Wells Fargo 2006 Annual Report Download - page 80

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78
Note 4: Federal Funds Sold, Securities Purchased Under Resale Agreements
and Other Short-Term Investments
The table to the right provides the detail of federal funds
sold, securities purchased under resale agreements and other
short-term investments.
(in millions) December 31,
2006 2005
Federal funds sold and securities
purchased under resale agreements $5,024 $3,789
Interest-earning deposits 413 847
Other short-term investments 641 670
Total $6,078 $5,306
Federal Reserve Board regulations require that each of our
subsidiary banks maintain reserve balances on deposits with
the Federal Reserve Banks. The average required reserve
balance was $1.7 billion in 2006 and $1.4 billion in 2005.
Federal law restricts the amount and the terms of both
credit and non-credit transactions between a bank and its
nonbank affiliates. They may not exceed 10% of the bank’s
capital and surplus (which for this purpose represents Tier 1
and Tier 2 capital, as calculated under the risk-based capital
guidelines, plus the balance of the allowance for credit losses
excluded from Tier 2 capital) with any single nonbank affiliate
and 20% of the bank’s capital and surplus with all its nonbank
affiliates. Transactions that are extensions of credit may require
collateral to be held to provide added security to the bank.
(For further discussion of risk-based capital, see Note 25.)
Dividends paid by our subsidiary banks are subject to
various federal and state regulatory limitations. Dividends
that may be paid by a national bank without the express
Note 3: Cash, Loan and Dividend Restrictions
approval of the Office of the Comptroller of the Currency
(OCC) are limited to that bank’s retained net profits for the
preceding two calendar years plus retained net profits up to
the date of any dividend declaration in the current calendar
year. Retained net profits, as defined by the OCC, consist
of net income less dividends declared during the period. We
also have state-chartered subsidiary banks that are subject
to state regulations that limit dividends. Under those provi-
sions, our national and state-chartered subsidiary banks
could have declared additional dividends of $4,762 million
at December 31, 2006, without obtaining prior regulatory
approval. Our nonbank subsidiaries are also limited by
certain federal and state statutory provisions and regulations
covering the amount of dividends that may be paid in any
given year. Based on retained earnings at December 31, 2006,
our nonbank subsidiaries could have declared additional
dividends of $3,201 million at December 31, 2006, without
obtaining prior approval.