Asset-size threshold determining dividend rate to Fed member banks adjusted up for 2021

The consolidated asset threshold in a rule that determines the dividend rate paid to Federal Reserve member banks will be $10.785 billion through 2021 (up $70 billion from the 2020 threshold) under a rule change published Thursday in the Federal Register.

All Federal Reserve member banks must, under the Federal Reserve Act (and Regulation I), subscribe to capital stock of their Federal Reserve District Banks. Member banks with assets at or below the consolidated asset threshold receive a 6% dividend on paid-in capital stock; those above the threshold receive a dividend equal to the lesser of 6% 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,” according to the final rule, which takes effect Jan. 11.

The act sets the threshold at $10 billion but requires an adjustment annually to reflect the change in the Gross Domestic Product Price Index published by the Bureau of Economic Analysis.

Federal Reserve Bank Capital Stock