How Do I Comply?

Laws, Regulations and Policies

Holding companies are subject to a variety of laws, regulations and policies designed to ensure their safe and sound operation and protect the subsidiary depository institutions.

Two statutes form the "backbone" for the supervision of holding companies and their ownership: the Bank Holding Act and the Change in Bank Control Act. Both of these statutes are implemented by Regulation Y, issued by the Board of Governors of the Federal Reserve System. Therefore, it is  recommended that management be familiar with the key provisions of this regulation.

Another important focus of holding company regulation is transactions between the company and its depository institution affiliates. In this regard, the Board of Governors' Regulation W implements Sections 23A and 23B of the Federal Reserve Act.

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Regulation Y
Common holding company transactions governed by this regulation include bank acquisitions, change in control, stock redemptions and new activities. Contains specific provisions pertaining to these transactions and the related regulatory filing requirements.

Regulatory Capital Requirements (Regulation Q)
Holding companies with $1 billion or more in consolidated assets are subject to the same regulatory capital requirements as banks - Regulation Q (12 CFR 217). The requirements also apply to some smaller companies if, for example, they are engaged in nonbank activities.

The requirements specify minimum Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based, and Total Risk-Based capital ratios of 4 percent, 4.5 percent, 6 percent, and 8 percent, respectively.  The requirements also specify a capital conservation buffer of 2.5% that will be applied to the risk-based ratios, and phased in beginning in 2016.

Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies

Source of Strength Policy
This is a fundamental expectation that holding companies should serve as a source of strength to their subsidiary financial institutions. Activities, conditions and other factors that limit this ability may raise significant supervisory issues.

Regulation W
Defines "covered transactions" and limits the dollar amount of these transactions with any single affiliate to 10 percent of the bank's tier 1 capital and reserves, and no more than 20 percent with respect to all affiliates. Requires that all covered transactions between a bank and an affiliate be on terms/conditions consistent with safe and sound banking practices (including a prohibition on the bank's purchase of low quality assets from an affiliate), and on terms/conditions equivalent to those that apply to similar transactions with nonaffiliates. Requires that all of a bank's extensions of credit to an affiliate must be appropriately collateralized.

Intercompany Transactions
Learn more about common intercompany transactions and related policies under Regulation W.