(a) In general.
(1) Except as otherwise
provided in section 251.4, a company may not consummate a covered
acquisition if upon consummation of the transaction, the liabilities
of the resulting company would exceed 10 percent of the financial
sector liabilities, and the company is or would become a financial
company.
(2) Financial sector liabilities.
(i) Subject to paragraph (a)(2)(ii)
of this section, as of July 1 of a given year, financial sector liabilities
are equal to the average of the year-end financial sector liabilities
figure for the preceding two calendar years. The measure of financial
sector liabilities will be in effect until June 30 of the following
calendar year.
(ii) For the period
beginning July 1, 2015, and ending June 30, 2016, financial sector
liabilities are equal to the year-end financial sector liabilities
figure as of December 31, 2014.
(iii) The year-end financial sector liabilities figure equals the
sum of the total consolidated liabilities of all top-tier U.S. financial
companies (as calculated under paragraph (b) of this section) and
the U.S. liabilities of all top-tier foreign financial companies (as
calculated under paragraph (c) of this section) as of December 31
of that year.
(iv) On an annual
basis and no later than July 1 of any calendar year, the Board will
calculate and publish the financial sector liabilities for the preceding
calendar year and the average of the financial sector liabilities
for the preceding two calendar years.
(b) Calculating total consolidated liabilities. For purposes of paragraph (a) of this section:
(1) Covered acquisition
by a U.S. company. For a covered acquisition in which a U.S.
company would acquire a U.S. company or a foreign company, liabilities
of the resulting U.S. financial company equal the consolidated liabilities
of the resulting U.S. financial company, calculated on a pro forma basis in accordance with paragraph (c) of this section.
(2) Covered acquisition
by a foreign company of another foreign company. For a covered
acquisition in which a foreign company would acquire another foreign
company, liabilities of the resulting foreign financial company equal
the U.S. liabilities of the resulting financial company, calculated
on a pro forma basis in accordance with paragraph (d) of this
section.
(3) Covered acquisition by a foreign company of a U.S. company. For
a covered acquisition in which a foreign company would acquire a U.S.
company, liabilities of the resulting foreign financial company equal
the sum of:
(i) The
U.S. liabilities of the foreign company immediately preceding the
transaction (calculated in accordance with paragraph (d) of this section)
and
(ii) The consolidated liabilities
of the U.S. company immediately preceding the transaction (calculated
in accordance with paragraph (c) of this section), reduced by the
amount corresponding to any balances and transactions that would be
eliminated in consolidation upon consummation of the transaction.
(c) Liabilities
of a U.S. company.
(1) U.S. company subject to applicable
risk-based capital rules. For a U.S. company subject to applicable
risk-based capital rules, consolidated liabilities are equal to:
(i) Total risk-weighted
assets of the company; plus
(ii) The amount of assets that are deducted from the company’s regulatory
capital elements under the applicable risk-based capital rules, times
a multiplier that is equal to the inverse of the company’s total risk-based
capital ratio minus one; minus
(iii) Total regulatory capital of the
company.
(2) U.S. company not subject to applicable risk-based
capital rules. For a U.S. company that is not subject to applicable
risk-based capital rules (other than 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)), consolidated liabilities are
equal to the total liabilities of such company on a consolidated basis,
as determined under applicable accounting standards.
(3) Qualifying
community banking organizations. For a U.S. 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), consolidated
liabilities are equal to:
(i) Average total consolidated assets
(as used in section 217.12 of this chapter) of the company as last
reported on the qualifying community banking organization’s applicable
regulatory filing with the qualifying community banking organization’s
appropriate Federal banking agency; minus
(ii) The company’s tier 1 capital (as
defined in section 217.2 of this chapter and calculated in accordance
with section 217.12(b) of this chapter).
(d) Liabilities of a foreign company.
(1) Foreign banking organization. For a foreign
banking organization, U.S. liabilities are equal to:
(i) The total consolidated assets
of each U.S. branch or U.S. agency of the foreign banking organization,
calculated in accordance with applicable accounting standards; plus
(ii) The total consolidated
liabilities of each top-tier U.S. subsidiary that is subject to applicable
risk-based capital rules (or reports information to the Board regarding
its capital under risk-based capital rules applicable to bank holding
companies), calculated as:
(A) Total consolidated risk-weighted assets of the subsidiary; plus
(B) The amount of assets
that are deducted from the subsidiary’s regulatory capital elements
under the applicable risk-based capital rules, times a multiplier
that is equal to the inverse of the subsidiary’s total risk-based
capital ratio minus one; minus
(C) Total consolidated regulatory capital of the subsidiary; plus
(iii) The total
consolidated assets of each top-tier U.S. subsidiary that is not subject
to applicable risk-based capital rules and does not report information
regarding its capital under risk-based capital rules applicable to
bank holding companies, calculated in accordance with applicable accounting
standards.
(2) Foreign financial company that is not a foreign
banking organization. For a foreign company that is not a foreign
banking organization, U.S. liabilities are equal to:
(i) The total consolidated liabilities
of each top-tier U.S. subsidiary that is subject to applicable risk-based
capital rules (or reports information to the Board regarding its capital
under risk-based capital rules applicable to bank holding companies),
calculated as:
(A) Total
consolidated risk-weighted assets of the subsidiary; plus
(B) The amount of assets that are deducted
from the subsidiary’s regulatory capital elements under the applicable
risk-based capital rules, times a multiplier that is equal to the
inverse of the company’s total risk-based capital ratio minus one; minus
(C) Total regulatory capital
of the subsidiary; plus
(ii) The total consolidated liabilities
of each top-tier U.S. subsidiary that is not subject to applicable
risk-based capital rules, calculated in accordance with applicable
accounting standards.
(3) Intercompany balances and transactions.
(i) Foreign banking organization. A foreign
banking organization must reduce the amount of consolidated liabilities
of its U.S. operations calculated pursuant to this paragraph (d) by
amounts corresponding to intercompany balances and intercompany transactions
between the foreign banking organization’s U.S. domiciled affiliates,
branches or agencies to the extent such items are not eliminated in
consolidation, and increase consolidated liabilities by net intercompany
balances and intercompany transactions between a non-U.S. domiciled
affiliate and a U.S. domiciled affiliate, branch, or agency of the
foreign banking organization, to the extent such items are not reflected
in the measure of liabilities.
(ii) Foreign financial company. A
foreign company that is not a foreign banking organization may reduce
the amount of consolidated liabilities of its U.S. operations calculated
pursuant to this paragraph (d) by amounts corresponding to intercompany
balances and intercompany transactions between the foreign organization’s
U.S. domiciled affiliates to the extent such items are not already
eliminated in consolidation; provided that it increases consolidated
liabilities by net intercompany balances and intercompany transactions
between a non-U.S. domiciled affiliate and a U.S. domiciled affiliate,
to the extent such items are not al ready reflected in the measure
of liabilities.
(e) Applicable accounting standard. If a company
does not calculate its total consolidated assets or liabilities under
GAAP for any regulatory purpose (including compliance with applicable
securities laws), the company may submit a request to the Board that
the company use an accounting standard or method of estimation other
than GAAP to calculate its liabilities for purposes of this part.
The Board may, in its discretion and subject to Board review and adjustment,
permit the company to provide estimated total consolidated liabilities
on an annual basis using this accounting standard or method of estimation.
