Merger can’t result in liabilities greater than 10% of $23.7 trillion, new Reg XX threshold mandates

“Aggregate financial sector liabilities” total about $23.7 trillion, according to a notice published Monday by the Federal Reserve – a key number in figuring out which large financial companies can merge as long the resulting company does not control more than 10% of that number.

Under the Fed’s annual “Announcement of Financial Sector Liabilities,” published in the Federal Register Monday, as mandated by the agency’s Regulation XX, 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”) is prohibited.

“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 (each, a ‘financial company’) 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,” the agency stated.

Under the rule, the agency has until July 1 to publish the aggregate financial sector liabilities. The effective period will be July 1, 2023, to June 30, 2024. The liabilities are equal to the average of the year-end financial sector liabilities figure (as of Dec. 31) of each of the preceding two calendar years, the agency said.

Specifically, according to the Fed, the liabilities number is equal to $23,694,977,610,000.

Announcement of Financial Sector Liabilities