Final Rule Expanding Definition of a Small Bank Holding Company Approved
March 6, 2006
Circular No. 11771

To All Depository Institutions and Others Concerned
in the Second Federal Reserve District:

The Federal Reserve Board has announced the approval of a final rule that expands the definition of a small bank holding company (BHC) under the Board's Small Bank Holding Company Policy Statement and the Board's risk-based and leverage capital guidelines for bank holding companies.

The policy statement facilitates the transfer of ownership of small community banks by permitting debt levels at small BHCs that are higher than what would typically be permitted for larger BHCs. Because 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 small BHCs.

In its revisions to the Policy Statement, the Board has raised the small BHC asset size threshold from $150 million to $500 million and amended the related qualitative criteria for determining eligibility as a small BHC for the purposes of the policy statement and the capital guidelines.

The amendments to the threshold and the qualitative criteria are designed to reflect changes in the industry since the initial issuance of the policy statement in 1980.

The final rule is substantially similar to the proposed rule issued in September 2005 and takes effect 30 days after publication in the Federal Register.

The Board's notice is attached. Publication in the Federal Register is expected shortly.

Press release OFFSITE
Final rule OFFSITE PDF