WASHINGTON The Federal Reserve Board approved a rule Thursday governing how bank holding companies can apply for status as financial holding companies, the special structure created by the Gramm-Leach-Bliley Act to exercise expanded financial and related powers.
The rule is substantially the same as an interim rule bank regulators have been operating under this year. It requires a company to certify that it and all of its subsidiaries are well-managed and well-capitalized, and that they meet their obligations under the Community Reinvestment Act.
A bank holding company can acquire financial holding company status by simply filing a statement of its intent to do so. If the Fed does not object to the move, the change automatically becomes effective 31 days after the filing. Financial holding companies must continue to meet the capital, management, and CRA requirements, or face restrictions on their operations.
The rule is part of a broader regulation that lists the activities that regulators have defined as financial in nature and those identified as incidental or complementary to finance. Gramm-Leach-Bliley approved financial holding companies to engage in any activities that fall into these three categories.
The rule will take effect 30 days after its publication in the Federal Register, which is expected soon.