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6000 - Bank Holding Company Act
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PART 225—BANK HOLDING COMPANIES
AND CHANGE IN BANK
CONTROL (REGULATION Y)
Regulations
Subpart A—General Provisions
Sec.
225.1
Authority, purpose, and scope.
225.2
Definitions.
225.3
Administration.
225.4
Corporate practices.
225.5
Registration, reports, and inspections.
225.6
Penalties for violations.
225.7
Exceptions to tying restrictions.
Subpart B—Acquisition of Bank Securities or Assets
225.11
Transactions requiring Board approval.
225.12
Transactions not requiring Board approval.
225.13
Factors considered in acting on bank acquisition proposals.
225.14
Expedited action for certain bank acquisitions by well-run bank holding
companies.
225.15
Procedures for other bank acquisition proposals.
225.16
Public notice, comments, hearings, and other provisions governing
applications and notices.
225.17
Notice procedure for one-bank holding company formations.
Subpart C—Nonbanking Activities and Acquisitions by Bank Holding
Companies
225.21
Prohibited nonbanking activities and acquisitions: exempt bank
holding companies.
225.22
Exempt nonbanking activities and acquisitions.
225.23
Expedited action for certain nonbanking proposals by well-run bank
holding companies.
225.24
Procedures for other nonbanking proposals.
225.25
Hearings, alteration of activities, and other matters.
225.26
Factors considered in acting on nonbanking proposals.
225.27
Procedures for determining scope of nonbanking activities.
225.28
List of permissible nonbanking activities.
Subpart D—Control and Divestiture Proceedings
225.31
Control proceedings.
Subpart E—Change in Bank Control
225.41
Transactions requiring prior notice.
225.42
Transactions not requiring prior notice.
225.43
Procedures for filing, processing, publishing, and acting on notices.
225.44
Reporting of stock loans.
Subpart F—Limitations on Nonbank Banks
225.52
Limitation on overdrafts.
Subpart G—Appraisal Standards for Federally Related Transactions
225.61
Authority, purpose, and scope.
225.62
Definitions.
225.63
Appraisals not required; transactions requiring a state certified or
licensed appraiser.
225.64
Minimum appraisal standards.
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225.65
Appraiser independence.
225.66
Professional association membership; competency.
225.67
Enforcement.
Subpart H—Notice of Addition or Change of Directors and Senior
Executive Officers
Sec.
225.71
Definitions.
225.72
Director and officer appointments; prior notice requirement.
225.73
Procedures for filing, processing, and acting on notices; standards for
disapproval; waiver of notice.
Subpart I—Financial Holding Companies
225.81
What is a financial holding company?
225.82
How does a bank holding company elect to become a financial holding
company?
225.83
What are the consequences of failing to continue to meet applicable
capital and management requirements?
225.84
What are the consequences of failing to maintain a satisfactory or
better rating under the Community Reinvestment Act at all insured
depository institution subsidiaries?
225.85
Is notice to or approval from the Board required prior to engaging in a
financial activity?
225.86
What activities are permissible for financial holding companies?
225.87
Is notice to the Board required after engaging in a financial activity?
225.88
How to request the Board to determine that an activity is financial in
nature or incidental to a financial activity?
225.89
How to request approval to engage in an activity that is complementary
to a financial activity?
225.90
What are the requirements for a foreign bank to be treated as a
financial holding company?
225.91
How may a foreign bank elect to be treated as a financial holding
company?
225.92
How does an election by a foreign bank become effective?
225.93
What are the consequences of a foreign bank failing to continue to meet
applicable capital and management requirements?
225.94
What are the consequences of an insured branch or depository
institution failing to maintain a satisfactory or better rating under
the Community Reinvestment Act?
Interpretations
225.101
Bank holding company's subsidiary banks owning shares of nonbanking
companies.
225.102
Bank holding company indirectly owning nonbanking company through
subsidiaries.
225.103
Bank holding company acquiring stock by dividends, stock splits or
exercise of rights.
225.104
``Services'' under section 4(c)(1) of Bank Holding Company Act.
225.107
Acquisition of stock in small business investment company.
225.109
``Services'' under section 4(c)(1) of Bank Holding Company Act.
225.111
Limit on investment by bank holding company system in stock of small
business investment companies.
225.112
Indirect control of small business concern through convertible
debentures held by small business investment company.
225.113
Services under section 4(a) of Bank Holding Company Act.
225.115
Applicability of Bank Service Corporation Act in certain bank holding
company situations.
225.118
Computer services for customers of subsidiary banks.
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225.121
Acquisition of Edge corporation affiliate by State member banks of
registered bank holding company.
225.122
Bank holding company ownership of mortgage companies.
225.123
Activities closely related to banking.
225.124
Foreign bank holding companies.
225.125
Investment adviser activities.
225.126
Activities not closely related to banking.
225.127
Investment in corporations or projects designed primarily to promote
community welfare.
225.129
Activities closely related to banking.
225.130
Issuance and sale of short-term debt obligations by bank holding
companies.
225.131
Activities closely related to banking.
225.132
Acquisition of assets.
225.133
Computation of amount invested in foreign corporations under general
consent procedures.
225.134
Escrow arrangements involving bank stock resulting in a violation of
the Bank Holding Company Act.
225.136
Utilization of foreign subsidiaries to sell long-term debt obligations
in foreign markets and to transfer the proceeds to their United States
parent(s) for domestic purposes.
225.137
Acquisition of shares pursuant to section 4(c)(6) of the Bank Holding
Company Act.
225.138
Statement of policy concerning divestitures by bank holding companies.
225.139
Presumption of continued control under section 2(g)(3) of the Bank
Holding Company Act.
225.140
Disposition of property acquired in satisfaction of debts previously
contracted.
225.141
Operations subsidiaries of a bank holding company.
225.142
Statement of policy concerning bank holding companies engaging in
futures, forward and options contracts on U.S. Government and agency
securities and money market instruments.
225.143
Policy statement on nonvoting equity investments by bank holding
companies.
225.144
Removed
225.145
Limitations established by the Competitive Equality Banking Act of 1987
on the activities and growth of nonbank banks.
Subpart J—Merchant Banking Investments
225.170
What type of investments are permitted by this subpart, and under what
conditions may they be made?
225.171
What are the limitations on managing or operating a portfolio company
held as a merchant banking investment?
225.172
What are the holding periods permitted for merchant banking
investments?
225.173
How are investments in private equity funds treated under this subpart?
225.174
What aggregate thresholds apply to merchant banking investments?
225.175
What risk management, record keeping and reporting policies are
required to make merchant banking investments?
225.176
How do the statutory cross marketing and sections 23A and B limitations
apply to merchant banking investments?
225.177
Definitions.
225.200
Conditions to Board's section 20 orders.
Appendices to Subparts
Appendix A--Capital
Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure
Appendix B--Capital
Adequacy Guidelines for Bank Holding Companies and State Member Banks:
Leverage Measure
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Appendix C—Small Bank Holding
Company Policy Statement
Appendix D--Capital
Adequacy Guidelines for Bank Holding Companies: Tier 1 Leverage Measure
Appendix E to Part 225—Capital
Adequacy Guidelines for Bank Holding Companies: Market Risk
Measure
Appendix F to Part
225—Interagency Guidelines Establishing Standards for Safeguarding
Customer Information.
Appendix G to Part 225—Capital
Adequacy Guidelines for Bank Holding Companies: Internal-Ratings-Based
and Advanced Measurement Approaches.
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, 3907,
and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
SOURCE: The provisions of this Part 225 appear at 49 Fed. Reg. 794,
January 5, 1984, effective February 6, 1984, and 58 Fed. Reg. 50512,
September 28, 1993, except for the procedural provisions of
§§ 225.14 and 225.23, which will be effective for all applications
and notices submitted to the Board on and after January 1, 1984.
REGULATIONS
Subpart A—General Provisions
§ 225.1 Authority, purpose, and scope.
(a) Authority. This part 1
(Regulation Y) is issued by the Board of Governors of the Federal
Reserve System (Board) under section 5(b) of the Bank
Holding Company Act of 1956, as amended
(12 U.S.C. 1844(b)) (BHC
Act); sections 8 and 13(a) of the International Banking Act of
1978 (12 U.S.C. 3106 and
3108); section 7(j)(13) of the
Federal Deposit Insurance Act, as amended by the Change in Bank Control
Act of 1978 (12 U.S.C.
1817(j)(13)) (Bank Control Act); section 8(b) of the
Federal Deposit Insurance Act (12
U.S.C. 1818(b)); section 914 of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989
(12 U.S.C. 1831i); section
106 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C.
1972); and the International Lending Supervision Act of 1983 (Pub. L.
98-181, title IX). The BHC Act is codified at 12 U.S.C. 1841, et
seq.
(b) Purpose. The principal purposes of this part are to:
(1) Regulate the acquisition of control of banks by companies and
individuals;
(2) Define and regulate the nonbanking activities in which bank
holding companies and foreign banking organizations with United States
operations may engage; and
(3) Set forth the procedures for securing approval for these
transactions and activities.
(c) Scope--(1) Subpart A contains general
provisions and definitions of terms used in this regulation.
(2) Subpart B governs acquisitions of bank or bank
holding company securities and assets by bank holding companies or by
any company that will become a bank holding company as a result of the
acquisition.
(3) Subpart C defines and regulates the nonbanking
activities in which bank holding companies and foreign banking
organizations may engage directly or through a subsidiary. The Board's
Regulation K governs certain nonbanking activities conducted by foreign
banking organizations and certain foreign activities conducted by bank
holding companies (12 CFR part
211, International Banking Operations).
(4) Subpart D specifies situations in which a company
is presumed to control voting securities or to have the power to
exercise a controlling influence over the management or policies of a
bank or other company; sets forth the procedures for making a control
determination; and provides rules governing the effectiveness of
divestitures by bank holding companies.
(5) Subpart E governs changes in bank control
resulting from the acquisition by individuals or companies (other than
bank holding companies) of voting securities of a bank holding company
or state member bank of the Federal Reserve System.
(6) Subpart F specifies the limitations that govern
companies that control so-called nonbank banks and the activities of
nonbank banks.
(7) Subpart G prescribes minimum standards that apply
to the performance of real estate appraisals and identifies
transactions that require state certified appraisers.
{{12-31-07 p.6084.01}}
(8) Subpart H identifies the circumstances when
written notice must be provided to the Board prior to the appointment
of a director or senior officer of a bank holding company and
establishes procedures for obtaining the required Board approval.
(9) Subpart I establishes the procedure by which a
bank holding company may elect to become a financial holding company,
enumerates the consequences if a financial holding company ceases to
meet a requirement applicable to a financial holding company, lists the
activities in which a financial holding company may engage, establishes
the procedure by which a person may request the Board to authorize
additional activities as financial in nature or incidental thereto, and
establishes the procedure by which a financial holding company may seek
approval to engage in an activity that is complementary to a financial
activity.
(10) Subpart J governs the conduct of merchant banking
investment activities by financial holding companies as permitted under
section 4(k)(4)(H) of the Bank Holding Company Act
(12 U.S.C. 1843 (k)(4)(H)).
(11) Appendix A to the regulation contains the Board's
Risk-Based Capital Adequacy Guidelines for bank holding companies.
(12) Appendix B contains the Board's Capital Adequacy
Guidelines for measuring leverage for bank holding companies and state
member banks.
(13) Appendix C contains the Board's policy statement
governing small bank holding companies.
(14) Appendix D contains the Board's Capital Adequacy
Guidelines for measuring tier 1 leverage for bank holding companies.
(15) Appendix E contains the Board's Capital Adequacy
Guidelines for measuring market risk of bank holding companies.
(16) Appendix F contains the Interagency Guidelines
Establishing Standards for Safeguarding Customer Information.
[Codified to 12 C.F.R. § 225.1]
[Section 225.1 amended at 62 Fed. Reg. 9319, February 28, 1997,
effective April 21, 1997; 65 Fed. Reg. 16472, March 28, 2000, effective
March 17, 2000; 66 Fed. Reg. 414, January 3, 2001, effective February
2, 2001; 66 Fed. Reg. 8484, January 31, 2001, effective February 15,
2001; 66 Fed. Reg. 8636, February 1, 2001, effective July 1,
2001]
§ 225.2 Definitions.
Except as modified in this regulation or unless the context
otherwise requires, the terms used in this regulation have the same
meaning as set forth in the relevant statutes.
(a) Affiliate means any company that controls, is
controlled by, or is under common control with, another bank.
(b)(1) Bank means:
(i) An insured bank as defined in section 3(h) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(h)); or
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(ii) An institution organized under the laws of the United States
which both:
(A) Accepts demand deposits or deposits that the depositor may
withdraw by check or similar means for payment to third parties or
others; and
(B) Is engaged in the business of making commercial loans.
(2) Bank does not include those institutions
qualifying under the exceptions listed in section 2(c)(2) of the BHC
Act (12 U.S.C. 1841(c)(2)).
(c)(1) Bank holding company means any company (including
a bank) that has direct or indirect control of a bank, other than
control that results from the ownership or control of:
(i) Voting securities held in good faith in a fiduciary capacity
(other than as provided in paragraphs (e)(2)(ii) and (iii) of this
section) without sole discretionary voting authority, or as otherwise
exempted under section 2(a)(5)(A) of the BHC Act;
(ii) Voting securities acquired and held only for a reasonable
period of time in connection with the underwriting of securities, as
provided in section 2(a)(5)(B) of the BHC Act;
(iii) Voting rights to voting securities acquired for the sole
purpose and in the course of participating in a proxy solicitation, as
provided in section 2(a)(5)(C) of the BHC Act;
(iv) Voting securities acquired in satisfaction of debts
previously contracted in good faith, as provided in section 2(a)(5)(D)
of the BHC Act, if the securities are divested within two years of
acquisition (or such later period as the Board may permit by order); or
(v) Voting securities of certain institutions owned by a thrift
institution or a trust company, as provided in sections 2(a)(5)(E) and
(F) of the BHC Act.
(2) Except for the purposes of § 225.4(b) of this subpart and
subpart E of this part or as otherwise provided in this regulation,
bank holding company includes a foreign banking
organization. For the purposes of subpart B of this part, bank
holding company includes a foreign banking organization only if it
owns or controls a bank in the United States.
(d)(1) Company includes any bank, corporation, general
or limited partnership, association or similar organization,
business trust, or any other trust unless by its terms it must
terminate either within 25 years, or within 21 years and 10 months
after the death of individuals living on the effective date of the
trust.
(2) Company does not include any organization, the
majority of the voting securities of which are owned by the United
States or any state.
(3) Testamentary trusts exempt. Unless the Board finds
that the trust is being operated as a business trust or company, a
trust is presumed not to be a company if the trust:
(i) Terminates within 21 years and 10 months after the death of
grantors or beneficiaries of the trust living on the effective date of
the trust or within 25 years;
(ii) Is a testamentary or inter vivos trust
established by an individual or individuals for the benefit of natural
persons (or trusts for the benefit of natural persons) who are related
by blood, marriage or adoption;
(iii) Contains only assets previously owned by the individual or
individuals who established the trust;
(iv) Is not a Massachusetts business trust; and
(v) Does not issue shares, certificates, or any other evidence of
ownership.
(4) Qualified limited partnerships exempt. Company
does not include a qualified limited partnership, as defined in section
2(o)(10) of the BHC Act.
(e)(1) Control of a bank or other company means (except
for the purposes of subpart E of this part):
(i) Ownership, control, or power to vote 25 percent or more of
the outstanding shares of any class of voting securities of the bank or
other company, directly or indirectly or acting through one or more
other persons;
(ii) Control in any manner over the election of a majority of the
directors, trustees, or general partners (or individuals exercising
similar functions) of the bank or other company;
(iii) The power to exercise, directly or indirectly, a
controlling influence over the management or policies of the bank or
other company, as determined by the Board after notice and opportunity
for hearing in accordance with
§ 225.31 of subpart D of
this part; or
(iv) Conditioning in any manner the transfer of 25 percent or
more of the outstanding shares of any class of voting securities of a
bank or other company upon the
{{2-28-01 p.6086}}transfer of 25 percent or more of the
outstanding shares of any class of voting securities of another bank or
other company.
(2) A bank or other company is deemed to control voting
securities or assets owned, controlled, or held, directly or
indirectly:
(i) By any subsidiary of the bank or other company;
(ii) In a fiduciary capacity (including by pension and
profit-sharing trusts) for the benefit of the shareholders, members, or
employees (or individuals serving in similar capacities) of the bank or
other company or any of its subsidiaries; or
(iii) In a fiduciary capacity for the benefit of the bank or
other company or any of its subsidiaries.
(f) Foreign banking organization and qualifying
foreign banking organization have the same meanings as provided in
§ 211.21(n) and § 211.23 of the Board's Regulation K
(12 CFR 211.21(n) and
211.23).
(g) Insured depository institution includes an insured
bank as defined in section 3(h) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(h)) and a
savings association.
(h) Lead insured depository institution means the
largest insured depository institution controlled by the bank holding
company as of the quarter ending immediately prior to the proposed
filing, based on a comparison of the average total risk-weighted assets
controlled during the previous 12-month period by each insured
depository institution subsidiary of the holding company.
(i) Management official means any officer, director
(including honorary or advisory directors), partner, or trustee of a
bank or other company, or any employee of the bank or other company
with policy-making functions.
(j) Nonbank bank means any institution that:
(1) Became a bank as a result of enactment of the Competitive
Equality Amendments of 1987 (Pub. L. 100-86), on the date of enactment
(August 10, 1987); and
(2) Was not controlled by a bank holding company on the day
before the enactment of the Competitive Equality Amendments of 1987
(August 9, 1987).
(k) Outstanding shares means any voting securities, but
does not include securities owned by the United States or by a company
wholly owned by the United States.
(l) Person includes an individual,
bank, corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization, or
any other form of entity.
(m) Savings association means:
(1) Any federal savings association or federal savings bank;
(2) Any building and loan association, savings and loan
association, homestead association, or cooperative bank if such
association or cooperative bank is a member of the Savings Association
Insurance Fund; and
(3) Any savings bank or cooperative that is deemed by the
director of the Office of Thrift Supervision to be a savings
association under section
10(l) of the Home Owners Loan Act.
(n) Shareholder--(1) Controlling shareholder
means a person that owns or controls, directly or indirectly, 25
percent or more of any class of voting securities of a bank or other
company.
(2) Principal shareholder means a person that owns or
controls, directly or indirectly, 10 percent or more of any class of
voting securities of a bank or other company, or any person that the
Board determines has the power, directly or indirectly, to exercise a
controlling influence over the management or policies of a bank or
other company.
(o) Subsidiary means a bank or other company that is
controlled by another company, and refers to a direct or indirect
subsidiary of a bank holding company. An indirect subsidiary is a bank
or other company that is controlled by a subsidiary of the bank holding
company.
(p) United States means the United States and includes
any state of the United States, the District of Columbia, any territory
of the United States, Puerto Rico, Guam, American Samoa, and the Virgin
Islands.
(q)(1) Voting securities means shares of common or
preferred stock, general or limited partnership shares or interests, or
similar interests if the shares or interest, by statute, charter, or in
any manner, entitle the holder:
{{10-31-07 p.6087}}
(i) To vote for or to select directors, trustees, or partners (or
persons exercising similar functions of the issuing company); or
(ii) To vote on or to direct the conduct of the operations or
other significant policies of the issuing company.
(2) Nonvoting shares. Preferred shares, limited
partnership shares or interests, or similar interests are not
voting securities if:
(i) Any voting rights associated with the shares or interest are
limited solely to the type customarily provided by statute with regard
to matters that would significantly and adversely affect the rights or
preference of the security or other interest, such as the issuance of
additional amounts or classes of senior securities, the modification of
the terms of the security or interest, the dissolution of the issuing
company, or the payment of dividends by the issuing company when
preferred dividends are in arrears;
(ii) The shares or interest represent an essentially passive
investment or financing device and do not otherwise provide the holder
with control over the issuing company; and
(iii) The shares or interest do not entitle the holder, by
statute, charter, or in any manner, to select or to vote for the
selection of directors, trustees, or partners (or persons exercising
similar functions) of the issuing company.
(3) Class of voting shares. Shares of stock issued by
a single issuer are deemed to be the same class of voting shares,
regardless of differences in dividend rights or liquidation preference,
if the shares are voted together as a single class on all matters for
which the shares have voting rights other than matters described in
paragraph (o)(2)(i) of this section that affect solely the rights or
preferences of the shares.
(r) Well-capitalized--(1) Bank holding company.
In the case of a bank holding
company, 2
well-capitalized means that:
(i) On a consolidated basis, the bank holding company maintains a
total risk-based capital ratio of 10.0 percent or greater, as defined
in Appendix A of this part;
(ii) On a consolidated basis, the bank holding company maintains
a Tier 1 risk-based capital ratio of 6.0 percent or greater, as defined
in Appendix A of this part; and
(iii) The bank holding company is not subject to any written
agreement, order, capital directive, or prompt corrective action
directive issued by the Board to meet and maintain a specific capital
level for any capital measure.
(2) Insured and uninsured depository
institution--(i) Insured depository institution. In
the case of an insured depository institution, "well capitalized"
means that the institution has and maintains at least the capital
levels required to be well capitalized under the capital adequacy
regulations or guidelines applicable to the institution that have been
adopted by the appropriate Federal banking agency for the institution
under section 38 of the Federal Deposit Insurance Act (12 U.S.C.
1831o).
(ii) Uninsured depository institution. In the case of
a depository institution the deposits of which are not insured by the
Federal Deposit Insurance Corporation, "well capitalized" means
that the institution has and maintains at least the capital levels
required for an insured depository institution to be well capitalized.
(3) Foreign banks--(i) Standards applied.
For purposes of determining whether a foreign banking organization
qualifies under paragraph (r)(1) of this section:
(A) A foreign banking organization whose home country supervisor,
as defined in § 211.21 of the Board's Regulation K
(12 CFR 211.21), has adopted
capital standards consistent in all respects with the Capital Accord of
the Basle Committee on Banking Supervision (Basle Accord) may calculate
its capital ratios under the home country standard; and
(B) A foreign banking organization whose home country supervisor
has not adopted capital standards consistent in all respects with the
Basle Accord shall obtain a determination from the Board that its
capital is equivalent to the capital that would be required of a U.S.
banking organization under paragraph (r)(1) of this section.
{{10-31-07 p.6088}}
(ii) Branches and agencies. For purposes of
determining, under paragraph (r)(1) of this section, whether a branch
or agency of a foreign banking organization is well-capitalized, the
branch or agency shall be deemed to have the same capital ratios as the
foreign banking organization.
(s) Well managed--(1) In general. Except as
otherwise provided in this part, a company or depository institution is
well managed if:
(i) At its most recent inspection or examination or subsequent
review by the appropriate Federal banking agency for the company or
institution (or the appropriate state banking agency in an examination
described in section 10(d) of the Federal Deposit Insurance Act
(12 U.S.C. 1820(d)), the
company or institution received:
(A) At least a satisfactory composite rating; and
(B) At least a satisfactory rating for management, if such rating
is given.
(ii) In the case of a company or depository institution that has
not received an inspection or examination rating, the Board has
determined, after a review of the managerial and other resources of the
company or depository institution and after consulting with the
appropriate Federal and state banking agencies, as applicable, for the
company or institution, that the company or institution is well
managed.
(2) Merged depository institutions--(i) Merger
involving well managed institutions. A depository institution that
results from the merger of two or more depository institutions that are
well managed shall be considered to be well managed unless the Board
determines otherwise after consulting with the appropriate Federal and
state banking agencies, as applicable, for each depository institution
involved in the merger.
(ii) Merger involving a poorly rated institution. A
depository institution that results from the merger of a depository
institution that is well managed with one or more depository
institutions that are not well managed or have not been examined shall
be considered to be well managed if the Board determines, after a
review of the managerial and other resources of the resulting
depository institution and after consulting with the appropriate
Federal and state banking agencies for the institutions involved in the
merger, as applicable, that the resulting institution is well managed.
(3) Foreign banking organizations. Except as
otherwise provided in this part, a foreign banking organization is
considered well managed if the combined operations of the foreign
banking organization in the United States have received at least a
satisfactory composite rating at the most recent annual assessment.
(t) Depository institution. For purposes of this part,
the term "depository institution" has the same meaning as in
section 3(c) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(c)).
[Codified to 12 C.F.R. § 225.2]
[Section 225.2 amended at 53 Fed. Reg. 37744, September 28, 1988;
54 Fed. Reg. 37302, September 8, 1989, effective October 10, 1989; 57
Fed. Reg. 41387, September 10, 1992; 58 Fed. Reg. 473, January 6, 1993,
effective February 4, 1993; 58 Fed. Reg. 4074, January 13, 1993,
effective February 4, 1993; 61 Fed. Reg. 56407, November 1, 1996,
effective October 23, 1996; 62 Fed. Reg. 9320, February 28, 1997,
effective April 21, 1997; 65 Fed. Reg. 3791, January 25, 2000; 65 Fed.
Reg. 15055, March 21, 2000, effective March 21, 2000; 66 Fed. Reg. 414,
January 3, 2001, effective February 2, 2001; 71 Fed. Reg. 9901,
February 28, 2006, effective March 30,
2006]
§ 225.3 Administration.
(a) Delegation of authority. Designated Board members
and officers and the Federal Reserve Banks are authorized by the Board
to exercise various functions prescribed in this regulation and in the
Board's Rules Regarding Delegation of Authority
(12 CFR Part 265) and the
Board's Rules of Procedure (12 CFR Part 262).
(b) Appropriate Federal Reserve Bank. In administering
this regulation, unless a different Federal Reserve Bank is designated
by the board, the appropriate Federal Reserve Bank is as
follows:
{{10-31-07 p.6089}}
(1) For a bank holding company (or a company applying to become a
bank holding company): the Reserve Bank of the Federal Reserve district
in which the company's banking operations are principally conducted, as
measured by total domestic deposits in its subsidiary banks on the date
it became (or will become) a bank holding company;
(2) For a foreign banking organization that has no subsidiary
bank and is not subject to paragraph (b)(1) of this section: the
Reserve Bank of the Federal Reserve district in which the total assets
of the organization's United States branches, agencies, and commercial
lending companies are the largest as of the later of January 1, 1980,
or the date it becomes a foreign banking organization;
(3) For an individual or company submitting a notice under
subpart E of this part: the Reserve Bank of the Federal Reserve
district in which the banking operations of the bank holding company or
State member bank to be acquired are principally conducted, as measured
by total domestic deposits on the date the notice is filed.
[Codified to 12 C.F.R. § 225.3]
[Section 225.3 amended at 62 Fed. Reg. 9321, February 28,
1997, effective April 21, 1997]
§ 225.4 Corporate practices.
(a) Bank holding company policy and operations. (1) A
bank holding company shall serve as a source of financial and
managerial strength to its subsidiary banks and shall not conduct its
operations in an unsafe or unsound manner.
(2) Whenever the Board believes an activity of a bank holding
company or control of a nonbank subsidiary (other than a nonbank
subsidiary of a bank) constitutes a serious risk to the financial
safety, soundness, or stability of a subsidiary bank of the bank
holding company and is inconsistent with sound banking principles or
the purposes of the BHC Act or the Financial Institutions Supervisory
Act of 1966, as amended (12 U.S.C. 1818(b) et seq.), the
Board may require the bank holding company to terminate the activity or
to terminate control of the subsidiary, as provided in section 5(e) of
the BHC Act.
(b) Purchase or redemption by a bank holding company of its
own securities--(1) Filing notice. Except as provided
in paragraph (b)(6) of this section, a bank holding company shall give
the Board prior written notice before purchasing or redeeming its
equity securities if the gross consideration for the purchase or
redemption, when aggregated with the net consideration paid by the
company for all such purchases or redemptions during the preceding 12
months, is equal to 10 percent or more of the company's consolidated
net worth. For the purposes of this section, "net consideration"
is the gross consideration paid by the company for all of its equity
securities purchased or redeemed during the period minus the gross
consideration received for all of its equity securities sold during the
period.
(2) Contents of notice. Any notice under this section
shall be filed with the appropriate Reserve Bank and shall contain the
following information:
(i) The purpose of the transaction, a description of the
securities to be purchased or redeemed, the total number of each class
outstanding, the gross consideration to be paid, and the terms and
sources of funding for the transaction;
(ii) A description of all equity securities redeemed within the
preceding 12 months, the net consideration paid, and the terms of any
debt incurred in connection with those transactions; and
(iii)(A) If the bank holding company has consolidated assets of
$500 million or more, consolidated pro forma risk-based
capital and leverage ratio calculations for the bank holding company as
of the most recent quarter, and, if the redemption is to be debt
funded, a parent-only pro forma balance sheet as of the most
recent quarter; or
(B) If the bank holding company has consolidated assets of less
than $500 million, a pro forma parent-only balance sheet as
of the most recent quarter, and, if the redemption is to be debt
funded, one-year income statement and cash flow projections.
(3) Acting on notice. Within 15 calendar days of
receipt of a notice under this section, the appropriate Reserve Bank
shall either approve the transaction proposed in the notice or refer
the notice to the Board for decision. If the notice is referred to the
Board for decision, the Board shall act on the notice within 30
calendar days after the Reserve Bank receives the notice.
(4) Factors considered in acting on notice. (i) The
Board may disapprove a proposed purchase or redemption if it finds that
the proposal would constitute an unsafe or
{{10-31-07 p.6090}}unsound practice, or would violate any
law, regulation, Board order, directive, or any condition imposed by,
or written agreement with, the Board.
(ii) In determining whether a proposal constitutes an unsafe or
unsound practice, the Board shall consider whether the bank holding
company's financial condition, after giving effect to the proposed
purchase or redemption, meets the financial standards applied by the
Board under section 3 of the BHC Act, including the Board's Capital
Adequacy Guidelines (Appendix
A of this part) and the Board's Policy Statement for Small Bank
Holding Companies (Appendix
C of this part).
(5) Disapproval and hearing. (i) The Board shall
notify the bank holding company in writing of the reasons for a
decision to disapprove any proposed purchase or redemption. Within 10
calendar days of receipt of a notice of disapproval by the Board, the
bank holding company may submit a written request for a hearing.
(ii) The Board shall order a hearing within 10 calendar days of
receipt of the request if it finds that material facts are in dispute,
or if it otherwise appears appropriate. Any hearing conducted under
this paragraph shall be held in accordance with the Board's Rules of
Practice for Formal Hearings (12 CFR part 263).
(iii) At the conclusion of the hearing, the Board shall by order
approve or disapprove the proposed purchase or redemption on the basis
of the record of the hearing.
(6) Exception for well-capitalized bank holding companies.
A bank holding company is not required to obtain prior Board
approval for the redemption or purchase of its equity securities under
this section provided:
(i) Both before and immediately after the redemption, the bank
holding company is well-capitalized;
(ii) The bank holding company is well-managed; and
(iii) The bank holding company is not the subject of any
unresolved supervisory issues.
(c) Deposit insurance. Every bank that is a bank
holding company or a subsidiary of a bank holding company shall obtain
federal deposit insurance and shall remain an insured bank
as defined in section 3(h) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(h)).
(d) Acting as transfer agent, or clearing agent. A bank
holding company or any nonbanking subsidiary that is a "bank," as
defined in section 3(a)(6) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(6)), and that is a transfer agent of securities, a
clearing agency, or a participant in a clearing agency (as those
terms are defined in section 3(a) of the Securities Exchange Act
(15 U.S.C. 78c(a)), shall be
subject to §§ 208.31--208.33 of the Board's Regulation H (12 CFR
208.31--208.33) as if it were a state member bank.
(e) Reporting requirement for credit secured by certain bank
holding company stock. Each executive officer or director of a
bank holding company the shares of which are not publicly traded shall
report annually to the board of directors of the bank holding company
the outstanding amount of any credit that was extended to the executive
officer or director and that is secured by shares of the bank holding
company. For purposes of this paragraph, the terms "executive
officer" and "director" shall have the meaning given in
§ 215.2 of Regulation O (12 CFR
215.2).
(f) Suspicious Activity Report. A bank holding company
or any nonbank subsidiary thereof, or a foreign bank that is subject to
the BHC Act or any nonbank subsidiary of such foreign bank operating in
the United States, shall file a suspicious activity report in
accordance with the provisions of § 208.62 of the Board's Regulation
H (12 CFR 208.62).
(g) Requirements for financial holding companies engaged in
securities underwriting, dealing, or market-making
activities. (1) Any intra-day extension of credit by a bank or
thrift, or U.S. branch or agency of a foreign bank to an affiliated
company engaged in underwriting, dealing in, or making a market in
securities pursuant to section 4(k)(4)(E) of the Bank Holding Company
Act (12 U.S.C. 1843(k)(4)(E))
must be on market terms consistent with section 23B of the Federal
Reserve Act. (12 U.S.C. 371c--1).
(2) A foreign bank that is or is treated as a financial holding
company under this part shall ensure that:
(i) Any extension of credit by any U.S. branch or agency of such
foreign bank to an affiliated company engaged in underwriting, dealing
in, or making a market in securities pursuant to section 4(k)(4)(E) of
the Bank Holding Company Act (12 U.S.C. 1843(k)(4)(E)), conforms to
sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 371c and
371c--1) as if the branch or agency were a member bank;
{{12-31-07 p.6090.01}}
(ii) Any purchase by any U.S. branch or agency of such foreign
bank, as principal or fiduciary, of securities for which a securities
affiliate described in paragraph (g)(2)(i) of this section is a
principal underwriter conforms to sections 23A and 23B of the Federal
Reserve Act (12 U.S.C. 371c and 371c--1) as if the branch or agency
were a member bank; and
(iii) Its U.S. branches and agencies not advertise or suggest
that they are responsible for the obligations of a securities affiliate
described in paragraph (g)(2)(i) of this section, consistent with
section 23B(c) of the Federal Reserve Act (12 U.S.C. 371c--1(c)) as if
the branches or agencies were member banks.
(h) Protection of customer information and consumer
information. A bank holding company shall comply with the
Interagency Guidelines Establishing Information Security Standards, as
set forth in appendix F of this part, prescribed pursuant to sectons
501 and 505 of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 and 6805). A
bank holding company shall properly dispose of consumer information in
accordance with the rules set forth at 16 CFR part 682.
[Codified to 12 C.F.R. § 225.4]
[Section 225.4 amended at 55 Fed. Reg. 47743, November 15, 1990,
effective December 18, 1990; 57 Fed. Reg. 22426, May 28, 1992,
effective May 18, 1992; 58 Fed. Reg. 47209, September 8, 1993,
effective October 8, 1993; 59 Fed. Reg. 22968, May 4, 1994; 59 Fed.
Reg. 39679, August 4, 1994, effective September 2, 1994; 61 Fed. Reg.
4344, February 5, 1996, effective April 1, 1996; 62 Fed. Reg. 9322,
February 28, 1997, effective April 21, 1997; 63 Fed. Reg. 58621
November 2, 1998; 65 Fed. Reg. 14442, March 17, 2000, effective March
11, 2000; 66 Fed. Reg. 8636, February 1, 2001, effective July 1, 2001;
69 Fed. Reg. 77618, December 28, 2004, effective July 1, 2005; 71 Fed.
Reg. 9901, February 28, 2006, effective March 30,
2006]
§ 225.5 Registration, reports, and inspections.
(a) Registration of bank holding companies. Each
company shall register within 180 days after becoming a bank holding
company by furnishing information in the manner and form prescribed by
the Board. A company that receives the Board's prior approval under
subpart B of this part to become a bank holding company may complete
this registration requirement through submission of its first annual
report to the Board as required by paragraph (b) of this section.
(b) Reports of bank holding companies. Each bank
holding company shall furnish, in the manner and form prescribed by the
Board, an annual report of the company's operations for the fiscal year
in which it becomes a bank holding company, and for each fiscal year
during which it remains a bank holding company. Additional information
and reports shall be furnished as the Board may require.
(c) Examinations and inspections. The Board may examine
or inspect any bank holding company and each of its subsidiaries and
prepare a report of their operations and activities. With respect to a
foreign banking organization, the Board may also examine any branch or
agency of a foreign bank in any state of the United States and may
examine or inspect each of the organization's subsidiaries in the
United States and prepare reports of
{{2-28-97 p.6091}}examination made by the
primary federal or state supervisor of the subsidiary bank of a bank
holding company or of the branch or agency of the foreign bank.
[Codified to 12 C.F.R. § 225.5]
[Section 225.5 amended at 62 Fed. Reg. 9323, February 28, 1997,
effective April 21, 1997]
§ 225.6 Penalties for violations.
(a) Criminal and civil
penalties. (1) Section 8 of the
BHC Act provides criminal penalties for willful violation, and
civil penalties for violation, by any company or individual of the BHC
Act or any regulation or order issued under it, or for making a false
entry in any book, report, or statement of a bank holding company.
(2) Civil money penalty assessments for violations of the BHC Act
shall be made in accordance with subpart B of the Board's Rules of
Practice for Hearings (12 CFR 263, subpart C). For any willful
violation of the Bank Control Act or any regulation or order issued
under it, the Board may assess a civil penalty as provided in
12 U.S.C. 1817(j)(15).
(b) Cease and desist proceedings. For any violation of
the BHC Act, the Bank Control Act, this regulation, or any order or
notice issued thereunder, the Board may institute a cease and desist
proceeding in accordance with the Financial Institutions Supervisory
Act of 1966, as amended (12 U.S.C.
1818(b) et seq.).
[Codified to 12 C.F.R. § 225.6]
[Section 225.6 amended at 62 Fed. Reg. 9323, February 28, 1997,
effective April 21, 1997]
§ 225.7 Exceptions to tying restrictions.
(a) Purpose. This section establishes exceptions to the
anti-tying restrictions of section 106 of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C.
1971, 1972(1)). These exceptions are in addition to those in
section 106. The section also restricts tying of electronic benefit
transfer services by bank holding companies and their nonbank
subsidiaries.
(b) Exceptions to statute. Subject to the limitations of
paragraph (c) of this section, a bank may:
(1) Extension to affiliates of statutory exceptions
preserving traditional banking relationships. Extend credit, lease
or sell property of any kind, or furnish any service, or fix or vary
the consideration for any of the foregoing, on the condition or
requirement that a customer:
(i) Obtain a loan, discount, deposit, or trust service from an
affiliate of the bank; or
(ii) Provide to an affiliate of the bank some additional credit,
property, or service that the bank could require to be provided to
itself pursuant to section 106(b)(1)(C) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C.
1972(1)(C)).
(2) Safe harbor for combined-balance discounts. Vary
the consideration for any product or package of products based on a
customer's maintaining a combined minimum balance in certain products
specified by the bank (eligible products), if:
(i) The bank offers deposits, and all such deposits are eligible
products; and
(ii) Balances in deposits count at least as much as nondeposit
products toward the minimum balance.
(3) Safe harbor for foreign transactions. Engage in
any transaction with a customer if that customer is:
(i) A corporation, business, or other person (other than an
individual) that:
(A) Is incorporated, chartered, or otherwise organized outside
the United States; and
(B) Has its principal place of business outside the United
States; or
(ii) An individual who is a citizen of a foreign country and is
not resident in the United States.
(c) Limitations on exceptions. Any exception granted
pursuant to this section shall terminate upon a finding by the Board
that the arrangement is resulting in anti-competitive
{{2-28-97 p.6092}}practices. The eligibility of a
bank to operate under any exception granted pursuant to this section
shall terminate upon a finding by the Board that its exercise of this
authority is resulting in anti-competitive practices.
(d) Extension of statute to electronic benefit transfer
services. A bank holding company or nonbank subsidiary of a bank
holding company that provides electronic benefit transfer services
shall be subject to the anti-tying restrictions applicable to such
services set forth in section 7(i)(11) of the Food Stamp Act of 1977 (7
U.S.C. 2016(i)(11)).
(e) For purposes of this section, bank has the meaning
given that term in section 106(a) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C.
1971), but shall also include a United States branch, agency,
or commercial lending company subsidiary of a foreign bank that is
subject to section 106 pursuant to section 8(d) of the International
Banking Act of 1978 (12 U.S.C.
3106(d)), and any company made subject to section 106 by
section 4(f)(9) or 4(h) of the BHC
Act.
[Codified to 12 C.F.R. § 225.7]
[Section 225.7 added at 59 Fed. Reg. 39679, August 4, 1994,
effective September 2, 1994; 59 Fed. Reg. 65474, December 20, 1994,
effective January 23, 1995; amended at 60 Fed. Reg. 20189, April 25,
1995, effective May 26, 1995; 62 Fed. Reg. 9323, February 28, 1997,
effective April 21, 1997]
1Code of Federal Regulations, title 12, chapter II, part 225. Go Back to Text
2For purposes of this subpart and subparts B and C of this
part, a bank holding company with consolidated assets under $500
million that is subject to the Small Bank Holding Company Policy
Statement in Appendix C of this part will be deemed to be
"well-capitalized" if the bank holding company meets the
requirements for expedited/waived processing in Appendix C. Go Back to Text
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