FRY12_FRY12A_20151230_omb

Supporting Statement for the
Consolidated Holding Company Report of Equity Investments in Nonfinancial Companies
(FR Y-12; OMB No. 7100-0300) and the
Annual Report of Merchant Banking Investments Held for an Extended Period
(FR Y-12A; OMB No. 7100-0300)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget (OMB), proposes to extend, without revision, the
following mandatory reports:
(1)
(2)

The Consolidated Holding Company Report of Equity Investments in Nonfinancial
Companies (FR Y-12; OMB No. 7100-0300) and
The Annual Report of Merchant Banking Investments Held for an Extended Period
(FR Y-12A; OMB No. 7100-0300).

The FR Y-12 report was implemented as of September 30, 2001, in response to the GrammLeach-Bliley Act (GLB Act) of 1999, which broadened the scope of permissible investments in
nonfinancial companies. The FR Y-12A was implemented as of December 31, 2006.
The FR Y-12 collects information from certain domestic bank holding companies
(BHCs) and savings and loan holding companies (SLHCs) (collectively, “holding companies”)
on their equity investments in nonfinancial companies.1 Respondents report the FR Y-12 either
quarterly or semiannually based on reporting threshold criteria. The FR Y-12A is filed annually
by institutions that hold merchant banking investments that are approaching the end of the
holding period permissible under Regulation Y. The total current annual reporting burden for
this information collection is estimated to be 1,783 hours.
Background and Justification
BHC investments in nonfinancial companies increased significantly during the late
1990s. These investments contributed significantly to earnings and capital at institutions actively
involved in this business line. Equity investments also contributed to the volatility of earnings
and capital and increased some institutions’ risk profiles. The GLB Act permits financial
holding companies (FHCs) to make investments in any amount, in any type of nonfinancial
company as part of a securities underwriting, merchant banking or investment banking activity.
The investments permissible under the GLB Act’s merchant banking authority are substantially
broader in scope than the investment activities otherwise permissible for BHCs. Thus, these
investments present the potential for additional volatility and risk in banking organizations’
portfolios.
1

Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) transferred all
former Office of Thrift Supervision authorities (including rulemaking) related to SLHCs to the Federal Reserve
effective July 21, 2011. On December 29, 2011, the Federal Reserve published a final notice in the Federal Register
(76 FR 81933) expanding the FR Y-12 and FR Y-12A reporting panels to include SLHCs in the same manner as
BHCs with certain exceptions and modifications.

On January 31, 2001, the Federal Reserve and U.S. Department of Treasury (the
agencies) published in the Federal Register a final rulemaking on merchant banking investments
made by FHCs (66 FR 8466). In Section 225.175 of this final rulemaking, the agencies stated
that reporting forms to fulfill the quarterly and annual reporting requirements would be published
separately. The rule also noted that data may be submitted at such times as may be determined
by the Board. The FR Y-12 data fulfill the quarterly reporting requirements and the FR Y-12A
data fulfill the annual reporting requirements.2
The FR Y-12 data serve as an important risk-monitoring device for institutions active in
this business line by allowing supervisory staff to monitor an institution’s activity between
review dates. They also serve as an early warning mechanism to identify institutions whose
activities in this area are growing rapidly and therefore warrant special supervisory attention.
After the FR Y-12 reporting process was introduced in 2001, 41 BHCs reported, as of
year-end 2001, $45.7 billion in aggregate equity investments in nonfinancial companies. As of
year-end 2014, 28 holding companies reported an aggregate $53.2 billion, reflecting the effect of
bank mergers, 2005 changes in filing criteria, and increased activity. This report will continue to
collect vital information for the supervisory process with the inclusion of the former investment
banks and unregulated financial companies.
Regulation Y implements a holding period restriction by permitting an FHC to own or
control a merchant banking investment for no longer than 10 years. Merchant banking
investments made in, or held through, a private equity fund, however, may be held for the
duration of the fund, up to a maximum of 15 years. An FHC must obtain the Federal Reserve’s
approval to own or hold a merchant banking investment beyond these time periods.3 The FR Y12A data continue to be a useful tool for examiners to monitor institutions that have merchant
banking investments that are approaching holding period limitations. As of year-end 2014, 19
FHCs reported $473 million in investments through the FR Y-12A reporting process.
Description of Information Collection
The FR Y-12 collects information on the types of investments made by holding
companies and their subsidiaries in nonfinancial companies (excluding investments held in
trading accounts).
This report is filed quarterly by each top-tier domestic holding company that:
 files the Consolidated Financial Statements for Holding Companies (FR Y-9C; OMB No.
7100-0128), and
 has aggregate nonfinancial equity investments that equal or exceed the lesser of $100 million
(on an acquisition cost basis) or 10 percent of the holding company’s consolidated tier 1
capital as of the report date, and

2

The Federal Reserve subsequently determined that the FR Y-12 could be submitted semiannually by FR Y-9SP
filers.
3
See 12 C.F.R. §§ 225.172(b)(4); 225.173(c).

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

has made an effective election to become a FHC or directly or indirectly has an Edge
corporation, agreement corporation, or small business investment company (SBIC)
subsidiary or holds equities under section 4(c)(6) or 4(c)(7) of the BHC Act.

This report is also filed semiannually by each top-tier domestic holding company that:
 files the Parent Company Only Financial Statements for Small Holding Companies (FR Y9SP; OMB No. 7100-0128), and
 has aggregate nonfinancial equity investments that equal or exceed (on an acquisition cost
basis) 10 percent of the holding company’s total capital as of the report date, and
 has made an effective election to become a FHC or directly or indirectly has an Edge
corporation, agreement corporation, or SBICs or holds equities under section 4(c)(6) or
4(c)(7) of the BHC Act.
The current FR Y-12 reporting form comprises four schedules: Schedule A - Type of
Investments, Schedule B - Type of Security, Schedule C - Type of Entity within the Banking
Organization, and Schedule D – Nonfinancial Investment Transactions During Reporting Period.
The information collected in each schedule is discussed below.
Schedule A – Type of Investments collects information on the acquisition cost, net
unrealized holding gains not recognized as income, carrying value, and publicly quoted value for
direct investments made in public entities, nonpublic entities, and all indirect investments. The
memoranda items collect information on the number of companies in which investments are
made for the entire portfolio, amount of investments made under the merchant banking authority,
the pre-tax impact on net income, amount of investments managed for others, and the pre-tax
impact of management fee income.
Schedule B – Type of Security collects information on the acquisition cost and carrying
value of the type of security held by the reporting institution: common stock, convertible debt
and convertible preferred stock, other equity instruments, and total portfolio. The memorandum
item collects information on unused equity commitments and warrant activity.
Schedule C – Type of Entity within the Banking Organization identifies the type of
company within the holding company structure through which the investments reported in
Schedules A and B are held (for example, broker/dealer, SBIC, or Edge subsidiary) and collects
the information on the acquisition cost, net unrealized holding gains not recognized as income,
and carrying value. The memoranda items collect information on the amount of domestic and
foreign investments.
Schedule D - Nonfinancial Investment Transactions During Reporting Period
collects information on all private equity merchant banking activity of the BHC and SLHC, on
an aggregate basis, for the reporting period. Columns A and B collect acquisition cost and
carrying value for all purchases, returns of capital, and net changes in valuation made for all
direct public investments. Columns C and D collect acquisition cost and carrying value for all
transactions involving all direct nonpublic investments. Columns E and F collect information on
the same items for all transactions involving indirect (fund) investments. These data provide
valuable insight into the scope of activity on a transaction basis and, when reviewed over time,

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provide critical trend data useful for holding company supervisory oversight as well as provide
valuable information to facilitate industry studies.
The FR Y-12A reporting form collects:
 The name and location of the corporate entity within the FHC organization that holds the
covered investment
 The date the FHC acquired the covered investment
 The name and location of the company held
 The primary activity of the company held (using the North American Industry Classification
System (NAICS) activity codes for commonly reported activities wherever possible). FHCs
provide a text description of the primary activity of the company held only if it is unable to
identify a five- or six-digit NAICS code corresponding to the activity
 The type of interest held by the FHC (for example, common stock, convertible bonds)
 The percentage of ownership held by the FHC (both voting and non-voting)
 The FHC’s acquisition cost of the covered investment
 The value at which the covered investment currently is carried on the FHC’s books
 A brief narrative explanation of the FHC’s plan and schedule for disposition of a covered
investment
Reporting Panel
The FR Y-12 reporting panel comprises a subset of top-tier domestic holding companies
that file the FR Y-9C or the FR Y-9SP and meet the FR Y-12 reporting threshold criteria. A
screening question on both FR Y-9 reports, developed from the FR Y-12 reporting threshold
criteria, is used to determine whether the holding company is required to complete the FR Y-12.
FHCs generally have to submit an FR Y-12A if they hold merchant banking investments for
longer than eight years (or 13 years in the case of an investment held through a qualifying private
equity fund). The applicable reporting periods (eight or 13 years) for a merchant banking
investment is less than the permissible holding periods (10 or 15 years) for the investment so that
the Federal Reserve can monitor investments that are approaching the end of the holding periods
generally permitted under Regulation Y.
Frequency
The Federal Reserve recommends that the quarterly (FR Y-9C filers) and semiannually
(FR Y-9SP filers) reporting frequency for the FR Y-12 and the annual reporting frequency for
the FR Y-12A remain unchanged. The current reporting frequencies provide adequate and
timely data to meet the analytical and supervisory needs of the Federal Reserve.
Time Schedule for Information Collection
The FR Y-12 data are collected as of the end of each calendar quarter from those holding
companies that file the FR Y-9C and as-of the end of June and December from those holding
companies that file the FR Y-9SP. The FR Y-12 data are submitted to the appropriate Federal
Reserve Bank within 45 calendar days after the as-of date for all FR Y-9C and FR Y-9SP

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respondents. The FR Y-12A report must be submitted by February 15 of the following calendar
year to the appropriate Reserve Bank.
Legal Status
The Board’s Legal Division has determined that the information collected under the
FR Y-12 and FR Y-12A is mandatory and authorized to be collected from BHCs and FHCs
pursuant to section 5(c) of the Bank Holding Company Act (12 U.S.C. § 1844(c)(1)(A)) and
from SLHCs pursuant to section 10 of the Home Owners Loan Act (12 U.S.C. § 1467a(b)).
Overall, the Board does not consider the data collected on the FR Y-12 to be confidential.
However, a holding company may request confidential treatment pursuant to sections (b)(4) of
the Freedom of Information Act (5 U.S.C. § 552(b)(4)). The Board considers the data collected
on the FR Y-12A to be confidential pursuant to sections (b)(4) and (b)(8) of the Freedom of
Information Act (5 U.S.C. §§ 552(b)(4) and (b)(8)).
Consultation Outside the Agency and Discussion of Public Comment
On October 22, 2015, the Federal Reserve published a notice in the Federal Register (80
FR 64000) requesting public comment for 60 days on the extension, without revision, of the
FR Y-12 and FR Y-12A. The comment period for this notice expired on December 21, 2015.
The Federal Reserve did not receive any comments. On December 29, 2015, the Federal
Reserve published a final notice in the Federal Register (80 FR 81324).
Estimate of Respondent Burden
The current total annual reporting burden for the FR Y-12 and FR Y-12A information
collection is 1,783 hours. The current annual reporting burden for the FR Y-12 is estimated to be
1,650 hours. The current annual burden for the FR Y-12A report is estimated to be 133 hours.
The total burden for the FR Y-12 and FR Y-12A represents less than 1 percent of total Federal
Reserve System annual burden.
Number of
respondents4
FR Y-12 (Quarterly)
FR Y-12 (Semiannual)
FR Y-12A

22
6
19

Estimated
Annual
average hours
frequency
per response
4
2
1

Total

16.5
16.5
7

Estimated
annual burden
hours
1,452
198
133
1,783

4

Of these respondents, 0 FR Y-12 (Quarterly), 6 FR Y-12 (Semiannual), and 0 FR Y-12A are estimated to be 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.

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The total annual reporting cost to the public for the FR Y-12 and FR Y-12A is estimated to be
$92,270.5
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 for collecting and processing these reports is
estimated to be $29,300.

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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 $17, 45% Financial Managers at
$63, 15% Lawyers at $64, and 10% Chief Executives at $87). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2014, published March 25, 2015, 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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