Circular
Interim Rule Under the Financial Modernization Act
April 6, 2000
Circular No. 11240

Alternative to Debt Rating Requirement to Control Financial Subsidiaries Comments Invited by May 15, 2000

To the Chief Executive Officers of All State Member Banks and
Bank Holding Companies in the Second Federal Reserve District:

The following is from a joint release by the Federal Reserve Board and the Department of the Treasury:

The Federal Reserve Board and the Secretary of the Treasury have announced their approval of an interim rule, effective March 14, 2000, establishing alternative criteria for debt ratings that certain large banks may satisfy in order to establish a financial subsidiary under the Financial Modernization Act.

Under the act, a national or state member bank ranked among the largest 50 insured banks may control a financial subsidiary only if the bank meets certain criteria, including having an issue of highly rated debt outstanding. The next 50 largest insured banks may control a financial subsidiary if they satisfy this debt rating requirement or an alternative requirement determined by Treasury and the Federal Reserve. Under the interim rule, a bank meets the alternative requirement if it has a current long-term issuer credit rating, from a nationally recognized statistical rating organization, that is within the three highest investment-grade rating categories used by the rating organization.

Comments will be accepted on the interim rule until May 15, 2000.

The official notice of the interim rule (pdf - 235kb), as published in the Federal Register of March 20, is available as a PDF file. Comments should be sent to the Board, as specified in the notice. Questions may be directed, at this Bank, to Darryll E. Hendricks, Senior Vice President.