Fed proposes to ‘modernize’ mutuals’ capital framework, including easier transition to stock held

The capital framework for mutual savings banks – including increased flexibility to raise capital – would be “modernized,” and make it easier for the banks to convert to stock held, under a proposal issued Friday by the Federal Reserve, the agency said.

Specifically, the Fed proposal would “would clarify which instruments count as regulatory capital and reduce procedural burdens, among other comprehensive updates,” the agency said in a release.

The Fed said the rules governing the mutual institutions – which are owned by their depositors, not shareholders and are sometimes referred to as “thrifts” (short for “thrift institutions”) – have not been updated since they were established in 1993. The Fed contended that the rules have proven, over time, to be overly burdensome and complex.

The Fed said its proposal would reduce burden for the banks by, among other things:

• Making it easier for thrift mutual holding companies (MHCs) to waive dividends, thereby also allowing mutual institutions to more effectively raise capital;
• Removing unnecessary restrictions and requirements associated with conversions from mutual to stock form;
• Allowing charter flexibility for subsidiary holding companies of thrift MHCs.

Comments on the proposal are due 60 days after publication in the Federal Register.

Federal Reserve Board requests comment on a proposal to modernize rules for mutual banking organizations