2010-27697. Federal Reserve Bank Services

AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Notice.

SUMMARY:

The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2011 of $39.5 million and the 2011 fee schedules for Federal Reserve priced services and electronic access. These actions were taken in accordance with the requirements of the Monetary Control Act of 1980, which requires that, over the long run, fees for Federal Reserve priced services be established on the basis of all direct and indirect costs, including the PSAF. The Board has also approved maintaining the current earnings credit rate on clearing balances.

DATES:

The new fee schedules and earnings credit rate become effective January 3, 2011.

FOR FURTHER INFORMATION CONTACT:

For questions regarding the fee schedules: Jeffrey C. Marquardt, Deputy Director, (202/452-2360); Jeffrey S.H. Yeganeh, Manager, Retail Payments, (202/728-5801); Linda S. Healey, Senior Financial Services Analyst, (202/452-5274), Division of Reserve Bank Operations and Payment Systems. For questions regarding the PSAF and earnings credits on clearing balances: Gregory L. Evans, Deputy Associate Director, (202/452-3945); Brenda L. Richards, Manager, Financial Accounting, (202/452-2753); or Jonathan C. Mueller, Senior Financial Analyst, (202/530-6291), Division of Reserve Bank Operations and Payment Systems. For users of Telecommunications Device for the Deaf (TDD) only, please call 202/263-4869. Copies of the 2011 fee schedules for the check service are available from the Board, the Federal Reserve Banks, or the Reserve Banks' financial services web site at http://www.frbservices.org.

SUPPLEMENTARY INFORMATION:

I. Private Sector Adjustment Factor And Priced Services

A. Overview—Each year, as required by the Monetary Control Act of 1980, the Reserve Banks set fees for priced services provided to depository institutions. These fees are set to recover, over the long run, all direct and indirect costs and imputed costs, including financing costs, taxes, and certain other expenses, as well as the return on equity (profit) that would have been earned if a private business firm provided the services. The imputed costs and imputed profit are collectively referred to as the PSAF. Similarly, investment income is imputed and netted with related direct costs associated with clearing balances to estimate net income on clearing balances (NICB). From 2000 through 2009, the Reserve Banks recovered 97.8 percent of their total expenses (including imputed costs) and targeted after-tax profits or return on equity (ROE) for providing priced services.^[1]

Table 1 summarizes 2009, 2010 estimated, and 2011 budgeted cost-recovery rates for all priced services. Cost recovery is estimated to be 102.9 percent in 2010 and budgeted to be 102.0 percent in 2011. The check service accounts for slightly over half of the total cost of priced services and thus Start Printed Page 67732significantly influences the aggregate cost-recovery rate.

Table 1—Aggregate Priced Services Pro Forma Cost and Revenue Performance ^a
[$ Millions]
Year	1 ^b Revenue	2 ^c Total expense	3 Net income (ROE) [1−2]	4 ^d Targeted ROE	5 ^e Recovery rate after targeted ROE [1/(2+4)]
2009	675.4	707.5	-32.1	19.9	92.8%
2010 (estimate)	572.7	543.3	29.4	13.3	102.9%
2011 (budget)	497.6	470.9	26.7	16.8	102.0%
^a Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding.
^b Revenue includes net income on clearing balances. Clearing balances are assumed to be invested in a broad portfolio of investments, such as short-term Treasury securities, government agency securities, federal funds, commercial paper, long-term corporate bonds, and money market funds. To impute income, a constant spread is determined from the historical average return on this portfolio and applied to the rate used to determine the cost of clearing balances. For 2011, investments are limited to short-term Treasury securities and federal funds with no constant spread imputed. NICB equals the imputed income from these investments less earnings credits granted to holders of clearing balances. The cost of earnings credits is based on the discounted three-month Treasury bill rate.
^c The calculation of total expense includes operating, imputed, and other expenses. Imputed and other expenses include taxes, FDIC insurance, Board of Governors' priced services expenses, the cost of float, and interest on imputed debt, if any. Credits or debits related to the accounting for pension plans under FAS 158 [ASC 715] are also included.
^d Targeted ROE is the after-tax ROE included in the PSAF. For the 2010 estimate, the targeted ROE reflects average actual clearing balance levels through July 2010.
^e The recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be recognized in accordance with FAS 158 [ASC 715]. Future gains or losses, and their effect on cost recovery, cannot be projected.

Table 2 portrays an overview of cost-recovery performance for the ten-year period from 2000 to 2009, 2009, 2010 budget, 2010 estimate, and 2011 budget by priced service.

Table 2—Priced Services Cost Recovery
[Percent]
Priced service	2000-2009	2009	2010 Budget	2010 Estimate	2011 Budget ^a
All services	97.8	92.8	96.9	102.9	102.0
Check	96.8	92.8	94.7	103.7	102.8
FedACH	102.6	93.4	99.9	101.9	100.4
Fedwire Funds and NSS	101.5	92.1	100.2	100.2	101.0
Fedwire Securities	101.0	93.8	103.1	104.3	103.8
^a 2011 budget figures reflect the latest data from the Reserve Banks. The Reserve Banks will transmit final budget data to the Board in November 2010, for Board consideration in December 2010.

1. 2010 Estimated Performance—The Reserve Banks estimate that they will recover 102.9 percent of the costs of providing priced services in 2010, including imputed costs and targeted ROE, compared with a budgeted recovery rate of 96.9 percent, as shown in table 2. The Reserve Banks estimate that all services will achieve full cost recovery. Overall, the Reserve Banks estimate that they will fully recover actual and imputed costs and earn net income of $29.4 million, compared with the target of $13.3 million. The greater-than-targeted net income is driven largely by the performance of the check service, which had greater-than-expected operational cost savings and revenue.

2. 2011 Private Sector Adjustment Factor—The 2011 PSAF for Reserve Bank priced services is $39.5 million. This amount represents a decrease of $2.4 million from the estimated 2010 revised PSAF of $41.9 million. Although the estimated imputed cost of equity is expected to increase, it is offset by a decrease in other required PSAF costs.^[2]

3. 2011 Projected Performance—The Reserve Banks project a priced services cost recovery rate of 102.0 percent in 2011. The 2011 fees for priced services are projected to result in a net income of $26.7 million compared with the target ROE of $16.8 million.

The primary risks to the Reserve Banks' ability to achieve their targeted cost recovery rates are unanticipated volume and revenue reductions and the potential for cost overruns or delays with technological upgrades. In light of these risks, the Reserve Banks will continue to refine their business and operational strategies to aggressively manage operating costs, take advantage of efficiencies gained from technological upgrades, and increase value-added product revenue.

4. 2011 Pricing—The following summarizes the Reserve Banks' changes in fee schedules for priced services in 2011:

Check

The Reserve Banks will decrease FedForward fees 8 percent for checks presented electronically and increase FedForward fees 50 percent for checks presented as substitute checks.^[3] The Start Printed Page 67733average fee paid by FedForward depositors will decline 14 percent from the average 2010 fee as the number of depository institutions that accept their presentments electronically increases. The Reserve Banks will retain FedReturn fees for checks returned electronically through FedLine at the current level, decrease fees 30 percent for checks returned electronically in PDF files, and increase fees 14 percent for endpoints that receive substitute checks.^[4] The average fee paid by FedReturn depositors will decrease 20 percent as the number of institutions that accept their returns electronically increases.^[5]

The Reserve Banks will increase traditional paper forward collection fees 181 percent and traditional paper return service fees 81 percent.
With the 2011 fees, the price index for the total check service will have increased 80 percent since 2001. In comparison, since 2005, the first full year in which the Reserve Banks offered Check 21 services, the price index for Check 21 services will have decreased 60 percent.

FedACH

The Reserve Banks will raise the addenda record fees for originations and receipts from $0.0013 to $0.0015 and increase the information extract file fee from $50 to $75.
With the 2011 fees, the price index for the FedACH service will have decreased 32 percent since 2001.

Fedwire Funds and National Settlement

The Reserve Banks will implement a per-item surcharge of $0.18 on the sender of Fedwire Funds transfers processed by the Reserve Banks after 5 p.m. ET.
The Reserve Banks will introduce a $10 monthly fee for the usage of the import/export feature of the FedLine Advantage electronic access package for the Fedwire Funds Service. This feature allows FedLine Advantage customers to import (export) an external file with multiple transactions into (from) the Fedwire Funds Service.
The Reserve Banks will increase the National Settlement Service's settlement file fee from $18 to $20, and the settlement entry fee from $0.80 to $0.90.
The Reserve Banks will change the Fedwire Funds Service's volume-based transfer fee structure to include incentive discounts based on customers' historic volume. This change will increase the base price of transfers but will provide substantial discounts from these fees for a portion of customers' expected volumes. The change will be implemented in two parts. First, the existing fees for all volume tiers will increase by as much as 73 percent. Second, customers will receive an 80 percent discount on these higher fees for the portion of a customer's monthly online volume that exceeds 50 percent of their historic benchmark volume, calculated as an average monthly volume of activity over the previous five calendar years. The change will produce a more stable stream of revenue for the Fedwire Funds service, for the first 50 percent of their customers' historic benchmark volume. Further, the Reserve Banks expect the incentive discounts to improve their ability to retain business and attract additional volume by decreasing the marginal price of transfers to a fee closer to the Reserve Banks' marginal cost. The decrease in the marginal price of transfers is consistent with the Federal Reserve's objectives to foster efficiency in the payment systems and to improve the efficiency of Reserve Bank services.
With the 2011 fees, the price index for the Fedwire Funds and National Settlement Services will have increased 28 percent since 2001.

Fedwire Securities

The Reserve Banks will retain fees at their current levels.
With the 2011 fees, the price index for the Fedwire Securities Service will have decreased 14 percent since 2001.

5. 2011 Price Index—Figure 1 compares indexes of fees for the Reserve Banks' priced services with the GDP price index. Compared with the price index for 2010, the price index for all Reserve Bank priced services is projected to decrease 3 percent in 2011. The price index for total check services is projected to decrease approximately 8 percent. The price index for Check 21 services is projected to decrease approximately 17 percent, reflecting the rapid increase in the number of depository institutions accepting checks electronically and the resulting reductions in the effective prices paid to collect and return checks using Check 21 services. The price index for all other check services is projected to increase 46 percent. The price index for electronic payment services, which include the FedACH Service, Fedwire Funds and National Settlement Services, and Fedwire Securities Service, is projected to increase approximately 3 percent. For the period 2001 to 2011, the price index for all priced services is expected to increase 68 percent. In comparison, for the period 2001 to 2009, the GDP price index increased 21 percent.

B. Private Sector Adjustment Factor—In March 2009, the Board requested comment on proposed changes to the methodology for calculating the PSAF.^[6] The Board proposed replacing the current correspondent bank model with a “publicly traded firm model” in which the key components used to determine the priced-services balance sheet and the PSAF costs would be based on data for the market of U.S. publicly traded firms. Specifically, these components include the capitalization ratio used to determine financing on the priced-services balance sheet and the effective tax rate, return on equity rate, and debt financing rates. The proposed changes were prompted by the implementation of the payment of interest on reserve balances held by depository institutions at the Reserve Banks and the anticipated consequent decline in balances held by depository institutions at Reserve Banks for clearing priced-services transactions (clearing balances).

Since the implementation of the payment of interest on reserve balances, clearing balances have not declined as rapidly as originally anticipated and remain significant. Between the October 2008 implementation of the payment of interest on reserve balances and January 2009, the total level of clearing balances held by depository institutions decreased approximately $2 billion, from $6.5 billion to $4.5 billion. During the first half of 2009, clearing balance levels were nearly flat at approximately $4.5 billion. Since mid-2009, clearing balances have declined moderately each month, and as of the end of July 2010, clearing balances were $2.6 billion. As a result of the relative significance of the remaining balances, the Board continued to use the correspondent bank model for the 2010 PSAF, and will continue using the correspondent bank model for the 2011 PSAF.^[7]

The method for calculating the financing and equity costs in the PSAF requires determining the appropriate imputed levels of debt and equity and then applying the applicable financing rates. In this process, a pro forma balance sheet using estimated assets and liabilities associated with the Reserve Banks' priced services is developed, and the remaining elements that would exist if these priced services were provided by a private business firm are imputed. The same generally accepted accounting principles that apply to commercial-entity financial statements apply to the relevant elements in the priced services pro forma financial statements.

The portion of Federal Reserve assets that will be used to provide priced services during the coming year is determined using information on actual assets and projected disposals and acquisitions. The priced portion of these assets is determined based on the allocation of the related depreciation expense. The priced portion of actual Federal Reserve liabilities consists of clearing balances and other liabilities such as accounts payable and accrued expenses.

Long-term debt is imputed only when core clearing balances, other long-term liabilities, and equity are not sufficient to fund long-term assets.^[8] Short-term debt is imputed only when other short-term liabilities and clearing balances not used to finance long-term assets are insufficient to fund short-term assets. A portion of clearing balances is used as a funding source for short-term priced services assets. Long-term assets may be Start Printed Page 67735partially funded from core clearing balances.

Imputed equity is set to meet the FDIC requirements for a well-capitalized institution for insurance premium purposes and represents the market capitalization, or shareholder value, for Reserve Bank priced services.^[9] The equity financing rate is the targeted ROE rate produced by the capital asset pricing model (CAPM). In the CAPM, the required rate of return on a firm's equity is equal to the return on a risk-free asset plus a risk premium. To implement the CAPM, the risk-free rate is based on the three-month Treasury bill; the beta is assumed to equal 1.0, which approximates the risk of the market as a whole; and the monthly returns in excess of the risk-free rate over the most recent 40 years are used as the market risk premium. The resulting ROE influences the dollar level of the PSAF because this is the return a shareholder would require in order to invest in a private business firm.

For simplicity, given that federal corporate income tax rates are graduated, state income tax rates vary, and various credits and deductions can apply, an actual income tax expense is not calculated for Reserve Bank priced services. Instead, the Board targets a pretax ROE that would provide sufficient income to fulfill the priced services' imputed income tax obligations. To the extent that actual performance results are greater or less than the targeted ROE, income taxes are adjusted using an imputed income tax rate that is the median of the rates paid by the top 50 bank holding companies based on deposit balances over the past five years, adjusted to the extent that they invested in tax-free municipal bonds.

The PSAF also includes the estimated priced-services-related expenses of the Board of Governors and imputed sales taxes based on Reserve Bank estimated expenditures. An assessment for FDIC insurance is imputed based on current FDIC rates and projected clearing balances held with the Reserve Banks.

1. Net Income on Clearing Balances—The NICB calculation is performed each year along with the PSAF calculation and is based on the assumption that the Reserve Banks invest clearing balances net of an imputed reserve requirement and balances used to finance priced services assets.^[10] The Reserve Banks impute a constant spread, determined by the return on a portfolio of investments, over the three-month Treasury bill rate and apply this investment rate to the net level of clearing balances.^[11] A return on the imputed reserve requirement, which is based on the level of clearing balances on the pro forma balance sheet, is imputed to reflect the return that would be earned on a required reserve balance held at a Reserve Bank.

The calculation also involves determining the priced services cost of earnings credits (amounts available to offset service fees) on contracted clearing balances held, net of expired earnings credits, based on a discounted Treasury bill rate. Rates and clearing balance levels used in the 2011 projected NICB are based on July 2010 rates and clearing balance levels. Because clearing balances are held for clearing priced services transactions or offsetting priced-services fees, they are directly related to priced services. The net earnings or expense attributed to the investments and the cost associated with holding clearing balances, therefore, are considered net income for priced services.

NICB is projected to be $1.2 million for 2011, including earnings on imputed reserve requirements.^[12] The imputed rate is equal to the three-month Treasury bill rate with no constant spread due to the results of the interest rate sensitivity analysis. See the “Analysis of the 2011 PSAF” section for more information on the interest rate sensitivity analysis results and the effect on the 2011 NICB.

2. Calculating Cost Recovery—The PSAF and NICB are incorporated into the projected and actual annual cost-recovery calculations for Reserve Bank priced services. Each year, the Board projects the PSAF for the following year using July clearing balance and rate data during the process of establishing priced services fees. When calculating actual cost recovery for the priced services at the end of each year, the Board historically has used the PSAF derived during the price-setting process with only minimal adjustments for actual rates or balance levels.^[13] Beginning in 2009, in light of the uncertainty about the long-term effect that the payment of interest on reserve balances would have on the level of clearing balances, the Board adjusts the PSAF used in the actual cost-recovery calculation to reflect the actual clearing balance levels maintained throughout the year. NICB is also projected in the fall of each year using July data and is recalculated to reflect actual interest rates and clearing balance levels during the year when calculating actual priced services cost recovery.

3. Analysis of the 2011 PSAF—The decrease in the 2011 PSAF is due primarily to a reduction in the level of imputed equity associated with a decrease in assets and clearing balances.

Projected 2011 Federal Reserve priced-services assets, reflected in table 3, have decreased $1,844.0 million, mainly due to a decline in imputed investments in marketable securities of $1,496.1 million. This reduction stems from the decline in clearing balances held by depository institutions at Reserve Banks.

The priced services balance sheet includes projected clearing balances of $2,600.3 million for 2011, which represents a decrease of $2,231.2 million from the amount of clearing balances on the balance sheet for the budgeted 2010 PSAF. Because of the continued uncertainty regarding the level of clearing balances in an interest-on-reserves environment, the actual PSAF costs used in cost-recovery calculations will continue to be based on the actual levels of clearing balances held throughout 2011.

Credit float, which represents the difference between items in process of collection and deferred credit items, increased from $1,200.0 million in 2010 Start Printed Page 67736to $1,800.0 million in 2011.^[14] The increase is primarily a result of credit float generated by a greater use of Check 21 deferred-availability products.

As previously mentioned, clearing balances are available as a funding source for priced-services assets. As shown in table 4, in 2011, $15.5 million in clearing balances is used as a funding source for short-term assets. Long-term liabilities and equity exceed long-term assets by $23.8 million; therefore, no core clearing balances are used to fund long-term assets.

The Board uses an interest rate sensitivity analysis to ensure that the interest rate risk of the priced services balance sheet, and its effect on cost recovery, are appropriately managed and that the priced services long-term assets are appropriately funded with long-term liabilities and equity. The interest rate sensitivity analysis measures the relationship between rate sensitive assets and liabilities when they reprice as a result of a change in interest rates.^[15] If a 200 basis point increase or decrease in interest rates changes priced services cost recovery by more than 2 percentage points, rather than using core clearing balances to fund long-term assets, long-term debt is imputed.

The interest rate sensitivity analysis shown in table 5 indicates that a 200 basis point decrease in rates decreases cost recovery 5.1 percentage points, while an increase of 200 basis points in rates increases cost recovery 4.9 percentage points. The greater-than-two-percentage-point effect on cost recovery is the result of a large gap between rate-sensitive assets and liabilities, and the relationship to priced services net income. The gap is caused by an increase in rate sensitive assets, specifically, the imputed federal funds investment needed to offset projected level of credit float in 2011. The results of the analysis have the following effects on the 2011 PSAF and NICB:

Generally, the results of the interest rate sensitivity analysis indicate when long-term debt should be imputed rather than using core clearing balances to fund long-term assets. The requirement to impute debt remedies an asset mismatch when too many clearing balances (rate sensitive liabilities) are being used to fund long-term assets and there is a need for another funding source (i.e. long-term debt). For the 2011 PSAF, however, the mismatch arises from the level of credit float rather than the use of clearing balances to fund long-term assets. If debt were to be imputed for the 2011 PSAF, clearing balances now used to finance assets would be invested in rate sensitive assets. Therefore, imputing debt would cause the gap between interest-rate-sensitive assets and liabilities to widen further, resulting in an even greater effect on cost recovery than shown in table 5. Accordingly, the Board will not impute debt for the 2011 PSAF. Going forward, imputed debt will be limited to the amount of clearing balances used to finance long-term assets. (See table 4 for the portion of clearing balances used to fund priced-services assets.)
Because of the heightened cost recovery sensitivity to interest rate fluctuations, the investment of clearing balances is limited to three-month Treasury bills (with no additional imputed constant spread).

As shown in table 3, the amount of equity imputed for the 2011 PSAF is $277.2 million, a decrease of $92.2 million from the imputed equity for 2010. In accordance with FAS 158 [ASC 715], this amount includes an accumulated other comprehensive loss of $343.2 million. Both the capital-to-total-assets ratio and the capital-to-risk-weighted-assets ratio meet or exceed the regulatory requirements for a well-capitalized depository institution. Equity is calculated as 5 percent of total assets, and the ratio of capital to risk-weighted assets exceeds 10 percent.^[16] The Reserve Banks imputed an FDIC assessment for the priced services based on the FDIC's proposed assessment rates and the level of clearing balances held at Reserve Banks.^[17] For 2011, the FDIC assessment is imputed at $5.3 million, compared with an FDIC assessment of $9.6 million in 2010.

Table 6 shows the imputed PSAF elements, including the pretax ROE and other required PSAF costs, for 2010 and 2011. The $3.4 million decrease in ROE is caused by a lower amount of imputed equity, slightly offset by a higher target ROE rate. Imputed sales taxes decreased from $5.2 million in 2010 to $4.2 million in 2011. The effective income tax rate used in 2011 decreased to 32.4 percent from 33.1 percent in 2010. The priced services portion of the Board's expenses decreased $2.0 million, from $7.2 million in 2010 to $5.2 million in 2011.

Table 3—Comparison of Pro Forma Balance Sheets for Federal Reserve Priced Services ¹⁸
[Millions of dollars—projected average for year]
	2011	2010	Change
Short-term assets:
Imputed reserve requirement on clearing balances	$440.0	$603.1	$(163.1)
Receivables	41.4	45.9	(4.5)
Materials and supplies	1.5	0.9	0.6
Prepaid expenses	7.6	23.2	(15.6)
Items in process of collection ¹⁹	300.0	520.0	(220.0)
Total short-term assets	790.7	1,193.1	(402.6)
Imputed investments	3,968.6	5,464.7	(1,496.1)
Long-term assets:
Premises ²⁰	173.1	235.4	(62.3)
Furniture and equipment	43.2	62.1	(18.9)
Leasehold improvements and long-term prepayments	68.2	60.3	7.9
Prepaid pension costs	299.8	148.9	150.9
Prepaid FDIC asset	10.9	24.6	(13.7)
Start Printed Page 67737
Deferred tax asset	189.7	198.9	(9.2)
Total long-term assets	784.9	730.2	54.7
Total assets	5,544.0	7,388.0	(1,844.0)
Short-term liabilities ²¹:
Clearing balances	2,600.3	4,831.5	(2,231.2)
Deferred credit items ¹⁹	2,100.0	1,720.0	380.0
Short-term payables	35.0	59.8	(24.8)
Total short-term liabilities	4,735.3	6,611.3	(1,876.0)
Long-term liabilities ²¹
Postemployment/postretirement benefits liability ²²	531.5	407.3	124.2
Total liabilities	5,266.8	7,018.6	(1,751.8)
Equity ²³	277.2	369.4	(92.2)
Total liabilities and equity	5,544.0	7,388.0	(1,844.0)

Table 4—Portion of Clearing Balances Used to Fund Priced-Services Assets
[Millions of dollars]
	2011		2010
A. Short-term asset financing
Short-term assets to be financed:
Receivables	$41.4		$45.9
Materials and supplies	1.5		0.9
Prepaid expenses	7.6		23.2
Total short-term assets to be financed	50.5		70.0
Short-term funding sources
Short-term payables	35.0		59.8
Portion of short-term assets funded with clearing balances ²⁴		15.5		10.2
B. Long-term asset financing
Long-term assets to be financed:
Premises	173.1		235.4
Furniture and equipment	43.2		62.1
Leasehold improvements and long-term prepayments	68.2		60.3
Prepaid pension costs	299.8		148.9
Prepaid FDIC asset	10.9		24.6
Deferred tax asset	189.7		198.9
Total long-term assets to be financed	784.9		730.2
Long-term funding sources:
Postemployment/postretirement benefits liability	531.5		407.3
Imputed equity ²⁵	277.2		369.4
Total long-term funding sources	808.7		776.7
Portion of long-term assets funded with core clearing balances ²⁴		0.0		0.0
C. Total clearing balances used for funding priced-services assets		15.5		10.2

Table 5—2011 Interest Rate Sensitivity Analysis ²⁶
[Millions of dollars]
	Rate sensitive	Rate insensitive	Total
Assets:
Imputed reserve requirement on clearing balances	$440.0		$440.0
Imputed investments	3,968.6		3,968.6
Receivables		$41.4	41.4
Materials and supplies		1.5	1.5
Prepaid expenses		7.6	7.6
Items in process of collection		300.0	300.0
Long-term assets		784.9	784.9
Total assets	4,408.6	1,135.4	5,544.0
Liabilities:
Clearing balances	2,600.3		2,600.3
Deferred credit items		2,100.0	2,100.0
Short-term payables		35.0	35.0
Long-term liabilities		531.5	531.5
Total liabilities	2,600.3	2,666.5	5,266.8
Rate change results:		200 basis point decrease in rates	200 basis point increase in rates
Asset yield ($4,408.6 × rate change)		$(88.2)	$88.2
Liability cost ($2,600.3 × rate change)		(52.0)	52.0
Effect of 200 basis point change		(36.2)	36.2
2011 budgeted revenue		497.6	497.6
Effect of change		(36.2)	36.2
Revenue adjusted for effect of interest rate change		461.4	533.8
2011 budgeted total expenses		443.4	443.4
2011 budgeted PSAF		44.3	44.3
Tax effect of interest rate change ($ change × 32.4%)		(11.7)	11.7
Total recovery amounts		476.0	499.4
Recovery rate before interest rate change		102.0%	102.0%
Recovery rate after interest rate change		96.9%	106.9%
Effect of interest rate change on cost recovery ²⁷		(5.1)%	4.9%

Table 6—Derivation of the 2011 and 2010 PSAF
[Millions of dollars]
		2011			2010
A. Imputed elements
Short-term debt ²⁸		$0.0			$0.0
Long-term debt ²⁹		0.0			0.0
Equity
Total assets from table 3	$5,544.0			$7,388.0
Required capital ratio ³⁰	5%			5%
Total equity		$277.2			$369.4
B. Cost of capital
1. Financing rates/costs
Short-term debt		N/A			N/A
Long-term debt		N/A			N/A
Start Printed Page 67739
Pretax return on equity ³¹		8.9%			7.6%
2. Elements of capital costs
Short-term debt			$0.0			$0.0
Long-term debt			0.0			0.0
Equity	$277.2×8.9% =		24.8	$369.4×7.6% =		28.2
			$24.8			$28.2
C. Other required PSAF costs
Sales taxes		$4.2			$5.2
FDIC assessment		5.3			9.6
Board of Governors expenses		5.2			7.2
			14.7			22.0
D. Total PSAF			$39.5			$50.2
As a percent of assets			0.7%			0.7%
As a percent of expenses ³²			8.9%			9.6%
E. Tax rates			32.4%			33.1%

Table 7—Computation of 2011 Capital Adequacy for Federal Reserve Priced Services
[Millions of dollars]
	Assets	Risk weight	Weighted assets
Imputed reserve requirement on clearing balances	$440.0	0.0	$0.0
Imputed investments:
3-month Treasury bills ³³	2,168.6	0.0	0.0
Federal funds ³⁴	1,800.0	0.2	360.0
Total imputed investments	3,968.6		360.0
Receivables	41.4	0.2	8.3
Materials and supplies	1.5	1.0	1.5
Prepaid expenses	7.6	1.0	7.6
Items in process of collection	300.0	0.2	60.0
Premises	173.1	1.0	173.1
Furniture and equipment	43.2	1.0	43.2
Leasehold improvements and long-term prepayments	68.2	1.0	68.2
Prepaid pension costs	299.8	1.0	299.8
Prepaid FDIC asset	10.9	1.0	10.9
Deferred tax asset	189.7	1.0	189.7
Total	5,544.0		1,222.3
Imputed equity for 2011	$277.2
Capital to risk-weighted assets	22.7%
Capital to total assets	5.0%

C. Earnings Credits on Clearing Balances—The Reserve Banks will maintain the current rate of 80 percent of the three-month Treasury bill rate to calculate earnings credits on clearing balances.

Clearing balances were introduced in 1981, as part of the Board's implementation of the Monetary Control Act, to facilitate access to Federal Reserve priced services by institutions that did not have sufficient reserve balances to support the settlement of their payment transactions. The Start Printed Page 67740earnings credit calculation uses a percentage discount on a rolling 13-week average of the annualized coupon equivalent yield of three-month Treasury bills in the secondary market. Earnings credits, which are calculated monthly, can be used only to offset charges for priced services and expire if not used within one year.^[35]

D. Check Service—Table 8 shows the 2009, 2010 estimated, and 2011 budgeted cost recovery performance for the commercial check service.

Table 8—Check Service Pro Forma Cost and Revenue Performance
[$ millions]
Year	1 Revenue	2 Total expense	3 Net income (ROE) [1-2]	4 Targeted ROE	5 Recovery rate after targeted ROE [1/(2+4)] (percent)
2009	490.9	514.6	−23.7	14.4	92.8
2010 (estimate)	358.7	337.6	21.1	8.2	103.7
2011 (budget)	279.2	262.2	17.0	9.3	102.8

1. 2010 Estimate—For 2010, the Reserve Banks estimate that the check service will recover 103.7 percent of total expenses and targeted ROE, compared with the budgeted recovery rate of 94.7 percent. The Reserve Banks expect to recover all actual and imputed costs of providing check services and earn a net income of $21.1 million (see table 8).

The higher-than-budgeted cost recovery is the result of higher projected revenue of $13.3 million. In paper services, revenue is higher than expected because of mid-year price increases and higher-than-budgeted exception item volume. In electronic services, the higher revenue is due to greater use of products with later deposit deadlines and volume destined to higher-priced paper endpoints. Expenses are projected to be $16.1 million lower than expected due primarily to the full-year effects of cost savings associated with the earlier-than-expected elimination of transportation for paper checks among Reserve Bank offices, the transition from courier service to overnight delivery service for paper check presentments, and the accelerated restructuring of the Reserve Banks' check processing infrastructure.

The general decline in the number of checks written continues to influence the decline in checks collected by the Reserve Banks. Through August, total forward check volume and return check volume is 9 percent and 16 percent lower, respectively, than the same period last year. For full-year 2010, the Reserve Banks estimate that their total forward check collection volume will decline nearly 10 percent and return check volume will decline 15 percent from 2009 levels.^[36] The proportion of checks deposited and presented electronically has grown steadily in 2010 (see table 9). The Reserve Banks expect that year-end 2010 FedForward deposit and FedReceipt presentment penetration rates will reach 99.7 percent and 98.9 percent, respectively. The Reserve Banks also expect that year-end 2010 FedReturn and FedReceipt Return penetration rates will reach 96.2 percent and 80.0 percent, respectively. FedReturn and FedReturn Receipt penetration rates have lagged those of FedForward and FedReceipt because initial efforts by the Reserve Banks and depository institutions to apply electronics to the check clearing process focused on the relatively higher volume forward collection process. Moreover, the recent economic environment has limited depository institutions' back-office investments to apply electronics to the check return process. To increase the adoption of FedReceipt Return, the Reserve Banks have introduced a PDF delivery option for lower-volume receivers of returned checks.

Table 9—Check 21 Product Penetration Rates ^a
[percent] ^b
	Forward deposit volume				Return volume ^c
	FedForward		FedReceipt		FedReturn		FedReceipt return
	Full-year	Year-end	Full-year	Year-end	Full-year	Year-end	Full-year	Year-end
2005	1.9	5.0	<0.1	0.1	4.0	6.9	N/A	N/A
2006	14.4	26.0	1.0	3.5	19.7	30.5	<0.1	<0.1
2007	42.6	57.9	12.5	22.7	37.8	45.4	0.5	1.1
2008	76.8	91.8	41.5	60.7	58.4	72.0	6.4	13.2
2009	96.5	98.6	80.4	91.7	81.2	91.2	34.1	50.8
2010 (estimate)	99.4	99.7	95.8	98.9	94.3	96.2	65.4	80.0
2011 (budget)	99.7	99.8	99.7	99.7	97.3	98.2	95.0	99.7
^a FedForward is the electronic forward check collection product; FedReceipt is electronic presentment with accompanying images; FedReturn is the electronic check return product; and FedReceipt Return is the electronic delivery of returned checks with accompanying images.
^b Deposit and presentment statistics are calculated as a percentage of total forward collection volume. Return statistics are calculated as a percentage of total return volume.
^c The Reserve Banks began offering PDF delivery of returned checks in 2009. For 2011 budget, volume associated with the delivery of returned checks in PDF files is included in FedReceipt Return volume.

Paper forward-collection volume is expected to decline nearly 85 percent and paper return-check volume is expected to decline 74 percent for the full year (see table 10).

Table 10—Paper Check Product Volume Changes
[Percent]
	Budgeted 2010 change	Estimated 2010 change
Forward Collection	−84	−85
Returns	−76	−74

2. 2011 Pricing—In 2011, the Reserve Banks project that the check service will recover 102.8 percent of total expenses and targeted ROE. Revenue is projected to be $279.2 million, a decline of $79.5 million from 2010. This decline is driven largely by an increasing proportion of checks being deposited and presented electronically and by projected reductions in both forward check collection and return check volume. Total expenses for the check service are projected to be $262.2 million, a decline of $75.2 million from 2010. The reduction in check costs is driven primarily by the full-year effects of cost savings associated with the consolidation of Reserve Bank check-processing sites, associated staff reductions, and reductions in transportation costs, as well as indirect support and overhead cost savings.^[37]

For 2011, the Reserve Banks estimate that their total forward check volume will decline nearly 10 percent (see table 11). FedForward and traditional paper check volumes are expected to decline 10 percent and 60 percent, respectively. The decline in Reserve Bank check volume can be attributed to increased competition, increased use of direct exchanges, and the continued decline in check use nationwide. The Reserve Banks also expect that total return volume will decline 14 percent, as FedReturn volume declines 11 percent and traditional paper returns decline 59 percent.

Table 11—Check Volumes
	2011 Budgeted volume (millions of items)	Growth from 2010 estimate (percent)
FedForward	6,960	−10
Traditional paper forward	18	−60
Total forward	6,978	−10
FedReturn	62	−11
Traditional paper return	2	−59
Total return	64	−14

The Reserve Banks will reduce FedForward fees, on average, 8 percent for checks presented electronically and increase fees 50 percent for checks presented as substitute checks (see table 12). The average fee paid by FedForward depositors will decline by 14 percent from the average 2010 fee, as the number of depository institutions that accept their presentments electronically increases. FedReturn fees, on average, will remain flat for checks returned electronically through FedLine, decrease 30 percent for checks returned electronically via PDF, and increase 14 percent for substitute check endpoints. The average fee paid by depository institutions using FedReturn will decrease 20 percent as the number of institutions that accept their returns electronically increases.

The Reserve Banks project that less than 1 percent of check forward deposit volume will be in traditional paper-based products. Accordingly, for the traditional paper check products, the Reserve Banks will increase forward paper check collection fees 181 percent and increase paper return fees 81 percent (see table 12). These increases reflect the high costs of handling the small remaining paper volume and are designed to encourage the continued adoption of Check 21 services. Start Printed Page 67742

Table 12—2011 Fee Changes
	2010 Average fee	2011 Average fee	Fee change (percent)
FedForward
Cash letter fee	$3.09	$3.18	3
Electronic endpoints	0.0204	0.0189	−8
Substitute check endpoints	0.1013	0.1514	50
Weighted average fee ^a,b	0.0252	0.0216	−14
FedReturn
Cash letter fee	3.51	3.51	0
Electronic endpoints
FedLine	0.4282	0.4296	<1
PDF	1.2151	0.85	−30
Substitute check endpoints	1.2151	1.39	14
Weighted average fee ^a,b	0.8183	0.6515	−20
Paper
Forward collection	0.4111	1.1537	181
Returns	5.7180	10.3651	81
^a The weighted average fees in this table represent combined cash letter and per-item fees for each product type, whereas the electronic and substitute check endpoints reflect only per item fees.
^b The weighted average fees for FedForward and FedReturn products are dependent on electronic receipt penetration rates. In this table, the weighted average fees are based on electronic receipt penetration rates estimated for full-year 2010 and projected for full-year 2011.

Risks to the Reserve Banks' ability to achieve budgeted 2011 cost recovery for the check service include greater-than-expected check volume losses to correspondent banks, aggregators, and direct exchanges, which would result in lower-than-anticipated revenue, and cost overruns associated with unanticipated problems with the Reserve Banks' Check 21 platform.

E. FedACH Service—Table 13 shows the 2009, 2010 estimate, and 2011 budgeted cost-recovery performance for the commercial FedACH service.

Table 13—FedACH Service Pro Forma Cost and Revenue Performance
[$ millions]
Year	1 Revenue	2 Total expense	3 Net income (ROE) [1-2]	4 Targeted ROE	5 Recovery rate after targeted ROE [1/(2+4)] (percent)
2009	94.7	98.6	−3.8	2.9	93.4
2010 (estimate)	110.6	105.9	4.7	2.7	101.9
2011 (budget)	110.4	106.1	4.3	3.8	100.4

1. 2010 Estimate—The Reserve Banks estimate that the FedACH service will recover 101.9 percent of total expenses and targeted ROE, compared with the budgeted recovery rate of 99.9 percent. The Reserve Banks expect to recover all actual and imputed costs of providing FedACH services and earn net income of $4.7 million. Through August, FedACH commercial origination volume is 3 percent higher than it was during the same period last year. For the full year, the Reserve Banks estimate that volume will grow nearly 3 percent.

2. 2011 Pricing—The Reserve Banks project that the FedACH service will recover 100.4 percent of total expenses and targeted ROE in 2011. Total revenue is budgeted to decrease $0.2 million from the 2010 estimate, primarily as a result of reductions in net income on clearing balances and electronic connection revenue, which is offset in part by an increase in product revenue. Total expenses are budgeted to increase $0.2 million from the 2010 estimate.

The Reserve Banks expect both FedACH commercial origination and receipt volume to grow approximately 3 percent in 2011, consistent with 2010 volume trends. Moreover, the sustained growth of direct exchanges, bank merger activity, and competition from the private-sector ACH operator, Electronic Payments Network (EPN), is expected to limit FedACH volume growth.

The Reserve Banks will maintain processing and service fees at current levels with two exceptions. The Reserve Banks will increase the addenda record fees for origination and receipt transactions from $0.0013 to $0.0015 and the monthly information extract file fee from $50 to $75.

Risks to meeting the Reserve Banks' budgeted 2011 cost recovery include lower-than-anticipated volume growth due to competition from EPN, increases in direct ACH exchanges, increased on-us volume due to bank mergers, and unanticipated problems with technology upgrades that result in cost overruns.

F. Fedwire Funds and National Settlement Services—Table 14 shows the 2009, 2010 estimate, and 2011 budgeted cost-recovery performance for the Fedwire Funds and National Settlement Services. Start Printed Page 67743

Table 14—Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
[$ millions]
Year	1 Revenue	2 Total expense	3 Net income (ROE) [1-2]	4 Targeted ROE	5 Recovery rate after targeted ROE [1/(2+4)] (percent)
2009	65.6	69.3	−3.6	2.0	92.1
2010 (estimate)	79.1	77.1	2.0	1.9	100.2
2011 (budget)	84.0	80.3	3.7	2.9	101.0

1. 2010 Estimate—The Reserve Banks estimate that the Fedwire Funds and National Settlement Services will recover 100.2 percent of total expenses and targeted ROE, compared with a 2010 budgeted recovery rate of 100.9 percent. The lower-than-expected recovery rate is attributed to lower-than-expected revenues from transaction volume and NICB. Through August, online Fedwire Funds volume was down 2 percent from the same period in 2009. For full-year 2010, the Reserve Banks estimate that online Fedwire Funds volume will decline 2 percent, compared to a budgeted decline of less than 1 percent. With respect to the National Settlement Service, the Reserve Banks estimate that the volume of settlement files will decrease 32 percent and the volume of settlement file entries will increase 11 percent for full-year 2010. The decline in settlement files and increase in entries is due primarily to the continued attrition and consolidation of local check clearinghouse arrangements.

2. 2011 Pricing—The Reserve Banks expect the Fedwire Funds and National Settlement Services to recover 101.0 percent of total expenses and targeted ROE in 2011. The Reserve Banks project total expenses to increase $3.3 million from the 2010 estimate. This increase is primarily due to pension costs and increasing amortization costs of the Fedwire technology migration. The Reserve Banks project total revenue to increase $4.9 million from the 2010 estimate due to increases in electronic connection revenue and the implementation of new fees and a new volume-based transfer fee structure for the Fedwire Funds Service, in addition to fee increases for the National Settlement Service.

The Reserve Banks will implement two new fees for the Fedwire Funds Service. First, an end-of-day per-item surcharge of $0.18 will apply to the sender of Fedwire Funds transfers processed by the Reserve Banks after 5 p.m. ET.^[38] Second, a $10 monthly fee will be charged for the usage of the import/export feature of the FedLine Advantage electronic access package for the Fedwire Funds Service.^[39] This feature, currently provided by the Reserve Banks for no additional charge, allows FedLine Advantage customers to import (export) an external file with multiple transactions into (from) the Fedwire Funds Service.

The Reserve Banks will change the Fedwire Funds Service's volume-based transfer fee structure to include incentive discounts based on customers' historic volume. This change will increase the base price of transfers but will provide substantial discounts on these prices for a portion of customers' expected volume. The change will be implemented in two parts. First, the existing fees for all volume tiers will increase by as much as 73 percent.^[40] Second, the Reserve Banks will apply an 80 percent discount on these new fees for the portion of a customer's monthly online volume that exceeds 50 percent of its historic benchmark volume.^[41] The Reserve Banks expect online volumes for the Fedwire Funds Service to increase 1 percent in 2011 from 2010 estimates in response to this new fee structure and general expectations for improved economic conditions.

The change in the volume-based transfer fees for the Fedwire Funds Service is consistent with the Reserve Banks' objectives to identify stable sources of revenue to recover the high fixed costs of operating the service and to improve the service's competitiveness in the wholesale payments market. The fee increases will produce more revenue from the relatively stable portion of a customer's monthly online volume (i.e., the first 50 percent of a customer's historic benchmark volume). The Reserve Banks expect these changes to improve their ability to retain existing business and attract new volume by aligning the marginal price of transfers for customers closer to the marginal cost of providing the service. The decrease in the marginal price of transfers is consistent with the Federal Reserve's objective to foster efficiency in the payment systems and to improve the efficiency of Reserve Bank provided services. With respect to the National Settlement Service, the Reserve Banks will increase the settlement file fee from $18 to $20, and the settlement entry fee from $0.80 to $0.90.^[42] Settlement file and settlement entry volumes for the National Settlement Service are budgeted to decrease slightly in 2011 from 2010 estimates.

G. Fedwire Securities Service—Table 15 shows the 2009, 2010 estimate, and 2011 budgeted cost recovery performance for the Fedwire Securities Service.^[43]

Table 15—Fedwire Securities Service Pro Forma Cost and Revenue Performance
[$ millions]
Year	1 Revenue	2 Total expense	3 Net income (ROE) [1-2]	4 Targeted ROE	5 Recovery rate after targeted ROE [1/(2+4)] (percent)
2009	24.2	25.1	−0.9	0.7	93.8
2010 (estimate)	24.2	22.7	1.6	0.6	104.3
2011 (budget)	24.0	22.3	1.7	0.8	103.8

1. 2010 Estimate—The Reserve Banks estimate that the Fedwire Securities Service will recover 104.3 percent of total expenses and targeted ROE, compared with a 2010 budgeted recovery rate of 103.9 percent. The higher-than-budgeted recovery rate is primarily attributable to lower-than-expected pension costs and higher-than-expected volume for Treasury securities.^[44] Through August, online securities volume is down almost 31 percent from the same period in 2009, due primarily to lower volume for agency securities.

2. 2011 Pricing—The Reserve Banks project that the Fedwire Securities Service will recover 103.8 percent of total expenses and targeted ROE in 2011. The Reserve Banks project that 2011 revenue and expense will decrease slightly from the 2010 estimate. For 2011, online securities volume is projected to remain flat from current 2010 estimates.

The fees for the Fedwire Securities Service will remain unchanged from 2010.

H. Electronic Access—The Reserve Banks allocate the costs and revenues associated with electronic access to the Reserve Banks' priced services. There are currently six electronic access channels through which customers can access the Reserve Banks' priced services: FedLine Direct ^®, FedLine Command ^®, FedLine Advantage ^®, FedLine Web ^®, FedMail ^®, and FedPhone ^®.^[45] The Reserve Banks package these channels into nine electronic access packages that are supplemented by a number of premium (or à la carte) access and accounting information options.

Attended access packages offer access to critical payment and information services via a web-based interface. The FedMail e-mail package provides access to basic information services via fax or e-mail, while the FedLine Web packages offer FedMail e-mail and online attended access to a broad range of informational services, including cash services, FedACH services, and check services. The FedLine Advantage packages expand upon the FedLine Web informational service packages and offer attended access to transactional services: FedACH, Fedwire Funds, and Fedwire Securities.

Unattended access packages are computer-to-computer, IP-based interfaces designed for medium- to high-volume customers. The FedLine Command package offers an unattended connection to FedACH, as well as most accounting information services. The final three packages are FedLine Direct packages that allow for unattended connections at one of three connection speeds to FedACH, Fedwire Funds, and Fedwire Securities transactional and information services and to most accounting information services.

For 2011, the Reserve Banks will restructure their FedLine packages to better meet their customers' needs for access options, delivery solutions, and information services. The Reserve Banks will offer redesigned versions of most FedLine packages. The more-robust versions will include access to certain value-added services with moderate price increases. The Reserve Banks will also increase fees for most of the FedLine Direct electronic access packages to improve the alignment of revenues and costs. In addition, the Reserve Banks will raise fees on various premium option services.

II. Analysis of Competitive Effect

All operational and legal changes considered by the Board that have a substantial effect on payments system participants are subject to the competitive impact analysis described in the March 1990 policy, “The Federal Reserve in the Payments System.” ^[46] Under this policy, the Board assesses whether proposed changes would have a direct and material adverse effect on the ability of other service providers to compete effectively with the Federal Reserve in providing similar services because of differing legal powers or constraints or because of a dominant market position deriving from such legal differences. If any proposed changes create such an effect, the Board must further evaluate the changes to assess whether the associated benefits — such as contributions to payment system efficiency, payment system integrity, or other Board objectives—can be achieved while minimizing the adverse effect on competition.

The Board projects that the 2011 fees, fee structures, and changes in service will not have a direct and material adverse effect on the ability of other service providers to compete effectively with the Reserve Banks in providing Start Printed Page 67745similar services. The fees should permit the Reserve Banks to earn a ROE that is comparable to overall market returns and provide for full cost recovery over the long run.

FedACH Service 2011 Fee Schedule
[Effective January 3, 2011. **Bold indicates changes from 2010 prices.**]
	Fee
FedACH minimum monthly fee ⁴⁷
ODFI	$25.00.
RDFI	15.00.
Origination (per item or record): ⁴⁸
Forward or return items in small files	0.0030.
Forward or return items in large files	0.0025.
Addenda record	0.0015.
Receipt (per item or record): ⁴⁹
Forward item fees with volume-based discount (excluding FedACH SameDay service items)
For the first 1,000,000 items per month	0.0025.
For 1,000,001 to 25,000,000 items per month	0.0018.
For more than 25,000,000 items per month	0.0016 (all items).
Return items	0.0025.
Addenda record	0.0015.
FedACH SameDay Service
Origination ^50 51
Forward item in a small file	0.0030.
Forward item in a large file	0.0035.
Addenda record	0.0015.
Return item in a small file	0.0030.
Return item in a large file	0.0025.
Return addenda record	0.0015.
Receipt ⁵²
Forward item	0.0025.
Addenda record/return addenda record	0.0015.
Return item	0.0025.
Risk Product:
Risk origination monitoring criteria ⁵³
Tier 1 (2-20 sets)	8.00/set of criteria/month.
Tier 2 (21-150 sets)	4.00/set of criteria/month.
Tier 3 (more than 150 sets)	1.00/set of criteria/month.
Risk origination monitoring batch	0.0025/batch.
FedEDI Plus:
Defined report generated	0.20.
On demand report generated	0.75.
Monthly premier report	10.00.
Daily premier report	0.50.
Secure delivery via e-mail	0.20.
Delivery via FedLine file access solution	0.30.
Monthly fee (per routing number):
Account servicing fee ⁵⁴	37.00.
FedACH settlement ⁵⁵	45.00.
Information extract file	75.00.
IAT Output File Sort	35.00.
FedLine Web origination returns and notification of change (NOC) fee: ⁵⁶	0.30.
Voice response returns/NOC fee: ⁵⁷	3.00.
Automated NOC fee: ⁵⁸	0.15.
Non-electronic input/output fee: ⁵⁹
CD or DVD input/output	50.00.
Paper input/output	50.00.
Facsimile exception returns/NOC ⁶⁰	30.00.
Canadian cross-border fee:
Item originated to Canada ⁶¹	0.62.
Return received from Canada ⁶²	0.99.
Trace of item at receiving gateway	5.50.
Trace of item not at receiving gateway	7.00.
Mexico service fee:
Item originated to Mexico ⁶¹	0.67.
Start Printed Page 67746
Return received from Mexico ⁶²	0.91.
Item trace	13.50.
A2R item originated to Mexico	3.45.
F3X item originated to Mexico	0.67.
Panama service fee:
Item originated to Panama ⁶¹	0.72.
Return received from Panama ⁶²	1.00.
Item trace	7.00.
NOC	0.72.
Latin America (MFIC) service fee:
Item originated to MFIC ⁶¹	4.40.
Return received from MFIC ⁶²	0.72.
Item trace	5.00.

Fedwire Funds and National Settlement Services 2011 Fee Schedule
[Effective January 3, 2011. **Bold indicates changes from 2010 Fee Schedule.**]
	Fee
Fedwire Funds Service
Monthly participation fee	$75.00
Basic volume-based transfer fee (originations and receipts)
Per transfer for the first 14,000 transfers per month	0.52
Per transfer for additional transfers up to 90,000 per month	0.23
Per transfer for every transfer over 90,000 per month	0.13
Volume-based transfer fee with the incentive discount (originations and receipts) ⁶³
Per eligible transfer for the first 14,000 transfers per month	0.104
Per eligible transfer for additional transfers up to 90,000 per month	0.046
Per eligible transfer for every transfer over 90,000 per month	0.026
Surcharge for offline transfers (originations and receipts)	40.00
Surcharge for end-of-day transfers originations ⁶⁴	0.18
Monthly import/export fee ⁶⁵	10.00
National Settlement Service
Basic
Settlement entry fee	0.90
Settlement file fee	20.00
Surcharge for offline file origination	40.00
Minimum monthly charge (account maintenance) ⁶⁶	60.00
Special settlement arrangements ⁶⁷
Fee per day	150.00
Basic transfer fee
Transfer or reversal originated or received	0.35
Surcharge
Offline transfer or reversal originated or received	60.00
Monthly maintenance fees
Account maintenance (per account)	36.00
Issues maintained (per issue/per account)	0.40
Claim adjustment fee	0.60
Joint custody fee	40.00

Electronic Access 2011 Fee Schedule
[Effective January 3, 2011. **Bold prices indicate changes from 2010 Fee Schedule.**]
Electronic Access Packages (monthly)	Fee
FedMail E-mail	$30.00.
FedLine Web (W3) Traditional	110.00.
Includes: FedMail e-mail
FedLine Web with three individual subscriptions
FedACH information services (includes RDFI file alert service)
Check 21 services ⁶⁸
Check 21 duplicate notification
Cash management system basic—own report only
Service charge information
Account management information ⁶⁹
End of day accounting file (PDF)
FedLine Web (W5) Enhanced	140.00.
Includes: FedLine Web (W3) traditional package
FedLine Web with five individual subscriptions
FedACH risk management services
FedACH EDI plus service via secure e-mail
Check payor bank services
Account management information
FedLine Advantage (A5) Traditional	380.00.
Includes: FedLine Web (W3) traditional package
FedLine Web with five individual subscriptions
FedACH transactions
Fedwire funds transactions
Fedwire securities transactions
Fedwire cover payments
Check payor bank services
Account management information with intra-day search
FedLine Advantage (A5) Enhanced	405.00.
Includes: FedLine Advantage A5 traditional package
FedLine Advantage with five individual subscriptions
FedACH risk management services
FedACH EDI via secure e-mail
FedLine Command Enhanced	700.00.
Includes: FedLine Advantage enhanced package
FedLine Advantage with five individual subscriptions
FedLine Command with two certificates
ACTS Report <20 subaccounts
Statement of account spreadsheet file (SASF)
FedLine Direct Traditional (D56)	3,000.00.
Includes:
FedLine Advantage A5 traditional package with 56K line speed
FedLine Advantage with five individual subscriptions
FedLine Command with two certificates
FedLine Direct with two certificates
Intra-day file
Statement of account spreadsheet file
End of day (machine readable) file
Service charge information
Billing data format file
FedLine Direct Enhanced (D256)	3,500.00.
Includes: FedLine Direct traditional (D56) package with 256K line speed
FedACH risk management services
FedACH EDI via secure e-mail
FedLine Direct Premier (DT1)	6,000.00.
Includes: FedLine Direct enhanced package with T1 line speed
One dedicated unattended wide area network connection for FedLine Direct
Premium Options (monthly) ⁷⁰
Electronic Access
Additional subscribers package (each package contains 5 additional subscribers)	80.00
Additional FedLine Command certificate ⁷¹	80.00
Additional FedLine Direct certificate ⁷²	80.00
Maintenance of additional virtual private network	60.00
FedLine Advantage 800# Usage (per hour)	2.00
Additional dedicated connections ⁷³
56K	2,000.00
256K	2,450.00
T1	3,000.00
Dial Only VPN surcharge	25.00.
Expedited VPN	500.00
FedLine international setup (one-time fee)	1,000.00
Transparent contingency ⁷⁴	1,000.00
Start Printed Page 67748
FedImage/large file delivery	Various.
FedMail fax (monthly per routing number)	40.00
Accounting Information Services
Cash Management System ⁷⁵
Basic—Respondent and/or sub-account reports (per report/month)	10.00
Basic—Respondent/sub-account recap report (per month)	40.00
Plus—Own report up to six times a day (per month)	60.00
Plus—Less than 10 respondent and/or sub-accounts	125.00
Plus—10-50 respondent and/or sub-accounts	225.00
Plus—51-100 respondents and/or sub-accounts	400.00
Plus—101-500 respondents and/or sub-accounts	750.00
Plus—>500 respondents and/or sub-accounts	1,000.00
End of day reconcilement file (per month) ⁷⁶	150.00
Statement of account spreadsheet file (per month) ⁷⁷	150.00
Intra-day file (per month) ⁷⁸	150.00
ACTS Report—< 20 sub-accounts	250.00
ACTS Report—21-40 sub-accounts	500.00
ACTS Report—41-60 sub-accounts	750.00
ACTS Report—>60 sub-accounts	1,000.00

By order of the Board of Governors of the Federal Reserve System, October 27, 2010.

Jennifer J. Johnson,

Secretary of the Board.

Footnotes

1. The ten-year recovery rate is based on the pro forma income statement for Federal Reserve priced services published in the Board's Annual Report.

Effective December 31, 2006, the Reserve Banks implemented Statement of Financial Accounting Standards (SFAS) No. 158: Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans [Accounting Standards Codification (ASC) 715 Compensation—Retirement Benefits], which resulted in recognizing a reduction in equity related to the priced services' benefit plans. Including this reduction in equity results in cost recovery of 93.0 percent for the ten-year period. This measure of long-run cost recovery is also published in the Board's Annual Report.

2010-27697. Federal Reserve Bank Services

AGENCY:

ACTION:

SUMMARY:

DATES:

FOR FURTHER INFORMATION CONTACT:

SUPPLEMENTARY INFORMATION:

I. Private Sector Adjustment Factor And Priced Services

Check

FedACH

Fedwire Funds and National Settlement

Fedwire Securities

II. Analysis of Competitive Effect

Footnotes

Document Information