The Policy Statement prescribes that bank holding companies with consolidated total assets of less than $500 million should maintain a debt-to-equity ratio that does not exceed .3 to 1.
The Federal Reserve also announced it had made final the interim rule allowing Subchapter S bank holding companies to treat debt issued to Treasury under the Troubled Asset Relief Program (TARP) as Tier 1 capital. The rule also allows small bank holding companies organized as S corporations to exclude TARP debt from the definition of “debt” under the Policy Statement.
The Federal Reserve is seeking comments on its interim final rule regarding the treatment of SBLF debt for S corporations. Comments must be submitted by July 30, 2011. The Subchapter S Bank Association is preparing a comment requesting that the rule also treat SBLF debt as Tier 1 capital for Sub S banks and bank holding companies, as it does for C corporation banking organizations.
For additional information, please contact Bruce Toppin at (210) 228-4414 or by email at btoppin@ktsllp.com.