WASHINGTON — The Federal Reserve Board released an interim rule Thursday implementing a congressionally mandated reduction in the Fed dividend for banks with over $10 billion in assets.
In December, Congress approved legislation cutting the previous 6% Fed dividend for large institutions by tying it to the 10-year rate for Treasury bonds. The dividend cut, which does not apply to institutions with less than $10 billion in assets, was included as a funding measure in a bill dealing with transportation infrastructure improvements.
Under the interim rule, which the public can comment on until April 29, banks subject to the dividend cut will have semiannual dividends calculated as the lesser of 3% of paid-in capital or one-half of the high yield of the 10-year Treasury note.
While institutions below the $10 billion asset threshold will continue to receive a 6% dividend on an annual basis, the rule requires smaller banks to report whether its assets have exceeded the threshold when it applies for new stock upon joining the Federal Reserve System or for additional capital stock when merging with another entity.