[Federal Register Volume 76, Number 26 (Tuesday, February 8, 2011)]
[Notices]
[Pages 6756-6757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2717]
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Notices
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains documents other than rules
or proposed rules that are applicable to the public. Notices of hearings
and investigations, committee meetings, agency decisions and rulings,
delegations of authority, filing of petitions and applications and agency
statements of organization and functions are examples of documents
appearing in this section.
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Federal Register / Vol. 76, No. 26 / Tuesday, February 8, 2011 /
Notices
[[Page 6756]]
FINANCIAL STABILITY OVERSIGHT COUNCIL
Recommendations Regarding Modifications to the Concentration
Limit on Large Financial Companies
AGENCY: Financial Stability Oversight Council.
ACTION: Notice and request for comment.
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SUMMARY: Section 622 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Act'' or ``Dodd-Frank Act'') establishes a
financial sector concentration limit that generally prohibits a
financial company \1\ from merging or consolidating with, acquiring all
or substantially all of the assets of, or otherwise acquiring control
of, another company if the resulting company's consolidated liabilities
would exceed 10 percent of the aggregate consolidated liabilities of
all financial companies.\2\ This concentration limit is intended, along
with a number of other provisions in the Dodd-Frank Act, to promote
financial stability and address the perception that large financial
institutions are ``too big to fail.'' Section 622 of the Act also
requires the Financial Stability Oversight Council (the ``Council'')
to: (i) Complete a study of the extent to which the concentration limit
would affect financial stability, moral hazard in the financial system,
the efficiency and competitiveness of United States financial firms and
financial markets, and the cost and availability of credit and other
financial services to households and businesses in the United States;
and (ii) make recommendations regarding any modifications to the
concentration limit that the Council determines would more effectively
implement section 622.\3\ On January 18, 2011, the Council approved and
issued its concentration limit study and the recommendations on how to
effectively implement section 622. The Council seeks public comment on
the Council recommendations described below. The Council will review
and, if appropriate, revise its recommendations in response to the
public comments it receives.
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\1\ Section 622's concentration limit applies only to a
``financial company,'' which is defined as: (i) An insured
depository institution; (ii) a bank holding company; (iii) a savings
and loan holding company; (iv) a company that controls an insured
depository institution; (v) a nonbank financial company supervised
by the Board of Governors of the Federal Reserve System under title
I of the Dodd-Frank Act; and (vi) a foreign bank or company that is
treated as a bank holding company for purposes of the Bank Holding
Company Act.
\2\ Public Law 111-203, 124 Stat. 1376 (2010). We refer to the
limit established by section 622 generally as the ``concentration
limit.'' This concentration limit was adopted as a new section 14 to
the Bank Holding Company Act of 1956 (the ``BHC Act'') (to be
codified at 12 U.S.C. 1852).
\3\ See 12 U.S.C. 1852(e).
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DATES: Comments must be received on or before March 10, 2011.
ADDRESSES: Interested persons are invited to submit comments regarding
this notice according to the instructions below. All submissions must
refer to the document title. The Council encourages the early
submission of comments.
Electronic Submission of Comments. Interested persons must submit
comments electronically through the Federal eRulemaking Portal at
http://www.regulations.gov. Electronic submission of comments allows
the commenter maximum time to prepare and submit a comment, ensures
timely receipt, and enables the Council to make them available to the
public. Comments submitted electronically through the http://www.regulations.gov Web site can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Mail: Send comments to Financial Stability Oversight Council, Attn:
Amias Gerety, 1500 Pennsylvania Avenue, NW., Washington DC 20220.
Note: To receive consideration as public comments, comments
must be submitted through the methods specified above. Again, all
submissions must refer to the title of the notice.
Public Inspection of Public Comments. All properly submitted
comments will be available for inspection and downloading at http://www.regulations.gov.
Additional Instructions. In general comments received, including
attachments and other supporting materials, are part of the public
record and are immediately available to the public. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: For further information regarding this
Notice and Request for Comment contact Amias Gerety, Office of Domestic
Finance, Treasury, at (202) 622-8716 or Jeff King, Office of the
General Counsel, Treasury, at (202) 622-1978. All responses to this
Notice and Request for Comment should be submitted via http://www.regulations.gov to ensure consideration.
SUPPLEMENTARY INFORMATION:
I. Background
Pursuant to section 622 of the Dodd-Frank Act, on January 18, 2011,
the Council approved and issued the concentration limit study including
recommendations on how to effectively implement section 622. The full
text of the concentration limit study and recommendations can be viewed
at http://www.treasury.gov/initiatives/Documents/Study%20on%20Concentration%20Limits%20on%20Large%20Firms%2001-17-11.pdf.
The Council believes that the concentration limit will have a
positive impact on U.S. financial stability. Specifically, the Council
believes that the concentration limit will reduce the risks to U.S.
financial stability created by increased concentration arising from
mergers, consolidations or acquisitions involving the largest U.S.
financial companies. In addition, restrictions on future growth through
acquisition by the largest financial companies ultimately will prevent
acquisitions that could make these firms harder for their officers and
directors to manage, for the financial markets to understand and
discipline, and for regulators to supervise. The concentration limit,
as structured, could also have the beneficial effect of causing the
largest financial companies to either shed risk or raise capital to
reduce their liabilities so as to permit additional acquisitions under
the concentration limit. Such actions, other things equal, would tend
[[Page 6757]]
to reduce the chance that the firm would fail. Moreover, the
concentration limit should provide a more comprehensive limitation on
growth through acquisition than the 10 percent nationwide deposit cap
imposed by the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 \4\ because it also takes into account non-deposit
liabilities and off-balance sheet exposures, limiting incentives to
shift liabilities from deposits to potentially more volatile on and
off-balance-sheet liabilities.
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\4\ Public Law 103-328, 108 Stat. 2338 (1994). Currently, the
Riegle-Neal Act deposit cap prohibits a depository institution, bank
holding company or savings and loan holding company from acquiring
or merging with an insured depository institution in another state
if, after consummation of the acquisition, the applicant would
control more than 10 percent of the total amount of deposits of
insured depository institutions in the United States. See 12 U.S.C.
1828(c), 1843(i), and 1467a(e)(2).
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Although the Council expects the impact of the concentration limit
on moral hazard, competition, and the availability of credit in the
U.S. financial system to be generally neutral over the short- to
medium-term, over the long term the Council expects the concentration
limit to enhance the competitiveness of U.S. financial markets by
preventing an increased dominance of those markets by a very small
number of firms.
The Act specifically provides that the concentration limit set
forth in section 622 is ``subject to,'' and thus may be modified by,
the recommendations made by the Council.\5\ The Board of Governors of
the Federal Reserve System (the ``Board'') is thus required to adopt
regulations that reflect and are in accordance with the Council's
recommendations to implement section 622.\6\ The Board must prescribe
these rules no later than 9 months after completion of the Council's
study. The Board also is authorized to issue interpretations or
guidance regarding application of the concentration limit to an
individual financial company or financial companies generally.
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\5\ See 12 U.S.C. 1852(b).
\6\ See 12 U.S.C. 1852(d).
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To more effectively implement section 622, the Council has
recommended: (i) Modifying the statutory definition of ``liabilities''
for certain companies that do not currently calculate or report risk-
weighted assets; (ii) modifying the calculation of aggregate financial
sector liabilities to use a two-year rolling average instead of a
single year for purposes of calculating the denominator of the limit
and requiring the Board to publicly report, on an annual basis and no
later than July 1 of any calendar year, a final calculation of the
aggregate consolidated liabilities of all financial companies as of the
end of the preceding calendar year; and (iii) extending the exception
provided in the statute for the acquisition of failing banks to other
failing insured depository institutions. The specific recommendations
made by the Council are set forth below. For further information on the
recommendations, please see the full text of the concentration limit
study and recommendations at http://www.treasury.gov/initiatives/Documents/Study%20on%20Concentration%20Limits%20on%20Large%20Firms%2001-17-11.pdf. As noted above, the Council will review and, if appropriate,
revise its recommendations in response to the public comments it
receives.
II. Solicitation for Public Comments on the Concentration Limit
Recommendations
The Council seeks public comment on the Council recommendations as
follows:
1. Definition of ``Liabilities'' for Certain Companies
Council Recommendation: The concentration limit under Section 622
should be modified so that the liabilities of any financial company
(other than an insurance company, a nonbank financial company
supervised by the Board, or a foreign bank or a foreign-based financial
company that is or is treated as a bank holding company) that is not
subject to consolidated risk-based capital rules that are substantially
similar to those applicable to bank holding companies shall be
calculated for purposes of the concentration limit pursuant to GAAP or
other appropriate accounting standards applicable to such company,
until such time that these companies may be subject to risk-based
capital rules or are required to report risk-weighted assets and
regulatory capital.
2. Collection, Aggregation and Public Dissemination of Concentration
Limit Data
Council Recommendation: The concentration limit under Section 622
should be modified to provide that a transaction covered by section 622
shall be considered to have violated the concentration limit if the
total consolidated liabilities of the acquiring financial company upon
consummation of the transaction would exceed 10 percent of the average
amount of aggregate consolidated liabilities of all financial companies
as reported by the Board as of the end of the two most recent calendar
years. For this purpose, rules issued under section 622 shall provide
for the Board to publicly report, on an annual basis and no later than
July 1 of any calendar year, a final calculation of the aggregate
consolidated liabilities of all financial companies as of the end of
the preceding calendar year.
3. Acquisition of Failing Insured Depository Institutions
Council Recommendation: The concentration limit under section 622
should be modified to provide that, with the prior written consent of
the Board, the concentration limit shall not apply to an acquisition of
any type of insured depository institution in default or in danger of
default.
Dated: January 31, 2011.
Alastair Fitzpayne,
Deputy Chief of Staff and Executive Secretary, Department of the
Treasury.
[FR Doc. 2011-2717 Filed 2-7-11; 8:45 am]
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