Fed moves cap on assets of merged institutions closer to $2.2 trillion

Financial firms resulting from a merger will be limited to no more than approximately $2.1787 trillion in total consolidated assets under a revised financial sector liability measurement announced by the central bank that applies over the next 12 months.

The Federal Reserve, in a notice published Thursday in the Federal Register, revised its calculation of aggregate financial sector liabilities to $21,787,962,476,000. (That’s up from the $21,229,884,414,000 figure set in June 2020.) A financial company resulting from merger or consolidation, under Fed rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), may not control more than 10% of aggregate financial sector liabilities. That works out to a cap of about $2.1787 trillion.

The new calculation applies for the period from July 1, 2021, through June 30, 2022.

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 Act, 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 (referred to as “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 Thursday’s notice.

Announcement of Financial Sector Liabilities