This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

52173 

Vol. 82, No. 217 

Monday, November 13, 2017 

1 12 U.S.C. 287. 

2 12 CFR 209.4(a). 

3 12 U.S.C. 287 and 12 CFR 209.4(c)(2). 

4 12 U.S.C. 289(a)(1). 

5 12 CFR 209.1(d)(3) (‘‘Total consolidated assets 

means the total assets on the stockholder’s balance 

sheet as reported by the stockholder on its 

Consolidated Report of Condition and Income (Call 

Report) as of the most recent December 31, except 

in the case of a new member or the surviving 

stockholder after a merger ‘total consolidated assets’ 

means (until the next December 31 Call Report 

becomes available) the total consolidated assets of 

the new member or the surviving stockholder at the 

time of its application for capital stock’’). 

6 12 CFR 209.4(e), (c)(1)(ii), and (d)(1)(ii); 

209.2(a); and 209.3(d)(3). 

7 12 CFR 209.4(f). 

8 81 FR 84415, 84417 (Nov. 23, 2016). 

9The BEA makes ongoing revisions to its 

estimates of the Gross Domestic Product Price Index 

for historical calendar quarters. The Board 

calculates annual adjustments from the baseline 

year (rather than from the prior-year total 

consolidated asset threshold) to ensure that the 

adjusted total consolidated asset threshold 

accurately reflects the cumulative change in the 

BEA’s most recent estimates of the Gross Domestic 

Product Price Index. 

10See 12 CFR 209.4(f) and n. 8 and accompanying 

text, supra. 

11 5 U.S.C. 603 and 604. 

FEDERAL RESERVE SYSTEM 

12 CFR Part 209 

[Regulation I; Docket No. R–1560] 

RIN 7100–AE 68 

Federal Reserve Bank Capital Stock 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board of Governors 

(Board) is publishing a final rule that 

applies an inflation adjustment to the 

threshold for total consolidated assets in 

Regulation I. Federal Reserve Bank 

(Reserve Bank) stockholders that have 

total consolidated assets above the 

threshold receive a different dividend 

rate on their Reserve Bank stock than 

stockholders with total consolidated 

assets at or below the threshold. The 

Federal Reserve Act requires that the 

Board annually adjust the total 

consolidated asset threshold to reflect 

the change in the Gross Domestic 

Product Price Index, published by the 

Bureau of Economic Analysis (BEA). 

Based on the change in the Gross 

Domestic Product Price Index as of 

September 28, 2017, the total 

consolidated asset threshold will be 

$10,283,000,000 through December 31, 

2018. 

DATES: This final rule is effective 

January 1, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Evan Winerman, Counsel (202/872– 

7578), Legal Division; or Kimberly 

Zaikov, Financial Project Leader (202/ 

452–2256), Reserve Bank Operations 

and Payments Systems Division. For 

users of Telecommunications Device for 

the Deaf (TDD) only, contact (202) 263– 

4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Regulation I governs the issuance and 

cancellation of capital stock by the 

Reserve Banks. Under section 5 of the 

Federal Reserve Act 1 and Regulation I,2

a member bank must subscribe to 

capital stock of the Reserve Bank of its 

district in an amount equal to six 

percent of the member bank’s capital 

and surplus. The member bank must 

pay for one-half of this subscription on 

the date that the Reserve Bank approves 

its application for capital stock, while 

the remaining half of the subscription 

shall be subject to call by the Board.3

Section 7(a)(1) of the Federal Reserve 

Act 4 provides that Reserve Bank 

stockholders with $10 billion or less in 

total consolidated assets shall receive a 

six percent dividend on paid-in capital 

stock, while stockholders with more 

than $10 billion in total consolidated 

assets shall receive a dividend on paidin capital stock equal to the lesser of six 

percent and ‘‘the rate equal to the high 

yield of the 10-year Treasury note 

auctioned at the last auction held prior 

to the payment of such dividend.’’ 

Section 7(a)(1) requires that the Board 

adjust the threshold for total 

consolidated assets annually to reflect 

the change in the Gross Domestic 

Product Price Index, published by the 

BEA. 

Regulation I implements section 

7(a)(1) of the Federal Reserve Act by (1) 

defining the term ‘‘total consolidated 

assets,’’ 5 (2) incorporating the statutory 

dividend rates for Reserve Bank 

stockholders 6 and (3) providing that the 

Board shall adjust the threshold for total 

consolidated assets annually to reflect 

the change in the Gross Domestic 

Product Price Index.7 The Board has 

explained that it ‘‘expects to make this 

adjustment [to the threshold for total 

consolidated assets] using the final 

second quarter estimate of the Gross 

Domestic Product Price Index for each 

year, published by the Bureau of 

Economic Analysis.’’ 8

II. Adjustment 

The Board annually adjusts the $10 

billion total consolidated asset 

threshold based on the change in the 

Gross Domestic Product Price Index 

between the second quarter of 2015 (the 

baseline year) and the second quarter of 

the current year.9 The second quarter 

2017 Gross Domestic Product Price 

Index estimate published by the BEA in 

September 2017 (113.037) is 2.83% 

higher than the second quarter 2015 

Gross Domestic Product Price Index 

estimate published by the BEA in 

September 2017 (109.921). Based on this 

change in the Gross Domestic Product 

Price Index, the threshold for total 

consolidated assets in Regulation I will 

be $10,283,000,000 as of the effective 

date of January 1, 2018. 

III. Administrative Law Matters 

Administrative Procedure Act 

The provisions of 5 U.S.C. 553(b) 

relating to notice of proposed 

rulemaking have not been followed in 

connection with the adoption of these 

amendments. The amendments involve 

expected, ministerial adjustments that 

are required by statute and Regulation I 

and are consistent with a method 

previously set forth by the Board.10

Accordingly, the Board finds good cause 

for determining, and so determines, that 

notice in accordance with 5 U.S.C. 

553(b) is unnecessary. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

does not apply to a rulemaking where a 

general notice of proposed rulemaking 

is not required.11 As noted previously, 

the Board has determined that it is 

unnecessary to publish a general notice 

of proposed rulemaking for this final 

rule. Accordingly, the RFA’s 

requirements relating to an initial and 


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52174 Federal Register / Vol. 82, No. 217 / Monday, November 13, 2017 / Rules and Regulations 

12 44 U.S.C. 3506; 5 CFR part 1320. 

final regulatory flexibility analysis do 

not apply. 

Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995,12 the Board has 

reviewed this final rule. No collections 

of information pursuant to the 

Paperwork Reduction Act are contained 

in the final rule. 

List of Subjects in 12 CFR Part 209 

Banks and banking, Federal Reserve 

System, Reporting and recordkeeping 

requirements, Securities. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Board amends Regulation 

I, 12 CFR part 209, as follows: 

PART 209—ISSUE AND 

CANCELLATION OF FEDERAL 

RESERVE BANK CAPITAL STOCK 

(REGULATION I) 

■ 1. The authority citation for part 209 

continues to read as follows: 

Authority: 12 U.S.C. 12 U.S.C. 222, 248, 

282, 286–288, 289, 321, 323, 327–328, and 

466. 

■ 2. In part 209, remove all references to 

‘‘$10,122,000,000’’ and add in their 

place ‘‘$10,283,000,000’’, wherever they 

appear. 

By order of the Board of Governors of the 

Federal Reserve System, acting through the 

Secretary of the Board under delegated 

authority, November 7, 2017. 

Margaret M. Shanks, 

Deputy Secretary of the Board. 

[FR Doc. 2017–24553 Filed 11–9–17; 8:45 am] 

BILLING CODE 6210–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 107 

RIN 3245–AG65 

Small Business Investment 

Companies—Administrative Fees 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Final rule. 

SUMMARY: The U.S. Small Business 

Administration (SBA) is revising its 

regulations to increase the Small 

Business Investment Company (SBIC) 

licensing and examination fees. The 

Small Business Investment Act of 1958, 

as amended, allows SBA to collect 

licensing and examination fees to offset 

SBA’s costs associated with the 

administration of these two activities. 

SBA last increased fees for SBICs in 

1996. Current fees offset less than 40% 

of SBA’s administrative expenses 

related to these activities. This final rule 

increases SBIC licensing and 

examination fees in annual steps 

through October 2020, at which time 

SBA estimates that the annual fees will 

recoup approximately 80% of SBA’s 

annual expenses directly related to 

these activities. Beginning in October 

2021, this rule increases licensing and 

examination fees annually based on 

inflation. 

DATES: This rule is effective December 

13, 2017. 

FOR FURTHER INFORMATION CONTACT: 

Theresa Jamerson, Office of Investment 

and Innovation, (202) 205–7563 or sbic@

sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

The Small Business Investment Act of 

1958, as amended (‘‘Act’’), authorizes 

SBA to collect fees to cover the costs 

associated with the licensing and 

examination of SBICs. 15 U.S.C. 

681(e)(2)(B) and 687b(b). Although SBA 

has regulations setting the amount of 

these fees, SBA has not increased 

licensing and examination fees for 

SBICs since 1996. As part of the final 

rule published January 31, 1996 (61 FR 

3177), SBA set licensing fees ‘‘to reflect 

the Agency’s costs of processing 

applications’’ and similarly set 

examination fees to ‘‘produce total 

revenue sufficient to cover the current 

direct costs to SBA of conducting 

examinations.’’ In a subsequent rule 

published on April 30, 1997 (62 FR 

23337), SBA capped examination fees at 

$14,000, which lowered the fee for 

SBICs with over $60 million in assets. 

As part of the rationale for this change, 

the rule stated, ‘‘many of the largest 

SBICs are bank-owned and do not use 

federal leverage, so that fees computed 

on the basis of total assets do not 

appropriately reflect the level of effort 

and risk associated with the 

examination process.’’ Neither rule 

included an adjustment for inflation. 

Although fees set in 1996, as adjusted 

in 1997, were intended to fully 

reimburse SBA’s costs, by fiscal year 

(FY) 1999 (the earliest fiscal year for 

which SBA expenses are readily 

available), licensing and examination 

fees only covered approximately 85% of 

SBA’s direct costs. SBA’s direct costs 

are the expenses related to licensing and 

examination (e.g., personnel 

compensation and benefits associated 

with licensing and examinations, 

technology, subscription services, travel 

and other costs associated with 

licensing and examinations), and 

excludes SBA’s overhead costs (e.g., 

office space, utilities, and other 

supporting offices within SBA). In FY 

2016, licensing and examination fees 

reimbursed approximately 35% of 

SBA’s direct licensing and examination 

expenses, and less than a quarter of 

SBA’s licensing and examination 

expenses when including overhead. 

On December 16, 2016, SBA 

published a proposed rule (81 FR 

91049) to gradually increase the SBIC 

licensing and examination fees each 

year through October 1, 2020, and 

thereafter annually based on inflation, 

beginning on October 1, 2021. The 

proposed rule detailed the reasons for 

the widening gap between fees received 

and SBA related expenses. Key reasons 

include inflation, changes in the SBIC 

portfolio, increased capital at risk (SBAguaranteed leverage and commitments), 

SBA’s efforts to improve SBIC program 

performance, and technology 

implementation. 

As noted above, the Act authorizes 

SBA to collect fees to cover the costs 

associated with the licensing and 

examination of SBICs. The Act requires 

SBA to deposit the fees in the account 

for salaries and expenses of the 

Administration and authorizes SBA to 

use licensing fees to cover licensing 

costs and examination fees to cover the 

costs of examinations and other program 

oversight activities. 15 U.S.C. 681(e)(2) 

and 687b(b). To the extent that SBA 

does not cover its licensing and 

examination costs by charging SBICs for 

these fees, the balance is paid out of 

Agency funds. In other words, when 

SBICs do not pay fees sufficient to cover 

SBA’s licensing and examination costs, 

taxpayers bear the burden of covering 

those costs. It is an appropriate use of 

SBA’s statutory authority in this final 

rule to increase SBIC licensing and 

examination fees to cover a greater 

percentage of licensing and examination 

costs. 

The effect of the statutory language 

authorizing SBA to use licensing fees to 

cover licensing costs and examination 

fees to cover the costs of examinations 

and ‘‘other program oversight activities’’ 

is that SBA may use examination fees to 

cover a broader category of expenses 

than those for which it may charge (i.e., 

examination costs alone). Although the 

current and estimated future costs of 

compensation and benefits of SBA 

personnel involved in licensing and 

examinations, not including any 

additional related expenses, fully 

support the fee increases in this final 

rule, in the proposed rule, SBA 

identified a number of costs it expected 

to pay for with the funds made available 


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