Regulation Y

Definition

The term Regulation Y refers to the corporate practices that bank holding companies and state-member banks need to follow.   The types of corporate practices controlled by Regulation Y include mergers and acquisitions, non-bank activities, and certain officer appointment during financially challenging times.

Explanation

Through Regulation Y, the Federal Reserve is empowered to regulate certain activities of both bank holding companies as well as state-member banks.  Specifically, Regulation Y outlines certain transactions to be approved by the Federal Reserve, including:

  • Bank holding companies must seek and obtain approval before acquiring or merging with another bank holding company.
  • A subsidiary of a bank holding company must seek and obtain approval before engaging in non-bank activities.
  • Before an individual or group acquires control of a bank holding company or state-member bank, the transaction must be approved by the Federal Reserve.
  • Finally, if a bank holding company or state-member bank falls into a troubled condition, it must seek and gain approval before appointing senior officers or seeking the election of a new member of its board of directors.

Related Terms

community development bank, postal savings bank, offshore bank, universal bank, Islamic bank