Fed Calculates Liability Concentration Limit

The Federal Reserve today announced that aggregate financial sector liabilities amounted to approximately $21.63 trillion, meaning that — under Section 622 of the Dodd-Frank Act, which prohibits the combination of financial companies if the resulting company’s liabilities account for more than 10 percent of the aggregate consolidated liabilities of all financial firms — financial companies cannot combine unless their aggregate liabilities amount to less than $2.16 trillion.

The limit applies to all insured depository institutions, bank and S&L holding companies, foreign banks and nonbanks subject to Financial Stability Oversight Council supervision. Liabilities are defined as the difference between risk-weighted assets — adjusted to reflect exposures deducted from regulatory capital — and total regulatory capital.