The Federal Reserve Board said Friday that it would allow S corporation mutual bank holding companies to include government capital provided through the Troubled Asset Relief Program in Tier 1 capital calculations.

A similar interim rule had been issued earlier for larger bank holding companies. The Fed adopted a final version of that rule Friday. Under that rule, bank holding companies can include senior perpetual preferred stock issued to the Treasury Department as Tier 1 capital.

Also Friday, the Fed said subordinated debt that S Corps issued to the Treasury in exchange for government capital would not be treated as debt in calculations of whether a firm meets federal debt-to-equity requirements.

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