Letter to the Board on Regulatory Modernization and Relief for Mutual Holding Companies

Dear Mr. McDonough:

The American Bankers Association (ABA) appreciates the opportunity to comment on the Board of Governors of the Federal Reserve System's proposed amendments to Regulations Q and MM concerning the regulatory framework for mutual holding companies and mutual banking organizations (the Proposal). The Proposal is an important modernization of the regulatory framework for mutual institutions, including clearer regulatory capital treatment for mutual capital certificates and special deposits, greater flexibility for dividend waivers, and relief from other regulatory requirements applicable to mutual holding companies. Collectively, these reforms would make the regulatory framework more flexible and better suited to the distinctive structure and capital needs of mutual institutions.

I. Summary of the Comment

ABA strongly supports proposed changes governing dividend waivers and mutual capital instruments. Both are important tools for institutions operating within the mutual structure. A well-designed framework for dividend waivers can promote capital preservation while allowing mutual holding companies to meet appropriate obligations at the holding-company level, while broader recognition of mutual capital instruments as permanent, loss-absorbing capital can provide mutual institutions additional flexibility to raise and maintain capital.

We believe the Proposal should serve as a foundation for broader reform. In particular, the Board's proposed treatment of mutual capital certificates provides a useful template for all mutual bank regulators to develop clear, consistent, and predictable standards for special deposits and other instruments that share the essential characteristics of mutual capital certificates.

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