Fed sets asset threshold for determining Reserve Bank dividend rate under Reg I

An asset threshold of $10.715 billion for determining the dividend rate paid to banks under Regulation I was approved by the Federal Reserve Board Thursday, the agency said.

The threshold decision is an annual adjustment made by the board, as required by law, to reflect the change in the Gross Domestic Product Price Index published by the Bureau of Economic Analysis. Under the provisions of the rule, although member banks hold stock in their local Federal Reserve Banks and earn dividends, the Fed said holding the stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans, the agency noted.

“Section 7(a)(1) of the Federal Reserve Act provides that member banks with total consolidated assets above the asset-size threshold shall receive a dividend on their paid-in Federal Reserve Bank capital stock equal to the lesser of 6% or the most recent 10-year Treasury auction rate prior to the dividend payment,” the Fed said in a release. “Other member banks receive a 6% dividend.”

Federal Reserve Board announces annual adjustment to the asset-size threshold in Regulation I