Bank Holding Company
Supervision Manual
January 2008 Update
The January 2008 update to the Bank Holding Company Supervision Manual has been published (supplement no. 33). The manual comprises the Federal Reserve System's regulatory, supervisory, and inspection guidance for bank holding companies (BHCs). The new supplement includes guidance on the following subjects:
- An Exception to the Board’s Risk-Based Capital Guidelines--Capital Held Against Regulation T Margin Loans. The section on Consolidated Capital (Examiners’ Guidelines for Assessing the Capital Adequacy of BHCs) was revised to include an exception to the Board’s risk-based capital guidelines for capital held against Regulation T margin loans. The first exception was approved by the Board on June 15, 2007. The Board approved the exception under the reservation-of-authority provision of the guidelines (12 CFR 225, appendix A, III.A). The exception permits a BHC, upon receiving specific Board approval, to apply a 10 percent risk weight to its Regulation T margin loans. Several BHCs subsequently have received approval for this exception.
- Board Order Authorizing a Financial Holding Company (FHC) To Acquire, Manage, and Operate Defined Pension Benefit Plans in the United Kingdom. This new section includes an October 12, 2007, Board order. That order determined, after consultation with the Secretary of the Treasury, that the acquisition, management, and operation in the United Kingdom of certain defined pension benefit plans, which are established by unaffiliated third parties in stand-alone transactions, are activities that are financial in nature and are permissible for an FHC to engage in under section 4(k) of the Bank Holding Company Act. The order also determined that when a depository institution is secondarily liable for a financial obligation of an affiliate, even if the depository institution’s liability is created by statute or regulatory action, the institution has issued a guarantee on behalf of an affiliate for the purposes of section 23A of the Federal Reserve Act and the Board’s Regulation W. See 12 CFR 225.86(e). The section, “Permissible Activities for FHCs (Section 4(k) of the BHC Act),” was also revised to include a brief discussion of, and reference to, this Board order.
- Regulation W. The section on “Intercompany Transactions” discusses generally section 23A and 23B of the Federal Reserve Act. The section has been revised to incorporate the provisions of Regulation W, which is based on those statutes. The regulation applies to transactions between insured depository institutions and their affiliates. The Board approved the regulation on November 27, 2002 (effective April 1, 2003). See SR letter 03-2.
A more detailed summary of changes is included with the update package. The public may obtain the manual and the updates (including pricing information) from Publications Fulfillment, MS-127, Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., Washington, DC 20551; telephone (202) 452-3244; or send a facsimile to (202) 728-5886.