The Federal Reserve Board has published for comment proposed amendments to Regulation Y that (1) establish the criteria for determining whether a company is “predominantly engaged in financial activities” and (2) define the terms “significant nonbank financial company” and “significant bank holding company” for purposes of Title I of the Dodd-Frank Act. These terms are relevant to various provisions of Title I of the Dodd-Frank Act, including Section 113, which authorizes the Financial Stability Oversight Council, or FSOC, to designate a nonbank financial company for supervision by the Federal Reserve Board if the FSOC determines that the company could pose a threat to the financial stability of the United States. The FSOC recently requested comment on a proposed rule to implement Section 113 of the Dodd-Frank Act.

More specifically, the Federal Reserve Board’s proposed rule establishes the requirements for determining if a company is “predominantly engaged in financial activities.” Under the Dodd-Frank Act, a company generally can be designated by the FSOC only if 85 percent or more of the company’s revenues or assets are related to activities that have been determined to be financial in nature under the Bank Holding Company Act.

As mentioned, the Federal Reserve Board’s proposed rule defines the terms “significant nonbank financial company” and “significant bank holding company.” Among the factors the FSOC must consider in determining whether to designate a nonbank financial company for supervision by the Federal Reserve Board is the extent and nature of the company’s transactions and relationships with other “significant” nonbank financial companies and “significant” bank holding companies. Under the proposal, a firm would be considered “significant” if it has $50 billion or more in total consolidated assets or had been designated by the FSOC as systemically important.

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