Considering a merger? You’ll have to keep it under $2.1 trillion under new Fed calculation

A company resulting from a merger of other financial companies will be limited to no larger than about $2.1 trillion in resulting assets, the Federal Reserve indicated Friday as it released its annual aggregate consolidated liabilities of financial companies across the nation.

According to the Fed, financial companies’ total aggregate liabilities will equal more than $21.2 trillion as of July 1; federal law limits mergers of financial companies that result in consolidated assets of no more than 10% of that number.

Each year, the Federal Reserve is required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to determine the aggregate liabilities total for financial companies. Under the law (and the Fed’s Reg XX), a financial company is prohibited from combining with another company if the resulting company’s liabilities would exceed 10% of the aggregate consolidated liabilities of all financial companies.

“Effective July 1, 2020, aggregate consolidated liabilities equal $21,229,884,414,000,” the Fed wrote, spelling out the $21.2 trillion calculation. “This number, which is the average of the year-end financial sector liabilities of the preceding two years, will be the measure of aggregate consolidated liabilities from July 1, 2020 through June 30, 2021.”

The Fed noted insured depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, and other companies that control insured depository institutions are covered by the limit

Federal Reserve Board releases annual determination of aggregate consolidated liabilities of financial companies as required by the Dodd-Frank Act