Banking and Finance Law Daily Fed proposes to automate member banks’ stock adjustment process
News
Friday, April 9, 2021

Fed proposes to automate member banks’ stock adjustment process

By Charles A. Menke, J.D.

The Fed’s action aims to reduce regulatory reporting burdens by eliminating the need for member banks to file applications to adjust their stock subscriptions, as well as allowing Reserve Banks to adjust a member bank’s stock subscription each time the member bank files a Call Report.

The Federal Reserve Board announced it has issued a notice of proposed rulemaking that would automate non-merger-related adjustments to member banks’ subscriptions to Federal Reserve Bank (Reserve Bank) capital stock. The Fed also proposed certain technical amendments to Regulation I and conforming revisions to the FR 2056 reporting form. Comments are due within 60 days after publication in the Federal Register.

Regulation I, which governs the issuance and cancellation of capital stock by the Reserve Banks, currently requires that a member bank apply to adjust its stock subscription at least annually and sometimes quarterly. According to the Fed, the Reserve Banks are developing software that will automatically retrieve the information necessary to calculate member banks’ required stock subscriptions from their Call Reports. The Fed’s proposed amendments to Regulation I would automate the stock adjustment process and, except with respect to mergers, eliminate the need for member banks to file applications to adjust their stock subscriptions thereby significantly reducing annual reporting burdens. A Reserve Bank could therefore adjust a member bank’s stock subscription each time the member bank files a Call Report, the Fed said. In addition, the proposed rulemaking would clarify that, when a Reserve Bank issues stock to a member bank, the Reserve Bank would obtain payment for that stock by debit to an account on the Reserve Bank's books or by other form of settlement to which the Reserve Bank agrees.

Additional proposed amendments to Regulation I would codify the Reserve Banks’ current practice of requesting pre-merger stock adjustment applications. These amendments would expressly require a surviving member bank to apply to adjust its stock subscription before merging or consolidating with another (member or nonmember) bank. The proposed changes aim to ensure that the Reserve Banks make timely changes to the stock subscriptions of surviving member banks that merge or consolidate with other banks, the Fed said.

The Fed also proposed two technical amendments to Regulation I, as well as conforming revisions to the FR 2056 reporting form. The first technical amendment would specify which Reserve Banks are responsible for receiving membership applications from banks located in U.S. territories and dependencies. The second technical amendment 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.

MainStory: TopStory BankingFinance BankingOperations FederalReserveSystem FedTracker PrudentialRegulation

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Banking and Finance Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.