Banking and Finance Law Daily Fed revises Bank Holding Company Supervision Manual
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Monday, April 22, 2019

Fed revises Bank Holding Company Supervision Manual

By Nicole D. Prysby, J.D.

The Fed has released Supplement 53 to the Bank Holding Company Supervision Manual. The revisions include coverage of the new Large Financial Institution Rating System, as well as other policy and guidance updates and technical changes.

The Federal Reserve Board has issued a revision to its Bank Holding Company Supervision Manual. The update, issued by the Division of Supervision and Regulations, is Supplement 53 to the Manual and reflects new regulatory provisions, guidance, and instructions since the last update in September 2017. The revisions include coverage of the new supervisory rating system adopted in 2018 for large bank holding companies (Bank Holding Company Supervision Manual Supplement 53—February 2019).

The changes include the following:

  • The Foreword section was renamed to "About this Manual" and now includes a clarification that supervisory guidance does not have the force and effect of law (new content added to Section 1000.0; Sections 1020.0 and 1030.0 removed);
  • "Large Financial Institution Rating System" was added with the supervisory rating system adopted in November 2018 for large financial institutions (e.g., bank holding companies with total consolidated assets of $100 billion or more) (Section 1060.0);
  • "RFI Rating System" was added to clarify which supervisory rating system applies to holding companies with total consolidated assets less than $100 billion (Section 1062.0);
  • "Intercompany Transactions (Transfer of Low-Quality Loans or Other Assets)" was renamed to "Intercompany Transactions (Transfer of Low-Quality Assets)" and updated to provide the current definition of low-quality assets (Section 2020.7);
  • "Control and Ownership (BHC Formations)" was updated to reflect that the applicability threshold of the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement is now $3 billion in total consolidated assets, up from $1 billion (Section 2090.2);
  • "International Banking Activities" was revised to remove outdated information and include information on enhanced prudential standards (Section 2100.0);
  • "Purchase and Sale of Loans Guaranteed by the U.S. Government" has been removed (Section 2170.0);
  • "Support of Bank-Affiliated Investment Funds" was revised to clarify that a state member bank’s management should notify and consult with the Fed prior to the bank providing material financial support to its advised funds (Section 2178.0);
  • Technical updates were made to two sections to remove outdated references (Sections 4000.0 and 4020.5);
  • "Consolidated Risk-Based Capital—Direct-Credit Substitutes Extended to ABCP Programs" was renamed to "Overview of Asset-Backed Commercial Paper Programs" and was substantially revised to reflect the current capital rules (Section 4060.8);
  • "Dodd-Frank Act Company-Run Stress Testing for Banking Organizations with Total Consolidated Assets $10–50 Billion," has been removed, as financial companies with total consolidated assets of less than $250 billion that are not bank holding companies are no longer subject to company-run stress testing requirements (Section 4069.0);
  • "Bank Holding Company Rating System" has been deleted, because the content in that section was moved to section 1062.0, "RFI Rating System" (and also revised to clarify the applicability of the RFI rating system) (Section 4070.0); and
  • "Alphabetical Subject Index" has been removed as obsolete because the Fed no longer offers print versions of the Manual (Section 6000.0).

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