Federal Reserve And Treasury Department Announce On Merchant Banking Activities The Federal Reserve Board and the Secretary of the Treasury jointly announced their approval on Friday of an interim rule governing the merchant banking activities of financial holding companies. The interim rule implements the merchant banking provisions of the Financial Modernization Act. The interim rule includes provisions on record keeping and reporting; risk management practices; holding periods for merchant banking investments; corporate separateness and limits on involvement in management; and limits on exposure of financial holding companies to merchant banking investments. The interim rule is effective today. The Board also today announced that it is seeking public comment on a proposed rule, developed in consultation with the Secretary of the Treasury, that would govern the regulatory capital treatment for equity investments in nonfinancial companies held by bank holding companies. The proposed rule would generally impose a 50 percent capital requirement on merchant banking investments and certain similar investments. Comments will be accepted on the interim rule and the capital proposal until May 22, 2000. The interim rule and the capital proposal will be revised as appropriate after the comments are reviewed. The joint notices are attached. Joint interim rule (143 KB PDF) Proposed rule on capital (34 KB PDF) Contacts: Federal Reserve: Dave Skidmore (202) 452-2955 Treasury: Bill Buck (202) 622-2960

2000 Banking and consumer regulatory policy