On December 3, 2015, the Board of Governors of the Federal Reserve System released Supervision and Regulation Letter 15-15, “Supervisory Concerns Related to Shareholder Protection Arrangements” (SR 15-15), offering guidance regarding shareholder protection arrangements that are likely to raise supervisory issues at bank holding companies and savings and loan holding companies. This guidance makes explicit the Federal Reserve’s emerging stance of disfavor towards such arrangements in recent years.

Specifically, the Federal Reserve’s concern is that these shareholder protection arrangements would have negative implications on a holding company’s capital or financial position, limit a holding company’s financial flexibility and capital-raising capacity, or otherwise impair a holding company’s ability to raise additional capital and impede the ability of a holding company to serve as a source of strength to its insured depository subsidiaries in violation of the Dodd-Frank Act and Regulations Y and LL.