[Federal Register Volume 80, Number 220 (Monday, November 16, 2015)]
[Notices]
[Pages 70783-70802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28932]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1522]


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 2016 of 
$13.1 million and the 2016 fee schedules for Federal Reserve priced 
services and electronic access. These actions were taken in accordance 
with 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 1, 2016.

FOR FURTHER INFORMATION CONTACT: For questions regarding the fee 
schedules: Susan V. Foley, Senior Associate Director, (202) 452-3596; 
Slavea A. Assenova, Financial Services Analyst, (202) 452-2087, 
Division of Reserve Bank Operations and Payment Systems. For questions 
regarding the PSAF: Gregory L. Evans, Deputy Associate Director, (202) 
452-3945; Lawrence Mize, Deputy Associate Director, (202) 452-5232; 
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 2016 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 2016 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 2005 through 
2014, the Reserve Banks recovered 102.9 percent of their total expenses 
(including imputed costs) and targeted after-tax profits or return on 
equity (ROE) for providing priced services.\1\
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    \1\ The ten-year recovery rate is based on the pro forma income 
statement for Federal Reserve priced services published in the 
Board's Annual Report. Effective December 31, 2006, the Reserve 
Banks implemented Statement of Financial Accounting Standards (SFAS) 
No. 158: Employers' Accounting for Defined Benefit Pension and Other 
Postretirement Plans [Accounting Standards Codification (ASC) 715 
Compensation--Retirement Benefits], which resulted in recognizing a 
cumulative reduction in equity related to the priced services' 
benefit plans. Including this cumulative reduction in equity from 
2005 to 2014 results in cost recovery of 95.1 percent for the ten-
year period. This measure of long-run cost recovery is also 
published in the Board's Annual Report.
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    Table 1 summarizes 2014 actual, 2015 estimated, and 2016 budgeted 
cost-recovery rates for all priced services. Cost recovery is estimated 
to be 104.1 percent in 2015 and budgeted to be 101.9 percent in 2016.

                   Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance a
                                              [Dollars in millions]
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                                                                                                   Recovery rate
              Year                    Revenue      Total expense    Net income     Targeted ROE   after targeted
                                                                                                  ROE  [1/(2+4)]
                                           1 \b\           2 \c\               3           4 \d\           5 \e\
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2014 (actual)...................           433.1           418.7            14.5             5.5          102.1%
2015 (estimate).................           427.1           404.6            22.6             5.6          104.1%
2016 (budget)...................           426.9           414.9            12.0             4.1          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, 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.

    Table 2 provides an overview of cost-recovery performance for the 
ten-year period from 2005 to 2014, 2014 actual, 2015 budget, 2015 
estimate, and 2016 budget by priced service.

[[Page 70784]]



                                     Table 2--Priced Services Cost Recovery
                                                    [Percent]
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                                                                    2015 budget                     2016 budget
         Priced service              2005-2014      2014 actual         \a\        2015 estimate        \b\
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All services....................           102.9           102.1           102.0           104.1           101.9
Check...........................           103.7           115.6           105.2           110.1           106.7
FedACH..........................           100.0            86.7           100.4           100.0            99.0
Fedwire Funds and NSS...........           101.9           103.2           100.7           100.7           100.0
Fedwire Securities..............           102.3           104.1            97.5           105.7            98.7
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\a\ The 2015 budget figures reflect the final budgets as approved by the Board in December 2014.
\b\ The 2016 budget figures reflect preliminary budget information from the Reserve Bank. The Reserve Banks will
  submit final budget data to the Board in November 2015, for Board consideration in December 2015.

    1. 2015 Estimated Performance--The Reserve Banks estimate that they 
will recover 104.1 percent of the costs of providing priced services in 
2015, including total expense and targeted ROE, compared with a 2015 
budgeted recovery rate of 102.0 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 $22.6 million, compared with the 
targeted ROE of $5.6 million. The Reserve Banks estimate that all 
services will achieve full cost recovery, despite higher-than-budgeted 
pension expenses. Greater-than-expected check volume processed by the 
Reserve Banks has been the single most significant factor influencing 
priced services cost recovery.
    2. 2016 Private-Sector Adjustment Factor--The 2016 PSAF for Reserve 
Bank priced services is $13.1 million. This amount represents a 
decrease of $4.9 million from the 2015 PSAF of $18.0 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. 2016 Projected Performance--The Reserve Banks project a priced 
services cost-recovery rate of 101.9 percent in 2016, with net income 
of $12.0 million, compared with a targeted ROE of $4.1 million. The 
Reserve Banks project that the check service and the Fedwire[supreg] 
Funds and National Settlement Service will fully recover their costs; 
however, the Reserve Banks project that the FedACH[supreg] Service and 
the Fedwire Securities Service will not achieve full cost recovery 
because of investment costs associated with multiyear technology 
initiatives to modernize their processing platforms.\2\ These 
investments are expected to enhance efficiency, the overall quality of 
operations, and the Reserve Banks' ability to offer additional services 
to depository institutions.
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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. In 2015, the Reserve Banks evaluated alternative 
processing solutions, including commercially available options.
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    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 operating costs, to increase product revenue, and to capitalize 
on efficiencies gained from technology initiatives.
    4. 2016 Pricing--The following summarizes the Reserve Banks' 
changes in fee schedules for priced services in 2016:

    Check
     The Reserve Banks will increase the per-item fee for 
FedReturn[supreg] items that are qualified to the Reserve Bank in 
instances in which the bank of first deposit cannot be identified from 
$8 to $15.
     The Reserve Banks will increase the fees for traditional 
paper check forward and return collection deposits. The Reserve Banks 
will increase the per-item fee for paper forward deposits from $2.00 to 
$2.50 and the per-item fee for each unencoded item from $1.00 to 
$1.50.\3\ The Reserve Banks will increase the per-item fee for paper 
return-collection deposits from $5.00 to $5.50 and the per-item fee for 
unqualified paper returns from $7.00 to $7.50. The Reserve Banks will 
discontinue image retrievals by fax for both incoming and outgoing 
retrievals within FedImage[supreg] Services.\4\
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    \3\ Unencoded items are those items deposited without encoding 
of certain elements, such as amount, added to the magnetic ink 
character recognition (MICR) line.
    \4\ FedImage Services offer depository institutions products for 
the capture, archive, and retrieval of check images. A current list 
of services can be found at https://www.frbservices.org/serviceofferings/check/fed_image_services.html.
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     The Reserve Banks will introduce Select Mixed Level 3 to 
the Select Mixed image cash letter (ICL) product.\5\ The new level will 
have a daily fee of $3,000 and per-item fees from $0.002 to $0.350.
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    \5\ A current list of Select Mixed endpoints can be found at 
https://www.frbservices.org/servicefees/check21_endpoint_listing.html.
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     The Reserve Banks will eliminate the FedForward[supreg] 
Fine Sort (ICL) product in January 2017 as part of the Reserve Banks' 
effort to reflect today's electronic check processing environment in 
their check fee schedule.\6\ To encourage depositors to shift volume 
from the fine-sort products to mixed deposit options in advance of this 
elimination, the Reserve Banks will increase the FedForward Fine Sort 
ICL product per-item fees at the 9 p.m., 1 a.m., and 5 a.m. deadlines 
by $0.002, $0.004, and $0.006, respectively.\7\ The Reserve Banks will 
increase the FedForward Deferred Fine Sort ICL product per-item fees at 
the 1 a.m., 5

[[Page 70785]]

a.m., and 10 a.m. deadlines by $0.004, $0.006, and $0.008, 
respectively.
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    \6\ In a paper check processing environment, the fine sort 
product allowed the Reserve Banks to gain efficiencies because the 
checks did not require processing on reader-sorters. In today's 
electronic check processing environment, all image cash letters are 
processed through the Reserve Banks' electronic system in the same 
manner, and the Reserve Banks do not gain any efficiencies by having 
the depositing bank fine sort electronic checks prior to deposit.
    \7\ All times are stated in the Eastern Time zone (ET).
    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. The Reserve Banks 
offer customers the option of sending FedForward ICLs for items 
drawn on specific endpoints in a separate cash letter, which 
combines a high fixed fee with a lower variable fee. All eligible 
items in the cash letter receive immediate availability, while 
ineligible items receive deferred availability of the next business 
day. A current list of FedForward deposit options can be found at 
https://www.frbservices.org/servicefees/check_services_2015.html.
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     In addition to the above changes, the Reserve Banks plan 
to announce further modifications to the check fee schedule during 2016 
that reflect the efficiencies of today's electronic check processing 
environment. The new schedule may include elimination of certain sorted 
deposit options and modifications to the current endpoint-based tiered 
pricing structure.
    FedACH

     The Reserve Banks will increase the minimum monthly fee 
for forward origination from $35 to $45.\8\
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    \8\ Any originating depository financial institution (ODFI) 
incurring less than $45 for the following fees will be charged the 
difference to reach the minimum: Forward value and nonvalue item 
origination fees, FedGlobal ACH origination surcharges, and FedACH 
SameDay forward origination surcharges.
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     The Reserve Banks will increase the minimum monthly fee 
for receipt from $25 to $35.\9\
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    \9\ Any receiving depository financial institution (RDFI) 
originating forward value and nonvalue items below the minimum level 
and incurring less than $35 in receipt fees will be charged the 
difference to reach the minimum based on origination. RDFIs not 
originating forward value and nonvalue items will incur the $35 
minimum monthly fee for receipt.
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     The Reserve Banks will eliminate the large file and small 
file per-item fees and introduce a single base fee of $0.0032 for all 
origination files. The Reserve Banks will provide a discount of $0.0005 
for origination volume between 750,000 to 1,500,000 items per month and 
$0.0007 for origination volume greater than 1,500,000 items per month.
     The Reserve Banks will lower the top-tier volume 
origination discount level based on monthly receipt volume from 
17,500,000 to 15,000,000 items per month, while maintaining the current 
discount amounts.\10\
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    \10\ Origination discounts apply only to those items received by 
FedACH receiving points and are available only to Premium Receivers.
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     The Reserve Banks will increase the forward item receipt 
fee from $0.0025 to $0.0032 per item, while keeping the return item 
receipt fee at $0.0075 per item.
     The Reserve Banks will change the volume-based receipt 
discount structure to encourage additional receipt volume. The changes 
will include a decrease in the first volume-based discount by 250,000 
items per month to 750,001 items a month, the introduction of a new 
volume-based discount tier for volume between 1,500,001 and 2,500,000 
items per month, and an increase for all existing volume-based receipt 
discounts by $0.0007.\11\
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    \11\ Premium Receivers (institutions receiving a certain portion 
of volume through FedACH) with volume greater than 1,500,000 items a 
month will receive the increased discount for all items received.
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     The Reserve Banks will implement a $20 monthly billing 
discount for any customer that pays the origination minimum fee, 
subscribes to a FedLine Web[supreg] Plus or higher package, and 
subscribes to either FedACH RDFI Alert, FedACH Risk[supreg] Origination 
Monitoring, or FedPayments[supreg] Reporter. In addition to the above 
changes, the Reserve Banks plan to reassess the FedGlobal[supreg] ACH 
fee schedule during 2016.

    Fedwire Funds and National Settlement
     The Reserve Banks will increase the Tier 1 per-item pre-
incentive fee from $0.73 to $0.79 per transaction, increase the Tier 3 
per-item pre-incentive fee from $0.150 to $0.155 per transaction, and 
leave Tier 2 per-item pre-incentive fees unchanged.\12\
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    \12\ 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 transfers over 60 percent 
of a customer's historic benchmark volume.
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     The Reserve Banks will increase the surcharge for offline 
transactions from $50 to $55. The Reserve Banks will increase the 
monthly participation fee from $90 to $95.

    Fedwire Securities and National Settlement Services
     The Reserve Banks will keep prices at existing levels for 
the priced Fedwire Securities and National Settlement Services.

    FedLine[supreg] Access Solutions
     The Reserve Banks will increase the fee for the FedLine 
Exchange\SM\ subscriber pack by $5 per month.\13\ The Reserve Banks 
will keep all other existing FedLine fees unchanged.
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    \13\ FedLine packages do not include user subscriptions for 
priced services. Depository institutions that wish to access priced 
services must purchase user subscriptions in packs of five (5-
packs).
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     The Reserve Banks will introduce a 256K/T1 legacy router 
surcharge of $5,000 per month to encourage customers to migrate to more 
efficient access solutions.\14\
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    \14\ The $5,000 per month surcharge will be effective July 1, 
2016. The price will increase to $10,000 per month on September 1, 
2016 and $20,000 per month on November 1, 2016.
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     The Reserve Banks will introduce a fee for customers that 
choose to implement FedLine using a customized (nonstandard) router 
setup. The fee will vary from $2,500 to $5,000 based on the complexity 
of the setup.
     The Reserve Banks will include two virtual private network 
(VPN) devices in the FedLine Direct[supreg] Premier package (rather 
than one) to align better with the FedLine Advantage[supreg] Premier 
package.
     Depository institutions with more than 250 Fedwire 
transactions per month, or more than one routing number, will only have 
access to the FedPayments Manager Import/Export (FPM) tool via FedLine 
Advantage Premier.\15\ Affected customers will experience a fee 
increase ranging from $15 to $75 per month to upgrade to FedLine 
Advantage Premier.
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    \15\ These customers are generally large institutions that may 
benefit from the expanded suite of services included in the FedLine 
Advantage Premier package. For example, large customers may benefit 
from the enhanced contingency preparedness solutions (such as a 
secondary VPN device) that are included in FedLine Premier packages.
    FedComplete Plus customers with more than 250 Fedwire 
transactions per month that use the FPM tool will also be 
transferred to FedComplete Premier packages with the associated fee 
increase because FedComplete Plus packages incorporate FedLine 
Advantage Plus. The transfer will affect about 10 current 
FedCompelete customers.
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    5. 2016 Price Index--Figure 1 compares indexes of fees for the 
Reserve Banks' priced services with the GDP price index.\16\ The price 
index for Reserve Bank priced services is projected to increase 
approximately 1 percent in 2016 from the 2015 level. The price index 
for Check 21 services is projected to increase less than 1 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 decrease 
nearly 1 percent. For the period 2006 to 2015, the price index for 
total priced services is expected to decrease 26 percent.
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    \16\ For the period 2006 to 2014, the GDP price index increased 
15 percent.
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BILLING CODE 6210-01-P

[[Page 70786]]

[GRAPHIC] [TIFF OMITTED] TN16NO15.212

BILLING CODE 6210-01-C
    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.\17\ 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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    \17\ 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.\18\
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    \18\ 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 pretax 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 than the targeted ROE, income 
taxes are adjusted using the effective tax rate.


[[Page 70787]]

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.\19\ 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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    \19\ 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. Because 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's PSR policy reflects 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 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 financial assets and equity on the pro forma balance sheet.\20\ 
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 
current operating expenses are computed based on its preliminary 2016 
budget at $53.8 million. In 2016, $51.1 million of equity was imputed 
to meet the FDIC capital requirements; however, an additional $2.7 
million of equity was imputed to meet the PSR policy requirement. The 
additional equity is solely allocated to Fedwire Funds Service.
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    \20\ This requirement 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.
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    Effective tax rate. Like 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 2016 PSAF is primarily due to lower financing 
costs as a result of fewer priced services assets to be financed than 
in 2015. Debt and equity financing rates declined and less debt and 
equity was imputed to fund priced services assets.
    Projected 2016 Federal Reserve priced-services assets, reflected in 
table 3, have decreased $486.3 million from 2015. This reduction is 
primarily due to a $589.0 million decrease in the balance of imputed 
investments in federal funds, driven by recent changes in the PSR 
policy resulting in a decrease in daily float balances and a 
corresponding effect on imputed investments. The reduction is offset by 
an increase of $170.0 million from 2015 in items in process of 
collection. As shown in table 3, imputed equity for 2016 is $53.8 
million, a decrease of $18.1 million from the equity imputed for 2015. 
In accordance with FAS 158 [ASC 715], this amount includes an 
accumulated other comprehensive loss of $666.1 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 2016 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 exceeds 
the required 10 percent of risk-weighted assets and equity exceeds 5 
percent of total assets (table 6). In 2015, long-term debt and equity 
was imputed to meet the asset funding requirements and reflects the 
leverage ratio observed in the market; additional equity of $7.6 
million was required (table 5) to meet the market leverage ratio.
    Table 5 shows the derivation of the 2016 and 2015 PSAF. Financing 
costs for 2016 are $6.1 million lower than in 2015. In addition to the 
decline in the levels of debt and equity mentioned above, the cost of 
equity declined 3 basis points. The reduced equity balance and the 
lower cost of equity result in a pretax ROE that is $2.0 million lower 
than the 2015 pretax ROE. Imputed sales taxes declined to $2.8 million 
in 2016 from $3.3 million in 2015. The priced services portion of the 
Board's expenses increased $1.7 million to $5.0 million in 2016 from 
$3.3 million in 2015. The effective income tax rate used in 2016 
decreased to 21.6 percent from 22.4 percent in 2015.

[[Page 70788]]



          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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                                                                       2016            2015           Change
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Short-term assets:
    Receivables.................................................           $35.6           $34.5            $1.0
    Materials and supplies......................................             0.5             0.6           (0.1)
    Prepaid expenses............................................            10.2            11.0           (0.9)
    Items in process of collection \21\.........................           321.0           151.0           170.0
                                                                 -----------------------------------------------
        Total short-term assets.................................           367.2           197.2           170.1
Imputed investments: \22\
    Imputed investment in Treasury Securities...................            55.8  ..............            55.8
    Imputed investment in Fed Funds.............................            11.0          600.00         (589.0)
                                                                 -----------------------------------------------
        Total imputed investments...............................            66.8          600.00         (533.2)
Long-term assets:
    Premises \23\...............................................           111.0           116.2           (5.2)
    Furniture and equipment.....................................            38.5            39.9           (1.5)
    Leasehold improvements and long-term prepayments............            89.5            91.5           (2.0)
    Pension asset...............................................  ..............            79.6          (79.6)
    Deferred tax asset..........................................           187.9           222.8          (35.0)
                                                                 -----------------------------------------------
        Total long-term assets..................................           426.8           550.0         (123.2)
                                                                 -----------------------------------------------
        Total assets............................................           860.9         1,347.2         (486.3)
                                                                 ===============================================
Short-term liabilities:
    Deferred credit items.......................................           332.0           751.0         (419.0)
    Short-term debt.............................................            19.0            18.5             0.5
    Short-term payables.........................................            27.2            27.6           (0.4)
                                                                 -----------------------------------------------
        Total short-term liabilities............................           378.2           797.2         (418.9)
Long-term liabilities:
    Pension liability...........................................            17.6  ..............            17.6
    Long-term debt..............................................  ..............            81.9          (81.9)
Postemployment/postretirement benefits and net pension                     411.3           396.3            15.0
 liabilities \24\...............................................
                                                                 -----------------------------------------------
        Total liabilities.......................................           807.1         1,275.3         (468.3)
Equity \25\.....................................................            53.8            71.9          (18.1)
                                                                 -----------------------------------------------
        Total liabilities and equity............................           860.9         1,347.2         (486.3)
----------------------------------------------------------------------------------------------------------------


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

    \21\ 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.
    \22\ Consistent with the Board's PSR policy, 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 current operating expenses is $53.8 million. In 
2016, $51.1 million of equity was imputed to meet the regulatory 
capital requirements; however, an additional $2.7 million of equity 
was imputed to meet the PSR policy requirement.
    \23\ Includes the allocation of Board of Governors assets to 
priced services of $1.3 and $0.7 million for 2016 and 2015, 
respectively.
    \24\ Includes the allocation of Board of Governors liabilities 
to priced services of $0.6 million for 2016 and 2015.
    \25\ Includes an accumulated other comprehensive loss of $666.1 
million for 2016 and $523.7 million for 2015, 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]
------------------------------------------------------------------------
                                               2016            2015
------------------------------------------------------------------------
A. Short-term asset financing
Short-term assets to be financed:
    Receivables.........................           $35.6           $34.5
    Materials and supplies..............             0.5             0.6
    Prepaid expenses....................            10.2            11.0
                                         -------------------------------
        Total short-term assets to be               46.2            46.2
         financed.......................
    Short-term payables.................            27.2            27.6
                                         -------------------------------
        Net short-term assets to be                 19.0            18.5
         financed.......................
                                         ===============================

[[Page 70789]]

 
        Imputed short-term debt                     19.0            18.5
         financing \26\.................
                                         ===============================
B. Long-term asset financing
Long-term assets to be financed:
    Premises............................           111.0           116.2
    Furniture and equipment.............            38.5            39.9
    Leasehold improvements and long-term            89.5            91.5
     prepayments........................
    Pension asset.......................  ..............            79.6
    Deferred tax asset..................           187.9           222.8
                                         -------------------------------
        Total long-term assets to be               426.8           550.0
         financed.......................
    Pension liability...................            17.6  ..............
    Postemployment/postretirement                  411.3           396.3
     benefits and net pension
     liabilities........................
                                         -------------------------------
        Net long-term assets to be                 (2.0)           153.8
         financed.......................
                                         ===============================
    Imputed long-term debt \26\.........  ..............            81.9
    Imputed equity \26\.................            53.8            71.9
                                         -------------------------------
        Total long-term financing.......            53.8           153.8
------------------------------------------------------------------------


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

    \26\ See table 5 for calculation.

                                  Table 5--Derivation of the 2016 and 2015 PSAF
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                               2016                            2015
                                                 ---------------------------------------------------------------
                                                       Debt           Equity           Debt           Equity
----------------------------------------------------------------------------------------------------------------
A. Imputed long-term debt and equity
    Net long-term assets to finance.............          $(2.0)          $(2.0)          $153.8          $153.8
    Capital structure observed in market........           58.5%           41.5%           58.2%           41.8%
                                                 ---------------------------------------------------------------
    Pre-adjusted long-term debt and equity......          $(1.2)          $(0.8)           $89.5           $64.3
Equity adjustments \27\:
        Equity to meet capital requirements.....  ..............            51.1  ..............            71.9
        Adjustment to debt and equity funding                1.2           (1.2)           (7.6)             7.6
         given capital requirements \28\........
        Adjusted equity balance.................  ..............           (2.0)  ..............            71.9
        Equity to meet capital requirements \29\  ..............            53.1  ..............  ..............
                                                 ---------------------------------------------------------------
                                                  ..............           $51.1           $81.9           $71.9
                                                 ===============================================================
B. Cost of capital:
Elements of capital costs
        Short-term debt \30\....................        $19.0 x 0.3% = $0.1
                                                        $18.5 x 0.2% = $0.0
    Long-term debt \30\.........................              x 4.2% =
                                                         81.9 x 5.0% = 4.1
    Equity \31\.................................         51.1 x 9.8% = 5.0
                                                         71.9 x 10.1% =7.3
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
                                                  ..............             5.1  ..............            11.4
C. Incremental cost of PSR policy:
    Equity to meet policy.......................        $2.7 x 9.8% = $0.3
                                                            x 10.1% = $
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
D. Other required PSAF costs:
    Sales taxes.................................  ..............            $2.8  ..............            $3.3
    Board of Governors expenses.................  ..............             5.0  ..............             3.3
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
                                                  ..............  ..............             7.8             6.6
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
                                                  ..............  ..............           $13.1           $18.0
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
E. Total PSAF:
    As a percent of assets......................  ..............            1.5%  ..............            1.0%
    As a percent of expenses....................  ..............            3.6%  ..............            4.5%

[[Page 70790]]

 
F. Tax rates....................................  ..............           21.6%  ..............           22.4%
----------------------------------------------------------------------------------------------------------------
\27\ 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 2016, the amount of imputed equity exceeded the minimum equity requirements for risk-weighted assets.
\28\ Equity adjustment offsets due to a shift of long-term debt funding to equity in order to meet FDIC capital
  requirements for well-capitalized institutions.
\29\ Additional equity in excess of that needed to fund priced services assets is offset by an asset balance of
  imputed investments in treasury securities.
\30\ Imputed short-term debt and long-term debt are computed at table 4.
\31\ The 2016 ROE is equal to a risk-free rate plus a risk premium (beta * market risk premium). The 2016 after-
  tax CAPM ROE is calculated as 0.03% + (1.0 * 7.62%) = 7.65%. Using a tax rate of 21.6%, the after-tax ROE is
  converted into a pretax ROE, which results in a pretax ROE of (7.65%/(1-21.6%)) = 9.76%. Calculations may be
  affected by rounding.


                Table 6--Computation of 2016 Capital Adequacy for Federal Reserve Priced Services
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Weighted
                                                                      Assets        Risk weight       assets
----------------------------------------------------------------------------------------------------------------
Imputed investments:
    1-Year Treasury securities \32\.............................           $55.8  ..............  ..............
    Federal funds \33\..........................................            11.0             0.2             2.2
                                                                 -----------------------------------------------
        Total imputed investments...............................            66.8  ..............             2.2
Receivables.....................................................           $35.6             0.2            $7.1
Materials and supplies..........................................             0.5             1.0             0.5
Prepaid expenses................................................            10.2             1.0            10.2
Items in process of collection..................................           321.0             0.2            64.2
Premises........................................................           111.0             1.0           111.0
Furniture and equipment.........................................            38.5             1.0            38.5
Leasehold improvements and long-term prepayments................            89.5             1.0            89.5
Pension asset...................................................  ..............             1.0  ..............
Deferred tax asset..............................................           187.9             1.0           187.9
                                                                 -----------------------------------------------
        Total...................................................           860.9  ..............           511.0
                                                                 ===============================================
Imputed equity..................................................           $53.8
Capital to risk-weighted assets.................................           10.5%
Capital to total assets.........................................            6.2%
----------------------------------------------------------------------------------------------------------------
\32\ 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.
\33\ The investments are imputed based on the amounts arising from the collection of items prior to providing
  credit according to established availability schedules.

    C. Check Service--Table 7 shows the 2014 actual, 2015 estimated, 
and 2016 budgeted cost-recovery performance for the commercial check 
service.

                          Table 7--Check Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense       (ROE)       Targeted ROE    ROE  [1/(2 +
                                                                                                        4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2014 (actual)...................           174.7           149.3            25.4             1.8          115.6%
2015 (estimate).................           159.3           142.7            16.5             2.0           110.1
2016 (budget)...................           149.9           139.1            10.7             1.3           106.7
----------------------------------------------------------------------------------------------------------------



[[Page 70791]]

1. 2015 Estimate--The Reserve Banks estimate that the check service 
will recover 110.1 percent of total expenses and targeted ROE, compared 
with a 2015 final budgeted recovery rate of 105.2 percent. Greater-
than-expected check volumes processed by the Reserve Banks and lower-
than-expected costs have influenced significantly the check services 
cost recovery.
    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.\34\ Through August, total forward check volume is 4.6 
percent lower and total return check volume is 11.9 percent lower-than 
for the same period last year. For full-year 2015, the Reserve Banks 
estimate that their total forward check volume will decline 5.6 percent 
(compared with a budgeted decline of nearly 7 percent) and their total 
return check volume will decline 11.6 percent (compared with a budgeted 
decline of about 14 percent) from 2014 levels.\35\
---------------------------------------------------------------------------

    \34\ The greater-than-expected check volume is attributed to the 
retention of current customers through continued enhancements of two 
FedForward product offerings: select mixed and premium mixed.
    \35\ Total Reserve Bank forward check volumes are expected to 
drop from 5.7 billion in 2014 to 5.4 billion in 2015. Total Reserve 
Bank return check volumes are expected to drop from roughly 36.5 
million in 2014 to 32.3 million in 2015.
---------------------------------------------------------------------------

    2. 2016 Pricing--The Reserve Banks expect the check service to 
recover 106.7 percent of total expenses and targeted ROE in 2016. The 
Reserve Banks project revenue to be $149.9 million, a decline of 5.9 
percent from the 2015 estimate. 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 6.2 percent, to 5.1 billion, and return check volumes will 
decline 12.7 percent to 28.5 million in 2016. Total expenses for the 
check service are projected to be $139.1 million, a decline of 2.5 
percent from 2015.\36\
---------------------------------------------------------------------------

    \36\ The reduction in check costs is driven in part by lower 
pension costs in 2016.
---------------------------------------------------------------------------

    The Reserve Banks will increase the per-item fee for FedReturn 
items that are qualified to the Reserve Bank in instances in which the 
bank of first deposit cannot be identified from $8 to $15.
    The Reserve Banks will increase the fees for traditional paper 
check forward and return collection deposits. The Reserve Banks will 
increase the per-item fee for paper forward deposits from $2.00 to 
$2.50 and the per-item fee for each unencoded item from $1.00 to 
$1.50.\37\ The Reserve Banks will increase the per-item fee for paper 
return collection deposits from $5.00 to $5.50 as well as the per-item 
fee for unqualified paper returns from $7.00 to $7.50. The Reserve 
Banks will discontinue image retrievals by fax for both incoming and 
outgoing retrievals within FedImage Services.\38\
---------------------------------------------------------------------------

    \37\ Unencoded items are those items deposited without encoding 
of certain elements, such as amount, added to the MICR line.
    \38\ FedImage Services offer depository institutions products 
for the capture, archive, and retrieval of check images. A current 
list of services can be found at https://www.frbservices.org/serviceofferings/check/fed_image_services.html.
---------------------------------------------------------------------------

    The Reserve Banks will introduce Select Mixed Level 3 tier to the 
Select Mixed image cash letter (ICL) product.\39\ The new level will 
have a daily fee of $3,000 and per-item fees from $0.002 to $0.350, as 
seen in table 8.
---------------------------------------------------------------------------

    \39\ A current list of Select Mixed endpoints can be found at 
https://www.frbservices.org/servicefees/check21_endpoint_listing.html.

                                                 Table 8--FedForward Select Mixed Image Cash Letter a b
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                5 a.m.                                          12 p.m.
                 Deadline                  -----------------------------------------------------------------------------------------------
                                                Level 1         Level 2         Level 3         Level 1         Level 2         Level 3
------------------------------------------------------------------------------------------------------------------------------------------
Daily fixed fee...........................       $2,200.00         $900.00       $3,000.00       $2,200.00         $900.00       $3,000.00
Cash letter surcharge.....................  ..............  ..............  ..............           25.00           25.00           25.00
Tier 1....................................          0.0020          0.0020          0.0020          0.0020          0.0020          0.0020
Tier 2....................................          0.0040          0.0060          0.0040          0.0040          0.0060          0.0040
Tier 3....................................          0.0060          0.0080          0.0060          0.0060          0.0080          0.0060
Tier 4....................................  ..............  ..............          0.0130  ..............  ..............          0.0130
Tier 5....................................  ..............  ..............          0.0220  ..............  ..............          0.0220
Tier 6....................................  ..............  ..............          0.1000  ..............  ..............          0.3500
Non-eligible endpoints....................          0.1000          0.1000             N/A          0.3500          0.3500             N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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_endpoint_listing.html.

    The Reserve Banks will eliminate the FedForward Fine Sort ICL 
product in January 2017 as part of the Reserve Banks effort to reflect 
today's electronic check processing environment in their check fee 
schedule.\40\ To encourage depositors to shift volume from the fine-
sort products to mixed deposit options in advance of this elimination, 
the Reserve Banks will increase the FedForward Fine Sort ICL product 
per-item fees at the 9 p.m., 1 a.m., and 5 a.m. deadlines by $0.002, 
$0.004, and $0.006, an average increase of 22.7 percent.\41\ The 
Reserve Banks will increase the FedForward Deferred Fine Sort ICL 
product per-item fees at the 1 a.m., 5 a.m., and 10 a.m. deadlines by 
$0.004, $0.006, and $0.008, an average increase of 48.8 percent. The 
per item fees for each deadline are listed in table 9.
---------------------------------------------------------------------------

    \40\ In a paper check processing environment, the fine sort 
product allowed the Reserve Banks to gain efficiencies because the 
checks did not require processing on reader-sorters. In today's 
electronic check processing environment, all image cash letters are 
processed through the Reserve Banks' electronic system in the same 
manner, and the Reserve Banks do not gain any efficiencies by having 
the depositing bank fine sort electronic checks prior to deposit.
    \41\ All times are stated in the eastern time zone (ET).
    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. The Reserve Banks 
offer customers the option of sending FedForward ICLs for items 
drawn on specific endpoints in a separate cash letter, which 
combines a high fixed fee with a lower variable fee. All eligible 
items in the cash letter receive immediate availability, while 
ineligible items receive deferred availability of the next business 
day. A current list of FedForward deposit options can be found at 
https://www.frbservices.org/servicefees/check_services_2015.html.

[[Page 70792]]



                                                     Table 9
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                 FedForward Fine Sort Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline........................................................          9 p.m.          1 a.m.          5 a.m.
----------------------------------------------------------------------------------------------------------------
Cash letter fee.................................................           $3.50           $6.50          $12.50
    Tier 1......................................................          0.0080          0.0120          0.0250
    Tier 2......................................................          0.0120          0.0170          0.0290
    Tier 3......................................................          0.0210          0.0260          0.0380
    Tier 4......................................................          0.0310          0.0360          0.0480
----------------------------------------------------------------------------------------------------------------
                             FedForward Fine Deferred Sort Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline........................................................          1 a.m.          5 a.m.         10 a.m.
----------------------------------------------------------------------------------------------------------------
Cash letter fee.................................................           $3.50           $3.50           $3.50
    Tier 1......................................................          0.0100          0.0130          0.0160
    Tier 2......................................................          0.0130          0.0160          0.0190
    Tier 3......................................................          0.0220          0.0250          0.0280
    Tier 4......................................................          0.0320          0.0350          0.0380
----------------------------------------------------------------------------------------------------------------
\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_endpoint_listing.html.

    The Reserve Banks estimate that the price changes will result in a 
0.5 percent average price increase for check customers. In addition to 
the above changes, the Reserve Banks plan to announce further 
modifications to the check fee schedule during 2016 that reflect the 
efficiencies of today's electronic check processing environment. The 
new schedule may include elimination of certain sorted deposit options 
and modifications to the current endpoint-based tiered pricing 
structure.
    Risks to the Reserve Banks' ability to achieve budgeted 2016 cost 
recovery for the check service include lower-than-expected check volume 
due to reductions in check writing overall and competition from 
correspondent banks, aggregators, and direct exchanges, which will 
result in lower-than-anticipated revenue.
    D. FedACH Service--Table 10 shows the 2014 actual, 2015 estimate, 
and 2016 budgeted cost-recovery performance for the commercial FedACH 
service.

                         Table 10--FedACH Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
              Year                    Revenue      Total expense    Net income     Targeted ROE    Recovery rate
-----------------------------------------------------------------      (ROE)     ---------------- after targeted
                                                                 ----------------                  ROE  [1/(2 +
                                                                                                        4)]
                                         1               2               3               4       ---------------
                                                                                                         5
----------------------------------------------------------------------------------------------------------------
2014 (actual)...................           124.4           141.4           -17.0             2.0           86.7%
2015 (estimate).................           125.5           123.7             1.8             1.7           100.0
2016 (budget)...................           129.8           129.9            -0.0             1.2            99.0
----------------------------------------------------------------------------------------------------------------

    1. 2015 Estimate--The Reserve Banks estimate that the FedACH 
service will recover 100.0 percent of total expenses and targeted ROE, 
compared with a 2015 final budgeted recovery rate of 100.4 percent.\42\ 
Through August, FedACH commercial origination and receipt volume was 
5.1 percent higher-than the same period last year. For full-year 2015 
the Reserve Banks estimate that FedACH commercial origination and 
receipt volume will increase 5.5 percent, compared with a budgeted 
increase of 3.5 percent.
---------------------------------------------------------------------------

    \42\ 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. In 2015, the Reserve Banks evaluated alternative 
processing solutions, including commercially available options.
---------------------------------------------------------------------------

    2. 2016 Pricing--The Reserve Banks expect the FedACH service to 
recover 99.0 percent of total expenses and targeted ROE in 2016. FedACH 
commercial origination and receipt volume is projected to grow 4.5 
percent contributing to an increase of $4.4 million in total revenue 
from the 2015 estimate. Total expenses are budgeted to increase $7.2 
million from 2015 budgeted expenses of $122.6 million, primarily 
because of costs associated with the development of a new FedACH 
technology platform.
    The Reserve Banks will increase the minimum monthly fee for forward 
origination from $35 to $45 and the minimum monthly fee for receipt 
from $25 to $35.\43\
---------------------------------------------------------------------------

    \43\ Any originating depository financial institution (ODFI) 
incurring less than $45 for the following fees will be charged the 
difference to reach the minimum: Forward value and nonvalue item 
origination fees, FedGlobal ACH origination surcharges, and FedACH 
SameDay forward origination surcharges.
    Any receiving depository financial institution (RDFI) 
originating forward value and nonvalue items below the minimum level 
and incurring less than $35 in receipt fees will be charged the 
difference to reach the minimum based on origination. RDFIs not 
originating forward value and nonvalue items will incur the $35 
minimum monthly fee for receipt.
---------------------------------------------------------------------------

    The Reserve Banks will eliminate large- and small-file per-item 
origination fees and introduce a single base fee of $0.0032 for all 
origination files with a discount of $0.0005 for origination volume 
between 750,000 to 1,500,000

[[Page 70793]]

items per month and $0.0007 for origination volume greater than 
1,500,000 items per month. The Reserve Banks will lower the top-tier 
volume origination discount level based on monthly receipt volume from 
17,500,000 to 15,000,000 items per month, while maintaining the current 
discount amounts.\44\
---------------------------------------------------------------------------

    \44\ Origination discounts apply only to those items received by 
FedACH receiving points and are available only to Premium Receivers 
(institutions receiving a certain portion of volume through FedACH).
---------------------------------------------------------------------------

    The Reserve Banks will increase the forward item receipt fee from 
$0.0025 to $0.0032 per item, while keeping the return item receipt fee 
at $0.0075 per item. The Reserve Banks will change the volume-based 
receipt discount structure to encourage additional receipt volume. The 
changes will include a decrease in the first volume-based discount by 
250,000 items per month to 750,001 items a month, the introduction of a 
new volume-based discount tier for volume between 1,500,001 and 
2,500,000 items per month, and an increase for all existing volume-
based receipt discounts by $0.0007 as seen in table 11.
[GRAPHIC] [TIFF OMITTED] TN16NO15.213

    The Reserve Banks will implement a $20 monthly billing discount for 
any customer that pays the origination minimum fee, subscribes to a 
FedLine Web Plus or higher package, and subscribes to either FedACH 
RDFI Alert, FedACH Risk Origination Monitoring, or FedPayments 
Reporter.
    The Reserve Banks estimate that the price changes will result in a 
6.5 percent average price increase for FedACH customers. In addition to 
the above changes, the Reserve Banks plan to reassess the FedGlobal ACH 
fee schedule during 2016.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2016 cost recovery for the FedACH service are cost overruns associated 
with unanticipated problems related to efforts to modernize the FedACH 
processing platform and higher-than-expected support and overhead 
costs. Other risks include lower-than-expected volume and associated 
revenue due to unanticipated 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 12 shows 
the 2014 actual, 2015 estimate, and 2016 budgeted cost-recovery 
performance for the Fedwire Funds and National Settlement Services.

         Table 12--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
              Year                    Revenue      Total expense    Net income     Targeted ROE    Recovery rate
-----------------------------------------------------------------  (ROE)  [1-2]  ---------------- after targeted
                                                                 ----------------                  ROE  [1/(2 +
                                                                                                        4)]
                                         1               2               3               4       ---------------
                                                                                                         5
----------------------------------------------------------------------------------------------------------------
2014 (actual)...................           110.1           105.2             4.8             1.4          103.2%
2015 (estimate).................           115.1           112.7             2.4             1.6           100.7
2016 (budget)...................           121.4           120.1             1.3             1.3           100.0
----------------------------------------------------------------------------------------------------------------

    1. 2015 Estimate--The Reserve Banks estimate that the Fedwire Funds 
and National Settlement Services will recover 100.7 percent of total 
expenses and targeted ROE, equal to the final budgeted recovery rate. 
Through August, Fedwire Funds Service online volume was 6.9 percent 
higher than for the same period last year. For full-year 2015, the 
Reserve Banks estimate Fedwire Funds Service online volume to increase 
4.0 percent from 2014 levels, compared with the 3.2 percent volume 
decrease that had been budgeted. The Reserve Banks do not expect the 
strong volume growth in late 2014 and early 2015 to continue at that 
level through year-end. Through August, National Settlement Service 
settlement file volume was 7.1 percent lower than for the same period 
last year, and settlement entry volume was 19.3 percent lower. For the 
full year, the Reserve Banks estimate that settlement file volume will 
decrease 5.9 percent (compared with a 1 percent budgeted decrease) and 
settlement entry volume

[[Page 70794]]

will decrease 15.6 percent from 2014 levels (compared with a budgeted 
7.2 percent decrease).
    2. 2016 Pricing--The Reserve Banks expect the Fedwire Funds Service 
to recover 100.0 percent of total expenses and targeted ROE. Revenue is 
projected to be $121.4 million, an increase of 5.5 percent from the 
2015 estimate. The Reserve Banks project total expenses to be $7.4 
million higher than the 2015 estimate. The Reserve Banks expect volume 
to grow 1.5 percent in 2016.
    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 $0.73 to $0.79 
and increasing the Tier 3 per item pre-incentive fee from $0.150 to 
$0.155. The Reserve Banks will keep the Tier 2 per-item pre-incentive 
fee unchanged.\45\
---------------------------------------------------------------------------

    \45\ 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 transfers over 60 percent 
of a customer's its historic benchmark volume.
---------------------------------------------------------------------------

    The Reserve Banks will increase the surcharge for offline 
transactions from $50 to $55. In addition, the Reserve Banks will 
increase the monthly participation fee from $90 to $95.
    The Reserve Banks estimate that the price changes will result in a 
5.8 percent average price increase for Fedwire Funds customers.
    The Reserve Banks will not change National Settlement Service fees 
for 2016. The Reserve Banks' Fedwire Funds and National Settlement 
Services fees are consistent with their multiyear strategy to minimize 
pricing volatility while undertaking ongoing technology upgrades and 
projects to further strengthen operational resiliency. The Reserve 
Banks recently completed a significant milestone in the Fedwire Funds 
portion of its modernization initiative by migrating its back-end 
settlement system from a mainframe to a distributed platform, although 
key work to complete the initiative remains in progress.
    The primary risk to the Reserve Banks' ability to achieve budgeted 
2016 cost recovery for these services is cost overruns from 
unanticipated problems with completing the final stages of complex 
technology programs.
    F. Fedwire Securities Service--Table 13 shows the 2014 actual, 2015 
estimate, and 2016 budgeted cost recovery performance for the Fedwire 
Securities Service.\46\
---------------------------------------------------------------------------

    \46\ The Reserve Banks provide transfer services for securities 
issued by the U.S. Treasury, federal government agencies, 
government-sponsored enterprises, and certain international 
institutions. The priced component of this service, reflected in 
this memorandum, consists of revenues, expenses, and volumes 
associated with the transfer of all non-Treasury securities. For 
Treasury securities, the U.S. Treasury assesses fees for the 
securities transfer component of the service. The Reserve Banks 
assess a fee for the funds settlement component of a Treasury 
securities transfer; this component is not treated as a priced 
service.

                   Table 13--Fedwire Securities Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
              Year                    Revenue      Total expense    Net income     Targeted ROE    Recovery rate
-----------------------------------------------------------------  (ROE)  [1-2]  ---------------- after targeted
                                                                 ----------------                  ROE  [1/(2 +
                                                                                                        4)]
                                         1               2               3               4       ---------------
                                                                                                         5
----------------------------------------------------------------------------------------------------------------
2014 (actual)...................            24.0            22.7             1.2             0.3          104.1%
2015 (estimate).................            27.3            25.5             1.8             0.4           105.7
2016 (budget)...................            25.8            25.9            -0.1             0.2            98.7
----------------------------------------------------------------------------------------------------------------

    1. 2015 Estimate--The Reserve Banks estimate that the Fedwire 
Securities Service will recover 105.7 percent of total expenses and 
targeted ROE, compared with a 2015 final budgeted recovery rate of 97.5 
percent. The higher-than-expected cost recovery is primarily due to not 
spending contingency funds that were budgeted for the Fedwire 
Modernization Program. Increased revenues generated from higher-than-
expected volumes from online agency transfers and account maintenance 
also increased cost recovery.
    Through August, Fedwire Securities Service online volume was 8.0 
percent lower than during the same period last year. For full-year 
2015, the Reserve Banks estimate Fedwire Securities Service online 
volume will decline 5.4 percent from 2014 levels, compared with a 
budgeted decline of 12.9 percent. The higher-than-expected online 
agency transfer volume resulted from the continued low interest-rate 
environment, which has supported mortgage underwriting activity and 
mortgage-backed securities issuance, and is generally associated with 
increased online agency transfer activity over the Fedwire Securities 
Service. Through August, account maintenance volume was 9.1 percent 
lower than during the same period last year. For the full year, the 
Reserve Banks estimate that account maintenance volume will decline 8.4 
percent over 2014 levels, compared with a budgeted decline of 14.1 
percent. The higher account maintenance volume is the result of 
conservative estimates for customer account closures that have not 
materialized.
    2. 2016 Pricing--The Reserve Banks expect the Fedwire Securities 
Service to recover 98.7 percent of total expenses and targeted ROE in 
2016. The Reserve Banks project that 2016 revenue will decrease by $1.5 
million and expenses will increase by $0.4 million, compared with 2015 
estimates.
    The Reserve Banks project that online transfer activity will 
decline 7.7 percent in 2016, the number of accounts maintained will 
decrease 8.5 percent, and the number of agency securities maintained 
will decrease 3.3 percent.\47\ The projected decline in account 
maintenance activity reflects customer closures of empty accounts to 
avoid unnecessary expenses and increased competition in collateral 
management services.\48\ The Reserve Banks project a decrease in online 
transfers as gradually increasing interest rates lead to less

[[Page 70795]]

mortgage refinancing, and, in turn, reduce issuances of mortgage-backed 
securities. The reduction in agency debt issuance reflects a reduction 
in government-sponsored enterprise portfolios, as required by the U.S. 
Treasury and the Federal Housing Finance Agency, leading to a reduced 
funding need for new debt issuance.\49\ New settlement logic introduced 
by the Fixed Income Clearing Corporation in late 2015 is also expected 
to reduce the number of agency debt transfers over the Fedwire 
Securities Service.\50\
---------------------------------------------------------------------------

    \47\ The online transfer fee, monthly account maintenance fee, 
and monthly issue maintenance fee accounted for approximately 92 
percent of total Fedwire Securities Service revenue through June 
2015.
    \48\ 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.
    \49\ Government sponsored enterprises are reducing their 
retained portfolio by 15 percent annually through 2018, as mandated 
by the Senior Preferred Stock Purchase Agreements, until each 
portfolio reaches a target level of $250 billion. Further 
information on these agreements can be found at: http://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-Stock-Purchase-Agreements.aspx.
    \50\ Information on the new settlement logic can be found at 
http://www.dtcc.com/~/media/Files/pdf/2015/6/22/GOV045-15.pdf.
---------------------------------------------------------------------------

    Expenses are budgeted to remain approximately the same as 2015 
estimates, reflecting higher expected operating costs offset by 
increased reimbursements from Treasury for fiscal agency services.\51\ 
Higher operating costs in 2016 reflect the full-year impact of the 
completion of a multiyear technology modernization initiative and the 
advancement of new initiatives to improve resiliency and operational 
functionality.
---------------------------------------------------------------------------

    \51\ Treasury reimbursement is calculated by multiplying costs 
by the ratio of Treasury to agency transfers. In 2015, Treasury 
projects its transfer volume will increase 7.0 percent, 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 not change priced Fedwire Securities Service 
fees for 2016.
    The primary risk to the Reserve Banks' ability to achieve budgeted 
2016 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[supreg], FedLine Web, FedLine Advantage, FedLine 
Command[supreg], and FedLine Direct.\52\ The Reserve Banks package 
these channels into nine FedLine packages, described 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[supreg] packages, which are bundled offerings of a FedLine 
Advantage connection and a fixed number of FedACH, Fedwire Funds, and 
Check 21-enabled services.
---------------------------------------------------------------------------

    \52\ FedMail, FedLine Web, FedLine Advantage, FedLine Command, 
and FedLine Direct are registered trademarks of the Federal Reserve 
Banks.
---------------------------------------------------------------------------

    Six attended access packages offer access to critical payment and 
information services via a web-based interface. The FedLine Exchange 
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.
    Three 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 two remaining options are 
FedLine Direct packages, which allow for unattended connections at one 
of two connection speeds to FedACH, Fedwire Funds, and Fedwire 
Securities transactional and information services and to most 
accounting information services.\53\
---------------------------------------------------------------------------

    \53\ None of the FedLine packages offer an unattended connection 
to check services. The Reserve Banks offer an unattended check 
product, Check 21 Large File Delivery, outside of the FedLine suite 
that allows a depository institution to upload and download check 
image cash letters automatically via a direct network connection to 
the Reserve Banks.
---------------------------------------------------------------------------

    For the 2016 FedLine fees, the Reserve Banks will make a minor 
adjustment to existing fees--a $5-per-month increase for the FedLine 
Exchange subscriber pack--keeping the remaining existing FedLine fees 
unchanged.\54\ As in previous years, the Reserve Banks will introduce 
new fees on outdated legacy services in 2016. In particular, the 
Reserve Banks will implement a $5,000-per-month surcharge for 256K/T1 
legacy routers to encourage customers to migrate to more efficient 
access solutions.\55\ The Reserve Banks will also introduce a new 
custom implementation fee in 2016 for institutions that request 
tailored FedLine Direct or WAN router setups. The fee, which will vary 
from $2,500 to $5,000 based on the complexity of the setup, is intended 
to help the Reserve Banks recover costs that result from nonstandard 
installations.
---------------------------------------------------------------------------

    \54\ FedLine packages do not include user subscriptions for 
priced services. Depository institutions that wish to access priced 
services must purchase user subscriptions in packs of five (5-
packs).
    \55\ The $5,000 per month surcharge will be effective July 1, 
2016. The price will increase to $10,000 per month on September 1, 
2016 and $20,000 per month on November 1, 2016.
---------------------------------------------------------------------------

    In addition, the Reserve Banks will make two structural changes to 
existing FedLine packages. First, the Reserve Banks will include two 
Virtual Private Network (VPN) devices in the FedLine Direct Premier 
package (rather than one) to help ensure consistency across existing 
Premier level FedLine packages. Second, the Reserve Banks will modify 
the availability of the FedPayments Manager Import/Export (FPM) tool 
within the FedLine Advantage Plus and Premier packages based on Fedwire 
volume thresholds. In particular, depository institutions with more 
than 250 Fedwire transactions per month, or more than one routing 
number, will only have access to the FPM tool via FedLine Advantage 
Premier. Affected customers will experience a fee increase ranging from 
$15 to $75 per month to upgrade to FedLine Advantage Premier.\56\ 
Customers that wish to maintain their FedLine Advantage Plus package 
will be able to do so by removing the FPM tool from their subscription.
---------------------------------------------------------------------------

    \56\ The $75 fee increase is the difference in pricing between 
the corresponding Plus and Premier packages. Affected customers that 
currently subscribe to the $60-per-month a la carte option for a 
secondary VPN device will experience only a $15 fee increase because 
a secondary VPN device is included in Premier packages. Affected 
customers include FedComplete Plus subscribers with more than 250 
Fedwire transactions per month, or more than one routing number, 
that use the FPM tool because FedComplete Plus packages include a 
subscription to FedLine Advantage Plus.
---------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in a 
1.5 percent average price increase for FedLine customers.

II. Analysis of Competitive Effect

    All operational and legal changes considered by the Board that have 
a substantial effect on payment system participants are subject to the 
competitive impact analysis described in the March 1990 policy ``The 
Federal Reserve in the Payments System.'' \57\ 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

[[Page 70796]]

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.
---------------------------------------------------------------------------

    \57\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------

    The 2016 fees, fee structures, and changes in service will not have 
a direct and material adverse effect on the ability of other service 
providers to compete effectively with the Reserve Banks in providing 
similar services.\58\ 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.
---------------------------------------------------------------------------

    \58\ Certain correspondent banks believe that the FedForward 
Fine Sort ICL product, which the Reserve Banks will eliminate in 
January 2017, enables them to compete more effectively with the 
Reserve Banks in the collection of checks destined to paying banks 
with which the correspondent banks do not have electronic 
presentment agreements. Paying banks, however, may not have an 
incentive to accept electronic presentment unless the correspondent 
bank makes a decision to present checks directly and provides the 
paying bank the choice of receiving presentments in paper or 
electronic form (as the Reserve Banks do). We do not believe that 
the elimination of the product will have a direct and material 
adverse effect on the ability of such service providers to compete 
effectively with the Reserve Banks in providing similar services due 
to legal differences.
    \59\ Any ODFI incurring less than $45 in forward value and 
nonvalue item origination fees will be charged a variable amount to 
reach the minimum.
    \60\ Any RDFI not originating forward value and nonvalue items 
and incurring less than $35 in receipt fees will be charged a 
variable amount to reach the minimum.
    \61\ The fee includes the item and addenda fees in addition to 
the conversion fee.
    \62\ 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.
    \63\ Origination discounts based on monthly volume apply only to 
those items received by FedACH receiving points and are available 
only to Premium Receivers (institutions receiving volume above a 
specified threshold through FedACH).
    \64\ RDFI originating and receiving items on the same RTN.
    \65\ This per-item discount is a reduction to the standard 
receipt fees listed in this fee schedule.
---------------------------------------------------------------------------

III. 2016 Fee Schedules

                    FedACH Service 2016 Fee Schedule
  [Effective January 1, 2016. Bold indicates changes from 2015 prices.]
------------------------------------------------------------------------
                                                      Fee
------------------------------------------------------------------------
FedACH minimum monthly fee
    Originating Depository Financial  $45.00.
     Institution (ODFI) \59\.
    Receiving Depository Financial    35.00.
     Institution (RDFI) \60\.
Origination (per item or record)
    Forward or return items.........  0.0032.
    Addenda record..................  0.0015.
    FedLine Web[supreg]-originated    0.35.
     returns and notification of
     change (NOC) \61\.
    Facsimile exception returns/NOC   45.00.
     \62\.
    Automated NOC...................  0.20.
    Volume-based discounts (based on
     monthly billed origination
     volume) per item when
     origination volume is:
        750,000 to 1,500,000 items    0.0005 discount.
         per month.
        More than 1,500,000 items     0.0007 discount.
         per month.
    Volume-based discounts (based on
     monthly billed receipt volume)
     \63\ per item when receipt
     volume is:.
    10,000,001 to 15,000,000 items    0.0002 discount.
     per month.
    More than 15,000,000 items per    0.0003 discount.
     month.
Receipt (per item or record)
    Forward Item....................  0.0032.
    Return Item.....................  0.0075.
    Addenda record..................  0.0015.
    On-Us Receipt Credit \64\.......  0.0032 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:
            750,001 to 12,500,000     0.0014 discount.
             items per month \65\.
            more than 12,500,000      0.0016 discount.
             items per month \66\.
        Premium Receivers, Level
         One--RDFIs receiving at
         least 90 percent of FedACH-
         originated volume through
         FedACH per item when volume
         is:
            750,001 to 1,500,000      0.0014 discount.
             items per month \65\.
            1,500,001 to 2,500,000    0.0014 discount.
             items per month \66\.
            72,500,001 to 12,500,000  0.0015 discount.
             items per month \66\.
            more than 12,500,000      0.0017 discount.
             items per month \66\.
        Premium Receivers, level
         two--RDFIs receiving at
         least 90 percent of ACH
         volume originated through
         FedACH or EPN per item when
         volume is:
            750,001 to 1,500,000      0.0014 discount.
             items per month \65\.
            1,500,001 to 2,500,000    0.0014 discount.
             items per month \66\.
            2,500,001 to 12,500,000   0.0016 discount.
             items per month \66\.
            more than 12,500,000      0.0018 discount.
             items per month \66\.
FedACH Bundled Service Discount
    Monthly Bundled Service Package   20.00 discount.
     Discount \67\.
FedACH SameDay Service
    Origination
        Forward item \68\...........  0.0035 surcharge.
        Addenda record \68\.........  0.0015 surcharge.
        Return item \69\............  0.0025 discount.
        Return addenda record \69\..  0.0015 discount.
    Receipt
        Forward item \65\...........  0.0025 discount.
        Return item \65\............  0.0075 discount.
        Addenda record (forward/      0.0015 discount.
         return) \65\.
Monthly FedACH Risk[supreg]
 Management fees \70\
    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 criteria    125.00.
         sets.

[[Page 70797]]

 
        For 24 through 47 criteria    150.00.
         sets.
        For 48 through 95 criteria    250.00.
         sets.
        For 96 through 191 criteria   425.00.
         sets.
        For 192 through 383 criteria  675.00.
         sets.
        For 384 through 584 criteria  850.00.
         sets.
        For more than 585 criteria    1,100.00.
         sets.
    Risk origination monitoring
     batch (based on total monthly
     volume)
        For 1 through 100,000         0.007.
         batches (per batch).
        For more than 100,000         0.0035.
         batches (per batch).
Monthly FedPayments Reporter Service
    FedPayments Reporter Service
     package pricing includes
        Standard reports \71\.......
        ACH volume summary by SEC
         code report--customer \72\
        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 more than 8,501       1,500.00.
             reports.
    Premier reports (per report
     generated) \73\
        ACH volume summary by SEC
         code report--depository
         financial institution
            For 1 through 5 reports.  10.00.
            For 6 through 10 reports  6.00.
            For more than 11 reports  1.00.
            On Demand Surcharge.....  1.00
        ACH volume summary by SEC
         code report--customer
            On Demand Surcharge.....  1.00.
        Monthly ACH routing number
         activity report
            For 1 through 5 reports.  10.00.
            For 6 through 10 reports  6.00.
            For more than 11 reports  1.00.
            On Demand Surcharge.....  1.00.
    On-us inclusion
        Participation (monthly fee    10.00.
         per RTN).
        Per-item....................  0.0030.
        Per-addenda.................  0.0015.
    Report delivery via encrypted     0.20.
     email (per email).
Other fees
    Monthly fee (per routing number)
        Account servicing fee \74\..  45.00.
        FedACH settlement \75\......  55.00.
        FedACH Information extract    100.00.
         file.
        IAT Output File Sort........  75.00.
        Automated NOC participation   5.00.
         fee \76\.
    Non-electronic input/output fee
     \77\
        CD/DVD (CD or DVD)..........  50.00.
        Paper (file or report)......  50.00.
FedGlobal ACH Payments \78\
    Canada service fee
        Item originated to Canada     0.62.
         \79\.
        Return received from Canada   0.99.
         \80\.
        Item trace at receiving       5.50.
         gateway.
        Item trace not at receiving   7.00.
         gateway.
    Mexico service fee
        Item originated to Mexico     0.67.
         \79\.
        Return received from Mexico   0.91.
         \80\.
        Account-to-receiver (A2R)     3.45.
         item originated to Mexico
         \79\.
        Foreign currency to foreign   0.67.
         currency (F3X) item
         originated to Mexico \79\.
        Item trace..................  13.50.
    Panama service fee
        Item originated to Panama     0.72.
         \79\.
        Return received from Panama   1.00.
         \80\.
        NOC.........................  0.72.
        Item trace..................  7.00.
    Latin America service fee
        A2R item originated to Latin  4.40.
         America \79\.
        Return received from Latin    0.72.
         America \80\.
        Item trace..................  5.00.
    Europe service fee
        Item originated to Europe     1.25.
         \79\.

[[Page 70798]]

 
        F3X item originated to        1.25.
         Europe \79\.
        Return received from Europe   1.35.
         \80\.
        Item trace..................  7.00.
------------------------------------------------------------------------

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

    \66\ Receipt volumes at these levels qualify for the waterfall 
discount which includes all FedACH receipt items.
    \67\ This monthly billing discount is available for any customer 
that (1) pays the FedACH minimum monthly fee; (2) purchases a 
FedLine Web Plus or higher package; and (3) subscribes to either 
FedACH RDFI Alert, FedACH Risk Origination Monitoring, or 
FedPayments Reporter.
    \68\ This per-item surcharge is in addition to the standard 
origination fees listed in the origination and receipt fee schedule.
    \69\ This per-item discount is a reduction to the standard 
origination fees listed in the origination and receipt fee schedule.
    \70\ 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 $45 monthly package fee.
    \71\ 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.
    \72\ ACH volume summary by SEC code reports generated on demand 
are subject to a $1.00 per report surcharge.
    \73\ Premier reports generated on demand are subject to the 
package/tiered fees plus a surcharge.
    \74\ 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 a private sector operator exclusively are not 
assessed this fee.
    \75\ The FedACH settlement fee is applied to any routing number 
with activity during a month, including institutions that elect to 
use a private sector operator 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.
    \76\ The notification of change fee will be assessed only when 
automated NOCs are generated.
    \77\ Limited services are offered in contingency situations.
    \78\ The international fees and surcharges vary from country to 
country as these are negotiated with each international gateway 
operator.
    \79\ This per-item surcharge is in addition to the standard 
domestic origination and input file processing fees.
    \80\ This per-item surcharge is in addition to the standard 
domestic receipt fees.

    Fedwire Funds and National Settlement Services 2016 Fee Schedule
  [Effective January 1, 2016. Bold indicates changes from 2015 prices.]
------------------------------------------------------------------------
                                                                Fee
------------------------------------------------------------------------
                          Fedwire Funds Service
------------------------------------------------------------------------
Monthly Participation Fee...............................          $95.00
Basic volume-based pre-incentive transfer fee
 (originations and receipts)--per transfer for:
    the first 14,000 transfers per month................            0.79
    additional transfers up to 90,000 per month.........            0.24
    every transfer over 90,000 per month................           0.155
Volume-based transfer fee with the incentive discount
 (originations and receipts)--per eligible transfer for:
 \81\
    the first 14,000 transfers per month................           0.158
    additional transfers up to 90,000 per month.........           0.048
    every transfer over 90,000 per month................           0.031
Surcharge for Off-line Transfers (Originations and                 55.00
 Receipts)..............................................
Surcharge for End-of-Day Transfer Originations \82\.....            0.26
Monthly FedPayments Manager import/export fee \83\......           50.00
Surcharge for high-value payments:
    >$10 million........................................            0.14
    >$100 million.......................................            0.36
Surcharge for Payment Notification:
    Origination Surcharge \84\..........................            0.20
    Receipt Volume \85\.................................             N/A
------------------------------------------------------------------------
                       National Settlement Service
------------------------------------------------------------------------
Basic
    Settlement Entry Fee................................            1.50
    Settlement File Fee.................................           30.00
Surcharge for Off-line File Origination \86\                       45.00
Minimum Monthly Fee (account maintenance) \87\                     60.00
Special Settlement Arrangements (fee per day) \88\                150.00
------------------------------------------------------------------------

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

    \81\ 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 past activity, then the customer qualifies automatically 
for incentive discounts for the year. The applicable incentive 
discounts are as follows: $0.632 for transfers up to 14,000; $0.192 
for transfers 14,001 to 90,000; and $0.124 for transfers over 
90,000.
    \82\ This surcharge applies to originators of transfers that are 
processed by the Reserve Banks after 5:00 p.m. ET.
    \83\ 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.
    \84\ Payment Notification and End-of-Day Origination surcharges 
apply to each Fedwire funds transfer message.
    \85\ Provided on billing statement for informational purposes 
only.
    \86\ Off-line files will be accepted only on an exception basis 
when a settlement agent's primary and backup means of transmitting 
settlement files are both unavailable. For information, contact the 
NSS Central Service Support Staff at (800) 758-9403.
    \87\ This minimum monthly charge is only assessed if total 
settlement charges during a calendar month are less than $60.
    \88\ 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.

[[Page 70799]]



 Fedwire Securities Service 2016 Fee Schedule (Non-Treasury Securities)
  [Effective January 1, 2016. Bold indicates changes from 2015 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
GNMA Serial Note CUSIP Fee..............................            9.00
Joint Custody Origination Surcharge \89\................           44.00
Delivery of Reports--Hard Copy Reports to On-Line                  50.00
 Customers..............................................
------------------------------------------------------------------------

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

    \89\ Fedwire Securities Service charges customers the Joint 
Custody Origination Surcharge for both Agency and Treasury 
securities.
    \90\ FedComplete packages are all-electronic service options 
that bundle payment services with an access solution for one monthly 
fee.
    \91\ Per-item surcharges are in addition to the standard fees 
listed in the applicable priced services fee schedules.
    \92\ 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.
    \93\ VPN hardware for FedLine Advantage and FedLine Command is 
billed directly by the vendor. A list of 2016 vendor fees can be 
found at https://www.frbservices.org/files/servicefees/pdf/access/2016_vendor_fees.pdf.
    \94\ These add-on services can be purchased only with a FedLine 
Customer Access Service option.
    \95\ There are no priced subscribers contained in the FedLine 
Exchange or FedLine packages.
    \96\ Additional FedLine Command Certificates available for 
FedLine Command and Direct packages only.
    \97\ Additional FedLine Direct Certificates available for 
FedLine Direct packages only.
    \98\ Additional VPNs are available for FedLine Advantage, 
FedLine Command, and FedLine Direct packages only.
    \99\ 56K option available to installed base only and is not 
available for new orders. Effective July 1, 2016, all remaining 56K 
connections will be disconnected. Network diversity supplemental 
charge of $2,000 a month may apply in addition to these fees.
    \100\ The FedLine Custom Implementation Fee will vary from 
$2,500 to $5,000 based on the complexity of the setup.
    \101\ FedLine Direct contingency solution is available only for 
FedLine Direct Plus & Premier packages.
    \102\ Cash Management Service options are limited to Plus and 
Premier packages.
    \103\ End of Day Reconcilement File option is available to 
FedLine Web Plus and FedLine Advantage Plus and Premier packages. 
Available for no extra fee in FedLine Command Plus and Direct 
packages.
    \104\ Statement of Account Spreadsheet File option is available 
to FedLine Web Plus and FedLine Advantage Plus and Premier packages. 
Available for no extra fee in FedLine Command Plus and Direct 
packages.
    \105\ Intra-day Download Search File option is available to the 
FedLine Web Plus package. Available for no extra fee in FedLine 
Advantage and higher packages.
    \106\ ACT Report options are limited to FedLine Command Plus and 
FedLine Direct Plus and Premier packages.

                        FedLine 2016 Fee Schedule
  [Effective January 1, 2016. Bold indicates changes from 2015 prices.
------------------------------------------------------------------------
                                                      Fee
------------------------------------------------------------------------
                   FedComplete Packages (Monthly) \90\
------------------------------------------------------------------------
FedComplete 100 Plus................  775.00.
    Includes:
        FedLine Advantage Plus
         package
        FedLine subscriber 5-pack
        FedLine Exchange subscriber
         5-pack
        7,500 FedForward
         transactions
        70 FedReturn 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
FedComplete 100 Premier.............  850.00.
    Includes:
        FedLine Advantage Premier
         package
        Volumes included in the
         FedComplete 100 Plus
         package
FedComplete 200 Plus................  1,300.00.
    Includes:
        FedLine Advantage Plus
         package
        FedLine subscriber 5-pack
        FedLine Exchange subscriber
         5-pack
        25,000 FedForward
         transactions
        225 FedReturn transactions

[[Page 70800]]

 
        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
FedComplete 200 Premier.............  1,375.00.
    Includes:
        FedLine Advantage Premier
         package
        Volumes included in the
         FedComplete 200 Plus
         package
FedComplete Excess Volume Surcharge
 \91\
    FedForward......................  0.01/item.
    FedReturn.......................  0.7500/item.
    Fedwire Funds Origination.......  0.7000/item.
    FedACH Origination..............  0.0025/item.
FedComplete package credit incentive  (1,500.00).
 \92\.
FedComplete credit adjustment.......  various.
FedComplete debit adjustment........  various.
------------------------------------------------------------------------
            FedLine Customer Access Solutions (Monthly) \93\
------------------------------------------------------------------------
FedLine Exchange....................  40.00.
    Includes:
        FedMail access channel
        FedACH Advice and Settlement
         Information
        Fedwire Funds Offline
         Advices
        Check 21 Services
        Check 21 Duplicate
         Notification Service
        Check Adjustments
        Accounting Statements
        Daylight Overdraft Reports
        Billing Statements
FedLine Web                           110.00.
    Includes:
        FedLine Web access channel
        Services included in the
         FedLine Exchange package
        FedACH Information Services
         & Derived Returns/NOCs
        FedACH Risk Services
         (includes RDFI Alert and
         Returns Reporting)
        FedACH information services
         (includes RDFI file Alert
         Service)
        FedCash Services
        Service Charge Information
FedLine Web Plus....................  140.00.
    Includes:
        FedLine Web traditional
         package
        FedACH Risk Origination
         Monitoring Service
        FedACH FedPayments Reporter
         Service
        Check Large Dollar Return
        Check FedImage Services
        Account Management
         Information
        Various accounting and
         inquiry services (ABMS
         inquiry, IAS/PSR inquiry,
         IAS detailed inquiries,
         notifications and advices,
         end-of-day accounting file
         (PDF))
FedLine Advantage...................  380.00.
    Includes:
        FedLine Advantage access
         channel
        Services included in the
         FedLine Web traditional
         package
        FedACH transactions
        Fedwire Funds transactions
        Fedwire Securities
         transactions
        National Settlement Service
         transactions
        Check Large Dollar Return
        Check FedImage Services
        Account Management
         Information with Intra-Day
         Download Search File
        Various accounting and
         inquiry 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 Origination
         Monitoring Service
        FedACH FedPayments Reporter
         Service
        Fedwire Funds FedPayments
         Manager Import/Export (less
         than 250 Fedwire
         transactions and one
         routing number per month)
        FedTransaction
         Analyzer[supreg] (less than
         250 Fedwire transactions
         and one routing number per
         month)
FedLine Advantage Premier             500.00.

[[Page 70801]]

 
    Includes:
        FedLine Advantage Plus
         package
        Secondary VPN device
        Fedwire Funds FedPayments
         Manager Import/Export (more
         than 250 Fedwire
         transactions or more than
         one routing number in a
         given month)
        FedTransaction Analyzer
         (more than 250 Fedwire
         transactions or more than
         one routing number per
         month)
FedLine Command Plus                  1,000.00.
    Includes:
        FedLine Command access
         channel
        Services included in the
         FedLine Advantage Plus
         package
        Fedwire Statement Services
        Fedwire Funds FedPayments
         Manager Import/Export (more
         than 250 Fedwire
         transactions or more than
         one routing number in a
         given month)
        FedTransaction Analyzer
         (more than 250 Fedwire
         transactions or more than
         one routing number per
         month)
        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 access
         channel
        256K Dedicated WAN
         Connection
        Services included in the
         FedLine Command Plus
         package
        Treasury Check Information
         System (TCIS)
FedLine Direct Premier                6,500.00
    Includes:
        FedLine Direct Plus package
        T1 dedicated WAN connection
        Secondary VPN device
        Cash Management Services
         Plus Own Report (No
         Respondent/Subaccount
         activity)
                    A la carte Options (Monthly) \94\
------------------------------------------------------------------------
Electronic Access
    FedLine Exchange Subscriber 5-    15.00.
     pack 95
    FedLine Subscriber 5-pack \95\    80.00.
    Additional FedLine Command        100.00.
     Certificate \96\
    Additional FedLine Direct         100.00.
     Certificate \97\
    Additional VPNs--Maintenance Fee  60.00.
     \98\
    Additional dedicated connections  56K
     \99\
            effective January 1,      14,000.00.
             2016.
            effective April 1, 2016.  28,000.00.
        256K........................  2,500.00.
        T1..........................  3,200.00.
    FedLine International Setup (one- 5,000.00.
     time fee)
    FedLine Custom Implementation     various
     Fee \100\
    FedLine Direct Contingency        1,000.00.
     Solution \101\
    Check 21 Large File Delivery      various.
    FedMail Fax                       70.00.
    VPN Device Modification           200.00.
    VPN Device Missed Activation      175.00.
     Appointment
    VPN Device Expedited Hardware     100.00.
     Surcharge
    VPN Device Replacement or Move    300.00.
Electronic Access Training
    Learning Center                   complimentary.
    Certificate Retrieval Download    complimentary.
     Tutorial
Accounting Information Services
    Cash Management System (CMS)
     Plus--Own report--up to six
     files with: \102\
        no respondent/sub-account     60.00.
         activity
        less than 10 respondent and/  125.00.
         or sub-accounts
        10-50 respondent and/or sub-  250.00.
         accounts
        51-100 respondents and/or     500.00.
         sub-accounts
        101-500 respondents and/or    750.00.
         sub-accounts
        >500 respondents and/or sub-  1,000.00.
         accounts
    End-of-Day Financial Institution  150.00.
     Reconcilement Data File \103\.
    Statement of Account Spreadsheet  150.00.
     File \104\.
    Intra-day Download Search File    150.00.
     (with AMI) \105\.
    ACTS Report \106\
        <20 sub-accounts............  500.00.
        21-40 sub-accounts..........  1,000.00.
        41-60 sub-accounts..........  1,500.00.
        >60 sub-accounts............  2,000.00.
Other
    Software Certification..........  0.00 to 8,000.00.
    Vendor Pass-Through Fee.........  various.
    Electronic Access Credit          various.
     Adjustment.
    Electronic Access Debit           various.
     Adjustment.
    Legacy Connection Service Fee
        (effective July 1, 2016)....  5,000.00.
        (effective September 1,       10,000.00.
         2016).
        (effective November 1, 2016)  20,000.00.
------------------------------------------------------------------------



[[Page 70802]]

    By order of the Board of Governors of the Federal Reserve 
System, November 2, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-28932 Filed 11-13-15; 8:45 am]
BILLING CODE 6210-01-P