On November 5, 2014, the US Board of Governors of the Federal Reserve System (“Federal Reserve Board”) issued a final rulemaking that establishes concentration limits for large financial companies. The final rule implements Section 622 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will be effective January 1, 2015.
The final rulemaking largely follows the initial proposal in May 2014. Generally, the rule prohibits a financial company from merging, acquiring, or otherwise combining with another company unless the combined organizations’ ratio of financial liabilities of financial companies as a whole remains below 10%. The final rule creates an exemption to allow companies to still engage in securitization transactions even if the limit has been reached.
Under the rule, liabilities are defined as the difference between adjusted
risk-weighted assets and total regulatory capital. Companies subject to the rule include bank holding companies, savings and loan holding companies, foreign banking organizations (“FBOs”), depository institutions and companies that control insured depositary institutions, and nonbank financial companies designated as systemically important by the Financial Stability Oversight Council.
The final rule is available at: