Citing market turmoil, the Federal Reserve Board said Tuesday it will postpone limits on trust-preferred securities that were supposed to take effect March 31.
The rule would limit internationally active bank holding companies to holding no more than 15% of their Tier 1 capital as trust-preferred securities; it now will take effect March 31, 2011.
"In light of conditions in the capital markets, the board has considered whether an additional extension of the effective date of the new limits is appropriate," according to the Fed. "The economic conditions for the past 18 months, and currently, have created a situation in which requiring adherence to the new limits by … March 31, 2009," would create a substantial burden for many bank holding companies in a way that was not anticipated when the rule was adopted, it said.
The extension means that all bank holding companies can hold 25% of their Tier 1 capital as trust-preferred securities.