FRB Issues Final Rule Regarding Concentration Limits for Large Financial Companies

The Board of Governors of the Federal Reserve System (“FRB”) issued a final rule to implement Dodd-Frank Section 622, which prohibits a financial company from acquiring, consolidating or merging with another company if the ratio of the resulting company’s liabilities exceeds 10 percent of the aggregate consolidated liabilities of all the financial companies.

The final rule, which is substantially similar to the proposal issued in May, adds an exemption to clarify that financial companies which have reached the 10 percent threshold may continue to engage in securitization activities. Under the final rule, such companies are barred from acquiring control of another company under merchant banking authority.

The final rule will be effective on January 1, 2015.

See: Text of the Final Rule; FRB Press Release.