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Fed expands list of community banks that face looser debt requirements

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Fed expands list of community banks that face looser debt requirements

The Federal Reserve is expanding the amount of companies that fall under its small bank holding company policy statement, which lets those companies function with more debt than the regulator usually allows.

The Fed's move is another step in its tweaking of current rules to comply with the Dodd-Frank revision package that President Donald Trump signed into law this year.

The provision helps smaller bank holding companies and savings and loan holding companies finance acquisitions through debt, given that the Fed says those companies "have less access to equity financing" than larger banks and therefore may need to use debt for such transactions. The companies' subsidiary depository institutions remain subject to minimum capital standards under the Fed's policy statement.

Currently, companies with less than $1 billion in assets can generally take advantage of that provision. The new law required the Fed to raise that threshold to $3 billion.

The Fed issued an interim final rule to let the change take effect quicker than it would under the usual rule-making process. The change will take effect immediately after it is published in the Federal Register, and the regulator is also taking comments on a final version of the rule.