The FRB issued an interim final rule (the “Interim Final Rule”) that allows bank holding companies (“BHCs”) organized as S Corps and BHCs organized in mutual form to exclude subordinated debt issued to the Department of the Treasury (“Treasury”) under the Small Business Lending Fund from treatment as debt for purposes of the debt-to-equity standard under the FRB’s Small Bank Holding Company Policy Statement (the “Policy Statement”). In the same release, the FRB adopted a final rule (the “Final Rule”) that allows S Corp BHCs and mutual BHCs to include in their calculation of Tier 1 capital the full amount (subject to certain limitations) of any subordinated debt securities issued to the Treasury under the Treasury’s Troubled Asset Relief Program (“TARP”). In the Final Rule, the FRB also allows small BHCs that are S Corps or organized as mutuals to exclude subordinated debt issued to Treasury under TARP from treatment as debt for purposes of the debt-to-equity standard under the Policy Statement.
The Final Rule became effective on June 2, 2011. Comments on the Interim Final Rule are due by July 30, 2011.