Wells Fargo 2010 Annual Report Download - page 124

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 $6.0 billion in 2010 and $2.4 billion in 2009.
Note 3: Cash, Loan and Dividend Restrictions
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 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 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 $1.6 billion at
December 31, 2010, 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, 2010, our nonbank
subsidiaries could have declared additional dividends of
$4.7 billion at December 31, 2010, 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 $0.05 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. The
Capital Plan Review outlines proposed capital actions by the
Company including per share dividend increases and share
repurchases from the Company’s benefit plans and the market.
The Company has submitted a Capital Plan Review to the FRB.
Note 4: Federal Funds Sold, Securities Purchased under Resale Agreements
The following table provides the detail of federal funds sold,
securities purchased under resale agreements, other short-term
investments and collateral we have received from other entities
under resale agreements and securities borrowing arrangements.
and Other Short-Term Investments
December 31,
(in millions) 2010 2009
Federal funds sold and securities
purchased under resale agreements $ 24,880 8,042
Interest-earning deposits 53,433 31,668
Other short-term investments 2,324 1,175
Total $ 80,637 40,885
Collateral received with the right
to sell or repledge (1) $ 22,495 9,663
Collateral sold or repledged (1) 14,624 7,952
(1) Prior period has been revised to correct previously reported amounts.
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