Wells Fargo 2015 Annual Report Download - page 154

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 total daily average required
reserve balance for all our subsidiary banks was $10.6 billion in
2015 and $12.9 billion in 2014.
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 (RBC)
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 RBC, see Note 26 (Regulatory and Agency
Capital Requirements) in this Report.
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 a state-chartered subsidiary bank that is
subject to state regulations that limit dividends. Under these
provisions and regulatory limitations, our national and state-
chartered subsidiary banks could have declared additional
dividends of $17.8 billion at December 31, 2015, without
obtaining prior regulatory approval. We have elected to retain
capital at our national and state-chartered subsidiary banks to
meet internal capital policy minimums and regulatory
requirements associated with the implementation of Basel III.
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, 2015, our nonbank
subsidiaries could have declared additional dividends of
$9.5 billion at December 31, 2015, without obtaining prior
approval.
The FRB's Capital Plan Rule (codified at 12 CFR 225.8 of
Regulation Y) establishes capital planning and prior notice and
approval requirements for capital distributions including
dividends by certain bank holding companies. The FRB has also
published guidance regarding its supervisory expectations for
capital planning, including capital policies regarding the process
relating to common stock dividend and repurchase decisions in
SR Letter 15-18. The effect of this guidance is to require the
approval of the FRB (or specifically under the Capital Plan Rule,
a notice of non-objection) for the Company to repurchase or
redeem common or perpetual preferred stock as well as to raise
the per share quarterly dividend from its current level of
$0.375 per share as declared by the Company’s Board of
Directors on January 26, 2016, payable on March 1, 2016.
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