Summary

GAO reviewed the Federal Reserve System's (FRS) new rule on capital adequacy guidelines, small bank holding company policy statement and treatment of subordinates securities issued to the United States Treasury under the Emergency Economic Stabilization Act of 2008. GAO found that (1) the final rule permits bank holding companies that have made a valid election to be taxed under Subchapter S of Chapter 1 of the U.S. Internal Revenue Code (S-Corp BHCs) and bank holding companies organized in mutual form (Mutual BHCs) to include the full amount of any new subordinated debt securities issued to the Treasury under the capital purchase program in tier 1 capital for purposes of the Board's risk-based and leverage capital guidelines for bank holding companies, provided that the Subordinated Securities will count toward the limit on the amount of other restricted core capital elements includable in tier 1 capital; and (2) FRS complied with applicable requirements in promulgating the rule.