounting standards.13
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
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.
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 SAP13 Council

study, p. 6.
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.
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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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.
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.
U.S. Financial Companies Subject to
Consolidated Risk-Based Capital Rules
The proposed rule would have
calculated liabilities of a U.S. financial
16 Council

study, p. 20.
section 622 of the Dodd-Frank Act; 12
U.S.C. 1852(a)(3)(C).
17 See

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company subject to consolidated riskbased 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 riskbased 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 riskweighted assets under the relevant riskbased capital rules.19
Section 622 provides that riskweighted 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 riskweighted 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
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).
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

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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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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
institution’s total capital ratio is equal to 16 percent
(twice the regulatory minimum), the institutionspecific factor would equal 1⁄.16 ¥ 1, or 6.25 ¥ 1,
or 5.25.

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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
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.
22 79

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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

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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 riskweighted 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
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
23 Some respondents will not report the new item
on the FR Y–7Q until December 2014.
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.

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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
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
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.
27 See 12 U.S.C. 1852(a)(3)(C).

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date is 90 calendar days after the
December 31 as-of-date.
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. § 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.
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
28 5

U.S.C. § 552.

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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 riskweighted 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.

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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.

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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.

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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
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
29 See

12 U.S.C. 1852(c).

30 Id.
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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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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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
32 Council

study, p. 3.
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).
33 604(d)

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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
35 Council

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68101

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.
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

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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
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
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.
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.
37 Council study, p. 10.
38 Council study, p. 10.
39 Council study, p. 5.

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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

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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
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.
40 Section 941 of the Dodd-Frank Act, 15 U.S.C.
78o–11.
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.

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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
III. Administrative Law Matters

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A. Solicitation of Comments on the Use
of Plain Language
Section 722 of the Gramm-LeachBliley 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. § 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
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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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 DoddFrank 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

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(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

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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.
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; onetime implementation: 200.
C. Regulatory Flexibility Act Analysis

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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
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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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.
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 DoddFrank 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.
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.
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
44 See

5 U.S.C. 603(a).
12 U.S.C. 5365 and 5366.
46 13 CFR 121.201.
45 See

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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.
§ 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

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Federal Register / Vol. 79, No. 220 / Friday, November 14, 2014 / Rules and Regulations
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.

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§ 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 § 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 § 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)

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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 § 211.21(b) of
the Board’s Regulation K (12 CFR
211.21(b)).

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(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 riskbased capital rules.
(o) Total risk-weighted assets means
the measure of consolidated riskweighted assets that a financial
company uses to calculate its risk-based
capital ratios under the applicable riskbased capital rules.
(p) U.S. branch has the same meaning
as the term ‘‘branch’’ in § 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 § 225.2(o) of
Regulation Y (12 CFR 225.2(o)), that is
a U.S. company.
§ 251.3

Concentration limit.

(a) In general. (1) Except as otherwise
provided in § 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 toptier 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

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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 riskbased 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.

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(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 riskbased 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 riskbased 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 riskbased 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 riskbased 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

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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.
§ 251.4
limit.

Exceptions to the concentration

(a) General. With the prior written
consent of the Board, the concentration
limit under § 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

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Federal Register / Vol. 79, No. 220 / Friday, November 14, 2014 / Rules and Regulations
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

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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.
§ 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.
§ 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

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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 25
[Docket No. FAA–2014–0564; Special
Conditions No. 25–XXX–SC]

Special Conditions: Dassault Model
Falcon 900EX Airplane; Electronic
System-Security Protection From
Unauthorized External Access
Federal Aviation
Administration (FAA), DOT.
ACTION: Final special conditions, request
for comments.
AGENCY:

These special conditions are
issued for Dassault Model Falcon 900EX
airplanes. These airplanes will have a
novel or unusual design feature
associated with electronic systemsecurity protection from unauthorized
external access. The applicable
airworthiness regulations do not contain
adequate or appropriate safety standards
for this design feature. These special
conditions contain the additional safety
standards that the Administrator
considers necessary to establish a level
of safety equivalent to that established
by the existing airworthiness standards.
DATES: Effective December 15, 2014.
FOR FURTHER INFORMATION CONTACT:
Varun Khanna, FAA, Airplane and
Flightcrew Interface Branch, ANM–111,
Transport Airplane Directorate, Aircraft
Certification Service, 1601 Lind Avenue
SW., Renton, Washington, 98057–3356;
telephone (425) 227–1298; facsimile
(425) 227–1320.
SUPPLEMENTARY INFORMATION:
SUMMARY:

Background
On March 20, 2013, Dassault Aircraft
Services applied for a type certificate for
their new Model 900EX airplane.
The Dassault Falcon 900EX is a
business jet with seating for up to 19
passengers. Three Allied Signal TFE
731–60–1C engines power the airplane,
which has a maximum takeoff weight of
49,000 pounds.
Contemporary transport-category
airplanes have both safety-related and
non-safety-related electronic system
networks for many operational
functions. However, electronic systemnetwork-security considerations and
functions have played a relatively minor
role in the certification of such systems
because of the isolation, protection
mechanisms, and limited connectivity
between the different networks.
Comments Invited
We invite interested people to take
part in this rulemaking by sending

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