The Federal Reserve today proposed a new rule to “modernize” the mutual bank regulatory framework, including changes to expand access to capital and remove restrictions on converting to a stock company.
According to the Fed, the proposal would amend Regulation MM to, among other things, eliminate certain dividend waiver requirements, reduce the burden associated with conversions from mutual-to-stock form, revise certain post-conversion restrictions, and eliminate the requirement that subsidiary holding companies of mutual holding companies obtain federal charters. It also seeks to facilitate access to capital by amending the Fed’s capital rule to clarify that mutual capital instruments may qualify as regulatory capital.
The proposal marks the first comprehensive update of the regulations governing mutual banks since 1993. The central bank assumed regulatory responsibility for the sector in 2011.
“Today’s proposal is another important step in our work to modernize the bank regulatory framework by updating mutual bank regulations for the first time in 30 years,” Fed Vice Chair for Supervision Michelle Bowman said. “The continued success of this model contributes to the institutional diversity of the U.S. banking system, which is one of the greatest strengths of our financial system. This proposal will allow mutual banks to continue to grow and more effectively serve communities across the country, while preserving their unique depositor-owned structure.”
The American Bankers Association has long advocated for updating the mutual bank regulatory framework. ABA President and CEO Rob Nichols called the proposal “a significant and long overdue step to ensure that these unique institutions can continue to thrive and remain competitive in our banking system.”
“For years, ABA has urged the Fed to ensure that mutual banks have access to an expanded range of capital options that will enable them to grow and to better serve their customers and communities, and we appreciate Gov. Bowman’s leadership in recognizing these concerns and driving these important changes forward,” he said. “We look forward to reviewing the proposal in full with our members and providing our feedback in the comment process.”
Comments on the proposal are due 60 days following publication in the Federal Register.
