Fed sets aggregate financial sector liabilities; figure is used to cap financial firms’ growth

A measurement used to ensure that no financial company through merger or consolidation acquires more than 10% of the aggregate financial sector liabilities was set at $20,664,262,842,000 for the period from July 1, 2019, through June 30, 2020, the Federal Reserve Board announced Monday.

Aggregate financial sector liabilities equals the average of the year-end financial sector liabilities figure (as of Dec. 31) of each of the preceding two calendar years. The Fed announces the figure each year under its Regulation XX.

Reg XX implements Section 622 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which prohibits a merger or acquisition that would result in a financial company that controls more than 10% 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 … 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% of the aggregate financial sector liabilities,” according to a notice released by the central bank.

Over the next 12 months, financial firms subject to the limit can hold no more than 10% of $20,664,262,842,000; that works out to a cap of approximately $2.0664 trillion.

For the previous 12 months, the 10% cap was based on on aggregate financial sector liabilities of $20,283,121,945,000.

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