The Federal Reserve Board on Thursday announced the annual adjustment to the asset-size threshold in Regulation I that determines the dividend rate paid to banks that are members of the Federal Reserve System. The updated total consolidated asset threshold is $10.715 billion through December 31, 2020.
Member banks hold stock in the Federal Reserve Banks and earn dividends. However, holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans.
Section 7(a)(1) of the Federal Reserve Act provides that member banks with total consolidated assets above the asset-size threshold shall receive a dividend on their paid-in Federal Reserve Bank capital stock equal to the lesser of 6 percent or the most recent 10-year Treasury auction rate prior to the dividend payment. Other member banks receive a 6 percent dividend.
The Federal Reserve Act requires the Board to adjust the asset-size threshold annually to reflect the change in the Gross Domestic Product Price Index, published by the Bureau of Economic Analysis.
The attached notice will be published shortly in the Federal Register.