ABA Responds to Federal Reserve’s Proposed Revisions to ‘Control’ Framework

The American Bankers Association today responded to a proposal from the Federal Reserve that would amend the regulatory framework for determining whether a bank or company exercises a “controlling influence” over another bank or company under the Bank Holding Company Act and the Home Owners’ Loan Act. The comment letter received significant participation and input from the ABA’s Fed “Control” Determination Working Group, which represents banks of all asset sizes and geographies.

ABA commended the Federal Reserve on its efforts to codify its published and unpublished interpretations—as well as its existing precedents and practices—into the agency’s control regulations to provide greater clarity, transparency, and compliance certainty for determining whether an investor controls a bank or company. These proposed regulatory reforms will encourage private investment in the banking industry while also providing banking organizations the opportunity to invest in fintech and other companies that support the business of banking, the association noted.

ABA also recommended areas for additional reform. Among other things, the association recommended that the Fed exclude from the presumption of control certain holdings of securities (such as options, warrants, and convertible securities) that do not amount to exercising a “controlling influence”; permit enhanced business relationships that do not rise to the level of a “control” relationship; and confirm that the presumption of non-control applies to any investment in a nonbank under section 4(c)(6) of the BHCA.