WASHINGTON — The Federal Reserve Board is seeking public comment on a proposal that would exempt banks with less than $1 billion in total assets from certain debt limits, a move favored by community banks.

In a proposal published Jan. 29, the Fed would raise the threshold for its Small Bank Holding Company Policy Statement from institutions with less than $500 million in total assets to $1 billion in total assets. The policy statement exempts banks under the threshold from certain limits of total debt, allowing those firms to more easily combine and also to lend to existing affiliates. Firms seeking the exemption must also meet other qualitative requirements with respect to nonbanking activity, off-balance sheet activity and public debt and equity.

The Fed also said it is seeking public comment on a proposal to exempt banks subject to the small bank holding company policy statement from filing quarterly consolidated financial reporting requirements in order to reduce the regulatory burden on those banks. The agency is requesting permission from the White House Office of Management and Budget for permission to make that reporting exemption effective as of March 31, the end of the current fiscal quarter, while the Fed continues to take comment on the proposed changes.

The policy statement threshold has been in effect for decades and was most recently raised from $150 million to $500 million in 2006. Federal Reserve Gov. Daniel Tarullo last November said he was in favor of raising the $500 million threshold to $1 billion in order to fulfill the policy statement's purpose of relieving most small banks from the regulatory obligations of the largest, riskiest banks.

Tarullo said the Collins Amendment in the Dodd-Frank Act limited the Fed's ability to raise the limit unilaterally, however, and Congress passed an exemption as part of the so-called "cromnibus" spending package in December.

The Fed will accept comment on raising the asset threshold through March 4 and will accept comment on the reporting changes for 60 days after its publication in the Federal Register.

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