(a) In general. A financial holding company may not, without Board approval, directly
or indirectly acquire any additional shares, assets, or ownership
interests under this subpart or make any additional capital contribution
to any company the shares, assets, or ownership interests of which
are held by the financial holding company under this subpart if the
aggregate carrying value of all merchant banking investments held
by the financial holding company under this subpart exceeds—
(1) 30 percent of the tier 1 capital
of the financial holding company; or
(2) after excluding interests in private equity funds, 20 percent
of the tier 1 capital of the financial holding company.
(b) How do these thresholds apply to
a private equity fund? Paragraph (a) of this section applies
to the interest acquired or controlled by the financial holding company
under this subpart in a private equity fund. Paragraph (a) of this
section does not apply to any interest in a company held by a private
equity fund or to any interest held by a person that is not affiliated
with the financial holding company.
(c) How long do these thresholds remain in effect? This section
225.174 shall cease to be effective on the date that a final rule
issued by the Board that specifically addresses the appropriate regulatory
capital treatment of merchant banking investments becomes effective.
(d) Qualifying community banking organizations. For purposes of this section, a financial holding company that is
a qualifying community banking organization (as defined in section
217.12 of this chapter) that is subject to the community bank leverage
ratio framework (as defined in section 217.12 of this chapter) calculates
its tier 1 capital (as defined in section 217.2 of this chapter) in
accordance with section 217.12(b) of this chapter.
