The Act limits the authority of the Board to regulate, examine, and require reports from functionally regulated subsidiaries, including registered broker-dealers, of FHCs. The Act establishes a streamlined supervisory system for regulating holding companies, notably:

• The Board generally is prohibited from imposing capital requirements on functionally regulated holding company subsidiaries (broker-dealer) that are in compliance with applicable federal and state capital requirements.
• The Board can impose capital requirements on holding companies.
• The Board generally must defer to the functional regulator of a holding company subsidiary (broker-dealer) in connection with regulation and supervision of the subsidiary.
• The Board can require additional reports, and conduct additional examinations, only for purposes such as monitoring and controlling financial and operating risks and determining compliance with applicable laws.
• The Board cannot regulate functionally regulated subsidiaries of an FHC except in instances in which there is a material risk to an affiliated insured bank or to the payment system.  

Operating Subsidiaries: The Act permits well-capitalized and well-managed national banks, with a satisfactory or better Community Reinvestment Act rating, to conduct most financial activities through an operating subsidiary.  The aggregate consolidated total assets of all financial subsidiaries of the national bank cannot exceed 45 percent of the parent bank’s total consolidated assets, or $50 billion, whichever is greater. An operating subsidiary cannot engage in insurance underwriting, real estate development, merchant banking, or insurance company portfolio investing. 

Unitary Thrift Holding Companies: Commercial companies are prohibited from buying thrifts under the Act.  Existing commercial ownership of thrifts is protected through a “grandfather” provision for entities in existence or those who had applications pending on or before May 4, 1999.

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