12 CFR 225.172 - What are the holding periods permitted for merchant banking investments?

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§ 225.172 What are the holding periods permitted for merchant banking investments?
(a) Must investments be made for resale? A financial holding company may own or control shares, assets and ownership interests pursuant to this subpart only for a period of time to enable the sale or disposition thereof on a reasonable basis consistent with the financial viability of the financial holding company's merchant banking investment activities.
(b) What period of time is generally permitted for holding merchant banking investments?—(1) In general. Except as provided in this section or § 225.173, a financial holding company may not, directly or indirectly, own, control or hold any share, asset or ownership interest pursuant to this subpart for a period that exceeds 10 years.
(2) Ownership interests acquired from or transferred to companies held under this subpart. For purposes of paragraph (b)(1) of this section, shares, assets or ownership interests—
(i) Acquired by a financial holding company from a company in which the financial holding company held an interest under this subpart will be considered to have been acquired by the financial holding company on the date that the share, asset or ownership interest was acquired by the company; and
(ii) Acquired by a company from a financial holding company will be considered to have been acquired by the company on the date that the share, asset or ownership interest was acquired by the financial holding company if—
(A) The financial holding company held the share, asset, or ownership interest under this subpart; and
(B) The financial holding company holds an interest in the acquiring company under this subpart.
(3) Interests previously held by a financial holding company under limited authority. For purposes of paragraph (b)(1) of this section, any shares, assets, or ownership interests previously owned or controlled, directly or indirectly, by a financial holding company under any other provision of the Federal banking laws that imposes a limited holding period will if acquired under this subpart be considered to have been acquired by the financial holding company under this subpart on the date the financial holding company first acquired ownership or control of the shares, assets or ownership interests under such other provision of law. For purposes of this paragraph (b)(3), a financial holding company includes a depository institution controlled by the financial holding company and any subsidiary of such a depository institution.
(4) Approval required to hold interests held in excess of time limit. A financial holding company may seek Board approval to own, control or hold shares, assets or ownership interests of a company under this subpart for a period that exceeds the period specified in paragraph (b)(1) of this section. A request for approval must:
(i) Be submitted to the Board at least 90 days prior to the expiration of the applicable time period;
(ii) Provide the reasons for the request, including information that addresses the factors in paragraph (b)(5) of this section; and
(iii) Explain the financial holding company's plan for divesting the shares, assets or ownership interests.
(5) Factors governing Board determinations. In reviewing any proposal under paragraph (b)(4) of this section, the Board may consider all the facts and circumstances related to the investment, including:
(i) The cost to the financial holding company of disposing of the investment within the applicable period;
(ii) The total exposure of the financial holding company to the company and the risks that disposing of the investment may pose to the financial holding company;
(iii) Market conditions;
(iv) The nature of the portfolio company's business;
(v) The extent and history of involvement by the financial holding company in the management and operations of the company; and
(vi) The average holding period of the financial holding company's merchant banking investments.
(6) Restrictions applicable to investments held beyond time period. A financial holding company that directly or indirectly owns, controls or holds any share, asset or ownership interest of a company under this subpart for a total period that exceeds the period specified in paragraph (b)(1) of this section must—
(i) For purposes of determining the financial holding company's regulatory capital, apply to the financial holding company's adjusted carrying value of such shares, assets, or ownership interests a capital charge determined by the Board that must be:
(A) Higher than the maximum marginal tier 1 capital charge applicable under part 217 to merchant banking investments held by that financial holding company; 1 and

Footnote(s):
1 Before January 1, 2015, the Board will consider the financial standards at 12 CFR part 225 appendices A, C, and E for a bank holding company that is not an advanced approaches bank holding company.

(B) In no event less than 25 percent of the adjusted carrying value of the investment; and
(ii) Abide by any other restrictions that the Board may impose in connection with granting approval under paragraph (b)(4) of this section.
[ Reg. Y, 62 FR 9329, Feb. 28, 1997, as amended at 78 FR 62291, Oct. 11, 2013

Title 12 published on 2014-01-01

The following are only the Rules published in the Federal Register after the published date of Title 12.

For a complete list of all Rules, Proposed Rules, and Notices view the Rulemaking tab.

  • 2014-07-01; vol. 79 # 126 - Tuesday, July 1, 2014
    1. 79 FR 37166 - Interagency Guidelines Establishing Information Security Standards
      GPO FDSys XML | Text
      FEDERAL RESERVE SYSTEM
      Final rule; technical amendment.
      Effective Date: This rule is effective July 31, 2014.
      12 CFR Parts 208 and 225

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.


United States Code
U.S. Code: Title 12 - BANKS AND BANKING

§ 1817 - Assessments

§ 1818 - Termination of status as insured depository institution

§ 1828 - Regulations governing insured depository institutions

§ 1831i - Agency disapproval of directors and senior executive officers of insured depository institutions or depository institution holding companies

12 U.S. Code § 1801 to 1805 - Omitted

§ 1843 - Interests in nonbanking organizations

§ 1844 - Administration

§ 1972 - Certain tying arrangements prohibited; correspondent accounts

§ 3106 - Nonbanking activities of foreign banks

§ 3108 - Regulation and enforcement

§ 3310 - Establishment of Appraisal Subcommittee

§ 3331 - Purpose

§ 3332 - Functions of Appraisal Subcommittee

§ 3333 - Chairperson of Appraisal Subcommittee; term of Chairperson; meetings

§ 3334 - Officers and staff

§ 3335 - Powers of Appraisal Subcommittee

§ 3336 - Procedures for establishing appraisal standards and requiring use of certified and licensed appraisers

§ 3337 - Startup funding

§ 3338 - Roster of State certified or licensed appraisers; authority to collect and transmit fees

§ 3339 - Functions of Federal financial institutions regulatory agencies relating to appraisal standards

§ 3340 - Time for proposal and adoption of standards

§ 3341 - Functions of Federal financial institutions regulatory agencies relating to appraiser qualifications

§ 3342 - Transactions requiring services of State certified appraiser

§ 3343 - Transactions requiring services of State licensed appraiser

§ 3344 - Time for proposal and adoption of rules

§ 3345 - Certification and licensing requirements

§ 3346 - Establishment of State appraiser certifying and licensing agencies

§ 3347 - Monitoring of State appraiser certifying and licensing agencies

§ 3348 - Recognition of State certified and licensed appraisers for purposes of this chapter

§ 3349 - Violations in obtaining and performing appraisals in federally related transactions

§ 3350 - Definitions

§ 3351 - Miscellaneous provisions

§ 3907 - Capital adequacy

§ 3909 - General authorities

U.S. Code: Title 15 - COMMERCE AND TRADE

Title 12 published on 2014-01-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 12 CFR 225 after this date.

  • 2014-07-01; vol. 79 # 126 - Tuesday, July 1, 2014
    1. 79 FR 37166 - Interagency Guidelines Establishing Information Security Standards
      GPO FDSys XML | Text
      FEDERAL RESERVE SYSTEM
      Final rule; technical amendment.
      Effective Date: This rule is effective July 31, 2014.
      12 CFR Parts 208 and 225