2 This policy statement, originally issued in 1980, fosters local ownership of small community banks. While the Board generally discourages the use of debt by bank holding companies to finance acquisitions, it recognizes that the limited access small institutions have to equity funding means that such firms often must rely on acquisition debt to accomplish a transfer of ownership.
The policy statement allows small, noncomplex bank holding companies to temporarily operate with higher levels of debt than would otherwise be permitted. It also exempts them from the Board’s risk-based and leverage capital guidelines and eliminates some regulatory reporting requirements. Of course, regulatory capital requirements will continue to apply to the depository institution subsidiaries of these companies.