[Federal Register Volume 77, Number 217 (Thursday, November 8, 2012)]
[Notices]
[Pages 66980-67007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26864]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1448]


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 2013 of 
$14.1 million and the 2013 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.

DATES: The new fee schedules become effective January 2, 2013.

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 2013 fee 
schedules for the check service are available from the Board, the 
Federal Reserve Banks, or the Reserve Banks' financial services web 
site at 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.\1\ From 2002 through 
2011, the Reserve Banks recovered 98.6 percent of their total expenses 
(including imputed costs) and targeted after-tax profits or return on 
equity (ROE) for providing priced services.\2\3
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    \1\ The methodology for computing imputed profit and imputed 
costs was changed for 2013 (see Attachment I). This change follows 
the elimination of the clearing balance program (77 FR 21846, April 
12, 2012). In the 2012 methodology, investment income is imputed and 
netted with related direct costs associated with clearing balances 
to estimate net income on clearing balances (NICB).
    \2\ 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 95.3 
percent for the ten-year period. This measure of long-run cost 
recovery is also published in the Board's Annual Report.
    \3\ Over this period, the Reserve Banks have undertaken a range 
of cost-reduction and revenue-generation initiatives as part of 
their long-term business strategy. These initiatives have included 
streamlining management structures, reducing staffing levels, 
increasing productivity, and selectively raising fees. These 
initiatives largely involved the check service, which contributes 
significantly to overall cost recovery and drove several years of 
under recovery earlier in the time period. For instance, the Reserve 
Banks restructured the number of offices at which paper checks were 
processed from forty-five at the beginning of 2003 to one location 
in 2010. The System's electronic check processing was also 
consolidated at one Federal Reserve site.

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[[Page 66981]]

    Table 1 summarizes 2011 actual, 2012 estimated, and 2013 budgeted 
cost-recovery rates for all priced services. Cost recovery is estimated 
to be 101.4 percent in 2012 and budgeted to be 102.7 percent in 2013. 
The check service accounts for nearly 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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                                       1 \b\           2 \c\             3             4 \d\           5 \e\
Year                                     Revenue   Total expense      Net income    Targeted roe   Recovery rate
                                                                           (roe)                  after targeted
                                                                           [1-2]                   roe [1/(2+4)]
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2011 (actual)...................           478.6           444.4            34.1            16.8          103.8%
2012 (estimate).................           446.3           431.0            15.3             9.1          101.4%
2013 (budget)...................           423.6           408.3            15.3             4.2          102.7%
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\a\ Calculations in table 1 and subsequent pro forma cost and revenue tables may be affected by rounding.
\b\ For 2011 and 2012, revenue includes net income on clearing balances (NICB). Clearing balances were assumed
  to be invested in short-term Treasury securities and federal funds. 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. For 2013, revenue includes imputed investment income
  from additional equity imputed to meet minimum capital requirements.
\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 2012 estimate and 2011 actuals, the targeted
  ROE reflects average actual clearing balance levels through July 2012 and December 2011, respectively. The
  clearing balance program was eliminated in 2012; therefore, the clearing balances are not included in the 2013
  budget.
\e\ The recovery rates in table 1 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 2002 to 2011, 2011 actual, 2012 budget, 2012 
estimate, and 2013 budget by priced service.

                                     Table 2--Priced Services Cost Recovery
                                                    [Percent]
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                                     2002-2011         2011            2012            2012            2013
Priced service                    ..............          Actual          Budget        Estimate      Budget \a\
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All services....................            98.6           103.8           101.2           101.4           102.7
Check...........................            97.6           105.4           102.2           103.8           107.2
FedACH..........................           102.4           100.8           100.7           100.3           100.4
Fedwire Funds and NSS...........           101.8           103.0            99.2            98.3            98.0
Fedwire Securities..............           102.2           103.1           102.6            98.2           100.9
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\a\ 2013 budget figures reflect the initial budget submissions from the Reserve Banks. The Reserve Banks will
  transmit final budget data to the Board in November 2012, for Board consideration in December 2012. 2012
  budget figures reflect the final budget as approved by the Board in December 2011.

    1. 2012 Estimated Performance--The Reserve Banks estimate that they 
will recover 101.4 percent of the costs of providing priced services in 
2012, including imputed costs and targeted ROE, compared with a 
budgeted recovery rate of 101.2 percent, as shown in table 2. Overall, 
the Reserve Banks estimate that they will fully recover actual and 
imputed costs and earn net income of $15.3 million, compared with the 
target of $9.1 million. While the check service and the FedACH Service 
are expected to achieve full cost recovery in 2012, the Fedwire Funds 
and National Settlement Services and the Fedwire Securities Service are 
expected to recover 98.3 and 98.2 percent of their costs, respectively. 
The shortfalls are due to both lower revenue, associated with less-
than-anticipated volume growth, and greater costs, associated with 
technological upgrades. Greater-than-expected check volume processed by 
the Reserve Banks has been the single most significant factor 
influencing priced services cost recovery.
    2. 2013 Private Sector Adjustment Factor--The 2013 PSAF for Reserve 
Bank priced services is $14.1 million. This amount represents a 
decrease of $8.7 million from the revised 2012 PSAF estimate of $22.8 
million. This reduction is primarily the result of a decrease in the 
cost of equity, which is due to a lower amount of imputed equity 
associated with the elimination of clearing balances, and the 
elimination of the FDIC assessment.\4\ 5
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    \4\ In October 2011, the Board approved a budgeted 2012 PSAF of 
$29.9 million, which was based on the July 2011 clearing balance 
level of $2,661.1 million. The 2012 estimated PSAF of $22.8 million, 
which is based on actual average clearing balances that were 
$2,073.3 at July 2012, reflects the elimination of the clearing 
balance program effective July 12, 2012 (77 FR 21846, April 12, 
2012). Clearing balances after July 12, 2012 were zero.
    \5\ The Board has changed its methodology for calculating the 
PSAF from a correspondent bank model to a publicly traded firm (PTF) 
model. These changes affect the comparative analysis of the 2013 and 
2012 PSAF. (Published elsewhere in today's Federal Register.)

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[[Page 66982]]

    3. 2013 Projected Performance--The Reserve Banks project that the 
check, FedACH, and Fedwire Securities Services will fully recover their 
costs in 2013. The Reserve Banks also project that the Fedwire Funds 
and National Settlement Service will achieve close to full-cost 
recovery. Overall, the Reserve Banks project a priced services cost-
recovery rate of 102.7 percent in 2013, with a net income of $15.3 
million, compared to a targeted ROE of $4.2 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. 2013 Pricing--The following summarizes the Reserve Banks' 
changes in fee schedules for priced services in 2013:

Check

     The Reserve Banks will retain at current levels FedForward 
and FedReturn fees for checks presented and returned electronically. At 
the same time, the Reserve Banks will increase fees for items destined 
for endpoints that receive substitute checks for forward items and for 
return items.\6\ The per item fee charged for electronic deposits that 
are presented as substitute checks will increase from $0.12 to $0.15 
and the per item fee charged for electronic returns that are delivered 
to the depositary bank as substitute checks will increase from $1.40 to 
$1.45. The effective average fee for collecting a check destined to a 
substitute check endpoint is expected to be $.1564, an increase of 19 
percent, for forward items and $1.4500, an increase of 4 percent, for 
return items.
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    \6\ 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 projected weighted effective average price to collect 
a check deposited electronically in 2013 will decline 4 percent to 
$0.0186 and the weighted effective average price to return a check 
deposited electronically will decline 3 percent to $0.6505. Virtually 
all forward and return items are now delivered electronically.
     The Reserve Banks also will simplify the fee structure for 
paper check forward and return collection deposits. The Reserve Banks 
will charge for two categories of forward collection deposits: encoded 
and unencoded. The fees are $10.00 per cash letter and $2.00 for each 
encoded item and $3.00 for each unencoded item. Additionally, the 
Reserve Banks will charge for two categories of return item deposits: 
qualified and unqualified. The fees are $15.00 per cash letter and 
$5.00 for each qualified item and $12.00 for each unqualified return. 
The fee to encode Canadian items will increase from $0.50 to $1.00 per 
item.
     The Reserve Banks project that approximately 0.01 percent 
of check forward deposit volume and approximately 0.53 percent of 
return check volume will be in paper-based products. The weighted 
effective average price for clearing a forward paper item and 
processing a return paper item in 2013 is projected to be $6.76 and 
$7.89 (increases of 55 and 5 percent), respectively, which reflects the 
high costs of handling the remaining paper volume.
     The Reserve Banks will reduce their forward presentment 
and return delivery options to FedReceipt Plus, PDF (for returns only), 
and paper.\7\ Additionally, the Helena Pilot, in which paying banks in 
the former Helena zone received FedReceipt Plus at no charge, will be 
discontinued.\8\
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    \7\ FedReceipt is electronic presentment with accompanying 
images of all items delivered to a paying bank or depositary bank.
    \8\ The Helena pilot was put in place in mid-2007 before the 
Helena office closed to encourage Helena zone customers to move to 
FedReceipt Plus, which would minimize the transportation costs 
associated with delivering paper items once the office closed.
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     The Reserve Banks also will introduce incentive pricing 
for depository institutions that designate the Reserve Banks as their 
electronic presentment and return point. Such depository institutions 
will receive discounts on fees charged for electronically deposited and 
returned items of $0.002 and $0.10, respectively. To receive the 
discounts, depository institutions will be required to register for the 
incentive, which will then begin the first full month after 
registration.
     With the 2013 fees, the price index for the total check 
service will have increased 54 percent since 2003. 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 
about 51 percent.

FedACH

     The Reserve Banks will raise the fee charged to receivers 
of ACH returns from $0.005 to $0.0075. The Reserve Banks will also 
increase the FedACH monthly settlement fee from $45 to $50 per routing 
number and the monthly international ACH transaction (IAT) output file 
sort fee from $50 to $75 per routing number. The fee for facsimile 
exception return and notification of change will rise from $30 to $45.
     The Reserve Banks will also introduce volume-tiered 
package pricing for the FedACH Risk Management and FedPayments Reporter 
Services, to make more attractive the usage of these services.
     With the 2013 fees, the price index for the FedACH service 
will have decreased 6 percent since 2003.

Fedwire Funds and National Settlement

     The Reserve Banks will implement a new per item fee of 
$0.30 on all transfers sent and received that exceed $100 million 
(high-value transfer surcharge). The Reserve Banks will also increase 
the end-of-day origination surcharge from $0.20 to $0.21, the surcharge 
for offline transfers from $40 to $45, and the monthly fee for the 
usage of the FedPayments Manager import/export tool from $20 to $30.\9\
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    \9\ This fee is charged to any Fedwire Funds participant that 
originates a Fedwire Funds transfer message via the FedPayments 
Manager (FPM) Funds tool and has the import/export processing option 
setting active at any point during the month.
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     The Reserve Banks will increase the Tier 1 per item pre-
incentive fee from $0.58 to $0.65 per transaction, the Tier 2 per item 
pre-incentive fee from $0.24 to $0.25, and the Tier 3 per item pre-
incentive fee from $.0135 to $.0145.\10\
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    \10\ 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 National Settlement 
Service's settlement file charge from $21 to $25 and the settlement 
charge per entry from $1.00 to $1.20. The Reserve Banks will also 
increase the National Settlement Service's surcharge for offline file 
origination from $40 to $45.
     With the 2013 fees, the price index for the Fedwire Funds 
and National

[[Page 66983]]

Settlement Services will have increased 77 percent since 2003.

Fedwire Securities

     The Reserve Banks will increase the online transfer fee 
from $0.45 to $0.54.
     The Reserve Banks will increase the monthly issue 
maintenance fee from $0.45 to $0.54 per issue. The Reserve Banks will 
also increase the claim adjustment fee from $0.66 to $0.75.
     With the 2013 fees, the price index for the Fedwire 
Securities Service will have increased 65 percent since 2003.

FedLine Access Solutions

     The Reserve Banks will increase the fees on legacy 
services, such as an additional $10 per month for FedMail Fax, $450 per 
month for FedLine Direct (56K), and $100 per month for the Dial-Only 
VPN surcharge. The Reserve Banks will also increase the monthly fees 
for basic cash management reports within the accounting services.
     The Reserve Banks will increase the monthly fees for 
FedLine Direct Plus (256K) and FedLine Direct Premier (T1) by $100 and 
$300, respectively. Fees for additional 256K and T1 connections will 
also increase by $50, as well as the fees for additional FedLine 
Command and FedLine Direct certificates by $20 per month. The Reserve 
Banks will also increase FedMail Email by $10 per month. Monthly fees 
for enhanced cash management reports, which include respondent and 
subaccount activity will also increase.
     Although the Reserve Banks will not change published fees, 
they will raise certain volume thresholds for FedComplete packages, 
which will improve the business case for customers.
     Electronic access fees are allocated to each priced 
service and are not separately reflected in comparison with the GDP 
price index.
    5. 2013 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 2012, the price index for all Reserve Bank priced 
services is projected to increase less than 1 percent in 2013. The 
price index for total check services is projected to decrease 
approximately 4 percent. The price index for Check 21 services is 
projected to decrease approximately 5 percent, reflecting a slight 
decrease in the effective prices paid to collect and return checks 
using Check 21 services and wide adoption of electronic check services. 
The price index for all other check services is projected to increase 
less than 1 percent. The price index for electronic payment services, 
which include the FedACH Service, Fedwire Funds and National Settlement 
Services, and Fedwire Securities Service, is projected to increase 
approximately 3 percent. For the period 2003 to 2013, the price index 
for all priced services is expected to increase 64 percent. In 
comparison, for the period 2003 to 2011, the GDP price index increased 
20 percent.

[[Page 66984]]

[GRAPHIC] [TIFF OMITTED] TN08NO12.044

    B. Private Sector Adjustment Factor--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 are imputed, as if these priced services were provided by a 
private business firm. The same generally accepted accounting 
principles that apply to commercial-entity financial statements apply 
to the relevant elements in the priced services pro forma financial 
statements.
    The portion of Federal Reserve assets that will be used to provide 
priced services during the coming year is determined using information 
on actual assets and projected disposals and acquisitions. The priced 
portion of these assets is determined based on the allocation of the 
related depreciation expense. The priced portion of actual Federal 
Reserve liabilities consists of pension and other benefits, accounts 
payable, and other liabilities.
    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 market risk premium. To implement the CAPM, the risk-free rate 
is based on the three-month Treasury bill; the beta is assumed to equal 
1.0, which approximates the risk of the market as a whole; and the 
monthly returns in excess of the risk-free rate over the most recent 40 
years are used as the market risk premium. The resulting ROE influences 
the dollar level of the PSAF because this is the return a shareholder 
would require in order to invest in a private business firm.
    For simplicity, given that federal corporate income tax rates are 
graduated, state income tax rates vary, and various credits and 
deductions can apply, an actual income tax expense is not calculated 
for Reserve Bank priced services. Instead, the Board targets a pretax 
ROE that would provide sufficient income to fulfill the priced 
services' imputed income tax obligations. To the extent that actual 
performance results are greater or less than the targeted ROE, income 
taxes are adjusted using an imputed income tax rate.
    The Board has changed its methodology for calculating the PSAF from 
a correspondent bank model to a publicly traded firm (PTF) model. These

[[Page 66985]]

changes affect the comparative analysis of the 2013 and 2012 PSAF. 
(Published elsewhere in today's Federal Register.)
    Capital structure. In the new PTF model, the capital structure is 
imputed based on the funding need (assets less liabilities), subject to 
minimum equity constraints. If estimated assets are in excess of 
estimated liabilities, the Board imputes first debt funding (either 
short- or long-term) and then equity to meet the capital structure of 
the U.S. publicly traded firm market or minimum equity constraints. 
Minimum equity follows the FDIC requirements for a well-capitalized 
institution of at least 5 percent of total assets and 10 percent of 
risk-weighted assets. If minimum equity constraints are not met after 
imputing equity based on all other financial statement components, 
additional equity is imputed to meet these constraints. Additional 
equity imputed to meet minimum equity requirements is imputed as 
invested in Treasury securities.
    The capital structure in the correspondent bank model was derived 
from the portion of Federal Reserve assets and liabilities associated 
with priced services. Short-term debt was imputed only when short-term 
liabilities were insufficient to fund short-term assets. Long-term debt 
was imputed only when core clearing balances, other long-term 
liabilities, and equity were not sufficient to fund long-term 
assets.\11\ Short-term debt was imputed only when other short-term 
liabilities and clearing balances not used to finance long-term assets 
were insufficient to fund short-term assets. A portion of clearing 
balances was used as a funding source for short-term priced-services 
assets. In addition, long-term assets have been partially funded from 
core clearing balances. Imputed equity was 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.\12\
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    \11\ For 2012, $1 billion of core clearing balances were 
considered the portion of the balances that has remained stable over 
time without regard to the magnitude of actual clearing balances.
    \12\ For 2013 and 2012 PSAF, 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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    Effective tax rate. As with the imputed capital structure, the 
effective tax rate in the PTF model is based on data from U.S. publicly 
traded firms. This tax rate is the mean of the weighted average rates 
of the U.S. publicly traded firm market over the past 5 years.
    The effective tax rate used in the correspondent bank model was 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.
    Debt and equity financing. In the PTF model, the imputed short- and 
long-term debt financing rates are derived from nonfinancial commercial 
paper rates from the Federal Reserve Board's H.15 Selected Interest 
Rates release and the annual Merrill Lynch Corporate & High Yield Index 
rate, respectively. The rates for debt and equity financing are applied 
to the priced services estimated imputed liabilities and imputed equity 
derived from the target capital structure. In the correspondent bank 
model, the debt financing rate, where applicable, was based on the debt 
financing rate observed from data from the top 50 bank holding 
companies.
    Net income on clearing balances. In 2012, the correspondent bank 
model imposed investment constraints based on interest rate 
fluctuations. Because of cost recovery sensitivity constraints to 
interest rate fluctuations, the investment of clearing balances in 2012 
was limited to three-month Treasury bills (with no additional imputed 
constant spread from an imputed investment portfolio). Clearing 
balances were eliminated in July 2012, and therefore are no longer a 
factor in calculating the PSAF.
    1. Calculating Cost Recovery--In 2012, the PSAF and NICB are 
incorporated into the projected and actual cost-recovery calculations 
for Reserve Bank priced services. When calculating actual cost recovery 
for the priced services at the end of each year, the Board historically 
has used the PSAF derived during the price-setting process with only 
minimal adjustments for actual rates or balance levels.\13\ Beginning 
in 2009, in light of the uncertainty about the long-term effect that 
the payment of interest on reserve balances would have on the level of 
clearing balances, the Board adjusted the PSAF used in the actual cost-
recovery calculation to reflect the actual clearing balance levels 
maintained throughout the year.
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    \13\ The largest portion of the PSAF, the target ROE, 
historically has been fixed. Imputed sales tax, income tax, and the 
FDIC assessment (where applicable) are recalculated at the end of 
each year to adjust for actual expenditures, net income, and 
clearing balance levels.
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    The NICB in the correspondent bank model was imputed 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.\14\ The Reserve Banks imputed a constant spread, 
determined by the return on a portfolio of investments, over the three-
month Treasury bill rate and applied this investment rate to the net 
level of clearing balances.\15\ A return on the imputed reserve 
requirement, which was based on the level of clearing balances on the 
pro forma balance sheet, was imputed to reflect the return that would 
be earned on a required reserve balance held at a Reserve Bank. The 
clearing balance program was eliminated effective July 12, 2012 as a 
part of reserve simplification efforts.\16\
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    \14\ 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.
    \15\ 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. 
The investments imputed for 2012 are three-month Treasury bills and 
federal funds.
    \16\ 77 FR 21846, April 12, 2012.
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    The calculation also involved 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 estimated NICB were based on 
July 2012 rates and clearing balance levels.
    2. Analysis of the 2013 PSAF--The decrease in the 2013 PSAF is due 
primarily to the elimination of the clearing balance program and the 
resulting reduction in the level of imputed investments and equity.
    Projected 2013 Federal Reserve priced-services assets, reflected in 
table 3, have decreased $3,324.3 million as compared to 2012, as a 
result of the decline in imputed investments associated with the 
elimination of clearing balances.
    Credit float, which represents the difference between items in 
process of

[[Page 66986]]

collection and deferred credit items, decreased to $550.0 million in 
2013 from $1,100.0 million in 2012.\17\ The decrease is primarily a 
result of decreased use of products that tend to generate credit float.
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    \17\ 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, the clearing balance program was 
discontinued in 2012, eliminating clearing balances as a funding source 
in 2013. The PTF methodology for calculating PSAF in 2013 does not 
incorporate clearing balances; therefore, funding for assets is derived 
exclusively from debt and equity. In 2013, $14.4 million in short-term 
debt was imputed to meet financing needs of short-term assets. 
Additional equity was imputed to meet the minimum capital to risk-
weighted asset ratio constraint of the PTF model. In 2012, 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 was 
used as a funding source for short-term assets. Long-term liabilities 
and equity exceeded long-term assets by $124.9 million; therefore, no 
core clearing balances were used to fund long-term assets. In 2013, 
additional equity imputed was $58.1 million and the corresponding 
investment income was $0.1 million.
    In 2013, minimum equity constraints were not met after imputing 
equity based on all other financial statement components. The 
calculation of cost recovery included imputing investment income 
associated with additional equity that resulted from imputing equity to 
meet the equity constraints in the model. If additional equity is 
imputed to meet these constraints, it is invested in Treasury 
securities.
    As shown in table 3, the amount of equity imputed for the 2013 PSAF 
is $72.3 million, a decrease of $162.4 million from the imputed equity 
for 2012. In accordance with FAS 158 [ASC 715], this amount includes an 
accumulated other comprehensive loss of $615.3 million. In 2013, the 
capital-to-total-assets ratio and the capital-to-risk-weighted-assets 
ratio must be equal to or greater than the regulatory requirements for 
a well-capitalized depository institution. The ratio of capital to 
risk-weighted assets is calculated at 10 percent, and equity exceeds 5 
percent of total assets.\18\ For 2013, with the replacement of the 
correspondent bank model, the FDIC assessment no longer applies. For 
2012, the Reserve Banks imputed an FDIC assessment of $2.2 million for 
the priced services based on the FDIC's assessment rates and the level 
of total priced services assets on the pro forma balance sheet.\19\
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    \18\ 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 include accumulated other comprehensive income or losses, 
as indicated above, until the regulators announce a final ruling.
    \19\ 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.
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    Table 5 shows the imputed PSAF elements for 2013 and 2012, 
including the pretax ROE and other required PSAF costs. The $13.1 
million decline in the 2012 ROE of $19.9 million is mainly caused by a 
lower amount of imputed equity. Imputed sales taxes decreased to $3.3 
million in 2013 from $3.7 million in 2012. The effective income tax 
rate used in 2013 increased to 38.5 percent from 30.9 percent in 2012. 
The priced services portion of the Board's expenses decreased $0.1 
million to $4.0 million in 2013 from $4.1 million in 2012.
BILLING CODE 6210-01-P

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    C. Check Service--Table 8 shows the 2011 actual, 2012 estimated, 
and 2013 budgeted cost recovery performance for the commercial check 
service.

[[Page 66991]]

[GRAPHIC] [TIFF OMITTED] TN08NO12.049

    1. 2012 Estimate--For 2012, the Reserve Banks estimate that the 
check service will recover 103.8 percent of total expenses and targeted 
ROE, compared with the budgeted recovery rate of 102.2 percent. The 
Reserve Banks expect to recover all actual and imputed costs of 
providing check services and earn a net income of $12.2 million (see 
table 8). Greater-than-expected check volume processed by the Reserve 
Banks has influenced significantly the check services cost recovery as 
additional fee revenue has exceeded the costs of processing new 
volumes.\34\
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    \34\ The greater-than-expected check volume is attributed to two 
new FedForward deposit options, which were introduced in late 2011: 
premium mixed and select mixed. The premium mixed option allows 
customers to send forward collection items in a mixed cash letter 
for a higher cash letter fee and lower electronic per-item fee. The 
select mixed option offers similar incentives; however, the customer 
sends forward collection items drawn on specific forward collection 
routing numbers in separate cash letters.
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    The general decline in the number of checks written continues to 
influence the decline in checks collected by the Reserve Banks. Through 
August, total forward check volume and return check volume is 3 percent 
and 19 percent lower, respectively, than for the same period last year. 
For full-year 2012, the Reserve Banks estimate that their total forward 
check collection volume will decline nearly 5 percent and return check 
volume will decline 21 percent from 2011 levels.\35\ The proportion of 
checks deposited and presented electronically continues to grow (see 
table 9). The Reserve Banks expect that year-end 2012 FedForward 
deposit and FedReceipt presentment penetration rates will exceed 99.9 
percent.\36\ The Reserve Banks also expect that year-end 2012 FedReturn 
and FedReceipt Return volume penetration rates will reach 99.2 percent 
and 95.0 percent, respectively.\37\
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    \35\ Total Reserve Bank forward check volumes are expected to 
drop from roughly 6.7 billion in 2011 to 6.4 billion in 2012. Total 
Reserve Bank return check volumes are expected to drop from roughly 
60.4 million in 2011 to 47.7 million in 2012.
    \36\ FedForward is the electronic forward check collection 
product. FedReceipt is electronic presentment with accompanying 
images.
    \37\ FedReturn is the electronic check return product. 
FedReceipt Return is the electronic delivery of returned checks with 
accompanying images.
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[[Page 66992]]


    2. 2013 Pricing--In 2013, the Reserve Banks project that the check 
service will recover 107.2 percent of total expenses and targeted ROE. 
Revenue is projected to be $185.3 million, a decline of 15 percent from 
2012. 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 $171.1 million, a decline of 17 
percent from 2012. 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.\38\
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    \38\ The Reserve Banks are scheduled to complete a multi-year 
check platform modernization initiative in October 2012.
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    The Reserve Banks estimate that total Reserve Bank forward check 
volumes will decline approximately 8 percent to 5.9 billion and return 
check volumes will decline approximately 16 percent to 40.2 million. 
The decline in Reserve Bank check volume can be attributed to the 
continued decline in check use nationwide.\39\
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    \39\ In addition, return items have declined due to posting 
practices at paying banks.
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    The Reserve Banks will retain at current levels FedForward and 
FedReturn fees for checks presented and returned electronically. At the 
same time, the Reserve Banks will increase fees for items destined for 
endpoints that receive substitute checks for forward items and for 
return items.\40\ The per item fee charged for FedForward items that 
are presented as substitute checks will increase from $0.12 to $0.15 
and the per item fee charged for FedReturn items that are delivered to 
the depositary bank as substitute checks will increase from $1.40 to 
$1.45. The effective average fee for collecting a check for a 
substitute check endpoint is expected to be $.1564, an increase of 19 
percent, for forward items and $1.4500, an increase of 4 percent, for 
return items.
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    \40\ 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 projected weighted effective average price to collect a check 
deposited electronically in 2013 will decline 4 percent to $0.0186 and 
the weighted effective average price to return a check deposited 
electronically will decline 3 percent to $0.6505.\41\ This result is 
because virtually all forward and return items are now delivered 
electronically.
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    \41\ The weighted average prices are dependent on deposit 
product mix, deadlines, and electronic receipt penetration rates. 
The weighted average fees are based on continued movement to lower 
priced deposit options and increased electronic receipt penetration 
rates for full year 2012 and projected for full year 2013.
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    The Reserve Banks will also simplify the fee structure for paper 
check forward and return collection deposits. The Reserve Banks will 
charge for two categories of forward collection deposits: encoded and 
unencoded. The fees are $10.00 per cash letter and $2.00 for each 
encoded item and $3.00 for each unencoded item. Additionally, the 
Reserve Banks will charge for two categories of return item deposits: 
qualified and unqualified. The fees are $15.00 per cash letter and 
$5.00 for each qualified item and $12.00 for each unqualified. The fee 
to encode Canadian items will increase from $0.50 to $1.00 per item.
    The Reserve Banks project that approximately 0.01 percent of check 
forward deposit volume and approximately 0.53 percent of return check 
volume will be in paper-based products. The weighted effective average 
price for clearing a forward paper item and processing a return paper 
item in 2013 is projected to be $6.7586 and $7.8891 (increases of 55 
and 5 percent), respectively, which reflects the high costs of handling 
the remaining paper volume.
    The Reserve Banks will reduce their forward presentment and return 
delivery options to FedReceipt Plus, PDF (for Returns only), and 
paper.\42\ Additionally, the Helena Pilot, in which paying banks in the 
former Helena zone received FedReceipt Plus at no charge, will be 
discontinued.\43\
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    \42\ FedReceipt is electronic presentment with accompanying 
images of all items delivered to a paying bank or depositary bank. 
For those depository institutions that do not have the ability to 
accept forward or return items in X9.37 format, the Reserve Banks 
can send a PDF file of the depository institution's inclearings and 
incoming returns directly to a printer located at the depository 
institution. The PDF file takes the place of physical delivery of 
paper checks.
    \43\ The Helena pilot was put in place in mid-2007 before the 
Helena office closed to encourage Helena zone customers to move to 
FedReceipt Plus, which would minimize the transportation costs 
associated with delivering paper items once the office closed.
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    The Reserve Banks will introduce incentive pricing for depository 
institutions that designate the Reserve Banks as their electronic 
presentment and return point. Such depository institutions will receive 
discounts on fees charged for electronically deposited and returned 
items of $0.002 and $0.10, respectively. To receive the discounts, 
depository institutions will be required to register for the incentive, 
which will then begin the first full month after registration.
    Risks to the Reserve Banks' ability to achieve budgeted 2013 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 
higher-than-expected support and overhead costs.
    D. FedACH Service--Table 11 shows the 2011 actual, 2012 estimate, 
and 2013 budgeted cost-recovery performance for the commercial FedACH 
service.
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[[Page 66993]]


    1. 2012 Estimate--The Reserve Banks estimate that the FedACH 
service will recover 100.3 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 $2.7 million. Through 
August, FedACH commercial origination volume was nearly 4 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. 2013 Pricing--The Reserve Banks project that the FedACH service 
will recover 100.4 percent of total expenses and targeted ROE in 2013. 
Total revenue is expected to increase $1.5 million from the 2012 
estimate, primarily due to projected growth in FedACH commercial 
origination and receipt volume of 3.0 percent. Total expenses are 
budgeted to increase $3.7 million from the 2012 estimate, generally due 
to costs associated with development of a new FedACH technology 
platform.
    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 $0.005 to $0.0075. In 
addition, the Reserve Banks will increase fees for select FedACH 
services. Specifically, the Reserve Banks will increase monthly fees 
for FedACH settlement and IAT output file sort, as well as, the per 
item fees for facsimile exception return and notification of change. 
The Reserve Banks will also introduce volume-tiered package pricing for 
the FedACH Risk Management and FedPayments Reporter Services, to make 
these services more attractive to customers. The Reserve Banks will 
also standardize the on-demand report fee for the FedPayments Reporter 
Service.
    The primary risk to the Reserve Banks' ability to achieve budgeted 
2013 cost recovery for the FedACH service is higher-than-expected 
support and overhead costs. Other risks include lower-than-expected 
volume due to unanticipated mergers and acquisitions, direct exchanges, 
and the competitive environment, which would result in lower-than-
anticipated revenue, and cost overruns associated with unanticipated 
problems with technology upgrades.
    E. Fedwire Funds and National Settlement Services--Table 12 shows 
the 2011 actual, 2012 estimate, and 2013 budgeted cost-recovery 
performance for the Fedwire Funds and National Settlement Services. 
[GRAPHIC] [TIFF OMITTED] TN08NO12.052

    1. 2012 Estimate--The Reserve Banks estimate that the Fedwire Funds 
and National Settlement Services will recover 98.3 percent of total 
expenses and targeted ROE, compared with a 2012 budgeted recovery rate 
of 99.2 percent. The lower-than-projected recovery rate is primarily 
attributed to higher-than-expected information technology costs. 
Through August, average daily Fedwire Funds volume was up 4.3 percent 
from the same period in 2011. For the full year, the Reserve Banks 
estimate that Fedwire Funds volume will increase by 2.5 percent. With 
respect to the National Settlement Service, the volume of settlement 
files increased 29.4 percent and the volume of settlement files 
increased 21.5 percent through August.\44\ For the full year, the 
Reserve Banks estimate that the volume of settlement files will 
increase by 20.0 percent while the volume of settlement entries will 
increase by 15.1 percent. The Board believes full-year volume growth 
will likely exceed the Reserve Banks' volume projections, which would 
raise marginally the 2012 cost recovery rate.
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    \44\ Although large in percentage terms, the increase in 
National Settlement Service activity is relatively small in 
magnitude. For instance, the 29.4 percent increase in settlement 
files represents about 7 new files per day.
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    2. 2013 Pricing--The Reserve Banks expect the Fedwire Funds and 
National Settlement Services to recover 98.0 percent of total expenses 
and targeted ROE. The Reserve Banks project total expenses to increase 
$9.8 million from the 2012 estimate. This increase is primarily due to 
their ongoing projects to upgrade the Fedwire application and related 
information technology infrastructure. The Reserve Banks project total 
revenue to increase $7.5 million from the 2012 estimate. This projected 
revenue increase is primarily the result of price increases for the 
Fedwire Funds and the National Settlement Services and a 2.0 percent 
projected growth in Fedwire Funds volume.
    The Reserve Banks will introduce a $0.30 surcharge for transfers 
exceeding $100 million.\45\ The Reserve Banks believe that high-value 
transfer surcharges are an equitable way to shift more of the cost 
associated with Fedwire resiliency to those high-value payments that 
drive the need for such resiliency.
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    \45\ In 2012, the Reserve Banks introduced a $0.12 high-value 
surcharge for both the senders and receivers of transfers exceeding 
$10 million and outlined plans to introduce additional high-value 
surcharges in future years.
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    The Reserve Banks will also adjust various existing fees for the 
Fedwire Funds Service. First, the Reserve Banks will increase the Tier 
1 per item pre-incentive fee (the fee before volume discounts are 
applied) from $0.58 to $0.65, the Tier 2 per item pre-incentive fee 
from $0.24 to $0.25, and the Tier 3 per item pre-incentive fee from 
$0.135 to $0.145. Second, the Reserve Banks will increase the late-day 
(after 5 p.m. ET) origination surcharge from $0.20 to $0.21. Third, the 
Reserve Banks will increase the Fedwire Funds offline transfer fee from 
$40 to $45. Lastly, the Reserve Banks will increase the FedPayments 
Manager import/export

[[Page 66994]]

monthly fee from $20 to $30. The Reserve Banks estimate that the new 
surcharge and price increases will result in an approximate 9.4 percent 
average price increase for Fedwire Funds customers.
    With respect to the National Settlement Service, the Reserve Banks 
will increase the settlement file fee from $21 to $25, the settlement 
entry fee from $1.00 to $1.20, and the offline origination fee per file 
from $40 to $45. In calculating projected revenue, the Reserve Banks 
project no volume growth.
    F. Fedwire Securities Service--Table 13 shows the 2011 actual, 2012 
estimate, and 2013 budgeted cost recovery performance for the Fedwire 
Securities Service.\46\
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    \46\ 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.
[GRAPHIC] [TIFF OMITTED] TN08NO12.053

    1. 2012 Estimate--The Reserve Banks estimate that the Fedwire 
Securities Service will recover 98.2 percent of total expenses and 
targeted ROE, compared with a 2012 budgeted recovery rate of 102.6 
percent. The lower-than-projected recovery is primarily attributed to 
higher-than-expected pension and information technology costs combined 
with lower revenue due to decreased transfer volume and claims 
adjustment requests. Through August, securities transfer volume was 
down 13.9 percent from the same period in 2011 while claims adjustment 
requests were down 48 percent. For the full year, the Reserve Banks 
estimate that Fedwire Securities transfer volume will decline by 13.6 
percent, reflecting lower issuance of mortgage-backed securities and 
the implementation of expanded multilateral pool netting of mortgage-
backed securities by the Fixed Income Clearing Corporation (FICC). 
Claims adjustments are estimated to decline by about 55 percent for the 
year, reflecting corresponding declines in settlement fails in the 
marketplace.
    2. 2013 Pricing--The Reserve Banks project that the Fedwire 
Securities Service will recover 100.9 percent of total expenses and 
targeted ROE. The Reserve Banks project that revenue and expenses will 
each increase by $0.5 million compared with the 2012 estimates.
    In calculating projected Fedwire Securities revenue for 2013, the 
Reserve Banks project that securities transfer activity will decline by 
17.9 percent and the number of accounts maintained will decrease by 7.5 
percent. The estimated decrease in transfer volumes reflects the 
projected lower issuance of mortgage-backed securities and the full-
year impact of multilateral pool netting at FICC. The number of 
accounts is also expected to continue to decrease because of prior year 
account maintenance fee increases and customers continuing to assess 
their account structures in light of changes to the maximum amount of 
deposits insured by the Federal Deposit Insurance Corporation.\47\
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    \47\ The increase in the maximum deposit insurance amount has 
reduced the demand by certain Fedwire Securities customers to hold 
deposits in collateral-backed accounts.
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    The Reserve Banks will adjust various existing fees for the Fedwire 
Securities Service. First, the Reserve Banks will increase the online 
transfer fee from $0.45 to $0.54. Second, the Reserve Banks will 
increase the monthly issue maintenance fee from $0.45 to $0.54 per 
issue. Lastly, the Reserve Banks will increase the claim adjustment fee 
from $0.66 to $0.75. The Reserve Banks' fees will represent an 11.6 
percent increase in average prices to achieve a target recovery rate of 
approximately 100.9 percent.
    G. FedLine Access--The Reserve Banks charge fees for the electronic 
connections that depository institutions use to access priced services 
and allocate the costs and revenue associated with this electronic 
access to the various priced services. There are currently five FedLine 
channels through which customers can access the Reserve Banks' priced 
services: FedMail[supreg], FedLine Web[supreg], FedLine 
Advantage[supreg], FedLine Command[supreg], and FedLine 
Direct[supreg].\48\ The Reserve Banks package these channels into ten 
FedLine packages that are supplemented by a number of premium (or 
[agrave] 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.
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    \48\ FedLine Direct, FedLine Command, FedLine Advantage, FedLine 
Web, and FedMail are registered trademarks of the Federal Reserve 
Banks. These channels may also be used to access nonpriced services 
provided by the Reserve Banks.
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    Attended access packages offer access to critical payment and 
information services via a web-based interface. The FedMail email 
package provides access to basic information services via fax or email, 
while two FedLine Web packages offer FedMail email 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

[[Page 66995]]

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 FedACH, Fedwire Funds, and Fedwire 
Securities transactional and information services and to most 
accounting information services.
    Many of the FedLine access solutions fee changes in 2013 are 
designed to encourage customers to migrate to more efficient payments 
solutions. Customers that continue to use legacy solutions will see 
greater increases in fees for those services. To that end, the Reserve 
Banks will increase the fees on legacy services, such as an additional 
$10 per month for FedMail Fax, $450 per month for FedLine Direct (56K), 
and $100 per month for the Dial-Only VPN surcharge. The Reserve Banks 
will also increase the monthly fees for basic cash management reports 
within the accounting services.
    In addition, the Reserve Banks will make other changes to FedLine 
pricing for 2013 in order to improve the alignment of value and 
revenue. In particular, the Reserve Banks will increase the monthly 
fees for FedLine Direct Plus (256K) and FedLine Direct Premier (T1) by 
$100 and $300, respectively. Fees for additional 256K and T1 
connections will also increase by $50, as well as the fees for 
additional FedLine Command and FedLine Direct certificates by $20 per 
month. The Reserve Banks will also increase FedMail Email by $10 per 
month. Monthly fees for two enhanced cash management reports, which 
include respondent and subaccount activity will also increase.
    The Reserve Banks will not change published fees for FedComplete 
packages; however, the Reserve Banks will raise certain volume 
thresholds for each of the packages to improve the business case for 
customers.

II. Analysis of Competitive Effect

    All operational and legal changes considered by the Board that have 
a substantial effect on payments system participants are subject to the 
competitive impact analysis described in the March 1990 policy, ``The 
Federal Reserve in the Payments System.'' \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.
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    \49\ Federal Reserve Regulatory Service (FRRS) 9-1558.
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    The Board projects that the 2013 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.

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BILLING CODE 6210-01-P

    By order of the Board of Governors of the Federal Reserve 
System, October 25, 2012.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2012-26864 Filed 11-7-12; 8:45 am]
BILLING CODE 6210-01-C