Annual Report of Merchant Banking Investments Held for an Extended Period
Data from the FR Y-12A provide the Federal Reserve with information concerning merchant banking investments that are approaching the end of the holding period permissible under Regulation Y. A financial holding company (FHC) generally would have to submit a FR Y-12A if it holds shares, assets, and other ownership interests of companies engaged in nonfinancial activities under merchant banking investment authority for longer than eight years (or thirteen years in the case of an investment held through a qualifying private equity fund).
Purpose: Data collected on the FR Y-12A allow the Federal Reserve to monitor merchant banking investments made by FHCs that are approaching the end of the relevant ten-year or fifteen-year holding period. These investments may be illiquid or have other characteristics that make it difficult for the FHC to dispose of the investments on a reasonable basis. FR Y-12A data provide the Federal Reserve with information concerning these aging investments and the FHC's plan for disposing of the investments.
Section 4(k)(4)(H) of the Bank Holding Company Act (BHC Act) (12 U.S.C. § 1843(k)(4)(H) and subpart J of the Board's Regulation Y (12 C.F.R. 225.170 et seq.) permit holding companies and foreign banks that have made an effective election to become an FHC to acquire merchant banking investments not otherwise permissible for an FHC. 12 U.S.C. § 1467A(c)(2)(H),12 U.S.C. § 3106(a), and 12 CFR 252.153(b)(2) respectively extend this authority to savings and loan holding companies, foreign banks, and U.S. intermediate holding companies. Merchant banking investments include investments that were initially made or acquired under any legal authority and that are held under the Merchant Banking Authority as of the reporting date. Regulation Y implements this holding period restriction by generally permitting an FHC to own or control a merchant banking investment for up to ten years. Merchant banking investments made in, or held through, a private equity fund, however, may be held for the duration of the fund, up to a maximum of fifteen years.
The FR Y-12A reporting panel is normally a subset of FR Y-12 filers. However, it is possible that an FHC that does not or no longer meets the FR Y-12 reporting threshold criteria would still hold older private equity investments approaching the end of the holding period permissible under Regulation Y.
An FHC that meets the reporting criteria should complete a separate FR Y-12A for each covered investment that it owns, controls, or holds as of December 31 of the relevant calendar year. The report must be submitted by February 15 of the subsequent calendar year to the appropriate Federal Reserve Bank.
The FR Y-12A data are not published.
Last Update: December 20, 2019