82 FR 52173 - Federal Reserve Bank Capital Stock

FEDERAL RESERVE SYSTEM

Federal Register Volume 82, Issue 217 (November 13, 2017)

Page Range		52173-52174
FR Document		2017-24553

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 28, 2017, the total consolidated asset threshold will be $10,283,000,000 through December 31, 2018.

Federal Register, Volume 82 Issue 217 (Monday, November 13, 2017)

[Federal Register Volume 82, Number 217 (Monday, November 13, 2017)]
[Rules and Regulations]
[Pages 52173-52174]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-24553]



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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. 

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Federal Register / Vol. 82, No. 217 / Monday, November 13, 2017 / 
Rules and Regulations

[[Page 52173]]



FEDERAL RESERVE SYSTEM

12 CFR Part 209

[Regulation I; Docket No. R-1560]
RIN 7100-AE 68


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 28, 2017, the total consolidated asset threshold 
will be $10,283,000,000 through December 31, 2018.

DATES: This final rule is effective January 1, 2018.

FOR FURTHER INFORMATION CONTACT: Evan Winerman, Counsel (202/872-7578), 
Legal Division; or Kimberly Zaikov, Financial Project Leader (202/452-
2256), 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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    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 2017 Gross Domestic 
Product Price Index estimate published by the BEA in September 2017 
(113.037) is 2.83% higher than the second quarter 2015 Gross Domestic 
Product Price Index estimate published by the BEA in September 2017 
(109.921). Based on this change in the Gross Domestic Product Price 
Index, the threshold for total consolidated assets in Regulation I will 
be $10,283,000,000 as of the effective date of January 1, 2018.
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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

[[Page 52174]]

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 ``$10,122,000,000'' and add in 
their place ``$10,283,000,000'', 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 7, 2017.
Margaret M. Shanks,
Deputy Secretary of the Board.
[FR Doc. 2017-24553 Filed 11-9-17; 8:45 am]
 BILLING CODE 6210-01-P

52174 Federal Register / Vol. 82, No. 217 / Monday, November 13, 2017 / Rules and Regulations

final regulatory flexibility analysis do SBA last increased fees for SBICs in licensing and examinations), and
not apply. 1996. Current fees offset less than 40% excludes SBA’s overhead costs (e.g.,
of SBA’s administrative expenses office space, utilities, and other
Paperwork Reduction Act
related to these activities. This final rule supporting offices within SBA). In FY
In accordance with the Paperwork increases SBIC licensing and 2016, licensing and examination fees
Reduction Act of 1995,12 the Board has examination fees in annual steps reimbursed approximately 35% of
reviewed this final rule. No collections through October 2020, at which time SBA’s direct licensing and examination
of information pursuant to the SBA estimates that the annual fees will expenses, and less than a quarter of
Paperwork Reduction Act are contained recoup approximately 80% of SBA’s SBA’s licensing and examination
in the final rule. annual expenses directly related to expenses when including overhead.
these activities. Beginning in October On December 16, 2016, SBA
List of Subjects in 12 CFR Part 209
2021, this rule increases licensing and published a proposed rule (81 FR
Banks and banking, Federal Reserve examination fees annually based on 91049) to gradually increase the SBIC
System, Reporting and recordkeeping inflation. licensing and examination fees each
requirements, Securities. year through October 1, 2020, and
DATES: This rule is effective December
Authority and Issuance thereafter annually based on inflation,
13, 2017.
beginning on October 1, 2021. The
For the reasons set forth in the FOR FURTHER INFORMATION CONTACT:
proposed rule detailed the reasons for
preamble, the Board amends Regulation Theresa Jamerson, Office of Investment the widening gap between fees received
I, 12 CFR part 209, as follows: and Innovation, (202) 205–7563 or sbic@ and SBA related expenses. Key reasons
sba.gov. include inflation, changes in the SBIC
PART 209—ISSUE AND SUPPLEMENTARY INFORMATION: portfolio, increased capital at risk (SBA-
CANCELLATION OF FEDERAL guaranteed leverage and commitments),
RESERVE BANK CAPITAL STOCK I. Background Information
SBA’s efforts to improve SBIC program
(REGULATION I) The Small Business Investment Act of performance, and technology
1958, as amended (‘‘Act’’), authorizes implementation.
■ 1. The authority citation for part 209 SBA to collect fees to cover the costs As noted above, the Act authorizes
continues to read as follows: associated with the licensing and SBA to collect fees to cover the costs
Authority: 12 U.S.C. 12 U.S.C. 222, 248, examination of SBICs. 15 U.S.C. associated with the licensing and
282, 286–288, 289, 321, 323, 327–328, and 681(e)(2)(B) and 687b(b). Although SBA examination of SBICs. The Act requires
466. has regulations setting the amount of SBA to deposit the fees in the account
■ 2. In part 209, remove all references to these fees, SBA has not increased for salaries and expenses of the
‘‘$10,122,000,000’’ and add in their licensing and examination fees for Administration and authorizes SBA to
place ‘‘$10,283,000,000’’, wherever they SBICs since 1996. As part of the final use licensing fees to cover licensing
appear. rule published January 31, 1996 (61 FR costs and examination fees to cover the
By order of the Board of Governors of the 3177), SBA set licensing fees ‘‘to reflect costs of examinations and other program
Federal Reserve System, acting through the the Agency’s costs of processing oversight activities. 15 U.S.C. 681(e)(2)
Secretary of the Board under delegated applications’’ and similarly set and 687b(b). To the extent that SBA
authority, November 7, 2017. examination fees to ‘‘produce total does not cover its licensing and
Margaret M. Shanks, revenue sufficient to cover the current examination costs by charging SBICs for
Deputy Secretary of the Board. direct costs to SBA of conducting these fees, the balance is paid out of
[FR Doc. 2017–24553 Filed 11–9–17; 8:45 am]
examinations.’’ In a subsequent rule Agency funds. In other words, when
published on April 30, 1997 (62 FR SBICs do not pay fees sufficient to cover
BILLING CODE 6210–01–P
23337), SBA capped examination fees at SBA’s licensing and examination costs,
$14,000, which lowered the fee for taxpayers bear the burden of covering
SBICs with over $60 million in assets. those costs. It is an appropriate use of
SMALL BUSINESS ADMINISTRATION As part of the rationale for this change, SBA’s statutory authority in this final
13 CFR Part 107 the rule stated, ‘‘many of the largest rule to increase SBIC licensing and
SBICs are bank-owned and do not use examination fees to cover a greater
RIN 3245–AG65 federal leverage, so that fees computed percentage of licensing and examination
on the basis of total assets do not costs.
Small Business Investment appropriately reflect the level of effort The effect of the statutory language
Companies—Administrative Fees and risk associated with the authorizing SBA to use licensing fees to
AGENCY: U.S. Small Business examination process.’’ Neither rule cover licensing costs and examination
Administration. included an adjustment for inflation. fees to cover the costs of examinations
ACTION: Final rule.
Although fees set in 1996, as adjusted and ‘‘other program oversight activities’’
in 1997, were intended to fully is that SBA may use examination fees to
SUMMARY: The U.S. Small Business reimburse SBA’s costs, by fiscal year cover a broader category of expenses
Administration (SBA) is revising its (FY) 1999 (the earliest fiscal year for than those for which it may charge (i.e.,
regulations to increase the Small which SBA expenses are readily examination costs alone). Although the
Business Investment Company (SBIC) available), licensing and examination current and estimated future costs of
asabaliauskas on DSKBBXCHB2PROD with RULES

licensing and examination fees. The fees only covered approximately 85% of compensation and benefits of SBA
Small Business Investment Act of 1958, SBA’s direct costs. SBA’s direct costs personnel involved in licensing and
as amended, allows SBA to collect are the expenses related to licensing and examinations, not including any
licensing and examination fees to offset examination (e.g., personnel additional related expenses, fully
SBA’s costs associated with the compensation and benefits associated support the fee increases in this final
administration of these two activities. with licensing and examinations, rule, in the proposed rule, SBA
technology, subscription services, travel identified a number of costs it expected
12 44 U.S.C. 3506; 5 CFR part 1320. and other costs associated with to pay for with the funds made available

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Document Created: 2017-11-10 01:18:26
Document Modified: 2017-11-10 01:18:26

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Final rule.
Dates		This final rule is effective January 1, 2018.
Contact		Evan Winerman, Counsel (202/872-7578), Legal Division; or Kimberly Zaikov, Financial Project Leader (202/452- 2256), Reserve Bank Operations and Payments Systems Division. For users of Telecommunications Device for the Deaf (TDD) only, contact (202) 263-4869.
FR Citation		82 FR 52173
CFR Associated		Banks and Banking; Federal Reserve System; Reporting and Recordkeeping Requirements and Securities