(a) Bank holding company policy and operations.
(1) A bank holding company shall serve
as a source of financial and managerial strength to its subsidiary
banks and shall not conduct its operations in an unsafe or unsound manner.
(2) Whenever the Board
believes an activity of a bank holding company or control of a nonbank
subsidiary (other than a nonbank subsidiary of a bank) constitutes
a serious risk to the financial safety, soundness, or stability of
a subsidiary bank of the bank holding company and is inconsistent
with sound banking principles or the purposes of the BHC Act or the
Financial Institutions Supervisory Act of 1966, as amended (12 U.S.C.
1818(b) et seq.), the Board may require the bank holding company
to terminate the activity or to terminate control of the subsidiary,
as provided in section 5(e) of the BHC Act.
4-013
(b) Purchase or redemption by a bank holding company
of its own securities.
(1) Filing notice. Except as provided in paragraph (b)(6), a bank holding company shall
give the Board prior written notice before purchasing or redeeming
its equity securities if the gross consideration for the purchase
or redemption, when aggregated with the net consideration paid by
the company for all such purchases or redemptions during the preceding
12 months, is equal to 10 percent or more of the company’s consolidated
net worth. For the purposes of this section, “net consideration”
is the gross consideration paid by the company for all of its equity
securities purchased or redeemed during the period minus the gross
consideration received for all of its equity securities sold during
the period.
(2) Contents of notice. Any notice under this
section shall be filed with the appropriate Reserve Bank and shall
contain the following information:
(i) the purpose of the transaction,
a description of the securities to be purchased or redeemed, the total
number of each class outstanding, the gross consideration to be paid,
and the terms and sources of funding for the transaction;
(ii) a description of all
equity securities redeemed within the preceding 12 months, the net
consideration paid, and the terms of any debt incurred in connection
with those transactions; and
(iii) (A) if the bank
holding company has consolidated assets of $3 billion or more, consolidated pro forma risk-based capital and leverage ratio calculations
for the bank holding company as of the most recent quarter, and, if
the redemption is to be debt funded, a parent-only pro forma balance sheet as of the most recent quarter; or
(B) if the bank holding company has consolidated
assets of less than $3 billion, a pro forma parent-only balance
sheet as of the most recent quarter, and, if the redemption is to
be debt funded, one-year income statement and cash-flow projections.
4-014
(3) Acting on
notice. Within 15 calendar days of receipt of a notice under
this section, the appropriate Reserve Bank shall either approve the
transaction proposed in the notice or refer the notice to the Board
for decision. If the notice is referred to the Board for decision,
the Board shall act on the notice within 30 calendar days after the
Reserve Bank receives the notice.
(4) Factors considered
in acting on notice.
(i) The Board may disapprove a proposed
purchase or redemption if it finds that the proposal would constitute
an unsafe or unsound practice, or would violate any law, regulation,
Board order, directive, or any condition imposed by, or written agreement
with, the Board.
(ii) In determining whether a proposal constitutes an unsafe or unsound
practice, the Board shall consider whether the bank holding company’s
financial condition, after giving effect to the proposed purchase
or redemption, meets the financial standards applied by the Board
under section 3 of the BHC Act, including 12 CFR part 217, and the
Board’s Policy Statement for Small Bank Holding Companies (appendix
C of this part).
(5) Disapproval and hearing.
(i) The Board shall notify the bank
holding company in writing of the reasons for a decision to disapprove
any proposed purchase or redemption. Within 10 calendar days of receipt
of a notice of disapproval by the Board, the bank holding company
may submit a written request for a hearing.
(ii) The Board shall order a hearing
within 10 calendar days of receipt of the request if it finds that
material facts are in dispute, or if it otherwise appears appropriate.
Any hearing conducted under this paragraph shall be held in accordance
with the Board’s Rules of Practice for Formal Hearings (12 CFR
263).
(iii) At the
conclusion of the hearing, the Board shall by order approve or disapprove
the proposed purchase or redemption on the basis of the record of
the hearing.
4-014.1
(6) Exception
for well-capitalized bank holding companies. A bank holding company
is not required to obtain prior Board approval for the redemption
or purchase of its equity securities under this section provided—
(i) both before and immediately after the redemption, the bank holding
company is well capitalized;
(ii) the bank holding company is well
managed; and
(iii)
the bank holding company is not the subject of any unresolved supervisory
issues.
(7) Exception for certain bank holding
companies. This section 225.4(b) shall not apply to any bank
holding company that is subject to section 225.8 of Regulation Y (12
CFR 225.8).
4-015
(c) Deposit
insurance. Every bank that is a bank holding company or a subsidiary
of a bank holding company shall obtain Federal Deposit Insurance and
shall remain an “insured bank” as defined in section 3(h)
of the Federal Deposit Insurance Act (12 USC 1813(h)).
4-015.1
(d) Acting as transfer agent or clearing
agent. A bank holding company or any nonbanking subsidiary that
is a “bank,” as defined in section 3(a)(6) of the Securities
Exchange Act of 1934 (15 USC 78c(a)(6)), and that is a transfer agent
of securities, a municipal securities dealer, a clearing agency, or
a participant in a clearing agency (as those terms are defined in
section 3(a) of the Securities Exchange Act (12 USC 78c(a)), shall
be subject to sections 208.31-208.33 of the Board’s Regulation
H (12 CFR 208.31-208.33) as if it were a state member bank.
4-015.2
(e) Reporting requirement for credit secured
by certain bank holding company stock. Each executive officer
or director of a bank holding company the shares of which are not
publicly traded shall report annually to the board of directors of
the bank holding company the outstanding amount of any credit that
was extended to the executive officer or director and that is secured
by shares of the bank holding company. For purposes of this paragraph,
the terms “executive officer” and “director”
shall have the meaning given in section 215.2 of Regulation O (12
CFR 215.2).
(f) Suspicious-activity
report. A bank holding company or any nonbank subsidiary thereof,
or a foreign bank that is subject to the BHC Act or any nonbank subsidiary
of such foreign bank operating in the United States, shall file a
suspicious-activity report in accordance with the provisions of section
208.62 of the Board’s Regulation H (12 CFR 208.62).
4-015.3
(g) Requirements for financial holding
companies engaged in securities underwriting, dealing, or market-making
activities.
(1) Any intraday extension of credit by
a bank or thrift, or U.S. branch or agency of a foreign bank to an affiliated
company engaged in underwriting, dealing in, or making a market in
securities pursuant to section 4(k)(4)(E) of the Bank Holding Company
Act (12 USC 1843(k)(4)(E)) must be on market terms consistent with
section 23B of the Federal Reserve Act (12 USC 371c-1).
(2) A foreign bank that is
or is treated as a financial holding company under this part shall
ensure that—
(i) any extension of credit by any U.S.
branch or agency of such foreign bank to an affiliated company engaged
in underwriting, dealing in, or making a market in securities pursuant
to section 4(k)(4)(E) of the Bank Holding Company Act (12 USC 1843(k)(4)(E)),
conforms to sections 23A and 23B of the Federal Reserve Act (12 USC
371c and 371c-1) as if the branch or agency were a member bank;
(ii) any purchase by
any U.S. branch or agency of such foreign bank, as principal or fiduciary,
of securities for which a securities affiliate described in paragraph
(g)(2)(i) of this section is a principal underwriter conforms to sections
23A and 23B of the Federal Reserve Act (12 USC 371c and 371c-1) as
if the branch or agency were a member bank; and
(iii) its U.S. branches and agencies
not advertise or suggest that they are responsible for the obligations
of a securities affiliate described in paragraph (g)(2)(i) of this
section, consistent with section 23B(c) of the Federal Reserve Act
(12 USC 371c-1) as if the branches or agencies were member banks.
4-015.4
(h)
Protection
of customer information and consumer information. A bank holding
company shall comply with the Interagency Guidelines Establishing
Information Security Standards, as set forth in appendix F of this
part, prescribed pursuant to sections 501 and 505 of the Gramm-Leach-Bliley
Act (15 USC 6801 and 6805) [at
4-863]. A bank holding company shall
dispose of consumer information in accordance with the rules set forth
at 16 CFR 682.
