Fed Small Holding Company Debt

On Aug. 28, Fed issued rules on small holding company debt.

  • Interim final rule expanded use of small bank holding company policy statement.
  • Per economic growth, regulatory relief and consumer protection act (EGRRCPA).
  • EGRRCPA directed Fed to raise threshold from $1bn to $3bn in 180 days.
  • Follows Fed Apr. 2015 rules, raising threshold for small BHC policy.

Aims and Scope

  • Policy statement facilitates the transfer of ownership, of small community banks.
  • For small bank holding companies (BHC), savings & loan holding company (SLHC).
  • By allowing holding companies to operate with higher levels of debt than normal.
  • Fed usually discourages use of debt by parent, so can act as a source of strength.
  • Policy recognizes that small BHCs, have less access to equity, than do large ones.

Leverage Relief in Policy

  • Rule raises asset threshold on policy from $1bn to $3bn total consolidated assets.
  • Holding companies that qualify for policy, are excluded from consolidated capital.
  • However, their bank subsidiaries continue to be subject to minimum capital rules.
  • Restricted to banks without significant non-banking or off-balance sheet activities.
  • Allows BHC use debt to finance, up to 75% of the purchase price of an acquisition.
  • BHC must commit to reduce debt, by retiring it within 25 years of being incurred.
  • Reduce debt-to equity ratio to 0.30:1 in 12 years, all banks to be well capitalized.
  • Refrain from paying dividends, until has reduced its debt-to-equity ratio to 1.0:1.

Reduced Reporting

  • Fed also modified respondent panel for certain holding company financial reports.
  • Provides reporting relief for BHC, SLHC under $3bn assets, if meets requirements.
  • Exempted BHC from quarterly consolidated financial reporting returns, of FR Y-9C.
  • Instead, submit summary parent-only financial data semiannually on the FR Y-9SP.


  • Interim final rule effective on publication in federal register, comment in 30 days.