[Federal Register Volume 76, Number 119 (Tuesday, June 21, 2011)]
[Rules and Regulations]
[Pages 35959-35963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14983]
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FEDERAL RESERVE SYSTEM
12 CFR Part 225
[Regulation Y; Docket No. R-1356]
Capital Adequacy Guidelines; Small Bank Holding Company Policy
Statement: Treatment of Subordinated Securities Issued to the United
States Treasury Under the Emergency Economic Stabilization Act of 2008
and the Small Business Jobs Act of 2010
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Final rule.
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SUMMARY: The Board is adopting a final rule that allows bank holding
companies that have made a valid election to be taxed under Subchapter
S of Chapter 1 of the U.S. Internal Revenue Code (S-Corp BHCs) and bank
holding companies organized in mutual form (Mutual BHCs) to include the
full amount of any subordinated debt securities issued to the U.S.
Department of the Treasury (Treasury) under the capital purchase
program (CPP), in tier 1 capital for purposes of the Board's risk-based
and leverage capital guidelines for bank holding companies, provided
that the Subordinated Securities will count toward the limit on the
amount of other restricted core capital elements includable in tier 1
capital; and allows bank holding companies that are subject to the
Board's Small Bank Holding Company Policy Statement (small bank holding
companies) and that are S-Corp BHCs or Mutual BHCs to exclude the CPP
Subordinated Securities from treatment as debt for purposes of the
debt-to-equity standard under the Small Bank Holding Company Policy
Statement (Policy Statement). The Board is also adopting, and
requesting comment on, an interim final rule that allows small bank
holding companies that are S-Corps or Mutual BHCs to exclude from
treatment as debt for purposes of the debt-to-equity standard under the
Policy Statement subordinated debt securities issued to the Treasury
through the Small Business Lending Fund established under the Small
Business Jobs Act of 2010.
DATES: The final rule will become effective on June 21, 2011. Comments
on allowing S-Corp BHCs and Mutual BHCs that issue SBLF Subordinated
Securities to the Treasury to exclude the securities from the
definition of debt under the Policy Statement are due by July 30, 2011.
FOR FURTHER INFORMATION CONTACT: Anna Lee Hewko, (202) 530-6260,
Assistant Director, Capital and Regulatory Policy, or Brendan G. Burke,
(202) Senior Supervisory Financial Analyst, Division of Banking
Supervision and Regulation; April C. Snyder, Counsel, (202) 452-3099,
or Benjamin W. McDonough, Counsel, (202) 452-2036, Legal Division;
Board of Governors of the Federal Reserve System, 20th Street and
Constitution Ave., NW., Washington, DC 20551. For the hearing impaired
only, Telecommunication Device for the Deaf (TDD), (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Background
On June 1, 2009, the Board issued an interim final rule (CPP
interim rule) (74 FR 26077) to allow bank holding companies that have
made a valid election to be taxed under Subchapter S of Chapter 1 of
the U.S. Internal Revenue Code (S-Corp BHCs) and bank holding companies
organized in mutual form (Mutual BHCs) to include the full amount of
any subordinated debt securities issued to the Treasury under the
capital purchase program (CPP Subordinated Securities) established by
Treasury under the Economic Stabilization Act of 2008 (EESA) \1\ in
tier 1 capital for purposes of the Board's risk-based and leverage
capital guidelines for bank holding companies (Capital Guidelines),\2\
provided that the Subordinated Securities would count toward the limit
on the amount of other restricted core capital elements includable in
tier 1 capital. The CPP interim rule also permitted bank holding
companies that are subject to the Board's Small Bank Holding Company
Policy Statement (Policy Statement) \3\ and that are S-Corps or Mutual
BHCs, to exclude the CPP Subordinated Securities from treatment as debt
for purposes of the debt-to-equity standard under the Policy Statement.
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\1\ Public Law 110-343, 122 Stat. 3765 (2008).
\2\ 12 CFR part 225, Appendices A and D.
\3\ 12 CFR part 225, Appendix C.
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The Board is now adopting the CPP interim final rule as a final
rule in substantially the same form, as discussed below. In addition,
for the reasons explained below, the Board is adopting as an interim
final rule a provision that would allow bank holding companies that are
subject to the Board's Policy Statement and that are S-Corp BHCs or
Mutual BHCs to exclude subordinated debt securities issued to the
Treasury through the Small Business Lending Fund established under the
Small Business Jobs Act of 2010 (SBLF Subordinated Securities) from
debt for purposes of the debt-to-equity standard under the Policy
Statement.
Capital Guidelines
Under the Troubled Asset Relief Program (TARP) established in the
Emergency Economic Stabilization Act of 2008 (EESA), Division A of Pub.
L. No. 110-343, 122 Stat. 3765 (2008), Treasury provided capital to
eligible banks, bank holding companies and savings associations
(collectively, banking organizations), as well as certain other
financial institutions (CPP).\4\ S-Corp BHCs generally could not
participate in the CPP through the issuance of Senior Perpetual
Preferred Stock because, under the Internal Revenue Code, S-Corp BHCs
may not issue more than one class of equity security. Bank holding
companies organized in mutual form also cannot issue Senior Perpetual
Preferred Stock
[[Page 35960]]
because of their mutual ownership structure.
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\4\ Through the CPP, Treasury invested in newly issued senior
perpetual preferred stock of banking organizations (Senior Perpetual
Preferred Stock) that are not S-Corps or organized in mutual form.
On June 1, 2009, the Board published a final rule on the capital
treatment of the Senior Perpetual Preferred Stock. See 74 FR 26081
(June 1, 2009).
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Under the CPP, Treasury purchased the CPP Subordinated Securities,
which rank senior to common stock but are subordinated to the claims of
depositors and other creditors unless such other claims are explicitly
made pari passu or subordinated to the Subordinated Securities.\5\
These terms were designed to facilitate S-Corp and Mutual BHC
participation in the CPP in a manner that is as economically comparable
as possible, consistent with the legal structure of S-Corp and Mutual
BHCs, the Board's capital adequacy guidelines, and the Internal Revenue
Code, to institutions that issued Senior Perpetual Preferred Stock to
the Treasury under the CPP.\6\
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\5\ This final rule accords the same capital treatment to
Subordinated Securities issued by Mutual BHCs as those issued by S-
Corp BHCs, and accordingly, any reference to a S-Corp BHC in the
notice shall also be deemed to include a Mutual BHC unless the
context otherwise requires.
\6\ The interest payments on the CPP Subordinated Securities are
tax deductible for shareholders of the issuing S-Corp and therefore
this interest rate is economically comparable (assuming a 35 percent
marginal tax rate) to the dividend payments on the Senior Preferred
Stock, which are not tax deductible.
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As with other securities issued to Treasury under the CPP, and as
described in further detail in the interim final rule, the CPP
Subordinated Securities included certain features designed to make them
attractive to a wide array of generally sound S-Corp and mutual banking
organizations and to encourage such companies to replace such
securities with private capital once the financial markets return to
more normal conditions. In particular, the CPP Subordinated Securities
bear an interest rate that increases substantially five years after
issuance.
Under the Board's current Capital Guidelines, the CPP Subordinated
Securities generally would be ineligible for tier 1 capital treatment
because they are subordinated debt, but would be eligible for inclusion
in tier 2 capital.\7\ However, the Subordinated Securities were
purposefully structured to have features that are very close to those
of the subordinated notes underlying trust preferred securities that
qualify for tier 1 capital as a restricted core capital element for
bank holding companies (qualifying trust preferred securities).\8\
Moreover, the CPP Subordinated Securities could not be redeemed without
the approval of the Federal Reserve, to ensure redemptions are
consistent with safety and soundness.\9\ Additionally, the CPP
Subordinated Securities were issued to Treasury as part of a nationwide
program to increase capital available to eligible banking organizations
that are in generally sound financial condition in order to promote
stability in the financial markets and the banking industry as a whole.
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\7\ See 12 CFR part 225, Appendix A, sections II.A.2. and
II.A.2.d.
\8\ For example, like such junior subordinated notes, the CPP
Subordinated Securities were deeply subordinated and junior to the
claims of depositors and other creditors of the issuing bank holding
company. Furthermore, interest payable on the CPP Subordinated
Securities could be deferred by the issuing S-Corp BHC for up to 20
quarters without creating an event of default and the CPP
Subordinated Securities were issued with a maturity of 30 years,
which is the same minimum term required for such junior subordinated
notes. See 12 CFR part 225, Appendix A, section II.A.1.c.iv.
\9\ See 12 CFR part 225, Appendix A, section II.A.1.c.ii.(2).
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For these reasons and in order to support the participation of S-
Corp BHCs in the Capital Purchase Program, promote the stability of
banking organizations and the financial system, and help banking
organizations meet the credit needs of creditworthy customers, the
Board adopted the CPP interim rule to permit S-Corp BHCs that issued
CPP Subordinated Securities to the Treasury to include the full amount
of such securities in tier 1 capital for purposes of the Board's
Capital Guidelines, subject to certain limitations.\10\
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\10\ As explained in the interim final rule, an S-Corp BHC
issuing CPP Subordinated Securities must take into account the
amount of CPP Subordinated Securities in determining the amount of
other restricted core capital elements the company could include in
its tier 1 capital. Thus, for example, if the amount of Subordinated
Securities issued by an S-Corp BHC equaled or exceeded 25 percent of
the company's tier 1 capital elements, the company could not include
any other currently outstanding or future restricted core capital
elements in tier 1 capital, and any such restricted core capital
elements in the company's tier 1 capital elements could only be
included in tier 2 capital. See 74 FR 26077, 26079 (June 1, 2009).
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The Board received two comments on the CPP interim rule. Both
comments generally were in favor of the Board's action. One commenter
suggested that the Board extend the capital treatment provided by the
CPP interim rule to instruments with similar terms issued to private
entities. Another commenter expressed support for the CPP interim rule
generally and asked that the Board clarify in the final rule that the
capital treatment of the CPP interim rule would apply to all CPP
Subordinated Securities issued, whether before or after the publication
of the CPP interim rule.
As discussed in the CPP interim rule, the Board, as a matter of
prudential policy and practice, generally has not allowed subordinated
debt to be included in tier 1 capital, given the contractual
obligations they place on the issuing banking organization and
consequent limited ability to absorb losses. The Board remains
concerned that instruments with debt or debt-like features have limited
ability to absorb losses. However, as discussed above and in the CPP
interim rule, issuance of the CPP Subordinated Securities to Treasury
in connection with TARP was consistent with a strong public policy
objective, which was to increase the capital available to banking
organizations generally in a stressed economic environment and thereby
promote stability in the financial markets and the banking industry as
a whole, as well as facilitate the ability of banking organizations to
meet the needs of creditworthy households, businesses, and other
customers. In addition, as discussed above and in the CPP interim rule,
the terms and public policy considerations related to the CPP
Subordinated Securities mitigated supervisory concerns. These facts and
circumstanced, viewed in light of the unique, temporary, and
extraordinary nature of the CPP, countervailed in many respects the
Board's concerns with regard to the subordinated debt nature of the
securities. For these reasons and others related to subsequent
legislation, as described below, the Board has not extended the capital
treatment provided under the CPP interim rule to subordinated debt
other than the CPP Subordinated Securities.
Since the issuance of the CPP interim rule, Congress passed the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(DFA).\11\ Under section 171 of the DFA, the Board must establish
minimum risk-based and capital leverage requirements for bank holding
companies that are no less than the generally applicable minimum risk-
based and leverage capital requirements for insured depository
institutions. Under current generally applicable capital requirements
for insured depository institutions, subordinated debt cannot be
included in the tier 1 capital of insured depository institutions and
therefore as a general matter, could not be included in the tier 1
capital of bank holding companies. However, the DFA exempted from the
requirements of section 171 debt instruments issued by banks and bank
holding companies pursuant to EESA to the Treasury prior to October 4,
2010. Therefore, section of the DFA generally does not affect the
treatment in the CPP interim rule of CPP Subordinated Debt Securities,
although other subordinated
[[Page 35961]]
debt securities are subject to section 171 of the DFA.
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\11\ Public Law 111-203, 124 Stat. 1376 (2010).
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For the reasons above, the Board has adopted the CPP interim rule
as a final rule, clarifying that the provisions apply to all CPP
Subordinated Securities issued to Treasury prior to October 4, 2010, in
accordance with the DFA.
The Board expects S-Corp BHCs that issue CPP Subordinated
Securities, like all other bank holding companies, to hold capital
commensurate with the level and nature of the risks to which they are
exposed. In addition, the Board expects banking organizations that
issue CPP Subordinated Securities to appropriately incorporate the
obligations associated with the CPP Subordinated Securities into the
organization's liquidity and capital funding plans.
Small Bank Holding Company Policy Statement
CPP Subordinated Securities
In the CPP interim rule, in order to maintain competitive equality
between large and small bank holding companies, the Board also amended
the Policy Statement to allow bank holding companies that are subject
to the Policy Statement and that are S-Corp BHCs to exclude the
Subordinated Securities from debt for purposes of the debt-to-equity
standard under Policy Statement.\12\ Generally, bank holding companies
with less than $500 million in consolidated assets (small bank holding
companies) are not subject to the Capital Guidelines and instead are
subject to the Policy Statement.
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\12\ 12 CFR part 225, Appendix C.
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The Policy Statement limits the ability of a small bank holding
company to pay dividends if its debt-to-equity ratio exceeds certain
limits. However, the Policy Statement provides that small bank holding
companies may exclude from debt an amount of subordinated debt
associated with qualifying trust preferred securities up to 25 percent
of the bank holding company's equity (as defined in the Policy
Statement), less goodwill on the parent company's balance sheet, in
determining compliance with the requirements of certain provisions of
the Policy Statement.\13\ The practical effect of excluding the CPP
Subordinated Securities from debt for purposes of the Policy Statement
is to allow issuance of CPP Subordinated Securities by small bank
holding companies without exceeding the debt-to-equity ratio standard
that would disallow the payment of dividends by such small bank holding
companies. In turn, this allows small bank holding companies that issue
CPP Subordinated Securities to downstream Treasury's investment in the
form of the CPP Subordinated Securities as additional common stock to
subsidiary depository institutions (that counts as tier 1 capital of
the depository institutions) and to pay dividends to the small bank
holding company's shareholders to the extent appropriate and permitted
by the Federal Reserve.
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\13\ 12 CFR part 225, Appendix C, section 2, n. 3.
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Because the CPP Subordinated Securities and the junior subordinated
notes underlying qualifying trust preferred securities have very
similar features, and to facilitate the participation of small bank
holding companies in the Capital Purchase Program, the Board adopted
the CPP interim rule to allow small bank holding companies that are S-
Corp BHCs to exclude the CPP Subordinated Securities from the
definition of debt for purposes of the debt-to-equity ratio standard
under the Policy Statement. The factors and considerations discussed
above with respect to the Board's treatment of the CPP Subordinated
Securities under its Capital Adequacy Guidelines also apply equally to
the Board's decision to modify the Policy Statement in this manner.
Section 171 of the DFA, by its terms, does not apply to any small
bank holding company that is subject to the Policy Statement as in
effect on May 19, 2010. The CPP Subordinated Securities may be excluded
from the definition of debt under the Policy Statement as in effect on
May 19, 2010. Therefore, S-Corp BHCs and Mutual BHCs subject to the
Policy Statement as in effect on May 19, 2010, are not subject to the
requirements of section 171 and may under the final rule continue to
exclude the CPP Subordinated Securities from debt.
SBLF Subordinated Securities
Under the Small Business Jobs Act of 2010 (SBJA),\14\ a $30 billion
Small Business Lending Fund (SBLF) was established to facilitate
lending to small business by banking organizations with less than $10
billion in consolidated assets. The increased lending would be enabled
through capital investments by Treasury in these banking organizations.
The resulting rise in availability of credit to small businesses is
intended to counteract the effects of the financial crisis on lending
to small businesses and encourage increased hiring by small businesses.
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\14\ Public Law 111-240, 124 Stat. 2504 (2010).
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Treasury has established term sheets for the issuance of
subordinated securities by S-Corp BHCs and Mutual BHCs that are
eligible for the SBLF program, with terms and structure similar to the
CPP Subordinated Securities. The SBLF Subordinated Securities, like the
CPP Subordinated Securities, are deeply subordinated, cannot be
redeemed by a bank holding company issuer without the permission of the
Federal Reserve, and cannot provide for accelerated interest except in
liquidation or bankruptcy.\15\ Furthermore, the SBLF Subordinated
Securities, like the CPP Subordinated Securities, are issued to
Treasury as part of a nationwide program to provide capital to eligible
banking organizations that are in generally sound financial condition
in order to increase the capital available for lending to small
businesses, thereby mitigating the ongoing effects of the financial
crisis on small businesses and promoting financial stability.
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\15\ The SBLF Subordinated Securities, like the CPP Securities,
bear an interest step-up feature. This feature is designed in
accordance with the SBJA. The SBLF Subordinated Securities, unlike
the CPP Subordinated Securities that had a maturity of 30 years,
have a stated maturity of 10 years. However, as with the CPP
Subordinated Securities, for public policy reasons, the step-up
feature is designed to encourage the issuer to replace the
government investment with private capital at a point in time prior
to the stated maturity. The term sheets for SBLF Subordinated
Securities are available on Treasury's Web site at http://www.treasury.gov/resource-center/sb-programs/Pages/Overview-for-S-Corporation-Banks-and-Mutual-Institutions.aspx.
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Based on these facts and circumstances, the Board has concluded
that the SBLF Subordinated Securities are in terms and substance
substantially equivalent to the CPP Subordinated Securities and may be
excluded from debt under the Policy Statement as in effect on May 19,
2010, on the same basis and for the same reasons as described above.
The Board therefore has approved an interim final rule for public
comment that allows S-Corp and mutual bank holding companies that issue
SBLF Subordinated Securities to the Treasury to exclude the securities
from the definition of debt under the Policy Statement.
The Board requests comment on allowing S-Corp BHCs and Mutual BHCs
to exclude the SBLF Subordinated Securities from debt under the Policy
Statement.
Administrative Procedure Act
As discussed above and in the interim final rule, the Board found
good cause for issuing the CPP interim rule and
[[Page 35962]]
making it effective on June 1, 2009, without opportunity to comment
before the effective date. The Board has considered comments that were
submitted after the publication of the final rule and for the reasons
described above, adopted the final rule for CPP Subordinated Securities
substantially in the form of the interim final rule.
Pursuant to sections 553(b) and (d) of the Administrative Procedure
Act (5 U.S.C. Sec. Sec. 553(b) and (d)), the Board also finds that
there is good cause for issuing this interim final rule with respect to
the SBLF Securities and making the rule effective on June 21, 2011, and
that it is impracticable, unnecessary, or contrary to the public
interest to issue a notice of proposed rulemaking. The Board is
requesting public comment on the interim final rule.
As explained, the SBLF Subordinated Securities are substantially
equivalent to the CPP Subordinated Securities in terms and substance.
Furthermore, the Board has adopted the interim final rule in light of
the important policy considerations of the SBLF program and to help
address the continued effects of the financial crisis and recession on
small businesses. The rule will allow S-Corp BHCs that are subject to
the Policy Statement to exclude the SBLF Subordinated Securities from
debt for purposes of the debt-to-equity ratio standard of the Policy
Statement. This will help counteract the effects of the recent
financial crisis on lending to small businesses and promote stability
in the banking system as well as economic growth through increased
availability of credit to small businesses.
The Board believes it is important to provide S-Corp BHCs that are
subject to the Policy Statement immediately with guidance concerning
the capital treatment of the SBLF Subordinated Securities so that they
may make appropriate judgments concerning the extent of their
participation in the SBLF program and to provide S-Corp BHCs with
immediate certainty concerning the treatment of SBLF Subordinated
Securities under the Policy Statement.
Regulatory Flexibility Act
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 rulemaking.\16\ Under regulations issued by the
Small Business Administration,\17\ a small entity includes a bank
holding company with assets of $175 million or less (a small bank
holding company). As of December 31, 2010, there were approximately
4,493 small bank holding companies.
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\16\ See 5 U.S.C. 603(a).
\17\ See 13 CFR 121.201.
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The purpose of the final rule for CPP Subordinated Securities, like
the interim final rule, is to facilitate participation in the CPP for
S-Corp and Mutual BHCs, increase capital available to banking
organizations, and promote stability in the financial markets and
banking industry. Similarly, the purpose of the interim final rule for
SBLF Subordinated Securities is to facilitate participation by S-Corp
BHCs and Mutual BHCs in the SBLF program, thereby making more capital
available for small business lending and alleviate the effects of the
financial crisis and economic downturn on lending to small businesses.
As a general matter, the Capital Guidelines apply only to a bank
holding company that has consolidated assets of $500 million or more.
Therefore, the final rule, like the CPP interim rule, would not affect
small bank holding companies. Furthermore, the final rule has no new
effect on small bank holding companies that were applicants to the CPP
and excluded CPP Subordinated Securities from the definition of debt
under the Policy Statement pursuant to the CPP interim rule, which
reduced burden and benefited small bank holding companies, as explained
in the CPP interim rule. Therefore, the Board believes adoption of the
final rule for CPP Subordinated Securities will not result in a
significant economic impact on small bank holding companies.
The changes to the Policy Statement under the interim final rule
for SBLF Subordinated Securities will also reduce burden and benefit
small bank holding companies. By allowing them to exclude the SBLF
Subordinated Securities from treatment as debt for purposes of the
debt-to-equity standard under the Policy Statement, issuance of the
subordinated securities to Treasury would have a neutral effect on the
ability of the issuing small bank holding company to issue dividends or
make acquisitions with regard to its debt-to-equity ratio. Furthermore,
the interim final rule does not appear to duplicate, overlap, or
conflict with any other Federal rules. Therefore, the Board believes
that the interim final rule will not result in a significant economic
impact on a substantial number of small entities. Nonetheless, the
Board seeks comment on whether the interim final rule would impose
undue burdens on, or have unintended consequences for, small banking
organizations, and whether there are ways such potential burdens or
consequences could be minimized in a manner consistent with the purpose
of the interim final rule.
Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3506), the Board has reviewed the final rule and
interim final rule to assess any information collections. There are no
collections of information as defined by the Paperwork Reduction Act in
the final rule or interim final rule.
Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102,
requires the Federal banking agencies to use plain language in all
proposed and final rules published after January 1, 2000. The Board
invites comment on how to make the interim final rule easier to
understand. For example:
Have we organized the material to suit your needs? If not,
how could the rule be more clearly stated?
Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
Do the regulations contain technical language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes would make the regulation easier to
understand?
Would more, but shorter, sections be better? If so, which
sections should be changed?
What else could we do to make the regulation easier to
understand?
List of Subjects in 12 CFR Part 225
Administrative practice and procedure, Banks, Banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
Authority and Issuance
Accordingly, the interim rule amending 12 CFR part 225 which was
published at 74 FR 26077 on June 1, 2009, is adopted as a final rule
with the following changes:
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
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, 3906,
[[Page 35963]]
3907, 3909, and 5371; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
0
2. Appendix A to part 225 is amended by revising section II.A.1.a.iv.,
paragraph (5), to read as follows:
Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure
* * * * *
II. * * *
A. * * *
1. * * *
a. * * *
iv. * * *
(5) Subordinated debentures issued prior to October 4, 2010, to
the Treasury under the TARP (TARP Subordinated Securities)
established by the EESA by a bank holding company that has made a
valid election to be taxed under Subchapter S of Chapter 1 of the
U.S. Internal Revenue Code (S-Corp BHC) or by a bank holding company
organized in mutual form (Mutual BHC).
* * * * *
0
3. In appendix C to part 225, revise paragraph 3 in footnote 3 to
section 2 to read as follows:
Appendix C to Part 225--Small Bank Holding Company Policy Statement
* * * * *
2. Ongoing Requirements
\3\ * * *
In addition, notwithstanding any other provision of this policy
statement and for purposes of compliance with paragraphs 2.C., 3.A.,
4.A.i, and 4.B.i. of this policy statement, both a bank holding
company that is organized in mutual form and a bank holding company
that has made a valid election to be taxed under Subchapter S of
Chapter 1 of the U.S. Internal Revenue Code may exclude from debt
subordinated debentures issued to the United States Department of
the Treasury under (i) the Troubled Asset Relief Program established
by the Emergency Economic Stabilization Act of 2008, Division A of
Public Law 110-343, 122 Stat. 3765 (2008), and (ii) the Small
Business Lending Fund established by the Small Business Jobs Act of
2010, Title IV of Public Law 111-240, 124 Stat. 2504 (2010).
* * * * *
By order of the Board of Governors of the Federal Reserve
System, June 13, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-14983 Filed 6-20-11; 8:45 am]
BILLING CODE 6210-01-P