[Federal Register Volume 60, Number 222 (Friday, November 17, 1995)]
[Rules and Regulations]
[Pages 57681-57682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28176]
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Rules and Regulations
Federal Register
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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
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Federal Register / Vol. 60, No. 222 / Friday, November 17, 1995 /
Rules and Regulations
[[Page 57681]]
FEDERAL HOUSING FINANCE BOARD
12 CFR Part 943
[No. 95-40]
Pricing of Services
AGENCY: Federal Housing Finance Board.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending
its regulation regarding the pricing of item processing services by the
Federal Home Loan Banks (Banks). The amendment eliminates the
requirement for Finance Board approval of prices for item-processing
and other services authorized in this regulation and deletes the
reference to a specifically designated office to act on behalf of the
Finance Board regarding this section. The approval requirement is
eliminated as it constitutes an unnecessary administrative burden.
EFFECTIVE DATE: November 17, 1995.
FOR FURTHER INFORMATION CONTACT: Edwin J. Avila, Financial Analyst,
(202) 408-2871; Edward J. Reedy, Associate Director, (202) 408-2959,
Regulatory Oversight Division; or Eric M. Raudenbush, Attorney-Advisor,
(202) 408-2932, Office of General Counsel; Federal Housing Finance
Board, 1777 F Street NW., Washington, D.C. 20006.
SUPPLEMENTARY INFORMATION:
I. General
Section 11(e)(2)(A) of the Federal Home Loan Bank Act (Bank Act),
12 U.S.C. 1431(e)(2)(A), authorizes the Banks to engage in the
collection and settlement of any negotiable or nonnegotiable items or
instruments of payment drawn on or issued by Bank members or
institutions eligible to apply for membership under section 4 of the
Bank Act. Id. section 1424. In order to preclude the Banks' status as
Government-Sponsored Enterprises from providing a competitive advantage
over private institutions, section 11(e)(2)(B) of the Bank Act requires
that the Banks make charges for these item-processing services that are
to be determined and regulated by the Finance Board consistent with the
statutory pricing principles established for Federal Reserve Banks.
Section 943.6 of the Finance Board's regulations implements this
requirement by providing that, in addition to covering operating
expenses, service pricing must cover other costs that would have been
borne, and reflect the imputed rate of return that would have been
earned, if the Banks were private corporations. See 12 CFR 943.6. As
currently written, Sec. 943.6(a) requires that Banks charge for item-
processing services in a manner ``approved by the [Finance] Board or
its designee.'' Id. Sec. 943.6(a). More specifically, Sec. 943.6(c)
requires that the Director of the Finance Board's District Banks
Directorate (DBD) at least annually review and approve Banks' prices
for item-processing services, in accordance with the established
pricing principles. Id. Sec. 943.6(c). All prices for Bank services
authorized by Part 943 must be published annually in the Federal
Register. Id.
Pursuant to the Bank Act and the regulations, the Finance Board has
established and promulgated a methodology for allocating the imputed
costs and rates of return, whereby a cost of capital adjustment factor,
commonly referred to as the Private Sector Adjustment Factor (PSAF), is
applied to assets used in providing these services. See 58 FR 59468
(1993). Under the PSAF Methodology, the FHLBanks are required to impute
debt, income taxes and a required return on equity (ROE), which are
based on the average rates from a bank holding company (BHC) sample
developed by the Federal Reserve Board for use in its PSAF calculation.
If a Bank's prior year ROE from its item-processing services equals or
exceeds the average ROE attained by the BHC sample group, then the
Finance Board considers that Bank's prices for the current year to be
in compliance with the regulation. Once a Bank's pricing has been
determined to be in compliance with the regulation, any subsequent
Finance Board approval is merely perfunctory and, therefore,
constitutes an unnecessary administrative burden. The Bank Act does not
require Finance Board ``approval'' of the Banks' prices.
Under current practice, approval of current prices is contingent
upon and determined by compliance with the PSAF compliance test. Thus,
the Finance Board need go no further than monitor for compliance with
this test. The Finance Board is, therefore, amending Secs. 943.6 (a)
and (c) of its regulations to eliminate the requirement for approval of
prices for item-processing and other services authorized in this
section, although Sec. 943.6(c) will continue to require Finance Board
``review'' of such prices for compliance with the regulation. Under the
current PSAF Methodology, if a Bank fails the compliance test, it must
submit for Finance Board review either: a revised pricing schedule for
item processing services; a business plan designed to resolve the non-
compliance; or an explanation of the unanticipated or temporary event
which led to the failure. The Bank's proposal for dealing with the non-
compliance requires the endorsement of the Finance Board or its
designee prior to implementation. Accordingly, under the regulation as
revised and the PSAF Methodology, explicit Finance Board approval of
prices will be required only when a Bank has failed the compliance
test.
In addition, the Finance Board is further amending Sec. 943.6(c) to
eliminate reference to the Director of DBD or his or her designee. Both
the position and office have been changed since the last publication of
the rule. The Finance Board finds it to be unnecessarily confusing and
burdensome to revise the regulation every time the office or official
changes, and believes that the naming of a specific office serves no
useful purpose. Hence, the regulation will now refer simply to the
Finance Board, as opposed to a specifically designated office within
the agency.
II. Administrative Procedure Act
This rulemaking simply removes an existing provision of Sec. 943.6
of the Finance Board regulations that is unnecessary and burdensome to
both the agency and the Banks and deletes reference to a specifically
designated office to act on behalf of the Finance Board. No additional
reporting is required of the Banks. Since the Banks must still comply
with the pricing
[[Page 57682]]
principles of the regulation, private providers of item processing
services will not be adversely impacted. As a result, the Finance Board
hereby finds that notice and public comment is unnecessary. Therefore,
for good cause shown under 5 U.S.C. 553(b)(B), this rule is exempt from
the notice and comment requirements of the Administrative Procedure
Act, as well as from the 30-day delay in the effective date pursuant to
5 U.S.C. 553(d)(3).
III. Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for this
regulation, the provisions of the Regulatory Flexibility Act, 5 U.S.C.
601, et. seq., do not apply.
List of Subjects in 12 CFR Part 943
Federal home loan banks.
Accordingly, the Federal Housing Finance Board hereby amends
chapter IX, title 12, Code of Federal Regulations, as set forth below.
PART 943--COLLECTION, SETTLEMENT, AND PROCESSING OF PAYMENT
INSTRUMENTS
1. The authority citation for part 943 is revised to read as
follows:
Authority: 12 U.S.C. 1430, 1431.
2. In Section 943.6, paragraphs (a) and (c) are revised to read as
follows:
Sec. 943.6 Pricing of services.
(a) General. Federal Home Loan Banks shall charge for services
authorized in this part in a manner consistent with the principles of
section 11(A)(c) of the Federal Reserve Act (12 U.S.C. 248a(c)), as
interpreted by this part.
* * * * *
(c) Review and publication. The Finance Board shall from time to
time and at least annually review the cost of capital adjustment factor
and review prices for services authorized in this part for compliance
with the principles set forth in paragraphs (a) and (b) of this
section. All prices for Bank services authorized in this part will be
published annually in the Federal Register.
Dated: November 8, 1995.
By the Federal Housing Finance Board.
Bruce A. Morrison,
Chairman.
[FR Doc. 95-28176 Filed 11-16-95; 8:45 am]
BILLING CODE 6725-01-P
