[Federal Register Volume 79, Number 215 (Thursday, November 6, 2014)]
[Notices]
[Pages 65937-65955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26322]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1500]


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 2015 of 
$18.0 million and the 2015 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, 2015.

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: 
Gregory L. Evans, Deputy Associate Director, (202) 452-3945; Brenda L. 
Haase, Manager, Financial Accounting, (202) 452-2753; or Manuel Garcia, 
Senior Financial Analyst, (202) 452-3480), 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 2015 
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, Priced Services Cost Recovery, and 
Overview of 2015 Price Changes

    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. From 2004 through 
2013, the Reserve Banks recovered 102.0 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 
cumulative reduction in equity related to the priced services' 
benefit plans. Including this cumulative reduction in equity from 
2006 to 2013 results in cost recovery of 95.9 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 2013 actual, 2014 estimated, and 2015 budgeted 
cost-recovery rates for all priced services. Cost recovery is estimated 
to be 100.8 percent in 2014 and budgeted to be 101.9 percent in 2015.

                  Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance \a\
                                              [Dollars in 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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2013 (actual)...................           441.3           409.3            32.0             4.2          106.7%
2014 (estimate).................           429.0           419.9             9.1             5.5           100.8
2015 (budget)...................           414.4           401.0            13.4             5.6           101.9
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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 imputed income on investments when equity is imputed at a level that meets minimum capital
  requirements and, when combined with liabilities, exceeds total assets (attachment 1).
\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.
\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.


[[Page 65938]]

    Table 2 provides an overview of cost-recovery performance for the 
ten-year period from 2004 to 2013, 2013 actual, 2014 budget, 2014 
estimate, and 2015 budget by priced service.

                                     Table 2--Priced Services Cost Recovery
                                                    [Percent]
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                                                                    2014 Budget                     2015 Budget
         Priced service              2004-2013      2013 Actual         \a\        2014 Estimate        \b\
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All services....................           102.0           106.7           102.3           100.8           101.9
Check...........................           102.0           115.4           108.8           114.2           105.4
FedACH..........................           102.1           101.2            99.2            86.5           100.0
Fedwire Funds and NSS...........           101.5            98.6            98.0           101.3           100.8
Fedwire Securities..............           102.2           105.0            98.0           100.1            96.5
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\a\ The 2014 budget figures reflect the final budgets as approved by the Board in December 2013.
\b\ The 2015 budget figures reflect preliminary budget information from the Reserve Bank. The Reserve Banks will
  submit final budget data to the Board in November 2014, for Board consideration in December 2014.

    1. 2014 Estimated Performance--The Reserve Banks estimate that they 
will recover 100.8 percent of the costs of providing priced services in 
2014, including total expense and targeted ROE of $5.5 million, 
compared with a budgeted recovery rate of 102.3 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 $9.1 million, 
compared with budgeted net income of $15.0 million. Although the check 
service, the Fedwire[supreg] Funds and National Settlement Services, 
and the Fedwire Securities Service are expected to achieve full cost 
recovery, the FedACH[supreg] Service is expected to recover 86.5 
percent of its costs because of a $31.6 million charge related to its 
investment associated with a multiyear technology initiative to 
modernize its processing platform.\2\ Greater-than-expected check 
volume processed by the Reserve Banks has been the single most 
significant factor influencing priced services cost recovery.
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    \2\ The Reserve Banks have been engaged in a multiyear 
technology initiative to modernize the FedACH processing platform by 
migrating the service from a mainframe system to a distributed 
computing environment. In late 2013, the Reserve Banks conducted an 
assessment focused on the viability and cost-effectiveness of the 
program. As a result, the Reserve Banks in 2014 suspended the 
program and began to investigate the use of other technology 
solutions.
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    2. 2015 Private Sector Adjustment Factor--The 2015 PSAF for Reserve 
Bank priced services is $18.0 million. This amount represents a 
decrease of $5.4 million from the 2014 PSAF of $23.4 million. This 
decrease is primarily the result of a reduction in the assets to be 
financed on the imputed priced-services balance sheet and an associated 
decline in the cost of debt and equity.
    3. 2015 Projected Performance--The Reserve Banks project a priced 
services cost-recovery rate of 101.9 percent in 2015, with net income 
of $13.4 million, compared to a targeted ROE of $5.6 million. The 
Reserve Banks project that the check service, the FedACH Service, and 
the Fedwire Funds and National Settlement Service will fully recover 
their costs; however, the Reserve Banks project that the Fedwire 
Securities Service will not achieve full-cost recovery because of 
investment costs associated with multiyear technology initiatives to 
modernize its processing platform. These investments are expected to 
enhance efficiency, the overall quality of operations, and the Reserve 
Banks' ability to offer additional services to depository institutions.
    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 with the technology 
modernization initiatives. In light of these risks, the Reserve Banks 
will continue to refine their business and operational strategies to 
manage aggressively operating costs, to increase product revenue, and 
to leverage efficiencies gained from technology initiatives.
    4. 2015 Pricing--The following summarizes the Reserve Banks' 
changes in fee schedules for priced services in 2015:

Check

     In October, the Reserve Banks announced a 12:00 noon ET 
deadline (but not the associated fee schedules) for the 
FedForward[supreg] product line, specifically, Mixed, Select Mixed, and 
Premium Mixed D products, which will provide the Reserve Banks an 
opportunity to present forward items to paying banks one day 
earlier.3 4 5
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    \3\ All times are stated in the Eastern Time Zone (ET).
    \4\ Depository institutions may deposit image cash letters using 
nine deposit options within the FedForward product line; the options 
vary in price structure and funds availability. A current list of 
FedForward deposit options can be found at http://frbservices.org/servicefees/check_services_2014.html.
    \5\ The Reserve Banks announced the new deadline in October, 
effective January 2, 2015, to provide both collecting banks and 
paying banks sufficient time to modify their processes to deposit 
and receive items at 12:00 noon and 2:00 p.m., respectively. The 
announcement can be found at http://www.frbservices.org/files/communications/pdf/check/100314_updated_new_fedforward_deposit_deadline.pdf.
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     In conjunction with the noon deadline, the Reserve Banks 
will reduce the per-item fees for tiers 1, 2, 3, and 4 within the 
current Mixed deposit option. For the Select Mixed option, the Reserve 
Banks will increase the per-item fees for non-eligible items from $0.10 
to $0.35 and to implement a $25 image cash letter (ICL) surcharge. For 
the Premium Mixed D option, the Reserve Banks will charge per-item fees 
$0.002 higher than the per-item fees at the current 1:00 a.m. deadline 
(with the exception of the substitute check fee, which will be $0.20 
higher) and a $25 ICL surcharge.
     The Reserve Banks will introduce two new deposit options 
to the FedForward Premium Mixed ICL products and to expand the list of 
eligible endpoints to the Select Mixed ICL products.
     The Reserve Banks will increase the FedForward Deferred 
Mixed ICL product per-item fees at the 5:00 a.m. and 10:00 a.m. 
deadlines by $0.002 and $0.004, respectively. The Reserve Banks will 
increase the FedForward Deferred Fine Sort ICL product per-item fees at 
the 5:00 a.m. and 10:00 a.m. deadlines by $0.001 and $0.002, 
respectively. The Reserve Banks hope to encourage depositors to shift 
volume from the deferred availability product to one of the immediate-
availability options at 12:00 noon.

FedACH

     The Reserve Banks will modify the FedACH Minimum 
Origination Fee calculation to include fees associated

[[Page 65939]]

with SameDay and FedGlobal[supreg] origination transactions in the 
computation.
     The Reserve Banks will reduce the volume tier thresholds 
for the FedACH Risk Management Services from 500,000 to 100,000 items 
monitored per month.\6\
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    \6\ The FedACH Risk Management Services includes FedACH Risk 
Origination Monitoring Service, FedACH Risk RDFI Alert Service, and 
FedACH Risk Returns Reporting Service. For more information, refer 
to http://frbservices.org/files/serviceofferings/pdf/FedACHRiskServices.pdf.
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Fedwire Funds and National Settlement

     The Reserve Banks will reduce the per-item fee on all 
transfers that exceed $10 million (high-value transfer surcharge) from 
$0.15 to $0.14. The Reserve Banks will increase the monthly fee for the 
usage of the FedPayments[supreg] Manager import/export tool from $45 to 
$50. In addition, the Reserve Banks will increase the surcharge for 
offline transactions from $45 to $50.\7\
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    \7\ The monthly 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 $0.69 to $0.73 per transaction, increase the Tier 3 
per-item pre-incentive fee from $0.14 to $0.15, and leave Tier 2 per-
item pre-incentive fees unchanged.\8\
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    \8\ 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 60 
percent of a customer's historic benchmark volume.
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Fedwire Securities

     The Reserve Banks will increase the online transfer fee 
from $0.54 to $0.65.
     The Reserve Banks will increase the monthly account 
maintenance fee from $40 to $48 per account, and increase the monthly 
issue maintenance fee from $0.54 to $0.65 per issue.
     The Reserve Banks will increase the Joint Custody 
origination surcharge from $40 to $44.

FedLine[supreg] Access Solutions

     The Reserve Banks will increase the fees on legacy 
services, such as an additional $10 per month for FedMail[supreg] Fax 
and $300 per month for FedLine Direct[supreg] (56K). The Reserve Banks 
also will raise the monthly fee for the 56K additional dedicated 
electronic access connection by $400 and to introduce a legacy device 
VPN surcharge of $2,500 per month.\9\
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    \9\ Effective February 1, 2015. Price will increase to $5,000 on 
May 1, 2015 and $7,500 on September 1, 2015.
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     The Reserve Banks will add a new package called FedLine 
Advantage[supreg] Premier to the FedLine packaged solutions that will 
be priced at $500 per month with FedTransaction Analyzer and a 
secondary VPN device.\10\
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    \10\ All customers, regardless of their chosen electronic access 
channel, are responsible for the purchase and installation of each 
VPN device.
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     The Reserve Banks will introduce two new tiers to the 
FedComplete[supreg] package solutions called FedComplete 100 Premier, 
priced at $850 per month, and FedComplete 200 Premier, priced at $1,375 
per month, with FedLine Advantage Premier included.
     The Reserve Banks will change the name of the FedMail 
Email package to FedLine Exchange; there is no change to the published 
fee.
    5. 2015 Price Index--Figure 1 compares indexes of fees for the 
Reserve Banks' priced services with the GDP price index starting in 
2005, which is the first full year the Reserve Banks offered Check 21 
services. The price index for Reserve Bank priced services is projected 
to increase approximately 1 percent in 2015 from the 2014 level. The 
price index for Check 21 services is projected to decrease 
approximately 3 percent. The price index for the FedACH Service is 
projected to decrease nearly 1 percent. The price index for the Fedwire 
Funds and National Settlement Services is projected to increase 
approximately 5 percent. The price index for the Fedwire Securities 
Services is projected to increase approximately 15 percent. For the 
period 2005 to 2014, the price index for total priced services is 
expected to decrease 32 percent. In comparison, for the period 2005 to 
2013, the GDP price index increased 16 percent.

[[Page 65940]]

[GRAPHIC] [TIFF OMITTED] TN06NO14.022

    B. Private Sector Adjustment Factor--The imputed debt financing 
costs, targeted ROE, and effective tax rate are based on a U.S. 
publicly traded firm market model.\11\ The method for calculating the 
financing 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.
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    \11\ Data for U.S. publicly traded firms is from the Standard 
and Poor's Compustat[supreg] database. This database contains 
information on more than 6,000 U.S. publicly traded firms, which 
approximates the entirety of the U.S. market.
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    The portion of Federal Reserve assets that will be used to provide 
priced services during the coming year is determined using information 
about actual assets and projected disposals and acquisitions. The 
priced portion of these assets is determined based on the allocation of 
depreciation and amortization expenses of each asset class. The priced 
portion of actual Federal Reserve liabilities consists of 
postemployment and postretirement benefits, accounts payable, and other 
liabilities. The priced portion of the actual net pension asset or 
liability is also included on the balance sheet.\12\
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    \12\ The pension assets are netted with the pension liabilities 
and reported as a net asset or net liability as required by ASC 715 
Compensation--Retirement Benefits.
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    The equity financing rate is the targeted ROE 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. The risk-free rate is based on the three-
month Treasury bill; the beta is assumed to be equal to 1.0, which 
approximates the risk of the market as a whole; and the market risk 
premium is based on the monthly returns in excess of the risk-free rate 
over the most recent 40 years. The resulting ROE reflects the return a 
shareholder would expect when investing 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 explicitly 
calculated for Reserve Bank priced services. Instead, the Board targets 
a pre-tax ROE that would provide sufficient income to fulfill the 
priced services' imputed income tax obligations. To the extent that 
performance results are greater or less

[[Page 65941]]

than the targeted ROE, income taxes are adjusted using the effective 
tax rate.
    Capital structure. The capital structure is imputed based on the 
imputed funding need (assets less liabilities), subject to minimum 
equity constraints. Short-term debt is imputed to fund the imputed 
short-term funding need. Long-term debt and equity are imputed to meet 
the priced services long-term funding need at a ratio based on the 
capital structure of the U.S. publicly traded firm market. The level of 
equity must meet the minimum equity constraints, which follow the FDIC 
requirements for a well-capitalized institution. The priced services 
must maintain equity of at least 5 percent of total assets and 10 
percent of risk-weighted assets.\13\ Any equity imputed that exceeds 
the amount needed to fund the priced services' assets and meet the 
minimum equity constraints is offset by a reduction in imputed long-
term debt. When imputed equity is larger than what can be offset by 
imputed debt, the excess is imputed as investments in Treasury 
securities; income imputed on these investments reduces the PSAF.
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    \13\ The FDIC rule, which was adopted as final on April 8, 2014, 
requires that well-capitalized institutions meet or exceed the 
following standards: (1) total capital to risk-weighted assets ratio 
of at least 10 percent, (2) tier 1 capital to risk-weighted assets 
ratio of at least 8 percent, (3) common equity tier 1 capital to 
risk-weighted assets ratio of at least 6.5 percent, and (4) a 
leverage ratio (tier 1 capital to total assets) of at least 5 
percent. Since all of the Federal Reserve priced services' equity on 
the pro forma balance sheet qualifies as tier 1 capital, only 
requirements 1 and 4 are binding. The FDIC rule can be located at 
https://www.fdic.gov/news/board/2014/2014-04-08_notice_dis_c_fr.pdf.
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    Application of the Payment System Risk (PSR) Policy to the Fedwire 
Services. The Board recently approved revisions to the PSR policy to 
reflect the new international standards for financial market 
infrastructures (FMIs) developed by the Committee on Payment and 
Settlement Systems and the Technical Committee of the International 
Organization of Securities Commissions in the Principles for Financial 
Market Infrastructures. The revised policy retains the expectation that 
the Fedwire Services will meet or exceed the applicable risk-management 
standards. Principle 15 states that an FMI should identify, monitor, 
and manage general business risk and hold sufficient liquid net assets 
funded by equity to cover potential general business losses so that it 
can continue operations and services as a going concern if those losses 
materialize. Further, liquid net assets should at all times be 
sufficient to ensure a recovery or orderly wind-down of critical 
operations and services. The Fedwire Services do not face the risk that 
a business shock would cause the service to wind down in a disorderly 
manner and disrupt the stability of the financial system. In order to 
foster competition with private-sector FMIs, however, the Reserve 
Banks' priced services will hold six months of the Fedwire Funds 
Service's current operating expenses as liquid net financial assets and 
equity on the pro forma balance sheet.\14\ Current operating expenses 
are defined as normal business operating expenses on the income 
statement less depreciation, amortization, taxes, and interest on debt. 
The Fedwire Funds Service's six months of operating expenses are 
computed based on its 2015 budget at $47.7 million.\15\ The revised PSR 
policy requirement is met in 2015 by the investments and equity imputed 
to the priced services balance sheet; therefore, there is no need to 
impute additional assets or equity.
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    \14\ This requirement, which becomes effective on December 31, 
2015, does not apply to the Fedwire Securities Service. There are no 
competitors to the Fedwire Securities Service that will face such a 
requirement, and imposing such a requirement when pricing securities 
services could artificially increase the cost of these services.
    \15\ 2015 budget pro forma as of October 8, 2014 based on 
initial transmission data.
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    Effective tax rate. As with the imputed capital structure, the 
effective tax rate is calculated based on data from U.S. publicly 
traded firms. The tax rate is the mean of the weighted average rates of 
the U.S. publicly traded firm market over the past 5 years.
    Debt and equity financing. The imputed short- and long-term debt 
financing rates are derived from the nonfinancial commercial paper 
rates from the Federal Reserve Board's H.15 Selected Interest Rates 
release (AA and A2/P2) 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 short-term debt, 
long-term debt, and equity needed to finance short- and long-term 
assets and meet equity requirements.
    The decrease in the 2015 PSAF is primarily due to lower financing 
costs as a result of fewer priced services assets to be financed than 
in 2014. Debt and equity financing rates declined and less debt and 
equity was imputed to fund priced services assets.
    Projected 2015 Federal Reserve priced-services assets, reflected in 
table 3, have decreased $107.3 million from 2014, which is primarily 
the result of a decline in the deferred tax asset. As shown in table 3, 
the amount of long-term debt for the 2015 PSAF is $81.9 million, a 
decline of $37.4 million from $119.3 million in 2014. Imputed equity 
for 2015 is $71.9 million, a decrease of approximately $10.4 million 
from the equity imputed for 2014. In accordance with FAS 158 [ASC 715], 
this amount includes an accumulated other comprehensive loss of $523.7 
million.
    Table 4 reflects the portion of short- and long-term assets that 
must be financed with actual or imputed liabilities and equity. Debt 
and equity imputed to fund the 2015 priced services assets within the 
observed market leverage ratio produced an equity level that did not 
meet the FDIC minimum equity requirements. As a result, additional 
equity was imputed to meet the FDIC requirements and imputed long-term 
debt was reduced. The ratio of capital to risk-weighted assets meets 
the required 10 percent of risk-weighted assets and equity exceeds 5 
percent of total assets (table 6). In 2014, long-term debt and equity 
was imputed to meet the asset funding requirements and reflects the 
leverage ratio observed in the market; no additional equity was 
required (table 5).
    Table 5 shows the derivation of the 2015 and 2014 PSAF. Financing 
costs for 2015 are $4.3 million lower than in 2014. In addition to the 
decline in the levels of debt and equity mentioned above, the long-term 
debt and cost of equity declined 9 basis points and 5 basis points, 
respectively. The reduced equity balance and the lower cost of equity 
result in a pre-tax ROE that is $1.4 million lower than the 2014 pre-
tax ROE. Imputed sales taxes declined to $3.3 million in 2015 from $3.5 
million in 2014. The priced services portion of the Board's expenses 
decreased $0.8 million to $3.3 million in 2015 from $4.1 million in 
2014. The effective income tax rate used in 2015 decreased to 22.4 
percent from 37.2 percent in 2014.

[[Page 65942]]



          Table 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal Reserve Priced Services
                                [Millions of dollars--projected average for year]
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                                                                       2015            2014           Change
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Short-term assets:
    Receivables.................................................            34.5            35.8           (1.3)
    Materials and supplies......................................             0.6             0.7           (0.1)
    Prepaid expenses............................................            11.0            11.1           (0.1)
Items in process of collection \16\.............................           151.0           200.0          (49.0)
                                                                 -----------------------------------------------
        Total short-term assets.................................           197.2           247.7          (50.5)
Imputed investments \17\........................................          $600.0          $600.0            $0.0
Long-term assets:
    Premises \18\...............................................          $116.2          $123.6          $(7.4)
    Furniture and equipment.....................................            39.9            37.6             2.3
    Leasehold improvements and long-term prepayments............            91.5           103.3          (11.7)
    Net pension asset...........................................            79.6            39.3            40.2
    Deferred tax asset..........................................           222.8           303.1          (80.2)
                                                                 -----------------------------------------------
        Total long-term assets..................................           550.0           606.8          (56.8)
                                                                 -----------------------------------------------
            Total assets........................................        $1,347.2        $1,454.5        $(107.3)
                                                                 ===============================================
Short-term liabilities:
    Deferred credit items.......................................          $751.0          $800.0         $(49.0)
    Short-term debt.............................................            18.5            22.2           (3.6)
    Short-term payables.........................................            27.6            25.5             2.1
                                                                 -----------------------------------------------
        Total short-term liabilities............................           797.2           847.7          (50.5)
Long-term liabilities:
    Long-term debt..............................................           $81.9          $119.3         $(37.4)
    Postemployment/postretirement benefits and net pension                 396.3           405.2           (8.9)
     liabilities \19\...........................................
                                                                 -----------------------------------------------
        Total liabilities.......................................        $1,275.3        $1,372.2         $(96.9)
Equity \17\ \20\................................................           $71.9           $82.3         $(10.4)
                                                                 ===============================================
            Total liabilities and equity........................        $1,347.2        $1,454.5        $(107.3)
----------------------------------------------------------------------------------------------------------------

     
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    \16\ Credit float, which represents the difference between items 
in process of collection and deferred credit items, occurs when the 
Reserve Banks debit the paying bank for transactions prior to 
providing credit to the depositing bank. Float is directly estimated 
at the service level.
    \17\ Consistent with the Federal Reserve Policy on Payment 
System Risk, the Reserve Banks' priced services will hold six months 
of the Fedwire Funds Service's current operating expenses as liquid 
net financial assets and equity on the pro forma balance sheet. Six 
months of the Fedwire Funds Service's projected operating expenses 
is $47.7 million. As this requirement takes effect on the last day 
of the year, the minimum liquid financial assets and equity 
requirement is $0.1 million ($47.7 million/365). The investments and 
equity imputed to the priced services balance sheet of $600 million 
and $71.9 million, respectively, are greater than the liquid 
financial assets and equity required; therefore no additional 
imputation is necessary.
    \18\ Includes the allocation of Board of Governors assets to 
priced services of $0.7 and $0.6 million for 2015 and 2014, 
respectively.
    \19\ Includes the allocation of Board of Governors liabilities 
to priced services of $0.6 million and $0.6 million for 2015 and 
2014, respectively.
    \20\ Includes an accumulated other comprehensive loss of $523.7 
million for 2015 and $497.5 million for 2014, 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. See table 5 for 
calculation of required imputed equity amount.

           Table 4--Imputed Funding for Priced-Services Assets
                          [Millions of dollars]
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                                               2015            2014
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A. Short-term asset financing
    Short-term assets to be financed....
        Receivables.....................           $34.5           $35.8
        Materials and supplies..........             0.6             0.7
        Prepaid expenses................            11.0            11.1
                                         -------------------------------
    Total short-term assets to be                  $46.2           $47.7
     financed...........................
        Short-term payables.............            27.6            25.5
                                         -------------------------------
      Net short-term assets to be                  $18.5           $22.2
       financed.........................
                                         ===============================
            Imputed short-term debt                $18.5           $22.2
             financing \21\.............
                                         ===============================
B. Long-term asset financing
    Long-term assets to be financed.....
        Premises........................          $116.2          $123.6

[[Page 65943]]

 
        Furniture and equipment.........            39.9            37.6
        Leasehold improvements and long-            91.5           103.3
         term prepayments...............
        Net pension asset...............            79.6            39.3
        Deferred tax asset..............           222.8           303.1
                                         -------------------------------
    Total long-term assets to be                  $550.0          $606.8
     financed...........................
        Postemployment/postretirement              396.3           405.2
         benefits and net pension
         liabilities....................
                                         -------------------------------
        Net long-term assets to be                $153.8          $201.6
         financed.......................
                                         ===============================
Imputed long-term debt \21\.............           $81.9          $119.3
Imputed equity \21\.....................            71.9            82.3
                                         -------------------------------
            Total long-term financing...          $153.8          $201.6
------------------------------------------------------------------------

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

    \21\ See table 5 for calculation.

                                  Table 5--Derivation of the 2015 and 2014 PSAF
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                              2015                             2014
                                               -----------------------------------------------------------------
                                                   Debt                 Equity      Debt                 Equity
----------------------------------------------------------------------------------------------------------------
A. Imputed long-term debt and equity:
    Net long-term assets to finance...........     $153.8  .........     $153.8     $201.6  .........     $201.6
    Capital structure observed in market......      58.2%  .........      41.8%      59.2%  .........      40.8%
                                               -----------------------------------------------------------------
    Pre-adjusted long-term debt and equity....      $89.5  .........      $64.3     $119.3  .........      $82.3
    Equity adjustments offset by: \22\
        Imputed long-term debt................      (7.6)  .........        7.6         --  .........         --
        Imputed investments...................         --  .........         --         --  .........         --
                                               -----------------------------------------------------------------
                                                    $81.9  .........      $71.9     $119.3  .........      $82.3
                                               =================================================================
B. Cost of capital:
    Elements of capital costs.................
        Short-term debt \23\..................    $18.5 x     0.2% =       $0.0    $22.2 x     0.2% =       $0.0
        Long-term debt \23\...................     81.9 x     5.0% =        4.1    119.3 x     5.9% =        7.0
        Equity \24\...........................     71.9 x    10.1% =        7.3     82.3 x    10.6% =        8.7
                                                                     -----------                      ----------
                                                .........  .........      $11.4  .........  .........      $15.8
C. Other required PSAF costs:
    Sales taxes...............................  .........       $3.3  .........  .........       $3.5
    Board of Governors expenses...............  .........        3.3  .........  .........        4.1
                                               -----------------------------------------------------------------
                                                .........  .........        6.6  .........  .........        7.6
                                               -----------------------------------------------------------------
                                                .........  .........      $18.0  .........  .........      $23.4
                                               =================================================================
D. Total PSAF:
    As a percent of assets....................  .........  .........       1.3%  .........  .........       1.6%
    As a percent of expenses..................  .........  .........       4.5%  .........  .........       5.6%
E. Tax rates..................................  .........  .........      22.4%  .........  .........      37.2%
----------------------------------------------------------------------------------------------------------------

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

    \22\ If minimum equity constraints are not met after imputing 
equity based on the capital structure observed in the market, 
additional equity is imputed to meet these constraints. The long-
term funding need was met by imputing long-term debt and equity 
based on the capital structure observed in the market (see tables 4 
and 6). In 2014, the amount of imputed equity was based on the 
minimum equity requirements for risk-weighted assets, or 10%.
    \23\ Imputed short-term debt and long-term debt are computed at 
table 4.
    \24\ The 2015 ROE is equal to a risk-free rate plus a risk 
premium (beta * market risk premium). The 2015 after-tax CAPM ROE is 
calculated as 0.03% + (1.0 * 7.83%) = 7.86%. Using a tax rate of 
22.4%, the after-tax ROE is converted into a pretax ROE, which 
results in a pretax ROE of (7.86%/(1 - 22.4%)) = 10.1%. Calculations 
may be affected by rounding.

[[Page 65944]]



                Table 6--Computation of 2015 Capital Adequacy for Federal Reserve Priced Services
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Weighted
                                                                      Assets        Risk weight       assets
----------------------------------------------------------------------------------------------------------------
Imputed investments:
    3-month Treasury bills \25\.................................             $--  ..............             $--
    Federal funds \26\..........................................           600.0             0.2           120.0
                                                                 ----------------                ---------------
        Total imputed investments...............................           600.0
Receivables.....................................................           $34.5             0.2            $6.9
Materials and supplies..........................................             0.6             1.0             0.6
Prepaid expenses................................................            11.0             1.0            11.0
Items in process of collection..................................           151.0             0.2            30.2
Premises........................................................           116.2             1.0           116.2
Furniture and equipment.........................................            39.9             1.0            39.9
Leasehold improvements and long-term prepayments................            91.5             1.0            91.5
Pension asset...................................................            79.6             1.0            79.6
Deferred tax asset..............................................           222.8             1.0           222.8
                                                                 ----------------                ---------------
            Total...............................................        $1,347.2  ..............          $718.8
                                                                 ================                ===============
Imputed equity..................................................  ..............  ..............           $71.9
Capital to risk-weighted assets.................................           10.0%
Capital to total assets.........................................            5.3%
----------------------------------------------------------------------------------------------------------------

    C. Check Service--Table 7 shows the 2013 actual, 2014 estimated, 
and 2015 budgeted cost-recovery performance for the commercial check 
service.
---------------------------------------------------------------------------

    \25\ 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 invested solely in 
Treasury securities. 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.
    \26\ The investments are imputed based on the amounts arising 
from the collection of items prior to providing credit according to 
established availability schedules.

                          Table 7--Check Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE    ROE [1/(2+4)]
                                                                                                         %
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2013 (actual)...................           198.9           170.7            28.2             1.7           115.4
2014 (estimate).................           172.5           149.1            23.4             1.9           114.2
2015 (budget)...................           151.8           142.0             9.8             2.0           105.4
----------------------------------------------------------------------------------------------------------------

    1. 2014 Estimate--The Reserve Banks estimate that the check service 
will recover 114.2 percent of total expenses and targeted ROE, compared 
with a 2014 budgeted recovery rate of 108.8 percent. Greater-than-
expected check volumes processed by the Reserve Banks and lower-than-
expected costs have influenced significantly the check services cost 
recovery.27 28
---------------------------------------------------------------------------

    \27\ The greater-than-expected check volume is attributed to 
continued enhancements of two strategic FedForward product 
offerings, specifically select mixed and premium mixed.
    \28\ Operating costs are expected to be $2.1 million lower than 
the original 2014 budget due to operational efficiencies in check 
processing as well as lower than budgeted information technology 
costs. Pension costs are also projected to be $3.5 million under the 
original budget.
---------------------------------------------------------------------------

    The decline in Reserve Bank check volume, which is attributable to 
the decline in the number of checks written generally, was not as great 
as anticipated. Through September, total forward check volume is 4.5 
percent lower and total return check volume is 12.4 percent lower than 
for the same period last year. For full-year 2014, the Reserve Banks 
estimate that their total forward check volume will decline 5.1 percent 
(compared to a budgeted decline of nearly 9 percent) and their total 
return check volume will decline 13.0 percent (compared to a budgeted 
decline of about 14 percent) from 2013 levels.\29\
---------------------------------------------------------------------------

    \29\ Total Reserve Bank forward check volumes are expected to 
drop from roughly 6.0 billion in 2013 to 5.7 billion in 2014. Total 
Reserve Bank return check volumes are expected to drop from roughly 
42.1 million in 2013 to 36.6 million in 2014.
---------------------------------------------------------------------------

    2. 2015 Pricing--The Reserve Banks project that the check service 
will recover 105.4 percent of total expenses and targeted ROE in 2015. 
The Reserve Banks project revenue to be $151.8 million, a decline of 12 
percent from 2014. This decline is driven largely by projected 
reductions in both forward check and return check volume. The Reserve 
Banks estimate that total Reserve Bank forward check volumes will 
decline nearly 7 percent to 5.3 billion and return check volumes will 
decline approximately 14 percent to 31.3 million in 2015. Total 
expenses for the check service are projected to be $142.0 million, a 
decline of nearly 5 percent from 2014. The reduction in check costs is 
driven primarily by the cost savings associated with the implementation 
of a more efficient

[[Page 65945]]

check processing platform and the full decommissioning of the legacy 
platform.\30\
---------------------------------------------------------------------------

    \30\ The Reserve Banks completed a multi-year check platform 
modernization initiative in October 2012.
---------------------------------------------------------------------------

    The Reserve Banks announced in October a 12:00 noon deadline (but 
not the associated fees) for three deposit options within the current 
FedForward product line, specifically, Mixed, Premium Mixed D, and 
Select Mixed products, to provide an opportunity for the bank of first 
deposit to present forward items to paying banks one day 
earlier.31 32 For the Mixed deposit option, the Reserve 
Banks will reduce the per-item fees for tiers 1, 2, 3, and 4 from the 
current 10:00 a.m. deposition option, as seen in table 8.\33\ For the 
Select Mixed option, the Reserve Banks will increase the per-item fees 
for non-eligible items from $0.10 to $0.35 and to implement a $25 ICL 
surcharge.\34\ For the Premium Mixed D option, the Reserve Banks will 
charge per-item fees $0.002 higher than the per-item fees at the 
current 1:00 a.m. deadline (with the exception of the substitute check 
fee, which will be $0.20 higher) and a $25 ICL surcharge.\35\
---------------------------------------------------------------------------

    \31\ Depository institutions deposit image cash letters using 
nine deposit options within the FedForward product line, which vary 
in price structure and funds availability. A current list of 
FedForward deposit options can be found at http://frbservices.org/servicefees/check_services_2014.html.
    \32\ The Reserve Banks announced the deadline in October, 
effective January 2, 2015, to provide both collecting banks and 
paying banks enough time to modify their processes to deposit and 
receive items at 12:00 noon and 2:00 p.m., respectively. The 
announcement can be found at http://www.frbservices.org/files/communications/pdf/check/100314_updated_new_fedforward_deposit_deadline.pdf.
    \33\ The Mixed product option allows customers to send forward 
collection items in a mixed cash letter at various deadlines for a 
lower cash letter fee and higher electronic per-item fee.
    \34\ The Select Mixed product option allows customers to send 
forward collection items drawn on specific endpoints in a separate 
cash letter, which combines a high fixed fee with a lower per-item 
variable fee. All eligible items in the cash letter receive 
immediate availability and qualify for the special pricing while 
ineligible items receive deferred availability of the next business 
day and pay a higher per-item fee. A current list of Select Mixed 
endpoints can be found at http://www.frbservices.org/servicefees/check21_endpoint_listing.html.
    \35\ The Premium Mixed product option allow customers to send 
forward collection items within a specific number of mixed cash 
letters for a daily fixed fee and a lower per-item fee. A surcharge, 
or overage fee, is charged for each cash letter deposited over the 
published threshold. Premium Mixed depositors are not eligible to 
use Fine Sort and Deferred Fine Sort products.

                                                     Table 8
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                   FedForward Mixed Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline....................................................   9:00 p.m.    1:00 a.m.    5:00 a.m.    12:00 p.m.
----------------------------------------------------------------------------------------------------------------
Cash letter fee.............................................        $3.50        $4.50        $6.50        $6.50
    Tier 1..................................................       0.0080       0.0230       0.0500       0.0700
    Tier 2..................................................       0.0200       0.0330       0.0800       0.1000
    Tier 3..................................................       0.0300       0.0500       0.2000       0.2200
    Tier 4..................................................       0.0400       0.0600       0.2500       0.2700
    Substitute check \e\....................................       0.1500       0.1500       0.3000       0.3500
----------------------------------------------------------------------------------------------------------------
                              FedForward Premium Mixed D Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline....................................................          1:00 a.m.
                                                                     12:00 p.m.
----------------------------------------------------------------------------------------------------------------
Cash letter fee \d\.........................................           $500.00
                                                                       $500.00
Cash letter surcharge \c\...................................  ........................
                                                                 ..................
                                                                        25.00
    Tier 1..................................................           0.0040
                                                                       0.0060
    Tier 2..................................................           0.0170
                                                                       0.0190
    Tier 3..................................................           0.0280
                                                                       0.0300
    Tier 4..................................................           0.0390
                                                                       0.0410
    Substitute check \e\....................................           0.1500
                                                                       0.3500
----------------------------------------------------------------------------------------------------------------
                                FedForward Select Mixed Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline....................................................          5:00 a.m.
                                                                     12:00 p.m.
                                                             ---------------------------------------------------
                                                                Level 1      Level 2      Level 1      Level 2
----------------------------------------------------------------------------------------------------------------
Daily fixed fee.............................................    $2,200.00      $900.00    $2,200.00      $900.00
Cash letter surcharge \c\...................................  ...........  ...........        25.00        25.00
Tier 1......................................................       0.0020       0.0020       0.0020       0.0020
Tier 2......................................................       0.0040       0.0060       0.0040       0.0060
Tier 3......................................................       0.0060       0.0080       0.0060       0.0080
Non-eligible endpoints......................................       0.1000       0.1000       0.3500       0.3500
----------------------------------------------------------------------------------------------------------------
\a\ All deadlines are Monday through Friday.
\b\ A current list of FedForward endpoint tier listings can be found at http://www.frbservices.org/servicefees/
  check21--Fendpoint--listing.html.
\c\ The surcharge will apply to each cash letter received between 5:00 a.m. and 12:00 p.m., in addition to the
  daily fixed fee.
\d\ Depositors who send more than the allowed maximum number of files will be charged a $35.00 file overage fee
  for each additional cash letter. The maximum number of cash letters per day for the Premium Mixed D product is
  35.
\e\ The Reserve Bank's Check 21 service fees include separate and substantially different fees for the delivery
  of checks to electronic endpoints versus paper substitute check endpoints.

    The Reserve Banks will introduce two new deposit options to the 
FedForward Premium Mixed ICL products, Premium Mixed E and F, as seen 
in table 9.

[[Page 65946]]



                           Table 9--FedForward Premium Mixed Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
                                                        Premium Mixed E \c\             Premium Mixed F \c\
                    Deadline                     ---------------------------------------------------------------
                                                     5:00 a.m.      12:00 p.m.       5:00 a.m.      12:00 p.m.
----------------------------------------------------------------------------------------------------------------
Daily fixed fee \d\.............................         $325.00         $325.00         $650.00         $650.00
Cash letter surcharge \e\.......................  ..............           25.00  ..............           25.00
Tier 1..........................................          0.0040          0.0060          0.0040          0.0060
Tier 2..........................................          0.0170          0.0190          0.0170          0.0190
Tier 3..........................................          0.0280          0.0300          0.0280          0.0300
Tier 4..........................................          0.0390          0.0410          0.0390          0.0410
Substitute Checks \f\...........................          0.3000          0.3500          0.3000          0.3500
----------------------------------------------------------------------------------------------------------------
\a\ All deadlines are Monday through Friday.
\b\ A current list of FedForward endpoint tier listings can be found at http://www.frbservices.org/servicefees/
  check21--Fendpoint--listing.html.
\c\ Premium Mixed E and Premium Mixed F products are not eligible to use Fine Sort or Deferred Fine Sort
  products.
\d\ Depositors who send more than the allowed maximum number of files will be charged a $35.00 file overage fee
  for each additional cash letter. The maximum number of cash letters per day for Premium Mixed E and Premium
  Mixed F is 30 and 60, respectively.
\e\ The surcharge will apply to each cash letter received between 5:00 a.m. and 12:00 p.m., in addition to the
  daily fixed fee.
\f\ The Reserve Bank's Check 21 service fees include separate and substantially different fees for the delivery
  of checks to electronic endpoints versus paper substitute check endpoints.

    The Reserve Banks will increase the FedForward Deferred Mixed ICL 
product per-item fees at the 5:00 a.m. and 10:00 a.m. deadlines by 
$0.002 and $0.004, respectively. They also will increase the FedForward 
Deferred Fine Sort ICL product per-item fees at the 5:00 a.m. and 10:00 
a.m. deadlines by $0.001 and $0.002, respectively. The Reserve Banks 
hope to encourage depositors to shift volume from the deferred-
availability product to one of the immediate-availability options at 
12:00 noon. The Reserve Banks estimate that the price changes will 
result in an approximate 0.5 percent average price decrease for check 
customers.
    Risks to the Reserve Banks' ability to achieve budgeted 2015 cost 
recovery for the check service include greater-than-expected check 
volume losses due to reductions in check writing overall and 
competition from 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 10 shows the 2013 actual, 2014 estimate, 
and 2015 budgeted cost-recovery performance for the commercial FedACH 
service.

                         Table 10--FedACH Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
              Year                    Revenue      Total expense    Net income     Targeted roe   after targeted
                                                                    (Roe) [1-2]                    Roe [1/(2+4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2013 (actual)...................           118.9           116.3             2.6             1.2          101.2%
2014 (estimate).................           123.3           140.9           -17.6             1.7            86.5
2015 (budget)...................           124.4           122.6             1.8             1.7           100.0
----------------------------------------------------------------------------------------------------------------

    1. 2014 Estimate--The Reserve Banks estimate that the FedACH 
service will recover 86.5 percent of total expenses and targeted ROE, 
compared with a 2014 budgeted recovery rate of 99.2 percent. The 
shortfall in the FedACH Service is due to a $31.6 million charge 
related to its investment associated with a multiyear technology 
initiative to modernize its processing platform.\36\ The Reserve Banks' 
long-term cost recovery average, from 2003 to 2014, is 102.1 percent. 
Through September, FedACH commercial origination and receipt volume was 
4.1 percent higher than it was during the same period last year. The 
Reserve Banks believe that the volume growth will continue at the same 
pace for the full year 2014, higher than the 3.0 budgeted volume 
increase.
---------------------------------------------------------------------------

    \36\ The Reserve Banks have been engaged in a multiyear 
technology initiative to modernize the FedACH processing platform by 
migrating the service from a mainframe system to a distributed 
computing environment. In late 2013, the Reserve Banks conducted an 
assessment focused on the viability and cost-effectiveness of the 
program. As a result, the Reserve Banks in 2014 suspended the 
program and began to investigate the use of other technology 
solutions.
---------------------------------------------------------------------------

    2. 2015 Pricing--The Reserve Banks expect the FedACH service to 
recover 100.0 percent of total expenses and targeted ROE in 2015. 
FedACH commercial origination and receipt volume is projected to grow 
3.5 percent contributing to an increase of $1.1 million in total 
revenue from the 2014 estimate. Total expenses are budgeted to decrease 
$900 thousand from 2014 budgeted expenses of $125.3 million, primarily 
because of efficiencies gained from synergies between the check and ACH 
operations.
    The Reserve Banks will modify the FedACH Minimum Origination Fee 
calculation to include fees associated with SameDay and FedGlobal 
origination transactions in the computation.\37\ The Reserve Banks will 
reduce the tier volume thresholds for the FedACH Risk Management 
Services from 500,000 to 100,000 items reviewed per month.
---------------------------------------------------------------------------

    \37\ Each Originating Depository Financial Institution (ODFI) is 
charged a minimum of $35 per month in forward value and non-value 
item origination fees. The fees associated with domestic FedACH, 
SameDay, and FedGlobal originations are collectively subject to the 
minimum fee.
---------------------------------------------------------------------------

    The primary risks to the Reserve Banks' ability to achieve budgeted 
2015 cost recovery for the FedACH service are cost overruns associated 
with unanticipated problems related to infrastructure currency efforts 
and higher-than-expected support and overhead costs. Other risks 
include lower-than-expected volume and associated revenue due to 
unanticipated

[[Page 65947]]

mergers and acquisitions and loss of market share due to direct 
exchanges and a shift of volume to the private-sector operator.
    E. Fedwire Funds and National Settlement Services--Table 11 shows 
the 2013 actual, 2014 estimate, and 2015 budgeted cost-recovery 
performance for the Fedwire Funds and National Settlement Services.

         Table 11--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
                                              [dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE    ROE [1/(2+4)]
                                                                                                         %
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2013 (actual)...................            96.7            97.1            -0.3             1.0            98.6
2014 (estimate).................           109.5           106.6             2.9             1.5           101.3
2015 (budget)...................           112.2           109.8             2.4             1.5           100.8
----------------------------------------------------------------------------------------------------------------

    1. 2014 Estimate -- The Reserve Banks estimate that the Fedwire 
Funds and National Settlement Services will recover 101.3 percent of 
total expenses and targeted ROE, compared with a 2014 budgeted recovery 
rate of 98.0 percent. The higher-than-budgeted cost recovery is 
primarily due to lower-than-expected operating costs, which offset 
weaker-than-anticipated volumes and associated revenue.
    Through September, Fedwire Funds Service online volume was 0.6 
percent lower than for the same period last year. For full-year 2014, 
the Reserve Banks estimate Fedwire Funds Service online volume to 
decline 1.1 percent from 2013 levels, compared to the 3.8 percent 
volume increase that had been budgeted. Through September, National 
Settlement Service settlement file volume was unchanged from the same 
period last year, while settlement entry volume was 5.6 percent lower. 
For the full year, the Reserve Banks estimate that settlement file 
volume will decrease 2.8 percent (same as budgeted) and settlement 
entry volume will decrease 7.3 percent from 2013 levels (compared to a 
budgeted 1.8 percent increase).
    2. 2015 Pricing--The Reserve Banks expect the Fedwire Funds Service 
to recover 100.8 percent of total expenses and targeted ROE. Revenue is 
projected to be $112.2 million, an increase of 2.5 percent from 2014. 
The Reserve Banks project total expenses to be $3.2 million higher than 
the 2014 estimate.
    The Reserve Banks will adjust the incentive pricing fees for the 
Fedwire Funds Service by increasing the Tier 1 per item pre-incentive 
fee (the fee before volume discounts are applied) from $0.69 to $0.73 
and increasing the Tier 3 per item pre-incentive fee from $0.14 to 
$0.15. The Reserve Banks intend to keep the Tier 2 per-item pre-
incentive fee the same.
    The Reserve Banks will decrease the surcharge for transfers 
exceeding $10 million from $0.15 to $0.14.
    The Reserve Banks will increase the FedPayments Manager import/
export monthly fee from $45 to $50. In addition, the Reserve Banks will 
increase the offline transaction surcharge from $45 to $50. The Reserve 
Banks estimate that the price changes will result in an approximate 4.7 
percent average price increase for Fedwire Funds customers.
    The Reserve Banks will not change National Settlement Service fees 
for 2015. The Reserve Banks' Fedwire Funds and National Settlement 
Services fees are consistent with their multi-year strategy to minimize 
pricing volatility while undertaking ongoing technology upgrades and 
related projects to further strengthen information security.
    The primary risk to the Reserve Banks' ability to achieve budgeted 
2015 cost recovery for these services is cost overruns and schedule 
delays from unanticipated problems with managing complex technology 
programs.
    F. Fedwire Securities Service--Table 12 shows the 2013 actual, 2014 
estimate, and 2015 budgeted cost recovery performance for the Fedwire 
Securities Service.\38\
---------------------------------------------------------------------------

    \38\ 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.

                   Table 12--Fedwire Securities Service Pro Forma Cost and Revenue Performance
                                              [dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE    ROE [1/(2+4)]
                                                                                                         %
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2013 (actual)...................            26.9            25.3             1.5             0.2           105.0
2014 (estimate).................            23.8            23.4             0.4             0.3           100.1
2015 (budget)...................            26.0            26.5            -0.6             0.4            96.5
----------------------------------------------------------------------------------------------------------------

    1. 2014 Estimate-- The Reserve Banks estimate that the Fedwire 
Securities Service will recover 100.1 percent of total expenses and 
targeted ROE, compared with a 2014 budgeted recovery rate of 98.0 
percent. The

[[Page 65948]]

higher-than-expected cost recovery is primarily due to lower-than-
budgeted information technology and pension costs, which offset weaker-
than-anticipated volumes and associated revenue.
    Through September, Fedwire Securities Service online volume was 
31.5 percent lower than the same period last year. For full-year 2014, 
the Reserve Banks estimate Fedwire Securities Service online volume to 
decline 30.8 percent from 2013 levels, compared to a budgeted decline 
of 10.9 percent.
    2. 2015 Pricing--The Reserve Banks expect the Fedwire Securities 
Service to recover 96.5 percent of total expenses and targeted ROE in 
2015. The Reserve Banks project that 2015 revenue and expenses will 
increase by $2.2 million and $3.1 million, respectively, compared to 
2014 estimates.
    The Reserve Banks project that online transfer activity will 
decline by 12.9 percent in 2015, the number of accounts maintained will 
decrease by 14.1 percent, and the number of agency securities 
maintained will increase by 0.1 percent.\39\ The projected decline in 
account maintenance activity reflects customer closures of empty 
accounts to avoid unnecessary expenses and increased competition in 
collateral management services.\40\ The Reserve Banks also estimate a 
decrease in online transfer activity, driven by lower expected issuance 
of mortgage-backed and agency debt securities. The reduction in 
mortgage-backed securities issuance reflects gradually increasing 
interest rates and lower anticipated mortgage refinancing. The 
reduction in agency debt issuance reflects a further required reduction 
in government sponsored enterprise portfolios, which has led to a 
reduced funding need for new debt issuance.
---------------------------------------------------------------------------

    \39\ The online transfer fee, monthly account maintenance fee, 
and monthly issue maintenance fee accounted for 92 percent of total 
Fedwire Securities Service revenue through June 2014.
    \40\ Specifically, collateral management services refers to the 
Fedwire Securities Joint Custody Service, which facilitates the 
collateralization of deposits made by a government entity, through 
the pledging of book-entry securities by its depository institution. 
Approximately 72 percent of Fedwire Securities priced accounts are 
collateral accounts related to the Joint Custody Service.
---------------------------------------------------------------------------

    Expenses are budgeted to increase by $3.1 million from 2014 
estimates, reflecting higher technology upgrade costs. The higher 
technology upgrade costs, however, are expected to be partially offset 
by higher Treasury reimbursements.\41\
---------------------------------------------------------------------------

    \41\ Treasury reimbursement is calculated by multiplying costs 
by the ratio of Treasury to agency transfers. In 2015, Treasury 
projects its transfer volume will remain flat, while the Reserve 
Banks expect agency transfers to decrease. Therefore, the higher 
projected ratio of Treasury to agency transfers will result in 
Treasury reimbursing a higher portion of total costs.
---------------------------------------------------------------------------

    The Reserve Banks will increase various fees for the Fedwire 
Securities Service. The Reserve Banks will increase the online transfer 
fee from $0.54 to $0.65, the monthly account maintenance fee from $40 
to $48, and the monthly issue maintenance fee from $0.54 to $0.65 per 
issue. The Reserve Banks will also increase the Joint Custody 
Origination Surcharge from $40 to $44. The Reserve Banks estimate that 
the price changes will result in an approximate 19.1 percent average 
price increase for Fedwire Securities customers.
    The primary risk to the Reserve Banks' ability to achieve budgeted 
2015 cost recovery for these services is cost overruns and schedule 
delays from unanticipated problems with managing complex technology 
upgrades.
    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, FedLine Web[supreg], FedLine Advantage, FedLine 
Command[supreg], and FedLine Direct.\42\ The Reserve Banks package 
these channels into ten FedLine packages, described in the two 
paragraphs below, that are supplemented by a number of premium (or 
[agrave] la carte) access and accounting information options. In 
addition, the Reserve Banks offer FedComplete packages, which are 
bundled offerings of a FedLine Advantage connection and a fixed number 
of FedACH, Fedwire Funds, and Check 21-enabled services.
---------------------------------------------------------------------------

    \42\ FedMail, FedLine Web, FedLine Advantage, FedLine Command, 
and FedLine Direct are registered trademarks of the Federal Reserve 
Banks.
---------------------------------------------------------------------------

    Five attended access packages offer access to critical payment and 
information services via a Web-based interface. The FedLine Exchange 
package (formerly the FedMail Email package) provides access to basic 
information services via email, while two FedLine Web packages offer an 
email option plus online attended access to a range of services, 
including cash services, FedACH information services, and check 
services. Three FedLine Advantage packages expand upon the FedLine Web 
packages and offer attended access to critical transactional services: 
FedACH, Fedwire Funds, and Fedwire Securities.
    Four 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 three remaining 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.\43\
---------------------------------------------------------------------------

    \43\ The FedLine Direct base-level package is available to 
current customers only and will be phased out in 2015 due to 
elimination of 56K line speed.
---------------------------------------------------------------------------

    Many of the FedLine access solutions fees in 2015 are designed to 
encourage customers to migrate to more efficient access solutions. The 
Reserve Banks will increase the fees on legacy services, such as an 
additional $10 per month for FedMail Fax, $300 per month for FedLine 
Direct (56K), and $400 for an additional 56K connection. The Reserve 
Banks also will introduce a $2,500 per month surcharge for those 
depository institutions that continue to use the AT&T VPN after 
February 1, 2015, instead of migrating to the Sprint VPN.
    In addition, the Reserve Banks will make other changes to FedLine 
pricing for 2015 to improve contingency preparedness between Reserve 
Banks and depository institutions. In particular, the Reserve Banks 
will add to the FedLine Advantage channel a new package, FedLine 
Advantage Premier that will be priced at $500 per month and includes a 
secondary VPN device.\44\ FedLine Advantage Premier will also include 
the FedTransaction Analyzer[supreg] tool, which enables depository 
institutions to streamline after-the-fact analysis of payment 
transactions and automate reporting processes. Depository institutions 
with more than 250 Fedwire transactions, or more than one routing 
number, will have access to the FedTransaction Analyzer tool via 
FedLine Advantage Premier rather than FedLine Advantage Plus 
package.\45\
---------------------------------------------------------------------------

    \44\ All customers, regardless of their chosen electronic access 
channel, are responsible for the purchase and installation of each 
VPN device.
    \45\ Current FedTransaction Analyzer customers will be 
automatically moved to FedLine Advantage Premier if they originate 
and receive more than 250 Fedwire funds transfers or have more than 
one routing number in a given month. Customers can opt out of the 
increased fees by discontinuing their use of the FedTransaction 
Analyzer tool or the FedLine Advantage access solution.
---------------------------------------------------------------------------

    The Reserve Banks will introduce two new tiers to FedComplete 
package solutions called FedComplete 100 Premier and FedComplete 200 
Premier,

[[Page 65949]]

which are $850 and $1,375 per month, respectively. These FedComplete 
packages include FedLine Advantage Premier.

II. Analysis of Competitive Effect

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

    \46\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------

    The changes for 2015 are limited to product enhancements and 
pricing modifications; no new products or pricing constructs are 
introduced. These changes 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 changes 
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.

III. 2015 Fee Schedules

                    FedACH Service 2015 Fee Schedule
  [Effective January 2, 2015. Bold indicates changes from 2014 prices]
------------------------------------------------------------------------
                                                    Fee
------------------------------------------------------------------------
FedACH minimum monthly fee.......
    Originating Depository         $35.00.
     Financial Institution (ODFI)
     \47\.
    Receiving Depository           25.00.
     Financial Institution (RDFI)
     \48\.
Origination (per item or record)
 \49\.
    Forward or return items in     0.0030.
     small files.
    Forward or return items in     0.0025.
     large files.
    Addenda record...............  0.0015.
    FedLine Web[supreg]-           0.35.
     originated returns and
     notification of change (NOC)
     fee \50\.
    Facsimile exception returns/   45.00.
     NOC \51\.
    Automated NOC fee............  0.20.
    Volume-based discounts (based
     on monthly billed receipt
     volume) \52\.
        Per item when receipt      0.0002 discount.
         volume is 10,000,001 to
         17,500,000 items per
         month.
        Per item when receipt      0.0003 discount.
         volume is more than
         17,500,000 items per
         month.
Receipt (per item or record).....
    Forward item.................  0.0025.
    Return item..................  0.0075.
    Addenda record...............  0.0015.
    On-us receipt credit \53\....  0.0025 discount.
    Volume-based discounts
     (forward items excluding
     FedACH SameDay service
     items).
      Non-Premium Receivers--
       RDFIs receiving less than
       90 percent of total
       network volume through
       FedACH.
        Per item when volume is    0.0007 discount.
         1,000,001 to 12,500,000
         items per month \54\.
        Per item when volume is    0.0009 discount.
         more than 12,500,000
         items per month \55\.
      Premium Receivers, level
       one--RDFIs receiving at
       least 90 percent of FedACH-
       originated volume through
       FedACH.
        Per item when volume is    0.0007 discount.
         1,000,001 to 2,500,000
         items per month \58\.
        Per item when volume is    0.0008 discount.
         2,500,001 to 12,500,000
         items per month \58\.
        Per item when volume is    0.0010 discount.
         more than 12,500,000
         items per month.\59\
      Premium Receivers, level
       two--RDFIs receiving at
       least 90 percent of ACH
       volume originated through
       FedACH or EPN.
        Per item when volume is    0.0007 discount.
         1,000,001 to 2,500,000
         items per month \58\.
        Per item when volume is    0.0009 discount.
         2,500,001 to 12,500,000
         items per month \58\.
        Per item when volume is    0.0011 discount.
         more than 12,500,000
         items per month \59\.
FedACH SameDay Service...........
    Origination 56 57............
        Forward item in a small    0.0030 surcharge.
         file.
        Forward item in a large    0.0035 surcharge.
         file.
        Addenda record...........  0.0015 surcharge.
        Return item in a small     0.0030 discount.
         file.
        Return item in a large     0.0025 discount.
         file.
        Return addenda record....  0.0015 discount.
    Receipt \58\.................
        Forward item.............  0.0025 discount.
        Return item..............  0.0075 discount.
        Addenda record (forward/   0.0015 discount.
         return).
Monthly FedACH Risk[supreg]
 Management fees \59\.
    Risk Origination Monitoring
     Service/RDFI Alert Service
     package pricing.
        For up to 5 criteria sets  35.00.
        For 6 through 11 criteria  70.00.
         sets.
        For 12 through 23          125.00.
         criteria sets.

[[Page 65950]]

 
        For 24 through 47          150.00.
         criteria sets.
        For 48 through 95          250.00.
         criteria sets.
        For 96 through 191         425.00.
         criteria sets.
        For 192 through 383        675.00.
         criteria sets.
        For 384 through 584        850.00.
         criteria sets.
        For 585+ criteria sets...  1,100.00.
    Risk origination monitoring
     batch.
        For 1 through 100,000      0.007/batch.
         batches.
        For 100,000+ batches.....  0.0035/batch.
Monthly FedPayments Reporter
 Service.
    FedPayments Reporter Service
     package pricing includes.
        Standard reports \60\....
        ACH volume summary by SEC
         code report--
         customer.\61\
        Daily return ratio report
        Monthly return ratio
         report.
        Receiver setup report....
        Report delivery via
         FedLine file access
         solution (monthly fee).
            For up to 50 reports.  35.00.
        For 51 through 150         55.00.
         reports.
        For 151 through 500        100.00.
         reports.
        For 501 through 1,000      180.00.
         reports.
        For 1,001 through 1,500    260.00.
         reports.
        For 1,501 through 2,500    420.00.
         reports.
        For 2,501 through 3,500    580.00.
         reports.
        For 3,501 through 4,500    740.00.
         reports.
        For 4,501 through 5,500    900.00.
         reports.
        For 5,501 through 7,000    1,100.00.
         reports.
        For 7,001 through 8,500    1,300.00.
         reports.
        For 8,501+ reports.......  1,500.00.
    Premier reports \62\.........
        ACH volume summary by SEC
         code report--depository
         financial institution.
            Reports 1 through 5..  10.00/report.
            Reports 6 through 10.  6.00/report.
            Reports 11+..........  1.00/report.
            On Demand............  1.00/report surcharge.
        ACH volume summary by SEC  1.00/report surcharge.
         code report--customer On
         Demand.
        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.
    On-us inclusion..............
        Participation fee........  10.00/month/RTN.
        Per-item fee.............  0.0030.
        Per-addenda fee..........  0.0015.
    Report delivery via encrypted  0.20/email.
     email.
Other fees.......................
    Monthly fee (per routing
     number).
        Account servicing fee      45.00.
         \63\.
        FedACH settlement \64\...  55.00.
        Information extract file.  100.00.
        IAT Output File Sort.....  75.00.
        Notification of change     5.00.
         participation fee \65\.
    Non-electronic input/output
     fee \66\.
        CD or DVD input/output...  50.00.
        Paper input/output.......  50.00.
FedGlobal ACH Payments...........
        Canada service fee.......
            Item originated to     0.62.
             Canada \67\.
            Return received from   0.99.
             Canada \68\.
            Trace of item at       5.50
             receiving gateway.
            Trace of item not at   7.00.
             receiving gateway.
        Mexico service fee.......
            Item originated to     0.67.
             Mexico \67\.
            Return received from   0.91.
             Mexico \68\.
            Item trace...........  13.50.
            A2R item originated    3.45.
             to Mexico 67 69.
            F3X item originated    0.67.
             to Mexico 68 70.
        Panama service fee.......
            Item originated to     0.72.
             Panama \67\.
            Return received from   1.00.
             Panama \68\.
            Item trace...........  7.00.

[[Page 65951]]

 
            NOC..................  0.72.
        Latin America service fee
            A2R item originated    4.40.
             to Latin America 67
             69.
            Return received from   0.72.
             Latin America \68\.
            Item trace...........  5.00.
        Europe service fee.......
            Item originated to     1.25.
             Europe \67\.
            F3X item originated    1.25.
             to Europe 67 70.
            Return received from   1.35.
             Europe \68\.
            Item trace...........  7.00.
------------------------------------------------------------------------

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

    \47\ Any ODFI incurring less than 35 in forward value and non-
value item origination fees will be charged a variable amount to 
reach the minimum.
    \48\ Any RDFI not originating forward value and non-value items 
and incurring less than 25 in receipt fees will be charged a 
variable amount to reach the minimum.
    \49\ Small files contain fewer than 2,500 items and large files 
contain 2,500 or more items.
    \50\ The fee includes the item and addenda fees in addition to 
the conversion fee.
    \51\ The fee includes the item and addenda fees in addition to 
the conversion fee. Reserve Banks also assess a 30 fee for every 
government paper return/NOC they process.
    \52\ Origination discounts apply only to those items received by 
FedACH receiving points and are available only to Premium Receivers.
    \53\ Depository institutions originating and receiving items on 
the same routing number.
    \54\ This per-item discount is a reduction to the standard 
receipt fees listed in this fee schedule.
    \55\ Receipt volumes of more than 12,500,000 items per month 
qualify for the waterfall discount which includes all FedACH receipt 
items.
    \56\ This per-item surcharge is in addition to the standard 
origination fees for forward items.
    \57\ This per-item discount is a reduction to the standard 
origination fees for return items.
    \58\ This per-item discount is a reduction to the standard 
receipt fees.
    \59\ Criteria may be set for both the origination monitoring 
service and the RDFI alert service. Subscribers with no criteria set 
up will be assessed the 35 monthly package fee.
    \60\ Standard reports include Customer Transaction Activity, 
Death Notification, International (IAT), Notification of Change, 
Payment Data Information File, Remittance Advice Detail, Remittance 
Advice Summary, Return Item, Return Ratio, Social Security 
Beneficiary, and Originator Setup Reports.
    \61\ ACH volume summary by SEC code reports generated on demand 
are subject to a 1.00 per report surcharge.
    \62\ Premier reports generated on demand are subject to the 
package/tiered fees plus a surcharge.
    \63\ The account servicing fee applies to routing numbers that 
have received or originated FedACH transactions. Institutions that 
receive only U.S. government transactions through the Reserve Banks 
or that elect to use EPN exclusively are not assessed this fee.
    \64\ The FedACH settlement fee is applied to any routing number 
with activity during a month, including institutions that elect to 
use EPN exclusively but also have items routed to or from customers 
that access the ACH network through FedACH. This fee does not apply 
to routing numbers that use the Reserve Banks for only U.S. 
government transactions.
    \65\ The notification of change 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 only U.S. government 
transactions.
    \66\ Limited services are offered in contingency situations.
    \67\ This per-item surcharge is in addition to the standard 
domestic origination and input file processing fees.
    \68\ This per-item surcharge is in addition to the standard 
domestic receipt fees.
    \69\ Account-to-receiver (A2R) allows funds from accounts at a 
U.S. depository institution to be retrieved by any receiver at 
either a participating bank location or a trusted, third-party 
provider.
    \70\ Payments are both transferred and received in foreign 
currency. The foreign exchange rate and settlement is managed and 
processed by participating U.S. depository institutions and the 
respective foreign gateway operators via their foreign correspondent 
banks.

    Fedwire Funds and National Settlement Services 2015 Fee Schedule
  [Effective January 2, 2015. Bold indicates changes from 2014 prices]
------------------------------------------------------------------------
                                                                Fee
------------------------------------------------------------------------
                          Fedwire Funds Service
------------------------------------------------------------------------
Monthly participation fee...............................          $90.00
Basic volume-based pre-incentive transfer fee
 (originations and receipts)............................
    Per transfer for the first 14,000 transfers per                 0.73
     month..............................................
    Per transfer for additional transfers up to 90,000              0.24
     per month..........................................
    Per transfer for every transfer over 90,000 per                 0.15
     month..............................................
Volume-based transfer fee with the incentive discount
 (originations and receipts) \71\.......................
    Per eligible transfer for the first 14,000 transfers           0.148
     per month..........................................
    Per eligible transfer for additional transfers up to           0.048
     90,000 per month...................................
    Per eligible transfer for every transfer over 90,000           0.030
     per month..........................................
Surcharge for offline transfers (originations and                  50.00
 receipts)..............................................
Surcharge for high-value payments  $10                   0.14
 million................................................
Surcharge for high-value payments > $100 million........            0.36
Surcharge for payment notification......................            0.20
Surcharge for late-day transfer originations \72\.......            0.26
Monthly FedPayments Manager import/export fee \73\......           50.00
------------------------------------------------------------------------
                       National Settlement Service
------------------------------------------------------------------------
Basic
    Settlement entry fee................................            1.50
    Settlement file fee.................................           30.00
Surcharge for offline file origination..................           45.00

[[Page 65952]]

 
Minimum monthly charge (account maintenance) \74\.......           60.00
Special settlement arrangements \75\....................
    Fee per day.........................................          150.00
------------------------------------------------------------------------

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

    \71\ The incentive discounts apply to the volume that exceeds 60 
percent of a customer's historic benchmark volume. Historic 
benchmark volume is based on a customer's average daily activity 
over the previous five calendar years. If a customer has fewer than 
five full calendar years of previous activity, its historic 
benchmark volume is based on its daily activity for as many full 
calendar years of data as are available. If a customer has less than 
one year of prior activity, then the customer qualifies 
automatically for incentive discounts for the year. The applicable 
incentive discounts are as follows: $0.582 for transfers up to 
14,000; $0.192 for transfers 14,001 to 90,000; and $0.120 for 
transfers over 90,000.
    \72\ This surcharge applies to originators of transfers that are 
processed by the Reserve Banks after 5:00 p.m. ET.
    \73\ This fee is charged to any Fedwire Funds participant that 
originates a transfer message via the FedPayments Manager (FPM) 
Funds tool and has the import/export processing option setting 
active at any point during the month.
    \74\ This minimum monthly charge is only assessed if total 
settlement charges during a calendar month are less than $60.
    \75\ 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 2015 Fee Schedule
  [Effective January 2, 2015. Bold indicates changes from 2014 prices]
------------------------------------------------------------------------
                                                                Fee
------------------------------------------------------------------------
Basic transfer fee
    Transfer or reversal originated or received.........           $0.65
Surcharge...............................................
    Offline origination & receipt surcharge.............           66.00
Monthly maintenance fees
    Account maintenance (per account)...................           48.00
    Issues maintained (per issue/per account)...........            0.65
Claim adjustment fee....................................            0.75
Joint Custody Origination Surcharge.....................           44.00
------------------------------------------------------------------------


                        FedLine 2015 Fee Schedule
  [Effective January 2, 2015. Bold indicates changes from 2014 prices.]
------------------------------------------------------------------------
   FedComplete Packages (monthly) \76\
------------------------------------------------------------------------
FedComplete 100 Plus.....................  $775.00.
Includes: 7,500 FedForward transactions..
    70 FedReturn[supreg] transactions....
    14,000 FedReceipt[supreg]
     transactions.
    35 Fedwire funds origination
     transfers.
    35 Fedwire funds receipt transfers...
    Fedwire participation fee............
    1,000 FedACH origination items.......
    FedACH minimum fee...................
    7,500 FedACH receipt items...........
    FedACH receipt minimum fee...........
    10 FedACH web return/NOC.............
    500 FedACH addenda originated........
    1,000 FedACH addenda received........
    FedACH account servicing.............
    FedACH settlement....................
    FedLine Advantage Plus...............
    FedLine subscriber 5-pack............
    FedLine Exchange subscriber 5-pack...
FedComplete 100 Premier..................  850.00.
Includes: 7,500 FedForward transactions..
    70 FedReturn transactions............
    14,000 FedReceipt transactions.......
    35 Fedwire funds origination
     transfers.
    35 Fedwire funds receipt transfers...
    Fedwire participation fee............
    1,000 FedACH origination items.......
    FedACH minimum fee...................
    7,500 FedACH receipt items...........
    FedACH receipt minimum fee...........

[[Page 65953]]

 
    10 FedACH web return/NOC.............
    500 FedACH addenda originated........
    1,000 FedACH addenda received........
    FedACH account servicing.............
    FedACH settlement....................
    FedLine Advantage Premier............
    FedLine subscriber 5-pack............
    FedLine Exchange subscriber 5-pack...
FedComplete 200 Plus.....................  1,300.00.
Includes: 25,000 FedForward transactions.
    225 FedReturn transactions...........
    25,000 FedReceipt transactions.......
    100 Fedwire funds origination
     transfers.
    100 Fedwire funds receipt transfers..
    Fedwire participation fee............
    2,000 FedACH origination items.......
    FedACH minimum fee...................
    25,000 FedACH receipt items..........
    FedACH receipt minimum fee...........
    20 FedACH web return/NOC.............
    750 FedACH addenda originated........
    1,500 FedACH addenda received........
    FedACH account servicing.............
    FedACH settlement....................
    FedLine Advantage Plus...............
    FedLine subscriber 5-pack............
    FedLine Exchange subscriber 5-pack...
FedComplete 200 Premier..................  1,375.00.
Includes: 25,000 FedForward transactions.
    225 FedReturn transactions...........
    25,000 FedReceipt transactions.......
    100 Fedwire funds origination
     transfers.
    100 Fedwire funds receipt transfers..
    Fedwire participation fee............
    2,000 FedACH origination items.......
    FedACH minimum fee...................
    25,000 FedACH receipt items..........
    FedACH receipt minimum fee...........
    20 FedACH web return/NOC.............
    750 FedACH addenda originated........
    1,500 FedACH addenda received........
    FedACH account servicing.............
    FedACH settlement....................
    FedLine Advantage Premier............
    FedLine subscriber 5-pack............
    FedLine Exchange subscriber 5-pack...
FedComplete Excess Volume Surcharge. \77\
    FedForward...........................  0.01/item.
    FedReturn............................  0.7500/item.
    Fedwire funds origination............  0.7000/item.
    FedACH origination...................  0.0025/item.
FedComplete package credit incentive \78\  (1,500.00).
FedLine Customer Access Solutions
 (monthly). \79\
FedLine Exchange (formerly FedMail Email)  40.00.
FedLine Web..............................  110.00.
Includes: FedLine Exchange...............
    FedLine Web with no priced services
     subscriptions.
    FedACH information services (includes
     RDFI file alert service).
    Check 21 services. \80\
    Check 21 duplicate notification......
    Check adjustments....................
    Service charge information...........
    Account management information. \81\
FedLine Web Plus.........................  140.00.
Includes:FedLine Web traditional package.
    FedACH risk management services......
    FedACH FedPayments Reporter Service
     via secure email.
    Check large dollar return............
    Check FedImage[supreg] services......
    Account management information.......
    Cash management plus service.........

[[Page 65954]]

 
    Various accounting and other inquiry
     and report services (Real-time
     Account Balance information,
     Daylight Overdraft Balance, and
     Available Funds Balance information;
     drill down and search features to
     view transaction details; daily
     Statement of Account and data files;
     collateral totals and details; and
     ex-post Daylight Overdraft reports)..
FedLine Advantage........................  380.00.
Includes: FedLine Web traditional package
    FedACH transactions..................
    Fedwire funds transactions...........
    Fedwire securities transactions......
    Fedwire cover payments...............
    Check large dollar return............
    Check FedImage services..............
    Account management information.......
    Various accounting services (ABMS
     inquiry, IAS/PSR inquiry, IAS
     detailed inquiries, notifications
     and advices, end-of-day accounting
     file (PDF)).
FedLine Advantage Plus...................  425.00.
Includes: FedLine Advantage traditional
 package.
    FedACH risk management services......
    FedACH FedPayments Reporter Service
     via secure email.
    Fedwire Funds FedPayments Manager
     import/export.
    FedTransaction Analyzer (less than
     250 FedWire transactions and one
     routing number per month).
    Account management information with
     intra-day search.
FedLine Advantage Premier................  500.00.
Includes: FedLine Advantage Plus package
 with no priced services subscriptions.
    FedTransaction Analyzer (more than
     250 Fedwire transactions and two
     routing numbers per month).
    Secondary VPN device.................
FedLine Command Plus.....................  1,000.00.
Includes: FedLine Advantage Plus package.
    FedLine Command with two certificates
    Fedwire statement services...........
    Intra-day CI file....................
    Statement of account spreadsheet file
     (SASF).
    Financial Institution Reconcilement
     Data File (FIRD).
    Billing Data Format File (BDFF)......
FedLine Direct. \82\.....................  4,500.00.
Includes: FedLine Advantage traditional
 package.
    56K Dedicated WAN Connection.........
    FedLine Command with two certificates
    FedLine Direct with two certificates.
    Fedwire statement services...........
    Intra-day file (I-Day CI File).......
    Statement of Account Spreadsheet File
     (SASF).
    Financial Institution Reconcilement
     Data File (FIRD).
    Billing Data Format File (BDFF)......
FedLine Direct Plus......................  3,600.00.
Includes: FedLine Direct traditional
 package.
    56K or 256K Dedicated WAN Connection.
    FedACH risk management services......
    FedACH FedPayments Reporter Service
     via secure email.
    Fedwire Funds FedPayments Manager
     import/export.
    FedTransaction Analyzer..............
FedLine Direct Premier...................  6,500.00.
Includes: FedLine Direct Plus package....
    T1 Dedicated WAN Connection..........
A La Carte Options (monthly). \83\
Electronic Access........................
    FedLine Exchange subscriber 5-pack     10.00.
     \84\.
    FedLine subscriber 5-pack............  80.00.
    Additional FedLine Command             100.00.
     certificate \85\.
    Additional FedLine Direct certificate  100.00.
     \86\.
    Maintenance of additional virtual      60.00.
     private network device.
    FedLine Advantage 800# Usage (per      3.00.
     hour).
    Dial-Only VPN surcharge..............  1,000.00.
    Additional dedicated connections.
     \87\
        56K..............................  3,500.00.
        256K.............................  2,500.00.
        T1...............................  3,200.00.
    FedLine international setup (one-time  5,000.00.
     fee).
    FedLine Direct contingency solution    1,000.00.
     \88\.
    Check 21 large file delivery.........  various.
    FedMail Fax..........................  70.00.
    Legacy VPN device surcharge \89\.....  2,500.00.

[[Page 65955]]

 
    VPN device modification..............  200.00.
    VPN device modification emergency      200.00.
     surcharge.
    VPN device missed activation           175.00.
     appointment.
    VPN device expedited hardware          100.00.
     surcharge.
    VPN device replacement or move.......  300.00.
    Expedited legacy VPN device order/     500.00.
     change \90\.
Accounting Information Services..........
    Cash Management System. \91\
        Plus--Own report--up to six files  60.00.
         with no respondent/sub-account
         activity (per month).
        Plus--Own report--up to six files  125.00.
         with less than 10 respondent and/
         or sub-accounts (per month).
        Plus--Own report--up to six files  250.00.
         with 10-50 respondent and/or sub-
         accounts (per month).
        Plus--Own report--up to six files  500.00.
         with 51-100 respondents and/or
         sub-accounts (per month.
        Plus--Own report--up to six files  750.00.
         with 101-500 respondents and/or
         sub-accounts (per month).
        Plus--Own report--up to six files  1,000.00.
         with >500 respondents and/or sub-
         accounts (per month).
    End-of-day financial institution       150.00.
     reconcilement data file (per month)
     \92\.
    Statement of account spreadsheet file  150.00.
     (per month) \93\.
    Intra-day download search file (with   150.00.
     AMI) (per month) \94\.
    ACTS Report--<20 sub-accounts........  500.00.
    ACTS Report--21-40 sub-accounts......  1,000.00.
    ACTS Report--41-60 sub-accounts......  1,500.00.
    ACTS Report--> 60 sub-accounts.......  2,000.00.
------------------------------------------------------------------------

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

    \76\ FedComplete packages are all-electronic service options 
that bundle payment services with an access solution for one monthly 
fee.
    \77\ Per-item surcharges are in addition to the standard fees 
listed in the applicable priced services fee schedules.
    \78\ New FedComplete package customers with a new FedLine 
Advantage connection are eligible for a one-time $1,500 credit 
applied to their Federal Reserve service charges. Customers 
receiving credit must continue using the FedComplete package for a 
minimum of six months or forfeit the $1,500 credit.
    \79\ VPN hardware for FedLine Advantage and FedLine Command is 
billed directly by the vendor. A list of fees can be found at http://www.frbservices.org/files/servicefees/pdf/access/2013_vendor_fees.pdf.
    \80\ 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.
    \81\ Ex-post Daylight Overdraft Reports and the daily Statement 
of Account are available via FedMail.
    \82\ FedLine Direct is available to installed customer base 
only. The 56K option is not available for new orders.
    \83\ These add-on services can be purchased only with a FedLine 
Customer Access Service option.
    \84\ There are no priced subscribers contained in the FedLine 
Exchange or FedLine packages.
    \85\ Additional FedLine Command Certificates available for 
FedLine Command and Direct packages only.
    \86\ Additional FedLine Direct Certificates available for 
FedLine Direct packages only.
    \87\ Network diversity supplemental charge of $2,000 a month may 
apply in addition to these fees.
    \88\ FedLine Direct contingency solution is available only for 
FedLine Direct Plus & Premier packages.
    \89\ Effective February 1, 2015. Price will increase to $5,000 
on May 1, 2015 and $7,500 on September 1, 2015.
    \90\ Applicable to VPN devices ordered before May 13, 2013.
    \91\ Cash Management Service options are limited to Plus and 
Premier packages.
    \92\ End of Day Reconcilement File option is available to 
FedLine Web Plus and FedLine Advantage Plus packages.
    \93\ Statement of Account Spreadsheet File option is available 
to FedLine Web Plus and FedLine Advantage Plus packages.
    \94\ 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, October 31, 2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-26322 Filed 11-5-14; 8:45 am]
BILLING CODE P