Automated process for purchases of reserve bank capital stock proposed by Fed

An automated process for making non-merger-related adjustments to member banks’ subscriptions to Federal Reserve Bank capital stock – with the aim of eliminating the need for member banks to file applications to adjust their stock subscriptions (except in the context of mergers) – was proposed Thursday by the Federal Reserve.

The Fed said the proposal “would significantly reduce the annual reporting burden” for member banks, in particular by employing software that automatically pulls information needed to calculate the member banks’ required stock subscriptions from call reports, automating the stock adjustment process. “More specifically, the Board proposes that a Reserve Bank would adjust a member bank’s stock subscription each time the member bank files a Call Report,” the Fed said.

Now, the Fed said, Regulation I requires that a member bank apply to adjust its stock subscription at least annually and sometimes quarterly. It determines the 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 proposal would also make explicit the current practice by Reserve Banks of requiring a surviving member bank to apply to adjust its stock subscription before merging or consolidating with another bank.

Two technical amendments to Reg I are also proposed, the Fed said. The first would specify which Reserve Banks are responsible for receiving membership applications from banks located in U.S. territories and dependencies. The second would state explicitly that a national bank that wants to convert into a state nonmember bank must promptly file with its Reserve Bank an application for cancellation of all its Reserve Bank stock.

A 60-day comment period is set for the proposal.

Federal Reserve Board invites public comment on a proposal to automate non-merger-related adjustments to member banks’ subscriptions to Federal Reserve Bank capital stock

Be the first to comment

Leave a Reply

Your email address will not be published.