82 FR 31062 - Announcement of Financial Sector Liabilities

FEDERAL RESERVE SYSTEM

Federal Register Volume 82, Issue 127 (July 5, 2017)

[Federal Register Volume 82, Number 127 (Wednesday, July 5, 2017)]
[Notices]
[Pages 31062-31063]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-14011]


-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

[Docket No. Op-1567]


Announcement of Financial Sector Liabilities

    Section 622 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, implemented by the Board's Regulation XX, prohibits a 
merger or acquisition that would result in a financial company that 
controls more than 10 percent of the aggregate consolidated liabilities 
of all financial companies (``aggregate financial sector 
liabilities''). Specifically, an insured depository institution, a bank 
holding company, a savings and loan holding company, a foreign banking 
organization, any other company that controls an insured depository 
institution, and a nonbank financial company designated by the 
Financial Stability Oversight Council (each, a ``financial company'') 
is prohibited from merging or consolidating with, acquiring all or 
substantially all of the assets of, or acquiring control of, another 
company if the resulting company's consolidated liabilities would 
exceed 10 percent of the aggregate financial sector liabilities.\1\
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 1852(a)(2), (b).
---------------------------------------------------------------------------

    Pursuant to Regulation XX, the Federal Reserve will publish the 
aggregate financial sector liabilities by July 1 of each year. 
Aggregate financial sector liabilities equals the average of the year-
end financial sector liabilities figure (as of December 31) of each of 
the preceding two calendar years.
    For Further Information Contact:
    Sean Healey, Supervisory Financial Analyst, (202) 912-4611; Matthew 
Suntag, Senior Attorney, (202) 452-3694; for persons who are deaf or 
hard of hearing, TTY (202) 263-4869.

Aggregate Financial Sector Liabilities

    Aggregate financial sector liabilities is equal to 
$21,010,053,985,500.\2\ This measure is in effect from July 1, 2017 
through June 30, 2018.
---------------------------------------------------------------------------

    \2\ This number reflects the average of the financial sector 
liabilities figure for the year ending December 31, 2015 
($21,940,911,695,000) and the year ending December 31, 2016 
($20,079,196,276,000). The decrease in liabilities between year-end 
2015 and 2016 was primarily caused by the status change of General 
Electric Company and Metlife, Inc. As of year-end 2015, both 
companies met the definition of financial company under Regulation 
XX and were included in the financial sector liability calculation 
for that year. As of year-end 2016, neither General Electric Company 
nor Metlife, Inc. met the definition of financial company and, thus, 
both were excluded from the financial liability calculation. A 
further decrease in liabilities resulted from certain foreign 
banking organizations holding more risk-based capital against their 
U.S.-based assets in year-end 2016, compared to year-end 2015.
---------------------------------------------------------------------------

Calculation Methodology

    Aggregate financial sector liabilities equals the average of the 
year-end financial sector liabilities figure (as of December 31) of 
each of the preceding two calendar years. The year-end financial sector 
liabilities figure equals the sum of the total consolidated liabilities 
of all top-tier U.S. financial companies and the U.S. liabilities of 
all top-tier foreign financial companies, calculated using the 
applicable methodology for each financial company, as set forth in 
Regulation XX and summarized below.
    Consolidated liabilities of a U.S. financial company that was 
subject to consolidated risk-based capital rules as of December 31 of 
the year being measured, equal the difference between its risk-weighted 
assets (as adjusted upward to reflect amounts that are deducted from 
regulatory capital elements pursuant to the Federal banking agencies' 
risk-based capital rules) and total regulatory capital, as calculated 
under the applicable risk-based capital rules. For the year ending on 
December 31, 2016, companies in this category include (with certain 
exceptions listed below) bank holding companies, savings and loan 
holding companies, and insured depository institutions. The Federal 
Reserve used information collected on the Consolidated Financial 
Statements for Holding Companies (FR Y-9C) and the Bank Consolidated 
Reports of Condition and Income (Call Report) to calculate liabilities 
of these institutions.
    Consolidated liabilities of a U.S. financial company not subject to 
consolidated risk-based capital rules as of December 31 of the year 
being measured, equal liabilities calculated in accordance with 
applicable accounting standards. For the year ending on December 31, 
2016, companies in this category include nonbank financial companies 
supervised by the Board, bank holding companies and savings and loan 
holding companies subject to the Federal Reserve's Small Bank Holding 
Company Policy Statement, savings and loan holding companies 
substantially engaged in insurance underwriting or commercial 
activities, and U.S. companies that control depository institutions but 
are not bank holding companies or savings and loan holding companies. 
``Applicable accounting standards'' is defined as GAAP, or such other 
accounting standard or method of estimation that the Board determines 
is appropriate.\3\ The Federal Reserve used information collected on 
the FR Y-9C, the Parent Company Only Financial Statements for Small 
Holding Companies (FR Y-9SP), and the Financial Company Report of 
Consolidated Liabilities (FR XX-1) to calculate liabilities of these 
institutions.
---------------------------------------------------------------------------

    \3\ A financial company may request to use an accounting 
standard or method of estimation other than GAAP if it does not 
calculate its total consolidated assets or liabilities under GAAP 
for any regulatory purpose (including compliance with applicable 
securities laws). 12 CFR 251.3(e).
---------------------------------------------------------------------------

    Section 622 provides that the U.S. liabilities of a ``foreign 
financial company'' equal the risk-weighted assets and regulatory 
capital attributable to the company's ``U.S. operations.'' Under 
Regulation XX, liabilities of a foreign banking organization's U.S. 
operations are calculated using the risk-weighted asset methodology for 
subsidiaries subject to risk-based capital rules, plus the assets of 
all branches, agencies, and nonbank subsidiaries, calculated in 
accordance with applicable accounting standards. Liabilities 
attributable to the U.S. operations of a foreign financial company that 
is not a foreign banking organization are calculated in a similar 
manner to the method described for foreign banking organizations, but 
liabilities of a U.S. subsidiary not subject to risk-based capital 
rules are calculated based on the U.S.

[[Page 31063]]

subsidiary's liabilities under applicable accounting standards. The 
Federal Reserve used information collected on the Capital and Asset 
Report for Foreign Banking Organizations (FR Y-7Q), the FR Y-9C and the 
FR XX-1 to calculate liabilities of these institutions.
    The Board granted a request from one financial company to use an 
accounting standard or method of estimation other than GAAP to 
calculate liabilities. The requesting company is an insurance company 
that reports financial information under Statutory Accounting 
Principles (``SAP''). The Board approved a method of estimation for 
this company that is based on line items from SAP reports, with 
adjustments to reflect certain differences in accounting treatment 
between GAAP and SAP.

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Director of Supervision and Regulation 
under delegated authority, June 28, 2017.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2017-14011 Filed 7-3-17; 8:45 am]
 BILLING CODE 6210-01-P