This report collects information from certain domestic holding companies on their equity investments in nonfinancial companies on four schedules: Type of Investments, Type of Security, Type of Entity within the Banking Organization and Nonfinancial Investment Transactions During the Reporting Period.
Purpose: The FR Y-12 report provides valuable supervisory information that permits examiners and other supervisory staff to monitor the ongoing growth and contribution to profitability of this increasingly active business line. For institutions active in this business line, regular reviews generally are conducted. The FR Y-12 serves as an important risk-monitoring device by allowing supervisory staff to monitor an institution's activity between examination dates. It also serves as an early-warning mechanism to identify institutions whose activities in this area are growing rapidly and that, therefore, may warrant special supervisory attention.
Holding company investments in nonfinancial companies have increased significantly over the past several years. These investments have contributed significantly to earnings and capital at institutions actively involved in this business line. Equity investments have also contributed to the volatility of earnings and capital in recent periods and have increased some institutions' risk profiles. The Gramm-Leach-Bliley Act of 1999 broadened the scope of permissible investments in nonfinancial companies. Thus, these investments present the potential for additional volatility and risk in banking organizations' portfolios. In January 2001, the Federal Reserve and the Treasury Department published a final rule on merchant banking investments made by financial holding companies. The rule stated that quarterly and annual reporting forms would be required; this report fulfills the quarterly reporting requirements discussed in the rule. The requirements were effective as of September 30, 2001. In 2005, the Federal Reserve revised the FR Y-12 reporting threshold to reduce regulatory burden; added a memorandum item to collect data on investments managed for others; added a memorandum item to identify whether the holding company holds any warrants received in connection with equity investment activity; eliminated the collection of data by type of entity within the banking organization on direct investments in public entities, direct investments in nonpublic entities, and all indirect investments; and added a new schedule, "Nonfinancial Investment Transactions During the Reporting Period" to collect information on all PEMB activity of the holding company on cumulative basis. In 2010, a memorandum item was added to collect data by type of transaction on the pre-tax impact of management fee income and two columns were added to collect data on direct investments in nonpublic entities.
The panel consists of top-tier domestic holding companies that file the FR Y-9C or FR Y-9SP and meet the reporting requirements stated in the instructions. This is a mandatory report.
The report is collected as of the end of each calendar quarter for FR Y-9C filers and as of the end of June and December for FR Y-9SP filers. The report must be submitted to the appropriate Reserve Bank within 45 calendar days after the as-of date.
Individual respondent data are available to the public upon request through the appropriate Reserve Bank. Under certain circumstances, however, respondents may request confidential treatment. Data from the FR Y-12 are not published.