Editorial Note on Part 225
Editorial Note: Nomenclature changes to part 225 appear at 69 FR 77618, Dec. 28, 2004.

§ 225.172 What are the holding periods permitted for merchant banking investments? ( a ) *Must investments be made for resale?* A financial holding company may own or control shares, assets and ownership interests pursuant to this subpart only for a period of time to enable the sale or disposition thereof on a reasonable basis consistent with the financial viability of the financial holding company's merchant banking investment activities.
( b ) *What period of time is generally permitted for holding merchant banking investments?* — ( 1 ) *In general.* Except as provided in this section or § 225.173, a financial holding company may not, directly or indirectly, own, control or hold any share, asset or ownership interest pursuant to this subpart for a period that exceeds 10 years.
( 2 ) *Ownership interests acquired from or transferred to companies held under this subpart.* For purposes of paragraph (b)(1) of this section, shares, assets or ownership interests— ( i ) Acquired by a financial holding company from a company in which the financial holding company held an interest under this subpart will be considered to have been acquired by the financial holding company on the date that the share, asset or ownership interest was acquired by the company; and
( ii ) Acquired by a company from a financial holding company will be considered to have been acquired by the company on the date that the share, asset or ownership interest was acquired by the financial holding company if— ( A ) The financial holding company held the share, asset, or ownership interest under this subpart; and
( B ) The financial holding company holds an interest in the acquiring company under this subpart.
( 3 ) *Interests previously held by a financial holding company under limited authority.* For purposes of paragraph (b)(1) of this section, any shares, assets, or ownership interests previously owned or controlled, directly or indirectly, by a financial holding company under any other provision of the Federal banking laws that imposes a limited holding period will if acquired under this subpart be considered to have been acquired by the financial holding company under this subpart on the date the financial holding company first acquired ownership or control of the shares, assets or ownership interests under such other provision of law. For purposes of this paragraph (b)(3), a financial holding company includes a depository institution controlled by the financial holding company and any subsidiary of such a depository institution.
( 4 ) *Approval required to hold interests held in excess of time limit.* A financial holding company may seek Board approval to own, control or hold shares, assets or ownership interests of a company under this subpart for a period that exceeds the period specified in paragraph (b)(1) of this section. A request for approval must: ( i ) Be submitted to the Board at least 90 days prior to the expiration of the applicable time period;
( ii ) Provide the reasons for the request, including information that addresses the factors in paragraph (b)(5) of this section; and
( iii ) Explain the financial holding company's plan for divesting the shares, assets or ownership interests.
( 5 ) *Factors governing Board determinations.* In reviewing any proposal under paragraph (b)(4) of this section, the Board may consider all the facts and circumstances related to the investment, including: ( i ) The cost to the financial holding company of disposing of the investment within the applicable period;
( ii ) The total exposure of the financial holding company to the company and the risks that disposing of the investment may pose to the financial holding company;
( iii ) Market conditions;
( iv ) The nature of the portfolio company's business;
( v ) The extent and history of involvement by the financial holding company in the management and operations of the company; and
( vi ) The average holding period of the financial holding company's merchant banking investments.
( 6 ) *Restrictions applicable to investments held beyond time period.* A financial holding company that directly or indirectly owns, controls or holds any share, asset or ownership interest of a company under this subpart for a total period that exceeds the period specified in paragraph (b)(1) of this section must— ( i ) For purposes of determining the financial holding company's regulatory capital, apply to the financial holding company's adjusted carrying value of such shares, assets, or ownership interests a capital charge determined by the Board that must be: ( A ) Higher than the maximum marginal tier 1 capital charge applicable under part 217 to merchant banking investments held by that financial holding company; and
( B ) In no event less than 25 percent of the adjusted carrying value of the investment; and
( ii ) Abide by any other restrictions that the Board may impose in connection with granting approval under paragraph (b)(4) of this section.
[Reg. Y, 62 FR 9329, Feb. 28, 1997, as amended at 78 FR 62291, Oct. 11, 2013; 80 FR 70673, Nov. 16, 2015]