HR 5291119th CongressIntroduced

Merchant Banking Modernization Act

Introduced: Sep 10, 2025

Sponsor: Rep. Williams, Roger [R-TX-25] (R-Texas)

Financial Services

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Merchant Banking Modernization Act would amend the Bank Holding Company Act of 1956 to change how long bank holding companies may hold merchant banking investments. The bill's language directs that, under regulations, the period generally permitted for holding merchant banking investments shall be at least 15 years. For investments that are already held on the date of enactment, the minimum holding period would begin from the initial date of each investment and run for at least 15 years. In short, the bill would impose a long-term horizon (a minimum of 15 years) for these non-banking investments by bank holding companies, with transitional rules applying to existing holdings. Note: the bill’s title suggests “up to 15 years,” but the enacted text specifies a minimum of 15 years. The practical effect, as written, would be to require longer rather than shorter holding periods unless regulators interpret the language differently.

Key Points

1Short title and purpose: The act is named the Merchant Banking Modernization Act and aims to reform how long bank holding companies can hold merchant banking investments.
2Core change to holding period: Section 4(k)(7)(A) of the Bank Holding Company Act would be amended to require that, under applicable regulations, the period for holding merchant banking investments shall not be less than 15 years.
3Grandfathering for existing investments: For any merchant banking investment held on the date of enactment, the 15-year minimum would apply from the investment’s initial date, effectively extending the minimum horizon for those existing investments.
4Regulatory framing: The minimum holding period would operate “under such regulations,” indicating that implementing regulations issued by the relevant banking regulators would specify details of how the 15-year requirement is applied and monitored.
5Scope and definitions: The change applies to “merchant banking investments” under the Bank Holding Company Act, i.e., investments in non-banking activities typically associated with merchant banking and private equity-like ventures conducted by bank holding companies.

Impact Areas

Primary group/area affected- Bank holding companies and their merchant banking subsidiaries: They would face a mandatory long-term holding horizon (minimum 15 years) for non-banking investments, shaping investment strategy, liquidity planning, and exit timing.Secondary group/area affected- Regulators and supervisory staff (e.g., Federal regulators responsible for BHCs): They would implement and enforce the new minimum holding period through regulations and supervision.Additional impacts- Investment strategy and liquidity: Banks may need to commit capital for longer periods, potentially reducing liquidity flexibility and affecting capital planning.- Risk management and portfolio composition: A longer holding period could influence risk profiles, valuation timelines, and exit risk associated with merchant banking assets like private equity or venture capital funds.- Market dynamics for merchant banking investments: Could affect fundraising, deal timelines, and competition among banks for long-horizon private equity investments.“Merchant banking investments” refer to non-banking ventures funded by bank holding companies (e.g., private equity, venture capital-style investments) that fall under the merchant banking provisions of the BHC Act.The language leaves room for implementing regulations to fill in specifics (e.g., how the 15-year period is calculated, exceptions, and transitional rules beyond the stated grandfathering).The practical effect depends on how regulators interpret and implement the regulation; the text itself sets a floor (minimum) of 15 years, though the title appears to imply a cap, creating a potential drafting ambiguity.

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