[Federal Register Volume 70, Number 173 (Thursday, September 8, 2005)]
[Proposed Rules]
[Pages 53320-53323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-17740]


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FEDERAL RESERVE SYSTEM

12 CFR Part 225

[Regulation Y; Docket No. R-1235]


Capital Adequacy Guidelines for Bank Holding Companies; Small 
Bank Holding Company Policy Statement; Definition of a Qualifying Small 
Bank Holding Company

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is proposing to raise the asset size threshold and revise the other 
criteria for determining whether a bank holding company (BHC) qualifies 
for the Board's Small Bank Holding Company Policy Statement (Regulation 
Y, Appendix C) (Policy Statement) and an exemption from the Board's 
risk-based and leverage capital adequacy guidelines for BHCs 
(Regulation Y, Appendices A and D) (Capital Guidelines). The proposal 
would increase the asset size threshold from $150 million to $500 
million in consolidated assets for determining whether a BHC would 
qualify for the Policy Statement and an exemption from the Capital 
Guidelines; modify the qualitative criteria used in determining whether 
a BHC that is under the asset size threshold nevertheless would not 
qualify for the Policy Statement or the exemption from the Capital 
Guidelines; and clarify the treatment under the Policy Statement of 
subordinated debt associated with trust preferred securities.

DATES: Comments must be received no later than November 7, 2005.

ADDRESSES: You may submit comments, identified by Docket No. R-1235, by 
any of the following methods:
    <bullet> Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#b3c1d6d4c09dd0dcdeded6ddc7c0f3d5d6d7d6c1d2dfc1d6c0d6c1c5d69dd4dcc5"><span class="__cf_email__" data-cfemail="8af8efedf9a4e9e5e7e7efe4fef9caecefeeeff8ebe6f8eff9eff8fcefa4ede5fc">[email protected]</span></a>. Include docket 
number in the subject line of the message.
    <bullet> FAX: 202/452-3819 or 202/452-3102.
    <bullet> Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Barbara Bouchard, Deputy Associate 
Director (202/452-3072 or <a href="/cdn-cgi/l/email-protection#a4c6c5d6c6c5d6c58ac6cbd1c7ccc5d6c0e4c2d6c68ac3cbd2"><span class="__cf_email__" data-cfemail="e684879484879487c8848993858e879482a6809484c8818990">[email protected]</span></a>), Mary Frances 
Monroe, Manager (202/452-5231 or <a href="/cdn-cgi/l/email-protection#620f03101b4c044c0f0d0c100d07220410004c050d14"><span class="__cf_email__" data-cfemail="3954584b40175f175456574b565c795f4b5b175e564f">[email protected]</span></a>), William 
Tiernay, Supervisory Financial Analyst (202/872-7579 or 
<a href="/cdn-cgi/l/email-protection#5f28363333363e327137712b363a2d313e261f392d3d71383029"><span class="__cf_email__" data-cfemail="8bfce2e7e7e2eae6a5e3a5ffe2eef9e5eaf2cbedf9e9a5ece4fd">[email protected]</span></a>), Supervisory and Risk Policy; Robert Maahs, 
Manager, Regulatory Reports (202/872-4935 or <a href="/cdn-cgi/l/email-protection#77051815120503591a16161f043711051559101801"><span class="__cf_email__" data-cfemail="9ceef3fef9eee8b2f1fdfdf4efdcfaeefeb2fbf3ea">[email protected]</span></a>); or 
Robert Brooks, Supervisory Financial Analyst (202/452-3103 or 
<a href="/cdn-cgi/l/email-protection#7a0815181f080e541808151511093a1c0818541d150c"><span class="__cf_email__" data-cfemail="73011c111601075d11011c1c1800331501115d141c05">[email protected]</span></a>), Applications, Division of Banking Supervision 
and Regulation; or Mark Van Der Weide, Senior Counsel (202/452-2263 or 
<a href="/cdn-cgi/l/email-protection#adc0ccdfc683dbccc3c9c8dfdac8c4c9c8edcbdfcf83cac2db"><span class="__cf_email__" data-cfemail="d6bbb7a4bdf8a0b7b8b2b3a4a1b3bfb2b396b0a4b4f8b1b9a0">[email protected]</span></a>), Legal Division. For the hearing impaired 
only, Telecommunication Device for the Deaf (TDD), contact 202/263-
4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Board issued the Policy Statement in 1980 to facilitate the 
transfer of ownership of small community-based banks in a manner that 
is consistent with bank safety and soundness. The Board generally has 
discouraged the use of debt by BHCs to finance the acquisition of banks 
or other companies because high levels of debt at a BHC can impair the 
ability of the BHC to serve as a source of strength to its subsidiary 
banks. The Board has recognized, however, that small BHCs have less 
access to equity financing than larger BHCs and that, therefore, the 
transfer of ownership of small banks often requires the use of 
acquisition debt. Accordingly, the Board adopted the Policy Statement 
to permit the formation and expansion of small BHCs with debt levels 
that are higher than what would be permitted for larger BHCs. The 
Policy Statement contains several conditions and restrictions that are 
designed to ensure that small BHCs that operate with the higher levels 
of debt permitted by the Policy Statement do not present an undue risk 
to the safety and soundness of their subsidiary banks.
    Currently, the Policy Statement applies to BHCs with pro forma 
consolidated assets of less than $150 million that (i) are not engaged 
in any nonbanking activities involving significant leverage; (ii) are 
not engaged in any significant off-balance sheet activities; and (iii) 
do not have a significant amount of outstanding debt that is held by 
the general public (``qualifying small BHCs''). Under the Policy 
Statement, qualifying small BHCs may use debt to finance up to 75 
percent of the purchase price of an acquisition (that is, they may have 
a debt-to-equity ratio of up to 3:1), but are subject to a number of 
ongoing requirements. The principal ongoing requirements are that a 
qualifying small BHC (i) reduce its parent company debt in such a 
manner that all debt is retired within 25 years of being incurred; (ii) 
reduce its debt-to-equity ratio to .30:1 or less within 12 years of the 
debt being incurred; (iii) ensure that each of its subsidiary insured 
depository institutions is well capitalized; and (iv) refrain from 
paying dividends until such time as it reduces its debt-to-equity ratio 
to 1.0:1 or less. The Policy Statement also specifically provides that 
a qualifying small BHC may not use the expedited applications 
procedures or obtain a waiver of the stock redemption filing 
requirements applicable to BHCs under the Board's Regulation Y (12 CFR 
225.4(b), 225.14, and 225.23) unless the BHC has a pro forma debt-to-
equity ratio of 1.0:1 or less.
    The Board adopted the risk-based capital guidelines in 1989 to 
assist in the assessment of the capital adequacy of BHCs. The risk-
based capital guidelines establish for BHCs minimum ratios of tier 1 
capital and total capital to risk-weighted assets. One of the Board's 
principal objectives in adopting

[[Page 53321]]

the risk-based capital guidelines was to make regulatory capital 
requirements more sensitive to differences in risk profiles among 
banking organizations. Supplemental to the risk-based capital 
guidelines, the Board in 1991 adopted the tier 1 leverage measure, a 
minimum ratio of tier 1 capital to total assets, to further assist in 
the assessment of the capital adequacy of BHCs with the principal 
objective of placing a constraint on the maximum degree to which a 
banking organization can leverage its equity capital base. Because 
qualifying small BHCs may, consistent with the Policy Statement, 
operate at a level of leverage that generally is inconsistent with the 
Capital Guidelines, the Capital Guidelines provide an exemption for 
qualifying small BHCs.

II. The Proposal

New Asset Threshold of $500 Million

    When the Board issued the Policy Statement in 1980, $150 million in 
consolidated assets represented a reasonable threshold for identifying 
those BHCs that might need additional flexibility for the purpose of 
enabling the transfer of ownership of small community-based banks. 
However, over the last two decades, inflation, industry consolidation, 
and the normal asset growth of BHCs have caused the $150 million 
threshold to lose much of its relevance.
    For these reasons, the Board proposes to increase the asset size 
threshold for qualifying small BHCs in the Policy Statement from $150 
million to $500 million in pro forma consolidated assets. While 
approximately 55 percent of all top tier BHCs currently qualify for the 
Policy Statement, under this proposal that number would increase to 85 
percent and would encompass approximately 4,400 BHCs. The Board notes 
that raising the threshold to $500 million, as proposed, goes well 
beyond the level (approximately $340 million) that would be appropriate 
to adjust the current threshold for inflation since the Board adopted 
the Policy Statement. The Board believes that raising the threshold to 
$500 million represents an appropriate balance between the goals of 
facilitating the transfer of ownership of small banks, on the one hand, 
and ensuring capital adequacy and access to necessary supervisory 
information on the other hand. The proposal also would make a 
conforming change to the asset size threshold in the Capital 
Guidelines.
    The Board does not believe that raising the asset threshold above 
$500 million would be appropriate at this time. BHCs that have more 
than $500 million in consolidated assets typically have sufficient 
access to equity markets and other sources of funding to enable them to 
finance acquisitions with a lower proportion of debt-to-equity than 
smaller BHCs.

Other Criteria for Identifying a Qualifying Small BHC

    As noted above, a BHC currently qualifies for the Policy Statement 
and is exempt from the Capital Guidelines only if the BHC falls below 
the asset threshold and (i) does not engage in any nonbanking 
activities involving significant leverage; (ii) does not engage in any 
significant off-balance sheet activities; and (iii) does not have a 
significant amount of outstanding debt that is held by the general 
public. The Board also is proposing to revise these qualitative 
criteria for determining whether a small BHC qualifies for the Policy 
Statement and generally is exempt from the Capital Guidelines.
    Specifically, the Board proposes to amend these criteria to provide 
that a BHC with less than $500 million in consolidated assets does not 
qualify for the Policy Statement (and is subject to the Capital 
Guidelines) if the BHC (i) is engaged in significant nonbanking 
activities either directly or through a nonbank subsidiary; (ii) 
conducts significant off-balance sheet activities, including 
securitizations or managing or administering assets for third parties, 
either directly or through a nonbank subsidiary; or (iii) has a 
material amount of debt or equity securities (other than trust 
preferred securities) outstanding that are registered with the 
Securities and Exchange Commission (SEC). The proposal also would make 
conforming changes to the Capital Guidelines.
    The Board expects that few BHCs with consolidated assets of less 
than $500 million would meet any of these criteria. In those cases 
where a BHC's management is uncertain whether the BHC meets any of 
these criteria, management should consult with the BHC's appropriate 
Reserve Bank.
    The Board believes these changes to the eligibility criteria under 
the Policy Statement are necessary or appropriate to reflect changes in 
the banking industry over the last two decades, including the nature of 
operations of many small BHCs. The enactment of the Gramm-Leach-Bliley 
Act in 1999 expanded significantly the range of nonbanking activities 
in which BHCs may engage, both directly and through their nonbank 
subsidiaries. Therefore, the Board is proposing to revise the criteria 
so as to exclude from the Policy Statement any BHC that engages in 
significant nonbanking activities or off-balance sheet activities, 
either directly or through a nonbank subsidiary. The more limiting 
reference to significantly leveraged nonbanking activities would be 
deleted, since nonleveraged activities may also entail significant 
risk, such as operational risk. The examples provided--securitizations 
and managing or administering assets for third parties--highlight two 
areas of off-balance sheet activities that may involve substantially 
larger operations and risk than balance sheet measures would indicate. 
These examples are not intended to be exclusive and other activities 
may well present similar concerns. The revision of the final criterion 
to exclude from the Policy Statement any BHC that has outstanding a 
material amount of SEC-registered debt or equity securities reflects 
the fact that SEC registrants typically exhibit a degree of complexity 
of operations and access to multiple funding sources that warrants 
excluding them from the Policy Statement and subjecting them to 
consolidated capital requirements. Moreover, the application of 
consolidated reporting requirements to these BHCs should not impose 
significant additional burden, as they are required to have 
consolidated financial statements for SEC reporting purposes.
    The Board is of the view that the amended criteria represent a 
prudent balance of its interest in expanding the Policy Statement 
treatment to a larger pool of small BHCs, while ensuring that larger 
and more complex BHCs remain well capitalized and continue to serve as 
a source of strength to their subsidiary banks.
    In addition, the Board is proposing to amend the Policy Statement 
and the Capital Guidelines to make explicit the Federal Reserve's 
existing authority to require on a case by case basis that a qualifying 
small BHC maintain consolidated capital when such action is warranted 
for supervisory reasons.
    In addition to the foregoing, a qualifying small BHC may 
voluntarily elect to comply with the Capital Guidelines.

Treatment of Subordinated Debt Associated With Trust Preferred 
Securities

    The Policy Statement currently does not address the treatment of 
subordinated debt that is issued in connection with the issuance of 
trust preferred securities.\1\ Currently, for

[[Page 53322]]

purposes of the Policy Statement, such subordinated debt on the parent 
company balance sheet is not treated as debt; however, the cash-flow 
impact of the subordinated debt is included in the Board's review of 
the financial condition of a BHC. The Board is now proposing to clarify 
that subordinated debt associated with trust preferred securities would 
be considered debt for most purposes under the Policy Statement. In 
particular, such subordinated debt would be included as debt in 
determining whether (i) a qualifying small BHC's acquisition debt is 75 
percent or less of the purchase price; or (ii) a qualifying small BHC's 
debt-to-equity ratio is greater than 1.0:1 (the ratio above which a 
qualifying small BHC is subject to dividend restrictions and is not 
permitted to use the expedited applications processing procedures or 
obtain a waiver of stock redemption filing requirements under 
Regulation Y).\2\ However, in order to provide for more equitable 
treatment between qualifying small BHCs and larger BHCs that are 
subject to the Capital Guidelines,\3\ a qualifying small BHC may 
exclude from debt an amount of subordinated debt associated with trust 
preferred securities equaling up to 25 percent of a small BHC's equity 
(as defined in the Policy Statement), less parent company goodwill in 
determining compliance with these requirements.
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    \1\ Trust preferred securities are undated cumulative preferred 
securities issued out of a special purpose entity, usually in the 
form of a trust, in which a BHC owns all of the common securities. 
The special purpose entity's sole asset is a deeply subordinated 
note issued by the BHC that typically has a fixed maturity of 30 
years.
    \2\ The Board also would consider subordinated debt associated 
with the issuance of trust preferred securities as covered by any 
supervisory debt commitments with the Federal Reserve.
    \3\ A BHC that is subject to the Capital Guidelines generally 
may count an amount of qualifying trust preferred securities as tier 
1 capital up to 25 percent of the sum of the BHC's core 1 capital 
elements. 12 CFR part 225, appendix A, Sec.  II.A.1.b.
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    In addition, in order to give qualifying small BHCs sufficient time 
to conform their debt structures, the Board is proposing to provide for 
a five-year transition period during which subordinated debt associated 
with trust preferred securities issued on or prior to the publication 
date of this proposed rule would not be considered debt under the 
Policy Statement. Such a transition period generally would be 
consistent with the five-year transition period afforded to larger BHCs 
to meet the Board's risk-based capital guidelines with respect to trust 
preferred securities.\4\ However, in the event that a qualifying small 
BHC issues additional subordinated debt associated with a new issuance 
of trust preferred securities after the date of this proposed rule, the 
temporary non-debt status of all the qualifying small BHC's existing 
subordinated debt associated with trust preferred securities would be 
terminated.
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    \4\ See 12 CFR part 225, appendix A, Sec.  II.A.1.b.ii.
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    In any event, subordinated debt associated with trust preferred 
securities would not be included as debt in determining compliance with 
the 12-year debt reduction and 25-year debt retirement requirements of 
the Policy Statement.

Small BHC Regulatory Reporting

    In order to assist the Federal Reserve in monitoring the financial 
health and operations of BHCs, the Board requires all BHCs to file 
certain reports with the Federal Reserve. One of the most important of 
the Federal Reserve reporting requirements is the Financial Statements 
for Bank Holding Companies (FR Y-9 series of reports; OMB No. 7100-
0128). Currently, BHCs with consolidated assets of less than $150 
million (and that also meet qualitative criteria similar to those in 
the Policy Statement) submit limited summary parent-only financial data 
semiannually on the FR Y-9SP. Currently, BHCs with consolidated assets 
of $150 million or more submit parent only financial data on the FR Y-
9LP and consolidated financial data on the FR Y-9C quarterly.
    In the near future, the Federal Reserve plans to propose for 
comment revisions to the FR Y-9 series of reports for 2006 (2006 
proposal). Pending approval, these revisions would include increasing 
the FR Y-9SP reporting threshold from $150 million to $500 million and 
conforming the FR Y-9SP reporting exception criteria to the proposed 
qualitative exception criteria under the Policy Statement and the 
Capital Guidelines. Under the 2006 proposal, BHCs that meet the 
criteria for filing the FR Y-9SP would be exempt from filing the FR Y-
9LP and FR Y-9C. Conversely, BHCs subject to the Capital Guidelines, 
including small BHCs that do not qualify under the revised Policy 
Statement and qualifying small BHCs that voluntarily elect to comply 
with the Capital Guidelines, would file the FR Y-9LP and the FR Y-9C on 
a quarterly basis.

Comments

    The Board seeks comments on all aspects of this proposal. 
Interested parties are encouraged to provide comments on the proposed 
increase to the asset threshold for the Policy Statement and the 
Capital Guidelines, and on whether the proposed $500 million threshold 
should be further adjusted over time based upon an index and, if so, 
what would constitute an appropriate index for this purpose. Interested 
parties also are encouraged to provide comments on the proposed 
qualitative criteria that would determine whether the Policy Statement 
or the Capital Guidelines apply to a BHC with consolidated assets of 
less than $500 million.

Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), the Board has determined that this proposed rule 
would not have a significant impact on a substantial number of small 
entities, as defined in the Regulatory Flexibility Act. However, the 
proposed rule would reduce regulatory burden by exempting most BHCs 
with total consolidated assets of between $150 million and $500 million 
from the application of the Board's Capital Guidelines. Moreover, 
although the proposal would treat subordinated debt associated with 
trust preferred securities as debt for most purposes under the Policy 
Statement, the proposal provides a substantial five-year transition 
period for subordinated debt associated with trust preferred securities 
issued on or prior to the publication date of the proposed rule.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320 Appendix A.1.), the Board has reviewed this proposed 
rulemaking under the authority delegated to the Board by the Office of 
Management and Budget. The Board has determined that this proposed rule 
does not involve a collection of information pursuant to the provisions 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). As 
mentioned previously, related amendments to the FR Y-9 series of 
reports will be proposed separately for comment in the near future.

Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the Federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. In light of this requirement, 
the Board has sought to present the proposed rule in a simple and 
straightforward manner. The Board invites comments on whether there are 
additional steps it could take to make the rule easier to understand.

List of Subjects in 12 CFR Part 225

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System, Holding companies,

[[Page 53323]]

Reporting and recordkeeping requirements, Securities.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set forth in the preamble, part 225 of chapter II 
of title 12 of the Code of Federal Regulations is proposed to be 
amended as set forth below:

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

    1. The authority citation for part 225 continues to read as 
follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843( c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, 
and 3909; 15 U.S.C. 6801 and 6805.

    2. Appendix A to part 225 is amended as follows:
    a. In section I, the fifth undesignated paragraph is revised.
    b. In section I, footnote 4 is removed and reserved.

Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding 
Companies: Risk Based Measure

I. * * *

* * * * *
    The risk-based guidelines apply on a consolidated basis to any 
bank holding company with consolidated assets of $500 million or 
more. The risk-based guidelines also apply on a consolidated basis 
to any bank holding company with consolidated assets of less than 
$500 million if the holding company (i) is engaged in significant 
nonbanking activities either directly or through a nonbank 
subsidiary; (ii) conducts significant off-balance sheet activities 
(including securitization and asset management or administration) 
either directly or through a nonbank subsidiary; or (iii) has a 
material amount of debt or equity securities outstanding (other than 
trust preferred securities) that are registered with the Securities 
and Exchange Commission (SEC). The Federal Reserve may apply the 
risk-based guidelines at its discretion to any bank holding company, 
regardless of asset size, if such action is warranted for 
supervisory purposes.
* * * * *
    3. Appendix C to part 225 is amended as follows:
    a. In section 1, the first undesignated paragraph is revised.
    b. In section 1, footnote 1 is removed and reserved.
    c. In section 2.A., a new paragraph is added after the first 
paragraph in footnote 3.

Appendix C to Part 225--Small Bank Holding Company Policy Statement

* * * * *
    1. * * *
    This policy statement applies only to bank holding companies 
with pro forma consolidated assets of less than $500 million that 
(i) are not engaged in significant nonbanking activities either 
directly or through a nonbank subsidiary; (ii) do not conduct 
significant off-balance sheet activities (including securitization 
and asset management or administration) either directly or through a 
nonbank subsidiary; and (iii) do not have a material amount of debt 
or equity securities outstanding (other than trust preferred 
securities) that are registered with the Securities and Exchange 
Commission. The Board may in its discretion exclude any bank holding 
company, regardless of asset size, from the policy statement if such 
action is warranted for supervisory purposes.
* * * * *
    2. * * *
    A. * * *
    \3\ * * *
    Subordinated debt associated with trust preferred securities 
generally would be treated as debt for purposes of paragraphs 2C, 
3A, 4Ai, and 4Bi of this policy statement. A bank holding company, 
however, may exclude from debt an amount of subordinated debt 
associated with trust preferred securities up to 25 percent of the 
holding company's equity (as defined below) less goodwill on the 
parent company's balance sheet in determining compliance with the 
requirements of such paragraphs of the policy statement. In 
addition, a bank holding company that has not issued subordinated 
debt associated with trust preferred securities after September 8, 
2005, may exclude from debt any subordinated debt associated with 
trust preferred securities until September 8, 2010. Subordinated 
debt associated with trust preferred securities will not be included 
as debt in determining compliance with any other requirements of 
this policy statement.
* * * * *
    4. Appendix D to part 225 is amended as follows:
    a. In section I., paragraph b. is revised.
    b. In section I.b., footnote 2 is removed and reserved.

Appendix D to Part 225--Capital Adequacy Guidelines for Bank Holding 
Companies: Tier 1 Leverage Measure

    I. * * *
    b. The tier 1 leverage guidelines apply on a consolidated basis 
to any bank holding company with consolidated assets of $500 million 
or more. The tier 1 leverage guidelines also apply on a consolidated 
basis to any bank holding company with consolidated assets of less 
than $500 million if the holding company (i) is engaged in 
significant nonbanking activities either directly or through a 
nonbank subsidiary; (ii) conducts significant off-balance sheet 
activities (including securitization and asset management or 
administration) either directly or through a nonbank subsidiary; or 
(iii) has a material amount of debt or equity securities outstanding 
(other than trust preferred securities) that are registered with the 
Securities and Exchange Commission. The Federal Reserve may apply 
the tier 1 leverage guidelines at its discretion to any bank holding 
company, regardless of asset size, if such action is warranted for 
supervisory purposes.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, September 1, 2005.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 05-17740 Filed 9-7-05; 8:45 am]
BILLING CODE 6210-02-P


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