Compliance Guide to Small Entities
Regulation I: Issue and Cancellation of Federal Reserve Bank Capital Stock
12 CFR 209
This description should not be interpreted as a comprehensive statement of the regulation. Rather, it is intended to give a broad overview of the regulation's requirements. The full regulation is available on the Government Printing Office web site.
Regulation I outlines procedures that a member bank must follow to purchase or redeem Federal Reserve Bank capital stock. The regulation applies to existing and proposed member banks, both state member banks and national banks. Generally, a member bank must subscribe to the capital stock of its District Federal Reserve Bank in an amount equal to 6 percent of the member bank's paid-up capital and surplus and must pay in half of that amount. The other half is subject to call by the Board of Governors.
A general description of the regulation, by section, follows.
Section 209.1 Authority, purpose, and scope
Relates to the issuance and cancellation of Federal Reserve Bank stock, whether the bank is becoming or ceasing to be a member of the System, or upon changes in the capital and surplus of a member bank.
Section 209.2 Banks desiring to become member banks
Requires a bank that wants to become a member bank to file an application for stock with the Federal Reserve Bank in whose District it is located.
Section 209.3 Cancellation of Reserve Bank stock
Sets out the procedures and effective date for cancellation of all of a bank's Reserve Bank stock in cases of withdrawal from or involuntary termination of membership in the Federal Reserve System, merger into a nonmember bank, cessation of business, or liquidation. Also describes the mechanism for exchange of Reserve Bank stock upon merger or change in location and specifies the notice required for voluntary withdrawal from membership.
Section 209.4 Amounts and payments
Outlines the procedure for determining the total amount of a member bank's subscription for Reserve Bank stock and for adjusting that amount to reflect changes in the member bank's paid-in capital stock and surplus in excess of the carryover amounts. Also deals with payments for subscriptions and cancellations and specifies how accrued dividends are to be calculated.
Section 209.5 The share register
States that a member bank's holding of Reserve Bank capital stock is to be represented by one or more notations on the Reserve Bank's books. These books may be kept electronically.