The Federal Reserve Board announced on October 16 the adoption of an interim final rule that will allow bank holding companies to include in their Tier 1 capital without restriction the senior perpetual preferred stock issued to the Treasury Department under the capital purchase program announced by the Treasury on October 14. Treasury established the capital purchase program under the Emergency Economic Stabilization Act of 2008, which became law on October 3. Certain features of the preferred stock as proposed by Treasury, such as the step up in rate from five to nine percent after five years, would normally have prevented the preferred shares from counting as Tier 1 capital.
The interim rule will be effective as of October 17. The Board is, however, seeking public comment on the interim rule. Comments must be submitted by November 21.