FRB Proposes Revisions To "Control" Rules

The Federal Reserve Board ("FRB") proposed to modify its regulations for determining "whether a company has the ability to exercise a controlling influence" on another company under the Bank Holding Company Act and the Home Owners' Loan Act.

The proposal identifies several factors and thresholds the FRB will use to determine whether a company has such a "controlling influence," including:

• the company's total voting and non-voting equity investment in the bank;
• director, officer and employee overlap between the company and the bank in question; and
• the scope of business relationships between the company and the bank.

The FRB proposed a "tiered framework" that would modify and clarify the FRB's existing regulatory presumptions of control. Specifically, the framework would establish a series of presumptions arranged in tiers based on the level of voting ownership: less than 5%, 5-9.99%, 10-14.99%, and 15-24.99%. According to the FRB, the proposal is