RegXX_20141210_omb

Supporting Statement for the
Reporting Requirements Associated with Regulation XX (Concentration Limit)
(Reg XX; OMB No. to be obtained) and
Financial Company Report of Consolidated Liabilities (; OMB No. to be obtained)
Concentration Limits on Large Financial Companies
(Docket No. R-1489) (RIN 7100 AE18)
Summary
The Board of Governors of the Federal Reserve System (Federal Reserve), under
delegated authority from the Office of Management and Budget (OMB), proposes to implement
the mandatory Reporting Requirements Associated with Regulation XX (Concentration Limits)
(Reg XX; OMB No. to be obtained) and Financial Company Report of Consolidated Liabilities
(FR XX-1; OMB No. to be obtained). The Paperwork Reduction Act (PRA) classifies reporting,
recordkeeping, or disclosure requirements of a regulation as an “information collection.”1
The Federal Reserve has adopted a final rule that would implement section 14 of the
Bank Holding Company Act of 1956 (BHC Act), which was added by section 622 of the DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 14
establishes a financial sector concentration limit that generally prohibits a financial company
from merging or consolidating with, or acquiring, another company if the resulting company’s
liabilities upon consummation would exceed 10 percent of the aggregate liabilities of all
financial companies. Regulation XX establishes reporting requirements for financial companies
that do not otherwise report consolidated financial information to the Federal Reserve or other
appropriate Federal banking agency and creates a new reporting form, the Financial Company
(as defined) Report of Consolidated Liabilities (FR XX-1). On May 15, 2014, the Federal
Reserve published a notice of proposed rulemaking in the Federal Register for public comment
(79 FR 27801). The comment period for the proposed rule expired on July 8, 2014. On
November 14, 2014, the Federal Reserve published a notice of final rulemaking in the Federal
Register (79 FR 68095). The final rule is effective on January 1, 2015.
The reporting requirements are found in sections 251.4(b), 251.4(c), and 251.6 of
Regulation XX. The Federal Reserve estimates the total annual burden for this information
collection to be 100 hours (200 hours for initial reporting) for the 40 institutions that it deems
respondents for purposes of the PRA.
Background and Justification
Section 622 of the Dodd-Frank Act amends the BHC Act to add a new section 14.
Section 622 establishes a financial sector concentration limit that prevents an insured depository
institution; a bank holding company; a foreign bank or company that is treated as a bank holding
company for purposes of the BHC Act; a savings and loan holding company; any other company
that controls an insured depository institution; or a nonbank financial company designated by the
Financial Stability Oversight Council (Council) for supervision by the Federal Reserve from
1

See 44 U.S.C. § 3501 et seq.

merging and consolidating with, acquiring all or substantially all of the assets of, or otherwise
acquiring control of another company if the resulting company’s consolidated liabilities would
exceed 10 percent of the aggregate consolidated liabilities of all financial companies. The
concentration limit supplements the nationwide deposit cap in Federal banking law by imposing
an additional limit on liabilities of financial companies.
Section 622 of the Dodd-Frank Act provides that the concentration limit is “subject to”
any recommendations made by the Council that the Council determines would more effectively
implement section 622, and the Federal Reserve is required to issue final regulations
implementing section 622 that “reflect any recommendations made by the Council.” On January
18, 2011, the Council recommended that the Federal Reserve’s regulations should:
 measure liabilities of financial companies not subject to consolidated risk-based capital
rules by using U.S. generally accepted accounting principles or other applicable
accounting standards,
 use a two-year average in calculating aggregate financial sector liabilities and that the
Federal Reserve publish annually by July 1 the current aggregate financial sector
liabilities, and
 extend the “failing bank exception” to the acquisition of any type of insured depository
institution in default or in danger of default, rather than only banks in default or danger of
default.
To implement section 622 of the Dodd-Frank Act and the Council’s recommendations, Reg XX
establishes reporting requirements for financial companies that do not otherwise report
consolidated financial information to the Federal Reserve or other appropriate Federal banking
agency and creates a new report, the Financial Company (as defined) Report of Consolidated
Liabilities (FR XX-1).
Section 622 of the Dodd-Frank Act further directs the Council to complete a study of the
extent to which the statutory concentration limit would affect financial stability, moral hazard in
the financial system, the efficiency and competitiveness of U.S. financial firms and financial
markets, and the cost and availability of credit and other financial services to households and
businesses in the U.S. In the Council study, the Council expressed the view that the
concentration limit would have a positive impact on U.S. financial stability by reducing the
systemic risks created by increased financial sector concentration arising from covered
acquisitions involving the largest U.S. financial companies. It concluded that the concentration
limit was likely to have little or no effect on moral hazard. With respect to the impact of the
concentration limit on competitiveness, the Council expected the effect to be positive generally,
but expressed concern that the limit introduces the potential for disparate treatment of covered
acquisitions between the largest U.S. and foreign firms, depending on which firm is the acquirer
or the target. The Council found that the concentration limit is unlikely to have a significant
effect on the cost and availability of credit and other financial services.
Description of Information Collection
The reporting requirements associated with Reg XX are found in sections 251.4(b) and
(c) and would be filed by insured depository institutions, bank holding companies, foreign
banking organizations, savings and loan holding company, companies that control insured

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depository institutions, and nonbank financial companies supervised by the Board. The reporting
requirements associated with FR XX-1 are found in section 251.6 and would be filed by U.S. and
foreign financial companies that do not otherwise report consolidated financial information to the
Federal Reserve or other appropriate Federal banking agency. Compliance with the information
collections is mandatory. No other Federal law mandates these reporting requirements.
Reg XX
Section 251.4(b) requires a financial company to request that the Federal Reserve provide
prior written consent before the financial company consummates a transaction. The request for
prior written consent must contain a description of the covered acquisition, the projected increase
in the company’s liabilities resulting from the acquisition, the projected aggregate increase in the
company’s liabilities from acquisitions during the twelve months preceding the projected date of
the acquisition (if the request is made pursuant to section 251.4(a)(3)), and any additional
information requested by the Federal Reserve.
Section 251.4(c) provides that the Federal Reserve grants prior written consent for a
covered acquisition that would result in an increase in the liabilities of the financial company that
does not exceed $100 million, when aggregated with all other covered acquisitions by the
financial company made pursuant to section 251.4(c) during the twelve months preceding the
date of the acquisition. A financial company that relies on prior written consent pursuant to
section 251.4(c) must provide a notice to the Federal Reserve within 10 days after consummating
the covered acquisition that describes the covered acquisition, the increase in the company’s
liabilities resulting from the acquisition, and the aggregate increase in the company’s liabilities
from covered acquisitions during the twelve months preceding the date of the acquisition.
FR XX-1
Section 251.6 requires financial companies that control an insured depository institution
that do not report consolidated financial information to the Federal Reserve or other appropriate
Federal banking agency to report information on their total liabilities. These institutions include
savings and loan holding companies where the top-tier holding company is an insurance
company that only prepares financial statements in accordance with Statutory Accounting
Principles, holding companies of industrial loan companies, limited-purpose credit card banks,
and limited-purpose trust banks. Because this information is necessary to implement section 622
of the Dodd-Frank Act, Regulation XX creates a new reporting form, FR XX-1, on which a
financial company that does not otherwise report consolidated financial information to the
Federal Reserve or other appropriate Federal banking agency would be required to report
information on their total consolidated liabilities.
Time Schedule for Information Collection
The reporting requirements for Reg XX in sections 251.4(b) and (c) are event-generated.
A financial company that relies on prior written consent pursuant to section 251.4(c) must
provide a notice to the Federal Reserve within 10 days after consummating the covered
acquisition.

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Since the Federal Reserve is required to report a final calculation based on data collected
as of the end of each calendar year, the new FR XX-1 reporting form would be completed by
respondent financial companies annually beginning with the report as of December 31, 2014.
The Federal Reserve will collect the first report by March 31, 2015.
Legal Status
The Board’s Legal Division has determined that this information collection is mandatory
by section 14 of the Bank Holding Company Act (12 U.S.C. §§ 1852(d)) and Regulation XX
(12 C.F.R. § 251). The data generally are not considered confidential, but may be regarded as
confidential under the Freedom of Information Act (5 U.S.C. §§ 552(b)(4)).
Consultation Outside the Agency and Discussion of Public Comment
On May 15, 2014, the Federal Reserve published a notice of proposed rulemaking in the
Federal Register for public comment (79 FR 27801). The comment period for the proposed rule
expired on July 8, 2014. Of the comments received on the proposed rule, four specifically
referenced the PRA. In response to these comments, the Federal Reserve modified the final rule
as follows (1) provided that financial sector liabilities will be calculated as of December 31,
2014, for purposes of the period beginning July 1, 2015, and ending June 30, 2016, and the twoyear average will be adopted for each year thereafter; (2) removed the prior notice requirement
for acquisitions by financial companies with total consolidated liabilities equal to or greater than
8 percent of aggregate financial sector liabilities; and (3) provided prior consent for a covered
acquisition that would result in an increase in the liabilities of the financial company that does
not exceed $100 million, when aggregated with all other covered acquisitions by the financial
company during the twelve months preceding the consummation of the transaction and set forth
a process and standard of review for de minimis transactions. These changes, as well as the
Federal Reserve’s other responses to the comments received, are discussed in detail in the final
rule. On November 14, 2014, the Federal Reserve published a notice of final rulemaking in the
Federal Register (79 FR 68095). The final rule is effective on January 1, 2015.
Estimate of Respondent Burden
The Federal Reserve’s total annual burden for Reg XX is estimated to be 20 hours and for
the FR XX-1 is estimated to be 280 hours (200 hours for initial set-up and 80 hours for ongoing
compliance). The Reg XX and FR XX-1 reporting requirements represent less than 1 percent of
the total Federal Reserve System paperwork burden.

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Annual
frequency

Estimated
average
hours
per response

1
1

1
1

10
10

10
10

40
40

1
1

5
2

200
80

Number of
respondents2
Reg XX
Reporting Burden
Section 251.4(b)
Section 251.4(c)
FR XX-1
Reporting Burden
Section 251.6 (initial set-up)
Section 251.6 (ongoing)

Estimated
annual burden
hours

Total

300

The total cost to the public for this information collection is estimated to be $15,270.3
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The cost to the Federal Reserve System is negligible.

2

Of these respondents, 20 are estimated small entities as defined by the Small Business Administration (i.e., entities
with less than $550 million in total assets) www.sba.gov/content/table-small-business-size-standards.
3
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $18, 45% Financial Managers at
$61, 15% Lawyers at $63, and 10% Chief Executives at $86). Hourly rate for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
2013, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using the BLS Occupational
Classification System, www.bls.gov/soc/.

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