Wells Fargo 2011 Annual Report Download - page 87

29 G-SIBs that would be subject to the surcharge, but has not yet
determined the surcharge amount for us and the other banks.
The FRB also recently proposed rules required under the
Dodd-Frank Act that will impose enhanced prudential standards
on large bank holding companies (BHCs) such as Wells Fargo,
including enhanced capital, stress testing and liquidity
requirements. We are reviewing the proposed rules to determine
their potential effect on our business.
Although uncertainty exists regarding final capital rules,
including the FRB’s approach to capital requirements, we
evaluate the impact of Basel III on our capital ratios based on
our interpretation of the proposed capital requirements and we
estimate that our Tier 1 common equity ratio under the Basel III
proposal exceeded the fully phased-in minimum of 7.0% by
50 basis points at the end of 2011. This estimate is subject to
change depending on final promulgation of Basel III capital
rulemaking and interpretations thereof by regulatory
authorities.
Table 44 and Table 45, which appear at the end of this
Capital Management section, provide information regarding our
Tier 1 common equity calculation under Basel I and as estimated
under Basel III, respectively.
Capital Planning
In connection with its increased focus on the adequacy of
regulatory capital and risk management for large financial firms,
the FRB required large banks to submit a capital plan in early
2011 as part of its Comprehensive Capital Analysis and Review
(CCAR). Following submission of our capital plan on
January 7, 2011, the FRB notified us on March 18, 2011, that it
did not object to our 2011 capital plan. Since that notification,
the Company took several capital actions, including increasing
the quarterly common stock dividend to $0.12 a share,
repurchasing $2.4 billion of our common stock, and redeeming
$9.2 billion of trust preferred securities that will no longer count
as Tier 1 capital under the Dodd-Frank Act and the proposed
Basel III capital standards.
In late 2011, the FRB finalized rules to require large BHCs to
submit capital plans annually and to obtain regulatory approval
before making capital distributions. 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.
Under the FRB’s new capital plan rule, the 2012 CCAR will
include a comprehensive capital plan supported by an
assessment of expected uses and sources of capital over a given
planning horizon under a range of expected and stress scenarios,
similar to the process the FRB relied upon to conduct the 2011
CCAR. As part of the 2012 CCAR, the FRB will also generate a
supervisory stress test driven by a sharp decline in the economy
and significant decline in asset pricing using the information
provided by the Company to estimate performance. The FRB has
indicated it will publish its estimates of performance under this
scenario on a BHC-specific basis. We submitted our board-
approved 2012 capital plan to the FRB on January 6, 2012. We
expect the FRB’s response to our submission in March 2012.
Securities Repurchases
From time to time the Board authorizes the Company to
repurchase shares of our common stock. Although we announce
when the Board authorizes share repurchases, we typically do
not give any public notice before we repurchase our shares.
Future stock repurchases may be private or open-market
repurchases, including block transactions, accelerated or
delayed block transactions, forward transactions, and similar
transactions. Additionally, we may enter into plans to purchase
stock that satisfy the conditions of Rule 10b5-1 of the Securities
Exchange Act of 1934. Various factors determine the amount
and timing of our share repurchases, including our capital
requirements, the number of shares we expect to issue for
employee benefit plans and acquisitions, market conditions
(including the trading price of our stock), and regulatory and
legal considerations, including the FRB’s response to our capital
plan.
In 2008, the Board authorized the repurchase of up to
25 million additional shares of our outstanding common stock.
In first quarter 2011, the Board authorized the repurchase of an
additional 200 million shares. During 2011, we repurchased
80 million shares of our common stock in the open market and
from our employee benefit plans and an additional 6 million
shares through a private forward repurchase transaction that
settled in fourth quarter 2011. During fourth quarter 2011, we
entered into a second forward repurchase transaction that
settled in first quarter 2012 for approximately 6 million shares of
common stock. At December 31, 2011, we had utilized all
previously remaining common stock repurchase authority from
the 2008 authorization and had remaining authority from the
2011 authorization to purchase approximately 117 million
shares. For more information about share repurchases during
2011, see Part II, Item 5 of our 2011 Form 10-K and for
additional information about our forward repurchase programs
see Note 1 (Summary of Significant Accounting Policies) to
Financial Statements in this Report.
Historically, our policy has been to repurchase shares under
the “safe harbor” conditions of Rule 10b-18 of the Securities
Exchange Act of 1934 including a limitation on the daily volume
of repurchases. Rule 10b-18 imposes an additional daily volume
limitation on share repurchases during a pending merger or
acquisition in which shares of our stock will constitute some or
all of the consideration. Our management may determine that
during a pending stock merger or acquisition when the safe
harbor would otherwise be available, it is in our best interest to
repurchase shares in excess of this additional daily volume
limitation. In such cases, we intend to repurchase shares in
compliance with the other conditions of the safe harbor,
including the standing daily volume limitation that applies
whether or not there is a pending stock merger or acquisition.
In connection with our participation in the Troubled Asset
Relief Program (TARP) Capital Purchase Program (CPP), we
issued to the U.S. Treasury Department warrants to purchase
110,261,688 shares of our common stock with an exercise price
of $34.01 per share expiring on October 28, 2018. The Board
authorized the repurchase by the Company of up to $1 billion of
the warrants. On May 26, 2010, in an auction by the U.S.
Treasury, we purchased 70,165,963 of the warrants at a price of
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