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Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272

September 19, 2005
Notice 05-51

TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Proposal to Expand the Definition of a
Small Bank Holding Company
DETAILS
The Board of Governors of the Federal Reserve System is proposing to raise the asset size
threshold and revise the other criteria for determining whether a bank holding company (BHC)
qualifies for the Board’s Small Bank Holding Company Policy Statement (Regulation Y,
Appendix C) (Policy Statement) and an exemption from the Board’s risk-based and leverage
capital adequacy guidelines for BHCs (Regulation Y, Appendices A and D) (Capital Guidelines).
The proposal would
•

Increase the asset size threshold from $150 million to $500 million in consolidated
assets for determining whether a BHC would qualify for the Policy Statement and an
exemption from the Capital Guidelines;

•

Modify the qualitative criteria used in determining whether a BHC that is under the
asset size threshold nevertheless would not qualify for the Policy Statement or the
exemption from the Capital Guidelines; and

•

Clarify the treatment under the Policy Statement of subordinated debt associated with
trust preferred securities.

The Board must receive comments by November 7, 2005. Please address comments to
Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

-2and Constitution Avenue, N.W., Washington, DC 20551. Also, you may mail comments
electronically to regs.comments@federalreserve.gov. All comments should refer to Docket No.
R-1235.
The public can also view and submit comments on proposals by the Board and other federal agencies from the www.regulations.gov web site.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 53320–23, Vol. 70, No. 173 of the
Federal Register dated September 8, 2005, is attached.
MORE INFORMATION
For more information, please contact Dorsey Davis, Banking Supervision Department,
(214) 922-6051. Previous Federal Reserve Bank notices are available on our web site at
www.dallasfed.org/banking/notices/index.html or by contacting the Public Affairs Department
at (214) 922-5254.

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Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules
You may submit comments,
identified by Docket No. R–1235, by any
of the following methods:
• Agency Web Site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
regs.comments@federalreserve.gov.
Include docket number in the subject
line of the message.
• FAX: 202/452–3819 or 202/452–
3102.
• Mail: Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at http://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons.
Accordingly, your comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper in Room MP–500 of the Board’s
Martin Building (20th and C Streets,
NW.) between 9 a.m. and 5 p.m. on
weekdays.
ADDRESSES:

FEDERAL RESERVE SYSTEM
12 CFR Part 225
[Regulation Y; Docket No. R–1235]

Capital Adequacy Guidelines for Bank
Holding Companies; Small Bank
Holding Company Policy Statement;
Definition of a Qualifying Small Bank
Holding Company
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule with request for
comments.
AGENCY:

SUMMARY: The Board of Governors of the
Federal Reserve System (Board) is
proposing to raise the asset size
threshold and revise the other criteria
for determining whether a bank holding
company (BHC) qualifies for the Board’s
Small Bank Holding Company Policy
Statement (Regulation Y, Appendix C)
(Policy Statement) and an exemption
from the Board’s risk-based and leverage
capital adequacy guidelines for BHCs
(Regulation Y, Appendices A and D)
(Capital Guidelines). The proposal
would increase the asset size threshold
from $150 million to $500 million in
consolidated assets for determining
whether a BHC would qualify for the
Policy Statement and an exemption
from the Capital Guidelines; modify the
qualitative criteria used in determining
whether a BHC that is under the asset
size threshold nevertheless would not
qualify for the Policy Statement or the
exemption from the Capital Guidelines;
and clarify the treatment under the
Policy Statement of subordinated debt
associated with trust preferred
securities.
DATES: Comments must be received no
later than November 7, 2005.

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FOR FURTHER INFORMATION CONTACT:

Barbara Bouchard, Deputy Associate
Director (202/452–3072 or
barbara.bouchard@frb.gov), Mary
Frances Monroe, Manager (202/452–
5231 or mary.f.monroe@frb.gov),
William Tiernay, Supervisory Financial
Analyst (202/872–7579 or
william.h.tiernay@frb.gov), Supervisory
and Risk Policy; Robert Maahs,
Manager, Regulatory Reports (202/872–
4935 or robert.maahs@frb.gov); or
Robert Brooks, Supervisory Financial
Analyst (202/452–3103 or
robert.brooks@frb.gov), Applications,
Division of Banking Supervision and
Regulation; or Mark Van Der Weide,
Senior Counsel (202/452–2263 or
mark.vanderweide@frb.gov), Legal
Division. For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), contact 202/263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
The Board issued the Policy
Statement in 1980 to facilitate the
transfer of ownership of small
community-based banks in a manner
that is consistent with bank safety and
soundness. The Board generally has
discouraged the use of debt by BHCs to
finance the acquisition of banks or other

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companies because high levels of debt at
a BHC can impair the ability of the BHC
to serve as a source of strength to its
subsidiary banks. The Board has
recognized, however, that small BHCs
have less access to equity financing than
larger BHCs and that, therefore, the
transfer of ownership of small banks
often requires the use of acquisition
debt. Accordingly, the Board adopted
the Policy Statement to permit the
formation and expansion of small BHCs
with debt levels that are higher than
what would be permitted for larger
BHCs. The Policy Statement contains
several conditions and restrictions that
are designed to ensure that small BHCs
that operate with the higher levels of
debt permitted by the Policy Statement
do not present an undue risk to the
safety and soundness of their subsidiary
banks.
Currently, the Policy Statement
applies to BHCs with pro forma
consolidated assets of less than $150
million that (i) are not engaged in any
nonbanking activities involving
significant leverage; (ii) are not engaged
in any significant off-balance sheet
activities; and (iii) do not have a
significant amount of outstanding debt
that is held by the general public
(‘‘qualifying small BHCs’’). Under the
Policy Statement, qualifying small BHCs
may use debt to finance up to 75 percent
of the purchase price of an acquisition
(that is, they may have a debt-to-equity
ratio of up to 3:1), but are subject to a
number of ongoing requirements. The
principal ongoing requirements are that
a qualifying small BHC (i) reduce its
parent company debt in such a manner
that all debt is retired within 25 years
of being incurred; (ii) reduce its debt-toequity ratio to .30:1 or less within 12
years of the debt being incurred; (iii)
ensure that each of its subsidiary
insured depository institutions is well
capitalized; and (iv) refrain from paying
dividends until such time as it reduces
its debt-to-equity ratio to 1.0:1 or less.
The Policy Statement also specifically
provides that a qualifying small BHC
may not use the expedited applications
procedures or obtain a waiver of the
stock redemption filing requirements
applicable to BHCs under the Board’s
Regulation Y (12 CFR 225.4(b), 225.14,
and 225.23) unless the BHC has a pro
forma debt-to-equity ratio of 1.0:1 or
less.
The Board adopted the risk-based
capital guidelines in 1989 to assist in
the assessment of the capital adequacy
of BHCs. The risk-based capital
guidelines establish for BHCs minimum
ratios of tier 1 capital and total capital
to risk-weighted assets. One of the
Board’s principal objectives in adopting

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Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules
the risk-based capital guidelines was to
make regulatory capital requirements
more sensitive to differences in risk
profiles among banking organizations.
Supplemental to the risk-based capital
guidelines, the Board in 1991 adopted
the tier 1 leverage measure, a minimum
ratio of tier 1 capital to total assets, to
further assist in the assessment of the
capital adequacy of BHCs with the
principal objective of placing a
constraint on the maximum degree to
which a banking organization can
leverage its equity capital base. Because
qualifying small BHCs may, consistent
with the Policy Statement, operate at a
level of leverage that generally is
inconsistent with the Capital
Guidelines, the Capital Guidelines
provide an exemption for qualifying
small BHCs.
II. The Proposal
New Asset Threshold of $500 Million
When the Board issued the Policy
Statement in 1980, $150 million in
consolidated assets represented a
reasonable threshold for identifying
those BHCs that might need additional
flexibility for the purpose of enabling
the transfer of ownership of small
community-based banks. However, over
the last two decades, inflation, industry
consolidation, and the normal asset
growth of BHCs have caused the $150
million threshold to lose much of its
relevance.
For these reasons, the Board proposes
to increase the asset size threshold for
qualifying small BHCs in the Policy
Statement from $150 million to $500
million in pro forma consolidated
assets. While approximately 55 percent
of all top tier BHCs currently qualify for
the Policy Statement, under this
proposal that number would increase to
85 percent and would encompass
approximately 4,400 BHCs. The Board
notes that raising the threshold to $500
million, as proposed, goes well beyond
the level (approximately $340 million)
that would be appropriate to adjust the
current threshold for inflation since the
Board adopted the Policy Statement.
The Board believes that raising the
threshold to $500 million represents an
appropriate balance between the goals
of facilitating the transfer of ownership
of small banks, on the one hand, and
ensuring capital adequacy and access to
necessary supervisory information on
the other hand. The proposal also would
make a conforming change to the asset
size threshold in the Capital Guidelines.
The Board does not believe that
raising the asset threshold above $500
million would be appropriate at this
time. BHCs that have more than $500

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million in consolidated assets typically
have sufficient access to equity markets
and other sources of funding to enable
them to finance acquisitions with a
lower proportion of debt-to-equity than
smaller BHCs.
Other Criteria for Identifying a
Qualifying Small BHC
As noted above, a BHC currently
qualifies for the Policy Statement and is
exempt from the Capital Guidelines
only if the BHC falls below the asset
threshold and (i) does not engage in any
nonbanking activities involving
significant leverage; (ii) does not engage
in any significant off-balance sheet
activities; and (iii) does not have a
significant amount of outstanding debt
that is held by the general public. The
Board also is proposing to revise these
qualitative criteria for determining
whether a small BHC qualifies for the
Policy Statement and generally is
exempt from the Capital Guidelines.
Specifically, the Board proposes to
amend these criteria to provide that a
BHC with less than $500 million in
consolidated assets does not qualify for
the Policy Statement (and is subject to
the Capital Guidelines) if the BHC (i) is
engaged in significant nonbanking
activities either directly or through a
nonbank subsidiary; (ii) conducts
significant off-balance sheet activities,
including securitizations or managing or
administering assets for third parties,
either directly or through a nonbank
subsidiary; or (iii) has a material amount
of debt or equity securities (other than
trust preferred securities) outstanding
that are registered with the Securities
and Exchange Commission (SEC). The
proposal also would make conforming
changes to the Capital Guidelines.
The Board expects that few BHCs
with consolidated assets of less than
$500 million would meet any of these
criteria. In those cases where a BHC’s
management is uncertain whether the
BHC meets any of these criteria,
management should consult with the
BHC’s appropriate Reserve Bank.
The Board believes these changes to
the eligibility criteria under the Policy
Statement are necessary or appropriate
to reflect changes in the banking
industry over the last two decades,
including the nature of operations of
many small BHCs. The enactment of the
Gramm-Leach-Bliley Act in 1999
expanded significantly the range of
nonbanking activities in which BHCs
may engage, both directly and through
their nonbank subsidiaries. Therefore,
the Board is proposing to revise the
criteria so as to exclude from the Policy
Statement any BHC that engages in
significant nonbanking activities or off-

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53321

balance sheet activities, either directly
or through a nonbank subsidiary. The
more limiting reference to significantly
leveraged nonbanking activities would
be deleted, since nonleveraged activities
may also entail significant risk, such as
operational risk. The examples
provided—securitizations and managing
or administering assets for third
parties—highlight two areas of offbalance sheet activities that may involve
substantially larger operations and risk
than balance sheet measures would
indicate. These examples are not
intended to be exclusive and other
activities may well present similar
concerns. The revision of the final
criterion to exclude from the Policy
Statement any BHC that has outstanding
a material amount of SEC-registered
debt or equity securities reflects the fact
that SEC registrants typically exhibit a
degree of complexity of operations and
access to multiple funding sources that
warrants excluding them from the
Policy Statement and subjecting them to
consolidated capital requirements.
Moreover, the application of
consolidated reporting requirements to
these BHCs should not impose
significant additional burden, as they
are required to have consolidated
financial statements for SEC reporting
purposes.
The Board is of the view that the
amended criteria represent a prudent
balance of its interest in expanding the
Policy Statement treatment to a larger
pool of small BHCs, while ensuring that
larger and more complex BHCs remain
well capitalized and continue to serve
as a source of strength to their
subsidiary banks.
In addition, the Board is proposing to
amend the Policy Statement and the
Capital Guidelines to make explicit the
Federal Reserve’s existing authority to
require on a case by case basis that a
qualifying small BHC maintain
consolidated capital when such action
is warranted for supervisory reasons.
In addition to the foregoing, a
qualifying small BHC may voluntarily
elect to comply with the Capital
Guidelines.
Treatment of Subordinated Debt
Associated With Trust Preferred
Securities
The Policy Statement currently does
not address the treatment of
subordinated debt that is issued in
connection with the issuance of trust
preferred securities.1 Currently, for
1 Trust preferred securities are undated
cumulative preferred securities issued out of a
special purpose entity, usually in the form of a

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Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules

purposes of the Policy Statement, such
subordinated debt on the parent
company balance sheet is not treated as
debt; however, the cash-flow impact of
the subordinated debt is included in the
Board’s review of the financial
condition of a BHC. The Board is now
proposing to clarify that subordinated
debt associated with trust preferred
securities would be considered debt for
most purposes under the Policy
Statement. In particular, such
subordinated debt would be included as
debt in determining whether (i) a
qualifying small BHC’s acquisition debt
is 75 percent or less of the purchase
price; or (ii) a qualifying small BHC’s
debt-to-equity ratio is greater than 1.0:1
(the ratio above which a qualifying
small BHC is subject to dividend
restrictions and is not permitted to use
the expedited applications processing
procedures or obtain a waiver of stock
redemption filing requirements under
Regulation Y).2 However, in order to
provide for more equitable treatment
between qualifying small BHCs and
larger BHCs that are subject to the
Capital Guidelines,3 a qualifying small
BHC may exclude from debt an amount
of subordinated debt associated with
trust preferred securities equaling up to
25 percent of a small BHC’s equity (as
defined in the Policy Statement), less
parent company goodwill in
determining compliance with these
requirements.
In addition, in order to give qualifying
small BHCs sufficient time to conform
their debt structures, the Board is
proposing to provide for a five-year
transition period during which
subordinated debt associated with trust
preferred securities issued on or prior to
the publication date of this proposed
rule would not be considered debt
under the Policy Statement. Such a
transition period generally would be
consistent with the five-year transition
period afforded to larger BHCs to meet
the Board’s risk-based capital guidelines
with respect to trust preferred
securities.4 However, in the event that a
qualifying small BHC issues additional
subordinated debt associated with a
new issuance of trust preferred
trust, in which a BHC owns all of the common
securities. The special purpose entity’s sole asset is
a deeply subordinated note issued by the BHC that
typically has a fixed maturity of 30 years.
2 The Board also would consider subordinated
debt associated with the issuance of trust preferred
securities as covered by any supervisory debt
commitments with the Federal Reserve.
3 A BHC that is subject to the Capital Guidelines
generally may count an amount of qualifying trust
preferred securities as tier 1 capital up to 25 percent
of the sum of the BHC’s core 1 capital elements. 12
CFR part 225, appendix A, § II.A.1.b.
4 See 12 CFR part 225, appendix A, § II.A.1.b.ii.

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securities after the date of this proposed
rule, the temporary non-debt status of
all the qualifying small BHC’s existing
subordinated debt associated with trust
preferred securities would be
terminated.
In any event, subordinated debt
associated with trust preferred securities
would not be included as debt in
determining compliance with the 12year debt reduction and 25-year debt
retirement requirements of the Policy
Statement.
Small BHC Regulatory Reporting
In order to assist the Federal Reserve
in monitoring the financial health and
operations of BHCs, the Board requires
all BHCs to file certain reports with the
Federal Reserve. One of the most
important of the Federal Reserve
reporting requirements is the Financial
Statements for Bank Holding Companies
(FR Y–9 series of reports; OMB No.
7100–0128). Currently, BHCs with
consolidated assets of less than $150
million (and that also meet qualitative
criteria similar to those in the Policy
Statement) submit limited summary
parent-only financial data semiannually
on the FR Y–9SP. Currently, BHCs with
consolidated assets of $150 million or
more submit parent only financial data
on the FR Y–9LP and consolidated
financial data on the FR Y–9C quarterly.
In the near future, the Federal Reserve
plans to propose for comment revisions
to the FR Y–9 series of reports for 2006
(2006 proposal). Pending approval,
these revisions would include
increasing the FR Y–9SP reporting
threshold from $150 million to $500
million and conforming the FR Y–9SP
reporting exception criteria to the
proposed qualitative exception criteria
under the Policy Statement and the
Capital Guidelines. Under the 2006
proposal, BHCs that meet the criteria for
filing the FR Y–9SP would be exempt
from filing the FR Y–9LP and FR Y–9C.
Conversely, BHCs subject to the Capital
Guidelines, including small BHCs that
do not qualify under the revised Policy
Statement and qualifying small BHCs
that voluntarily elect to comply with the
Capital Guidelines, would file the FR Y–
9LP and the FR Y–9C on a quarterly
basis.
Comments
The Board seeks comments on all
aspects of this proposal. Interested
parties are encouraged to provide
comments on the proposed increase to
the asset threshold for the Policy
Statement and the Capital Guidelines,
and on whether the proposed $500
million threshold should be further
adjusted over time based upon an index

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Fmt 4702

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and, if so, what would constitute an
appropriate index for this purpose.
Interested parties also are encouraged to
provide comments on the proposed
qualitative criteria that would determine
whether the Policy Statement or the
Capital Guidelines apply to a BHC with
consolidated assets of less than $500
million.
Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), the Board has determined that
this proposed rule would not have a
significant impact on a substantial
number of small entities, as defined in
the Regulatory Flexibility Act. However,
the proposed rule would reduce
regulatory burden by exempting most
BHCs with total consolidated assets of
between $150 million and $500 million
from the application of the Board’s
Capital Guidelines. Moreover, although
the proposal would treat subordinated
debt associated with trust preferred
securities as debt for most purposes
under the Policy Statement, the
proposal provides a substantial five-year
transition period for subordinated debt
associated with trust preferred securities
issued on or prior to the publication
date of the proposed rule.
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1.), the Board
has reviewed this proposed rulemaking
under the authority delegated to the
Board by the Office of Management and
Budget. The Board has determined that
this proposed rule does not involve a
collection of information pursuant to
the provisions of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501
et seq.). As mentioned previously,
related amendments to the FR Y–9
series of reports will be proposed
separately for comment in the near
future.
Plain Language
Section 722 of the Gramm-LeachBliley Act requires the Federal banking
agencies to use ‘‘plain language’’ in all
proposed and final rules published after
January 1, 2000. In light of this
requirement, the Board has sought to
present the proposed rule in a simple
and straightforward manner. The Board
invites comments on whether there are
additional steps it could take to make
the rule easier to understand.
List of Subjects in 12 CFR Part 225
Administrative practice and
procedure, Banks, banking, Federal
Reserve System, Holding companies,

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Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules
Reporting and recordkeeping
requirements, Securities.
Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the
preamble, part 225 of chapter II of title
12 of the Code of Federal Regulations is
proposed to be amended as set forth
below:
PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL (REGULATION Y)
1. The authority citation for part 225
continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818,
1828(o), 1831i, 1831p–1, 1843( c)(8), 1844(b),
1972(1), 3106, 3108, 3310, 3331–3351, 3907,
and 3909; 15 U.S.C. 6801 and 6805.

2. Appendix A to part 225 is amended
as follows:
a. In section I, the fifth undesignated
paragraph is revised.
b. In section I, footnote 4 is removed
and reserved.
Appendix A to Part 225—Capital
Adequacy Guidelines for Bank Holding
Companies: Risk Based Measure
I. * * *

*

*

*

*

*

The risk-based guidelines apply on a
consolidated basis to any bank holding
company with consolidated assets of $500
million or more. The risk-based guidelines
also apply on a consolidated basis to any
bank holding company with consolidated
assets of less than $500 million if the holding
company (i) is engaged in significant
nonbanking activities either directly or
through a nonbank subsidiary; (ii) conducts
significant off-balance sheet activities
(including securitization and asset
management or administration) either
directly or through a nonbank subsidiary; or
(iii) has a material amount of debt or equity
securities outstanding (other than trust
preferred securities) that are registered with
the Securities and Exchange Commission
(SEC). The Federal Reserve may apply the
risk-based guidelines at its discretion to any
bank holding company, regardless of asset
size, if such action is warranted for
supervisory purposes.

*

*
*
*
*
3. Appendix C to part 225 is amended
as follows:
a. In section 1, the first undesignated
paragraph is revised.
b. In section 1, footnote 1 is removed
and reserved.
c. In section 2.A., a new paragraph is
added after the first paragraph in
footnote 3.
Appendix C to Part 225—Small Bank
Holding Company Policy Statement
*

*

*

*

*

1. * * *
This policy statement applies only to bank
holding companies with pro forma
consolidated assets of less than $500 million
that (i) are not engaged in significant
nonbanking activities either directly or
through a nonbank subsidiary; (ii) do not
conduct significant off-balance sheet
activities (including securitization and asset
management or administration) either
directly or through a nonbank subsidiary;
and (iii) do not have a material amount of
debt or equity securities outstanding (other
than trust preferred securities) that are
registered with the Securities and Exchange
Commission. The Board may in its discretion
exclude any bank holding company,
regardless of asset size, from the policy
statement if such action is warranted for
supervisory purposes.

*

*

*

*

*

2. * * *
A. * * *
3* * *
Subordinated debt associated with trust
preferred securities generally would be
treated as debt for purposes of paragraphs 2C,
3A, 4Ai, and 4Bi of this policy statement. A
bank holding company, however, may
exclude from debt an amount of subordinated
debt associated with trust preferred securities
up to 25 percent of the holding company’s
equity (as defined below) less goodwill on
the parent company’s balance sheet in
determining compliance with the
requirements of such paragraphs of the
policy statement. In addition, a bank holding
company that has not issued subordinated
debt associated with trust preferred securities
after September 8, 2005, may exclude from
debt any subordinated debt associated with
trust preferred securities until September 8,
2010. Subordinated debt associated with
trust preferred securities will not be included
as debt in determining compliance with any
other requirements of this policy statement.

*

*

*

*

*

4. Appendix D to part 225 is amended as
follows:
a. In section I., paragraph b. is revised.
b. In section I.b., footnote 2 is removed and
reserved.

Appendix D to Part 225—Capital
Adequacy Guidelines for Bank Holding
Companies: Tier 1 Leverage Measure
I. * * *
b. The tier 1 leverage guidelines apply on
a consolidated basis to any bank holding
company with consolidated assets of $500
million or more. The tier 1 leverage
guidelines also apply on a consolidated basis
to any bank holding company with
consolidated assets of less than $500 million
if the holding company (i) is engaged in
significant nonbanking activities either
directly or through a nonbank subsidiary; (ii)
conducts significant off-balance sheet
activities (including securitization and asset
management or administration) either
directly or through a nonbank subsidiary; or
(iii) has a material amount of debt or equity
securities outstanding (other than trust
preferred securities) that are registered with
the Securities and Exchange Commission.

53323

The Federal Reserve may apply the tier 1
leverage guidelines at its discretion to any
bank holding company, regardless of asset
size, if such action is warranted for
supervisory purposes.

*

*

*

*

*

By order of the Board of Governors of the
Federal Reserve System, September 1, 2005.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 05–17740 Filed 9–7–05; 8:45 am]
BILLING CODE 6210–02–P


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102