What is Regulation Y?

Regulation Y is a regulatory regime promulgated by the US Federal Reserve Bank. It regulates corporate bank holding companies and state-member banks. Most notably, it establishes capital reserve ratios.

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How Does Regulation Y Work?

Regulation Y governs transactions by bank holding companies. Transactions requiring Federal Reserve approval include: Engaging in any non-banking activity, Mergers with or acquisitions of other bank holding companies or state member banks; are the appointment of executives of troubled bank holding companies or state member banks. The amount of disclosure and compliance required of a regulated entity will depend upon the banks efficiency rating or how well it is run. The Federal Reserve rates the bank based upon management performance and composite ratings. Primarily, well-run banks are subject to less scrutiny when undertaking a regulated transaction. Though any proposed action is still subject to an administrative, 30-day, public-comment process. Troubled banks, on the other hand, are subject to extensive scrutiny.