Source: Federal Reserve

The Federal Reserve Board today issued examination guidance identifying sound practices for equity investment and merchant banking.

The guidance, contained in a supervisory letter sent to Federal Reserve bank examiners and supervisors as well as banking organizations supervised by the Federal Reserve, codifies, and supplements existing supervisory practices.

"While equity investments in non-financial companies can contribute substantially to earnings, such investments, like other rapidly growing and highly profitable business lines, can entail significant market, liquidity and other risks," wrote Richard Spillenkothen, director of the Board's Division of Banking Supervision and Regulation...

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