Federal Reserve Bank Capital Stock, 2027-2031 [2022-00503]

Download as PDF 2027 Rules and Regulations Federal Register Vol. 87, No. 9 Thursday, January 13, 2022 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. FEDERAL RESERVE SYSTEM 12 CFR Part 209 [Regulation I; Docket No. R–1745] RIN 7100–AG13 Federal Reserve Bank Capital Stock Board of Governors of the Federal Reserve System. ACTION: Final rule. AGENCY: The Board of Governors (Board) is publishing a final rule that amends Regulation I to automate nonmerger-related adjustments to member banks’ subscriptions to Federal Reserve Bank (Reserve Bank) capital stock. The final rule also makes certain technical amendments to Regulation I and conforming revisions to the FR 2056 reporting form. DATES: Effective February 14, 2022. FOR FURTHER INFORMATION CONTACT: Evan Winerman, Senior Counsel (202– 872–7578), Legal Division; or Kimberly Zaikov, Manager (202–452–2256), Reserve Bank Operations and Payments Systems Division. You may also contact us by email via https:// www.federalreserve.gov/apps/ ContactUs/feedback.aspx, choose Staff Group: Regulations. SUPPLEMENTARY INFORMATION: SUMMARY: jspears on DSK121TN23PROD with RULES1 I. Background Regulation I governs the issuance and cancellation of capital stock by the Reserve Banks. Under section 5 of the Federal Reserve Act and Regulation I, a member bank (other than a mutual savings bank) must subscribe to capital stock of the Reserve Bank of its district in an amount equal to 6 percent of the member bank’s capital and surplus.1 Similarly, under section 9 of the Federal Reserve Act and Regulation I, a member bank that is a mutual savings bank must subscribe to capital stock of the Reserve Bank of its district in an amount equal 1 12 U.S.C. 287 and 12 CFR 209.4(a). VerDate Sep<11>2014 16:51 Jan 12, 2022 Jkt 256001 to six-tenths of 1 percent of its total deposit liabilities.2 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 Under section 7 of the Federal Reserve Act and Regulation I, smaller member banks (currently those with $11.229 billion or less in total consolidated assets) receive a 6 percent annual dividend on their Reserve Bank stock.4 Other member banks receive a dividend at the lesser of (i) the annual rate equal to the high yield of the 10year Treasury note auctioned at the last auction held prior to the payment of such dividend and (ii) an annual rate of 6 percent.5 A. Non-Merger-Related Adjustments to Reserve Bank Stock Subscriptions Regulation I requires that a member bank apply to adjust its stock subscription ‘‘promptly after filing’’ its December 31 report of condition (Call Report).6 Additionally, a member bank must apply to adjust its stock subscription promptly after filing any other quarterly Call Report showing that the member bank has experienced an increase or decrease to its capital and surplus (or its total deposit liabilities for a mutual savings bank) requiring a change in excess of the lesser of 15 percent or 100 shares of Reserve Bank capital stock.7 Member banks use the FR 2056 reporting form to apply for 2 12 U.S.C. 333 and 12 CFR 209.4(b). The Federal Reserve Act and Regulation I allow a mutual savings bank to maintain a temporary ‘‘deposit’’ with a Reserve Bank in lieu of obtaining capital stock if the mutual savings bank is not permitted to purchase Reserve Bank stock under state law. However, if the relevant state law is not amended at the first session of the legislature after the bank is admitted to authorize the purchase of Reserve Bank stock, or if the bank fails to purchase the stock within six months of such amendment, the Reserve Bank will terminate the membership of the mutual savings bank. 12 U.S.C. 333; 12 CFR 209.2(a) and 208.3(a)(1). 3 12 U.S.C. 287 and 12 CFR 209.4(c)(2). 4 12 U.S.C. 289 and 12 CFR 209.4(e). Regulation I generally defines total consolidated assets by reference to the total assets reported on a member bank’s most recent December 31 Call Report. 12 CFR 209.1(d)(3). 5 Id. 6 12 CFR 209.4(a) and (b). 7 Id. PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 adjustments to their stock subscriptions.8 B. Merger-Related Adjustments to Reserve Bank Stock Subscriptions Regulation I provides that, when two member banks merge or consolidate, the appropriate Reserve Banks shall cancel shares of the nonsurviving bank and credit shares to the surviving bank.9 In order to effectuate this requirement, the Reserve Banks direct surviving member banks to apply to adjust their stock subscriptions before they merge or consolidate with other member banks. Similarly, the Reserve Banks direct nonsurviving member banks to apply to cancel their stock subscriptions before they merge or consolidate with other member banks.10 Regulation I does not expressly require that a surviving member bank apply to adjust its stock subscription before it merges or consolidates with a nonmember bank. In practice, however, the Reserve Banks request that surviving member banks apply to adjust their stock subscriptions before they merge or consolidate with nonmember banks.11 This practice allows the Reserve Banks to make timely changes to the stock subscriptions of surviving member banks that merge or consolidate with nonmember banks. When a surviving member bank applies to adjust its stock subscription, it must state whether its total consolidated assets exceed $11.229 billion.12 This requirement ensures that a Reserve Bank receives timely and accurate notice of whether a merger has caused a surviving member bank’s total consolidated assets to exceed $11.229 billion, which (as noted above) 8 See Federal Reserve, Reporting Forms at https:// www.federalreserve.gov/reportforms/forms/FR_ 205620200115_f.pdf. 9 12 CFR 209.3(d)(1) and (2). If the surviving or nonsurviving bank is a mutual savings bank that is not permitted to purchase Reserve Bank stock under state law, Regulation I instead directs the Reserve Bank to transfer or increase the member bank’s deposit obligation. Id. 10 Nonsurviving member banks use the FR 2086a reporting form to apply to cancel their stock subscriptions. https://www.federalreserve.gov/ reportforms/forms/FR_2086a20200115_f.pdf. 11 The surviving bank applies to adjust its stock subscription based on its anticipated post-merger capital and surplus or, in the case of a member bank that is a mutual savings bank, its anticipated postmerger total deposit liabilities. 12 12 CFR 209.1(d)(3) and 209.3(d)(3). E:\FR\FM\13JAR1.SGM 13JAR1 2028 Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / Rules and Regulations determines the dividend rate to which the member bank is entitled. II. Description of the Final Rule On April 13, 2021, the Board published a proposal to automate nonmerger-related adjustments to member banks’ subscriptions to Reserve Bank capital stock.13 The Board also proposed to clarify that a surviving member bank must apply to adjust its stock subscription before merging or consolidating with another bank. Finally, the Board proposed two technical amendments to Regulation I. The Board received no responsive comments on the proposal. The Board is finalizing the proposed amendments with certain technical clarifications. jspears on DSK121TN23PROD with RULES1 A. Automation of Non-Merger-Related Stock Adjustments As noted above, Regulation I currently requires that a member bank apply to adjust its stock subscription at least annually and sometimes quarterly. A member bank determines its required stock subscription based on its capital and surplus (or total deposit liabilities for a mutual savings bank) as reported in the member bank’s most recent Call Report. The Reserve Banks have developed software that automatically pulls the information needed to calculate member banks’ required stock subscriptions from Call Reports. The Board is therefore amending section 209.4 to automate the stock adjustment process. Specifically, the Reserve Banks will adjust a member bank’s stock subscription each time the member bank files a Call Report.14 This automated process will eliminate the need for member banks to file applications to adjust their stock subscriptions (except in the context of mergers, as described infra). The Board is also clarifying that, when a Reserve Bank issues stock to a member bank, the Reserve Bank will obtain payment for that stock by debit to an account on the Reserve Bank’s books or by other form of settlement to which the Reserve Bank agrees. B. Merger-Related Stock Adjustments As noted above, before two member banks merge or consolidate, the Reserve Banks direct the surviving member bank to apply to adjust its stock subscription and the nonsurviving member bank to apply to cancel its stock subscription. Similarly, before a member bank merges or consolidates with a nonmember bank, 13 86 FR 19152 (April 13, 2021). the Board is automating the process for adjusting the deposit obligation of a mutual savings bank that has a deposit with the appropriate Reserve Bank in lieu of Reserve Bank capital stock. 14 Similarly, VerDate Sep<11>2014 16:51 Jan 12, 2022 Jkt 256001 the Reserve Banks request that the surviving member bank apply to adjust its stock subscription. The Board is amending section 209.3 to codify the Reserve Banks’ current practice of requesting pre-merger stock adjustment applications. The amendments will expressly require a surviving member bank to apply to adjust its stock subscription before merging or consolidating with another member bank or nonmember bank.15 16 This will ensure that the Reserve Banks make timely changes to the stock subscriptions of surviving member banks that merge or consolidate with other banks. Relatedly, the Board is making conforming amendments to two provisions of Regulation I (current 12 CFR 209.1(d)(3) and 209.3(d)(3)) to clarify that, consistent with the existing text of Regulation I, a surviving member bank must state in its stock adjustment application whether its total consolidated assets exceed $11.229 billion. C. Technical Amendments The Board proposed two technical amendments and is finalizing these amendments with a non-substantive clarification. The Board is also adopting a third, related technical amendment. Section 209.1(c) recognizes that a bank located in a United States dependency or possession may apply for membership, and a footnote in section 209.1(c) explains that such a bank ‘‘should communicate with the Federal Reserve Bank with which it desires to do business.’’ The Board is amending this footnote to clarify that a bank located in the Virgin Islands or Puerto Rico should communicate with the Federal Reserve Bank of New York, while a bank located in Guam, American Samoa, or the Northern Mariana Islands should communicate with the Federal Reserve Bank of San Francisco. The amendment will make this footnote in Regulation I consistent 15 Similarly, if a surviving bank is a mutual savings bank that is not permitted to purchase Reserve Bank stock under state law, the final rule will require the surviving bank to apply to adjust its deposit obligation. 16 Regulation I expressly requires that a nonsurviving member bank apply to cancel its stock subscription when it ‘‘is merged or consolidated into a nonmember bank.’’ 12 CFR 209.3(a). The final rule will expressly require that a nonsurviving member bank apply to cancel its stock subscription (or, in the case of a mutual savings bank that is not permitted to purchase Reserve Bank stock, transfer its deposit obligation) before merging or consolidating with another member bank. This amendment is consistent with the existing requirement in Regulation I that a member bank apply to cancel its stock subscription when it ‘‘desires to withdraw from membership’’ or ‘‘voluntarily . . . ceases business.’’ 12 CFR 209.3(a). PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 with a provision in the Board’s Regulation J that clarifies the Federal Reserve Districts in which banks from United States dependencies and possessions are deemed to be located.17 Section 209.3(a) requires that any bank that desires to withdraw from membership in the Federal Reserve System promptly file with its Reserve Bank an application for cancellation of all its Reserve Bank stock. The Board proposed to amend section 209.3(a) to clarify that, consistent with the Board’s current understanding, this requirement applies to any national bank that wants to convert into a ‘‘State nonmember bank.’’ The final rule clarifies that this requirement applies to a national bank that converts into any nonmember bank—not only a ‘‘State’’ nonmember bank.18 Relatedly, section 209.3(c) specifies that when a member bank merges into, consolidates with, or converts into a ‘‘State nonmember bank,’’ the member bank’s stock shall be cancelled on the effective date of the merger, consolidation, or conversion. The final rule clarifies that a member bank’s stock shall be cancelled on the effective date of a member bank’s merger into, consolidation with, or conversion into any nonmember bank—not only a State nonmember bank. IV. Regulatory Analysis A. Regulatory Flexibility Act The Regulatory Flexibility Act (‘‘RFA’’), 5 U.S.C. 601 et seq., generally requires that an agency assess the impact a rule is expected to have on small entities.19 The RFA requires an agency either to provide a regulatory flexibility analysis or to certify that the rule will not have a significant economic impact on a substantial number of small entities. The Board did not receive any comments on its initial regulatory flexibility analysis. The Board certifies that the final rule will not have a significant economic impact on a substantial number of small entities. As described in the information above, the final rule will reduce reporting requirements for member banks by automating non-merger-related stock adjustments. Additionally, the final rule will require that a surviving stockholder apply to adjust its stock subscription 17 See 12 CFR 210.2(i)(1)(A). example, this requirement applies to a national bank that converts into a federal savings bank. 19 Under size standards established by the Small Business Administration, banks and other depository institutions are considered ‘‘small’’ if they have less than $600 million in assets. 13 CFR 121.201. 18 For E:\FR\FM\13JAR1.SGM 13JAR1 Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / Rules and Regulations before merging or consolidating with another bank.20 There are approximately 50 mergers each year in which the surviving stockholder is a member bank, and it will take a surviving stockholder approximately 30 minutes to complete the paperwork associated with an adjustment to its stock subscription. Accordingly, the final rule will not have a significant economic impact on a substantial number of small entities. B. Paperwork Reduction Act Certain provisions of the final rule contain ‘‘collections of information’’ within the meaning of the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501–3521). 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 Board reviewed the final rule under the authority delegated to the Board by OMB. The Board did not receive any specific comments on the PRA. The final rule contains revisions to sections 209.3 and 209.4 that automate non-merger-related adjustments to member banks’ subscriptions to Reserve Bank capital stock. Automating the adjustment process would reduce the frequency of reporting. To implement this requirement, the Board has extended for three years, with revision, the Federal Reserve Bank Stock Applications (FR 2030, FR 2030a, FR 2056, FR 2086, FR2086a, 2087; OMB No. 7100–0042). The revisions would affect only the FR 2056. Adopted Revision, With Extension, of the Following Information Collection jspears on DSK121TN23PROD with RULES1 Report title: Federal Reserve Bank Stock Applications. Agency form numbers: FR 2030; FR 2030a; FR 2056; FR 2086; FR 2086a; FR 2087. OMB control number: 7100–0042. Frequency: On occasion. Respondents: New national banks, non-member state banks converting into national banks, member banks, and member banks converting into or 20 Consistent with the current text of Regulation I, a surviving member bank would need to report in its stock adjustment application whether its total consolidated assets exceed $11.229 billion. See n. 12, supra. Additionally, consistent with the current text of Regulation I, a nonsurviving member bank would need to apply to cancel its stock before merging or consolidating with another bank. See n. 15, supra. VerDate Sep<11>2014 16:51 Jan 12, 2022 Jkt 256001 merging into member or nonmember banks. Estimated number of respondents: FR 2030, 4; FR 2030a, 7; FR 2056, 50; FR 2086, 10; FR 2086a, 86; FR 2087, 1. Estimated average hours per response: 0.5. Estimated annual burden hours: FR 2030, 2; FR 2030a, 3.5; FR 2056, 25; FR 2086, 5; FR 2086a, 43; FR 2087, 0.5. General description of report: Any national bank wanting to purchase stock in the Federal Reserve System, any member bank wanting to increase or decrease its Federal Reserve Bank stock holdings, or any bank wanting to cancel its stock holdings must file an application with the appropriate Federal Reserve Bank. The application forms for the initial subscription of Federal Reserve Bank stock filed by organizing national banks and nonmember state banks converting to national banks (FR 2030 and 2030a, respectively) and the application forms for the cancellation of Federal Reserve Bank stock filed by liquidating member banks, member banks merging or consolidating with nonmember banks, and insolvent member banks (FR 2086, FR 2086a, and FR 2087, respectively) require one or more of the following: A resolution by the applying bank’s board of directors authorizing the transaction, an indication of the capital and surplus of the bank as of the date of application, a certification (by official signatures) of the resolution, and/or an indication of the number of shares and dollar amount of the Federal Reserve Bank stock to be purchased or cancelled. The application form for an interim adjustment in a member bank’s holdings of Federal Reserve Bank stock (FR 2056) requires an indication of the capital and surplus of the bank (or total deposit liabilities for a mutual savings bank) as of the date of application and an indication of the number of shares held and the number of shares to be acquired or canceled. A member bank must submit a completed FR 2056 form to correct a discrepancy between the amount of Federal Reserve Bank stock required to be held and the amount actually held by the member bank. The latter is determined through information that the member bank reports quarterly on the Consolidated Reports of Condition and Income (Call Report) (FFIEC 031, FFIEC 041, and FFIEC 051; OMB No. 7100–0036). Legal authorization and confidentiality: The Federal Reserve Bank Stock Applications are authorized PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 2029 pursuant to sections 9 and 11(a) of the FRA (12 U.S.C. 321 and 248(a)). Additionally, the FR 2030 and FR 2030a are specifically authorized by section 2 of the FRA (12 U.S.C. 222 and 282), the FR 2056, FR 2086, and FR 2086a are authorized by section 5 of the FRA (12 U.S.C. 287), and the FR 2087 is authorized by section 6 of the FRA (12 U.S.C. 288). The FR 2030, FR 2030a, FR 2056, FR 2086, FR 2086a, and FR 2087 are mandatory. Individual respondents may request that information submitted to the Board in these applications be kept confidential on a case-by-case basis. Such applications may contain information related the business plans of the respondent. Under certain circumstances, this information may be withheld under exemption 4 of the Freedom of Information Act (FOIA), which protects privileged or confidential commercial or financial information (5 U.S.C. 552(b)(4)). These applications may also contain information of a personal nature the disclosure of which would result in a clearly unwarranted invasion of personal privacy, which may be protected under exemption 6 of the FOIA (5 U.S.C. 552(b)(6)). Additionally, exemption 8 of the FOIA (5 U.S.C. 552(b)(8)) may apply to the extent the reported information is contained in or related to examination reports. Current actions: The Board has adopted amendments to Regulation I that automate non-merger-related adjustments to member banks’ subscriptions to Reserve Bank capital stock. Regulation I currently requires that a member bank apply to adjust its stock subscription at least annually and sometimes quarterly. A member bank determines its required stock subscription based on its capital and surplus (or total deposit liabilities for a mutual savings bank) as reported in the member bank’s most recent Call Report. The Reserve Banks have developed software that automatically pulls the information needed to calculate member banks’ required stock subscriptions from Call Reports. Accordingly, the Board adopted amendments to section 209.4 that will automate non-merger-related stock adjustments. The Board also adopted amendments to section 209.3(d) that would require a surviving stockholder to apply to adjust its stock subscription before merging with another bank. E:\FR\FM\13JAR1.SGM 13JAR1 2030 Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / Rules and Regulations Consistent with these changes to Regulation I, the Board eliminated the requirement that member banks routinely submit FR 2056 reporting forms to adjust their stock subscriptions. The Board amended the FR 2056 reporting form to clarify that the form should be filed only by a surviving member bank that merges or consolidates with another bank. 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) 1. The authority citation for part 209 continues to read as follows: ■ § 209.3 Cancellation of Reserve Bank stock; mergers involving member banks. Authority: 12 U.S.C. 12 U.S.C. 222, 248, 282, 286–288, 289, 321, 323, 327–328, and 466. 2. Revise the heading to part 209 to read as shown above. ■ 3. Amend § 209.1 by revising paragraphs (c) and (d)(3) to read as follows. ■ § 209.1 Authority, purpose, scope, and definitions. * * * * (c) Scope. This part applies to member banks of the Federal Reserve System, to national banks in process of organization, and to state banks applying for membership. National banks and locally-incorporated banks located in United States dependencies and possessions are eligible (with the consent of the Board) but not required to apply for membership under section 19(h) of the Federal Reserve Act, 12 U.S.C. 466.1 jspears on DSK121TN23PROD with RULES1 * 1 A bank located in the Virgin Islands or Puerto Rico should communicate with the Federal Reserve Bank of New York regarding applications for membership under the provisions of section 19(h) of the Federal Reserve Act. A bank located in Guam, American Samoa, or the Northern Mariana Islands should communicate with the Federal Reserve Bank of San Francisco regarding applications for membership under the provisions of section 19(h) of the Federal Reserve Act. (d) * * * (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) VerDate Sep<11>2014 16:51 Jan 12, 2022 Jkt 256001 as of the most recent December 31, except in the case of: (i) A new member ‘‘total consolidated assets’’ means (until the next December 31 Call Report becomes available) the total consolidated assets of the new member at the time of its application for capital stock; and (ii) A surviving stockholder after a merger ‘‘total consolidated assets’’ means (until the next December 31 Call Report becomes available) the total consolidated assets reported by that stockholder pursuant to § 209.3(d)(5). ■ 4. Amend § 209.3 by: ■ a. Revising the section heading; ■ b. Revising paragraphs (a) and (c) and the paragraph (d) subject heading; ■ c. Redesignating paragraphs (d)(1), (2), and (3) as paragraphs (d)(2), (3), and (5), respectively and adding new paragraph (d)(1) and paragraph (d)(4); and ■ d. Revising newly redesignated paragraph (d)(5). The revisions and additions to read as follows: (a) Application for cancellation. Any bank that desires to withdraw from membership in the Federal Reserve System (including a national bank that wants to convert into a nonmember bank), voluntarily liquidates or ceases business, is merged or consolidated into a nonmember bank, or is involuntarily liquidated by a receiver or conservator or otherwise, shall promptly file with its Reserve Bank an application for cancellation of all its Reserve Bank stock (or withdrawal of its deposit, as the case may be) and payment therefor in accordance with § 209.4. * * * * * (c) Effective date of cancellation. Cancellation in whole of a bank’s Reserve Bank capital stock shall be effective, in the case of: (1) Voluntary withdrawal from membership by a state bank, as of the date of such withdrawal; (2) Merger into, consolidation with, or (for a national bank) conversion into, a nonmember bank, as of the effective date of the merger, consolidation, or conversion; and (3) Involuntary termination of membership, as of the date the Board issues the order of termination. (d) Exchange of stock on merger or change in location; stock adjustment upon merger with a nonmember bank; reporting of total consolidated assets following merger—(1) Applications. (i) Before a merger or consolidation of member banks, the nonsurviving member bank shall file an application with the appropriate Reserve Bank to PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 cancel its shares of Reserve Bank stock (or in the case of a mutual savings bank not authorized to purchase Reserve Bank stock, shall file an application to transfer its deposit to the account of the surviving bank) and the surviving member bank shall file an application with the appropriate Reserve Bank for issue of a corresponding number of shares of Reserve Bank stock (or in the case of a mutual savings bank not authorized to purchase Reserve Bank stock, shall file an application to increase its deposit obligation). (ii) Before a merger or consolidation of a member bank and a nonmember bank, a surviving member bank shall file an application with the appropriate Reserve Bank to adjust its Reserve Bank capital stock subscription to equal six percent of the member bank’s anticipated post-merger capital and surplus, or, in the case of member bank that is a mutual savings bank, six-tenths of 1 percent of the member bank’s anticipated post-merger total deposit liabilities. A mutual savings bank not authorized to purchase Reserve Bank stock shall file an application to adjust its deposit obligation in a like manner. * * * * * (4) Merger with a nonmember bank. Upon a merger or consolidation of a member bank and a nonmember bank, the Reserve Bank will adjust the surviving member bank’s stock subscription to equal six percent of the member bank’s capital and surplus, or, in the case of a member bank that is a mutual savings bank, six-tenths of 1 percent of the member bank’s total deposit liabilities. If a mutual savings bank has a deposit with the appropriate Reserve Bank in lieu of Reserve Bank capital stock, its deposit obligation shall be adjusted in a like manner. (5) Statement of total consolidated assets. When a member bank merges or consolidates with another bank and the surviving bank remains a Reserve Bank stockholder, the surviving stockholder must report whether its total consolidated assets exceed $11,229,000,000 in the application described in paragraph (d)(1) of this section. * * * * * ■ 5. Amend § 209.4 by: ■ a. Revising paragraphs (a) and (b) and paragraph (c)(1) introductory text; ■ b. Redesignating paragraphs (c)(2) and (3) as paragraphs (c)(3) and (4), and adding a new paragraph (c)(2); and ■ c. Revising paragraph (d)(1) introductory text. The revisions and addition read as follows: E:\FR\FM\13JAR1.SGM 13JAR1 jspears on DSK121TN23PROD with RULES1 Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / Rules and Regulations § 209.4 Amounts and payments for subscriptions and cancellations; timing and rate of dividends. FARM CREDIT SYSTEM INSURANCE CORPORATION (a) Amount of subscription. The total subscription of a member bank (other than a mutual savings bank) shall equal six percent of its capital and surplus as shown on its most recent Call Report. After a member bank files a Call Report, the appropriate Reserve Bank will adjust the member bank’s Reserve Bank capital stock subscription to equal six percent of the member bank’s capital and surplus. (b) Mutual savings banks. The total subscription of a member bank that is a mutual savings bank shall equal sixtenths of 1 percent of its total deposit liabilities as shown on its most recent Call Report. After a member bank that is a mutual savings bank files a Call Report, the appropriate Reserve Bank will adjust the member bank’s Reserve Bank capital stock subscription to equal six-tenths of 1 percent of the member bank’s total deposit liabilities. If a mutual savings bank has a deposit with the appropriate Reserve Bank in lieu of Reserve Bank capital stock, its deposit obligation shall be adjusted in a like manner. (c) * * * (1) When a Reserve Bank issues capital stock to a member bank (or accepts a deposit in lieu thereof), the member bank shall pay the Reserve Bank— * * * * * (2) A Reserve Bank shall obtain settlement for the payment described in paragraph (c)(1) of this section by debit to an account on the Reserve Bank’s books or other form of settlement to which the Reserve Bank agrees. * * * * * (d) * * * (1) When a Reserve Bank cancels Reserve Bank capital stock of a member bank, or (in the case of involuntary termination of membership) upon the effective date of cancellation specified in § 209.3(c)(3), the Reserve Bank shall— * * * * * 12 CFR Part 1411 By order of the Board of Governors of the Federal Reserve System. Ann Misback, Secretary of the Board. [FR Doc. 2022–00503 Filed 1–12–22; 8:45 am] BILLING CODE 6210–01–P VerDate Sep<11>2014 16:51 Jan 12, 2022 Jkt 256001 RIN 3055–AA18 Rules of Practice and Procedure; Adjusting Civil Money Penalties for Inflation Farm Credit System Insurance Corporation. ACTION: Final rule. AGENCY: This rule implements inflation adjustments to civil money penalties (CMPs) that the Farm Credit System Insurance Corporation (FCSIC) may impose under the Farm Credit Act of 1971, as amended. These adjustments are required by 2015 amendments to the Federal Civil Penalties Inflation Adjustment Act of 1990. DATES: Effective date: This regulation is effective on January 13, 2022. Applicability date: The adjusted amounts of civil money penalties in this rule are applicable to penalties assessed on or after January 15, 2022, for conduct occurring on or after November 2, 2015. FOR FURTHER INFORMATION CONTACT: Lynn M. Powalski, General Counsel, Farm Credit System Insurance Corporation, 1501 Farm Credit Drive, McLean, Virginia 22102, (703) 883– 4380, TTY (703) 883–4390. SUPPLEMENTARY INFORMATION: SUMMARY: I. Background The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act) amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (the Inflation Adjustment Act) 1 to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect. The Inflation Adjustment Act provides for the regular evaluation of CMPs and requires FCSIC, and every other Federal agency with authority to impose CMPs, to ensure that CMPs continue to maintain their deterrent values.2 1 Public Law 101–410, 104 Stat. 890 (Oct. 5, 1990), as amended by Public Law 104–134, title III, § 31001(s)(1), 110 Stat. 1321–373 (Apr. 26, 1996); Public Law 105–362, title XIII, § 1301(a), 112 Stat. 3293 (Nov. 10, 1998); Public Law 114–74, title VII, § 701(b), 129 Stat. 599 (Nov. 2, 2015), codified at 28 U.S.C. 2461 note. 2 Under the amended Inflation Adjustment Act, a CMP is defined as any penalty, fine, or other sanction that: (1) Either is for a specific monetary amount as provided by Federal law or has a maximum amount provided for by Federal law; (2) is assessed or enforced by an agency pursuant to Federal law; and (3) is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts. All three requirements must be met for a fine to be considered a CMP. PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 2031 FCSIC must enact regulations that annually adjust its CMPs pursuant to the inflation adjustment formula of the amended Inflation Adjustment Act and rounded using a method prescribed by the Inflation Adjustment Act. The new amounts are applicable to penalties assessed on or after January 15, 2022, for conduct occurring on or after November 2, 2015. Agencies do not have discretion in choosing whether to adjust a CMP, by how much to adjust a CMP, or the methods used to determine the adjustment. II. CMPs Imposed Pursuant to Section 5.65 of the Farm Credit Act First, section 5.65(c) of the Farm Credit Act, as amended (Act), provides that any insured Farm Credit System bank that willfully fails or refuses to file any certified statement or pay any required premium shall be subject to a penalty of not more than $100 for each day that such violations continue, which penalty FCSIC may recover for its use.3 Second, section 5.65(d) of the Act provides that, except with the prior written consent of the Farm Credit Administration, it shall be unlawful for any person convicted of any criminal offense involving dishonesty or a breach of trust to serve as a director, officer, or employee of any System institution.4 For each willful violation of section 5.65(d), the institution involved shall be subject to a penalty of not more than $100 for each day during which the violation continues, which FCSIC may recover for its use. FCSIC’s current § 1411.1 provides that FCSIC can impose a maximum penalty of $217 per day for a violation under section 5.65(c) and (d) of the Act. III. Required Adjustments The 2015 Act requires agencies to make annual adjustments for inflation. Annual inflation adjustments are based on the percent change between the October Consumer Price Index for all Urban Consumers (CPI–U) preceding the date of the adjustment, and the prior year’s October CPI–U. Based on the CPI– U for October 2021, not seasonally adjusted, the cost-of-living adjustment multiplier for 2022 is 1.06222.5 Multiplying 1.06222 times the current penalty amount of $217, after rounding to the nearest dollar as required by the 3 12 U.S.C. 2277a–14(c). U.S.C. 2277a–14(d). 5 See Office of Mgmt. & Budget, Exec. Office of the President, OMB Memorandum No. M–22–07, Implementation of Penalty Inflation Adjustments for 2020, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (December 15, 2021). 4 12 E:\FR\FM\13JAR1.SGM 13JAR1

Agencies

[Federal Register Volume 87, Number 9 (Thursday, January 13, 2022)]
[Rules and Regulations]
[Pages 2027-2031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00503]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / 
Rules and Regulations

[[Page 2027]]



FEDERAL RESERVE SYSTEM

12 CFR Part 209

[Regulation I; Docket No. R-1745]
RIN 7100-AG13


Federal Reserve Bank Capital Stock

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors (Board) is publishing a final rule that 
amends Regulation I to automate non-merger-related adjustments to 
member banks' subscriptions to Federal Reserve Bank (Reserve Bank) 
capital stock. The final rule also makes certain technical amendments 
to Regulation I and conforming revisions to the FR 2056 reporting form.

DATES: Effective February 14, 2022.

FOR FURTHER INFORMATION CONTACT: Evan Winerman, Senior Counsel (202-
872-7578), Legal Division; or Kimberly Zaikov, Manager (202-452-2256), 
Reserve Bank Operations and Payments Systems Division. You may also 
contact us by email via https://www.federalreserve.gov/apps/ContactUs/feedback.aspx, choose Staff Group: Regulations.

SUPPLEMENTARY INFORMATION:

I. Background

    Regulation I governs the issuance and cancellation of capital stock 
by the Reserve Banks. Under section 5 of the Federal Reserve Act and 
Regulation I, a member bank (other than a mutual savings bank) must 
subscribe to capital stock of the Reserve Bank of its district in an 
amount equal to 6 percent of the member bank's capital and surplus.\1\ 
Similarly, under section 9 of the Federal Reserve Act and Regulation I, 
a member bank that is a mutual savings bank must subscribe to capital 
stock of the Reserve Bank of its district in an amount equal to six-
tenths of 1 percent of its total deposit liabilities.\2\ 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 and 12 CFR 209.4(a).
    \2\ 12 U.S.C. 333 and 12 CFR 209.4(b). The Federal Reserve Act 
and Regulation I allow a mutual savings bank to maintain a temporary 
``deposit'' with a Reserve Bank in lieu of obtaining capital stock 
if the mutual savings bank is not permitted to purchase Reserve Bank 
stock under state law. However, if the relevant state law is not 
amended at the first session of the legislature after the bank is 
admitted to authorize the purchase of Reserve Bank stock, or if the 
bank fails to purchase the stock within six months of such 
amendment, the Reserve Bank will terminate the membership of the 
mutual savings bank. 12 U.S.C. 333; 12 CFR 209.2(a) and 208.3(a)(1).
    \3\ 12 U.S.C. 287 and 12 CFR 209.4(c)(2).
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    Under section 7 of the Federal Reserve Act and Regulation I, 
smaller member banks (currently those with $11.229 billion or less in 
total consolidated assets) receive a 6 percent annual dividend on their 
Reserve Bank stock.\4\ Other member banks receive a dividend at the 
lesser of (i) 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 (ii) an annual rate of 6 percent.\5\
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    \4\ 12 U.S.C. 289 and 12 CFR 209.4(e). Regulation I generally 
defines total consolidated assets by reference to the total assets 
reported on a member bank's most recent December 31 Call Report. 12 
CFR 209.1(d)(3).
    \5\ Id.
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A. Non-Merger-Related Adjustments to Reserve Bank Stock Subscriptions

    Regulation I requires that a member bank apply to adjust its stock 
subscription ``promptly after filing'' its December 31 report of 
condition (Call Report).\6\ Additionally, a member bank must apply to 
adjust its stock subscription promptly after filing any other quarterly 
Call Report showing that the member bank has experienced an increase or 
decrease to its capital and surplus (or its total deposit liabilities 
for a mutual savings bank) requiring a change in excess of the lesser 
of 15 percent or 100 shares of Reserve Bank capital stock.\7\ Member 
banks use the FR 2056 reporting form to apply for adjustments to their 
stock subscriptions.\8\
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    \6\ 12 CFR 209.4(a) and (b).
    \7\ Id.
    \8\ See Federal Reserve, Reporting Forms at https://www.federalreserve.gov/reportforms/forms/FR_205620200115_f.pdf.
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B. Merger-Related Adjustments to Reserve Bank Stock Subscriptions

    Regulation I provides that, when two member banks merge or 
consolidate, the appropriate Reserve Banks shall cancel shares of the 
nonsurviving bank and credit shares to the surviving bank.\9\ In order 
to effectuate this requirement, the Reserve Banks direct surviving 
member banks to apply to adjust their stock subscriptions before they 
merge or consolidate with other member banks. Similarly, the Reserve 
Banks direct nonsurviving member banks to apply to cancel their stock 
subscriptions before they merge or consolidate with other member 
banks.\10\
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    \9\ 12 CFR 209.3(d)(1) and (2). If the surviving or nonsurviving 
bank is a mutual savings bank that is not permitted to purchase 
Reserve Bank stock under state law, Regulation I instead directs the 
Reserve Bank to transfer or increase the member bank's deposit 
obligation. Id.
    \10\ Nonsurviving member banks use the FR 2086a reporting form 
to apply to cancel their stock subscriptions. https://www.federalreserve.gov/reportforms/forms/FR_2086a20200115_f.pdf.
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    Regulation I does not expressly require that a surviving member 
bank apply to adjust its stock subscription before it merges or 
consolidates with a nonmember bank. In practice, however, the Reserve 
Banks request that surviving member banks apply to adjust their stock 
subscriptions before they merge or consolidate with nonmember 
banks.\11\ This practice allows the Reserve Banks to make timely 
changes to the stock subscriptions of surviving member banks that merge 
or consolidate with nonmember banks.
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    \11\ The surviving bank applies to adjust its stock subscription 
based on its anticipated post-merger capital and surplus or, in the 
case of a member bank that is a mutual savings bank, its anticipated 
post-merger total deposit liabilities.
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    When a surviving member bank applies to adjust its stock 
subscription, it must state whether its total consolidated assets 
exceed $11.229 billion.\12\ This requirement ensures that a Reserve 
Bank receives timely and accurate notice of whether a merger has caused 
a surviving member bank's total consolidated assets to exceed $11.229 
billion, which (as noted above)

[[Page 2028]]

determines the dividend rate to which the member bank is entitled.
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    \12\ 12 CFR 209.1(d)(3) and 209.3(d)(3).
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II. Description of the Final Rule

    On April 13, 2021, the Board published a proposal to automate non-
merger-related adjustments to member banks' subscriptions to Reserve 
Bank capital stock.\13\ The Board also proposed to clarify that a 
surviving member bank must apply to adjust its stock subscription 
before merging or consolidating with another bank. Finally, the Board 
proposed two technical amendments to Regulation I.
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    \13\ 86 FR 19152 (April 13, 2021).
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    The Board received no responsive comments on the proposal. The 
Board is finalizing the proposed amendments with certain technical 
clarifications.

A. Automation of Non-Merger-Related Stock Adjustments

    As noted above, Regulation I currently requires that a member bank 
apply to adjust its stock subscription at least annually and sometimes 
quarterly. A member bank determines its required stock subscription 
based on its capital and surplus (or total deposit liabilities for a 
mutual savings bank) as reported in the member bank's most recent Call 
Report.
    The Reserve Banks have developed software that automatically pulls 
the information needed to calculate member banks' required stock 
subscriptions from Call Reports. The Board is therefore amending 
section 209.4 to automate the stock adjustment process. Specifically, 
the Reserve Banks will adjust a member bank's stock subscription each 
time the member bank files a Call Report.\14\ This automated process 
will eliminate the need for member banks to file applications to adjust 
their stock subscriptions (except in the context of mergers, as 
described infra).
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    \14\ Similarly, the Board is automating the process for 
adjusting the deposit obligation of a mutual savings bank that has a 
deposit with the appropriate Reserve Bank in lieu of Reserve Bank 
capital stock.
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    The Board is also clarifying that, when a Reserve Bank issues stock 
to a member bank, the Reserve Bank will obtain payment for that stock 
by debit to an account on the Reserve Bank's books or by other form of 
settlement to which the Reserve Bank agrees.

B. Merger-Related Stock Adjustments

    As noted above, before two member banks merge or consolidate, the 
Reserve Banks direct the surviving member bank to apply to adjust its 
stock subscription and the nonsurviving member bank to apply to cancel 
its stock subscription. Similarly, before a member bank merges or 
consolidates with a nonmember bank, the Reserve Banks request that the 
surviving member bank apply to adjust its stock subscription.
    The Board is amending section 209.3 to codify the Reserve Banks' 
current practice of requesting pre-merger stock adjustment 
applications. The amendments will expressly require a surviving member 
bank to apply to adjust its stock subscription before merging or 
consolidating with another member bank or nonmember bank.\15\ \16\ This 
will ensure that the Reserve Banks make timely changes to the stock 
subscriptions of surviving member banks that merge or consolidate with 
other banks.
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    \15\ Similarly, if a surviving bank is a mutual savings bank 
that is not permitted to purchase Reserve Bank stock under state 
law, the final rule will require the surviving bank to apply to 
adjust its deposit obligation.
    \16\ Regulation I expressly requires that a nonsurviving member 
bank apply to cancel its stock subscription when it ``is merged or 
consolidated into a nonmember bank.'' 12 CFR 209.3(a). The final 
rule will expressly require that a nonsurviving member bank apply to 
cancel its stock subscription (or, in the case of a mutual savings 
bank that is not permitted to purchase Reserve Bank stock, transfer 
its deposit obligation) before merging or consolidating with another 
member bank. This amendment is consistent with the existing 
requirement in Regulation I that a member bank apply to cancel its 
stock subscription when it ``desires to withdraw from membership'' 
or ``voluntarily . . . ceases business.'' 12 CFR 209.3(a).
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    Relatedly, the Board is making conforming amendments to two 
provisions of Regulation I (current 12 CFR 209.1(d)(3) and 209.3(d)(3)) 
to clarify that, consistent with the existing text of Regulation I, a 
surviving member bank must state in its stock adjustment application 
whether its total consolidated assets exceed $11.229 billion.

C. Technical Amendments

    The Board proposed two technical amendments and is finalizing these 
amendments with a non-substantive clarification. The Board is also 
adopting a third, related technical amendment.
    Section 209.1(c) recognizes that a bank located in a United States 
dependency or possession may apply for membership, and a footnote in 
section 209.1(c) explains that such a bank ``should communicate with 
the Federal Reserve Bank with which it desires to do business.'' The 
Board is amending this footnote to clarify that a bank located in the 
Virgin Islands or Puerto Rico should communicate with the Federal 
Reserve Bank of New York, while a bank located in Guam, American Samoa, 
or the Northern Mariana Islands should communicate with the Federal 
Reserve Bank of San Francisco. The amendment will make this footnote in 
Regulation I consistent with a provision in the Board's Regulation J 
that clarifies the Federal Reserve Districts in which banks from United 
States dependencies and possessions are deemed to be located.\17\
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    \17\ See 12 CFR 210.2(i)(1)(A).
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    Section 209.3(a) requires that any bank that desires to withdraw 
from membership in the Federal Reserve System promptly file with its 
Reserve Bank an application for cancellation of all its Reserve Bank 
stock. The Board proposed to amend section 209.3(a) to clarify that, 
consistent with the Board's current understanding, this requirement 
applies to any national bank that wants to convert into a ``State 
nonmember bank.'' The final rule clarifies that this requirement 
applies to a national bank that converts into any nonmember bank--not 
only a ``State'' nonmember bank.\18\
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    \18\ For example, this requirement applies to a national bank 
that converts into a federal savings bank.
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    Relatedly, section 209.3(c) specifies that when a member bank 
merges into, consolidates with, or converts into a ``State nonmember 
bank,'' the member bank's stock shall be cancelled on the effective 
date of the merger, consolidation, or conversion. The final rule 
clarifies that a member bank's stock shall be cancelled on the 
effective date of a member bank's merger into, consolidation with, or 
conversion into any nonmember bank--not only a State nonmember bank.

IV. Regulatory Analysis

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
generally requires that an agency assess the impact a rule is expected 
to have on small entities.\19\ The RFA requires an agency either to 
provide a regulatory flexibility analysis or to certify that the rule 
will not have a significant economic impact on a substantial number of 
small entities.
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    \19\ Under size standards established by the Small Business 
Administration, banks and other depository institutions are 
considered ``small'' if they have less than $600 million in assets. 
13 CFR 121.201.
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    The Board did not receive any comments on its initial regulatory 
flexibility analysis. The Board certifies that the final rule will not 
have a significant economic impact on a substantial number of small 
entities. As described in the information above, the final rule will 
reduce reporting requirements for member banks by automating non-
merger-related stock adjustments. Additionally, the final rule will 
require that a surviving stockholder apply to adjust its stock 
subscription

[[Page 2029]]

before merging or consolidating with another bank.\20\ There are 
approximately 50 mergers each year in which the surviving stockholder 
is a member bank, and it will take a surviving stockholder 
approximately 30 minutes to complete the paperwork associated with an 
adjustment to its stock subscription. Accordingly, the final rule will 
not have a significant economic impact on a substantial number of small 
entities.
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    \20\ Consistent with the current text of Regulation I, a 
surviving member bank would need to report in its stock adjustment 
application whether its total consolidated assets exceed $11.229 
billion. See n. 12, supra. Additionally, consistent with the current 
text of Regulation I, a nonsurviving member bank would need to apply 
to cancel its stock before merging or consolidating with another 
bank. See n. 15, supra.
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B. Paperwork Reduction Act

    Certain provisions of the final rule contain ``collections of 
information'' within the meaning of the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3501-3521). 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 Board reviewed the final rule under the 
authority delegated to the Board by OMB. The Board did not receive any 
specific comments on the PRA.
    The final rule contains revisions to sections 209.3 and 209.4 that 
automate non-merger-related adjustments to member banks' subscriptions 
to Reserve Bank capital stock. Automating the adjustment process would 
reduce the frequency of reporting. To implement this requirement, the 
Board has extended for three years, with revision, the Federal Reserve 
Bank Stock Applications (FR 2030, FR 2030a, FR 2056, FR 2086, FR2086a, 
2087; OMB No. 7100-0042). The revisions would affect only the FR 2056.

Adopted Revision, With Extension, of the Following Information 
Collection

    Report title: Federal Reserve Bank Stock Applications.
    Agency form numbers: FR 2030; FR 2030a; FR 2056; FR 2086; FR 2086a; 
FR 2087.
    OMB control number: 7100-0042.
    Frequency: On occasion.
    Respondents: New national banks, non-member state banks converting 
into national banks, member banks, and member banks converting into or 
merging into member or nonmember banks.
    Estimated number of respondents: FR 2030, 4; FR 2030a, 7; FR 2056, 
50; FR 2086, 10; FR 2086a, 86; FR 2087, 1.
    Estimated average hours per response: 0.5.
    Estimated annual burden hours: FR 2030, 2; FR 2030a, 3.5; FR 2056, 
25; FR 2086, 5; FR 2086a, 43; FR 2087, 0.5.
    General description of report: Any national bank wanting to 
purchase stock in the Federal Reserve System, any member bank wanting 
to increase or decrease its Federal Reserve Bank stock holdings, or any 
bank wanting to cancel its stock holdings must file an application with 
the appropriate Federal Reserve Bank. The application forms for the 
initial subscription of Federal Reserve Bank stock filed by organizing 
national banks and nonmember state banks converting to national banks 
(FR 2030 and 2030a, respectively) and the application forms for the 
cancellation of Federal Reserve Bank stock filed by liquidating member 
banks, member banks merging or consolidating with nonmember banks, and 
insolvent member banks (FR 2086, FR 2086a, and FR 2087, respectively) 
require one or more of the following: A resolution by the applying 
bank's board of directors authorizing the transaction, an indication of 
the capital and surplus of the bank as of the date of application, a 
certification (by official signatures) of the resolution, and/or an 
indication of the number of shares and dollar amount of the Federal 
Reserve Bank stock to be purchased or cancelled.
    The application form for an interim adjustment in a member bank's 
holdings of Federal Reserve Bank stock (FR 2056) requires an indication 
of the capital and surplus of the bank (or total deposit liabilities 
for a mutual savings bank) as of the date of application and an 
indication of the number of shares held and the number of shares to be 
acquired or canceled. A member bank must submit a completed FR 2056 
form to correct a discrepancy between the amount of Federal Reserve 
Bank stock required to be held and the amount actually held by the 
member bank. The latter is determined through information that the 
member bank reports quarterly on the Consolidated Reports of Condition 
and Income (Call Report) (FFIEC 031, FFIEC 041, and FFIEC 051; OMB No. 
7100-0036).
    Legal authorization and confidentiality: The Federal Reserve Bank 
Stock Applications are authorized pursuant to sections 9 and 11(a) of 
the FRA (12 U.S.C. 321 and 248(a)). Additionally, the FR 2030 and FR 
2030a are specifically authorized by section 2 of the FRA (12 U.S.C. 
222 and 282), the FR 2056, FR 2086, and FR 2086a are authorized by 
section 5 of the FRA (12 U.S.C. 287), and the FR 2087 is authorized by 
section 6 of the FRA (12 U.S.C. 288). The FR 2030, FR 2030a, FR 2056, 
FR 2086, FR 2086a, and FR 2087 are mandatory.
    Individual respondents may request that information submitted to 
the Board in these applications be kept confidential on a case-by-case 
basis. Such applications may contain information related the business 
plans of the respondent. Under certain circumstances, this information 
may be withheld under exemption 4 of the Freedom of Information Act 
(FOIA), which protects privileged or confidential commercial or 
financial information (5 U.S.C. 552(b)(4)). These applications may also 
contain information of a personal nature the disclosure of which would 
result in a clearly unwarranted invasion of personal privacy, which may 
be protected under exemption 6 of the FOIA (5 U.S.C. 552(b)(6)). 
Additionally, exemption 8 of the FOIA (5 U.S.C. 552(b)(8)) may apply to 
the extent the reported information is contained in or related to 
examination reports.
    Current actions: The Board has adopted amendments to Regulation I 
that automate non-merger-related adjustments to member banks' 
subscriptions to Reserve Bank capital stock.
    Regulation I currently requires that a member bank apply to adjust 
its stock subscription at least annually and sometimes quarterly. A 
member bank determines its required stock subscription based on its 
capital and surplus (or total deposit liabilities for a mutual savings 
bank) as reported in the member bank's most recent Call Report.
    The Reserve Banks have developed software that automatically pulls 
the information needed to calculate member banks' required stock 
subscriptions from Call Reports. Accordingly, the Board adopted 
amendments to section 209.4 that will automate non-merger-related stock 
adjustments. The Board also adopted amendments to section 209.3(d) that 
would require a surviving stockholder to apply to adjust its stock 
subscription before merging with another bank.

[[Page 2030]]

Consistent with these changes to Regulation I, the Board eliminated the 
requirement that member banks routinely submit FR 2056 reporting forms 
to adjust their stock subscriptions. The Board amended the FR 2056 
reporting form to clarify that the form should be filed only by a 
surviving member bank that merges or consolidates with another bank.

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 continues 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. Revise the heading to part 209 to read as shown above.

0
3. Amend Sec.  209.1 by revising paragraphs (c) and (d)(3) to read as 
follows.


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

* * * * *
    (c) Scope. This part applies to member banks of the Federal Reserve 
System, to national banks in process of organization, and to state 
banks applying for membership. National banks and locally-incorporated 
banks located in United States dependencies and possessions are 
eligible (with the consent of the Board) but not required to apply for 
membership under section 19(h) of the Federal Reserve Act, 12 U.S.C. 
466.\1\

    \1\ A bank located in the Virgin Islands or Puerto Rico should 
communicate with the Federal Reserve Bank of New York regarding 
applications for membership under the provisions of section 19(h) of 
the Federal Reserve Act. A bank located in Guam, American Samoa, or 
the Northern Mariana Islands should communicate with the Federal 
Reserve Bank of San Francisco regarding applications for membership 
under the provisions of section 19(h) of the Federal Reserve Act.

    (d) * * *
    (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:
    (i) A new member ``total consolidated assets'' means (until the 
next December 31 Call Report becomes available) the total consolidated 
assets of the new member at the time of its application for capital 
stock; and
    (ii) A surviving stockholder after a merger ``total consolidated 
assets'' means (until the next December 31 Call Report becomes 
available) the total consolidated assets reported by that stockholder 
pursuant to Sec.  209.3(d)(5).

0
4. Amend Sec.  209.3 by:
0
a. Revising the section heading;
0
b. Revising paragraphs (a) and (c) and the paragraph (d) subject 
heading;
0
c. Redesignating paragraphs (d)(1), (2), and (3) as paragraphs (d)(2), 
(3), and (5), respectively and adding new paragraph (d)(1) and 
paragraph (d)(4); and
0
d. Revising newly redesignated paragraph (d)(5).
    The revisions and additions to read as follows:


Sec.  209.3   Cancellation of Reserve Bank stock; mergers involving 
member banks.

    (a) Application for cancellation. Any bank that desires to withdraw 
from membership in the Federal Reserve System (including a national 
bank that wants to convert into a nonmember bank), voluntarily 
liquidates or ceases business, is merged or consolidated into a 
nonmember bank, or is involuntarily liquidated by a receiver or 
conservator or otherwise, shall promptly file with its Reserve Bank an 
application for cancellation of all its Reserve Bank stock (or 
withdrawal of its deposit, as the case may be) and payment therefor in 
accordance with Sec.  209.4.
* * * * *
    (c) Effective date of cancellation. Cancellation in whole of a 
bank's Reserve Bank capital stock shall be effective, in the case of:
    (1) Voluntary withdrawal from membership by a state bank, as of the 
date of such withdrawal;
    (2) Merger into, consolidation with, or (for a national bank) 
conversion into, a nonmember bank, as of the effective date of the 
merger, consolidation, or conversion; and
    (3) Involuntary termination of membership, as of the date the Board 
issues the order of termination.
    (d) Exchange of stock on merger or change in location; stock 
adjustment upon merger with a nonmember bank; reporting of total 
consolidated assets following merger--(1) Applications. (i) Before a 
merger or consolidation of member banks, the nonsurviving member bank 
shall file an application with the appropriate Reserve Bank to cancel 
its shares of Reserve Bank stock (or in the case of a mutual savings 
bank not authorized to purchase Reserve Bank stock, shall file an 
application to transfer its deposit to the account of the surviving 
bank) and the surviving member bank shall file an application with the 
appropriate Reserve Bank for issue of a corresponding number of shares 
of Reserve Bank stock (or in the case of a mutual savings bank not 
authorized to purchase Reserve Bank stock, shall file an application to 
increase its deposit obligation).
    (ii) Before a merger or consolidation of a member bank and a 
nonmember bank, a surviving member bank shall file an application with 
the appropriate Reserve Bank to adjust its Reserve Bank capital stock 
subscription to equal six percent of the member bank's anticipated 
post-merger capital and surplus, or, in the case of member bank that is 
a mutual savings bank, six-tenths of 1 percent of the member bank's 
anticipated post-merger total deposit liabilities. A mutual savings 
bank not authorized to purchase Reserve Bank stock shall file an 
application to adjust its deposit obligation in a like manner.
* * * * *
    (4) Merger with a nonmember bank. Upon a merger or consolidation of 
a member bank and a nonmember bank, the Reserve Bank will adjust the 
surviving member bank's stock subscription to equal six percent of the 
member bank's capital and surplus, or, in the case of a member bank 
that is a mutual savings bank, six-tenths of 1 percent of the member 
bank's total deposit liabilities. If a mutual savings bank has a 
deposit with the appropriate Reserve Bank in lieu of Reserve Bank 
capital stock, its deposit obligation shall be adjusted in a like 
manner.
    (5) Statement of total consolidated assets. When a member bank 
merges or consolidates with another bank and the surviving bank remains 
a Reserve Bank stockholder, the surviving stockholder must report 
whether its total consolidated assets exceed $11,229,000,000 in the 
application described in paragraph (d)(1) of this section.
* * * * *

0
5. Amend Sec.  209.4 by:
0
a. Revising paragraphs (a) and (b) and paragraph (c)(1) introductory 
text;
0
b. Redesignating paragraphs (c)(2) and (3) as paragraphs (c)(3) and 
(4), and adding a new paragraph (c)(2); and
0
c. Revising paragraph (d)(1) introductory text.
    The revisions and addition read as follows:

[[Page 2031]]

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

    (a) Amount of subscription. The total subscription of a member bank 
(other than a mutual savings bank) shall equal six percent of its 
capital and surplus as shown on its most recent Call Report. After a 
member bank files a Call Report, the appropriate Reserve Bank will 
adjust the member bank's Reserve Bank capital stock subscription to 
equal six percent of the member bank's capital and surplus.
    (b) Mutual savings banks. The total subscription of a member bank 
that is a mutual savings bank shall equal six-tenths of 1 percent of 
its total deposit liabilities as shown on its most recent Call Report. 
After a member bank that is a mutual savings bank files a Call Report, 
the appropriate Reserve Bank will adjust the member bank's Reserve Bank 
capital stock subscription to equal six-tenths of 1 percent of the 
member bank's total deposit liabilities. If a mutual savings bank has a 
deposit with the appropriate Reserve Bank in lieu of Reserve Bank 
capital stock, its deposit obligation shall be adjusted in a like 
manner.
    (c) * * *
    (1) When a Reserve Bank issues capital stock to a member bank (or 
accepts a deposit in lieu thereof), the member bank shall pay the 
Reserve Bank--
* * * * *
    (2) A Reserve Bank shall obtain settlement for the payment 
described in paragraph (c)(1) of this section by debit to an account on 
the Reserve Bank's books or other form of settlement to which the 
Reserve Bank agrees.
* * * * *
    (d) * * *
    (1) When a Reserve Bank cancels Reserve Bank capital stock of a 
member bank, 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--
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2022-00503 Filed 1-12-22; 8:45 am]
BILLING CODE 6210-01-P