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Fixing America’s Surface Transportation Act (FAST Act) Frequently Asked Questions

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The Fixing America’s Surface Transportation Act (FAST Act), which was enacted on December 4, 2015, amended Section 7 of the Federal Reserve Act related to Reserve Bank surplus and the payment of dividends to member banks. The FAST Act changes the dividend rate for member banks with more than $10 billion (adjusted annually for inflation) of total consolidated assets, effective January 1, 2016, to the lesser of six percent or the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of the dividend. Please see the Board of Governors February 18, 2016 press release for further information at Board of Governors February 18, 2016 press release (Off-site).

In accordance with the required FAST Act changes, the Federal Reserve has developed the following FAQs:

  1. What are total consolidated assets?

    The amount reported on call reports as total assets for each stockholding member bank. (Note: this amount appears on Line 12 of call report Schedule RC)

  2. How often should total consolidated assets be reviewed?

    Total consolidated assets as of the member bank's most recent December 31 call report is used to determine if an institution exceeds the $10 billion threshold. This evaluation is performed annually.

    The only exceptions to this approach are that, when a bank joins the Federal Reserve System or when a member bank merges with another entity and the surviving bank continues to be a Reserve Bank stockholder, the new member bank or the surviving member bank must report whether its total consolidated assets exceed $10 billion in its application for capital stock.

  3. Will the frequency of dividend payments change?

    Dividends will continue to be paid semi-annually (June & December.)

  4. How will the June and December dividend payment rates be calculated?

    Member banks with more than $10 billion in total consolidated assets shall receive each semi-annual dividend on paid-in capital stock at a rate equal to the lesser of three percent (i.e., one-half of an annualized rate of six percent) or one-half of the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of such dividend.

    Member banks with $10 billion or less in total consolidated assets will continue to receive each semi-annual dividend payment at a rate equal to three percent.

  5. How will the Federal Reserve Banks determine the "high yield of the 10-year Treasury note"?

    The auction results of the "high yield of the 10-year Treasury note" are published by the Department of the Treasury. The Treasury auction results (Off-site) are available to the public.

  6. How will accrued dividends be paid for stock purchases between dividend payment dates?

    When a member bank with more than $10 billion in total consolidated assets subscribes to additional Reserve Bank capital stock, the member bank will pay for accrued dividends at an annual rate equal to the lesser of six percent or the high yield of the 10-year Treasury note auctioned at the last auction held prior to the previous dividend payment date (that is, the rate used for the previous dividend payment to member banks with more than $10 billion in total consolidated assets), prorated to cover the period between the last dividend payment date and the date of subscription.

    When a member bank with $10 billion or less in total consolidated assets subscribes to additional Reserve Bank capital stock, the member bank will pay for accrued dividends at an annual rate of six percent, prorated to cover the period between the last dividend payment date and the date of subscription.

  7. How will accrued dividend payments be paid for stock reductions between dividend payment dates?

    When a member bank with more than $10 billion in total consolidated assets reduces its Reserve Bank capital stock, the member bank will be paid for accrued dividends at an annual rate of the lesser of six percent or the high yield of the 10-year Treasury note auctioned at the last auction held prior to the stock reduction processing date, prorated to cover the period between the last dividend payment date and the stock reduction processing date.

    When a member bank with $10 billion or less in total consolidated reduces its Reserve Bank capital stock, the member bank will be paid for accrued dividends at an annual rate of six percent, prorated to cover the period between the last dividend payment date and the stock reduction processing date.

  8. Will a Reserve Bank adjust a member bank's semi-annual dividend payment if the member bank pays for accrued dividends on a stock subscription at a rate that is different from the annualized rate that the stockholder ultimately receives at the next scheduled dividend payment date?

    Yes. This adjustment would equal the difference between the accrued dividends the member bank paid for the additional shares and the portion of the next dividend payment attributable to that additional subscription, prorated to cover the period from the last dividend payment date to the subscription date. If a member bank paid for accrued dividends at a higher rate than the annualized rate the member receives at the next dividend payment, the Reserve Bank will increase the member bank's dividend payment. If a member bank paid for accrued dividends at a lower rate than the annualized rate the member receives at the next dividend payment, the Reserve Bank will reduce the member bank's dividend payment.

  9. Would an event subsequent to the previously paid semi-annual dividend payment change the next dividend payment? (i.e., if a member bank merges Q3, would it impact the June dividend payment)

    No, each semi-annual dividend payment is final and will not be adjusted for subsequent events.

  10. The current form FR2056 used for requesting new capital stock after a merger does not have any section to identify whether our total consolidated assets exceed $10 billion. Is there another form we should be completing?

    New application forms (FR2056 and others) adding a check box to identify if a member bank exceeds the total consolidated assets threshold of $10 billion are currently in draft and available for review on the Board's public website (Off-site), but should not be submitted until the comment period ends and the forms are finalized. In the interim, member banks should continue to use the current forms (Off-site). A surviving member bank that has merged with another entity since filing its December 31, 2015 call report can note on its FR2056 application if it exceeds the threshold; Reserve Bank will contact member bank as needed to confirm its total consolidated asset position.

  11. What payments will the Reserve Banks make to a member bank that liquidates or voluntarily withdraws from membership?

    If a member bank with more than $10 billion in assets liquidates or voluntarily withdraws from membership, the Reserve Banks will pay the par value of the capital stock plus accrued dividends at an annual rate of the lesser of six percent or the high yield of the 10-year Treasury note auctioned at the last auction held prior to the stock reduction processing date, prorated to cover the period between the last dividend payment date and the effective date of withdrawal or liquidation.

    If a member bank with $10 billion or less in assets liquidates or voluntarily withdraws from membership, the Reserve Banks will pay the par value of the capital stock plus accrued dividends at an annual rate of six percent, prorated to cover the period between the last dividend payment date and the effective date of withdrawal or liquidation.

  12. Can you provide the formula for stock transactions (capital paid-in + dividends)?

    Capital paid-in will be charged/paid based on the number of shares adjusted * $50; accrued dividend will be processed as follows:

    Share Increase-Dividends = Capital paid-in (Deposit Liabilities for Mutual Savings Banks) increase * (Annual rate of the lesser of six percent or the high yield of the 10-year Treasury note auctioned at the last auction held prior to the previous dividend payment date) / 360 days * Number of days between the last dividend payment date and the date of subscription.

    Share Decrease/Surrender-Dividends = Capital paid-in (Deposit Liabilities for Mutual Savings Banks) decrease * (Annual rate of the lesser of six percent or the high yield of the 10-year Treasury note auctioned at the last auction held prior to the transaction date) / 360 days * Number of days shares held since the last dividend payment date.

  13. Will the additional transactions for large member banks currently required due to FRS system limitations (which posts all transaction at a 6% annual dividend rate) be a permanent process when transactions are functioned?

    No, the Federal Reserve is in process of enhancing its accounting application to meet the additional requirements defined by the FAST Act. These enhancements are currently expected to be completed in 2017; as such, the additional transactions are expected to continue throughout 2016.

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