Wells Fargo 2011 Annual Report Download - page 134

Note 3: Cash, Loan and Dividend Restrictions
Federal Reserve Board (FRB) regulations require that each of
our subsidiary banks maintain reserve balances on deposit with
the Federal Reserve Banks. The average required reserve balance
was $7.0 billion in 2011 and $6.0 billion in 2010.
Federal law restricts the amount and the terms of both credit
and non-credit transactions between a bank and its nonbank
affiliates. These transaction amounts may not exceed 10% of the
bank's capital and surplus, which for this purpose represents
total capital, as calculated under the risk-based capital (RBC)
guidelines, plus the balance of the allowance for credit losses in
excess of the amount included in total 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 RBC, see Note 26.
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 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
provisions, our national and state-chartered subsidiary banks
could have declared additional dividends of $0.6 billion at
December 31, 2011, 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, 2011, our nonbank
subsidiaries could have declared additional dividends of
$5.7 billion at December 31, 2011, without obtaining prior
approval.
The FRB published clarifying supervisory guidance in 2009,
SR 09-4 Applying Supervisory Guidance and Regulations on
the Payment of Dividends, Stock Redemptions, and Stock
Repurchases at Bank Holding Companies, pertaining to FRB's
criteria, assessment and approval process for reductions in
capital including the redemption of Troubled Asset Relief
Program (TARP) and the payment of dividends. The effect of this
guidance is to require the approval of the FRB for the Company
to repurchase or redeem common or perpetual preferred stock
as well as to increase the per share dividend from its current
level of $0.12 per share. In November 2010, the FRB updated the
SR 09-4 guidance to require the original 19 Supervisory Capital
Assessment Program (SCAP) banks to submit a Capital Plan
Review to the FRB no later than January 7, 2011. In
December 2011, the FRB finalized rules under 12 CFR Part 225,
Regulation Y requiring large bank holding companies (BHCs) to
submit capital plans annually and to obtain regulatory approval
before making capital distributions including share dividend
increases or share repurchases. The rule requires updates to
capital plans in the event of material changes in a BHC’s risk
profile, including as a result of any significant acquisitions. The
Company submitted its board-approved 2012 capital plan to the
FRB on January 6, 2012.
Note 4: Federal Funds Sold, Securities Purchased under Resale Agreements
and Other Short-Term Investments
The following table provides the detail of federal funds sold,
securities purchased under resale agreements, and other short-
term investments.
December 31,
(in millions)
2011
2010
Federal funds sold and securities
purchased under resale agreements
$
24,255
24,880
Interest-earning deposits
18,917
53,433
Other short-term investments
1,195
2,324
Total
$
44,367
80,637
We receive collateral from other entities under resale
agreements and securities borrowings. For additional
information, see Note 14.
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