Fed issues final rule on financial company mergers, consolidations

November 5, 2014

WASHINGTON (11/6/14)--A final rule was issued by the Federal Reserve board of governors Wednesday implementing a section of the Dodd-Frank Act that deals with financial companies merging or consolidating. The rule is a final version of a proposal issued in May.

The rule implements section 622 of Dodd-Frank, which establishes a limit that generally prohibits a financial company from merging, consolidating or acquiring another company if the resulting company's liabilities would exceed 10% of the aggregate liabilities of all financial companies.

Under the final rule, if a financial company has reached the 10% concentration limit, the company could not acquire control of another company under merchant banking authority. The rule contains an exemption to clarify that a financial company may continue to engage in securitization activities if it has reached the limit.

According to the Fed, firms not subject to consolidated risk-based capital rules would measure liabilities using generally accepted accounting standards.

It also established reporting requirements for financial companies that do not otherwise report consolidated financial information to the board of governors or other appropriate federal agency.

The rule will become effective Jan. 1.