On January 30, the Board of Governors of the Federal Reserve System (the Board) adopted a final rule to simplify and increase the transparency of determinations of when a company has the ability to exercise a controlling influence over another company for purposes of the Bank Holding Company Act or the Home Owners’ Loan Act. The rule takes the form of amendments to Regulation Y. The highlight of the rule is a tiered framework that substantially revises and clarifies the Board’s existing regulatory presumptions of control. The framework, which is summarized in a single chart, has four tiers, each identified by the threshold percentage level of voting stock held by a potential controlling party. At each level, the framework incorporates the other major factors that the Board has historically viewed as presenting control concerns, such as business relationships and officer/employee interlocks. The rule also includes a new presumption of noncontrol if a company owns less than 10 percent of the outstanding securities of each class of voting stock of another company and is not presumed to control the other company due to other factors identified in the rule.

The rule is available here.

A chart showing the four tiers of presumptions concerning control is available here.