Current through Register Vol. 49, No. 18, September 16, 2024
PURPOSE: This section sets forth authorized
activities, approval procedures, and conditions for banks and trust companies
engaging in activities through a financial subsidiary under section
362.105.1(15), RSMo 2000. In the interests of being brief and concise, the
regulation does not include certain restrictions applicable only to extremely
large institutions. The Division of Finance will amend the regulation to
include these restrictions if appropriate in the future.
(1) Financial Subsidiary Powers. A bank or
trust company may establish a "financial subsidiary." A financial subsidiary is
any subsidiary of the bank or trust company other than a subsidiary that
conducts only a) activities in which its parent bank or trust company may
engage directly, and/or b) activities that are authorized for subsidiaries of
that bank or trust company under Missouri statutes or regulations other than
this regulation or section 362.105.1(15), RSMo 2000. A financial subsidiary may
engage in any of the activities authorized for a national bank financial
subsidiary under the Gramm-Leach-Bliley Financial Modernization Act of 1999 and
the implementing regulations and official federal agency
interpretations.
(2) Requirements.
To establish or continue to hold an interest in a financial subsidiary, a bank
or trust company must:
(A) Meet the Missouri
minimum capital requirement as defined in section (5) of this
regulation;
(B) Be, along with each
of its depository institution affiliates, well capitalized and well managed
pursuant to the definitions included in section (5) of this
regulation;
(C) In addition to
providing information prepared in accordance with generally accepted accounting
principles, separately present financial information for the institution in the
manner provided in paragraph (5)(C)2. of this rule in any published or posted
financial statement of the institution;
(D) Have aggregate consolidated total assets
of all financial subsidiaries not exceeding forty-five percent (45%) of the
bank or trust company's consolidated total assets;
(E) Have reasonable policies and procedures
to preserve the separate corporate identity and limited liability of the
institution and the financial subsidiaries of the institution;
(F) Have procedures for identifying and
managing financial and operational risks within the institution and the
financial subsidiary that adequately protect the institution from such
risks;
(G) Have obtained Community
Reinvestment Act (CRA) ratings of "satisfactory record of meeting community
credit needs" or better on the most recent CRA examination of the bank or trust
company and any of its insured depository institution affiliates; and
(H) Comply with the requirements of sections
23A and 23B of the Federal Reserve Act applicable to financial
subsidiaries.
(3) Notice
and Approval Process. A bank or trust company establishing a financial
subsidiary to conduct only agency activities must provide the Division of
Finance with a written notice within thirty (30) days after such establishment.
However, a bank or trust company must obtain prior written approval from the
Division of Finance before any of its financial subsidiaries can conduct any
activities as principal.
(4)
Remedies for Failure to Meet Requirements.
(A)
If a bank or trust company does not continue to satisfy the requirements of
subsections (2)(A) through (2)(F) of this regulation for establishing or
holding an interest in a financial subsidiary, the bank or trust company must,
within forty-five (45) days after receiving written notice from the Division of
Finance of such noncompliance, either enter into an agreement with the Division
of Finance to comply with such sections or be subject to enforcement action to
require such compliance, which may include, but will not be limited to,
restrictions on the activities of the institution or any of its subsidiaries
or, if the noncompliance continues for one hundred eighty (180) days or more
after the written notice, divestiture of ownership in the financial
subsidiary.
(B) The remedies
specifically mentioned in subsection (4)(A) do not limit any ability of the
Division of Finance to take any enforcement action based on any violation of
statute or regulation or on any safety and soundness issue, including, but not
limited to violations of other sections of this regulation.
(5) Definitions.
(A) "Establish a financial subsidiary" means
to acquire control of a financial subsidiary or to control any subsidiary that
commences financial subsidiary activities.
(B) "Missouri minimum capital requirement"
means a level of capital which equals or exceeds the required minimum level
specified by the Division of Finance.
(C) Well capitalized.
1. "Well capitalized" means an institution
has a level of capital designated as "well capitalized" pursuant to
12 U.S.C.
1831 by the institution's appropriate federal
banking agency, as defined in
12
U.S.C. 1813.
2. Provided, however, that for a bank or
trust company that controls a financial subsidiary to be "well capitalized," it
must also remain well capitalized as described in paragraph (5)(C)1. after
deducting the aggregate amount of its outstanding equity investment, including
retained earnings, in its financial subsidiaries from its total assets and
tangible equity and also deducting such investment from its total risk-based
capital, and the bank or trust company will not consolidate the assets and
liabilities of the financial subsidiary with those of the bank or trust company
for purposes of determining regulatory capital under this subsection.
(D) "Well managed" means:
1. An institution has received a composite
rating of 1 or 2 under the Uniform Financial Institutions Rating System (or an
equivalent rating under an equivalent rating system) in connection with the
most recent Division of Finance or federal regulatory agency examination or
subsequent review of the institution and, at least a rating of 2 for
management; or
2. In the case of an
institution that has not been examined by the Division of Finance or a federal
bank regulatory agency, the existence and use of managerial resources that the
Division of Finance determines are satisfactory.
*Original authority: 361.105, RSMo 1967, amended 1993,
1994, 1995; 362.105, RSMo 1939, amended 1949, 1963, 1965, 1967, 1977, 1983,
1986, 1990, 1991, 1992, 1995, 2000; 362.106, RSMo 1981, amended 1985,
1990.
