Federal Reserve Bank Capital Stock, 9082-9089 [2016-03747]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 81, Number 36 (Wednesday, February 24, 2016)]
[Rules and Regulations]
[Pages 9082-9089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03747]


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FEDERAL RESERVE SYSTEM

12 CFR Part 209

[Regulation I; Docket No. R-1533]
RIN 7100-AE 47


Federal Reserve Bank Capital Stock

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim final rule with request for comment.

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SUMMARY: The Board of Governors (Board) requests public comment on an 
interim final rule that amends Regulation I to establish procedures for 
payment of dividends by the Federal Reserve Banks (Reserve Banks) to 
implement the provisions of section 32203 of the ``Fixing America's 
Surface Transportation Act.'' The interim final rule sets out the 
dividend rates applicable to Reserve Bank depository institution 
stockholders and amends provisions of Regulation I regarding treatment 
of accrued dividends when a Reserve Bank issues or cancels Federal 
Reserve Bank capital stock.

DATES: This interim final rule is effective on February 24, 2016. 
Comments on the interim final rule must be received on or before April 
29, 2016. Comments on the Paperwork Reduction Act burden estimates must 
be received on or before April 29, 2016.

ADDRESSES: When submitting comments, please consider submitting your 
comments by email or fax because paper mail in the Washington, DC area 
and at the Board may be subject to delay. You may submit comments, 
identified by Docket No. R-1533, RIN 7100-AE 47, by any of the 
following methods:
     Agency Web site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room 3515, 1801 K Street NW. (between 18th and 19th 
Streets NW.), Washington, DC 20006 between 9 a.m. and 5 p.m. on 
weekdays.

FOR FURTHER INFORMATION CONTACT: Evan Winerman, Counsel (202/872-7578), 
Legal Division; or Kimberly Zaikov, Financial Project Leader (202/452-
2256), Reserve Bank Operations and Payments Systems Division. Users of 
Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Overview

    Regulation I governs the issuance and cancellation of capital stock 
by the Reserve Banks. Under section 5 of the Federal Reserve Act \1\ 
and Regulation I,\2\ a member bank must subscribe to capital stock of 
the Reserve Bank of its district in an amount equal to six percent of 
the member bank's capital and surplus. The member bank must pay for 
one-half of this subscription on the date that the Reserve Bank 
approves its application for capital stock, while the remaining half of 
the subscription shall be subject to call by the Board.\3\
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    \1\ 12 U.S.C. 287.
    \2\ 12 CFR 209.4(a).
    \3\ 12 U.S.C. 287 and 12 CFR 209.4(c)(2).
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    On December 4, 2015, President Obama signed the ``Fixing America's 
Surface Transportation Act'' (``FAST Act'').\4\ Section 32203 of the 
FAST Act amended the provisions of section 7(a)(1) of the Federal 
Reserve Act,\5\ which governs dividend payments to Reserve Bank 
stockholders. Until the FAST Act amendments to section 7(a)(1) became 
effective on January 1, 2016, all member banks were entitled to a six 
percent dividend on their paid-in capital stock.\6\ Section 7(a)(1) 
continues

[[Page 9083]]

to provide for a six percent dividend for stockholders with $10 billion 
or less in total consolidated assets, but now provides that 
stockholders with more than $10 billion in total consolidated assets 
shall receive a dividend on paid-in capital stock equal to the lesser 
of six percent and ``the rate equal to the high yield of the 10-year 
Treasury note auctioned at the last auction held prior to the payment 
of such dividend.'' The FAST Act also added Section 7(a)(1)(C) to the 
Federal Reserve Act, which provides that the Board must adjust the $10 
billion threshold for total consolidated assets annually to reflect the 
change in the Gross Domestic Product Price Index, published by the 
Bureau of Economic Analysis.
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    \4\ Pub. L. 114-94, 129 Stat. 1312 (2015). See https://www.congress.gov/114/bills/hr22/BILLS-114hr22enr.pdf/.
    \5\ 12 U.S.C. 289(a)(1).
    \6\ Section 7(a)(1)(A) provided the following until January 1, 
2016: ``In General. After all necessary expenses of a Federal 
reserve bank have been paid or provided for, the stockholders of the 
bank shall be entitled to receive an annual dividend of 6 percent on 
paid-in capital stock.''
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    Prior to the amendments published today, Regulation I did not 
address the timing of payment of dividends to Federal Reserve Bank 
stockholders (other than, as discussed below, the payment of accrued 
dividends when a Reserve Bank issues new stock or cancels existing 
stock). Before the enactment of the FAST Act, the Reserve Banks' 
longstanding practice was to make dividend payments on paid-in capital 
stock each year on the last business days of June and December at the 
annualized rate of six percent (that is, a dividend payment of 3 
percent twice per year). As discussed further below, the Board is 
amending Regulation I to implement the new dividend rate structure 
mandated by the FAST Act. The Reserve Banks will continue their 
practice of making semi-annual dividend payments, although at a new 
rate for larger institutions.
    In addition, Regulation I contains provisions with respect to the 
treatment of accrued dividends when a Reserve Bank issues new stock or 
cancels existing stock. These Regulation I provisions implement 
portions of sections 5, 6, and 9 of the Federal Reserve Act, which were 
not amended by the FAST Act.\7\ Section 5 provides that (1) when a 
Reserve Bank issues new shares to a stockholder, the stockholder must 
pay the Reserve Bank for accrued dividends at a monthly rate of one-
half of one percent from the last dividend and, correspondingly, (2) 
when a stockholder reduces or liquidates its holding of Reserve Bank 
stock, the Reserve Bank must pay the stockholder for accrued dividends 
at a monthly rate of one-half of one percent from the last dividend. 
Similarly, sections 6 and 9(10) of the Federal Reserve Act state that, 
when a member bank becomes insolvent or voluntarily withdraws from 
Reserve Bank membership, the Reserve Bank shall pay accrued dividends 
on the bank's cancelled stock at a monthly rate of one-half of one 
percent. Prior to the amendments published today, Regulation I adopted 
the approach described in sections 5, 6, and 9(10) of the Federal 
Reserve Act, providing in Sec.  209.4(d) and 209.4(e)(1) that dividends 
for subscriptions to, and cancellations of, Reserve Bank stock shall 
accrue at a monthly rate of one-half of one percent. As discussed 
below, the interim final rule adjusts the accrued dividend rates for 
larger institutions to be consistent with the rate adopted in the FAST 
Act.
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    \7\ 12 U.S.C. 287, 288, and 328.
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II. Description of Interim Final Rule

A. Dividend Payment Rate

    The interim final rule amends Regulation I to include a new 
paragraph, Sec.  209.4(e), addressing the rate for dividend payments by 
the Reserve Banks. Section 209.4(e)(1)(i) implements the FAST Act 
provision requiring that banks with more than $10 billion in total 
consolidated assets receive a dividend on their Reserve Bank capital 
stock at an annual rate of the lesser of six percent and the high yield 
of the 10-year Treasury note auctioned at the last auction held prior 
to the payment of the dividend. Section 209.4(e)(1)(ii) provides that 
banks with $10 billion or less in total consolidated assets will 
continue to receive a dividend at an annual rate of six percent. 
Section 209.4(e)(3) provides that dividends are cumulative.\8\
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    \8\ Section 7(a)(1)(B) of the Federal Reserve Act, 12 U.S.C. 
289(a)(1)(B), states that ``[t]he entitlement to dividends . . . 
shall be cumulative.''
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    Section 209.4(e)(2) provides that each dividend ``will be adjusted 
to reflect the period from the last dividend payment date to the 
current dividend payment date according to the dividend proration 
basis.'' Section 209.1(d)(2) in turn defines ``dividend proration 
basis'' as ``the use of a 360-day year of 12 30-day months for purposes 
of computing dividend payments.'' Thus, under the interim final rule, a 
semi-annual dividend payment to a stockholder with $10 billion or less 
in total consolidated assets would continue to be calculated as three 
percent of paid-in capital. A semi-annual dividend payment to a 
stockholder with more than $10 billion in total consolidated assets 
would be calculated as the lesser of three percent or one-half of the 
high yield of the 10-year Treasury note auctioned at the last auction 
held prior to the payment of the dividend.

B. Payment of Accrued Dividends for Subscriptions to Reserve Bank Stock

    As discussed above, section 5 of the Federal Reserve Act provides 
that, when a stockholder subscribes to new capital stock, it must pay 
for accrued dividends on that new stock at a monthly rate of one-half 
of one percent from the last dividend (i.e., a monthly rate derived 
from a six percent annual rate). Prior to the amendments published 
today, Regulation I adopted the same approach in Sec.  209.4(d). This 
requirement ensures that the stockholder will not be overcompensated at 
the next dividend payment, because the stockholder has paid in advance 
for the portion of the stockholder's next dividend payment attributable 
to the period for which the member bank did not own the stock.
    Although section 5 of the Federal Reserve Act continues to provide 
that a stockholder should pay for accrued dividends at a monthly rate 
of one-half of one percent from the last dividend, section 7 of the 
Federal Reserve Act now provides that stockholders with more than $10 
billion in total consolidated assets will receive an annual dividend at 
the lesser of six percent and the high yield of the 10-year Treasury 
note auctioned at the last auction held prior to the payment of the 
dividend. Applying sections 5 and 7 literally could cause a larger 
stockholder to overpay for accrued dividends if it paid at a rate based 
on a six percent annual rate but received its next dividend payment at 
an annual rate below six percent (assuming the high yield of the 10-
year Treasury note at the applicable auction was below six percent).
    The Board believes that, when a stockholder with more than $10 
billion in total consolidated assets subscribes to additional Reserve 
Bank capital stock, the best way to reconcile the conflict between 
sections 5 and 7 of the Federal Reserve Act is to require the 
stockholder to pay for accrued dividends at an annual rate of the 
lesser of six percent and the high yield of the 10-year Treasury note 
auctioned at the last auction held prior to the previous dividend 
payment date (that is, the rate used for the previous dividend payment 
to stockholders with more than $10 billion in total consolidated 
assets), prorated to cover the period between the last dividend payment 
date and the date of subscription. This approach would allow a larger 
stockholder to pay for accrued dividends at a rate that is generally 
close to the dividend rate the stockholder will earn at the next 
dividend payment. This approach also resolves the statutory conflict in 
favor of

[[Page 9084]]

giving effect to the most recent Congressional act regarding the 
payment of dividends as provided in the FAST Act. Accordingly, the 
interim final rule adopts this approach in Sec.  209.4(c)(1)(ii)(A). 
Conversely, Sec.  209.4(c)(1)(ii)(B) provides that stockholders with 
$10 billion or less in total consolidated assets will continue to pay 
for accrued dividends at an annual rate of six percent (prorated to 
cover the period between the last dividend payment date and the date of 
subscription), as those stockholders will continue to receive a six 
percent annual dividend.
    The interim final rule provides at Sec.  209.4(c)(3) for an 
adjustment at the next annual dividend if a stockholder pays for 
accrued dividends at a rate that is different from the annualized rate 
that the stockholder ultimately receives at the next scheduled dividend 
payment date. This adjustment would equal the difference between the 
accrued dividends the stockholder paid for the additional subscription 
and the portion of the next dividend payment attributable to that 
additional subscription, prorated to cover the period from the last 
dividend payment date to the subscription date.\9\
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    \9\ For example, if a stockholder pays for three months of 
accrued dividends on $1,000 of stock at a prorated 0.2% monthly rate 
(derived from a 2.4% annual rate at the last auction held prior to 
the previous dividend), and the stockholder ultimately receives its 
next dividend at a prorated 0.3% monthly rate (derived from a 3.6% 
annual rate at the last auction held prior to the next dividend), 
the Reserve Bank would reduce the stockholder's next dividend 
payment by the difference between (a) the accrued dividends that the 
stockholder paid on the date of subscription (i.e., $1,000 * (3 
months/12 months) * 0.2%, or $6) and (b) the dividend payment 
attributable to the stock subscription based on the rate from last 
auction held prior to the next dividend payment date (i.e., $1,000 * 
(3 months/12 months) * 0.3%, or $9). The Reserve Bank would 
therefore reduce the stockholder's next dividend payment by $3. 
Conversely, if the same stockholder paid for accrued dividends at a 
0.3% monthly rate but then received its next dividend at a 0.2% 
monthly rate, the Reserve Bank would increase the stockholder's next 
dividend payment by $3.
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C. Payment of Accrued Dividends for Cancellations of Reserve Bank Stock

    As discussed above, three provisions of the Federal Reserve Act 
(sections 5, 6, and 9(10)) state that, when a Reserve Bank cancels 
stock, the Reserve Bank shall pay the stockholder for accrued dividends 
at a monthly rate of one-half of one percent from the last dividend 
(i.e., a monthly rate derived from a six percent annual rate). Prior to 
the amendments published today, Regulation I adopted the same approach 
in Sec.  209.4(e)(1). These provisions of the Federal Reserve Act and 
Regulation I now conflict with section 7 of the Federal Reserve Act, 
which provides (following passage of the FAST Act) that stockholders 
with more than $10 billion in total consolidated assets will receive an 
annual dividend at the lesser of six percent and the high yield of the 
10-year Treasury note auctioned at the last auction held prior to the 
payment of the dividend.
    The Board believes that, when a Reserve Bank cancels stock held by 
a stockholder with more than $10 billion in total consolidated assets, 
the best way to reconcile sections 5, 6, and 9(10) of the Federal 
Reserve Act with section 7 of the Federal Reserve Act is to require the 
Reserve Bank to pay the stockholder for accrued dividends at an annual 
rate of the lesser of six percent and the high yield of the 10-year 
Treasury note auctioned at the last auction held prior to the date of 
cancellation, prorated to cover the period between the last dividend 
payment date and the date of cancellation. As noted above, this 
approach also resolves the statutory conflict between sections 5, 6, 
and 9(10), on the one hand, and section 7 on the other, in favor of the 
most recent Congressional act regarding dividends expressed in the FAST 
Act. Accordingly, the interim final rule adopts this approach in Sec.  
209.4(d)(1)(ii)(A). Conversely, Sec.  209.4(d)(1)(ii)(B) provides that, 
when a Reserve Bank cancels stock of a stockholder with $10 billion or 
less in total consolidated assets, the Reserve Bank will pay the 
stockholder for accrued dividends at an annual rate of six percent 
(prorated to cover the period between the last dividend payment date 
and the date of cancellation), as those stockholders will continue to 
receive a six percent annual dividend.

D. Total Consolidated Assets: Definition and Inflation Adjustment

    The dividend rate to which a stockholder is entitled under Section 
7 of the Federal Reserve Act (as amended by the FAST Act) depends on 
the stockholder's ``total consolidated assets.'' The interim final rule 
amends Regulation I to include a new paragraph, Sec.  209.1(d)(3), that 
generally defines total consolidated assets by reference to total 
assets reported on the stockholder's most recent December 31 
Consolidated Report of Condition and Income (Call Report).\10\ The only 
exceptions to this approach are that, when a bank joins the Federal 
Reserve System or when a member bank merges with another entity and the 
surviving bank continues to be a Reserve Bank stockholder, the new 
member bank or the surviving bank must report whether its total 
consolidated assets exceed $10 billion in its application for capital 
stock. To that end, the interim final rule amends Sec.  209.2(a) to 
require that a bank seeking to join the Federal Reserve System report 
whether its total consolidated assets exceed $10 billion in its 
application for capital stock. Similarly, the interim final rule adds a 
new paragraph, Sec.  209.3(d)(3), that requires a surviving bank to 
report whether its total consolidated assets exceed $10 billion when it 
submits its next application for additional capital stock.
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    \10\ The Board has also moved, without revision, the definition 
of ``capital stock and surplus'' to the definitions in new Sec.  
209.1(d).
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    Section 7(a)(1)(C) of the Federal Reserve Act (added by the FAST 
Act) requires that the Board make an annual inflation adjustment to the 
total consolidated asset threshold that determines the dividend rate to 
which a Reserve Bank is entitled. The interim final rule implements 
this provision at Sec.  209.4(f). The Board expects to make this 
adjustment using the final second quarter estimate of the Gross 
Domestic Product Price Index for each year, published by the Bureau of 
Economic Analysis.

III. Effective Date; Solicitation of Comments

    This interim final rule is effective immediately. Pursuant to the 
Administrative Procedure Act (APA), at 5 U.S.C. 553(b)(B), notice and 
comment are not required prior to the issuance of a final rule if an 
agency, for good cause, finds that ``notice and public procedure 
thereon are impracticable, unnecessary, or contrary to the public 
interest.'' \11\ Similarly, a final rule may be published with an 
immediate effective date if an agency finds good cause and publishes 
such with the final rule.\12\
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    \11\ 5 U.S.C. 553(b)(B).
    \12\ 5 U.S.C. 553(d)(3).
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    Consistent with section 553(b)(B) of the APA, the Board finds that 
there is good cause to issue this rule as an interim final rule because 
the rule is necessary to provide immediate guidance to the Reserve 
Banks regarding the issuance and cancellation of stock, which are 
governed by the provisions of the FAST Act that became effective on 
January 1, 2016. The Board finds that obtaining notice and comment 
prior to issuing the interim final rule would be impracticable and 
contrary to the public interest. The Board finds for the same reasons 
that there is good cause to publish the interim final rule with an 
immediate effective date.
    Although notice and comment are not required prior to the effective 
date of

[[Page 9085]]

this interim final rule, the Board believes that public comment on how 
it implements the FAST Act could help improve that implementation. 
Consequently, the Board invites comment on all aspects of this 
rulemaking and will review those comments before adopting a final rule.

IV. Regulatory Analysis

A. Regulatory Flexibility Act Analysis

    In accordance with section 4 of the Regulatory Flexibility Act 
(``RFA''), 5 U.S.C. 601 et seq., the Board is publishing an initial 
regulatory flexibility analysis for the interim final rule. The RFA 
generally requires an agency to assess the impact a rule is expected to 
have on small entities. Under size standards established by the Small 
Business Administration, banks and other depository institutions are 
considered ``small'' if they have less than $550 million in assets.\13\ 
The RFA requires an agency either to provide a regulatory flexibility 
analysis or to certify that the interim final rule will not have a 
significant economic impact on a substantial number of small entities.
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    \13\ 13 CFR 121.201.
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    The interim final rule implements amended provisions of the Federal 
Reserve Act providing that Reserve Bank stockholders with more than $10 
billion in total consolidated assets will receive a dividend at an 
annual rate equal to the lower of six percent and the high yield of the 
10-year Treasury note auctioned at the last auction held prior to the 
payment of such dividend (with such dividend prorated to cover the 
period between the last dividend payment date and the current dividend 
payment date). The interim final rule also provides that, if a Reserve 
Bank cancels stock of a stockholder with more than $10 billion in total 
consolidated assets, the Reserve Bank will pay the stockholder accrued 
dividends at an annual rate of the lesser of six percent and the high 
yield of the most recent 10-year Treasury note auction held prior to 
the date of cancellation, prorated to cover the period between the last 
dividend payment date and the cancellation date. Finally, the interim 
final rule provides that, if a Reserve Bank issues new stock to a 
stockholder with more than $10 billion in total consolidated assets, 
the stockholder will pay accrued dividends on such stock at an annual 
rate of the lesser of six percent and the high yield of the most recent 
10-year Treasury note auction held prior to the previous dividend 
payment date (prorated to cover the period between the last dividend 
payment date and the subscription date). The next regular dividend 
payment to that stockholder would be adjusted to account for the 
difference between the rate at which the stockholder paid for accrued 
dividends and the rate at which the stockholder receives the regular 
dividend payment.
    Under the interim final rule, Reserve Bank stockholders with $10 
billion or less in total consolidated assets will continue to receive a 
dividend on their Reserve Bank stock at an annual rate of six percent 
(prorated to cover the period between the last dividend payment and the 
current dividend payment). If a Reserve Bank issues new stock to, or 
cancels existing stock of, a stockholder with $10 billion or less in 
total consolidated assets, the stockholder or the Reserve Bank would 
(respectively) continue to pay accrued dividends on such stock at an 
annual rate of six percent (prorated to cover the period between the 
last dividend payment date and the subscription date or the 
cancellation date). Additionally, the interim final rule continues to 
allow Reserve Banks to pay dividends semiannually to all stockholders, 
including banks with $10 billion or less in total consolidated assets.
    The only new requirement that the interim final rule imposes on 
stockholders with $10 billion or less in total consolidated assets is 
that such a stockholder must report whether its total consolidated 
assets exceed $10 billion when the stockholder applies for (1) new 
capital stock upon joining the Federal Reserve System or (2) additional 
capital stock upon merging with another entity. Excluding these two 
situations, a Reserve Bank will determine the total consolidated assets 
of all stockholders by reference to the stockholder's most recent 
December 31 Call Report. The interim final rule requires the Board to 
make an annual inflation adjustment to the $10 billion total 
consolidated asset threshold.
    As noted above, a depository institution is ``small'' for purposes 
of the RFA if it has less than $550 million of assets. The only effect 
of the interim final rule on stockholders with less than $550 million 
of assets is to require such stockholders to report whether their total 
consolidated assets exceed $10 billion when they join the Federal 
Reserve System or merge with another entity. These reporting 
requirements will have a minimal economic impact on stockholders that 
are small entities. The Board expects that existing banks and banks 
that are in the process of organization can readily calculate their 
total consolidated assets. The Board currently requires that a bank 
file an application form with the Reserve Bank in whose district it is 
located if the bank wishes to join the Federal Reserve System or if the 
bank must increase or decrease its holding of Reserve Bank stock.\14\ 
The Board will revise these forms to require that, when a bank applies 
for membership or applies for new stock after merging with another 
entity, the bank report whether its total consolidated assets exceed 
$10 billion.
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    \14\ See FR 2030 (application for capital stock for organizing 
national banks); FR 2030A (application for capital stock for 
nonmember state banks that are converting to national banks); FR 
2083A (application for capital stock by state banks (except mutual 
savings banks) and national banks that are converting to state 
banks); FR 2083B (application for capital stock by mutual savings 
banks); FR 2056 (application for adjustment in holding of Reserve 
Bank stock).
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    The RFA requires a description of any significant alternatives that 
accomplish the stated objectives of applicable statutes and that 
minimize any significant economic impact of the rule on small entities. 
In this circumstance, there is no feasible alternative to requiring 
that a bank in the process of organization report whether its total 
consolidated assets exceed $10 billion when it applies to join the 
System, because such banks will not have filed a Call Report before 
applying for membership. With respect to measuring the total 
consolidated assets of a surviving bank after a merger, the Reserve 
Banks could alternatively (1) refer to the total assets reported by the 
surviving bank on its most recent December 31 Call Report or (2) add 
the total assets of the surviving bank and the nonsurviving bank as 
reported on each bank's most recent December 31 Call Report. These 
alternative approaches to measuring total consolidated assets in the 
merger context would reduce the reporting burden on small entities, but 
they would not provide timely and accurate notice to a Reserve Bank of 
whether a merger has caused a surviving bank's total consolidated 
assets to exceed $10 billion. The Board believes that requiring 
surviving banks to report whether total consolidated assets exceed $10 
billion when they apply for additional capital stock is a minimal 
reporting burden of an amount that is known by the banks and serves the 
intent of the FAST Act.
    The Board does not believe that the interim final rule duplicates, 
overlaps, or conflicts with any other Federal rules. In light of the 
foregoing, the Board does not believe that the interim final rule would 
have a significant economic impact on a substantial number of small 
entities. Nonetheless, the Board seeks

[[Page 9086]]

comment on whether the interim final rule imposes undue burdens on, or 
has unintended consequences for, small organizations, and whether there 
are ways such potential burdens or consequences could be minimized in a 
manner consistent with the Federal Reserve Act.

B. Paperwork Reduction Act Analysis

    In accordance with section 3512 of the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3521) (PRA), the Board may not conduct or sponsor, 
and a respondent is not required to respond to, an information 
collection unless it displays a currently valid Office of Management 
and Budget (OMB) control number. The OMB control numbers are 7100-0042 
and 7100-0046. The Board reviewed the interim final rule under the 
authority delegated to the Board by OMB. The interim final rule 
contains requirements subject to the PRA. The reporting requirements 
are found in Sec. Sec.  209.2(a) and 209.3(d)(3).
    Comments are invited on:
    a. Whether the collections of information are necessary for the 
proper performance of the Federal Reserve's functions, including 
whether the information has practical utility;
    b. The accuracy of the estimate of the burden of the information 
collections, including the validity of the methodology and assumptions 
used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments will become a matter of public record. Comments on 
aspects of this notice that may affect reporting, recordkeeping, or 
disclosure requirements and burden estimates should be sent to: 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551. A copy of the comments may also be 
submitted to the OMB desk officer by mail to U.S. Office of Management 
and Budget, 725 17th Street NW., #10235, Washington, DC 20503 or by 
facsimile to 202-395-5806, Attention, Agency Desk Officer.
    Proposed Revisions, With Extension for Three Years, of the 
Following Information Collections:
    (1) Title of Information Collection: Applications for Subscription 
to, Adjustment in Holding of, and Cancellation of Federal Reserve Bank 
Stock.
    Agency Form Number: FR 2030, FR 2030a, FR 2056, FR 2086, FR 2086a, 
FR 2087.
    OMB Control Number: 7100-0042.
    Frequency of Response: On occasion.
    Affected Public: Businesses or other for-profit.
    Respondents: National, State Member, and Nonmember banks.
    Abstract: These application forms are required by the Federal 
Reserve Act and Regulation I. These forms must be used by a new or 
existing member bank (including a national bank) to request the 
issuance, and adjustment in, or cancellation of Federal Reserve Bank 
stock. The forms must contain certain certifications by the applicants, 
as well as certain other financial and shareholder data that is needed 
by the Federal Reserve to process the request.
    Current Actions: The dividend rate to which a Reserve Bank 
stockholder is entitled under Section 7 of the Federal Reserve Act (as 
amended by the FAST Act) depends on the stockholder's ``total 
consolidated assets.'' Section 209.2(a) requires a bank to report 
whether its total consolidated assets exceed $10 billion when it 
applies for membership in the Federal Reserve System. Section 
209.3(d)(3) requires a bank to report whether its total consolidated 
assets exceed $10 billion when it applies for additional capital stock 
after merging with another entity. The Board is proposing to revise FR 
2030, FR 2030a, and FR 2056 to require that a bank report whether its 
total consolidated assets exceed $10 billion when it applies to join 
the Federal Reserve System or applies for additional capital stock 
after merging with another entity. The proposed revisions would 
increase the estimated average hours per response for FR 2030 and FR 
2030a by half an hour. The proposed revisions would increase the 
estimated average hours per response for FR 2056 by one-quarter of an 
hour. The Board is not proposing to revise FR 2086, FR 2086A, and FR 
2087. The draft reporting forms are available on the Board's public Web 
site at https://www.federalreserve.gov/apps/reportforms/review.aspx.
    Estimated annual reporting hours: FR 2030: 4 hours; FR 2030a: 2 
hours; FR 2056: 1000 hours; FR 2086: 5 hours; FR 2086a: 40 hours; FR 
2087: 1 hour.
    Estimated average hours per response: FR 2030: 1 hour; FR 2030a: 1 
hour; FR 2056: 0.75 hours; FR 2086: 0.5 hours; FR 2086a: 0.5 hours; FR 
2087: 0.5 hours.
    Number of respondents: FR 2030: 4; FR 2030a: 2; FR 2056: 1,333; FR 
2086: 10; FR 2086a: 79; FR 2087: 1.
    (2) Title of Information Collection: Application for Membership in 
the Federal Reserve System.
    Agency Form Number: FR 2083, FR 2083A, FR 2083B, and FR 2083C.
    OMB Control Number: 7100-0046.
    Frequency of Response: On occasion.
    Affected Public: Businesses or other for-profit.
    Respondents: Newly organized banks that seek to become state member 
banks, or existing banks or savings institutions that seek to convert 
to state member bank status.
    Abstract: The application for membership is a required one-time 
submission that collects the information necessary for the Federal 
Reserve to evaluate the statutory criteria for admission of a new or 
existing state bank into membership in the Federal Reserve System. The 
application collects managerial, financial, and structural data.
    Current Actions: The dividend rate to which a Reserve Bank 
stockholder is entitled under Section 7 of the Federal Reserve Act (as 
amended by the FAST Act) depends on the stockholder's ``total 
consolidated assets.'' Section 209.2(a) requires a bank to report 
whether its total consolidated assets exceed $10 billion when it 
applies for membership in the Federal Reserve System. The Board is 
proposing to revise FR 2083A and FR 2083B to require that a bank report 
whether its total consolidated assets exceed $10 billion when it 
applies to join the Federal Reserve System. The proposed revisions 
would increase the estimated average hours per response by half an 
hour. The Board is not proposing to revise FR 2083 or FR 2083C. The 
draft reporting forms are available on the Board's public Web site at 
https://www.federalreserve.gov/apps/reportforms/review.aspx. The 
estimated annual reporting hours listed below, and the estimated 
average hours per response, are cumulative totals for FR 2083, FR 
2083A, FR 2083B, and FR 2083C.
    Estimated annual reporting hours: 207 hours.
    Estimated average hours per response: 4.5 hours.
    Number of respondents: 46.

C. Riegle Community Development and Regulatory Improvement Act

    Section 302 of Riegle Community Development and Regulatory 
Improvement Act (12 U.S.C. 4802) generally requires that regulations 
prescribed by Federal banking agencies which impose additional 
reporting, disclosures or other new requirements on insured depository 
institutions take effect on the first day of a calendar

[[Page 9087]]

quarter which begins on or after the date on which the regulation is 
published in final form unless the agency determines, for good cause 
published with the regulation, that the regulation should become 
effective before such time. The final rule will be effective on 
February 24, 2016. The first day of a calendar quarter which begins on 
or after the date on which the final rule will be published is April 1, 
2016. As discussed below, the Board has determined for good cause that 
the regulation should take effect on February 24, 2016.
    The FAST Act amendments to Section 7(a)(1) of the Federal Reserve 
Act, which will affect the dividend rate that the Reserve Banks pay to 
stockholders with more than $10 billion in total consolidated assets, 
became effective on January 1, 2016. Before April 1, 2016 (the first 
day of the next calendar quarter), the Reserve Banks may need to issue 
new stock to (1) a bank that is applying for membership in the Federal 
Reserve System or (2) a bank that is increasing its holding of Reserve 
Bank stock following a merger. A Reserve Bank must have a reliable 
report of such a bank's total consolidated assets before it can issue 
stock. The Board therefore finds, for good cause, that this interim 
final rule shall be effective on [insert date of publication].

D. Plain Language

    Section 722 of the Gramm-Leach Bliley Act requires the Board to use 
plain language in all proposed and final rules published after January 
1, 2000. The Board invites your comments on how to make this interim 
final rule easier to understand. For example:
     Has the Board organized the material to suit your needs? 
If not, how could this material be better organized?
     Are the requirements in the interim final rule clearly 
stated? If not, how could the interim final rule be more clearly 
stated?
     Does the interim final rule contain language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the interim final rule easier to 
understand? If so, what changes to the format would make the interim 
final rule easier to understand?
     What else could the Board do to make the regulation easier 
to understand?

List of Subjects in 12 CFR Part 209

    Banks and banking, Federal Reserve System, Reporting and 
recordkeeping requirements, Securities.

Authority and Issuance

    For the reasons set forth in the preamble, the Board will amend 
Regulation I, 12 CFR part 209, as follows:

PART 209--FEDERAL RESERVE BANK CAPITAL STOCK (REGULATION I)

0
1. The authority citation for part 209 is revised to read as follows:

    Authority: 12 U.S.C. 12 U.S.C. 222, 248, 282, 286-288, 289, 321, 
323, 327-328, and 466.


0
2. Amend Sec.  209.1 by revising the section heading and paragraphs (a) 
and (b) and adding paragraph (d) to read as follows:


Sec.  209.1  Authority, purpose, scope, and definitions.

    (a) Authority. This part is issued pursuant to 12 U.S.C. 222, 248, 
282, 286-288, 289, 321, 323, 327-328, and 466.
    (b) Purpose. The purpose of this part is to implement the 
provisions of the Federal Reserve Act relating to the issuance and 
cancellation of Federal Reserve Bank stock upon becoming or ceasing to 
be a member bank, or upon changes in the capital and surplus of a 
member bank, of the Federal Reserve System. This part also implements 
the provisions of the Federal Reserve Act relating to the payment of 
dividends to member banks.
* * * * *
    (d) Definitions. For purposes of this part--
    (1) Capital Stock and Surplus. Capital stock and surplus of a 
member bank means the paid-in capital stock \2\ and paid-in surplus of 
the bank, less any deficit in the aggregate of its retained earnings, 
gains (losses) on available for sale securities, and foreign currency 
translation accounts, all as shown on the bank's most recent report of 
condition. Paid-in capital stock and paid-in surplus of a bank in 
organization means the amount which is to be paid in at the time the 
bank commences business.
---------------------------------------------------------------------------

    \2\ Capital stock includes common stock and preferred stock 
(including sinking fund preferred stock).
---------------------------------------------------------------------------

    (2) Dividend proration basis means the use of a 360-day year of 12 
30-day months for purposes of computing dividend payments.
    (3) Total consolidated assets means the total assets on the 
stockholder's balance sheet as reported by the stockholder on its 
Consolidated Report of Condition and Income (Call Report) as of the 
most recent December 31, except in the case of a new member or the 
surviving stockholder after a merger ``total consolidated assets'' 
means (until the next December 31 Call Report becomes available) the 
total consolidated assets of the new member or the surviving 
stockholder at the time of its application for capital stock.

0
3. In Sec.  209.2, revise paragraph (a) to read as follows:


Sec.  209.2  Banks desiring to become member banks.

    (a) Application for stock or deposit. Each national bank in process 
of organization,\3\ each nonmember state bank converting into a 
national bank, and each nonmember state bank applying for membership in 
the Federal Reserve System under Regulation H, 12 CFR part 208, shall 
file with the Federal Reserve Bank (Reserve Bank) in whose district it 
is located an application for stock (or deposit in the case of mutual 
savings banks not authorized to purchase Reserve Bank stock \4\) in the 
Reserve Bank. This application for stock must state whether the 
applicant's total consolidated assets exceed $10,000,000,000. The bank 
shall pay for the stock (or deposit) in accordance with Sec.  209.4 of 
this part.
---------------------------------------------------------------------------

    \3\ A new national bank organized by the Federal Deposit 
Insurance Corporation under section 11(n) of the Federal Deposit 
Insurance Act (12 U.S.C. 1821(n)) should not apply until in the 
process of issuing stock pursuant to section 11(n)(15) of that act. 
Reserve Bank approval of such an application shall not be effective 
until the issuance of a certificate by the Comptroller of the 
Currency pursuant to section 11(n)(16) of that act.
    \4\ A mutual savings bank not authorized to purchase Federal 
Reserve Bank stock may apply for membership evidenced initially by a 
deposit. (See Sec.  208.3(a) of Regulation H, 12 CFR part 208.) The 
membership of the savings bank shall be terminated if the laws under 
which it is organized are not amended to authorize such purchase at 
the first session of the legislature after its admission, or if it 
fails to purchase such stock within six months after such an 
amendment.
---------------------------------------------------------------------------

* * * * *

0
4. Amend Sec.  209.3 as follows:
0
a. Revise the section heading.
0
b. Revise the paragraph (d) subject heading and paragraphs (d)(1) and 
(d)(2)(i).
0
c. Add paragraph (d)(3).
    The revisions and addition read as follows:


Sec.  209.3  Cancellation of Reserve Bank stock; reporting of total 
consolidated assets following merger.

* * * * *
    (d) Exchange of stock on merger or change in location; reporting of 
total consolidated assets following merger--(1) Merger of member banks 
in the same Federal Reserve District. Upon a merger or consolidation of 
member banks located in the same Federal Reserve

[[Page 9088]]

District, the Reserve Bank shall cancel the shares of the nonsurviving 
bank (or in the case of a mutual savings bank not authorized to 
purchase Reserve Bank stock, shall credit the deposit to the account of 
the surviving bank) and shall credit the appropriate number of shares 
on its books to (or in the case of a mutual savings bank not authorized 
to purchase Reserve Bank stock, shall accept an appropriate increase in 
the deposit of) the surviving bank, subject to paragraph (d)(3) of 
Sec.  209.4.
    (2) * * *
    (i) The Reserve Bank of the member bank's former District, or of 
the nonsurviving member bank, shall cancel the bank's shares and 
transfer the amount paid in for those shares, plus accrued dividends 
(as specified in paragraph (d)(1)(ii) of Sec.  209.4) and subject to 
paragraph (d)(3) of Sec.  209.4 (or, in the case of a mutual savings 
bank member not authorized to purchase Federal Reserve Bank stock, the 
amount of its deposit, adjusted in a like manner), to the Reserve Bank 
of the bank's new District or of the surviving bank; and
* * * * *
    (3) Statement of total consolidated assets. When a member bank 
merges with another entity and the surviving bank remains a Reserve 
Bank stockholder, the surviving stockholder must state whether its 
total consolidated assets exceed $10,000,000,000 in its next 
application for additional capital stock.
* * * * *

0
5. Amend Sec.  209.4 as follows:
0
a. Revise the section heading.
0
b. Remove paragraph (b).
0
c. Redesignate paragraphs (c) through (e) as paragraphs (b) through 
(d).
0
d. Revise newly redesignated paragraphs (c) and (d).
0
e. Add paragraphs (e) and (f).


Sec.  209.4   Amounts and payments for subscriptions and cancellations; 
timing and rate of dividends.

* * * * *
    (c) Payment for subscriptions. (1) Upon approval by the Reserve 
Bank of an application for capital stock (or for a deposit in lieu 
thereof), the applying bank shall pay the Reserve Bank--
    (i) One-half of the subscription amount; and
    (ii) Accrued dividends equal to the paid-in subscription amount in 
paragraph (c)(1)(i) of this section multiplied by--
    (A) In the case of a bank with total consolidated assets of more 
than $10,000,000,000, an annual rate equal to the lesser of the high 
yield of the 10-year Treasury note auctioned at the last auction held 
prior to the date of the last dividend payment and 6 percent, adjusted 
to reflect the period from the last dividend payment date to the 
subscription date according to the dividend proration basis.
    (B) In the case of a bank with total consolidated assets of 
$10,000,000,000 or less, 6 percent, adjusted to reflect the period from 
the last dividend payment date to the subscription date according to 
the dividend proration basis.
    (2) Upon payment (and in the case of a national banks in 
organization or state nonmember bank converting into a national bank, 
upon authorization or approval by the Comptroller of the Currency), the 
Reserve Bank shall issue the appropriate number of shares by crediting 
the bank with the appropriate number of shares on its books. In the 
case of a mutual savings bank not authorized to purchase Reserve Bank 
stock, the Reserve Bank will accept the deposit or addition to the 
deposit in place of issuing shares. The remaining half of the 
subscription or additional subscription (including subscriptions for 
deposits or additions to deposits) shall be subject to call by the 
Board.
    (3) If the dividend rate applied at the next scheduled dividend 
payment date is based on a different annual rate than the rate used to 
compute the amount of the accrued dividend payment pursuant to 
paragraph (c)(1)(ii) of this section, the amount of the dividends paid 
at the next scheduled dividend payment date should be adjusted 
accordingly. The amount of the adjustment should equal the difference 
between--
    (i) The accrued dividend payment pursuant paragraph (c)(1)(ii) of 
this section, and
    (ii) The result of multiplying the subscription amount paid 
pursuant to paragraph (c)(1)(i) of this section by the dividend rate 
applied at the next scheduled dividend payment, adjusted to reflect the 
period from the last dividend payment date to the subscription date 
according to the dividend proration basis.
    (d) Payment for cancellations. (1) Upon approval of an application 
for cancellation of Reserve Bank capital stock, or (in the case of 
involuntary termination of membership) upon the effective date of 
cancellation specified in Sec.  209.3(c)(3), the Reserve Bank shall--
    (i) Reduce the bank's shareholding on the Reserve Bank's books by 
the number of shares required to be canceled and shall pay the paid-in 
subscription of the canceled stock; and
    (ii) Pay accrued dividends equal to the paid-in subscription of the 
canceled stock in paragraph (d)(1)(i) of this section multiplied by--
    (A) In the case of a bank with total consolidated assets of more 
than $10,000,000,000, an annual rate equal to the lesser of the high 
yield of the 10-year Treasury note auctioned at the last auction held 
prior to the date of cancellation and 6 percent, adjusted to reflect 
the period from the last dividend payment date to the cancellation date 
according to the dividend proration basis; or
    (B) In the case of a bank with total consolidated assets of 
$10,000,000,000 or less, 6 percent, adjusted to reflect the period from 
the last dividend payment date to the cancellation date according to 
the dividend proration basis.
    (2) The sum of the payments under paragraph (d)(1) of this section 
cannot exceed the book value of the stock.\5\
---------------------------------------------------------------------------

    \5\ Under sections 6 and 9(10) of the Act, a Reserve Bank is 
under no obligation to pay unearned accrued dividends on redemption 
of its capital stock from an insolvent member bank for which a 
receiver has been appointed or from state member banks on voluntary 
withdrawal from or involuntary termination of membership.
---------------------------------------------------------------------------

    (3) In the case of any cancellation of Reserve Bank stock under 
this Part, the Reserve Bank may first apply such sum to any liability 
of the bank to the Reserve Bank and pay over the remainder to the bank 
(or receiver or conservator, as appropriate).
    (e) Dividend. (1) After all necessary expenses of a Reserve Bank 
have been paid or provided for, the stockholders of a Reserve Bank 
shall be entitled to receive a dividend on paid-in capital stock of--
    (i) in the case of a bank with total consolidated assets of more 
than $10,000,000,000, the lesser of the annual rate equal to the high 
yield of the 10-year Treasury note auctioned at the last auction held 
prior to the payment of such dividend and an annual rate of 6 percent, 
or
    (ii) in the case of a bank with total consolidated assets of 
$10,000,000,000 or less, an annual rate of 6 percent.
    (2) The dividend pursuant to paragraph (e)(1) of this section will 
be adjusted to reflect the period from the last dividend payment date 
to the current dividend payment date according to the dividend 
proration basis.
    (3) The entitlement to dividends under paragraph (e)(1) of this 
section shall be cumulative.
    (f) Annual adjustment to total consolidated assets. The dollar 
amounts for total consolidated assets specified in paragraphs (c), (d), 
and (e) of this section and Sec. Sec.  209.2 and 209.3 shall be 
adjusted annually to reflect the change

[[Page 9089]]

in the Gross Domestic Product Price Index, published by the Bureau of 
Economic Analysis.

    By order of the Board of Governors of the Federal Reserve 
System, February 18, 2016.
Robert deV. Frierson,
Secretary to the Board.
[FR Doc. 2016-03747 Filed 2-23-16; 8:45 am]
 BILLING CODE 6210-01-P