Federal Reserve Bank Services
Federal Register, Volume 80 Issue 220 (Monday, November 16, 2015)
Federal Register Volume 80, Number 220 (Monday, November 16, 2015)
Notices
Pages 70783-70802
From the Federal Register Online via the Government Publishing Office www.gpo.gov
FR Doc No: 2015-28932
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FEDERAL RESERVE SYSTEM
Docket No. OP-1522
Federal Reserve Bank Services
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2016 of $13.1 million and the 2016 fee schedules for Federal Reserve priced services and electronic access. These actions were taken in accordance with the Monetary Control Act of 1980, which requires that, over the long run, fees for Federal Reserve priced services be established on the basis of all direct and indirect costs, including the PSAF.
DATES: The new fee schedules become effective January 1, 2016.
FOR FURTHER INFORMATION CONTACT: For questions regarding the fee schedules: Susan V. Foley, Senior Associate Director, (202) 452-3596; Slavea A. Assenova, Financial Services Analyst, (202) 452-2087, Division of Reserve Bank Operations and Payment Systems. For questions regarding the PSAF: Gregory L. Evans, Deputy Associate Director, (202) 452-3945; Lawrence Mize, Deputy Associate Director, (202) 452-5232; Manuel Garcia, Senior Financial Analyst, (202) 452-3480, Division of Reserve Bank Operations and Payment Systems. For users of Telecommunications Device for the Deaf (TDD) only, please call (202) 263-4869. Copies of the 2016 fee schedules for the check service are available from the Board, the Federal Reserve Banks, or the Reserve Banks' financial services Web site at www.frbservices.org.
SUPPLEMENTARY INFORMATION:
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Private Sector Adjustment Factor, Priced Services Cost Recovery, and Overview of 2016 Price Changes
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Overview--Each year, as required by the Monetary Control Act of 1980, the Reserve Banks set fees for priced services provided to depository institutions. These fees are set to recover, over the long run, all direct and indirect costs and imputed costs, including financing costs, taxes, and certain other expenses, as well as the return on equity (profit) that would have been earned if a private business firm provided the services. The imputed costs and imputed profit are collectively referred to as the PSAF. From 2005 through 2014, the Reserve Banks recovered 102.9 percent of their total expenses (including imputed costs) and targeted after-tax profits or return on equity (ROE) for providing priced services.\1\
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\1\ The ten-year recovery rate is based on the pro forma income statement for Federal Reserve priced services published in the Board's Annual Report. Effective December 31, 2006, the Reserve Banks implemented Statement of Financial Accounting Standards (SFAS) No. 158: Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans Accounting Standards Codification (ASC) 715 Compensation--Retirement Benefits, which resulted in recognizing a cumulative reduction in equity related to the priced services' benefit plans. Including this cumulative reduction in equity from 2005 to 2014 results in cost recovery of 95.1 percent for the ten-
year period. This measure of long-run cost recovery is also published in the Board's Annual Report.
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Table 1 summarizes 2014 actual, 2015 estimated, and 2016 budgeted cost-recovery rates for all priced services. Cost recovery is estimated to be 104.1 percent in 2015 and budgeted to be 101.9 percent in 2016.
Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance a
Dollars in millions
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Recovery rate
Year Revenue Total expense Net income Targeted ROE after targeted
ROE 1/(2+4)
1 \b\ 2 \c\ 3 4 \d\ 5 \e\
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2014 (actual)................... 433.1 418.7 14.5 5.5 102.1%
2015 (estimate)................. 427.1 404.6 22.6 5.6 104.1%
2016 (budget)................... 426.9 414.9 12.0 4.1 101.9%
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\a\ Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding.
\b\ Revenue includes imputed income on investments when equity is imputed at a level that meets minimum capital
requirements and, when combined with liabilities, exceeds total assets (attachment 1).
\c\ The calculation of total expense includes operating, imputed, and other expenses. Imputed and other expenses
include taxes, Board of Governors' priced services expenses, the cost of float, and interest on imputed debt,
if any. Credits or debits related to the accounting for pension plans under FAS 158 ASC 715 are also
included.
\d\ Targeted ROE is the after-tax ROE included in the PSAF.
\e\ The recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be
recognized in accordance with FAS 158 ASC 715. Future gains or losses, and their effect on cost recovery,
cannot be projected.
Table 2 provides an overview of cost-recovery performance for the ten-year period from 2005 to 2014, 2014 actual, 2015 budget, 2015 estimate, and 2016 budget by priced service.
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Table 2--Priced Services Cost Recovery
Percent
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2015 budget 2016 budget
Priced service 2005-2014 2014 actual \a\ 2015 estimate \b\
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All services.................... 102.9 102.1 102.0 104.1 101.9
Check........................... 103.7 115.6 105.2 110.1 106.7
FedACH.......................... 100.0 86.7 100.4 100.0 99.0
Fedwire Funds and NSS........... 101.9 103.2 100.7 100.7 100.0
Fedwire Securities.............. 102.3 104.1 97.5 105.7 98.7
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\a\ The 2015 budget figures reflect the final budgets as approved by the Board in December 2014.
\b\ The 2016 budget figures reflect preliminary budget information from the Reserve Bank. The Reserve Banks will
submit final budget data to the Board in November 2015, for Board consideration in December 2015.
1. 2015 Estimated Performance--The Reserve Banks estimate that they will recover 104.1 percent of the costs of providing priced services in 2015, including total expense and targeted ROE, compared with a 2015 budgeted recovery rate of 102.0 percent, as shown in table 2. Overall, the Reserve Banks estimate that they will fully recover actual and imputed costs and earn net income of $22.6 million, compared with the targeted ROE of $5.6 million. The Reserve Banks estimate that all services will achieve full cost recovery, despite higher-than-budgeted pension expenses. Greater-than-expected check volume processed by the Reserve Banks has been the single most significant factor influencing priced services cost recovery.
2. 2016 Private-Sector Adjustment Factor--The 2016 PSAF for Reserve Bank priced services is $13.1 million. This amount represents a decrease of $4.9 million from the 2015 PSAF of $18.0 million. This decrease is primarily the result of a reduction in the assets to be financed on the imputed priced-services balance sheet and an associated decline in the cost of debt and equity.
3. 2016 Projected Performance--The Reserve Banks project a priced services cost-recovery rate of 101.9 percent in 2016, with net income of $12.0 million, compared with a targeted ROE of $4.1 million. The Reserve Banks project that the check service and the Fedwiresupreg Funds and National Settlement Service will fully recover their costs; however, the Reserve Banks project that the FedACHsupreg Service and the Fedwire Securities Service will not achieve full cost recovery because of investment costs associated with multiyear technology initiatives to modernize their processing platforms.\2\ These investments are expected to enhance efficiency, the overall quality of operations, and the Reserve Banks' ability to offer additional services to depository institutions.
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\2\ The Reserve Banks have been engaged in a multiyear technology initiative to modernize the FedACH processing platform by migrating the service from a mainframe system to a distributed computing environment. In late 2013, the Reserve Banks conducted an assessment focused on the viability and cost-effectiveness of the program. As a result, the Reserve Banks in 2014 suspended the program and began to investigate the use of other technology solutions. In 2015, the Reserve Banks evaluated alternative processing solutions, including commercially available options.
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The primary risks to the Reserve Banks' ability to achieve their targeted cost-recovery rates are unanticipated volume and revenue reductions and the potential for cost overruns with the technology modernization initiatives. In light of these risks, the Reserve Banks will continue to refine their business and operational strategies to manage operating costs, to increase product revenue, and to capitalize on efficiencies gained from technology initiatives.
4. 2016 Pricing--The following summarizes the Reserve Banks' changes in fee schedules for priced services in 2016:
Check
The Reserve Banks will increase the per-item fee for FedReturnsupreg items that are qualified to the Reserve Bank in instances in which the bank of first deposit cannot be identified from $8 to $15.
The Reserve Banks will increase the fees for traditional paper check forward and return collection deposits. The Reserve Banks will increase the per-item fee for paper forward deposits from $2.00 to $2.50 and the per-item fee for each unencoded item from $1.00 to $1.50.\3\ The Reserve Banks will increase the per-item fee for paper return-collection deposits from $5.00 to $5.50 and the per-item fee for unqualified paper returns from $7.00 to $7.50. The Reserve Banks will discontinue image retrievals by fax for both incoming and outgoing retrievals within FedImagesupreg Services.\4\
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\3\ Unencoded items are those items deposited without encoding of certain elements, such as amount, added to the magnetic ink character recognition (MICR) line.
\4\ FedImage Services offer depository institutions products for the capture, archive, and retrieval of check images. A current list of services can be found at https://www.frbservices.org/serviceofferings/check/fed_image_services.html.
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The Reserve Banks will introduce Select Mixed Level 3 to the Select Mixed image cash letter (ICL) product.\5\ The new level will have a daily fee of $3,000 and per-item fees from $0.002 to $0.350.
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\5\ A current list of Select Mixed endpoints can be found at https://www.frbservices.org/servicefees/check21_endpoint_listing.html.
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The Reserve Banks will eliminate the FedForwardsupreg Fine Sort (ICL) product in January 2017 as part of the Reserve Banks' effort to reflect today's electronic check processing environment in their check fee schedule.\6\ To encourage depositors to shift volume from the fine-sort products to mixed deposit options in advance of this elimination, the Reserve Banks will increase the FedForward Fine Sort ICL product per-item fees at the 9 p.m., 1 a.m., and 5 a.m. deadlines by $0.002, $0.004, and $0.006, respectively.\7\ The Reserve Banks will increase the FedForward Deferred Fine Sort ICL product per-item fees at the 1 a.m., 5
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a.m., and 10 a.m. deadlines by $0.004, $0.006, and $0.008, respectively.
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\6\ In a paper check processing environment, the fine sort product allowed the Reserve Banks to gain efficiencies because the checks did not require processing on reader-sorters. In today's electronic check processing environment, all image cash letters are processed through the Reserve Banks' electronic system in the same manner, and the Reserve Banks do not gain any efficiencies by having the depositing bank fine sort electronic checks prior to deposit.
\7\ All times are stated in the Eastern Time zone (ET).
Depository institutions may deposit image cash letters using nine deposit options within the FedForward product line; the options vary in price structure and funds availability. The Reserve Banks offer customers the option of sending FedForward ICLs for items drawn on specific endpoints in a separate cash letter, which combines a high fixed fee with a lower variable fee. All eligible items in the cash letter receive immediate availability, while ineligible items receive deferred availability of the next business day. A current list of FedForward deposit options can be found at https://www.frbservices.org/servicefees/check_services_2015.html.
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In addition to the above changes, the Reserve Banks plan to announce further modifications to the check fee schedule during 2016 that reflect the efficiencies of today's electronic check processing environment. The new schedule may include elimination of certain sorted deposit options and modifications to the current endpoint-based tiered pricing structure.
FedACH
The Reserve Banks will increase the minimum monthly fee for forward origination from $35 to $45.\8\
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\8\ Any originating depository financial institution (ODFI) incurring less than $45 for the following fees will be charged the difference to reach the minimum: Forward value and nonvalue item origination fees, FedGlobal ACH origination surcharges, and FedACH SameDay forward origination surcharges.
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The Reserve Banks will increase the minimum monthly fee for receipt from $25 to $35.\9\
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\9\ Any receiving depository financial institution (RDFI) originating forward value and nonvalue items below the minimum level and incurring less than $35 in receipt fees will be charged the difference to reach the minimum based on origination. RDFIs not originating forward value and nonvalue items will incur the $35 minimum monthly fee for receipt.
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The Reserve Banks will eliminate the large file and small file per-item fees and introduce a single base fee of $0.0032 for all origination files. The Reserve Banks will provide a discount of $0.0005 for origination volume between 750,000 to 1,500,000 items per month and $0.0007 for origination volume greater than 1,500,000 items per month.
The Reserve Banks will lower the top-tier volume origination discount level based on monthly receipt volume from 17,500,000 to 15,000,000 items per month, while maintaining the current discount amounts.\10\
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\10\ Origination discounts apply only to those items received by FedACH receiving points and are available only to Premium Receivers.
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The Reserve Banks will increase the forward item receipt fee from $0.0025 to $0.0032 per item, while keeping the return item receipt fee at $0.0075 per item.
The Reserve Banks will change the volume-based receipt discount structure to encourage additional receipt volume. The changes will include a decrease in the first volume-based discount by 250,000 items per month to 750,001 items a month, the introduction of a new volume-based discount tier for volume between 1,500,001 and 2,500,000 items per month, and an increase for all existing volume-based receipt discounts by $0.0007.\11\
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\11\ Premium Receivers (institutions receiving a certain portion of volume through FedACH) with volume greater than 1,500,000 items a month will receive the increased discount for all items received.
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The Reserve Banks will implement a $20 monthly billing discount for any customer that pays the origination minimum fee, subscribes to a FedLine Websupreg Plus or higher package, and subscribes to either FedACH RDFI Alert, FedACH Risksupreg Origination Monitoring, or FedPaymentssupreg Reporter. In addition to the above changes, the Reserve Banks plan to reassess the FedGlobalsupreg ACH fee schedule during 2016.
Fedwire Funds and National Settlement
The Reserve Banks will increase the Tier 1 per-item pre-
incentive fee from $0.73 to $0.79 per transaction, increase the Tier 3 per-item pre-incentive fee from $0.150 to $0.155 per transaction, and leave Tier 2 per-item pre-incentive fees unchanged.\12\
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\12\ The per-item pre-incentive fee is the fee that the Reserve Banks charge for transfers that do not qualify for incentive discounts. The Tier 1 per-item pre-incentive fee applies to the first 14,000 transfers, the Tier 2 per-item pre-incentive fee applies to the next 76,000 transfers, and the Tier 3 per-item pre-
incentive fee applies to any additional transfers. The Reserve Banks apply an 80 percent incentive discount to transfers over 60 percent of a customer's historic benchmark volume.
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The Reserve Banks will increase the surcharge for offline transactions from $50 to $55. The Reserve Banks will increase the monthly participation fee from $90 to $95.
Fedwire Securities and National Settlement Services
The Reserve Banks will keep prices at existing levels for the priced Fedwire Securities and National Settlement Services.
FedLinesupreg Access Solutions
The Reserve Banks will increase the fee for the FedLine Exchange\SM\ subscriber pack by $5 per month.\13\ The Reserve Banks will keep all other existing FedLine fees unchanged.
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\13\ FedLine packages do not include user subscriptions for priced services. Depository institutions that wish to access priced services must purchase user subscriptions in packs of five (5-
packs).
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The Reserve Banks will introduce a 256K/T1 legacy router surcharge of $5,000 per month to encourage customers to migrate to more efficient access solutions.\14\
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\14\ The $5,000 per month surcharge will be effective July 1, 2016. The price will increase to $10,000 per month on September 1, 2016 and $20,000 per month on November 1, 2016.
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The Reserve Banks will introduce a fee for customers that choose to implement FedLine using a customized (nonstandard) router setup. The fee will vary from $2,500 to $5,000 based on the complexity of the setup.
The Reserve Banks will include two virtual private network (VPN) devices in the FedLine Directsupreg Premier package (rather than one) to align better with the FedLine Advantagesupreg Premier package.
Depository institutions with more than 250 Fedwire transactions per month, or more than one routing number, will only have access to the FedPayments Manager Import/Export (FPM) tool via FedLine Advantage Premier.\15\ Affected customers will experience a fee increase ranging from $15 to $75 per month to upgrade to FedLine Advantage Premier.
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\15\ These customers are generally large institutions that may benefit from the expanded suite of services included in the FedLine Advantage Premier package. For example, large customers may benefit from the enhanced contingency preparedness solutions (such as a secondary VPN device) that are included in FedLine Premier packages.
FedComplete Plus customers with more than 250 Fedwire transactions per month that use the FPM tool will also be transferred to FedComplete Premier packages with the associated fee increase because FedComplete Plus packages incorporate FedLine Advantage Plus. The transfer will affect about 10 current FedCompelete customers.
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5. 2016 Price Index--Figure 1 compares indexes of fees for the Reserve Banks' priced services with the GDP price index.\16\ The price index for Reserve Bank priced services is projected to increase approximately 1 percent in 2016 from the 2015 level. The price index for Check 21 services is projected to increase less than 1 percent. The price index for the FedACH Service is projected to decrease nearly 1 percent. The price index for the Fedwire Funds and National Settlement Services is projected to increase approximately 5 percent. The price index for the Fedwire Securities Services is projected to decrease nearly 1 percent. For the period 2006 to 2015, the price index for total priced services is expected to decrease 26 percent.
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\16\ For the period 2006 to 2014, the GDP price index increased 15 percent.
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BILLING CODE 6210-01-P
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GRAPHIC TIFF OMITTED TN16NO15.212
BILLING CODE 6210-01-C
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Private Sector Adjustment Factor--The imputed debt financing costs, targeted ROE, and effective tax rate are based on a U.S. publicly traded firm market model.\17\ The method for calculating the financing costs in the PSAF requires determining the appropriate imputed levels of debt and equity and then applying the applicable financing rates. In this process, a pro forma balance sheet using estimated assets and liabilities associated with the Reserve Banks' priced services is developed, and the remaining elements that would exist are imputed as if these priced services were provided by a private business firm. The same generally accepted accounting principles that apply to commercial-entity financial statements apply to the relevant elements in the priced services pro forma financial statements.
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\17\ Data for U.S. publicly traded firms is from the Standard and Poor's Compustatsupreg database. This database contains information on more than 6,000 U.S. publicly traded firms, which approximates the entirety of the U.S. market.
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The portion of Federal Reserve assets that will be used to provide priced services during the coming year is determined using information about actual assets and projected disposals and acquisitions. The priced portion of these assets is determined based on the allocation of depreciation and amortization expenses of each asset class. The priced portion of actual Federal Reserve liabilities consists of postemployment and postretirement benefits, accounts payable, and other liabilities. The priced portion of the actual net pension asset or liability is also included on the balance sheet.\18\
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\18\ The pension assets are netted with the pension liabilities and reported as a net asset or net liability as required by ASC 715 Compensation--Retirement Benefits.
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The equity financing rate is the targeted ROE produced by the capital asset pricing model (CAPM). In the CAPM, the required rate of return on a firm's equity is equal to the return on a risk-free asset plus a market risk premium. The risk-free rate is based on the three-
month Treasury bill; the beta is assumed to be equal to 1.0, which approximates the risk of the market as a whole; and the market risk premium is based on the monthly returns in excess of the risk-free rate over the most recent 40 years. The resulting ROE reflects the return a shareholder would expect when investing in a private business firm.
For simplicity, given that federal corporate income tax rates are graduated, state income tax rates vary, and various credits and deductions can apply, an actual income tax expense is not explicitly calculated for Reserve Bank priced services. Instead, the Board targets a pretax ROE that would provide sufficient income to fulfill the priced services' imputed income tax obligations. To the extent that performance results are greater or less than the targeted ROE, income taxes are adjusted using the effective tax rate.
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Capital structure. The capital structure is imputed based on the imputed funding need (assets less liabilities), subject to minimum equity constraints. Short-term debt is imputed to fund the imputed short-term funding need. Long-term debt and equity are imputed to meet the priced services long-term funding need at a ratio based on the capital structure of the U.S. publicly traded firm market. The level of equity must meet the minimum equity constraints, which follow the FDIC requirements for a well-capitalized institution. The priced services must maintain equity of at least 5 percent of total assets and 10 percent of risk-weighted assets.\19\ Any equity imputed that exceeds the amount needed to fund the priced services' assets and meet the minimum equity constraints is offset by a reduction in imputed long-
term debt. When imputed equity is larger than what can be offset by imputed debt, the excess is imputed as investments in Treasury securities; income imputed on these investments reduces the PSAF.
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\19\ The FDIC rule, which was adopted as final on April 8, 2014, requires that well-capitalized institutions meet or exceed the following standards: (1) Total capital to risk-weighted assets ratio of at least 10 percent, (2) tier 1 capital to risk-weighted assets ratio of at least 8 percent, (3) common equity tier 1 capital to risk-weighted assets ratio of at least 6.5 percent, and (4) a leverage ratio (tier 1 capital to total assets) of at least 5 percent. Because all of the Federal Reserve priced services' equity on the pro forma balance sheet qualifies as tier 1 capital, only requirements 1 and 4 are binding. The FDIC rule can be located at https://www.fdic.gov/news/board/2014/2014-04-08_notice_dis_c_fr.pdf.
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Application of the Payment System Risk (PSR) Policy to the Fedwire Services. The Board's PSR policy reflects the new international standards for financial market infrastructures (FMIs) developed by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions in the Principles for Financial Market Infrastructures. The revised policy retains the expectation that the Fedwire Services meet or exceed the applicable risk-management standards. Principle 15 states that an FMI should identify, monitor, and manage general business risk and hold sufficient liquid net assets funded by equity to cover potential general business losses so that it can continue operations and services as a going concern if those losses materialize. Further, liquid net assets should at all times be sufficient to ensure a recovery or orderly wind-down of critical operations and services. The Fedwire Services do not face the risk that a business shock would cause the service to wind down in a disorderly manner and disrupt the stability of the financial system. In order to foster competition with private-
sector FMIs, however, the Reserve Banks' priced services will hold six months of the Fedwire Funds Service's current operating expenses as liquid financial assets and equity on the pro forma balance sheet.\20\ Current operating expenses are defined as normal business operating expenses on the income statement less depreciation, amortization, taxes, and interest on debt. The Fedwire Funds Service's six months of current operating expenses are computed based on its preliminary 2016 budget at $53.8 million. In 2016, $51.1 million of equity was imputed to meet the FDIC capital requirements; however, an additional $2.7 million of equity was imputed to meet the PSR policy requirement. The additional equity is solely allocated to Fedwire Funds Service.
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\20\ This requirement does not apply to the Fedwire Securities Service. There are no competitors to the Fedwire Securities Service that will face such a requirement, and imposing such a requirement when pricing securities services could artificially increase the cost of these services.
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Effective tax rate. Like the imputed capital structure, the effective tax rate is calculated based on data from U.S. publicly traded firms. The tax rate is the mean of the weighted average rates of the U.S. publicly traded firm market over the past 5 years.
Debt and equity financing. The imputed short- and long-term debt financing rates are derived from the nonfinancial commercial paper rates from the Federal Reserve Board's H.15 Selected Interest Rates release (AA and A2/P2) and the annual Merrill Lynch Corporate & High Yield Index rate, respectively. The rates for debt and equity financing are applied to the priced services estimated imputed short-term debt, long-term debt, and equity needed to finance short- and long-term assets and meet equity requirements.
The decrease in the 2016 PSAF is primarily due to lower financing costs as a result of fewer priced services assets to be financed than in 2015. Debt and equity financing rates declined and less debt and equity was imputed to fund priced services assets.
Projected 2016 Federal Reserve priced-services assets, reflected in table 3, have decreased $486.3 million from 2015. This reduction is primarily due to a $589.0 million decrease in the balance of imputed investments in federal funds, driven by recent changes in the PSR policy resulting in a decrease in daily float balances and a corresponding effect on imputed investments. The reduction is offset by an increase of $170.0 million from 2015 in items in process of collection. As shown in table 3, imputed equity for 2016 is $53.8 million, a decrease of $18.1 million from the equity imputed for 2015. In accordance with FAS 158 ASC 715, this amount includes an accumulated other comprehensive loss of $666.1 million.
Table 4 reflects the portion of short- and long-term assets that must be financed with actual or imputed liabilities and equity. Debt and equity imputed to fund the 2016 priced services assets within the observed market leverage ratio produced an equity level that did not meet the FDIC minimum equity requirements. As a result, additional equity was imputed to meet the FDIC requirements, and imputed long-term debt was reduced. The ratio of capital to risk-weighted assets exceeds the required 10 percent of risk-weighted assets and equity exceeds 5 percent of total assets (table 6). In 2015, long-term debt and equity was imputed to meet the asset funding requirements and reflects the leverage ratio observed in the market; additional equity of $7.6 million was required (table 5) to meet the market leverage ratio.
Table 5 shows the derivation of the 2016 and 2015 PSAF. Financing costs for 2016 are $6.1 million lower than in 2015. In addition to the decline in the levels of debt and equity mentioned above, the cost of equity declined 3 basis points. The reduced equity balance and the lower cost of equity result in a pretax ROE that is $2.0 million lower than the 2015 pretax ROE. Imputed sales taxes declined to $2.8 million in 2016 from $3.3 million in 2015. The priced services portion of the Board's expenses increased $1.7 million to $5.0 million in 2016 from $3.3 million in 2015. The effective income tax rate used in 2016 decreased to 21.6 percent from 22.4 percent in 2015.
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Table 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal Reserve Priced Services
Millions of dollars--projected average for year
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2016 2015 Change
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Short-term assets:
Receivables................................................. $35.6 $34.5 $1.0
Materials and supplies...................................... 0.5 0.6 (0.1)
Prepaid expenses............................................ 10.2 11.0 (0.9)
Items in process of collection \21\......................... 321.0 151.0 170.0
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Total short-term assets................................. 367.2 197.2 170.1
Imputed investments: \22\
Imputed investment in Treasury Securities................... 55.8 .............. 55.8
Imputed investment in Fed Funds............................. 11.0 600.00 (589.0)
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Total imputed investments............................... 66.8 600.00 (533.2)
Long-term assets:
Premises \23\............................................... 111.0 116.2 (5.2)
Furniture and equipment..................................... 38.5 39.9 (1.5)
Leasehold improvements and long-term prepayments............ 89.5 91.5 (2.0)
Pension asset............................................... .............. 79.6 (79.6)
Deferred tax asset.......................................... 187.9 222.8 (35.0)
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Total long-term assets.................................. 426.8 550.0 (123.2)
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Total assets............................................ 860.9 1,347.2 (486.3)
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Short-term liabilities:
Deferred credit items....................................... 332.0 751.0 (419.0)
Short-term debt............................................. 19.0 18.5 0.5
Short-term payables......................................... 27.2 27.6 (0.4)
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Total short-term liabilities............................ 378.2 797.2 (418.9)
Long-term liabilities:
Pension liability........................................... 17.6 .............. 17.6
Long-term debt.............................................. .............. 81.9 (81.9)
Postemployment/postretirement benefits and net pension 411.3 396.3 15.0
liabilities \24\...............................................
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Total liabilities....................................... 807.1 1,275.3 (468.3)
Equity \25\..................................................... 53.8 71.9 (18.1)
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Total liabilities and equity............................ 860.9 1,347.2 (486.3)
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\21\ Credit float, which represents the difference between items in process of collection and deferred credit items, occurs when the Reserve Banks debit the paying bank for transactions prior to providing credit to the depositing bank. Float is directly estimated at the service level.
\22\ Consistent with the Board's PSR policy, the Reserve Banks' priced services will hold six months of the Fedwire Funds Service's current operating expenses as liquid net financial assets and equity on the pro forma balance sheet. Six months of the Fedwire Funds Service's projected current operating expenses is $53.8 million. In 2016, $51.1 million of equity was imputed to meet the regulatory capital requirements; however, an additional $2.7 million of equity was imputed to meet the PSR policy requirement.
\23\ Includes the allocation of Board of Governors assets to priced services of $1.3 and $0.7 million for 2016 and 2015, respectively.
\24\ Includes the allocation of Board of Governors liabilities to priced services of $0.6 million for 2016 and 2015.
\25\ Includes an accumulated other comprehensive loss of $666.1 million for 2016 and $523.7 million for 2015, which reflects the ongoing amortization of the accumulated loss in accordance with FAS 158 ASC 715. Future gains or losses, and their effects on the pro forma balance sheet, cannot be projected. See table 5 for calculation of required imputed equity amount.
Table 4--Imputed Funding for Priced-Services Assets
Millions of dollars
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2016 2015
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Short-term asset financing
Short-term assets to be financed:
Receivables......................... $35.6 $34.5
Materials and supplies.............. 0.5 0.6
Prepaid expenses.................... 10.2 11.0
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Total short-term assets to be 46.2 46.2
financed.......................
Short-term payables................. 27.2 27.6
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Net short-term assets to be 19.0 18.5
financed.......................
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Imputed short-term debt 19.0 18.5
financing \26\.................
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Long-term asset financing
Long-term assets to be financed:
Premises............................ 111.0 116.2
Furniture and equipment............. 38.5 39.9
Leasehold improvements and long-term 89.5 91.5
prepayments........................
Pension asset....................... .............. 79.6
Deferred tax asset.................. 187.9 222.8
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Total long-term assets to be 426.8 550.0
financed.......................
Pension liability................... 17.6 ..............
Postemployment/postretirement 411.3 396.3
benefits and net pension
liabilities........................
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Net long-term assets to be (2.0) 153.8
financed.......................
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Imputed long-term debt \26\......... .............. 81.9
Imputed equity \26\................. 53.8 71.9
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Total long-term financing....... 53.8 153.8
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\26\ See table 5 for calculation.
Table 5--Derivation of the 2016 and 2015 PSAF
Dollars in millions
----------------------------------------------------------------------------------------------------------------
2016 2015
---------------------------------------------------------------
Debt Equity Debt Equity
----------------------------------------------------------------------------------------------------------------
-
Imputed long-term debt and equity
Net long-term assets to finance............. $(2.0) $(2.0) $153.8 $153.8
Capital structure observed in market........ 58.5% 41.5% 58.2% 41.8%
---------------------------------------------------------------
Pre-adjusted long-term debt and equity...... $(1.2) $(0.8) $89.5 $64.3
Equity adjustments \27\:
Equity to meet capital requirements..... .............. 51.1 .............. 71.9
Adjustment to debt and equity funding 1.2 (1.2) (7.6) 7.6
given capital requirements \28\........
Adjusted equity balance................. .............. (2.0) .............. 71.9
Equity to meet capital requirements \29\ .............. 53.1 .............. ..............
---------------------------------------------------------------
.............. $51.1 $81.9 $71.9
===============================================================
-
Cost of capital:
Elements of capital costs
Short-term debt \30\.................... $19.0 x 0.3% = $0.1
$18.5 x 0.2% = $0.0
Long-term debt \30\......................... x 4.2% =
81.9 x 5.0% = 4.1
Equity \31\................................. 51.1 x 9.8% = 5.0
71.9 x 10.1% =7.3
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
.............. 5.1 .............. 11.4
-
Incremental cost of PSR policy:
Equity to meet policy....................... $2.7 x 9.8% = $0.3
x 10.1% = $
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
-
Other required PSAF costs:
Sales taxes................................. .............. $2.8 .............. $3.3
Board of Governors expenses................. .............. 5.0 .............. 3.3
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
.............. .............. 7.8 6.6
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
.............. .............. $13.1 $18.0
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
-
Total PSAF:
As a percent of assets...................... .............. 1.5% .............. 1.0%
As a percent of expenses.................... .............. 3.6% .............. 4.5%
Page 70790
-
Tax rates.................................... .............. 21.6% .............. 22.4%
----------------------------------------------------------------------------------------------------------------
\27\ If minimum equity constraints are not met after imputing equity based on the capital structure observed in
the market, additional equity is imputed to meet these constraints. The long-term funding need was met by
imputing long-term debt and equity based on the capital structure observed in the market (see tables 4 and 6).
In 2016, the amount of imputed equity exceeded the minimum equity requirements for risk-weighted assets.
\28\ Equity adjustment offsets due to a shift of long-term debt funding to equity in order to meet FDIC capital
requirements for well-capitalized institutions.
\29\ Additional equity in excess of that needed to fund priced services assets is offset by an asset balance of
imputed investments in treasury securities.
\30\ Imputed short-term debt and long-term debt are computed at table 4.
\31\ The 2016 ROE is equal to a risk-free rate plus a risk premium (beta * market risk premium). The 2016 after-
tax CAPM ROE is calculated as 0.03% + (1.0 * 7.62%) = 7.65%. Using a tax rate of 21.6%, the after-tax ROE is
converted into a pretax ROE, which results in a pretax ROE of (7.65%/(1-21.6%)) = 9.76%. Calculations may be
affected by rounding.
Table 6--Computation of 2016 Capital Adequacy for Federal Reserve Priced Services
Dollars in millions
----------------------------------------------------------------------------------------------------------------
Weighted
Assets Risk weight assets
----------------------------------------------------------------------------------------------------------------
Imputed investments:
1-Year Treasury securities \32\............................. $55.8 .............. ..............
Federal funds \33\.......................................... 11.0 0.2 2.2
-----------------------------------------------
Total imputed investments............................... 66.8 .............. 2.2
Receivables..................................................... $35.6 0.2 $7.1
Materials and supplies.......................................... 0.5 1.0 0.5
Prepaid expenses................................................ 10.2 1.0 10.2
Items in process of collection.................................. 321.0 0.2 64.2
Premises........................................................ 111.0 1.0 111.0
Furniture and equipment......................................... 38.5 1.0 38.5
Leasehold improvements and long-term prepayments................ 89.5 1.0 89.5
Pension asset................................................... .............. 1.0 ..............
Deferred tax asset.............................................. 187.9 1.0 187.9
-----------------------------------------------
Total................................................... 860.9 .............. 511.0
===============================================
Imputed equity.................................................. $53.8
Capital to risk-weighted assets................................. 10.5%
Capital to total assets......................................... 6.2%
----------------------------------------------------------------------------------------------------------------
\32\ If minimum equity constraints are not met after imputing equity based on all other financial statement
components, additional equity is imputed to meet these constraints. Additional equity imputed to meet minimum
equity requirements is invested solely in Treasury securities. The imputed investments are similar to those
for which rates are available on the Federal Reserve's H.15 statistical release, which can be located at http://www.federalreserve.gov/releases/h15/data.htm.
\33\ The investments are imputed based on the amounts arising from the collection of items prior to providing
credit according to established availability schedules.
-
Check Service--Table 7 shows the 2014 actual, 2015 estimated, and 2016 budgeted cost-recovery performance for the commercial check service.
Table 7--Check Service Pro Forma Cost and Revenue Performance
Dollars in millions
----------------------------------------------------------------------------------------------------------------
Recovery rate
Net income after targeted
Year Revenue Total expense (ROE) Targeted ROE ROE 1/(2 +
4)
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
2014 (actual)................... 174.7 149.3 25.4 1.8 115.6%
2015 (estimate)................. 159.3 142.7 16.5 2.0 110.1
2016 (budget)................... 149.9 139.1 10.7 1.3 106.7
----------------------------------------------------------------------------------------------------------------
Page 70791
1. 2015 Estimate--The Reserve Banks estimate that the check service will recover 110.1 percent of total expenses and targeted ROE, compared with a 2015 final budgeted recovery rate of 105.2 percent. Greater-
than-expected check volumes processed by the Reserve Banks and lower-
than-expected costs have influenced significantly the check services cost recovery.
The decline in Reserve Bank check volume, which is attributable to the decline in the number of checks written generally, was not as great as anticipated.\34\ Through August, total forward check volume is 4.6 percent lower and total return check volume is 11.9 percent lower-than for the same period last year. For full-year 2015, the Reserve Banks estimate that their total forward check volume will decline 5.6 percent (compared with a budgeted decline of nearly 7 percent) and their total return check volume will decline 11.6 percent (compared with a budgeted decline of about 14 percent) from 2014 levels.\35\
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\34\ The greater-than-expected check volume is attributed to the retention of current customers through continued enhancements of two FedForward product offerings: select mixed and premium mixed.
\35\ Total Reserve Bank forward check volumes are expected to drop from 5.7 billion in 2014 to 5.4 billion in 2015. Total Reserve Bank return check volumes are expected to drop from roughly 36.5 million in 2014 to 32.3 million in 2015.
---------------------------------------------------------------------------
2. 2016 Pricing--The Reserve Banks expect the check service to recover 106.7 percent of total expenses and targeted ROE in 2016. The Reserve Banks project revenue to be $149.9 million, a decline of 5.9 percent from the 2015 estimate. This decline is driven largely by projected reductions in both forward check and return check volume. The Reserve Banks estimate that total Reserve Bank forward check volumes will decline 6.2 percent, to 5.1 billion, and return check volumes will decline 12.7 percent to 28.5 million in 2016. Total expenses for the check service are projected to be $139.1 million, a decline of 2.5 percent from 2015.\36\
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\36\ The reduction in check costs is driven in part by lower pension costs in 2016.
---------------------------------------------------------------------------
The Reserve Banks will increase the per-item fee for FedReturn items that are qualified to the Reserve Bank in instances in which the bank of first deposit cannot be identified from $8 to $15.
The Reserve Banks will increase the fees for traditional paper check forward and return collection deposits. The Reserve Banks will increase the per-item fee for paper forward deposits from $2.00 to $2.50 and the per-item fee for each unencoded item from $1.00 to $1.50.\37\ The Reserve Banks will increase the per-item fee for paper return collection deposits from $5.00 to $5.50 as well as the per-item fee for unqualified paper returns from $7.00 to $7.50. The Reserve Banks will discontinue image retrievals by fax for both incoming and outgoing retrievals within FedImage Services.\38\
---------------------------------------------------------------------------
\37\ Unencoded items are those items deposited without encoding of certain elements, such as amount, added to the MICR line.
\38\ FedImage Services offer depository institutions products for the capture, archive, and retrieval of check images. A current list of services can be found at https://www.frbservices.org/serviceofferings/check/fed_image_services.html.
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The Reserve Banks will introduce Select Mixed Level 3 tier to the Select Mixed image cash letter (ICL) product.\39\ The new level will have a daily fee of $3,000 and per-item fees from $0.002 to $0.350, as seen in table 8.
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\39\ A current list of Select Mixed endpoints can be found at https://www.frbservices.org/servicefees/check21_endpoint_listing.html.
Table 8--FedForward Select Mixed Image Cash Letter a b
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 a.m. 12 p.m.
Deadline -----------------------------------------------------------------------------------------------
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
------------------------------------------------------------------------------------------------------------------------------------------
Daily fixed fee........................... $2,200.00 $900.00 $3,000.00 $2,200.00 $900.00 $3,000.00
Cash letter surcharge..................... .............. .............. .............. 25.00 25.00 25.00
Tier 1.................................... 0.0020 0.0020 0.0020 0.0020 0.0020 0.0020
Tier 2.................................... 0.0040 0.0060 0.0040 0.0040 0.0060 0.0040
Tier 3.................................... 0.0060 0.0080 0.0060 0.0060 0.0080 0.0060
Tier 4.................................... .............. .............. 0.0130 .............. .............. 0.0130
Tier 5.................................... .............. .............. 0.0220 .............. .............. 0.0220
Tier 6.................................... .............. .............. 0.1000 .............. .............. 0.3500
Non-eligible endpoints.................... 0.1000 0.1000 N/A 0.3500 0.3500 N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ All deadlines are Monday through Friday.
\b\ A current list of FedForward endpoint tier listings can be found at http://www.frbservices.org/servicefees/check21_endpoint_listing.html.
The Reserve Banks will eliminate the FedForward Fine Sort ICL product in January 2017 as part of the Reserve Banks effort to reflect today's electronic check processing environment in their check fee schedule.\40\ To encourage depositors to shift volume from the fine-
sort products to mixed deposit options in advance of this elimination, the Reserve Banks will increase the FedForward Fine Sort ICL product per-item fees at the 9 p.m., 1 a.m., and 5 a.m. deadlines by $0.002, $0.004, and $0.006, an average increase of 22.7 percent.\41\ The Reserve Banks will increase the FedForward Deferred Fine Sort ICL product per-item fees at the 1 a.m., 5 a.m., and 10 a.m. deadlines by $0.004, $0.006, and $0.008, an average increase of 48.8 percent. The per item fees for each deadline are listed in table 9.
---------------------------------------------------------------------------
\40\ In a paper check processing environment, the fine sort product allowed the Reserve Banks to gain efficiencies because the checks did not require processing on reader-sorters. In today's electronic check processing environment, all image cash letters are processed through the Reserve Banks' electronic system in the same manner, and the Reserve Banks do not gain any efficiencies by having the depositing bank fine sort electronic checks prior to deposit.
\41\ All times are stated in the eastern time zone (ET).
Depository institutions may deposit image cash letters using nine deposit options within the FedForward product line; the options vary in price structure and funds availability. The Reserve Banks offer customers the option of sending FedForward ICLs for items drawn on specific endpoints in a separate cash letter, which combines a high fixed fee with a lower variable fee. All eligible items in the cash letter receive immediate availability, while ineligible items receive deferred availability of the next business day. A current list of FedForward deposit options can be found at https://www.frbservices.org/servicefees/check_services_2015.html.
Page 70792
Table 9
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
FedForward Fine Sort Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline........................................................ 9 p.m. 1 a.m. 5 a.m.
----------------------------------------------------------------------------------------------------------------
Cash letter fee................................................. $3.50 $6.50 $12.50
Tier 1...................................................... 0.0080 0.0120 0.0250
Tier 2...................................................... 0.0120 0.0170 0.0290
Tier 3...................................................... 0.0210 0.0260 0.0380
Tier 4...................................................... 0.0310 0.0360 0.0480
----------------------------------------------------------------------------------------------------------------
FedForward Fine Deferred Sort Image Cash Letter \a\ \b\
----------------------------------------------------------------------------------------------------------------
Deadline........................................................ 1 a.m. 5 a.m. 10 a.m.
----------------------------------------------------------------------------------------------------------------
Cash letter fee................................................. $3.50 $3.50 $3.50
Tier 1...................................................... 0.0100 0.0130 0.0160
Tier 2...................................................... 0.0130 0.0160 0.0190
Tier 3...................................................... 0.0220 0.0250 0.0280
Tier 4...................................................... 0.0320 0.0350 0.0380
----------------------------------------------------------------------------------------------------------------
\a\ All deadlines are Monday through Friday.
\b\ A current list of FedForward endpoint tier listings can be found at http://www.frbservices.org/servicefees/check21_endpoint_listing.html.
The Reserve Banks estimate that the price changes will result in a 0.5 percent average price increase for check customers. In addition to the above changes, the Reserve Banks plan to announce further modifications to the check fee schedule during 2016 that reflect the efficiencies of today's electronic check processing environment. The new schedule may include elimination of certain sorted deposit options and modifications to the current endpoint-based tiered pricing structure.
Risks to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for the check service include lower-than-expected check volume due to reductions in check writing overall and competition from correspondent banks, aggregators, and direct exchanges, which will result in lower-than-anticipated revenue.
-
FedACH Service--Table 10 shows the 2014 actual, 2015 estimate, and 2016 budgeted cost-recovery performance for the commercial FedACH service.
Table 10--FedACH Service Pro Forma Cost and Revenue Performance
Dollars in millions
----------------------------------------------------------------------------------------------------------------
Year Revenue Total expense Net income Targeted ROE Recovery rate
----------------------------------------------------------------- (ROE) ---------------- after targeted
---------------- ROE 1/(2 +
4)
1 2 3 4 ---------------
5
----------------------------------------------------------------------------------------------------------------
2014 (actual)................... 124.4 141.4 -17.0 2.0 86.7%
2015 (estimate)................. 125.5 123.7 1.8 1.7 100.0
2016 (budget)................... 129.8 129.9 -0.0 1.2 99.0
----------------------------------------------------------------------------------------------------------------
1. 2015 Estimate--The Reserve Banks estimate that the FedACH service will recover 100.0 percent of total expenses and targeted ROE, compared with a 2015 final budgeted recovery rate of 100.4 percent.\42\ Through August, FedACH commercial origination and receipt volume was 5.1 percent higher-than the same period last year. For full-year 2015 the Reserve Banks estimate that FedACH commercial origination and receipt volume will increase 5.5 percent, compared with a budgeted increase of 3.5 percent.
---------------------------------------------------------------------------
\42\ The Reserve Banks have been engaged in a multiyear technology initiative to modernize the FedACH processing platform by migrating the service from a mainframe system to a distributed computing environment. In late 2013, the Reserve Banks conducted an assessment focused on the viability and cost-effectiveness of the program. As a result, the Reserve Banks in 2014 suspended the program and began to investigate the use of other technology solutions. In 2015, the Reserve Banks evaluated alternative processing solutions, including commercially available options.
---------------------------------------------------------------------------
2. 2016 Pricing--The Reserve Banks expect the FedACH service to recover 99.0 percent of total expenses and targeted ROE in 2016. FedACH commercial origination and receipt volume is projected to grow 4.5 percent contributing to an increase of $4.4 million in total revenue from the 2015 estimate. Total expenses are budgeted to increase $7.2 million from 2015 budgeted expenses of $122.6 million, primarily because of costs associated with the development of a new FedACH technology platform.
The Reserve Banks will increase the minimum monthly fee for forward origination from $35 to $45 and the minimum monthly fee for receipt from $25 to $35.\43\
---------------------------------------------------------------------------
\43\ Any originating depository financial institution (ODFI) incurring less than $45 for the following fees will be charged the difference to reach the minimum: Forward value and nonvalue item origination fees, FedGlobal ACH origination surcharges, and FedACH SameDay forward origination surcharges.
Any receiving depository financial institution (RDFI) originating forward value and nonvalue items below the minimum level and incurring less than $35 in receipt fees will be charged the difference to reach the minimum based on origination. RDFIs not originating forward value and nonvalue items will incur the $35 minimum monthly fee for receipt.
---------------------------------------------------------------------------
The Reserve Banks will eliminate large- and small-file per-item origination fees and introduce a single base fee of $0.0032 for all origination files with a discount of $0.0005 for origination volume between 750,000 to 1,500,000
Page 70793
items per month and $0.0007 for origination volume greater than 1,500,000 items per month. The Reserve Banks will lower the top-tier volume origination discount level based on monthly receipt volume from 17,500,000 to 15,000,000 items per month, while maintaining the current discount amounts.\44\
---------------------------------------------------------------------------
\44\ Origination discounts apply only to those items received by FedACH receiving points and are available only to Premium Receivers (institutions receiving a certain portion of volume through FedACH).
---------------------------------------------------------------------------
The Reserve Banks will increase the forward item receipt fee from $0.0025 to $0.0032 per item, while keeping the return item receipt fee at $0.0075 per item. The Reserve Banks will change the volume-based receipt discount structure to encourage additional receipt volume. The changes will include a decrease in the first volume-based discount by 250,000 items per month to 750,001 items a month, the introduction of a new volume-based discount tier for volume between 1,500,001 and 2,500,000 items per month, and an increase for all existing volume-
based receipt discounts by $0.0007 as seen in table 11.
GRAPHIC TIFF OMITTED TN16NO15.213
The Reserve Banks will implement a $20 monthly billing discount for any customer that pays the origination minimum fee, subscribes to a FedLine Web Plus or higher package, and subscribes to either FedACH RDFI Alert, FedACH Risk Origination Monitoring, or FedPayments Reporter.
The Reserve Banks estimate that the price changes will result in a 6.5 percent average price increase for FedACH customers. In addition to the above changes, the Reserve Banks plan to reassess the FedGlobal ACH fee schedule during 2016.
The primary risks to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for the FedACH service are cost overruns associated with unanticipated problems related to efforts to modernize the FedACH processing platform and higher-than-expected support and overhead costs. Other risks include lower-than-expected volume and associated revenue due to unanticipated mergers and acquisitions and loss of market share due to direct exchanges and a shift of volume to the private-sector operator.
-
Fedwire Funds and National Settlement Services--Table 12 shows the 2014 actual, 2015 estimate, and 2016 budgeted cost-recovery performance for the Fedwire Funds and National Settlement Services.
Table 12--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
Dollars in millions
----------------------------------------------------------------------------------------------------------------
Year Revenue Total expense Net income Targeted ROE Recovery rate
----------------------------------------------------------------- (ROE) 1-2 ---------------- after targeted
---------------- ROE 1/(2 +
4)
1 2 3 4 ---------------
5
----------------------------------------------------------------------------------------------------------------
2014 (actual)................... 110.1 105.2 4.8 1.4 103.2%
2015 (estimate)................. 115.1 112.7 2.4 1.6 100.7
2016 (budget)................... 121.4 120.1 1.3 1.3 100.0
----------------------------------------------------------------------------------------------------------------
1. 2015 Estimate--The Reserve Banks estimate that the Fedwire Funds and National Settlement Services will recover 100.7 percent of total expenses and targeted ROE, equal to the final budgeted recovery rate. Through August, Fedwire Funds Service online volume was 6.9 percent higher than for the same period last year. For full-year 2015, the Reserve Banks estimate Fedwire Funds Service online volume to increase 4.0 percent from 2014 levels, compared with the 3.2 percent volume decrease that had been budgeted. The Reserve Banks do not expect the strong volume growth in late 2014 and early 2015 to continue at that level through year-end. Through August, National Settlement Service settlement file volume was 7.1 percent lower than for the same period last year, and settlement entry volume was 19.3 percent lower. For the full year, the Reserve Banks estimate that settlement file volume will decrease 5.9 percent (compared with a 1 percent budgeted decrease) and settlement entry volume
Page 70794
will decrease 15.6 percent from 2014 levels (compared with a budgeted 7.2 percent decrease).
2. 2016 Pricing--The Reserve Banks expect the Fedwire Funds Service to recover 100.0 percent of total expenses and targeted ROE. Revenue is projected to be $121.4 million, an increase of 5.5 percent from the 2015 estimate. The Reserve Banks project total expenses to be $7.4 million higher than the 2015 estimate. The Reserve Banks expect volume to grow 1.5 percent in 2016.
The Reserve Banks will adjust the incentive pricing fees for the Fedwire Funds Service by increasing the Tier 1 per item pre-incentive fee (the fee before volume discounts are applied) from $0.73 to $0.79 and increasing the Tier 3 per item pre-incentive fee from $0.150 to $0.155. The Reserve Banks will keep the Tier 2 per-item pre-incentive fee unchanged.\45\
---------------------------------------------------------------------------
\45\ The per-item pre-incentive fee is the fee that the Reserve Banks charge for transfers that do not qualify for incentive discounts. The Tier 1 per-item pre-incentive fee applies to the first 14,000 transfers, the Tier 2 per-item pre-incentive fee applies to the next 76,000 transfers, and the Tier 3 per-item pre-
incentive fee applies to any additional transfers. The Reserve Banks apply an 80 percent incentive discount to transfers over 60 percent of a customer's its historic benchmark volume.
---------------------------------------------------------------------------
The Reserve Banks will increase the surcharge for offline transactions from $50 to $55. In addition, the Reserve Banks will increase the monthly participation fee from $90 to $95.
The Reserve Banks estimate that the price changes will result in a 5.8 percent average price increase for Fedwire Funds customers.
The Reserve Banks will not change National Settlement Service fees for 2016. The Reserve Banks' Fedwire Funds and National Settlement Services fees are consistent with their multiyear strategy to minimize pricing volatility while undertaking ongoing technology upgrades and projects to further strengthen operational resiliency. The Reserve Banks recently completed a significant milestone in the Fedwire Funds portion of its modernization initiative by migrating its back-end settlement system from a mainframe to a distributed platform, although key work to complete the initiative remains in progress.
The primary risk to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for these services is cost overruns from unanticipated problems with completing the final stages of complex technology programs.
-
Fedwire Securities Service--Table 13 shows the 2014 actual, 2015 estimate, and 2016 budgeted cost recovery performance for the Fedwire Securities Service.\46\
---------------------------------------------------------------------------
\46\ The Reserve Banks provide transfer services for securities issued by the U.S. Treasury, federal government agencies, government-sponsored enterprises, and certain international institutions. The priced component of this service, reflected in this memorandum, consists of revenues, expenses, and volumes associated with the transfer of all non-Treasury securities. For Treasury securities, the U.S. Treasury assesses fees for the securities transfer component of the service. The Reserve Banks assess a fee for the funds settlement component of a Treasury securities transfer; this component is not treated as a priced service.
Table 13--Fedwire Securities Service Pro Forma Cost and Revenue Performance
Dollars in millions
----------------------------------------------------------------------------------------------------------------
Year Revenue Total expense Net income Targeted ROE Recovery rate
----------------------------------------------------------------- (ROE) 1-2 ---------------- after targeted
---------------- ROE 1/(2 +
4)
1 2 3 4 ---------------
5
----------------------------------------------------------------------------------------------------------------
2014 (actual)................... 24.0 22.7 1.2 0.3 104.1%
2015 (estimate)................. 27.3 25.5 1.8 0.4 105.7
2016 (budget)................... 25.8 25.9 -0.1 0.2 98.7
----------------------------------------------------------------------------------------------------------------
1. 2015 Estimate--The Reserve Banks estimate that the Fedwire Securities Service will recover 105.7 percent of total expenses and targeted ROE, compared with a 2015 final budgeted recovery rate of 97.5 percent. The higher-than-expected cost recovery is primarily due to not spending contingency funds that were budgeted for the Fedwire Modernization Program. Increased revenues generated from higher-than-
expected volumes from online agency transfers and account maintenance also increased cost recovery.
Through August, Fedwire Securities Service online volume was 8.0 percent lower than during the same period last year. For full-year 2015, the Reserve Banks estimate Fedwire Securities Service online volume will decline 5.4 percent from 2014 levels, compared with a budgeted decline of 12.9 percent. The higher-than-expected online agency transfer volume resulted from the continued low interest-rate environment, which has supported mortgage underwriting activity and mortgage-backed securities issuance, and is generally associated with increased online agency transfer activity over the Fedwire Securities Service. Through August, account maintenance volume was 9.1 percent lower than during the same period last year. For the full year, the Reserve Banks estimate that account maintenance volume will decline 8.4 percent over 2014 levels, compared with a budgeted decline of 14.1 percent. The higher account maintenance volume is the result of conservative estimates for customer account closures that have not materialized.
2. 2016 Pricing--The Reserve Banks expect the Fedwire Securities Service to recover 98.7 percent of total expenses and targeted ROE in 2016. The Reserve Banks project that 2016 revenue will decrease by $1.5 million and expenses will increase by $0.4 million, compared with 2015 estimates.
The Reserve Banks project that online transfer activity will decline 7.7 percent in 2016, the number of accounts maintained will decrease 8.5 percent, and the number of agency securities maintained will decrease 3.3 percent.\47\ The projected decline in account maintenance activity reflects customer closures of empty accounts to avoid unnecessary expenses and increased competition in collateral management services.\48\ The Reserve Banks project a decrease in online transfers as gradually increasing interest rates lead to less
Page 70795
mortgage refinancing, and, in turn, reduce issuances of mortgage-backed securities. The reduction in agency debt issuance reflects a reduction in government-sponsored enterprise portfolios, as required by the U.S. Treasury and the Federal Housing Finance Agency, leading to a reduced funding need for new debt issuance.\49\ New settlement logic introduced by the Fixed Income Clearing Corporation in late 2015 is also expected to reduce the number of agency debt transfers over the Fedwire Securities Service.\50\
---------------------------------------------------------------------------
\47\ The online transfer fee, monthly account maintenance fee, and monthly issue maintenance fee accounted for approximately 92 percent of total Fedwire Securities Service revenue through June 2015.
\48\ Specifically, collateral management services refers to the Fedwire Securities Joint Custody Service, which facilitates the collateralization of deposits made by a government entity, through the pledging of book-entry securities by its depository institution. Approximately 72 percent of Fedwire Securities priced accounts are collateral accounts related to the Joint Custody Service.
\49\ Government sponsored enterprises are reducing their retained portfolio by 15 percent annually through 2018, as mandated by the Senior Preferred Stock Purchase Agreements, until each portfolio reaches a target level of $250 billion. Further information on these agreements can be found at: http://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-Stock-Purchase-Agreements.aspx.
\50\ Information on the new settlement logic can be found at http://www.dtcc.com/~/media/Files/pdf/2015/6/22/GOV045-15.pdf.
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Expenses are budgeted to remain approximately the same as 2015 estimates, reflecting higher expected operating costs offset by increased reimbursements from Treasury for fiscal agency services.\51\ Higher operating costs in 2016 reflect the full-year impact of the completion of a multiyear technology modernization initiative and the advancement of new initiatives to improve resiliency and operational functionality.
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\51\ Treasury reimbursement is calculated by multiplying costs by the ratio of Treasury to agency transfers. In 2015, Treasury projects its transfer volume will increase 7.0 percent, while the Reserve Banks expect agency transfers to decrease. Therefore, the higher projected ratio of Treasury to agency transfers will result in Treasury reimbursing a higher portion of total costs.
---------------------------------------------------------------------------
The Reserve Banks will not change priced Fedwire Securities Service fees for 2016.
The primary risk to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for these services is cost overruns and schedule delays from unanticipated problems with managing complex technology upgrades.
-
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: FedMailsupreg, FedLine Web, FedLine Advantage, FedLine Commandsupreg, and FedLine Direct.\52\ The Reserve Banks package these channels into nine FedLine packages, described below, that are supplemented by a number of premium (or agrave la carte) access and accounting information options. In addition, the Reserve Banks offer FedCompletesupreg packages, which are bundled offerings of a FedLine Advantage connection and a fixed number of FedACH, Fedwire Funds, and Check 21-enabled services.
---------------------------------------------------------------------------
\52\ FedMail, FedLine Web, FedLine Advantage, FedLine Command, and FedLine Direct are registered trademarks of the Federal Reserve Banks.
---------------------------------------------------------------------------
Six attended access packages offer access to critical payment and information services via a web-based interface. The FedLine Exchange package provides access to basic information services via email, while two FedLine Web packages offer an email option plus online attended access to a range of services, including cash services, FedACH information services, and check services. Three FedLine Advantage packages expand upon the FedLine Web packages and offer attended access to critical transactional services: FedACH, Fedwire Funds, and Fedwire Securities.
Three unattended access packages are computer-to-computer, IP-based interfaces designed for medium- to high-volume customers. The FedLine Command package offers an unattended connection to FedACH, as well as most accounting information services. The two remaining options are FedLine Direct packages, which allow for unattended connections at one of two connection speeds to FedACH, Fedwire Funds, and Fedwire Securities transactional and information services and to most accounting information services.\53\
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\53\ None of the FedLine packages offer an unattended connection to check services. The Reserve Banks offer an unattended check product, Check 21 Large File Delivery, outside of the FedLine suite that allows a depository institution to upload and download check image cash letters automatically via a direct network connection to the Reserve Banks.
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For the 2016 FedLine fees, the Reserve Banks will make a minor adjustment to existing fees--a $5-per-month increase for the FedLine Exchange subscriber pack--keeping the remaining existing FedLine fees unchanged.\54\ As in previous years, the Reserve Banks will introduce new fees on outdated legacy services in 2016. In particular, the Reserve Banks will implement a $5,000-per-month surcharge for 256K/T1 legacy routers to encourage customers to migrate to more efficient access solutions.\55\ The Reserve Banks will also introduce a new custom implementation fee in 2016 for institutions that request tailored FedLine Direct or WAN router setups. The fee, which will vary from $2,500 to $5,000 based on the complexity of the setup, is intended to help the Reserve Banks recover costs that result from nonstandard installations.
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\54\ FedLine packages do not include user subscriptions for priced services. Depository institutions that wish to access priced services must purchase user subscriptions in packs of five (5-
packs).
\55\ The $5,000 per month surcharge will be effective July 1, 2016. The price will increase to $10,000 per month on September 1, 2016 and $20,000 per month on November 1, 2016.
---------------------------------------------------------------------------
In addition, the Reserve Banks will make two structural changes to existing FedLine packages. First, the Reserve Banks will include two Virtual Private Network (VPN) devices in the FedLine Direct Premier package (rather than one) to help ensure consistency across existing Premier level FedLine packages. Second, the Reserve Banks will modify the availability of the FedPayments Manager Import/Export (FPM) tool within the FedLine Advantage Plus and Premier packages based on Fedwire volume thresholds. In particular, depository institutions with more than 250 Fedwire transactions per month, or more than one routing number, will only have access to the FPM tool via FedLine Advantage Premier. Affected customers will experience a fee increase ranging from $15 to $75 per month to upgrade to FedLine Advantage Premier.\56\ Customers that wish to maintain their FedLine Advantage Plus package will be able to do so by removing the FPM tool from their subscription.
---------------------------------------------------------------------------
\56\ The $75 fee increase is the difference in pricing between the corresponding Plus and Premier packages. Affected customers that currently subscribe to the $60-per-month a la carte option for a secondary VPN device will experience only a $15 fee increase because a secondary VPN device is included in Premier packages. Affected customers include FedComplete Plus subscribers with more than 250 Fedwire transactions per month, or more than one routing number, that use the FPM tool because FedComplete Plus packages include a subscription to FedLine Advantage Plus.
---------------------------------------------------------------------------
The Reserve Banks estimate that the price changes will result in a 1.5 percent average price increase for FedLine customers.
-
-
Analysis of Competitive Effect
All operational and legal changes considered by the Board that have a substantial effect on payment system participants are subject to the competitive impact analysis described in the March 1990 policy ``The Federal Reserve in the Payments System.'' \57\ Under this policy, the Board assesses whether proposed changes would have a direct and material adverse effect on the ability of other service providers to compete effectively with the Federal Reserve in providing similar services because of differing legal powers or
Page 70796
constraints or because of a dominant market position deriving from such legal differences. If any proposed changes create such an effect, the Board must further evaluate the changes to assess whether the benefits associated with the changes--such as contributions to payment system efficiency, payment system integrity, or other Board objectives--can be achieved while minimizing the adverse effect on competition.
---------------------------------------------------------------------------
\57\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------
The 2016 fees, fee structures, and changes in service will not have a direct and material adverse effect on the ability of other service providers to compete effectively with the Reserve Banks in providing similar services.\58\ The changes should permit the Reserve Banks to earn a ROE that is comparable to overall market returns and provide for full cost recovery over the long run.
---------------------------------------------------------------------------
\58\ Certain correspondent banks believe that the FedForward Fine Sort ICL product, which the Reserve Banks will eliminate in January 2017, enables them to compete more effectively with the Reserve Banks in the collection of checks destined to paying banks with which the correspondent banks do not have electronic presentment agreements. Paying banks, however, may not have an incentive to accept electronic presentment unless the correspondent bank makes a decision to present checks directly and provides the paying bank the choice of receiving presentments in paper or electronic form (as the Reserve Banks do). We do not believe that the elimination of the product will have a direct and material adverse effect on the ability of such service providers to compete effectively with the Reserve Banks in providing similar services due to legal differences.
\59\ Any ODFI incurring less than $45 in forward value and nonvalue item origination fees will be charged a variable amount to reach the minimum.
\60\ Any RDFI not originating forward value and nonvalue items and incurring less than $35 in receipt fees will be charged a variable amount to reach the minimum.
\61\ The fee includes the item and addenda fees in addition to the conversion fee.
\62\ The fee includes the item and addenda fees in addition to the conversion fee. Reserve Banks also assess a $30 fee for every government paper return/NOC they process.
\63\ Origination discounts based on monthly volume apply only to those items received by FedACH receiving points and are available only to Premium Receivers (institutions receiving volume above a specified threshold through FedACH).
\64\ RDFI originating and receiving items on the same RTN.
\65\ This per-item discount is a reduction to the standard receipt fees listed in this fee schedule.
---------------------------------------------------------------------------
-
2016 Fee Schedules
FedACH Service 2016 Fee Schedule
Effective January 1, 2016. Bold indicates changes from 2015 prices.
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
FedACH minimum monthly fee
Originating Depository Financial $45.00.
Institution (ODFI) \59\.
Receiving Depository Financial 35.00.
Institution (RDFI) \60\.
Origination (per item or record)
Forward or return items......... 0.0032.
Addenda record.................. 0.0015.
FedLine Websupreg-originated 0.35.
returns and notification of
change (NOC) \61\.
Facsimile exception returns/NOC 45.00.
\62\.
Automated NOC................... 0.20.
Volume-based discounts (based on
monthly billed origination
volume) per item when
origination volume is:
750,000 to 1,500,000 items 0.0005 discount.
per month.
More than 1,500,000 items 0.0007 discount.
per month.
Volume-based discounts (based on
monthly billed receipt volume)
\63\ per item when receipt
volume is:.
10,000,001 to 15,000,000 items 0.0002 discount.
per month.
More than 15,000,000 items per 0.0003 discount.
month.
Receipt (per item or record)
Forward Item.................... 0.0032.
Return Item..................... 0.0075.
Addenda record.................. 0.0015.
On-Us Receipt Credit \64\....... 0.0032 discount.
Volume-based discounts (forward
items excluding FedACH SameDay
service items)
Non-Premium Receivers--RDFIs
receiving less than 90
percent of total network
volume through FedACH per
item when volume is:
750,001 to 12,500,000 0.0014 discount.
items per month \65\.
more than 12,500,000 0.0016 discount.
items per month \66\.
Premium Receivers, Level
One--RDFIs receiving at
least 90 percent of FedACH-
originated volume through
FedACH per item when volume
is:
750,001 to 1,500,000 0.0014 discount.
items per month \65\.
1,500,001 to 2,500,000 0.0014 discount.
items per month \66\.
72,500,001 to 12,500,000 0.0015 discount.
items per month \66\.
more than 12,500,000 0.0017 discount.
items per month \66\.
Premium Receivers, level
two--RDFIs receiving at
least 90 percent of ACH
volume originated through
FedACH or EPN per item when
volume is:
750,001 to 1,500,000 0.0014 discount.
items per month \65\.
1,500,001 to 2,500,000 0.0014 discount.
items per month \66\.
2,500,001 to 12,500,000 0.0016 discount.
items per month \66\.
more than 12,500,000 0.0018 discount.
items per month \66\.
FedACH Bundled Service Discount
Monthly Bundled Service Package 20.00 discount.
Discount \67\.
FedACH SameDay Service
Origination
Forward item \68\........... 0.0035 surcharge.
Addenda record \68\......... 0.0015 surcharge.
Return item \69\............ 0.0025 discount.
Return addenda record \69\.. 0.0015 discount.
Receipt
Forward item \65\........... 0.0025 discount.
Return item \65\............ 0.0075 discount.
Addenda record (forward/ 0.0015 discount.
return) \65\.
Monthly FedACH Risksupreg
Management fees \70\
Risk Origination Monitoring
Service/RDFI Alert Service
package pricing
For up to 5 criteria sets... 35.00.
For 6 through 11 criteria 70.00.
sets.
For 12 through 23 criteria 125.00.
sets.
Page 70797
For 24 through 47 criteria 150.00.
sets.
For 48 through 95 criteria 250.00.
sets.
For 96 through 191 criteria 425.00.
sets.
For 192 through 383 criteria 675.00.
sets.
For 384 through 584 criteria 850.00.
sets.
For more than 585 criteria 1,100.00.
sets.
Risk origination monitoring
batch (based on total monthly
volume)
For 1 through 100,000 0.007.
batches (per batch).
For more than 100,000 0.0035.
batches (per batch).
Monthly FedPayments Reporter Service
FedPayments Reporter Service
package pricing includes
Standard reports \71\.......
ACH volume summary by SEC
code report--customer \72\
Daily return ratio report
Monthly return ratio report
Receiver setup report
Report delivery via FedLine
file access solution
(monthly fee)
For up to 50 reports.... 35.00.
For 51 through 150 55.00.
reports.
For 151 through 500 100.00.
reports.
For 501 through 1,000 180.00.
reports.
For 1,001 through 1,500 260.00.
reports.
For 1,501 through 2,500 420.00.
reports.
For 2,501 through 3,500 580.00.
reports.
For 3,501 through 4,500 740.00.
reports.
For 4,501 through 5,500 900.00.
reports.
For 5,501 through 7,000 1,100.00.
reports.
For 7,001 through 8,500 1,300.00.
reports.
For more than 8,501 1,500.00.
reports.
Premier reports (per report
generated) \73\
ACH volume summary by SEC
code report--depository
financial institution
For 1 through 5 reports. 10.00.
For 6 through 10 reports 6.00.
For more than 11 reports 1.00.
On Demand Surcharge..... 1.00
ACH volume summary by SEC
code report--customer
On Demand Surcharge..... 1.00.
Monthly ACH routing number
activity report
For 1 through 5 reports. 10.00.
For 6 through 10 reports 6.00.
For more than 11 reports 1.00.
On Demand Surcharge..... 1.00.
On-us inclusion
Participation (monthly fee 10.00.
per RTN).
Per-item.................... 0.0030.
Per-addenda................. 0.0015.
Report delivery via encrypted 0.20.
email (per email).
Other fees
Monthly fee (per routing number)
Account servicing fee \74\.. 45.00.
FedACH settlement \75\...... 55.00.
FedACH Information extract 100.00.
file.
IAT Output File Sort........ 75.00.
Automated NOC participation 5.00.
fee \76\.
Non-electronic input/output fee
\77\
CD/DVD (CD or DVD).......... 50.00.
Paper (file or report)...... 50.00.
FedGlobal ACH Payments \78\
Canada service fee
Item originated to Canada 0.62.
\79\.
Return received from Canada 0.99.
\80\.
Item trace at receiving 5.50.
gateway.
Item trace not at receiving 7.00.
gateway.
Mexico service fee
Item originated to Mexico 0.67.
\79\.
Return received from Mexico 0.91.
\80\.
Account-to-receiver (A2R) 3.45.
item originated to Mexico
\79\.
Foreign currency to foreign 0.67.
currency (F3X) item
originated to Mexico \79\.
Item trace.................. 13.50.
Panama service fee
Item originated to Panama 0.72.
\79\.
Return received from Panama 1.00.
\80\.
NOC......................... 0.72.
Item trace.................. 7.00.
Latin America service fee
A2R item originated to Latin 4.40.
America \79\.
Return received from Latin 0.72.
America \80\.
Item trace.................. 5.00.
Europe service fee
Item originated to Europe 1.25.
\79\.
Page 70798
F3X item originated to 1.25.
Europe \79\.
Return received from Europe 1.35.
\80\.
Item trace.................. 7.00.
------------------------------------------------------------------------
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\66\ Receipt volumes at these levels qualify for the waterfall discount which includes all FedACH receipt items.
\67\ This monthly billing discount is available for any customer that (1) pays the FedACH minimum monthly fee; (2) purchases a FedLine Web Plus or higher package; and (3) subscribes to either FedACH RDFI Alert, FedACH Risk Origination Monitoring, or FedPayments Reporter.
\68\ This per-item surcharge is in addition to the standard origination fees listed in the origination and receipt fee schedule.
\69\ This per-item discount is a reduction to the standard origination fees listed in the origination and receipt fee schedule.
\70\ Criteria may be set for both the origination monitoring service and the RDFI alert service. Subscribers with no criteria set up will be assessed the $45 monthly package fee.
\71\ Standard reports include Customer Transaction Activity, Death Notification, International (IAT), Notification of Change, Payment Data Information File, Remittance Advice Detail, Remittance Advice Summary, Return Item, Return Ratio, Social Security Beneficiary, and Originator Setup Reports.
\72\ ACH volume summary by SEC code reports generated on demand are subject to a $1.00 per report surcharge.
\73\ Premier reports generated on demand are subject to the package/tiered fees plus a surcharge.
\74\ The account servicing fee applies to routing numbers that have received or originated FedACH transactions. Institutions that receive only U.S. government transactions through the Reserve Banks or that elect to use a private sector operator exclusively are not assessed this fee.
\75\ The FedACH settlement fee is applied to any routing number with activity during a month, including institutions that elect to use a private sector operator exclusively but also have items routed to or from customers that access the ACH network through FedACH. This fee does not apply to routing numbers that use the Reserve Banks for only U.S. government transactions.
\76\ The notification of change fee will be assessed only when automated NOCs are generated.
\77\ Limited services are offered in contingency situations.
\78\ The international fees and surcharges vary from country to country as these are negotiated with each international gateway operator.
\79\ This per-item surcharge is in addition to the standard domestic origination and input file processing fees.
\80\ This per-item surcharge is in addition to the standard domestic receipt fees.
Fedwire Funds and National Settlement Services 2016 Fee Schedule
Effective January 1, 2016. Bold indicates changes from 2015 prices.
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Fedwire Funds Service
------------------------------------------------------------------------
Monthly Participation Fee............................... $95.00
Basic volume-based pre-incentive transfer fee
(originations and receipts)--per transfer for:
the first 14,000 transfers per month................ 0.79
additional transfers up to 90,000 per month......... 0.24
every transfer over 90,000 per month................ 0.155
Volume-based transfer fee with the incentive discount
(originations and receipts)--per eligible transfer for:
\81\
the first 14,000 transfers per month................ 0.158
additional transfers up to 90,000 per month......... 0.048
every transfer over 90,000 per month................ 0.031
Surcharge for Off-line Transfers (Originations and 55.00
Receipts)..............................................
Surcharge for End-of-Day Transfer Originations \82\..... 0.26
Monthly FedPayments Manager import/export fee \83\...... 50.00
Surcharge for high-value payments:
>$10 million........................................ 0.14
>$100 million....................................... 0.36
Surcharge for Payment Notification:
Origination Surcharge \84\.......................... 0.20
Receipt Volume \85\................................. N/A
------------------------------------------------------------------------
National Settlement Service
------------------------------------------------------------------------
Basic
Settlement Entry Fee................................ 1.50
Settlement File Fee................................. 30.00
Surcharge for Off-line File Origination \86\ 45.00
Minimum Monthly Fee (account maintenance) \87\ 60.00
Special Settlement Arrangements (fee per day) \88\ 150.00
------------------------------------------------------------------------
---------------------------------------------------------------------------
\81\ The incentive discounts apply to the volume that exceeds 60 percent of a customer's historic benchmark volume. Historic benchmark volume is based on a customer's average daily activity over the previous five calendar years. If a customer has fewer than five full calendar years of previous activity, its historic benchmark volume is based on its daily activity for as many full calendar years of data as are available. If a customer has less than one year of past activity, then the customer qualifies automatically for incentive discounts for the year. The applicable incentive discounts are as follows: $0.632 for transfers up to 14,000; $0.192 for transfers 14,001 to 90,000; and $0.124 for transfers over 90,000.
\82\ This surcharge applies to originators of transfers that are processed by the Reserve Banks after 5:00 p.m. ET.
\83\ This fee is charged to any Fedwire Funds participant that originates a transfer message via the FedPayments Manager (FPM) Funds tool and has the import/export processing option setting active at any point during the month.
\84\ Payment Notification and End-of-Day Origination surcharges apply to each Fedwire funds transfer message.
\85\ Provided on billing statement for informational purposes only.
\86\ Off-line files will be accepted only on an exception basis when a settlement agent's primary and backup means of transmitting settlement files are both unavailable. For information, contact the NSS Central Service Support Staff at (800) 758-9403.
\87\ This minimum monthly charge is only assessed if total settlement charges during a calendar month are less than $60.
\88\ Special settlement arrangements use Fedwire Funds transfers to effect settlement. Participants in arrangements and settlement agents are also charged the applicable Fedwire Funds transfer fee for each transfer into and out of the settlement account.
Page 70799
Fedwire Securities Service 2016 Fee Schedule (Non-Treasury Securities)
Effective January 1, 2016. Bold indicates changes from 2015 prices.
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Basic Transfer Fee
Transfer or reversal originated or received......... 0.65
Surcharge
Offline origination & receipt surcharge............. 66.00
Monthly Maintenance Fees
Account maintenance (per account)................... 48.00
Issues maintained (per issue/per account)........... 0.65
Claim Adjustment Fee.................................... 0.75
GNMA Serial Note CUSIP Fee.............................. 9.00
Joint Custody Origination Surcharge \89\................ 44.00
Delivery of Reports--Hard Copy Reports to On-Line 50.00
Customers..............................................
------------------------------------------------------------------------
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\89\ Fedwire Securities Service charges customers the Joint Custody Origination Surcharge for both Agency and Treasury securities.
\90\ FedComplete packages are all-electronic service options that bundle payment services with an access solution for one monthly fee.
\91\ Per-item surcharges are in addition to the standard fees listed in the applicable priced services fee schedules.
\92\ New FedComplete package customers with a new FedLine Advantage connection are eligible for a one-time $1,500 credit applied to their Federal Reserve service charges. Customers receiving credit must continue using the FedComplete package for a minimum of six months or forfeit the $1,500 credit.
\93\ VPN hardware for FedLine Advantage and FedLine Command is billed directly by the vendor. A list of 2016 vendor fees can be found at https://www.frbservices.org/files/servicefees/pdf/access/2016_vendor_fees.pdf.
\94\ These add-on services can be purchased only with a FedLine Customer Access Service option.
\95\ There are no priced subscribers contained in the FedLine Exchange or FedLine packages.
\96\ Additional FedLine Command Certificates available for FedLine Command and Direct packages only.
\97\ Additional FedLine Direct Certificates available for FedLine Direct packages only.
\98\ Additional VPNs are available for FedLine Advantage, FedLine Command, and FedLine Direct packages only.
\99\ 56K option available to installed base only and is not available for new orders. Effective July 1, 2016, all remaining 56K connections will be disconnected. Network diversity supplemental charge of $2,000 a month may apply in addition to these fees.
\100\ The FedLine Custom Implementation Fee will vary from $2,500 to $5,000 based on the complexity of the setup.
\101\ FedLine Direct contingency solution is available only for FedLine Direct Plus & Premier packages.
\102\ Cash Management Service options are limited to Plus and Premier packages.
\103\ End of Day Reconcilement File option is available to FedLine Web Plus and FedLine Advantage Plus and Premier packages. Available for no extra fee in FedLine Command Plus and Direct packages.
\104\ Statement of Account Spreadsheet File option is available to FedLine Web Plus and FedLine Advantage Plus and Premier packages. Available for no extra fee in FedLine Command Plus and Direct packages.
\105\ Intra-day Download Search File option is available to the FedLine Web Plus package. Available for no extra fee in FedLine Advantage and higher packages.
\106\ ACT Report options are limited to FedLine Command Plus and FedLine Direct Plus and Premier packages.
FedLine 2016 Fee Schedule
Effective January 1, 2016. Bold indicates changes from 2015 prices.
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
FedComplete Packages (Monthly) \90\
------------------------------------------------------------------------
FedComplete 100 Plus................ 775.00.
Includes:
FedLine Advantage Plus
package
FedLine subscriber 5-pack
FedLine Exchange subscriber
5-pack
7,500 FedForward
transactions
70 FedReturn transactions
14,000 FedReceiptsupreg
transactions
35 Fedwire funds origination
transfers
35 Fedwire funds receipt
transfers
Fedwire participation fee
1,000 FedACH origination
items
FedACH minimum fee
7,500 FedACH receipt items
FedACH receipt minimum fee
10 FedACH web return/NOC
500 FedACH addenda
originated
1,000 FedACH addenda
received
FedACH account servicing
FedACH settlement
FedComplete 100 Premier............. 850.00.
Includes:
FedLine Advantage Premier
package
Volumes included in the
FedComplete 100 Plus
package
FedComplete 200 Plus................ 1,300.00.
Includes:
FedLine Advantage Plus
package
FedLine subscriber 5-pack
FedLine Exchange subscriber
5-pack
25,000 FedForward
transactions
225 FedReturn transactions
Page 70800
25,000 FedReceipt
transactions
100 Fedwire funds
origination transfers
100 Fedwire funds receipt
transfers
Fedwire participation fee
2,000 FedACH origination
items
FedACH minimum fee
25,000 FedACH receipt items
FedACH receipt minimum fee
20 FedACH web return/NOC
750 FedACH addenda
originated
1,500 FedACH addenda
received
FedACH account servicing
FedACH settlement
FedComplete 200 Premier............. 1,375.00.
Includes:
FedLine Advantage Premier
package
Volumes included in the
FedComplete 200 Plus
package
FedComplete Excess Volume Surcharge
\91\
FedForward...................... 0.01/item.
FedReturn....................... 0.7500/item.
Fedwire Funds Origination....... 0.7000/item.
FedACH Origination.............. 0.0025/item.
FedComplete package credit incentive (1,500.00).
\92\.
FedComplete credit adjustment....... various.
FedComplete debit adjustment........ various.
------------------------------------------------------------------------
FedLine Customer Access Solutions (Monthly) \93\
------------------------------------------------------------------------
FedLine Exchange.................... 40.00.
Includes:
FedMail access channel
FedACH Advice and Settlement
Information
Fedwire Funds Offline
Advices
Check 21 Services
Check 21 Duplicate
Notification Service
Check Adjustments
Accounting Statements
Daylight Overdraft Reports
Billing Statements
FedLine Web 110.00.
Includes:
FedLine Web access channel
Services included in the
FedLine Exchange package
FedACH Information Services
& Derived Returns/NOCs
FedACH Risk Services
(includes RDFI Alert and
Returns Reporting)
FedACH information services
(includes RDFI file Alert
Service)
FedCash Services
Service Charge Information
FedLine Web Plus.................... 140.00.
Includes:
FedLine Web traditional
package
FedACH Risk Origination
Monitoring Service
FedACH FedPayments Reporter
Service
Check Large Dollar Return
Check FedImage Services
Account Management
Information
Various accounting and
inquiry services (ABMS
inquiry, IAS/PSR inquiry,
IAS detailed inquiries,
notifications and advices,
end-of-day accounting file
(PDF))
FedLine Advantage................... 380.00.
Includes:
FedLine Advantage access
channel
Services included in the
FedLine Web traditional
package
FedACH transactions
Fedwire Funds transactions
Fedwire Securities
transactions
National Settlement Service
transactions
Check Large Dollar Return
Check FedImage Services
Account Management
Information with Intra-Day
Download Search File
Various accounting and
inquiry services (ABMS
inquiry, IAS/PSR inquiry,
IAS detailed inquiries,
notifications and advices,
end-of-day accounting file
(PDF))
FedLine Advantage Plus.............. 425.00.
Includes:
FedLine Advantage
traditional package
FedACH Risk Origination
Monitoring Service
FedACH FedPayments Reporter
Service
Fedwire Funds FedPayments
Manager Import/Export (less
than 250 Fedwire
transactions and one
routing number per month)
FedTransaction
Analyzersupreg (less than
250 Fedwire transactions
and one routing number per
month)
FedLine Advantage Premier 500.00.
Page 70801
Includes:
FedLine Advantage Plus
package
Secondary VPN device
Fedwire Funds FedPayments
Manager Import/Export (more
than 250 Fedwire
transactions or more than
one routing number in a
given month)
FedTransaction Analyzer
(more than 250 Fedwire
transactions or more than
one routing number per
month)
FedLine Command Plus 1,000.00.
Includes:
FedLine Command access
channel
Services included in the
FedLine Advantage Plus
package
Fedwire Statement Services
Fedwire Funds FedPayments
Manager Import/Export (more
than 250 Fedwire
transactions or more than
one routing number in a
given month)
FedTransaction Analyzer
(more than 250 Fedwire
transactions or more than
one routing number per
month)
Intra-Day File (I-Day CI
File)
Statement of Account
Spreadsheet File (SASF)
Financial Institution
Reconcilement Data File
(FIRD)
Billing Data Format File
(BDFF)
FedLine Direct Plus 3,600.00.
Includes:
FedLine Direct access
channel
256K Dedicated WAN
Connection
Services included in the
FedLine Command Plus
package
Treasury Check Information
System (TCIS)
FedLine Direct Premier 6,500.00
Includes:
FedLine Direct Plus package
T1 dedicated WAN connection
Secondary VPN device
Cash Management Services
Plus Own Report (No
Respondent/Subaccount
activity)
A la carte Options (Monthly) \94\
------------------------------------------------------------------------
Electronic Access
FedLine Exchange Subscriber 5- 15.00.
pack 95
FedLine Subscriber 5-pack \95\ 80.00.
Additional FedLine Command 100.00.
Certificate \96\
Additional FedLine Direct 100.00.
Certificate \97\
Additional VPNs--Maintenance Fee 60.00.
\98\
Additional dedicated connections 56K
\99\
effective January 1, 14,000.00.
2016.
effective April 1, 2016. 28,000.00.
256K........................ 2,500.00.
T1.......................... 3,200.00.
FedLine International Setup (one- 5,000.00.
time fee)
FedLine Custom Implementation various
Fee \100\
FedLine Direct Contingency 1,000.00.
Solution \101\
Check 21 Large File Delivery various.
FedMail Fax 70.00.
VPN Device Modification 200.00.
VPN Device Missed Activation 175.00.
Appointment
VPN Device Expedited Hardware 100.00.
Surcharge
VPN Device Replacement or Move 300.00.
Electronic Access Training
Learning Center complimentary.
Certificate Retrieval Download complimentary.
Tutorial
Accounting Information Services
Cash Management System (CMS)
Plus--Own report--up to six
files with: \102\
no respondent/sub-account 60.00.
activity
less than 10 respondent and/ 125.00.
or sub-accounts
10-50 respondent and/or sub- 250.00.
accounts
51-100 respondents and/or 500.00.
sub-accounts
101-500 respondents and/or 750.00.
sub-accounts
>500 respondents and/or sub- 1,000.00.
accounts
End-of-Day Financial Institution 150.00.
Reconcilement Data File \103\.
Statement of Account Spreadsheet 150.00.
File \104\.
Intra-day Download Search File 150.00.
(with AMI) \105\.
ACTS Report \106\
60 sub-accounts............ 2,000.00.
Other
Software Certification.......... 0.00 to 8,000.00.
Vendor Pass-Through Fee......... various.
Electronic Access Credit various.
Adjustment.
Electronic Access Debit various.
Adjustment.
Legacy Connection Service Fee
(effective July 1, 2016).... 5,000.00.
(effective September 1, 10,000.00.
2016).
(effective November 1, 2016) 20,000.00.
------------------------------------------------------------------------
Page 70802
By order of the Board of Governors of the Federal Reserve System, November 2, 2015.
Robert deV. Frierson,
Secretary of the Board.
FR Doc. 2015-28932 Filed 11-13-15; 8:45 am
BILLING CODE 6210-01-P
