Fed sets cap of $20.3 trillion for determining limits of financial company consolidation in 2018-19

A 2018-19 cap of $20.3 trillion has been adopted by the Federal Reserve for use in limiting the consolidation of large banks and other financial companies, the central bank said in a release Friday.

In releasing its annual determination of aggregate consolidated liabilities of financial companies, the Fed said the new cap would be in effect from July 1 to June 30, 2019. Specifically, the cap will be $20,283,121,945,000, the Fed stated.

The aggregate consolidated liabilities determination is required under section 622 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). According to the Fed, Dodd-Frank prohibits a financial company from combining with another company if the resulting company’s liabilities exceeds 10% of the aggregate consolidated liabilities of all financial companies.

Companies subject to the limit include insured depository institutions (banks and savings and loans), bank and savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and nonbank financial companies designated for Federal Reserve Board supervision by the Financial Stability Oversight Council (FSOC).

Under the Fed’s Regulation XX, companies subject to the limit are 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% of the aggregate financial sector liabilities.

According to the Fed, the aggregate consolidated liabilities is the average of the year-end financial sector liabilities of the preceding two years.

Federal Reserve Board releases annual determination of aggregate consolidated liabilities of financial companies