Federal Register, Volume 76 Issue 214 (Friday, November 4, 2011)

[Federal Register Volume 76, Number 214 (Friday, November 4, 2011)]
[Notices]
[Pages 68440-68458]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28588]

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FEDERAL RESERVE SYSTEM

[Docket No. OP-1436]

Federal Reserve Bank Services

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
has approved the private sector adjustment factor (PSAF) for 2012 of
$29.9 million and the 2012 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, 2012.

FOR FURTHER INFORMATION CONTACT: For questions regarding the fee
schedules: Susan V. Foley, Associate Director, (202/452-3596); Samantha
J. Pelosi, Manager, Retail Payments, (202/530-6292); 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 John W. Curle, Senior
Financial Analyst, (202/452-3916), 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 2012 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 2001 through 2010, the Reserve Banks recovered 97.9 percent of
their total expenses (including imputed costs) and targeted after-tax
profits or return on equity (ROE) for providing priced services.\1\
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\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 95.1
percent for the ten-year period. This measure of long-run cost
recovery is also published in the Board's Annual Report.
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Table 1 summarizes 2010 actual, 2011 estimated, and 2012 budgeted
cost-recovery rates for all priced services. Cost recovery is estimated
to be 102.3 percent in 2011 and budgeted to be 100.8 percent in 2012.
The check service accounts for slightly over half of the total cost of
priced services and thus significantly influences the aggregate cost-
recovery rate.

Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance a
[$ millions]
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5 \e\
2 \c\ Total 3 Net income 4 \d\ recovery rate
Year 1 \b\ Revenue expense (roe) [1-2] Targeted roe after targeted
roe [1/(2+4)]
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2010 (actual)................... 574.7 532.8 41.8 13.1 105.3%
2011 (estimate)................. 471.4 444.1 27.3 16.8 102.3%
2012 (budget)................... 436.7 419.6 17.1 13.8 100.8%
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\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 2012, 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.

[[Page 68441]]

\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 2011 estimate, the targeted ROE reflects
average actual clearing balance levels through July 2011.
\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 2001 to 2010, 2010 actual, 2011 budget, 2011
estimate, and 2012 budget by priced service.

Table 2--Priced Services Cost Recovery
[Percent]
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2012 Budget
Priced service 2001-2010 2010 Actual 2011 Budget 2011 Estimate \a\
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All services.................... 97.9 105.3 102.1 102.3 100.8
Check........................... 96.9 107.1 102.9 103.6 101.0
FedACH.......................... 102.7 103.4 100.2 100.2 100.5
Fedwire Funds and NSS........... 101.4 100.6 100.5 101.5 100.0
Fedwire Securities.............. 100.9 102.8 106.5 100.4 102.5
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\a\ 2012 budget figures reflect the latest data from the Reserve Banks. The Reserve Banks will transmit final
budget data to the Board in November 2011, for Board consideration in December 2011. 2011 budget figures
reflect the final budget as approved by the Board.

1. 2011 Estimated Performance--The Reserve Banks estimate that they
will recover 102.3 percent of the costs of providing priced services in
2011, including imputed costs and targeted ROE, compared with a
budgeted recovery rate of 102.1 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 $27.3 million,
compared with the target of $16.8 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.
2. 2012 Private Sector Adjustment Factor--The 2012 PSAF for Reserve
Bank priced services is $29.9 million. This amount represents a
decrease of $7.6 million from the revised 2011 PSAF estimate of $37.5
million. This reduction is primarily the result of a change in the FDIC
assessment as well as a decrease in the cost of equity, which is due to
a lower amount of imputed equity.\2\
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\2\ In October 2010, the Board approved a budgeted 2011 PSAF of
$39.5 million, which was based on the July 2010 clearing balance
level of $2,600.3 million. Since that time, clearing balances have
continued to decline, which affects the 2011 PSAF and NICB. The 2011
estimated PSAF of $37.5 million, which is based on actual average
clearing balances of $2,595.8 million through July 2011, reflects a
change in the FDIC assessment. Similar to 2010, the 2011 final PSAF
will be adjusted to reflect average clearing balance levels through
the end of 2011.
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3. 2012 Projected Performance--The Reserve Banks project a priced
services cost recovery rate of 100.8 percent in 2012. The 2012 fees for
priced services are projected to result in a net income of $17.1
million compared with the target ROE of $13.8 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 manage
aggressively operating costs, take advantage of efficiencies gained
from technological upgrades, and increase product revenue.
4. 2012 Pricing--The following summarizes the Reserve Banks'
changes in fee schedules for priced services in 2012:
Check
The Reserve Banks will reduce by half their forward and
return deadlines from 8 to 4 and 4 to 2, respectively. FedForward cash
letter fees will decrease by 8 percent on a per-item basis. In addition
the Reserve Banks will increase FedForward fees for checks presented
electronically by 4 percent and increase FedForward fees for checks
presented as substitute checks by 2 percent.\3\ The net result is only
a modest increase in the per item weighted effective average fee.
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\3\ FedForward is the electronic forward check collection
product. A substitute check is a paper reproduction of an original
check that contains an image of the front and back of the original
check and is suitable for automated processing in the same manner as
the original check.
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The Reserve Banks will retain at current levels FedReturn
fees for checks returned electronically and for endpoints that receive
substitute checks.\4\ The effective average fee paid by FedReturn
depositors will decrease approximately 16 percent as the number of
institutions that accept their returns electronically increases.\5\
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\4\ FedReturn is the electronic check return product.
\5\ The Reserve Banks' Check 21 service fees include separate
and substantially different fees for the delivery of checks to
electronic endpoints and substitute check endpoints. Therefore, the
effective average fee paid by depository institutions that use Check
21 services is dependent on the proportion of institutions that
accept checks electronically.
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The Reserve Banks will retain traditional paper forward
collection and return fees at their current levels.
The Reserve Banks will price separately for two categories
of adjustment types that are identified commonly in Reserve Bank
processing operations: Encoding errors and non-conforming items that
fail Reserve Bank edit checks.
With the 2012 fees, the price index for the total check
service will have increased 63 percent since 2002. 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 50
percent.
FedACH
The Reserve Banks will raise the fee charged to receivers
of ACH returns from $0.0025 to $0.005. The Reserve Banks will also
increase the information extract file monthly fee from $75 to $100 and
increase the international

[[Page 68442]]

ACH transaction (IAT) output file sort monthly fee from $35 to $50.
Fees for FedLine Web origination returns and notification of change
will also rise from $0.30 to $0.35.
With the 2012 fees, the price index for the FedACH service
will have decreased 16 percent since 2002.
Fedwire Funds and National Settlement
The Reserve Banks will implement a new per item fee of
$0.12 on all transfers sent and received that exceed $10 million (high-
value transfer surcharge).
The Reserve Banks will implement a new per item fee of
$0.20 on all transfers sent that contain any data in the new tag field
{3620{time} that supports payment notification and tracking (payment
notification surcharge).
The Reserve Banks will increase the Tier 1 per item pre-
incentive fee from $0.52 to $0.58 per transaction; the Tier 2 per item
pre-incentive fee from $0.23 to $0.24; and the Tier 3 per item pre-
incentive fee from $0.13 to $0.135.\6\
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\6\ The per item pre-incentive fee is the fee that the Reserve
Banks charge for transfers that do not qualify for incentive
discounts. The Tier 1 per item pre-incentive fee applies to the
first 14,000 transfers, the Tier 2 per item pre-incentive fee
applies to the next 76,000 transfers, and the Tier 3 per item pre-
incentive fee applies to any additional transfers. The Reserve Banks
apply an 80 percent incentive discount to every transfer over 50
percent of a customer's historic benchmark volume.
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The Reserve Banks will increase the monthly fee for the
usage of the import/export feature of the FedLine Advantage electronic
access package from $10 to $20.
The Reserve Banks will increase the end-of-day origination
surcharge from $0.18 to $0.20.
The Reserve Banks will increase the Fedwire monthly
participation fee from $75 to $85.
The Reserve Banks will increase the National Settlement
Service's settlement file charge from $20 to $21, and the settlement
charge per entry from $0.90 to $1.00.
With the 2012 fees, the price index for the Fedwire Funds
and National Settlement Services will have increased 44 percent since
2002.
Fedwire Securities
The Reserve Banks will increase the online transfer fee
from $0.35 to $0.45.
The Reserve Banks will increase the monthly account
maintenance fee from $36 to $40.
The Reserve Banks will increase the monthly issue
maintenance fee from $0.40 to $0.45 per issue.
The Reserve Banks will increase the offline surcharge from
$60 to $66.
The Reserve Banks will increase the claim adjustment fee
from $0.60 to $0.66.
With the 2012 fees, the price index for the Fedwire
Securities Service will have decreased 14 percent since 2002.
Electronic Access
The Reserve Banks propose adding a new package, FedLine
Advantage Premier to the FedLine packaged solutions that will be priced
at $500 per month.
The Reserve Banks will begin to charge $15 per month for
FedPhone.
The Reserve Banks will also charge an additional $20 per
month for the FedLine Advantage Plus packages, $100 per month for the
FedLine Command Plus packages, $250 per month for FedLine Direct
packages, and $200 per month for the FedLine Direct Premier packages.
The Reserve Banks will raise the monthly fees for
additional dedicated electronic access connections, specifically, the
56K, T1, and VPN surcharge by $250, $150, and $25, respectively.
The FedLine international one-time setup fee will increase
from $1,000 to $5,000.
The Reserve Banks will also increase the monthly fees for
accounting information services basic reports to improve the alignment
of value and revenue.
Electronic access fees are allocated to each priced
service and are not separately reflected in comparison with the GDP
price index.
5. 2012 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 2011, the price index for all Reserve Bank
priced services is projected to increase 4 percent in 2012. The price
index for total check services is projected also to increase
approximately 4 percent. The price index for Check 21 services is
projected to increase just over 1 percent, reflecting a slight increase
in the effective prices paid to collect and return checks using Check
21 services and stabilization in the adoption of electronic check
services. The price index for all other check services is projected to
increase approximately 14 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 5 percent. For the period 2002 to
2012, the price index for all priced services is expected to increase
64 percent. In comparison, for the period 2002 to 2010, the GDP price
index increased 21 percent.

[[Page 68443]]

[GRAPHIC] [TIFF OMITTED] TN04NO11.054

B. Private Sector Adjustment Factor--In 2009, the Board requested
comment on proposed changes to the methodology for calculating the
PSAF.\7\ 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.
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).
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\7\ 74 FR 15481-15491 (Apr. 6, 2009).
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Since the implementation of the payment of interest on reserve
balances, clearing balances have not decreased as much as 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 $2.0 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 further, and as of the end of July 2011, clearing balances
were $2.7 billion. As a result of the relative significance of the
remaining balances, the Board used the correspondent bank model for the
2011 PSAF, and will continue using the correspondent bank model for the
2012 PSAF.
The Board recently requested public comment on proposed amendments
to Regulation D, which implements section 19 of the Federal Reserve Act
and requires reserve requirements be held on certain deposits and other
liabilities of depository institutions for the purpose of implementing
monetary policy.\8\ The proposed amendments eliminate the contractual
clearing balance program and its administrative complexities as part of
an effort to simplify reserve balance administration. Because
contractual clearing balances are a significant element in determining
imputed costs that must be recovered by Reserve Bank priced services
fees, the Board requested comment on additional questions related to
imputing costs to be recovered by Reserve Bank priced services fees
after the proposed elimination of the contractual clearing balance
program.
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\8\ 76 FR 64250-64259 (Oct. 18, 2011).
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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

[[Page 68444]]

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.\9\ 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 partially funded from core clearing
balances.
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\9\ Core clearing balances, currently $1 billion, are considered
the portion of the balances that has remained stable over time
without regard to the magnitude of actual clearing balances.
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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.\10\ 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.
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\10\ As shown in table 7, the FDIC requirements for a well-
capitalized depository institution are 1) a ratio of total capital
to risk-weighted assets of 10 percent or greater, 2) a ratio of Tier
1 capital to risk-weighted assets of 6 percent or greater, and 3) a
leverage ratio of Tier 1 capital to total assets of 5 percent or
greater. The priced services balance sheet has no components of Tier
1 or total capital other than equity; therefore, requirements 1 and
2 are essentially the same measurement.
As used in this context, the term ``shareholder'' does not refer
to the member banks of the Federal Reserve System, but rather to the
implied shareholders that would have an ownership interest if the
Reserve Banks' priced services were provided by a private firm.
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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 during 2012 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.\11\ 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.\12\ 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.
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\11\ Reserve requirements are the amount of funds that a
depository institution must hold, in the form of vault cash or
deposits with Federal Reserve Banks, in reserve against specified
deposit liabilities. The dollar amount of a depository institution's
reserve requirement is determined by applying the reserve ratios
specified in the Board's Regulation D to the institution's
reservable liabilities. The Reserve Banks priced services impute a
reserve requirement of 10 percent, which is applied to the amount of
clearing balances held with the Reserve Banks and to credit float.
\12\ The allowed portfolio of investments is comparable to a
bank holding company's investment holdings, such as short-term
Treasury securities, government agency securities, federal funds,
commercial paper, long-term corporate bonds, and money market funds.
As shown in table 7, the investments imputed for 2012 are three-
month Treasury bills and federal funds.
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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 three-month Treasury bill rate. Rates and
clearing balance levels used in the 2012 projected NICB are based on
July 2011 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 $1.0 million for 2012, including earnings
on imputed reserve requirements.\13\ 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 section of
this memo ``Analysis of the 2012 PSAF'' for more information on the
interest rate sensitivity analysis results and the effect on the 2012
NICB.
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\13\ The 2011 NICB was initially budgeted to be $1.2 million and
the estimate is consistent with the budget.
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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.\14\ 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 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.
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\14\ The largest portion of the PSAF, the target ROE,
historically has been fixed. Imputed sales tax, income tax, and the
FDIC assessment are recalculated at the end of each year to adjust
for actual expenditures, net income, and clearing balance levels.
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3. Analysis of the 2012 PSAF--The decrease in the 2012 PSAF is due

[[Page 68445]]

primarily to a reduction in the level of imputed equity associated with
a decrease in assets and credit float.
Projected 2012 Federal Reserve priced-services assets, reflected in
table 3, have decreased $850.8 million, mainly due to a decline in
imputed investments in marketable securities of $477.9 million as a
result of lower expected credit float. The priced services balance
sheet includes projected clearing balances of $2,661.1 million for
2012, which represents an increase of $60.8 million from the amount of
clearing balances on the balance sheet for the budgeted 2011 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 2012.
Credit float, which represents the difference between items in
process of collection and deferred credit items, decreased from
$1,800.0 million in 2011 to $1,100.0 million in 2012.\15\ The decrease
is primarily a result of credit float generated by a less use of Check
21 deferred-availability products.
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\15\ Credit float occurs when the Reserve Banks present
transactions to the paying bank prior to providing credit to the
depositing bank.
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As previously mentioned, clearing balances are available as a
funding source for priced-services assets. As shown in table 4, in
2012, $19.2 million in clearing balances is used as a funding source
for short-term assets. Long-term liabilities and equity exceed long-
term assets by $124.9 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.\16\ 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.
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\16\ Interest rate sensitive assets and liabilities are defined
as those balances that will reprice within a year.
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The interest rate sensitivity analysis shown in table 5 indicates
that a 200 basis point decrease in rates decreases cost recovery 3.9
percentage points, while an increase of 200 basis points in rates
increases cost recovery 3.8 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 the projected level of credit float in 2011. The
results of the analysis have the following effects on the 2012 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 and 2012 PSAF, however, the mismatch arises from the level of
credit float rather than the use of clearing balances to fund long-term
assets. If the Board were to impute debt for the 2012 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 2012 PSAF. Imputed
debt is 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 2012 PSAF is $234.7 million, a decrease of $42.5
million from the imputed equity for 2011. In accordance with FAS 158
[ASC 715], this amount includes an accumulated other comprehensive loss
of $537.7 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.\17\ The Reserve Banks imputed
an FDIC assessment for the priced services based on the FDIC's
assessment rates and the level of total priced services assets held at
Reserve Banks.\18\ For 2012, the FDIC assessment is imputed at $2.2
million, compared with an FDIC assessment of $5.3 million in 2011.
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\17\ In December 2006, the Board, the FDIC, the Office of the
Comptroller of the Currency, and the Office of Thrift Supervision
announced an interim ruling that excludes FAS 158 [ASC 715]-related
accumulated other comprehensive income or losses from the
calculation of regulatory capital. The Reserve Banks, however,
elected to impute total equity at 5 percent of assets, as indicated
above, until the regulators announce a final ruling.
\18\ The FDIC changed the base of its assessments from deposits
to total assets. For information on the FDIC assessment rates, see
the Final Rule at http://www.fdic.gov/news/news/press/2011/pr11028.html.
---------------------------------------------------------------------------

Table 6 shows the imputed PSAF elements for 2012 and 2011,
including the pretax ROE and other required PSAF costs. The $4.9
million decrease in ROE is caused by a lower amount of imputed equity
and a lower target ROE rate. Imputed sales taxes decreased from $4.2
million in 2011 to $3.7 million in 2012. The effective income tax rate
used in 2012 decreased to 30.9 percent from 32.4 percent in 2011. The
priced services portion of the Board's expenses decreased $1.1 million,
from $5.2 million in 2011 to $4.1 million in 2012.

Table 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal
Reserve Priced Services \19\
[Millions of dollars--projected average for year]
------------------------------------------------------------------------
2012 2011 Change
------------------------------------------------------------------------
Short-term assets:
Imputed reserves requirements on $376.1 $440.0 $(63.9)
reserveable liabilities...........
Receivables........................ 36.3 41.4 (5.1)
Materials and supplies............. 0.9 1.5 (0.6)
Prepaid expenses................... 10.3 7.6 2.7

[[Page 68446]]

Items in process of collection \20\ 250.0 300.0 (50.0)
--------------------------------
Total short-term assets........ 673.6 790.5 (116.9)
Imputed investments.................... 3,490.7 3,968.6 (477.9)
Long-term assets:
Premises \21\...................... 148.2 173.1 (24.9)
Furniture and equipment............ 36.3 43.2 (6.9)
Leasehold improvements and long- 75.9 68.2 7.7
term prepayments..................
Prepaid pension costs.............. ......... 299.8 (299.8)
Prepaid FDIC asset................. 19.4 10.9 8.5
Deferred tax asset................. 249.1 189.7 59.4
--------------------------------
Total long-term assets......... 528.9 784.9 (256.0)
--------------------------------
Total assets................... 4,693.2 5,544.0 (850.8)
================================
Short-term liabilities: \22\
Clearing balances.................. 2,661.1 2,600.3 60.8
Deferred credit items \20\......... 1,350.0 2,100.0 (750.0)
Short-term payables................ 28.3 35.0 (6.7)
--------------------------------
Total short-term liabilities... 4,039.4 4,735.3 (695.9)
Long-term liabilities: \22\
Postemployment/postretirement 419.1 531.5 (112.4)
benefits liability and pension
liabilities \23\..................
--------------------------------
Total liabilities.............. 4,458.5 5,266.8 (808.3)
Equity \24\............................ 234.7 277.2 (42.5)
--------------------------------
Total liabilities and equity... 4,693.2 5,544.0 (850.8)
------------------------------------------------------------------------

---------------------------------------------------------------------------

\19\ The 2011 PSAF values in tables 3, 4, and 6 reflect the
budgeted 2011 PSAF of $39.5 million approved by the Board in October
2010.
\20\ Represents float that is directly estimated at the service
level.
\21\ Includes the allocation of Board of Governors assets to
priced services of $0.6 million and $0.7 million for 2012 and 2011,
respectively.
\22\ No debt is imputed because clearing balances are a funding
source.
\23\ Includes the allocation of Board of Governors liabilities
to priced services of $0.5 million and $0.5 million for 2012 and
2011, respectively. Includes pension liabilities of $4.1 and $0.0
million for 2012 and 2011, respectively.
\24\ Includes an accumulated other comprehensive loss of $537.7
million for 2012 and $343.2 million for 2011, which reflects the
ongoing amortization of the accumulated loss in accordance with FAS
158 [ASC 715]. Future gains or losses, and their effects on the pro
forma balance sheet, cannot be projected.

Table 4--Portion of Clearing Balances Used To Fund Priced-Services
Assets
[Millions of dollars]
------------------------------------------------------------------------
2012 2011
------------------------------------------------------------------------
A. Short-term asset financing
Short-term assets to be financed:
Receivables................................... $36.3 $41.4
Materials and supplies........................ 0.9 1.5
Prepaid expenses.............................. 10.3 7.6
---------------------
Total short-term assets to be financed.... 47.5 50.5
Short-term funding sources:
Short-term payables........................... 28.3 35.0
Portion of short-term assets funded with 19.2 15.5
clearing balances \25\.......................
B. Long-term asset financing
Long-term assets to be financed:
Premises...................................... 148.2 173.1
Furniture and equipment....................... 36.3 43.2
Leasehold improvements and long-term 75.9 68.2
prepayments..................................
Prepaid pension costs......................... ......... 299.8
Prepaid FDIC asset............................ 19.4 10.9
Deferred tax asset............................ 249.1 189.7
---------------------
Total long-term assets to be financed..... 528.9 784.9
Long-term funding sources:
Postemployment/postretirement benefits 419.1 531.5
liability....................................

[[Page 68447]]

Imputed equity \26\........................... 234.7 277.2
---------------------
Total long-term funding sources........... 653.8 808.7
Portion of long-term assets funded with core 0.0 0.0
clearing balances \25\.......................
=====================
C. Total clearing balances used for funding priced- 19.2 15.5
services assets..................................
------------------------------------------------------------------------

---------------------------------------------------------------------------

\25\ Clearing balances shown in table 3 are available for
financing priced-services assets. Using these balances reduces the
amount available for investment in the NICB calculation. Long-term
assets are financed with long-term liabilities, equity, and core
clearing balances; a total of $1 billion in clearing balances is
available for this purpose in 2011 and 2012, respectively. Short-
term assets are financed with short-term payables and clearing
balances not used to finance long-term assets. No short- or long-
term debt is imputed.
\26\ See table 6 for calculation of required imputed equity
amount.

Table 5--2012 Interest Rate Sensitivity Analysis \27\
[Millions of dollars]
----------------------------------------------------------------------------------------------------------------
Rate
Rate sensitive insensitive Total
----------------------------------------------------------------------------------------------------------------
Assets:
Imputed reserve requirement on clearing balances............ $ 376.1 .............. $376.1
Imputed investments......................................... 3,490.7 .............. 3,490.7
Receivables................................................. .............. $36.3 36.3
Materials and supplies...................................... .............. 0.9 0.9
Prepaid expenses............................................ .............. 10.3 10.3
Items in process of collection.............................. .............. 250.0 250.0
Long-term assets............................................ .............. 528.9 528.9
-----------------------------------------------
Total assets............................................ 3,866.8 826.4 4,693.2
===============================================
Liabilities:
Clearing balances........................................... 2,661.1 .............. 2,661.1
Deferred credit items....................................... .............. 1,350.0 1,350.0
Short-term payables......................................... .............. 28.3 28.3
Long-term liabilities....................................... .............. 419.1 419.1
-----------------------------------------------
Total liabilities....................................... 2,661.1 1,797.4 4,458.5
----------------------------------------------------------------------------------------------------------------

200 basis 200 basis
Rate change results point decrease point increase
in rates in rates
------------------------------------------------------------------------
Asset yield ($4,408.4 x rate change).... $(77.3) $77.3
Liability cost ($2,600.3 x rate change). (53.2) 53.2
-------------------------------
Effect of 200 basis point change.... (24.1) 24.1
===============================
2012 budgeted revenue................... 436.7 436.7
Effect of change........................ (24.1) 24.1
-------------------------------
Revenue adjusted for effect of 412.6 460.8
interest rate change...............
===============================
2012 budgeted total expenses............ 401.9 401.9
2012 budgeted PSAF...................... 31.4 31.4
Tax effect of interest rate change ($ (7.5) 7.5
change x 30.9%)........................
-------------------------------
Total recovery amounts.............. 425.8 440.8
-------------------------------
Recovery rate before interest rate 100.8% 100.8%
change.................................
Recovery rate after interest rate change 96.9% 104.5%
Effect of interest rate change on cost (3.9)% 3.8%
recovery \28\..........................
------------------------------------------------------------------------

---------------------------------------------------------------------------

\27\ The interest rate sensitivity analysis evaluates the level
of interest rate risk presented by the difference between rate-
sensitive assets and rate-sensitive liabilities. The analysis
reviews the ratio of rate-sensitive assets to rate-sensitive
liabilities and the effect on cost recovery of a change in interest
rates of up to 200 basis points. Calculations may be affected by
rounding.
\28\ The effect of a potential change in rates is greater than a
two percentage point change in cost recovery; however, no long-term
debt is imputed for 2012 because the priced services have adequate
funding sources. See the section of the memo ``Analysis of the 2012
PSAF'' for more information on the interest rate sensitivity
analysis results and its effect on the 2012 PSAF and NICB.

[[Page 68448]]

Table 6--Derivation of the 2012 and 2011 PSAF
[Millions of dollars]
------------------------------------------------------------------------
2012 2011
------------------------------------------------------------------------
A. Imputed elements
Short-term debt \29\................ $0.0 $0.0
Long-term debt \30\................. 0.0 0.0
Equity..............................
Total assets from table 3....... 4,693.2 5,544.0
Required capital ratio \31\..... 5% 5%
-------------------------------
Total equity................ 234.7 277.2
B. Cost of capital
1. Financing rates/costs
Short-term debt..................... N/A N/A
Long-term debt...................... N/A N/A
Pretax return on equity \32\........ 8.5% 8.9%
2. Elements of capital costs
Short-term debt..................... 0.0 0.0
Long-term debt...................... 0.0 0.0
Equity.......................... 234.7 x 8.5% = 277.2 x 8.9%
19.9 =24.8
19.9 24.8
C. Other required PSAF costs
Sales taxes......................... 3.7 4.2
FDIC assessment..................... 2.2 5.3
Board of Governors expenses......... 4.1 5.2
10.0 14.7
-------------------------------
D. Total PSAF........................... 29.9 39.5
-------------------------------
As a percent of assets.............. 0.6% 0.7%
As a percent of expenses \33\....... 6.5% 8.9%
-------------------------------
E. Tax rates............................ 30.9% 32.4%
------------------------------------------------------------------------

---------------------------------------------------------------------------

\29\ No short-term debt is imputed because clearing balances are
a funding source for those assets that are not financed with short-
term payables.
\30\ No long-term debt is imputed because core clearing balances
are a funding source.
\31\ Based on the regulatory requirements for a well-capitalized
institution for the purpose of assessing insurance premiums.
\32\ The 2012 ROE is equal to a risk-free rate plus a risk
premium (beta * market risk premium). The 2012 after-tax CAPM ROE is
calculated as 0.04% + (1 * 5.83%) = 5.87%. Using a tax rate of
30.9%, the after-tax ROE is converted into a pretax ROE, which
results in a pretax ROE of (5.87% / (1-30.9%)) = 8.5%. Calculations
may be affected by rounding.
\33\ System 2012 and 2011 budgeted priced services expenses less
shipping and float are $430.8 million and $441.7 million,
respectively. A new methodology was adopted for the estimation of
budgeted priced services in 2012.

Table 7--Computation of 2012 Capital Adequacy for Federal Reserve Priced
Services
[millions of dollars]
------------------------------------------------------------------------
Weighted
Assets Risk weight assets
------------------------------------------------------------------------
Imputed reserve requirement on $376.1 0.0 $0.0
clearing balances...............
Imputed investments:
3-month Treasury bills \34\.. 2,390.7 0.0 0.0
Federal funds \35\........... 1,100.0 0.2 220.0
--------------------------------------
Total imputed investments 3,490.7 ........... 220.0
--------------------------------------
Receivables...................... 36.3 0.2 7.3
Materials and supplies........... 0.9 1.0 0.9
Repaid expenses.................. 10.3 1.0 10.3
Items in process of collection... 250.0 0.2 50.0
Premises......................... 148.2 1.0 148.2
Furniture and equipment.......... 36.3 1.0 36.3
Leasehold improvements and long- 75.9 1.0 75.9
term prepayments................
Prepaid pension costs............ ........... 1.0 ...........
Prepaid FDIC asset............... 19.4 1.0 19.4
Deferred tax asset............... 249.1 1.0 249.1
--------------------------------------

[[Page 68449]]

Total........................ $4,693.2 ........... $817.4
======================================
Imputed equity for 2012.......... $234.7 ........... ...........
Capital to risk-weighted assets.. 28.7% ........... ...........
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.\36\
---------------------------------------------------------------------------

\34\ The imputed investments are similar to those for which
rates are available on the Federal Reserve's H.15 statistical
release, which can be located at http://www.federalreserve.gov/releases/h15/data.htm.
\35\ The investments are computed from the amounts arising from
the collection of items prior to providing credit according to
established availability schedules. These imputed amounts are
invested in federal funds.
\36\ The Board has requested public comment on proposed
amendments to Regulation D to eliminate the clearing balance
program. If the Board adopts these amendments, effective during
2012, the clearing balances would be redesignated as excess
reserves, and would be subject to explicit interest, rather than
earnings credits. See 76 FR 64250-64259 (Oct. 18, 2011).
---------------------------------------------------------------------------

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 earnings 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.\37\
---------------------------------------------------------------------------

\37\ A band is established around the contracted clearing
balance to determine the maximum balance on which credits are earned
as well as any deficiency charges. The clearing balance allowance is
2 percent of the contracted amount or $25,000, whichever is greater.
Earnings credits are based on the period-average balance maintained
up to a maximum of the contracted amount plus the clearing balance
allowance. Deficiency charges apply when the average balance falls
below the contracted amount less the allowance, although credits are
still earned on the average maintained balance.
---------------------------------------------------------------------------

D. Check Service--Table 8 shows the 2010 actual, 2011 estimated,
and 2012 budgeted cost recovery performance for the commercial check
service.

Table 8--Check Service Pro Forma Cost and Revenue Performance
[$ millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 Recovery rate
Year 1 Revenue 2 Total expense 3 Net income 4 Targeted roe after targeted
(ROE) [1-2] [1/(2+4)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010 (actual)................................................. 358.4 326.5 31.9 8.1 107.1%
2011 (estimate)............................................... 254.8 237.1 17.7 8.8 103.6%
2012 (budget)................................................. 209.1 200.4 8.6 6.5 101.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

1. 2011 Estimate--For 2011, the Reserve Banks estimate that the
check service will recover 103.6 percent of total expenses and targeted
ROE, compared with the budgeted recovery rate of 102.9 percent. The
Reserve Banks expect to recover all actual and imputed costs of
providing check services and earn a net income of $17.7 million (see
table 8).
The general decline in the number of checks written continues to
influence the decline in checks collected by the Reserve Banks. Through
September, total forward check volume and return check volume is 14
percent and 17 percent lower, respectively, than the same period last
year. For full-year 2011, the Reserve Banks estimate that their total
forward check collection volume will decline nearly 16 percent and
return check volume will decline 15 percent from 2010 levels.\38\ The
proportion of checks deposited and presented electronically has grown
steadily in 2011 (see table 9). The Reserve Banks expect that year-end
2011 FedForward deposit and FedReceipt presentment penetration rates
will reach 99.9 percent and 99.6 percent, respectively. The Reserve
Banks also expect that year-end 2011 FedReturn and FedReceipt Return
volume penetration rates will reach 98.8 percent and 99.1 percent,
respectively.
---------------------------------------------------------------------------

\38\ Total Reserve Bank forward check volumes are expected to
drop from roughly 7.7 billion in 2010 to 6.4 billion in 2011. Total
Reserve Bank return check volumes are expected to drop from roughly
73.2 million in 2010 to 62.3 million in 2011.

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

[[Page 68450]]

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............................................ 99.4 99.7 95.8 98.9 94.3 96.2 65.4 80.0
2011 (estimate)................................. 99.9 99.9 99.5 99.6 97.9 98.8 87.2 99.1
2012 (budget)................................... > 99.9 99.9 99.7 99.8 99.3 99.3 99.1 99.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 estimate and 2012 budget, volume associated with the delivery of
returned checks in PDF files is included in FedReceipt Return volume.

2. 2012 Pricing--In 2012, the Reserve Banks project that the check
service will recover 101.0 percent of total expenses and targeted ROE.
Revenue is projected to be $209.1 million, a decline of $45.7 million
from 2011. This decline is driven largely by projected reductions in
both forward check collection and return check volume. Total expenses
for the check service are projected to be $200.4 million, a decline of
$36.7 million from 2011. The reduction in check costs is driven
primarily by the cost savings associated with a mature electronic check
environment and the implementation of a more efficient check processing
platform.
The Reserve Banks estimate that total Reserve Bank forward check
volumes and return check volumes will decline approximately 14 percent,
to 5.5 billion and 53.5 million, 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 will reduce by half the number of forward and
return deadlines from 8 to 4 and 4 to 2, respectively, to respond to
customer requests for a simplified deadline structure. The Reserve
Banks will also eliminate the presort deposit options, which result in
higher per item fees for those depositors. Reserve Banks project far
fewer cash letters will be submitted in 2012 and that cash letters that
are submitted will have a larger number of items per cash letter thus
decreasing the per item cash letter fee. Savings in cash letter fees
are partially offset by a 4 percent increase in FedForward fees for
checks presented electronically and a 2 percent increase in FedForward
fees for checks presented as substitute checks, resulting in only a
modest increase in the per item weighted effective average fee (see
Table 10).\39\
---------------------------------------------------------------------------

\39\ FedForward is the electronic forward check collection
product. A substitute check is a paper reproduction of an original
check that contains an image of the front and back of the original
check and is suitable for automated processing in the same manner as
the original check.
---------------------------------------------------------------------------

The Reserve Banks will retain at current levels FedReturn fees for
checks returned electronically and for endpoints that receive
substitute checks.\40\ The effective average fee paid by FedReturn
depositors will decrease approximately 16 percent as the number of
institutions that accept their returns electronically increases. The
effective average fee for forward collection and returned checks that
are deposited with Reserve Banks in electronic form and presented in
electronic form is projected to be $0.02 and $0.57, respectively.
---------------------------------------------------------------------------

\40\ FedReturn is the electronic check return product.
---------------------------------------------------------------------------

The Reserve Banks project that approximately 0.02 percent of check
forward deposit volume and approximately 0.74 percent of return check
volume will be in traditional paper-based products. The effective
average fee for forward collection and returned checks that are
deposited with Reserve Banks in paper form is projected to be $5.29 and
$10.31, respectively, which reflects the high costs of handling the
small remaining paper volume. The Reserve Banks will retain paper check
collection fees at their current levels.

Table 10--2012 Fee Changes
----------------------------------------------------------------------------------------------------------------
2011 Effective 2012 Effective Fee change
average fee average fee (percent)
----------------------------------------------------------------------------------------------------------------
FedForwarder:
Per item cash letter fee.............................. $0.0017 $0.0015 -8
Electronic endpoints.................................. 0.0188 0.0196 4
Substitute check endpoints............................ 0.1304 0.1329 2
Weighted effective average fee a b................ $0.0213 $0.0215 1
FedReturn:
Per item cash letter fee.............................. 0.0902 0.0755 -16
Electronic endpoints..................................
FedReceipt........................................ 0.4300 0.4285 0
PDF............................................... 0.8500 0.8500 0
Substitute check endpoints........................ 1.3999 1.4000 <1
Weighted effective average fee a b................ 0.6826 0.5728 -16

[[Page 68451]]

Paper: c
Forward collection.................................... 1.8020 5.2938 194
Returns............................................... $6.9624 $10.3100 48
----------------------------------------------------------------------------------------------------------------
\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 2011 and projected for full-year 2012.
\c\ The effective average fee reflects the respective per item cash letter fee.

The Reserve Banks will charge for two categories of adjustments:
Encoding errors and a subset of non-conforming items. The fees are
$5.00 for each encoding error and for each non-conforming item up to 20
items. If a non-conforming item adjustment request includes more than
20 instances of the same edit failure, then a flat fee of $125 will be
charged for the group of non-conforming items. The fees will be charged
to the depositor. The pricing strategy is designed to increase the
efficiency of Reserve Bank operations, improve the efficiency of the
adjustment process, and reduce the risk associated with the check
payments system. The implementation date has not been finalized.
Risks to the Reserve Banks' ability to achieve budgeted 2012 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 technology
upgrades.
E. FedACH Service--The table below shows the 2010 actual, 2011
estimate, and 2012 budgeted cost-recovery performance for the
commercial FedACH service.

Table 11--FedACH Service Pro Forma Cost and Revenue Performance
[$ millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 Recovery rate
Year 1 Revenue 2 Total expense 3 Net income 4 Targeted ROE after targeted
(ROE) [1-2] ROE [1/(2+4)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010 (actual)................................................. 111.5 105.2 6.3 2.6 103.4%
2011 (estimate)............................................... 110.3 106.0 4.3 4.1 100.2%
2012 (budget)................................................. 112.6 108.4 4.2 3.6 100.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------

1. 2011 Estimate--The Reserve Banks estimate that the FedACH
service will recover 100.2 percent of total expenses and targeted ROE.
The Reserve Banks expect to recover all actual and imputed costs of
providing FedACH services and earn net income of $4.3 million. Through
September, FedACH commercial origination volume was nearly 1 percent
higher than it was during the same period last year. For the full year,
the Reserve Banks estimate that volume growth will continue at current
trends.
2. 2012 Pricing--The Reserve Banks project that the FedACH service
will recover 100.5 percent of total expenses and targeted ROE in 2012.
Total revenue and total expenses are budgeted to increase $2.3 million
and $2.4 million, respectively. The Reserve Banks expect both FedACH
commercial origination and receipt volume to grow approximately 2.5
percent in 2012.
The Reserve Banks will maintain core transaction fees at current
levels with one exception. The Reserve Banks will increase the per item
fee charged to receivers of ACH returns from $0.0025 to $0.005.
Additionally, the Reserve Banks will increase fees for select value
added services. Specifically, the Reserve Banks will increase per item
fees for FedLine Web origination returns and notification of change,
monthly fees for information extract file, and the IAT output file sort
fee. The National Automated Clearing House Association (NACHA) will
also increase the per entry network administration fee. The Reserve
Banks estimate that the effective price will remain at the 2011 level.
Risks to the Reserve Banks' ability to achieve budgeted 2012 cost
recovery for the FedACH service include greater-than-expected volume
losses due to unanticipated mergers and acquisitions, direct exchanges,
and the competitive environment, which could result in lower-than-
anticipated revenue, and cost overruns associated with unanticipated
problems with technology upgrades.
F. Fedwire Funds and National Settlement Services--Table 12 shows
the 2010 actual, 2011 estimate, and 2012 budgeted cost-recovery
performance for the Fedwire Funds and National Settlement Services.

Table 12--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
[$ millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 Recovery rate
Year 1 Revenue 2 Total expense 3 Net income 4 Targeted ROE after targeted
(ROE) [1-2] ROE [1/(2+4)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010 (actual)................................................. 80.3 77.9 2.4 1.9 100.6%

[[Page 68452]]

2011 (estimate)............................................... 83.4 79.1 4.3 3.0 101.5%
2012 (budget)................................................. 88.9 86.1 2.8 2.8 100.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

1. 2011 Estimate--The Reserve Banks estimate that the Fedwire Funds
and National Settlement Services will recover 101.5 percent of total
expenses and targeted ROE, compared with a 2011 budgeted recovery rate
of 100.5 percent. Through September, online Fedwire Funds volume was up
2.2 percent from the same period in 2010. For the full year, the
Reserve Banks estimate that online Fedwire Funds volume will decline by
0.9 percent. With respect to the National Settlement Service, the
volume of settlement files decreased 6.2 percent while the volume of
settlement file entries increased 8.3 percent through September. For
the full year, the Reserve Banks estimate that the volume of settlement
files will decrease by 7.2 percent while the volume of settlement
entries will increase by 4.7 percent.
2. 2012 Pricing--The Reserve Banks expect the Fedwire Funds and
National Settlement Services to recover 100.0 percent of total expenses
and targeted ROE in 2012. The Reserve Banks project total expenses to
increase $7.0 million from the 2011 estimate. This increase is
primarily due to technology upgrades and related infrastructure
projects, and the establishment of a program management office to
support these projects. The Reserve Banks project total revenue to
increase $5.5 million from the 2011 estimate. This projected revenue
increase is primarily due to the implementation of new fees for Fedwire
Funds and price increases for both the Fedwire Funds and the National
Settlement Services.
The Reserve Banks will implement two new fees for the Fedwire Funds
Service. First, a high-value transfer per item fee of $0.12 will apply
to both senders and receivers of transfers that exceed $10 million.\41\
This high-value transfer surcharge is expected to increase revenue for
the Fedwire Funds Service by $0.9 million.\42\ Second, a payment
notification per item fee of $0.20 will apply to transfers sent that
contain any data in the new field tag {3620{time} that supports
payment notification and tracking. The Reserve Banks assume no new
revenue increases as a result of the payment notification
surcharge.\43\ In calculating projected Fedwire Funds revenue for 2012,
the Reserve Banks project flat volume growth.
---------------------------------------------------------------------------

\41\ The Reserve Banks estimate that 2.96 percent of Funds
transfers are valued at $10 million or greater.
\42\ Nearly 80 percent of the projected increase in revenue will
come from the largest Fedwire participants that are included in the
CRSO's National Account Program. About 160 out of more than 6,000
Funds participants will experience price increases more than 1
percent. About 100 participants will experience price increases
greater than 2 percent while 20 participants will have price
increases ranging between 7 and 30 percent.
\43\ For cost recovery purposes, the Reserve Banks project no
new revenue increases due to uncertainty regarding precisely how
much payment notification volume will be generated once this service
is introduced. The Reserve Banks, however, estimate that the
surcharge could potentially raise roughly $250 thousand per year if
notification features are used one percent of the time.
---------------------------------------------------------------------------

The implementation of the high-value transfer surcharge is
consistent with the Reserve Banks' objective to maintain the safety and
resilience of the Fedwire Funds Service, which is especially important
for funds transfers that are of high value. Although only about 3
percent of Fedwire Funds transfers are valued at $10 million or more,
these transfers collectively account for roughly 95 percent of the
value settled by the Fedwire Funds Service. The Reserve Banks believe
that the high-value transfer surcharge is an equitable way to shift
more of the cost associated with Fedwire resiliency to those payments
that drive the need for such resiliency. The implementation of the
payment notification surcharge is consistent with the Reserve Banks'
goals of improving their ability to retain existing business and
attract new volume by aligning the services provided by the Reserve
Banks with the evolving needs of their customers.
In addition to implementing the two new surcharges mentioned above,
the Reserve Banks will adjust various fees for the Fedwire Funds
Service. First, the Reserve Banks will increase the Tier 1 per item
pre-incentive fee from $0.52 to $0.58, the Tier 2 per item pre-
incentive fee from $0.23 to $0.24, and the Tier 3 per item pre-
incentive fee from $0.13 to $0.135.\44\ Second, the Reserve Banks will
increase the end-of-day origination surcharge from $0.18 to $0.20.
Third, the Reserve Banks will increase the Fedwire Funds monthly
participation fee from $75 to $85. Lastly, the Reserve Banks will
increase the FedLine Advantage import/export monthly fee from $10 to
$20. The Reserve Banks estimate that the new surcharges and price
increases will result in an effective price increase of approximately 9
percent.
---------------------------------------------------------------------------

\44\ The per item pre-incentive fee is the fee that the Reserve
Banks charge for transfers that do not qualify for incentive
discounts. The Tier 1 per item pre-incentive fee applies to the
first 14,000 transfers, the Tier 2 per item pre-incentive fee
applies to the next 76,000 transfers, and the Tier 3 per item pre-
incentive fee applies to any additional transfers. The Reserve Banks
apply an 80 percent incentive discount to every transfer over 50
percent of a customer's historic benchmark volume. A summary of the
incentive fee structure is provided in a footnote in the Fedwire
Funds and National Settlement Services fee schedule.
---------------------------------------------------------------------------

With respect to the National Settlement Service, the Reserve Banks
will increase the NSS file fee from $20 to $21 and the per entry fee
from $0.90 to $1.00. In calculating projected NSS revenue for 2012, the
Reserve Banks project flat volume growth.
G. Fedwire Securities Service--Table 13 shows the 2010 actual, 2011
estimate, and 2012 budgeted cost recovery performance for the Fedwire
Securities Service.\45\
---------------------------------------------------------------------------

\45\ The Reserve Banks provide transfer services for securities
issued by the U.S. Treasury, federal government agencies,
government-sponsored enterprises, and certain international
institutions. The priced component of this service, reflected in
this memorandum, consists of revenues, expenses, and volumes
associated with the transfer of all non-Treasury securities. For
Treasury securities, the U.S. Treasury assesses fees for the
securities transfer component of the service. The Reserve Banks
assess a fee for the funds settlement component of a Treasury
securities transfer; this component is not treated as a priced
service.

[[Page 68453]]

Table 13--Fedwire Securities Service Pro Forma Cost and Revenue Performance
[$ millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 Recovery rate
Year 1 Revenue 2 Total expense 3 Net income 4 Targeted ROE after targeted
(ROE) [1-2] ROE [1/(2+4)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010 (actual)................................................. 24.4 23.2 1.2 0.6 102.8%
2011 (estimate)............................................... 22.9 22.0 0.9 0.8 100.4%
2012 (budget)................................................. 26.1 24.6 1.4 0.8 102.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------

1. 2011 Estimate--The Reserve Banks estimate that the Fedwire
Securities Service will recover 100.4 percent of total expenses and
targeted ROE, compared with a 2011 budgeted recovery rate of 106.5
percent. The lower-than-budgeted recovery is primarily attributed to
higher-than-expected costs associated with technology upgrades and
infrastructure projects. Through September, online securities volume
was down 5.3 percent from the same period in 2010. For the full year,
the Reserve Banks estimate that online Fedwire Securities volume will
decline by 8.9 percent.
2. 2012 Pricing--The Reserve Banks project that the Fedwire
Securities Service will recover 102.5 percent of total expenses and
targeted ROE in 2012. The Reserve Banks project that 2011 revenue and
expenses will increase by $3.2 million and $2.6 million, respectively,
compared with the 2011 estimates.\46\ In calculating projected Fedwire
Securities revenue for 2012, the Reserve Banks project flat volume
growth.
---------------------------------------------------------------------------

\46\ As with Fedwire Funds, estimated increases in expenses for
the Fedwire Securities Service are primarily due to technology
upgrades and infrastructure projects. The Reserve Banks expect peak
costs associated with these efforts to occur in 2013-2014.
---------------------------------------------------------------------------

The Reserve Banks will adjust various fees for the Fedwire
Securities Service. First, the Reserve Banks will increase the online
transfer fee from $0.35 to $0.45. Second, the Reserve Banks will
increase the monthly account maintenance fee from $36 to $40 and the
monthly issue maintenance fee from $0.40 to $0.45 per issue. Third, the
Reserve Banks will increase the offline surcharge from $60 to $66.
Lastly, the Reserve Banks will increase the claim adjustment fee from
$0.60 to $0.66.
The Reserve Banks' 2012 Fedwire Securities Service fees are
consistent with their multi-year cost projections for a pricing
strategy that takes into account technology upgrades and infrastructure
projects. Under this approach, the Reserve Banks are targeting a 102.5
percent recovery rate for 2012, which would result in an effective
price increase of approximately 11 percent.
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:
FedPhone[reg], FedMail[reg], FedLine Web[reg], FedLine Advantage[reg],
FedLine Command[reg], and FedLine Direct[reg].\47\ The Reserve Banks
package these channels into ten electronic access packages that are
supplemented by a number of premium (or a la carte) access and
accounting information options. In addition, the Reserve Banks offer
three FedComplete packages, which are bundled offerings of a FedLine
Advantage connection and a fixed number of FedACH, Fedwire Funds, and
Check 21-enabled services.
---------------------------------------------------------------------------

\47\ FedLine Direct, FedLine Command, FedLine Advantage, FedLine
Web, FedMail, and FedPhone are registered trademarks of the Federal
Reserve Banks. These connections may also be used to access
nonpriced services provided by the Reserve Banks.
---------------------------------------------------------------------------

The FedPhone access package provides a telephone link to the FedACH
services'' automated voice response system, which is used to submit
return items and notifications of change. The other access packages are
broken into attended and unattended offerings.
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 two FedLine Web packages offer FedMail e-mail options plus
online attended access to a broad range of informational services,
including cash services, FedACH services, and check services. Three
FedLine Advantage packages expand upon the FedLine Web informational
service packages and offer attended access to transactional services:
Check, 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, which allow for unattended connections at one
of three connection speeds to Check, FedACH, Fedwire Funds, and Fedwire
Securities transactional and information services and to most
accounting information services.
For 2012, the Reserve Banks will introduce a new package to and
increase the fees for select FedLine packaged solutions, to better meet
their customers'' needs for access options, delivery solutions, and
information services and to address increasing costs. The new package,
FedLine Advantage Premier, priced at $500 per month, will accommodate
the growth and expansion of value-add services as cross-business risk
and information services expand. For example, the Transaction Analyzer
service will be tiered based on a customers'' transaction volume with
the top volume tiers covered by the new FedLine Advantage Premier
package. In addition, the Reserve Banks will begin to charge $15 per
month for FedPhone for current customers that use the FedPhone channel
to access the Reserve Banks'' priced services; the introduction of this
fee supports the Reserve Banks'' strategic direction of moving to Web-
based electronic access. The Reserve Banks will also charge an
additional $20 per month for the FedLine Advantage Plus packages, $100
per month for the FedLine Command Plus packages, $250 per month for
FedLine Direct packages, and $200 per month for the FedLine Direct
Premier packages.
In addition to raising the fees for select electronic access
packages, the Reserve Banks will make other changes to electronic
access pricing for 2012. In particular, the Reserve Banks will raise
the monthly fees for additional dedicated electronic access
connections, specifically, the 56K, T1, and VPN surcharge by $250,
$150, and $25, respectively, to align with an increase in

[[Page 68454]]

costs. The FedLine international one-time setup fee will increase from
$1,000 to $5,000.\48\ The Reserve Banks will also increase the monthly
fees for accounting information services basic reports to improve the
alignment of value and revenue.

II. Analysis of Competitive Effect
---------------------------------------------------------------------------

\48\ The one-time set up fee is generally for customers who are
moving a particular part of their operation overseas. The overseas
users establish credentials that require significant administrative
and legal resources to complete.
---------------------------------------------------------------------------

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.'' \49\ 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.
---------------------------------------------------------------------------

\49\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------

The Board projects that the 2012 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 similar 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 2012 Fee Schedule
[Effective January 3, 2012.]
[Bold indicates changes from 2011 prices.]
----------------------------------------------------------------------------------------------------------------
Fee
----------------------------------------------------------------------------------------------------------------
FedACH minimum monthly fee: \50\
ODFI................................................. $35.00
RDFI................................................. $25.00
Origination (per item or record): \51\
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): \52\
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......................................... $0.005
Addenda record....................................... $0.0015
FedACH SameDay Service
Origination: 53 54
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: \55\
Forward item......................................... $0.0025
Addenda record/return addenda record................. $0.0015
Return item.......................................... $0.0025
FedACH Risk Management Services: \56\
Risk origination monitoring criteria:
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
Basic receiver setup report (previously RDFI Quick Included in access fee.
Scan).
Standard reports:
Scheduled report generated........................... $0.20/report.
On demand report generated........................... $0.75/report.
Premier reports:
Monthly ACH routing number activity report:..............
Reports 1 through 5.................................. $10.00/report.
Reports 6 through 10................................. $6.00/report.
Reports 11+.......................................... $1.00/report.
Daily return ratio report:
Reports 1 through 200................................ $0.35/report.
Reports 201 through 1000............................. $0.20/report.
Reports 1001+........................................ $0.10/report.
Monthly return ratio report:
Reports 1 through 10................................. $6.00/report.

[[Page 68455]]

Reports 11 through 50................................ $3.00/report.
Reports 51+.......................................... $1.00/report.
On-us inclusion:
Participation fee.................................... $10.00/month/RTN.
Per item fee......................................... $0.0030.
Per addenda fee...................................... $0.0015.
Report delivery options:
Via encrypted e-mail................................. $0.20/e-mail.
Via FedLine file access solution..................... $0.30/report.
Monthly fee (per routing number):
Account servicing fee \57\........................... $37.00
FedACH settlement \58\............................... $45.00
Information extract file............................. $100.00
IAT Output File Sort................................. $50.00
FedLine Web origination returns and notification of $0.35
change (NOC) fee \59\.
Voice response returns/NOC fee \60\.................. $6.00
Automated NOC fee \61\............................... $0.15
Non-electronic input/output fee: \62\
CD or DVD input/output............................... $50.00
Paper input/output................................... $50.00
Facsimile exception returns/NOC \63\................. $30.00
NACHA network administration fees: \64\
NACHA administration network fee/month............... $12.00
NACHA administration network fee/entry............... $0.000145
FedGlobal ACH Payments
Canada service fee:
Item originated to Canada \65\....................... $0.62
Return received from Canada \66\..................... $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 \55\....................... $0.67
Return received from Mexico \56\..................... $0.91
Item trace........................................... $13.50
A2R item originated to Mexico \55\................... $3.45
F3X item originated to Mexico \55\................... $0.67
Panama service fee:
Item originated to Panama \55\....................... $0.72
Return received from Panama \56\..................... $1.00
Item trace........................................... $7.00
NOC.................................................. $0.72
Latin America (MFIC) service fee:
Item originated to MFIC \55\......................... $4.40
Return received from MFIC \56\....................... $0.72
Item trace........................................... $5.00
Europe service fee:
Item originated to Europe \55\....................... $1.25
F3X item originated to Europe \55\................... $1.25
Return received from Europe \56\..................... $1.35
Item trace........................................... $7.00
----------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------

\50\ An ODFI is subject to a $35 minimum fee on its origination
volume; an RDFI that does not originate forward items is subject to
a $25 minimum fee on its receipt volume.
\51\ Small files contain fewer than 2,500 items and large files
contain 2,500 or more items. These origination fees do not apply to
items that the Reserve Banks receive from EPN.
\52\ Receipt fees do not apply to items that the Reserve Banks
send to EPN.
\53\ This per-item surcharge is in addition to the standard
origination and input file processing fees for forward items.
\54\ This per-item discount is a reduction to the standard
origination and input file processing fees for return items.
\55\ This per-item discount is a reduction to the standard
receipt fees.
\56\ Criteria may be set for both the origination monitoring
service and the RDFI alert service. There is no fee for the first
set of monitoring criteria or for RDFI alert file-level criteria.
Batch monitoring fee is assessed for each batch monitored and
scanned.
\57\ The account-servicing fee applies to routing numbers that
have received or originated FedACH transactions. Institutions that
receive only U.S. government transactions or that elect to use the
other operator exclusively are not assessed the account servicing
fee.
\58\ The FedACH settlement fee is applied to any routing number
with activity during a month. This fee does not apply to routing
numbers that use the Reserve Banks for U.S. government transactions
only.
\59\ The fee includes the item and addenda fees in addition to
the conversion fee.
\60\ The fee includes the item and addenda fees in addition to
the voice response fee.
\61\ The fee includes the notification of change processing fee.
\62\ Limited services are offered in contingency situations.
\63\ The fee includes the transaction fee in addition to the
conversion fee. Reserve Banks also assess a $30 fee for every
government paper return/NOC they process.
\64\ NACHA network administration fees are established by NACHA
in accordance with NACHA Operating Rules, Article One (General
Rules), Section 1.11 (Network Administration Fees).
\65\ This per-item surcharge is in addition to the standard
domestic origination and input file processing fees.
\66\ This per-item surcharge is in addition to the standard
domestic receipt fees.

[[Page 68456]]

Fedwire Funds and National Settlement Services 2012 Fee Schedule
[Effective January 3, 2012]
[Bold indicates changes from 2011 Fee Schedule]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Fedwire Funds Service
------------------------------------------------------------------------
Monthly participation fee...................... $85.00
Basic volume-based pre-incentive transfer fee
(originations and receipts):
Per transfer for the first 14,000 transfers $0.58
per month.................................
Per transfer for additional transfers up to $0.24
90,000 per month..........................
Per transfer for every transfer over 90,000 $0.135
per month.................................
Volume-based transfer fee with the incentive
discount (originations and receipts): \67\
Per eligible transfer for the first 14,000 $0.116
transfers per month.......................
Per eligible transfer for additional $0.048
transfers up to 90,000 per month..........
Per eligible transfer for every transfer $0.027
over 90,000 per month.....................
Surcharge for offline transfers (originations $40.00
and receipts).................................
Surcharge for high value payments.............. $0.12
Surcharge for payment notification............. $0.20
Surcharge for end-of-day transfer originations $0.20
\68\..........................................
Monthly import/export fee...................... $20.00
------------------------------------------------------------------------
National Settlement Service
------------------------------------------------------------------------
Basic
Settlement entry fee....................... $1.00
Settlement file fee........................ $21.00
Surcharge for offline file origination......... $40.00
Minimum monthly charge (account maintenance) $60.00
\69\..........................................
Special settlement arrangements: \70\
Fee per day................................ $150.00
------------------------------------------------------------------------

---------------------------------------------------------------------------

\67\ The incentive discounts are applicable on the portion of a
customer's volume that exceeds 50 percent of their historic
benchmark volume. Historic benchmark volume will be based on a
customer's average daily activity over the previous five full
calendar years, adjusted for the number of business days in the
current month. If a customer has less than five full calendar years
of previous activity, then the historic benchmark volume will be
based on the daily activity for as many full calendar years of
available data. If a customer has less than one full year calendar
year's worth of prior activity, historic benchmark volume will be
set retroactively at actual volume for the current month. The
applicable incentive discounts are as follows: - $0.464 for
transfers up to 14,000; - $0.192 for transfers 14,001 to 90,000; and
- $0.108 for transfers over 90,000.
\68\ This surcharge applies to originators of transfers that are
processed by the Reserve Banks after 5 p.m. ET.
\69\ This minimum monthly charge is only assessed if total
settlement charges during a calendar month are less than $60.
\70\ Special settlement arrangements use Fedwire Funds transfers
to effect settlement. Participants in arrangements and settlement
agents are also charged the applicable Fedwire Funds transfer fee
for each transfer into and out of the settlement account.

Fedwire Securities Service 2012 Fee Schedule, (Non-Treasury Securities)
[Effective January 3, 2012]
[Bold indicates changes from 2011 Fee Schedule]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Basic transfer fee:
Transfer or reversal originated or received $0.45
Surcharge:
Offline origination & receipt surcharge.... $66.00
Monthly maintenance fees:
Account maintenance (per account).......... $40.00
Issues maintained (per issue/per account).. $0.45
Claim adjustment fee........................... $0.66
Joint custody fee.............................. $40.00
------------------------------------------------------------------------

(This space is intentionally blank)

[[Page 68457]]

Electronic Access 2012 Fee Schedule
[Effective January 3, 2012
Bold prices indicate changes from 2011 Fee Schedule]
------------------------------------------------------------------------

------------------------------------------------------------------------
FedComplete Packages (monthly): 71
FedComplete............................................. $750.00
FedComplete Plus........................................ $775.00
FedComplete Plus 2.0.................................... $1,400.00
Electronic Access Packages (monthly):
FedPhone................................................ $15.00
FedMail Email........................................... $30.00
FedLine Web (W3)........................................ $110.00
Includes:
FedMail email
FedLine Web with three individual subscriptions
FedACH information services (includes RDFI file
alert service)
Check 21 services 72
Check 21 duplicate notification
Cash management system basic--own report only
Service charge information
Account management information 73
End of day accounting file (PDF)
FedLine Web Plus (W5)................................... $140.00
Includes:
FedLine Web (W3) traditional package
FedLine Web with five individual subscriptions
FedACH risk management services
FedACH EDI plus service via secure email
Check payor bank services
Account management information
FedLine Advantage (A5).................................. $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 Plus (A5)............................. $425.00
Includes:
FedLine Advantage A5 traditional package
FedLine Advantage with five individual subscriptions
FedACH risk management services
FedACH EDI via secure email
FedTransaction Analyzer
FedLine Advantage Premier............................... $500.00
Includes:
FedLine Advantage A5 traditional package
FedLine Advantage with five individual subscriptions
FedACH risk management services
FedACH EDI via secure email
FedTransaction Analyzer large volume
FedLine Command Plus.................................... $800.00
Includes:
FedLine Advantage Plus package
FedLine Advantage with five individual subscriptions
FedLine Command with two certificates
ACTS Report <20 subaccounts
Statement of account spreadsheet file (SASF)
FedTransaction Analyzer
FedLine Direct (D56).................................... $3,250.00
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 Plus (D256).............................. $3,500.00
Includes:

[[Page 68458]]

FedLine Direct traditional (D56) package with 256K
line speed
FedACH risk management services
FedACH EDI via secure email
FedTransaction Analyzer
FedLine Direct Premier (DT1)............................ $6,200.00
Includes:
FedLine Direct Plus package with T1 line speed
One dedicated unattended wide area network
connection for FedLine Direct
FedTransaction Analyzer large volume
Premium Options (monthly) 74
Electronic Access:
Additional subscribers package (each package $80.00
contains 5 additional subscribers).................
Additional FedLine Command certificate 75........... $80.00
Additional FedLine Direct certificate 76............ $80.00
Maintenance of additional virtual private network... $60.00
FedLine Advantage 800 Usage (per hour)..... $2.00
Additional dedicated connections 77
56K................................................. $2,250.00
256K................................................ $2,450.00
T1.................................................. $3,150.00
Dial Only VPN surcharge............................. $50.00
Expedited VPN device order/change................... $500.00
FedLine international setup (one-time fee).......... $5,000.00
FedLine Direct contingency solution 78.............. $1,000.00
Check 21 large file delivery........................ Various
FedMail fax (monthly per routing number)............ $40.00
Accounting Information Services
Cash Management System: 79
Basic--Individual respondent and/or sub-account $15.00
reports (per report/month).........................
Basic--Respondent/sub-account recap report (per $60.00
month).............................................
Plus--Own report-up to six files with no respondent/ $60.00
sub-account activity (per month)...................
Plus--Own report-up to six files with less than 10 $125.00
respondent and/or sub-accounts (per month).........
Plus--Own report-up to six files with 10-50 $225.00
respondent and/or sub-accounts (per month).........
Plus--Own report-up to six files with 51-100 $400.00
respondents and/or sub-accounts (per month)........
Plus--Own report-up to six files with 101-500 $750.00
respondents and/or sub-accounts (per month)........
Plus--Own report-up to six files with >500 $1,000.00
respondents and/or sub-accounts....................
Statement of account end of day reconcilement file $150.00
(per month) 80.....................................
Statement of account spreadsheet file (per month) 81 $150.00
Intra-day download search file (with AMI) (per $150.00
month) 82..........................................
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
------------------------------------------------------------------------

Dated: October 28, 2011.
Jennifer J. Johnson,
Secretary of the Board.

---------------------------------------------------------------------------

\71\ FedComplete packages are all-electronic service options
that bundle payment services with as access solution for one monthly
fee.
\72\ Check 21 services can be accessed via three options:
FedLine Web, an Internet connection with Axway Secure Transport
Client, or a dedicated connection using Connect:Direct.
\73\ Daylight Overdraft Report, Ex-Post Activity Snapshot, and
Integrated Accounting Statement of Account are available via
FedMail.
\74\ Premium options for FedLine Web are limited to FedMail Fax.
\75\ Additional FedLine Command Certificates available for
FedLine Command and Direct packages only.
\76\ Additional FedLine Direct Certificates available for
FedLine Direct packages only.
\77\ Network diversity supplemental charge of $2,000 a month may
apply in addition to these fees.
\78\ Transparent contingency is available only for FedLine
Direct packages.
\79\ Cash Management System options are limited to Plus and
Premier packages.
\80\ End of Day Reconcilement File option is available to
FedLine Web Plus and FedLine Advantage Plus packages.
\81\ Statement of Account Spreadsheet File option is available
to FedLine Web Plus and FedLine Advantage Plus packages.
\82\ ACTS Report options are limited to FedLine Command Plus and
FedLine Direct Plus and Premier packages.
---------------------------------------------------------------------------

By order of the Board of Governors of the Federal Reserve System.

Dated: October 28, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-28588 Filed 11-3-11; 8:45 am]
BILLING CODE 6210-01-P