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The FDIC approved a final rule that, among other things, codifies the obligations of parent companies over subsidiary industrial banks. The FDIC stated that the final rule aims to mitigate "undue risk" to the Deposit Insurance Fund in the absence of Federal Reserve Board supervision.
As described in previous coverage of the proposal, a parent company would be required to enter into a written agreement with the FDIC and the subsidiary industrial bank detailing (i) the relationship between the parent company and industrial bank, (ii) the parent company's obligation to ensure the industrial bank meets capital and liquidity requirements, and (iii) the FDIC's supervisory expectations of the parent company.
The FDIC stated that the final rule is "largely consistent" with the proposal, but makes a few substantive changes:
- parent companies must make additional disclosures regarding their systems for protecting consumer and nonpublic personal information;
- a parent company's representation on the board of a subsidiary industrial bank must be less than a majority, but is no longer capped at 25 percent, as proposed; and
- an industrial bank must obtain FDIC permission to appoint a director or affiliated senior executive officer, but only for the first three years after the industrial bank became a subsidiary of its parent company.
The final rule will become effective on April 1, 2021.
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