Board of Governors of the Federal Reserve System

Good afternoon. I want to start by thanking our staff for their work on this important project to update an important area of the Board's regulatory framework for bank holding companies and savings and loan holding companies.

The concept of control is a threshold issue for the Board because it determines the perimeter of the Board's supervisory and regulatory authority over depository institution holding companies. Under the Bank Holding Company Act and the Home Owners' Loan Act, the Board is charged with oversight over companies that "control" a bank or savings association. Companies that control a bank or savings association are bank holding companies or savings and loan holding companies and thus subject to the Board's supervision and regulation.

The Board's control regime has developed over many decades through a common law process and has become one of the more ad hoc and complicated areas of the Board's regulatory administration. The complexity and relative lack of transparency of the Board's case-by-case approach to control can impose a substantial compliance and uncertainty burden on both banking organizations and investors in banking organizations. The proposal being considered today is intended to enhance the predictability, simplicity, and transparency of the Board's framework for evaluating control.

Historically, the Board has decided most questions of control based on the specific facts and circumstances presented by each particular case. Therefore, it has been difficult for banking firms and investors in banking firms to determine whether a particular proposed investment could give rise to control concerns. This proposal would improve the predictability and simplicity of the Board's control framework by establishing a broadly applicable and uniform set of rules to address the large majority of control fact patterns.

Historically, many of the control doctrines of the Board and staff have been unwritten or have been written but not well publicized. Most of the control doctrines of the Board and staff also have never gone through the crucible of a public comment process. The proposal would improve the transparency of the Board's control framework by placing substantially all of the Board's control positions into a comprehensive public regulation and putting that regulation out for public comment before finalization.

The substance of the control standards set forth in the proposed regulation generally would be consistent with the Board's current control framework, although the proposal contains a few targeted policy adjustments that staff will describe in greater detail.

I very much look forward to public feedback on the proposed rule. I will now turn it over to Mark Van Der Weide, the general counsel, to kick off the staff presentations.