[Federal Register Volume 81, Number 209 (Friday, October 28, 2016)]
[Notices]
[Pages 75058-75088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26068]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

[Docket No. OP-1552]


Federal Reserve Bank Services

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

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

SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
has approved the private sector adjustment factor (PSAF) for 2017 of 
$16.6 million and the 2017 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 3, 2017.

FOR FURTHER INFORMATION CONTACT: For questions regarding the fee 
schedules: Susan V. Foley, Senior Associate Director, (202) 452-3596; 
Linda Healey, Senior Financial Services Analyst, (202) 452-5274, 
Division of Reserve Bank Operations and Payment Systems. For questions 
regarding the PSAF: Gregory L. Evans, Deputy Associate Director, (202) 
452-3945; Lawrence Mize, Deputy Associate Director, (202) 452-5232; Max 
Sinthorntham, Senior Financial Analyst, (202) 452-2864, 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 2017 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 2017 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 2006 through 
2015, the Reserve Banks recovered 102.6 percent of their total expenses 
(including imputed costs) and targeted after-tax profits or return on 
equity (ROE) for providing priced services.\1\
---------------------------------------------------------------------------

    \1\ The 10-year recovery rate is based on the pro forma income 
statements for Federal Reserve priced services published in the 
Board's Annual Report. Effective December 31, 2006, the Reserve 
Banks implemented the Financial Accounting Standard Board's (FASB) 
Statement of Financial Accounting Standards (SFAS) No. 158, 
Employers' Accounting for Defined Benefit Pension and Other 
Postretirement Plans (codified in FASB Accounting Standards 
Codification (ASC) Topic 715 (ASC 715), Compesation-Retirement 
Benefits), which resulted in recognizing a cumulative reduction in 
equity related to the priced services' benefit plans. Including this 
cumulative reduction in equity from 2006 to 2015 results in cost 
recovery of 92.8 percent for the ten-year period. This measure of 
long-run cost recovery is also published in the Board's Annual 
Report.
---------------------------------------------------------------------------

    Table 1 summarizes 2015 actual, 2016 estimated, and 2017 budgeted 
cost-recovery rates for all priced services. Cost recovery is estimated 
to be 103.6 percent in 2016 and budgeted to be 100.0 percent in 2017.

                  Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance \a\
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                  5 \e\ Recovery
                                                    2 \c\ Total    3 Net income   4 \d\ Targeted    rate after
              Year                 1 \b\ Revenue      expense          (ROE)            ROE        targeted  ROE
                                                                                                        (%)
                                                                           [1-2]                       [1/(2+4)]
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................           429.1           397.8            31.3             5.6           106.4
2016 (estimate).................           432.5           413.3            19.1             4.1           103.6
2017 (budget)...................           439.4           434.8             4.6             4.6           100.0
----------------------------------------------------------------------------------------------------------------
\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.
\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.

[[Page 75059]]

 
\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 budgets, estimates, 
and performance for the 10-year period from 2006 to 2015, 2015 actual, 
2016 budget, 2016 estimate, and 2017 budget by priced service.

                                     Table 2--Priced Services Cost Recovery
                                                    [Percent]
----------------------------------------------------------------------------------------------------------------
                                                                    2016 Budget                     2017 Budget
         Priced service              2006-2015      2015 Actual         \a\        2016 Estimate        \b\
----------------------------------------------------------------------------------------------------------------
All services....................           102.6           106.4           101.4           103.6           100.0
Check...........................           103.6           113.0           105.7           109.7           104.5
FedACH..........................            99.5           100.7            99.5            98.8            95.5
Fedwire Funds and NSS...........           101.8           103.9            99.4           103.2           101.0
Fedwire Securities..............           102.7           108.2            97.5            97.6            97.5
----------------------------------------------------------------------------------------------------------------
\a\ The 2016 budget figures reflect the final budgets as approved by the Board in December 2015.
\b\ The 2017 budget figures reflect preliminary budget information from the Reserve Bank. The Reserve Banks will
  submit final budget data to the Board in November 2016, for Board consideration in December 2016.

    1. 2016 Estimated Performance--The Reserve Banks estimate that they 
will recover 103.6 percent of the costs of providing priced services in 
2016, including total expense and targeted ROE, compared with a 2016 
budgeted recovery rate of 101.4 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 $19.1 million, compared with the 
targeted ROE of $4.1 million. The Reserve Banks estimate that the check 
service and the Fedwire[supreg] Funds and National Settlement Service 
will achieve full cost recovery; however, the Reserve Banks estimate 
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. Greater-than-expected 
check volume processed by the Reserve Banks has been the single most 
significant factor influencing priced services cost recovery.
---------------------------------------------------------------------------

    \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 2016, the Reserve Banks chose a 
commercially available option as their processing solution to 
modernize the FedACH platform.
    The Reserve Banks completed a multiyear technology initiative to 
modernize the processing platform for the Fedwire Securities 
Services in 2015. The capitalized software costs of this initiative 
will be amortized until October 2020 and thus remain a primary 
factor in the cost recovery calculation for these services in 2016.
---------------------------------------------------------------------------

    2. 2017 Private-Sector Adjustment Factor--The 2017 PSAF for Reserve 
Bank priced services is $16.6 million. This amount represents an 
increase of $3.5 million from the 2016 PSAF of $13.1 million. This 
increase is primarily the result of an increase in the total cost of 
capital, which includes cost of debt and targeted return on equity.
    3. 2017 Projected Performance--The Reserve Banks project a priced 
services cost-recovery rate of 100.0 percent in 2017, with both net 
income and targeted ROE of $4.6 million. The Reserve Banks project that 
the price changes will result in a 3.2 percent average price increase 
for customers. The Reserve Banks project that the check service and the 
Fedwire Funds and National Settlement Service will fully recover their 
costs; however, the Reserve Banks project that the FedACH Service and 
the Fedwire Securities Service will not achieve full cost recovery. 
Although FedACH is not budgeted to fully recover its costs in 2017, the 
Reserve Banks are expected to fully recover FedACH costs following 
finalization of the FedACH technology modernization project and over 
the long run. In addition, the Board believes the Reserve Banks' 2017 
FedACH fee increases are consistent with a multi-year strategy to 
minimize pricing volatility and provide long-term price stability for 
customers while undertaking the ongoing technology upgrade that will 
result in FedACH incurring higher expenses over the next few years. 
Although the Fedwire Securities Service is not budgeted to fully 
recover its costs in 2017, the Board believes the Reserve Banks are 
expected to fully recover Fedwire Securities Service costs over the 
long run following a few years of under recovery. As a result of an 
expected decrease in volume as well as the advancement of new 
initiatives to improve resiliency and operational functionality, the 
Reserve Banks plan to increase fees gradually over a multi-year period 
to avoid the dramatic impact of a sharp one-year increase.
    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 refining their business and operational strategies to 
manage operating costs, to increase product revenue, and to capitalize 
on efficiencies gained from technology initiatives.
    4. 2017 Pricing--The following summarizes the Reserve Banks' fee 
schedules for priced services in 2017:
    Check
     The Reserve Banks announced in July 2016, restructured 
FedForward[supreg], FedReturn[supreg], and FedReceipt[supreg] fee 
schedules to reflect today's electronic check-processing environment 
and announced in October 2016 a minor additional modification.\3\ These 
previously announced fees, discussed in attachment II, will be 
effective in January 2017, consistent with the fee schedules for other 
priced services. The Reserve Banks announced the restructured fee 
schedules earlier in the year to provide customers with sufficient 
notice.
---------------------------------------------------------------------------

    \3\ For the July announcement, see https://www.frbservices.org/files/servicefees/pdf/071116_2017_check_pricing_customer_letter.pdf.
    For the October announcement, see https://frbservices.org/files/communications/pdf/check/100316-check-modification-announcement.pdf.
---------------------------------------------------------------------------

    FedACH
     The Reserve Banks will increase the minimum monthly fee 
for FedACH origination from $45 to $50 and the minimum monthly fee for 
FedACH receipt from $35 to $40.
     The Reserve Banks will increase the FedACH Account 
Servicing fee from

[[Page 75060]]

$45 to $58. The Reserve Banks will also change the name of the FedACH 
Account Servicing fee to the FedACH Participation fee.
     The Reserve Banks will eliminate the on-us receipt credit 
of $0.0032 per item.
     The Reserve Banks will increase the FedACH Information 
Extract File fee from $100 to $150 per file.
     The Reserve Banks will increase the FedPayments Reporter 
fee approximately 10 percent rounded to the nearest $5 for each level 
of the tiered package pricing. The Reserve Banks also will introduce a 
new top tier, with a $1,800 monthly fee, for a package that includes 
more than 10,000 reports.
     The Reserve Banks will introduce a fixed monthly fee and a 
volume-based tiered pricing structure for the FedGlobal ACH service. 
The tiered pricing structure will include per-item surcharges that are 
in addition to the standard FedACH origination fee of $0.0032 and vary 
according to the transaction's destination, as seen in table 9. The top 
tier will cover monthly origination volume of more than 500 items and 
include a $185 fixed monthly fee and a per-item surcharge that is $0.12 
lower than current per-item fees. The next tier will cover monthly 
origination volume between 161 and 500 items and include a $60 fixed 
monthly fee and a per-item surcharge that is $0.13 higher than current 
per-item fees. The bottom tier will cover monthly origination volume 
between 0 and 160 items and include a $20 fixed monthly fee and a per-
item surcharge that is $0.38 higher than current per-item fees.
    Fedwire Funds
     The Reserve Banks will increase the Tier 1 per-item 
preincentive fee from $0.790 to $0.820 per transaction, increase the 
Tier 2 per-item preincentive fee from $0.240 to $0.245, and increase 
the Tier 3 per-item preincentive fee from $0.155 to $0.170 per 
transaction.\4\
---------------------------------------------------------------------------

    \4\ The per-item preincentive fee is the fee that the Reserve 
Banks charge for transfers that do not qualify for incentive 
discounts. The Tier 1 per-item preincentive fee applies to the first 
14,000 transfers, the Tier 2 per-item preincentive fee applies to 
the next 76,000 transfers, and the Tier 3 per-item preincentive 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.
---------------------------------------------------------------------------

     The Reserve Banks will increase the surcharge for offline 
transactions from $55 to $60.
    National Settlement Services
     The Reserve Banks will keep prices at existing levels for 
the priced National Settlement Services.
    Fedwire Securities
     The Reserve Banks will increase the online agency transfer 
fee from $0.65 to $0.77.
     The Reserve Banks will increase the offline origination 
and receipt surcharge transfer fee from $66 to $80.
     The Reserve Banks will increase the monthly agency issues 
maintenance fee from $0.65 to $0.77.
     The Reserve Banks will increase the monthly account 
maintenance fee from $48.00 to $57.50.
     The Reserve Banks will increase the joint custody 
origination surcharge from $44 to $46.
     The Reserve Banks will increase the claims adjustment fees 
from $0.75 to $0.80.
    FedLine[supreg] Access Solutions
     The Reserve Banks will increase five existing monthly 
fees: (1) The FedLine Web[supreg] Plus fee from $140 to $160, (2) the 
FedLine Direct[supreg] Premier fee from $6,500 to $6,700, (3) the 
FedComplete[supreg] 200 Plus fee from $1,300 to $1,350, (4) the 
FedComplete 200 Premier fee from $1,375 to $1,425, and (5) the 
FedMail[supreg] Fax a la carte fee from $70 to $100.
     The Reserve Banks will implement a legacy software fee to 
encourage FedLine Direct customers to migrate to a new messaging 
solution. The fee will be introduced in July 2017 at $5,000 per month 
and will increase in steps to $20,000 per month by the end of 2017.
     The Reserve Banks will remove the legacy email service 
from all FedLine Web, Advantage[supreg], Command[supreg], and Direct 
packages and introduce a $20-per-month fee to purchase an a la carte 
subscription to this service.
     The Reserve Banks will modify the E-Payments Routing 
Directory and make associated changes to FedLine packages and fees. A 
new automated download directory service will be introduced and 
available only to subscribers of plus- and premier-level FedLine 
packages. A la carte fees for additional directory download codes, 
ranging from $75 to $2,000 per month, will also be introduced. In 
addition, the new lineup of FedLine Exchange packages, discussed below, 
will allow customers that do not use FedLine for Federal Reserve 
Financial Services to access the directory.
     The Reserve Banks will introduce a new FedLine 
Exchange[supreg] service, along with two new associated packages: A 
base-level and premier-level. The base package will be priced at $40 
per month and include the manual download directory service. The 
premier package will be priced at $125 per month and include both the 
manual and automated download directory services.
     The Reserve Banks will introduce a new FedMail package, 
priced at $85 per month, which will include the same services as those 
included in the existing FedLine Exchange package to ensure continuity 
of this service. All existing FedLine Exchange subscribers will be 
transitioned to the new FedMail package and experience a fee increase 
of $45.
    5. 2017 Price Index--Figure 1 compares indexes of fees for the 
Reserve Banks' priced services with the GDP price index.\5\ The price 
index for Reserve Bank priced services is projected to decrease less 
than 1 percent in 2017 from the 2016 level. The price index for Check 
21 services is projected to decrease approximately 3 percent. The price 
index for the FedACH Service is projected to increase nearly 1 percent. 
The price index for the Fedwire Funds and National Settlement Services 
is projected to increase approximately 2 percent. The price index for 
the Fedwire Securities Services is projected to increase nearly 1 
percent. For the period 2007 to 2017, the price index for total priced 
services is expected to decrease approximately 19 percent.
---------------------------------------------------------------------------

    \5\ For the period 2007 to 2015, the GDP price index increased 
13 percent.

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

[[Page 75061]]

[GRAPHIC] [TIFF OMITTED] TN28OC16.038

    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.\6\ 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.
---------------------------------------------------------------------------

    \6\ 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.
---------------------------------------------------------------------------

    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.\7\
---------------------------------------------------------------------------

    \7\ 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.
---------------------------------------------------------------------------

    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.
    Capital structure. The capital structure is imputed based on the 
imputed funding need (assets less

[[Page 75062]]

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.\8\ 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.
---------------------------------------------------------------------------

    \8\ The FDIC rule, which was adopted as final on April 14, 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.
---------------------------------------------------------------------------

    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.\9\ 
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 2017 
budget at $53.9 million. In 2017, $14.1 million of equity was imputed 
to meet the FDIC capital requirements. No additional imputed equity was 
necessary to meet the PSR policy requirement.
---------------------------------------------------------------------------

    \9\ This requirement does not apply to the Fedwire Securities 
Service. There are no competitors to the Fedwire Securities Service 
that would face such a requirement, and imposing such a requirement 
when pricing the securities services could artificially increase the 
cost of these services.
---------------------------------------------------------------------------

    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 increase in the 2017 PSAF to $16.6 million from $13.1 million 
in 2016 is primarily attributable to a $2.0 million increase in the 
cost of debt and a $1.0 million increase in the return on equity offset 
by a $0.3 million decrease in the incremental return on imputed equity 
necessary for PSR policy compliance, all three of which were driven 
primarily by increased imputed funding needs arising from higher retail 
float asset balances.
    Projected 2017 Federal Reserve priced-services assets, reflected in 
table 3, have increased $143.1 million from 2016. This increase is 
primarily due to a $234.0 million increase in the balance of imputed 
investments in federal funds and a net $42.8 million increase in long-
term assets, inclusive of pension, Bank premises, furniture and 
equipment, and leasehold improvements and long-term prepayments. The 
increase was partially offset by an $80.0 million decrease in items in 
process of collection and a $55.8 million decrease in imputed 
investments in Treasury securities. The significant increase in the 
imputed investments in federal funds balance is related to a reduction 
in debit float due to new deposit deadlines associated with the 
Endpoint-Culled ICL deposit option deadlines implemented in July 2016, 
which are intended to reduce float and items in process of collection. 
These balances had increased significantly as a result of the PSR 
policy implementation in 2015. The Endpoint-Culled ICL deposit option 
defers the portion of deposits the Federal Reserve is unable to present 
after a specific deadline during the processing cycle to limit 
instances where same-day credit is offered under the PSR policy for 
items that cannot be collected same day. The resulting balance of 2017 
imputed investments in federal funds was sufficient to comply with the 
PSR policy expectations for Fedwire Funds, and no additional costs were 
incurred. As shown in table 3, imputed equity for 2017 is $58.6 
million, an increase of $4.8 million from the equity imputed for 2016. 
In accordance with ASC 715, this amount includes an accumulated other 
comprehensive loss of $635.1 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 2017 priced services assets within the 
observed market leverage ratio produced an equity level that did not 
meet the FDIC minimum equity requirements. As a result, additional 
equity was imputed to meet the FDIC requirements, and imputed long-term 
debt was reduced. The ratio of capital to risk-weighted assets meets 
the required 10 percent of risk-weighted assets, and equity exceeds 5 
percent of total assets (table 6). In 2017, 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 $14.1 
million was required (table 5) to meet the market leverage ratio.
    Table 5 shows the derivation of the 2017 and 2016 PSAF. Financing 
costs for 2017 are $2.7 million higher than in 2016. In addition to the 
increase in the levels of debt and equity mentioned above, the cost of 
equity increased in 2017 to 41.6 percent from 41.5 percent in 2016. The 
increased equity balance and the slightly higher cost of equity result 
in a pretax ROE that is $1.0 million higher than the 2016 pretax ROE. 
Imputed sales taxes increased to

[[Page 75063]]

$3.2 million in 2017 from $2.8 million in 2016. The priced services 
portion of the Board's expenses increased $0.4 million to $5.4 million 
in 2017. The effective income tax rate used in 2017 increased to 22.7 
percent from 21.6 percent in 2016.
---------------------------------------------------------------------------

    \10\ 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.
    \11\ 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 $53.9 million. In 
2017, $58.6 million of equity was imputed to meet the regulatory 
capital requirements.
    \12\ Includes the allocation of Board of Governors assets to 
priced services of $1.2 million for 2017 and $1.3 million for 2016.
    \13\ Includes the allocation of Board of Governors liabilities 
to priced services of $0.6 million for 2017 and 2016.
    \14\ Includes an accumulated other comprehensive loss of $635.1 
million for 2017 and $666.1 million for 2016, 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 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal Reserve Priced Services
                                [Millions of dollars--projected average for year]
----------------------------------------------------------------------------------------------------------------
                                                                       2017            2016           Change
----------------------------------------------------------------------------------------------------------------
Short-term assets:
    Receivables.................................................           $36.6           $35.6            $1.1
    Materials and supplies......................................             0.6             0.5             0.1
    Prepaid expenses............................................            11.2            10.2             1.0
    Items in process of collection \10\.........................           241.0           321.0          (80.0)
                                                                 -----------------------------------------------
        Total short-term assets.................................           289.4           367.2          (77.9)
Imputed investments: \11\
    Imputed investment in Treasury Securities...................  ..............            55.8          (55.8)
    Imputed investment in Fed Funds.............................           245.0            11.0           234.0
                                                                 -----------------------------------------------
        Total imputed investments...............................           245.0            66.8           178.2
Long-term assets:
    Premises \12\...............................................           128.7           111.0            17.7
    Furniture and equipment.....................................            39.0            38.5             0.5
    Leasehold improvements and long-term prepayments............           104.8            89.5            15.3
    Pension asset...............................................            10.9  ..............            10.9
    Deferred tax asset..........................................           186.1           187.9           (1.8)
                                                                 -----------------------------------------------
        Total long-term assets..................................           469.6           426.8            42.8
                                                                 -----------------------------------------------
            Total assets........................................         1,003.9           860.9           143.1
                                                                 ===============================================
Short-term liabilities:
    Deferred credit items.......................................           486.0           332.0           154.0
    Short-term debt.............................................            18.1            19.0           (0.9)
    Short-term payables.........................................            30.2            27.2             3.0
                                                                 -----------------------------------------------
        Total short-term liabilities............................           534.4           387.2           156.1
Long-term liabilities:
    Pension liability...........................................  ..............            17.6          (17.6)
    Long-term debt..............................................            48.4             0.0            48.4
    Postemployment/postretirement benefits and net pension                 362.5           411.3            48.7
     liabilities \13\...........................................
                                                                 -----------------------------------------------
            Total liabilities...................................           945.3           807.1           138.3
Equity \14\.....................................................            58.6            53.8             4.8
                                                                 -----------------------------------------------
    Total liabilities and equity................................         1,003.9           860.9           143.1
----------------------------------------------------------------------------------------------------------------


           Table 4--Imputed Funding for Priced-Services Assets
                          [Millions of dollars]
------------------------------------------------------------------------
                                               2017            2016
------------------------------------------------------------------------
A. Short-term asset financing:
    Short-term assets to be financed:
        Receivables.....................           $36.6           $35.6
        Materials and supplies..........             0.6             0.5
        Prepaid expenses................            11.2            10.2
                                         -------------------------------
    Total short-term assets to be                   48.4            46.2
     financed...........................
        Short-term payables.............            30.2            27.2
    Net short-term assets to be financed            18.1            19.0
    Imputed short-term debt financing               18.1            19.0
     \15\...............................
B. Long-term asset financing:
    Long-term assets to be financed:      ..............
        Premises........................           128.7           111.0

[[Page 75064]]

 
        Furniture and equipment.........            39.0            38.5
        Leasehold improvements and long-           104.8            89.5
         term prepayments...............
        Pension asset...................            10.9  ..............
        Deferred tax asset..............           186.1           187.9
                                         -------------------------------
    Total long-term assets to be                   469.6           426.8
     financed...........................
        Pension liability...............  ..............            17.6
        Postemployment/postretirement              362.5           411.3
         benefits and net pension
         liabilities....................
        Net long-term assets to be                 107.0           (2.0)
         financed.......................
        Imputed long-term debt \15\.....            48.4  ..............
        Imputed equity \15\.............            58.6            53.8
                                         -------------------------------
            Total long-term financing...           107.0            53.8
------------------------------------------------------------------------

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

    \15\ See table 5 for calculation.
    \16\ 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 2017, the amount of imputed equity exceeded the minimum 
equity requirements for risk-weighted assets.
    \17\ Equity adjustment offsets are due to a shift of long-term 
debt funding to equity in order to meet FDIC capital requirements 
for well-capitalized institutions.
    \18\ Additional equity in excess of that needed to fund priced 
services assets is offset by an asset balance of imputed investments 
in treasury securities.
    \19\ Imputed short-term debt and long-term debt are computed at 
table 4.
    \20\ The 2017 ROE is equal to a risk-free rate plus a risk 
premium (beta * market risk premium). The 2017 after-tax CAPM ROE is 
calculated as 0.30% + (1.0 * 7.59%) = 7.89%. Using a tax rate of 
22.7%, the after-tax ROE is converted into a pretax ROE, which 
results in a pretax ROE of (7.89%/(1-22.7%)) = 10.21%. Calculations 
may be affected by rounding.

                                  Table 5--Derivation of the 2017 and 2016 PSAF
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                      2017                                  2016
                                     ---------------------------------------------------------------------------
                                             Debt              Equity              Debt              Equity
----------------------------------------------------------------------------------------------------------------
A. Imputed long-term debt and
 equity:
    Net long-term assets to finance.             $107.0             $107.0             $(2.0)             $(2.0)
    Capital structure observed in                 58.4%              41.6%              58.5%              41.5%
     market.........................
                                     ---------------------------------------------------------------------------
    Pre-adjusted long-term debt and               $62.5              $44.5             $(1.2)             $(0.8)
     equity.........................
    Equity adjustments: \16\
        Equity to meet capital        .................               58.6  .................               51.1
         requirements...............
        Adjustment to debt and                   (14.1)               14.1                1.2              (1.2)
         equity funding given
         capital requirements \17\..
        Adjusted equity balance.....                 --               58.6                 --              (2.0)
        Equity to meet capital                       --                 --                 --               53.1
         requirements \18\..........
                                     ---------------------------------------------------------------------------
            Total imputed long-term               $48.4              $58.6                 --              $51.1
             debt and equity........
B. Cost of capital:
    Elements of capital costs:
        Short-term debt \19\........     $18.1 x 0.6% =               $0.1     $19.0 x 0.3% =               $0.1
        Long-term debt \19\.........      48.4 x 4.0% =                1.9        -- x 4.2% =                 --
        Equity \20\.................     58.6 x 10.2% =                6.0      51.1 x 9.8% =                5.0
                                     ---------------------------------------------------------------------------
                                      .................               $8.0  .................               $5.1
C. Incremental cost of PSR policy:
    Equity to meet policy...........     $ -- x 10.2% =               $ --      $2.7 x 9.8% =               $0.3
                                     ---------------------------------------------------------------------------
D. Other required PSAF costs:
    Sales taxes.....................               $3.2  .................               $2.8  .................
    Board of Governors expenses.....                5.4  .................                5.0  .................
                                      .................                8.6  .................                7.8
                                     ---------------------------------------------------------------------------
                                      .................              $16.6  .................              $13.1
E. Total PSAF:
    As a percent of assets..........  .................               1.7%  .................               1.5%
    As a percent of expenses........  .................               3.9%  .................               3.6%
F. Tax rates:.......................  .................              22.7%  .................              21.6%
----------------------------------------------------------------------------------------------------------------


[[Page 75065]]


                Table 6--Computation of 2017 Capital Adequacy for Federal Reserve Priced Services
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Weighted
                                                                      Assets        Risk weight     assets ($)
----------------------------------------------------------------------------------------------------------------
Imputed investments:
    1-Year Treasury securities \21\.............................            $ --              --              --
    Federal funds \22\..........................................           245.0             0.2            49.0
                                                                 -----------------------------------------------
        Total imputed investments...............................           245.0  ..............            49.0
Receivables.....................................................            36.6             0.2             7.3
Materials and supplies..........................................             0.6             1.0             0.6
Prepaid expenses................................................            11.2             1.0            11.2
Items in process of collection..................................           241.0             0.2            48.2
Premises........................................................           128.7             1.0           128.7
Furniture and equipment.........................................            39.0             1.0            39.0
Leasehold improvements and long-term prepayments................           104.8             1.0           104.8
Pension asset...................................................            10.9             1.0            10.9
Deferred tax asset..............................................           186.1             1.0           186.1
                                                                 -----------------------------------------------
    Total.......................................................         1,003.9  ..............           585.8
Imputed equity:
    Capital to risk-weighted assets.............................           10.0%
    Capital to total assets.....................................            5.8%
----------------------------------------------------------------------------------------------------------------

    C. Check Service -- Table 7 shows the 2015 actual, 2016 estimated, 
and 2017 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)  [1-2]    Targeted ROE   ROE (%)  [1/(2
                                                                                                       + 4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................           160.6           140.2            20.4             2.0           113.0
2016 (estimate).................           152.9           138.1            14.8             1.3           109.7
2017 (budget)...................           141.2           133.7             7.5             1.4           104.5
----------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the check service 
will recover 109.7 percent of total expenses and targeted ROE, compared 
with a 2016 budgeted recovery rate of 105.7 percent. Greater-than-
expected check volumes processed by the Reserve Banks and lower-than-
expected costs have influenced significantly the check service's cost 
recovery.
---------------------------------------------------------------------------

    \21\ 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.
    \22\ The investments are imputed based on the amounts arising 
from the collection of items prior to providing credit according to 
established availability schedules.
---------------------------------------------------------------------------

    The decline in Reserve Bank check volume, which is attributable to 
the decline in the number of checks written generally, was not as great 
as anticipated. Through August, total commercial forward check volume 
is 3.9 percent lower and total commercial return check volume is 3.3 
percent lower than for the same period last year. For full-year 2016, 
the Reserve Banks estimate that their total forward check volume will 
decline 5.2 percent (compared with a budgeted decline of 6.2 percent) 
and their total return check volume will decline 6.8 percent (compared 
with a budgeted decline of 12.7 percent) from 2015 levels.\23\
---------------------------------------------------------------------------

    \23\ Total Reserve Bank forward check volumes are expected to 
drop from 5.5 billion in 2015 to 5.2 billion in 2016. Total Reserve 
Bank return check volumes are expected to drop from 33.2 million in 
2015 to 30.9 million in 2016.
---------------------------------------------------------------------------

    2. 2017 Pricing--The Reserve Banks expect the check service to 
recover 104.5 percent of total expenses and targeted ROE in 2017. The 
Reserve Banks project revenue to be $141.2 million, a decline of 7.7 
percent from the 2016 estimate. This decline is driven largely by the 
Reserve Banks' restructured FedForward, FedReturn, and FedReceipt fee 
schedules, discussed below.\24\ Total expenses for the check service 
are projected to decrease to $133.7 million, a decline of $4.4 million, 
or 3.2 percent, from 2016 expenses primarily due to reduced operating 
costs, including cost savings associated with increased efficiencies of 
the Reserve Banks' customer support services for the FedACH and check 
service lines.
---------------------------------------------------------------------------

    \24\ This decline is also driven, in part, by anticipated 
continuing decline in the number of checks written generally. The 
Reserve Banks estimate that total commercial forward check volumes 
in 2017 will decline 5.0 percent, to 4.9 billion, and total 
commercial return check volumes will decline 10.1 percent to 27.8 
million in 2017.

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

[[Page 75066]]

    In July 2016, the Reserve Banks announced restructured FedForward, 
FedReturn and FedReceipt fee schedules designed to reflect the 
efficiencies of electronic check processing and better serve the needs 
of the marketplace in today's electronic environment.\25\ The Reserve 
Banks announced the restructured fee schedules earlier in the year to 
provide customers with sufficient notice.\26\
---------------------------------------------------------------------------

    \25\ As part of the Board's approval of the Reserve Banks' 2016 
check fee schedules, the Board noted that the Reserve Banks would 
announce changes to the check service to reflect the efficiencies of 
today's electronic check processing environment. 79 FR 65937, 70785 
(Nov. 16, 2015).
    \26\ A full summary of the modifications was included with 
Reserve Bank's announcement and is available at https://frbservices.org/files/servicefees/pdf/071116_2017_check_pricing_summary_of_changes.pdf. The Reserve Banks' 
modified fee schedules are available at https://www.frbservices.org/servicefees/check_services_2016.html.
---------------------------------------------------------------------------

    Specifically, the Reserve Banks announced simplified FedFoward and 
FedReturn deposit products. The simplified deposit products will offer 
two fixed-fee options: a per-image cash letter (ICL) fee and a daily 
subscription fee.\27\ Both options will offer standard and premium 
variations, with premium variations offering higher fixed and lower 
per-item fees than the standard variations. Both options will also 
include per-item fees, based on a modified volume-based tiered pricing 
structure, with tiers defined by volume of items received by a 
chartered institution from the Reserve Banks.\28\ Tiers for the three 
premium variations of the daily subscription fee deposit options, 
FedFoward Premium Daily Fee A, B, and C and FedReturn Premium Daily Fee 
A, will be based only on volume received by a chartered institution 
from a subset of the Reserve Banks' customers.\29\ The volumes used to 
define all tiers will be evaluated and set annually as part of the 
Board's approval of annual fee schedules.\30\
---------------------------------------------------------------------------

    \27\ The per-ICL fee structure offers a fixed fee for each 
deposited image cash letter and a per-item fee for each item in the 
cash letter. The subscription structure offers a daily subscription 
fee and a per-item fee for each item. Per-item fees are determined 
by the Reserve Banks' volume-based tiered pricing structure.
    \28\ Under the tiered pricing structure, depositors pay a 
variable per-item fee based on the endpoint to which an item is 
being delivered. Tiers are currently determined at the individual 
routing number.
    \29\ The Reserve Banks believe the top 15 customers, which 
account for approximately 33 percent of the Reserve Banks' deposit 
volume, represent the most-likely users of the Premium Daily Fee 
deposit options because of the high daily fixed fees and lower per-
item fees.
    \30\ The tiers for 2017 are available at https://www.frbservices.org/servicefees/check21_endpoint_listing.html.
---------------------------------------------------------------------------

    The Premium Daily Fee deposit options will include a fifth tier, 
Tier 0, comprised of routing numbers for which the Reserve Banks 
currently receive little to no volume from the specified subset of 
Reserve Bank customers (and therefore cannot currently be assigned to 
the other tiers with sufficient certainty). Tier 0 will also be 
evaluated annually, along with all other tiers, so that if volume 
migrates to routing numbers in tier 0 (enabling more information on 
which to assign a tier) those routing numbers will be moved to the 
appropriate tier.
    In October 2016, the Reserve Banks announced minor modifications to 
the Premium Daily Fee products.\31\ To clarify Tier 0's transitional 
purpose, the Reserve Banks announced that routing numbers cannot be 
placed in Tier 0 if they have previously been assigned to one of the 
other tiers. Based on additional review of Tier 0's composition, the 
Reserve Banks also announced that a routing number will only be 
assigned to Tier 0 if the chartered institution receives a minimum of 
150 items daily.\32\ As a result, the Reserve Banks determined that 
approximately 3,800 routing numbers initially included in Tier 0 could 
more appropriately be placed in another tier, Tier 4.\33\
---------------------------------------------------------------------------

    \31\ For the announcement, see https://frbservices.org/files/communications/pdf/check/100316-check-modification-announcement.pdf.
    \32\ The Reserve Banks determined after further analysis that a 
floor of 150 items daily was appropriate to avoid placing small 
institutions in Tier 0 because of limited total volumes 
(institutions below the floor receive an average of only 47 items 
daily).
    \33\ To minimize any customer impact of these changes, the 
Reserve Banks also reduced the Tier 4 per-item fees and daily fixed 
fees for two of the Premium Daily Fee deposit options.
---------------------------------------------------------------------------

    The Reserve Banks also announced that most sorted-deposit options 
will be eliminated, including the Fine Sort ICL, Deferred Fine Sort 
ICL, and Fixed Mixed ICL deposit options.\34\ The Reserve Banks 
announced that they will not, however, modify the Endpoint-Culled ICL 
deposit option, the Dollar Cut Mixed ICL (renamed ``Dollar-Culled 
ICL'') option, or the Deferred Mixed ICL (renamed ``Deferred ICL'') 
option.\35\ The Reserve Banks will continue to allow separately sorted 
Treasury Check, Postal Money Order, and Savings Bond ICLs.
---------------------------------------------------------------------------

    \34\ In a paper check processing environment, the fine-sort 
products 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 ICLs 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 before deposit.
    \35\ Under the Endpoint-Culled ICL deposit option (offered only 
at 12:00 p.m. ET), items drawn on routing numbers enrolled in the 
Reserve Banks' Premium Presentment service and those presented as 
substitute checks are culled from the cash letter by the Reserve 
Banks and placed into a Deferred Imaged Cash Letter, with depositors 
receiving next-day credit availability on those items. The product 
allows the Reserve Banks to limit instances where same-day credit is 
offered for items that cannot be collected same day (the Reserve 
Banks similarly cull items deposited on the 12:00 p.m. ET deposit 
deadline offered as part of the Premium Daily Fee deposit options). 
Under the Deferred ICL deposit option, credit for all items 
deposited is deferred until the next business day. Under the Dollar-
Culled ICL deposit option, items written for less than $1,000, plus 
all items for $1,000 or more that are drawn on a substitute check 
endpoint, are culled from the cash letter by the Reserve Banks and 
placed into a Deferred Imaged Cash Letter, with depositors receiving 
the next-day credit availability of that deposit option. Items of 
$1,000 or more (except for those that will be presented as 
substitute checks) are kept in the original cash letter, with same-
day credit availability at the next deadline according to the 
Federal Reserve Policy on Payment System Risk.
---------------------------------------------------------------------------

    Finally, the Reserve Banks announced modifications to their 
FedReceipt product, including reduced FedReceipt fees for forward and 
return items and elimination of the FedReceipt Plus Deposit Discount 
for both FedForward and FedReturn deposits.\36\ The Reserve Banks also 
announced that they will modify volume tiers for their Courtesy 
Delivery service (renamed ``Accelerated Delivery Service'') and that 
the Retail Payments Premium Receiver discount will be applied to items 
deposited by a chartered institution rather than on items received. 
Both products remain otherwise unchanged.
---------------------------------------------------------------------------

    \36\ The Reserve Banks implemented the deposit discount 
structure to encourage banks to transition from paper to electronic 
items. With the Reserve Banks presenting and returning more than 99 
percent of items electronically, the discount is no longer necessary 
to encourage banks to move away from paper.
---------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in a 
3.5 percent average price decrease for check customers.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 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 
would result in lower-than-anticipated revenue.
    D. FedACH Service--Table 8 shows the 2015 actual, 2016 estimate, 
and 2017 budgeted cost-recovery performance for the commercial FedACH 
service.

[[Page 75067]]



                         Table 8--FedACH Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE   ROE %, [1/(2 +
                                                                                                        4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................           125.5           122.8             2.7             1.8           100.7
2016 (estimate).................           130.7           131.0            -0.3             1.3            98.8
2017 (budget)...................           140.4           145.4            -5.1             1.6            95.5
----------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the FedACH 
service will recover 98.8 percent of total expenses and targeted ROE, 
compared with a 2016 budgeted recovery rate of 99.5 percent. Through 
August, FedACH commercial origination and receipt volume was 5.8 
percent higher than it was during the same period last year. For full-
year 2016 the Reserve Banks estimate that FedACH commercial origination 
and receipt volume will increase 4.9 percent, compared with a budgeted 
increase of 4.5 percent. Although volume is higher than originally 
projected, the Reserve Banks estimate lower-than-budgeted 2016 cost 
recovery due to higher than anticipated environmental costs such as an 
increase in pension expense and refinement in the accounting treatment 
between capital and expenses for the FedACH technology modernization 
program.\37\
---------------------------------------------------------------------------

    \37\ 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 2016, the Reserve Banks chose a 
commercially available option as their processing solution to 
modernize the FedACH platform.
---------------------------------------------------------------------------

    2. 2017 Pricing--The Reserve Banks expect the FedACH service to 
recover 95.5 percent of total expenses and targeted ROE in 2017. FedACH 
commercial origination and receipt volume is projected to grow 5.7 
percent, contributing to an increase of $9.7 million in total revenue 
from the 2016 estimate. Total expenses are budgeted to increase $14.4 
million from 2016 expenses, 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 $45 to $50 and the minimum monthly fee for receipt 
from $35 to $40.\38\ The Reserve Banks also will increase the FedACH 
Account Servicing Fee from $45 to $58 and change the fee name to the 
``FedACH Participation fee,'' to reflect more accurately the intention 
of the fee, which is to recover fixed costs related to participation in 
the FedACH network. The Reserve Banks also will eliminate the on-us 
receipt credit of $0.0032 per item. All on-us items will be charged the 
current FedACH receipt per-item fee of $0.0032 per item.
---------------------------------------------------------------------------

    \38\ Any originating depository financial institution (ODFI) 
incurring less than $50 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) that 
incurs less than $40 in receipt fees and originates forward value 
and nonvalue items incurring less than $50 in origination fees will 
only be charged the difference in the origination fee to reach the 
minimum monthly origination fee of $50. Any RDFI that incurs less 
than $40 in receipt fees and is not originating forward value and 
nonvalue items will incur the $40 minimum monthly fee for receipt.
---------------------------------------------------------------------------

    The Reserve Banks will increase the FedACH Information Extract File 
fee from $100 to $150 per file. The Reserve Banks also will increase 
the FedPayments Reporter fee approximately 10 percent rounded to the 
nearest $5 for each level of the tiered package pricing. They also will 
introduce a new top tier, with a $1,800 monthly fee, for a package that 
includes more than 10,000 reports.
    Further, the Reserve Banks will introduce a fixed monthly fee and a 
volume-based tiered pricing structure for the FedGlobal ACH 
service.\39\ The tiered pricing structure will include per-item 
surcharges that are in addition to the standard FedACH origination fee 
of $0.0032 and vary according to the transaction's destination, as seen 
in table 9. The top tier will cover monthly origination volume over 500 
items and include a $185 fixed monthly fee and a per-item surcharge 
that is $0.12 lower than current per-item fees. The next tier will 
cover monthly origination volume between 161 and 500 items and include 
a $60 fixed monthly fee and a per-item surcharge that is $0.13 higher 
than current per-item fees. The bottom tier will cover monthly 
origination volume between 0 and 160 items and include a $20 fixed 
monthly fee and a per-item surcharge that is $0.38 higher than current 
per-item fees.
---------------------------------------------------------------------------

    \39\ The FedGlobal ACH pricing changes meet the Federal Reserve 
Board's guidance on the Reserve Banks' use of volume-based pricing 
for electronic payment services and products. 62 FR 14146 (March 25, 
1997) (FRB Docket No. R-0967).

                                         Table 9--FedGlobal ACH Service Volume-Based Origination Surcharges \40\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Fixed  monthly     Canada  (per      Mexico  (per      Panama  (per      Europe  (per
                        Volume  (items)                                fee          transaction)      transaction)      transaction)      transaction)
--------------------------------------------------------------------------------------------------------------------------------------------------------
More than 500.................................................              $185             $0.50             $0.55             $0.60             $1.13
161-500.......................................................                60              0.75              0.80              0.85              1.38
0-160.........................................................                20              1.00              1.05              1.10              1.63
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in a 
5.3 percent average price increase for FedACH customers.
---------------------------------------------------------------------------

    \40\ These per-item surcharges are in addition to the standard 
domestic FedACH origination fees.
---------------------------------------------------------------------------

    While the Reserve Banks are not budgeted to fully recover costs in 
2017, they are expected to fully recover costs

[[Page 75068]]

following finalization of the FedACH technology modernization project. 
The Reserve Banks' FedACH fee increases balance raising fees 
dramatically during a temporary period of increased costs associated 
with a defined technology upgrade that will be expected to result in 
significant over recovery following this defined period. The approach 
to moderately increase fees only is consistent with a multi-year 
strategy to minimize pricing volatility and provide long-term price 
stability for customers while undertaking the ongoing technology 
upgrade that will result in FedACH incurring higher expenses over the 
next few years.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 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 10 shows 
the 2015 actual, 2016 estimate, and 2017 budgeted cost-recovery 
performance for the Fedwire Funds and National Settlement Services.

                             Table 10--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
                                                                  [Dollars in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Recovery rate
                                                                                              Net income                    after targeted
                           Year                                 Revenue      Total expense   (ROE)  [1-2]    Targeted ROE    ROE (%) [1/(2
                                                                                                                                 + 4)]
                                                                         1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015 (actual).............................................           116.0           110.1             5.9             1.6           103.9
2016 (estimate)...........................................           123.1           118.0             5.1             1.3           103.2
2017 (budget).............................................           128.8           126.3             2.6             1.3           101.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the Fedwire Funds 
and National Settlement Services will recover 103.2 percent of total 
expenses and targeted ROE, compared with a 2016 budgeted recovery rate 
of 99.4 percent. Through August, Fedwire Funds Service online volume 
was 3.6 percent higher than for the same period last year. For full-
year 2016, the Reserve Banks estimate Fedwire Funds Service online 
volume to increase 1.9 percent from 2015 levels, compared with the 0.3 
percent volume decrease that had been budgeted. The Reserve Banks do 
not expect the volume growth in 2015 and early 2016 to continue at that 
level through year-end. Through August, National Settlement Service 
settlement file volume was 1.0 percent lower than for the same period 
last year, and settlement entry volume was 3.0 percent lower. For the 
full year, the Reserve Banks estimate that settlement file volume will 
decrease 1.1 percent (compared with a budgeted 5.3 percent increase) 
and settlement entry volume will decrease 4.0 percent from 2015 levels 
(compared with a budgeted 0.8 percent decrease). NSS settlement file 
and entry volumes are anticipated to be lower than budgeted, as the 
onboarding of a new arrangement originally expected to occur in the 
fourth quarter of 2016 has now been delayed until 2017.
    2. 2017 Pricing--The Reserve Banks expect the Fedwire Funds and 
National Settlement Services to recover 101.0 percent of total expenses 
and targeted ROE. Revenue is projected to be $128.8 million, an 
increase of 4.6 percent from the 2016 estimate. The Reserve Banks 
project total expenses to be $8.3 million higher than the 2016 
expenses, primarily because of capitalized software costs associated 
with the Fedwire Funds modernization program that will be amortized 
until January 2022 and other costs related to new resiliency 
initiatives.
    The Reserve Banks will adjust the incentive pricing fees for the 
Fedwire Funds Service by increasing the Tier 1 per-item preincentive 
fee (the fee before volume discounts are applied) from $0.790 to 
$0.820, increasing the Tier 2 per-item preincentive fee from $0.240 to 
$0.245, and increasing the Tier 3 per-item preincentive fee from $0.155 
to $0.170.\41\ The Reserve Banks also will increase the surcharge for 
offline transactions from $55 to $60. The Reserve Banks estimate that 
the price changes will result in a 3.3 percent average price increase 
for Fedwire Funds customers.
---------------------------------------------------------------------------

    \41\ The per-item preincentive fee is the fee that the Reserve 
Banks charge for transfers that do not qualify for incentive 
discounts. The Tier 1 per-item preincentive fee applies to the first 
14,000 transfers, the Tier 2 per-item preincentive fee applies to 
the next 76,000 transfers, and the Tier 3 per-item preincentive 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.
---------------------------------------------------------------------------

    The Reserve Banks will not change National Settlement Service fees 
for 2017.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 cost recovery for these services are cost overruns from new 
initiatives to improve resiliency and operational functionality.
    F. Fedwire Securities Service--Table 11 shows the 2015 actual, 2016 
estimate, and 2017 budgeted cost recovery performance for the Fedwire 
Securities Service.\42\
---------------------------------------------------------------------------

    \42\ 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 consists of 
revenues, expenses, and volumes associated with the transfer of all 
non-Treasury securities. For Treasury securities, the U.S. Treasury 
assesses fees for the securities transfer component of the service. 
The Reserve Banks assess a fee for the funds settlement component of 
a Treasury securities transfer; this component is not treated as a 
priced service.

[[Page 75069]]



                   Table 11--Fedwire Securities Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE   ROE (%)  [1/(2
                                                                                                       + 4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................            27.1            24.7             2.4             0.3           108.2
2016 (estimate).................            25.8            26.2            -0.4             0.3            97.6
2017 (budget)...................            29.0            29.4            -0.4             0.3            97.5
----------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the Fedwire 
Securities Service will recover 97.6 percent of total expenses and 
targeted ROE, close to the 2016 budgeted recovery rate of 97.5 percent.
    Through August, Fedwire Securities Service online agency transfer 
volume was 13.1 percent lower than during the same period last year. 
For full-year 2016, the Reserve Banks estimate Fedwire Securities 
Service online agency transfer volume will decline 13.5 percent from 
2015 levels, compared with a budgeted decline of 5.4 percent. The 
lower-than-expected online agency transfer volume resulted from lower-
than-projected Agency debt issuance, as Fannie Mae and Freddie Mac 
continue to reduce the overall size of their portfolios in accordance 
with Federal Housing Finance Agency guidelines. In addition, new 
mortgage originations and mortgage paydowns from refinancing activity 
are expected to decline before year-end if interest rates rise in the 
fourth quarter, which will result in falling levels of issuance and 
settlement activity for agency mortgage-backed securities over Fedwire 
Securities. Through August, account maintenance volume was 4.4 percent 
lower than during the same period last year. For the full year 2016, 
the Reserve Banks estimate that account maintenance volume will decline 
5.0 percent over 2015 levels, compared with a budgeted decline of 8.8 
percent. The higher account maintenance volume is the result of 
conservative estimates for customer account closures that have not 
materialized.
    2. 2017 Pricing--The Reserve Banks expect the Fedwire Securities 
Service to recover 97.5 percent of total expenses and targeted ROE in 
2017. The Reserve Banks project that online agency transfer activity 
will decline 7.5 percent in 2017, the number of accounts maintained 
will decrease 7.4 percent, and the number of agency issues maintained 
will decrease 2.4 percent.\43\ The projected decline in both online 
transfer and account maintenance volume in 2017 reflects, in part, an 
anticipated drop in demand resulting from JP Morgan Chase's exit from 
the U.S. government securities clearing and settlement business for its 
broker-dealer services by mid-2018.\44\ Moreover, as in 2016, the 
Reserve Banks continue to project a decrease in online transfers as 
interest rates may possibly increase, leading to less mortgage 
refinancing, and, in turn, reducing issuances of mortgage-backed 
securities. In addition, the reduction in agency debt issuance will 
continue to reflect 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.\45\ New settlement logic launched by the Fixed Income 
Clearing Corporation in January 2016, and further changes in mid-2017 
are also expected to reduce the number of agency debt transfers over 
the Fedwire Securities Service.\46\
---------------------------------------------------------------------------

    \43\ The online transfer fee, monthly account maintenance fee, 
and monthly issue maintenance fee accounted for approximately 93 
percent of total Fedwire Securities Service revenue through June 
2016.
    \44\ JP Morgan Chase announced in July 2016, its intent to exit 
the government securities clearing and settlement business. It is 
expected that the exit will result in significant reductions of 
transfer volume over Fedwire Securities as more transactions shift 
to in-house activity at the remaining custodian banks.
    \45\ 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.
    \46\ Information on the Fixed Income Clearing Corporation's new 
settlement logic can be found at http://www.dtcc.com/~/media/Files/
pdf/2015/6/22/GOV045-15.pdf.
---------------------------------------------------------------------------

    Revenue is projected to be $29.0 million, an increase of 12.4 
percent from the 2016 estimate; this projected rise in revenue results 
from higher fees, discussed below, that offset the anticipated online 
transfer and account maintenance volume declines. The Reserve Banks 
also project that 2017 expenses will increase by $3.2 million, compared 
with 2016 expenses, reflecting higher expected operating costs. Higher 
operating costs in 2017 reflect the amortization of capital software 
costs from completed modernization initiatives as well as the 
advancement of new initiatives to improve resiliency and operational 
functionality.
    The Reserve Banks will increase the online agency transfer fee from 
$0.65 to $0.77 and increase the offline origination and receipt 
surcharge transfer fee from $66 to $80. The Reserve Banks also will 
increase the monthly agency issues maintenance fee from $0.65 to $0.77 
and will increase the monthly account maintenance fee from $48 to 
$57.50. Moreover, the Reserve Banks will increase the joint custody 
origination surcharge from $44 to $46. Finally, the Reserve Banks will 
increase the claims adjustment fees from $0.75 to $0.80. The Reserve 
Banks estimate that the price changes will result in an 18.0 percent 
average price increase for Fedwire Securities customers.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 cost recovery for these services are lower-than-expected volume 
resulting from the pace of structural changes in government securities 
settlement, and cost overruns from new initiatives to improve 
resiliency and operational functionality.
    G. FedLine Access--The Reserve Banks charge fees for the electronic 
connections that depository institutions use to access priced services 
and allocate the costs and revenue associated with this electronic 
access to the various priced services. There are currently five FedLine 
channels through which customers can access the Reserve Banks' priced 
services: FedMail, FedLine Web, FedLine Advantage, FedLine Command, and 
FedLine

[[Page 75070]]

Direct.\47\ The Reserve Banks package these channels into nine FedLine 
packages, described below, that are supplemented by a number of premium 
(or a la carte) access and accounting information options. In addition, 
the Reserve Banks offer FedComplete packages, which are bundled 
offerings of a FedLine Advantage connection and a fixed number of 
FedACH, Fedwire Funds, and Check 21-enabled services.
---------------------------------------------------------------------------

    \47\ FedMail, FedLine Web, FedLine Advantage, FedLine Command, 
and FedLine Direct are registered trademarks of the Federal Reserve 
Banks.
---------------------------------------------------------------------------

    Six attended access packages offer manual 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. 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.\48\
---------------------------------------------------------------------------

    \48\ 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 2017 FedLine fees, the Reserve Banks will increase five 
existing monthly fees: (1) The FedLine Web Plus fee from $140 to $160, 
(2) the FedLine Direct Premier fee from $6,500 to $6,700, (3) the 
FedComplete 200 Plus fee from $1,300 to $1,350, (4) the FedComplete 200 
Premier fee from $1,375 to $1,425, and (5) the FedMail Fax a la carte 
fee from $70 to $100. As in previous years, the Reserve Banks will 
introduce new fees on legacy services. In particular, the Reserve Banks 
will implement a legacy software fee to encourage FedLine Direct 
customers to migrate to an enhanced messaging solution.\49\ To provide 
customers sufficient time to migrate, the fee will not become effective 
until the third quarter of 2017. The fee will be introduced on July 1, 
2017, at $5,000 per month and will increase in steps to $20,000 per 
month by the end of 2017.\50\ In addition, the Reserve Banks will 
remove the legacy email service from all FedLine Web, Advantage, 
Command, and Direct packages and introduce a $20-per-month fee to 
purchase an a la carte subscription to this service. Customers in these 
packages that currently use the email service will have the opportunity 
to cancel the service to avoid the a la carte fee.
---------------------------------------------------------------------------

    \49\ To avoid the fee, FedLine Direct customers will need to 
configure their systems to run a supported version of the MQ 
platform. MQ is a critical messaging component that facilitates the 
exchange of information between applications, systems, services and 
files.
    \50\ The fee will increase to $10,000 per month on September 1, 
2017, and to $20,000 per month on November 1, 2017.
---------------------------------------------------------------------------

    In addition, the Reserve Banks will modify the E-Payments Routing 
Directory and make several associated changes to FedLine packages and 
fees.\51\ Currently, all FedLine Web, Advantage, Command, and Direct 
packages include two services to download the directory: manual and 
automated.\52\ The Reserve Banks will introduce a new automated 
download service that will allow subscribers to provide access to the 
directory to their customers (that is, non-financial institutions that 
require access to the directory). Access to the directory will be 
controlled through the use of download codes, and financial 
institutions will be responsible for distributing the codes to their 
respective customers. Additionally, the Reserve Banks will include the 
automated download service in only plus- and premier-level FedLine 
packages.\53\ Five download codes will be included in these packages, 
and additional codes will be available to purchase through an a la 
carte option (codes will be available in bundles ranging in price from 
$75 to $2,000 per month).
---------------------------------------------------------------------------

    \51\ E-Payments Routing Directory provides basic routing 
information for Fedwire Funds, Fedwire Securities, and FedACH 
transactions.
    \52\ The manual service allows subscribers to download the 
directory in a manual fashion via a web-based interface. The 
automated service allows subscribers to schedule daily, weekly, or 
monthly automated (unattended) downloads of the directory.
    \53\ Plus- and premier-level packages are FedLine Web Plus, 
FedLine Advantage Plus and Premier, FedLine Command Plus, and 
FedLine Direct Plus and Premier. In addition the new FedLine 
Exchange Premier package will have access to the automated service.
---------------------------------------------------------------------------

    To accommodate the enhancements to the E-payments Directory, the 
Reserve Banks will introduce a new FedLine Exchange service, along with 
a new set of associated packages. Currently, the FedLine Exchange 
service is an email-based interface, and there is only one package 
available. The new FedLine Exchange service--which will be a web-based 
interface (that is, accessible via a web browser rather than email)--
will allow customers that do not use FedLine for Federal Reserve 
Financial Services to access the E-Payments Routing Directory.\54\ The 
new service will be available in two packages: A base-level and 
premier-level. The base package, priced at $40 per month, will include 
the manual download directory service. The premier package, priced at 
$125 month, will include both the manual and automated download 
directory services.\55\ To ensure continuity of service, the services 
available in the existing FedLine Exchange package will continue to be 
available through a new package, FedMail, as discussed below.
---------------------------------------------------------------------------

    \54\ Customers that do not use FedLine to access Federal Reserve 
Financial Services are generally small financial institutions that 
partner with a payment processor or other third party for 
transactional processing.
    \55\ FedLine Exchange customers will need to request credentials 
to access the manual directory download service. These credentials 
will be billed via a FedMail-FedLine Exchange Subscriber 5-pack. The 
automated download directory service under the FedLine Exchange 
Premier package includes five download codes so a separate 
subscriber 5-pack is not required.
---------------------------------------------------------------------------

    The Reserve banks will introduce a new FedMail package, priced at 
$85 per month, which will include the same email-based services 
included in the existing FedLine Exchange package.\56\ Subscribers of 
the existing FedLine Exchange package will be transitioned to the new 
FedMail package and experience a fee increase of $45.\57\
---------------------------------------------------------------------------

    \56\ The addition of the FedMail package and the FedLine 
Exchange Premier package will increase the total number of FedLine 
packages from nine to eleven.
    \57\ The $45 increase represents the difference in price between 
the new FedMail package ($85) and the existing FedLine Exchange 
package ($40).
---------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in an 
8.1 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.'' \58\ Under this policy, the 
Board assesses whether proposed changes will have a direct and material 
adverse effect on the ability of other service providers to compete 
effectively with the Federal

[[Page 75071]]

Reserve in providing similar services because of differing legal powers 
or constraints or because of a dominant market position deriving from 
such legal differences. If any proposed changes create such an effect, 
the Board must further evaluate the changes to assess whether the 
benefits associated with the changes--such as contributions to payment 
system efficiency, payment system integrity, or other Board 
objectives--can be achieved while minimizing the adverse effect on 
competition.
---------------------------------------------------------------------------

    \58\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------

    The 2017 fees, fee structures, and changes in service will not have 
a direct and material adverse effect on the ability of other service 
providers to compete effectively with the Reserve Banks in providing 
similar services. The changes should permit the Reserve Banks to earn a 
ROE that is comparable to overall market returns and provide for full 
cost recovery over the long run.

III. 2017 Fee Schedules

BILLING CODE 6210-01-P

[[Page 75072]]

[GRAPHIC] [TIFF OMITTED] TN28OC16.039


[[Page 75073]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.040


[[Page 75074]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.041


[[Page 75075]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.042


[[Page 75076]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.043


[[Page 75077]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.044


[[Page 75078]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.045


[[Page 75079]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.046


[[Page 75080]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.047


[[Page 75081]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.048


[[Page 75082]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.049


[[Page 75083]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.050


[[Page 75084]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.051


[[Page 75085]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.052


[[Page 75086]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.053


[[Page 75087]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.054


[[Page 75088]]


[GRAPHIC] [TIFF OMITTED] TN28OC16.055


    By order of the Board of Governors of the Federal Reserve 
System, October 25, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-26068 Filed 10-27-16; 8:45 am]
 BILLING CODE 6210-01-C