Regulation I

What Is Regulation I?

Regulation I is a requirement upheld by the Federal Reserve on member banks. Regulation I specifies that any bank that turns into a member of the Federal Reserve must get a certain amount of stock in its Federal Reserve Bank. Regulation I states the procedures for banks to purchase and reclaim Federal Reserve Bank capital stock. The bank can't utilize this stock as collateral.

Figuring out Regulation I

Federal regional banks issue shares of its stock to Federal Reserve member banks. This isn't equivalent to possessing stock in private companies like Microsoft or General Electric, in that the stock can't be traded or sold on a market or exchange. Federal Reserve bank offices are not worked for profit, and ownership of a certain amount of stock is a condition of membership in the Federal banking system.

Federal Reserve member banks are required to buy stock that equals no less than 6% of their capital and surplus. Reserve Bank stock can't be moved to another party and pays dividends like clockwork. Banks must guarantee that the ratio of the stock held to their capital and surplus remaining parts consistent at 6% or more consistently. Banks must pay in 3% of their capital and surplus holdings. Generally, banks must buy into, or purchase, capital stock from their District Federal Reserve Bank.

Regulation I Compliance

Regulation I frames procedures for Federal Reserve member banks to remain in compliance with capital stock subscription requirements, as well as procedures for banks wishing to become Federal Reserve member banks. Regulation I tends to both the issuance and cancellation of capital stock in the Federal Reserve bank, how to deal with changes that could happen to a member bank's capital or surplus, and how banks could enter or leave the Federal Reserve banking system.

Under Regulation I, a bank that needs to turn into a member of the Federal Reserve banking system must file an application for stock with the District Federal Reserve bank in the district where it is found. The regulation likewise spreads out procedures for the cancellation of this stock assuming the bank ought to pull out from or automatically or deliberately end its membership in the Federal Reserve System. Conditions under which this could happen incorporate the bank leaving business, its merger with a nonmember bank, or its liquidation.

Extra Functions of Regulation I

Regulation I likewise frames the strategy for deciding the amount Federal Reserve stock a member bank ought to buy, including procedures for adjusting that amount as per changes to the member bank's liquid assets. Moreover, the regulation determines how dividends are to be assessed and how records of member banks' holdings of Federal Reserve Bank capital stock are to be kept in the Reserve Bank's books.

Features

• Regulation I is an expectation of the Federal Reserve that any bank that turns into a member must get a certain amount of stock in its Federal Reserve Bank.
• The stock can't be utilized as collateral by the bank.
• Regulation I states the procedures for banks to purchase and recover Federal Reserve Bank capital stock.