Fed Issues Regulation to Implement Dividend Cuts

The Federal Reserve today issued an interim final rule modifying Regulation I — which governs the capital stock issued by the regional Federal Reserve Banks — to conform to the dividend cuts passed by Congress in December’s highway spending bill. The bill chopped the dividend paid to banks with more than $10 billion in assets from an annual rate of 6 percent to the latest high yield on 10-year Treasurys. Dividends for banks with assets of less than $10 billion will see no change.

The changes to Reg I also include specifying when dividend payments are made and how dividend totals will be accrued. The Fed noted that its approach was intended to resolve conflicting sections of the Federal Reserve Act following the highway bill’s latest changes. The final rule also addresses payment of dividends when a Fed bank cancels stock. The rule is effective immediately, but comments will be accepted before April 29.