Federal Reserve Board adopted final rule for banks holding companies

The Federal Reserve Board stated in its announcement the adoption of a final rule according to which banks holding companies will be allowed to include in their Tier 1 capital without limitation senior perpetual preferred stock issued to the U.S. Treasury Department under the Troubled Asset Relief Program (TARP). This rule makes final the interim final rule that the Board adopted in October 2008. The Board also announced the adoption of an interim final rule that will allow bank holding companies that are S-Corps or that are organized in mutual form to include in Tier 1 capital all subordinated debt issued to Treasury under TARP, provided that the subordinated debt will count toward the limit on the amount of other restricted core capital elements includable in Tier 1 capital. The interim final rule also will allow small bank holding companies that are S-Corps or that are organized in mutual form to exclude subordinated debt issued to Treasury under TARP from treatment as "debt" for purposes of the debt-to-equity standard under the Board's Small Bank Holding Company Policy Statement. The final rule and the interim final rule will be effective on publication in the Federal Register, which is expected soon.  However, the Board is looking for public comment on the interim rule which must be submitted within 30 days of publication of the interim rule in the Federal Register.