Financial Holding Company
Section 1843(l) of 12 U.S.C.; Sections 225.82 and 225.91-92 of Regulation Y.
Who must file?
A bank holding company ("BHC") and a foreign bank that operates a branch, agency, or commercial lending company in the United States, or a company of which the foreign bank is a subsidiary ("FBO"), must file a written declaration with the appropriate Federal Reserve Bank to become a Financial Holding Company ("FHC"). Savings and loan holding companies should consult with Federal Reserve staff before filing an FHC election in order to be treated as an FHC.
Publication requirements--newspaper/Federal Register
No publication is required for proposals associated with this filing.
While no form is required, a written declaration must be submitted containing the following information and in the format prescribed below:
- An affirmative statement that the BHC or FBO elects to be an FHC.
- The name and head-office address of the BHC or FBO and each depository institution it controls. For purposes of the election process, the term "depository institution'' means any national bank, state-chartered bank, savings association, savings bank, industrial bank, and any trust company or other banking institution that engages in the business of receiving deposits other than trust funds.
- A certification that the BHC or FBO and all depository institutions controlled by the BHC or FBO are well capitalized as of the date the declaration is filed.1
- The capital ratios for all relevant capital measures as of the close of the previous quarter, for the consolidated BHC or FBO and each depository institution controlled by the BHC or FBO on the date the BHC or FBO files its declaration.2
- A certification that the BHC or FBO and each of the depository institutions it controls are well managed3 as of the date the BHC or FBO files its declaration.4
- The declaration must be signed by an official or representative with authority to legally bind the BHC or FBO.
Additional requirements for FBOs to qualify as FHCs
Refer to the following references for processing time frames and more specific requirements for an FBO to meet the well-capitalized and well-managed criteria: (a) Section 4(l) of the BHC Act, as amended by section 606(a) of the DFA; (b) Sections 225.81-82 and 225.90-91 of Regulation Y (12 CFR 225.81-82; 225.90-91); and (c) Supervisory Letter SR 08-9, Consolidated Supervision of Bank Holding Companies and the Combined U.S. Operations of Foreign Banking Organizations. Before filing an election to be treated as an FHC, it is recommended that an FBO file a request for review of its qualifications through the pre-clearance process in accordance with section 225.91(c).
Consultations with Reserve Bank
Certain situations, such as an FHC election in the context of a merger or acquisition, or an FHC election by an FBO, will require additional information. The relevant Reserve Bank should be consulted prior to filing an FHC election in such situations.
The Federal Reserve considers the factors in sections 1843(l)(1) and (2) of 12 U.S.C.; sections 225.82 and 225.91-92 of Regulation Y (12 CFR 225.82 and 225.91-92).
Processing time frames
A BHC's election to become an FHC is effective on the 31st calendar day after the date that a complete declaration is received by the responsible Federal Reserve Bank unless the Federal Reserve Bank or the Federal Reserve Board notifies the BHC before that time that the election is effective. The processing clock will not commence until the Federal Reserve Bank has acknowledged receipt of a complete declaration. Typically, the Federal Reserve will send a letter noting that the election is effective and outlining ongoing requirements, including filing requirements.
When an FHC declaration becomes effective, the BHC or FBO may engage in the expanded financial activities available to such companies. If, however, the Board has timely notified a BHC or FBO that its declaration is ineffective, the BHC or FBO will not be considered an FHC and may not begin to engage in any expanded activities.
A BHC or FBO with an effective election to be, or be treated as, an FHC is subject to the requirements under sections 4(l) and 4(m) of the BHC Act.
Sample declaration by a BHC
1. Affirmative Statement of Declaration - [Name of BHC] hereby elects to be a Financial Holding Company.
2. Names and Addresses - The head office address of [Name of BHC] is as follows:
[Name of BHC]
The names and addresses of all depository institutions controlled by [Name of BHC] are as follows [Repeat as needed]:
[Name of Depository Institution]
3. Capital Certification - [Name of BHC] certifies that it and [name of each of its depository institutions] are well capitalized as of the [date of the declaration].
4. Capital Ratios5- As of [date of the previous quarter], the capital ratios of [name of depository institution] were as follows: _ % (Tier 1 Risk-Based Capital); __ % (Total Risk-Based Capital); and __ % (Tier 1 Leverage)." [Repeat as needed].
As of [date of the previous quarter-end], the capital ratios of [name of BHC] were as follows: _ % (Tier 1 Risk-Based Capital); __ % (Total Risk-Based Capital); and __ % (Tier 1 Leverage)." [Repeat as needed].
5. Management Certification - [Name of BHC] certifies that it and [name of each of its depository institutions] are well managed as of the [date of the declaration].
Signature of Authorized Representative
Name and Title
Date of Declaration
1. Section 606 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") added a new requirement that BHCs, including FBOs, also meet the well-capitalized and well-managed criteria in order to qualify as an FHC. BHCs subject to the Small BHC Policy Statement (Appendix C to Part 225 of Regulation Y) should calculate consolidated capital ratios on a one-time basis (and provide a consolidating statement and capital calculations) for purposes of the election. After doing so, it can revert to compliance with the Small BHC Policy Statement requirements until such time as it no longer qualifies for such treatment. Return to text
2. The Bank Holding Company Act ("BHC Act") requires the Board to apply "comparable" capital standards to an FBO electing to become, or to be treated as, an FHC as would be applied to a U.S. BHC making the same election. Return to text
4. Additionally, an FHC election may not be considered effective if any insured depository institution controlled by the BHC or FBO has not achieved at least a rating of "satisfactory record of meeting community credit needs" under the Community Reinvestment Act at the institution's most recent examination. Return to text
5. On July 2, 2013, the Federal Reserve Board approved a final regulatory capital rule that, among other things, includes a revision to the definition of "well-capitalized" in the Prompt Corrective Action ("PCA") framework to reflect certain changes in accordance with Basel III regulatory capital reforms and the Dodd-Frank Act. Community banking organizations must begin complying with the rule on January 1, 2015, while the larger banking organizations have been required to comply since January 2014. Return to text