[Federal Register Volume 83, Number 224 (Tuesday, November 20, 2018)]
[Rules and Regulations]
[Pages 58466-58467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25266]


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FEDERAL RESERVE SYSTEM

12 CFR Part 209

[Regulation I; Docket No. R-1635]
RIN 7100-AF27


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 
applies an inflation adjustment to the threshold for total consolidated 
assets in Regulation I. Federal Reserve Bank (Reserve Bank) 
stockholders that have total consolidated assets above the threshold 
receive a different dividend rate on their Reserve Bank stock than 
stockholders with total consolidated assets at or below the threshold. 
The Federal Reserve Act requires that the Board annually adjust the 
total consolidated asset threshold to reflect the change in the Gross 
Domestic Product Price Index, published by the Bureau of Economic 
Analysis (BEA). Based on the change in the Gross Domestic Product Price 
Index as of September 27, 2018, the total consolidated asset threshold 
will be $10,518,000,000 through December 31, 2019.

DATES: This final rule is effective January 1, 2019.

FOR FURTHER INFORMATION CONTACT: Evan Winerman, Senior Counsel (202) 
872-7578), Legal Division; or Jamie Noonan, Lead Financial Institutions 
Policy Analyst (202) 530-6296), Reserve Bank Operations and Payments 
Systems Division. For users of Telecommunications Device for the Deaf 
(TDD) only, contact (202) 263-4869.

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 \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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[[Page 58467]]

    Section 7(a)(1) of the Federal Reserve Act \4\ provides that 
Reserve Bank stockholders with $10 billion or less in total 
consolidated assets shall receive a six percent dividend on paid-in 
capital stock, while 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.'' Section 7(a)(1) requires that 
the Board adjust the threshold for total consolidated assets annually 
to reflect the change in the Gross Domestic Product Price Index, 
published by the BEA.
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    \4\ 12 U.S.C. 289(a)(1).
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    Regulation I implements section 7(a)(1) of the Federal Reserve Act 
by (1) defining the term ``total consolidated assets,'' \5\ (2) 
incorporating the statutory dividend rates for Reserve Bank 
stockholders \6\ and (3) providing that the Board shall adjust the 
threshold for total consolidated assets annually to reflect the change 
in the Gross Domestic Product Price Index.\7\ The Board has explained 
that it ``expects to make this adjustment [to the threshold for total 
consolidated assets] using the final second quarter estimate of the 
Gross Domestic Product Price Index for each year, published by the 
Bureau of Economic Analysis.'' \8\
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    \5\ 12 CFR 209.1(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 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''.
    \6\ 12 CFR 209.4(e), (c)(1)(ii), and (d)(1)(ii); 209.2(a); and 
209.3(d)(3).
    \7\ 12 CFR 209.4(f).
    \8\ 81 FR 84415, 84417 (Nov. 23, 2016).
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II. Adjustment

    The Board annually adjusts the $10 billion total consolidated asset 
threshold based on the change in the Gross Domestic Product Price Index 
between the second quarter of 2015 (the baseline year) and the second 
quarter of the current year.\9\ The second quarter 2018 Gross Domestic 
Product Price Index estimate published by the BEA in September 2018 
(110.172) is 5.18% higher than the second quarter 2015 Gross Domestic 
Product Price Index estimate published by the BEA in September 2018 
(104.745). Based on this change in the Gross Domestic Product Price 
Index, the threshold for total consolidated assets in Regulation I will 
be $10,518,000,000 as of the effective date of January 1, 2019.
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    \9\ The BEA makes ongoing revisions to its estimates of the 
Gross Domestic Product Price Index for historical calendar quarters. 
The Board calculates annual adjustments from the baseline year 
(rather than from the prior-year total consolidated asset threshold) 
to ensure that the adjusted total consolidated asset threshold 
accurately reflects the cumulative change in the BEA's most recent 
estimates of the Gross Domestic Product Price Index.
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III. Administrative Law Matters

Administrative Procedure Act

    The provisions of 5 U.S.C. 553(b) relating to notice of proposed 
rulemaking have not been followed in connection with the adoption of 
these amendments. The amendments involve expected, ministerial 
adjustments that are required by statute and Regulation I and are 
consistent with a method previously set forth by the Board.\10\ 
Accordingly, the Board finds good cause for determining, and so 
determines, that notice in accordance with 5 U.S.C. 553(b) is 
unnecessary.
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    \10\ See 12 CFR 209.4(f) and n. 8 and accompanying text, supra.
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Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\11\ As 
noted previously, the Board has determined that it is unnecessary to 
publish a general notice of proposed rulemaking for this final rule. 
Accordingly, the RFA's requirements relating to an initial and final 
regulatory flexibility analysis do not apply.
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    \11\ 5 U.S.C. 603 and 604.
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Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\12\ the 
Board has reviewed this final rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the final 
rule.
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    \12\ 44 U.S.C. 3506; 5 CFR part 1320.
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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 amends 
Regulation I, 12 CFR part 209, as follows:

PART 209--ISSUE AND CANCELLATION OF 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. In part 209, remove all references to ``$10,283,000,000'' and add in 
their place ``$10,518,000,000'', wherever they appear.

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Secretary of the Board under delegated 
authority, November 14, 2018.
Ann Misback,
Secretary of the Board.
[FR Doc. 2018-25266 Filed 11-19-18; 8:45 am]
BILLING CODE 6210-01-P