Federal Reserve Bank Services
| Published date | 01 February 2019 |
| Citation | 84 FR 1126 |
| Record Number | 2019-00624 |
| Section | Notices |
| Court | Federal Reserve System |
Federal Register, Volume 84 Issue 22 (Friday, February 1, 2019)
[Federal Register Volume 84, Number 22 (Friday, February 1, 2019)]
[Notices]
[Pages 1126-1147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-00624]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
[Docket No. OP-1636]
Federal Reserve Bank Services
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
has approved the private sector adjustment factor (PSAF) for 2019 of
$17.8 million and the 2019 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 2, 2019.
FOR FURTHER INFORMATION CONTACT: For questions regarding the fee
schedules: David C. Mills, Deputy Associate Director, (202) 530-6265;
Amanda Holcombe, Financial Institution Policy Analyst, (202) 912-4625;
Emily Massaro, Financial Institution Policy Analyst, (202) 452-2493,
Division of Reserve Bank Operations and Payment Systems. For questions
regarding the PSAF: Lawrence Mize, Deputy Associate Director, (202)
452-5232; Max Sinthorntham, Senior Financial Institution Policy
Analyst, (202) 452-2864, Division of Reserve Bank Operations and
Payment Systems. For users of Telecommunications Device for the Deaf
(TDD) only, please call (202) 263-4869. Copies of the 2019 fee
schedules for the check service are available from the Board, the
Federal Reserve Banks, or the Reserve Banks' financial services website
at www.frbservices.org.
I. Supplementary Information
Private Sector Adjustment Factor, Priced Services Cost Recovery, and
Overview of 2019 Price Changes
A. Overview--Each year, as required by the Monetary Control Act of
1980, the Reserve Banks set fees for priced services provided to
depository institutions. These fees are set to recover, over the long
run, all direct and indirect costs and imputed costs, including
financing costs, taxes, and certain other expenses, as well as the
return on equity (profit) that will have been earned if a private
business firm provided the services. The imputed costs and imputed
profit are collectively referred to as the private-sector adjustment
factor (PSAF). From 2008 through 2017, the Reserve Banks recovered
101.9 percent of their total expenses (including imputed costs) and
targeted after-tax profits or return on equity (ROE) for providing
priced services.\1\
---------------------------------------------------------------------------
\1\ The 10-year recovery rate is based on the pro forma income
statements for Federal Reserve priced services published in the
Board's Annual Report. Effective December 31, 2006, the Reserve
Banks implemented 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
2008 to 2017 results in cost recovery of 94.7 percent for the ten-
year period. This measure of long-run cost recovery is also
published in the Board's Annual Report.
---------------------------------------------------------------------------
Table 1 summarizes 2017 actual, 2018 estimated, and 2019 budgeted
cost-recovery rates for all priced services. Cost recovery is estimated
to be 101.0 percent in 2018 and budgeted to be 100.9 percent in 2019.
Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance a
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Recovery rate
Year Revenue Total expense Net income Targeted ROE after targeted
(ROE) ROE (%)
1 \b\ 2 \c\ 3 4 \d\ 5 \e\ \f\
[1-2] [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2017 (actual)................... 441.6 419.4 22.2 4.6 104.1
2018 (estimate)................. 441.7 432.0 9.7 5.2 101.0
2019 (budget)................... 440.2 430.8 9.4 5.4 100.9
----------------------------------------------------------------------------------------------------------------
\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). For 2018, the projected
revenue assumes implementation of the proposed fee changes.
\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 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 ASC 715. Future gains or losses, and their effect on cost recovery, cannot be
projected.
[[Page 1127]]
\f\ For 2019, credits or debits related to the accounting for pension plans under ASC 715 include service cost
only with the adoption of ASU 2017-07 Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost (Topic 715).
Table 2 provides an overview of cost-recovery budgets, estimates,
and performance for the 10-year period from 2008 to 2017, 2017 actual,
2018 budget, 2018 estimate, and 2019 budget by priced service.
Table 2--Priced Services Cost Recovery
[Percent]
----------------------------------------------------------------------------------------------------------------
2018 budget 2019 budget
Priced service 2008-2017 2017 actual \a\ 2018 estimate \b\
----------------------------------------------------------------------------------------------------------------
All services.................... 101.9 104.1 100.1 101.0 100.9
Check........................... 103.5 107.0 101.6 101.7 101.5
FedACH.......................... 98.5 99.8 96.1 98.0 101.8
Fedwire Funds and NSS........... 101.5 106.2 103.9 105.0 100.7
Fedwire Securities.............. 102.2 103.6 97.6 96.5 94.7
----------------------------------------------------------------------------------------------------------------
\a\ The 2018 budget figures reflect the final budgets as approved by the Board in December 2017.
\b\ The 2019 budget figures reflect preliminary budget information from the Reserve Banks. The Reserve Banks
will submit final budget data to the Board in November 2018, for Board consideration in December 2018.
1. 2018 Estimated Performance--The Reserve Banks estimate that they
will recover 101.0 percent of the costs of providing priced services in
2018, including total expense and targeted ROE, compared with a 2018
budgeted recovery rate of 100.1 percent, as shown in table 2. Overall,
the Reserve Banks estimate that they will fully recover actual and
imputed costs and earn net income of $9.7 million, compared with the
targeted ROE of $5.2 million. The Reserve Banks estimate that the check
service and the Fedwire[supreg] Funds and National Settlement Services
will achieve full cost recovery; however, the Reserve Banks continue to
estimate that the FedACH[supreg] Service and the Fedwire Securities
Service will not achieve full cost recovery. Consistent with recent
years, the FedACH Service will not achieve full cost recovery because
of investment costs associated with the multiyear technology initiative
to modernize its processing platform.\2\ This investment is expected to
enhance efficiency, the overall quality of operations, and the Reserve
Banks' ability to offer additional services to depository institutions.
The Reserve Banks estimate that the Fedwire Securities Service will not
achieve full cost recovery because of ongoing market structure changes
and investment costs associated with initiatives to promote operational
resiliency.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
2. 2019 Private-Sector Adjustment Factor--The 2019 PSAF for Reserve
Bank priced services is $17.8 million. This amount represents a
decrease of $1.1 million from the 2018 PSAF of $18.9 million. This
decrease is primarily the result of a decrease in the total cost of
debt and partially offset by an increase in Board of Governors
expenses.
3. 2019 Projected Performance--The Reserve Banks project a priced
services cost recovery rate of 100.9 percent in 2019, with a net income
of $9.4 million and targeted ROE of $5.4 million. The Reserve Banks
project that the price changes will result in a 2.5 percent average
price increase for customers. The Reserve Banks project that each of
the individual service lines, other than the Fedwire Securities
Service, will fully recover their costs. The Reserve Banks anticipate
that the FedACH technology modernization initiative will conclude in
2019, allowing for a projected return to cost recovery for the FedACH
Service. Although the Fedwire Securities Service is not budgeted to
fully cover its costs in 2019 because of volume declines driven by
market changes, the service is projected to recover costs over the long
run.\3\
---------------------------------------------------------------------------
\3\ Fedwire Securities Service's ten-year average recovery rate
in 2019 is 101.6 percent.
As the aggregate impact of market structural changes
materializes, the Reserve Banks will take into account subsequent
volume changes as well as future anticipated cost allocation
adjustments, in order to adjust the Fedwire Securities Service's
prices and to continue recovering costs over the long-run.
---------------------------------------------------------------------------
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 from new and ongoing
improvement 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. 2019 Pricing--The following summarizes the Reserve Banks'
changes in fee schedules for priced services in 2019:
Check
The Reserve Banks will reassign the tier placement of
1,116 forward and 240 return endpoints in the FedForward[supreg] and
FedReturn[supreg] products, respectively.\4\
---------------------------------------------------------------------------
\4\ The Reserve Banks evaluate and set tier assignments annually
based on changes in the volume of items received by endpoints.
---------------------------------------------------------------------------
The Reserve Banks will lower the average daily forward
receipt and return tier volume thresholds approximately 6.0 percent for
tiers 1, 2, 3, and 4 for FedForward[supreg] and FedReturn[supreg] image
cash letter and daily fee deposit options based on the 2019 tier
assignments to account for the anticipated continued decline in check
deposit volumes.
The Reserve Banks will increase per-item fees for the
FedForward[supreg] Premium Daily Fee A, B, and C deposit options by
$0.001 for Tier 3 and $0.003 for Tier 4. The Reserve Banks will also
increase the Premium Daily Fee C daily fixed fee by $200, from $3,500
to $3,700.
The Reserve Banks will increase cash letter fees by $0.50
for all deadlines on FedForward[supreg] Standard, Deferred, Dollar-
Culled, and Endpoint-Culled image cash letters and FedReturn[supreg]
Standard image cash letters.
The Reserve Banks will increase the per-item fee for the
FedReceipt[supreg] Premium Delivery 8:00 a.m. EST target by $0.006 and
per item fees for the Premium Delivery 10:00 a.m. target and Premium
Delivery 12:00 noon target by $0.002.\5\
---------------------------------------------------------------------------
\5\ The 8:00 a.m. delivery target is expressed in eastern time,
while the 10:00 a.m. and 12:00 noon targets are local time.
---------------------------------------------------------------------------
The Reserve Banks will increase FedReceipt[supreg]
Electronic Reject Repair fees by $0.05, increasing the Basic repair
[[Page 1128]]
from $0.15 per-item to $0.20 per-item and increasing the Premium repair
from $0.25 per-item to $0.30 per-item.
The Reserve Banks will increase all fees for the
FedImage[supreg] product and certain truncation fees 10.0 percent
(rounded to the nearest increment based upon the number of decimal
places of the current fee).
The Reserve Banks will introduce two new fees intended to
improve the quality of check deposit processing and reduce errors in
adjustment case submissions. The Reserve Banks will introduce a $0.50
fee for encoding error and duplicate-payment adjustment cases caused by
the depositary bank's incorrect encoding or duplicate deposit of an
item. The Reserve Banks will also introduce a $2.50 fee for automated
adjustment case types that require manual intervention by Reserve Bank
staff due to error on the part of the adjusting bank.
FedACH
The Reserve Banks will offer a new ACH Exception
Resolution Service[supreg] that will provide an automated means for
customers to resolve ACH exceptions. The fee structure will contain
fixed and variable elements, as outlined in the ACH fee schedule.
The Reserve Banks will keep prices at existing levels for
all existing priced FedACH products.
Fedwire Funds
The Reserve Banks will increase the offline send surcharge
and offline receive surcharge from $60.00 to $65.00.
National Settlement Service (NSS)
The Reserve Banks will keep prices at existing levels for
the priced NSS products.
Fedwire Securities
The Reserve Banks will increase the agency online transfer
fee from $0.77 to $0.98.
The Reserve Banks will increase the automated claims
adjustment process (ACAP) fee from $0.80 to $1.00.
FedLine[supreg] Access Solutions
The Reserve Banks will discontinue offering new FedMail
Fax subscriptions.
The Reserve Banks will discontinue offering the Accounting
Totals by Service (ACTS) report.
The Reserve Banks will discontinue charging [agrave] la
carte fees for additional FedLine Command server certificates. The
Reserve Banks will provide FedLine Command server certificates as part
of FedLine Command packages at no additional cost.
The Reserve Banks will offer upgraded FedLine
Direct[supreg] Plus and Premier packages, with monthly fees of $5,500
and $10,500 respectively, to reflect the incorporation of the Check 21
Large File Delivery service with the FedLine Direct solution. Existing
customers may continue to use the legacy FedLine Direct Plus and
Premier packages until they migrate to the upgraded packages. The
Reserve Banks will also increase the monthly fee for the legacy FedLine
Direct Plus package by $350, from $3,650 to $4,000.
The Reserve Banks will increase the monthly [agrave] la
carte fee for Network Diversity by $500, from $2,000 to $2,500.
5. 2019 Price Index--Figure 1 compares indexes of fees for the
Reserve Banks' priced services with the GDP price index.\6\ The price
index for Reserve Bank priced services is projected to remain
relatively flat, with a decrease of less than 1 percent in 2019 from
the 2018 level. The price index for Check 21 services is projected to
increase approximately 3 percent. The price indexes for the FedACH
Service, the Fedwire Funds and National Settlement Services, and the
Fedwire Securities Service are projected to decrease approximately 1
percent, 2 percent, and 3 percent, respectively. For the period 2009 to
2019, the price index for total priced services is expected to decrease
nearly 7 percent.
---------------------------------------------------------------------------
\6\ For the period 2009 to 2017, the GDP price index increased
13.6 percent.
---------------------------------------------------------------------------
[[Page 1129]]
[GRAPHIC] [TIFF OMITTED] TN01FE19.001
B. Private Sector Adjustment Factor--The imputed debt financing
costs, targeted ROE, and effective tax rate are based on a U.S.
publicly traded firm market model.\7\ 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.
---------------------------------------------------------------------------
\7\ Data for U.S. publicly traded firms is from the Standard and
Poor's Compustat[supreg] database. This database contains
information on more than 6,000 U.S. publicly traded firms, which
approximates the entirety of the U.S. market.
---------------------------------------------------------------------------
The portion of Federal Reserve assets that will be used to provide
priced services during the coming year is determined using information
about actual assets and projected disposals and acquisitions. The
priced portion of these assets is determined based on the allocation of
depreciation and amortization expenses of each asset class. The priced
portion of actual Federal Reserve liabilities consists of
postemployment and postretirement benefits, accounts payable, and other
liabilities. The priced portion of the actual net pension asset or
liability is also included on the balance sheet.\8\
---------------------------------------------------------------------------
\8\ The pension assets are netted with the pension liabilities
and reported as a net asset or net liability as required by ASC 715
Compensation--Retirement Benefits.
---------------------------------------------------------------------------
The equity financing rate is the targeted ROE produced by the
capital asset pricing model (CAPM). In the CAPM, the required rate of
return on a firm's equity is equal to the return on a risk-free asset
plus a market risk premium. The risk-free rate is based on the three-
month Treasury bill; the beta is assumed to be equal to 1.0, which
approximates the risk of the market as a whole; and the market risk
premium is based on the monthly returns in excess of the risk-free rate
over the most recent 40 years. The resulting ROE reflects the return a
shareholder would expect when investing in a private business firm.
For simplicity, given that federal corporate income tax rates are
graduated, state income tax rates vary, and various credits and
deductions can apply, an actual income tax expense is not explicitly
calculated for Reserve Bank priced services. Instead, the Board targets
a pretax ROE that would provide sufficient income to fulfill the priced
services' imputed income tax obligations. To the extent that
performance results are greater or less
[[Page 1130]]
than the targeted ROE, income taxes are adjusted using the effective
tax rate.
Capital structure. The capital structure is imputed based on the
imputed funding need (assets less liabilities), subject to minimum
equity constraints. Short-term debt is imputed to fund the imputed
short-term funding need. Long-term debt and equity are imputed to meet
the priced services long-term funding need at a ratio based on the
capital structure of the U.S. publicly traded firm market. The level of
equity must meet the minimum equity constraints, which follow the FDIC
requirements for a well-capitalized institution. The priced services
must maintain equity of at least 5 percent of total assets and 10
percent of risk-weighted assets.\9\ 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.
---------------------------------------------------------------------------
\9\ The FDIC rule, which was adopted as final on April 14, 2014,
requires that well-capitalized institutions meet or exceed the
following standards: (1) Total capital to risk-weighted assets ratio
of at least 10 percent, (2) tier 1 capital to risk-weighted assets
ratio of at least 8 percent, (3) common equity tier 1 capital to
risk-weighted assets ratio of at least 6.5 percent, and (4) a
leverage ratio (tier 1 capital to total assets) of at least 5
percent. Because all of the Federal Reserve priced services' equity
on the pro forma balance sheet qualifies as tier 1 capital, only
requirements 1 and 4 are binding. The FDIC rule can be located at
https://www.fdic.gov/news/board/2014/2014-04-08_notice_dis_c_fr.pdf.
---------------------------------------------------------------------------
Application of the Payment System Risk (PSR) Policy to the Fedwire
Services. The Board's PSR policy incorporates the 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 an
amount equivalent to six months of the Fedwire Funds Service's current
operating expenses as liquid financial assets and equity on the pro
forma balance sheet.\10\ Current operating expenses are defined as
normal business operating expenses on the income statement, less
depreciation, amortization, taxes, and interest on debt. Using the
Fedwire Funds Service's preliminary 2019 budget, six months of current
operating expenses would be $50.5 million. In 2019, $38.8 million of
equity was imputed to meet the FDIC capital requirements, resulting in
an ending equity balance of $51.8 million. No additional imputed equity
was necessary to meet the PSR policy requirement.
---------------------------------------------------------------------------
\10\ This requirement does not apply to the Fedwire Securities
Service. There are no competitors to the Fedwire Securities Service
that would face such a requirement, and imposing such a requirement
when pricing the securities services could artificially increase the
cost of these services.
---------------------------------------------------------------------------
Effective tax rate. Like the imputed capital structure, the
effective tax rate is calculated based on data from U.S. publicly
traded firms. The tax rate is the mean of the weighted average rates of
the U.S. publicly traded firm market over the past 5 years.
Debt and equity financing. The imputed short- and long-term debt
financing rates are derived from the nonfinancial commercial paper
rates from the Federal Reserve Board's H.15 Selected Interest Rates
release (AA and A2/P2) and the annual Merrill Lynch Corporate & High
Yield Index rate, respectively. The equity financing rate is described
above. 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 2019 PSAF is $17.8 million, compared with $18.9 million in
2018. The decrease of $1.1 million is attributable to a $2.8 million
decrease in the cost of debt and a $0.3 million decrease in sales tax,
offset by a $1.9 million increase in the Board's costs and a $0.1
million increase in the return on equity. The net $2.7 million decrease
in cost of capital ($2.8 million less $0.1 million) resulted from lower
funding needs driven by lower long-term assets. The increase in Board
costs are attributed to a shift from policy to priced services
oversight activities.
The PSAF expense of $17.8 million, detailed in table 5, reflects
$7.1 million for capital funding, $7.0 million for BOG expense and $3.7
million in sales tax expense.
As shown in table 3, 2019 total assets of $846.6 million increased
by $29.4 million from 2018. The net increase in total assets reflects a
$105 million increase in short-term assets and imputed investments
offset by a $75.6 million decrease in long-term assets.
The increase in the short-term assets is primarily driven by the
imputed investments in Treasury securities and Federal Funds. These
increases in short-term assets are largely offset by increases in
short-term liabilities in the form of deferred credits. There were
larger averages for check items in process of collection, and higher
average ACH Pre-Fund account balances in the first several months of
2018. The 2019 balances are estimated based on the current account
balance average for the first part of 2018.
The net long-term asset decrease of $75.6 million primarily
consists of a $53.0 million decrease in the net pension asset and a
combined $18.6 million decrease in Furniture and equipment and
Leasehold improvements and long-term prepayments. The net pension asset
decrease reflects lower plan contributions over the past two years,
down from $720 million to $240 million in 2018 and from $480 million to
$180 million in 2019. The decrease in furniture and equipment and
Leasehold improvements and long-term prepayments are mainly due to a
lower allocation of Reserve Bank assets to the Federal Reserve's priced
services.
The capital structure of the 2019 pro forma balance sheet, provided
in table 4, is composed of equity of $51.8 million, or 10 percent of
the 2019 risk weighted assets detailed in table 6, and no long-term
debt. The 2019 capital structure differs from that of 2018, which was
composed of $57.8 million of equity and $76.9 million of long-term
debt. The 2019 imputed equity required to fund assets and meet the
publicly traded firm model capital requirements is $31.3 million. Long-
term debt of $18.2 million was imputed at the observed market ratio of
58.3 percent. To meet the FDIC capital requirements for a well-
capitalized institution, the $18.2 million of imputed long-term debt
was substituted for equity, and additional $20.5 million equity was
imputed. The resulting $51.8 million total level of equity satisfies
the PSR policy requirements for 2019.
The net Accumulated Other Comprehensive Income loss is $624.3
[[Page 1131]]
million, compared with $637.2 million in 2018. The slight decrease is
primarily attributable to the actuarial gains as a result of higher
than expected returns on pension assets and a lower discount rate. AOCI
is in a net loss position and does not reduce the total imputed equity
required to fund priced services assets or fulfill the FDIC equity
requirements for a well-capitalized institution.
---------------------------------------------------------------------------
\11\ 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.
\12\ Consistent with the Board's PSR policy, the Reserve Banks'
priced services will hold and amount equivalent to 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 $50.5 million. In 2019, $38.8 million of equity was
imputed to meet the regulatory capital requirements.
\13\ Includes the allocation of Board of Governors assets to
priced services of $2.9 million for 2019 and $1.1 million for 2018.
\14\ Includes the allocation of Board of Governors liabilities
to priced services of $0.8 million for 2019 and $0.6 million for
2018.
\15\ Includes an accumulated other comprehensive loss of $624.3
million for 2019 and $637.2 million for 2018, which reflects the
ongoing amortization of the accumulated loss in accordance with ASC
715. Future gains or losses, and their effects on the pro forma
balance sheet, cannot be projected. See table 5 for calculation of
required imputed equity amount.
Table 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal Reserve Priced Services
[Millions of dollars--projected average for year]
----------------------------------------------------------------------------------------------------------------
2019 2018 Change
----------------------------------------------------------------------------------------------------------------
Short-term assets:
Receivables................................................. $36.7 $36.6 $0.0
Materials and supplies...................................... 0.6 0.5 0.1
Prepaid expenses............................................ 11.1 13.0 (1.9)
Items in process of collection \11\......................... 95.0 87.0 8.0
-----------------------------------------------
Total short-term assets................................. 143.4 137.1 6.3
Imputed investments: \12\
Imputed investment in Treasury Securities................... 20.5 .............. 20.5
Imputed investment in Fed Funds............................. 253.0 174.8 78.2
-----------------------------------------------
Total imputed investments............................... 273.5 174.8 98.7
Long-term assets:
Premises \13\............................................... 104.2 103.7 0.2
Furniture and equipment..................................... 32.8 38.9 (6.0)
Leasehold improvements and long-term prepayments............ 87.7 100.3 (12.6)
Net pension asset........................................... 23.6 76.6 (53.0)
Deferred tax asset.......................................... 181.4 185.6 (4.1)
-----------------------------------------------
Total long-term assets.................................. 429.7 505.3 (75.6)
-----------------------------------------------
Total assets........................................ 846.6 817.2 29.4
===============================================
Short-term liabilities:
Deferred credit items....................................... 348.0 261.8 86.2
Short-term debt............................................. 13.5 14.5 (1.0)
Short-term payables......................................... 34.9 35.6 (0.7)
-----------------------------------------------
Total short-term liabilities............................ 396.4 311.9 84.5
Long-term liabilities:
Long-term debt.............................................. .............. 76.9 (76.9)
Postemployment/postretirement benefits and net pension 398.4 370.5 27.9
liabilities \14\...........................................
-----------------------------------------------
Total liabilities....................................... 794.8 759.3 35.4
Equity \15\............................................. 51.8 57.8 (6.0)
-----------------------------------------------
Total liabilities and equity........................ 846.6 817.2 29.4
----------------------------------------------------------------------------------------------------------------
Table 4--Imputed Funding for Priced-Services Assets
[Millions of dollars]
------------------------------------------------------------------------
2019 2018
------------------------------------------------------------------------
A. Short-term asset financing:
Short-term assets to be financed:
Receivables..................... $36.7 $36.6
Materials and supplies.......... 0.6 0.5
Prepaid expenses................ 11.1 13.0
-------------------------------
Total short-term assets to be 48.4 50.1
financed...........................
Short-term payables............. 34.9 35.6
-------------------------------
Net short-term assets to be financed 13.5 14.5
===============================
[[Page 1132]]
Imputed short-term debt financing: 13.5 14.5
\16\...............................
===============================
B. Long-term asset financing:
Long-term assets to be financed:
Premises........................ 104.2 103.9
Furniture and equipment......... 32.8 38.9
Leasehold improvements and long- 87.7 100.3
term prepayments...............
Net pension asset............... 23.6 76.6
Deferred tax asset.............. 181.4 185.6
-------------------------------
Total long-term assets to be 429.7 505.3
financed...........................
Postemployment/postretirement 398.4 370.5
benefits and net pension
liabilities....................
-------------------------------
Net long-term assets to be 31.3 134.8
financed.......................
===============================
Imputed long-term debt \23\..... .............. 76.9
Imputed equity \23\............. 51.8 57.8
-------------------------------
Total long-term financing... 51.8 134.8
------------------------------------------------------------------------
---------------------------------------------------------------------------
\16\ See table 5 for calculation.
\17\ 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 2019, the amount of imputed equity met the minimum equity
requirements for risk-weighted assets.
\18\ Equity adjustment offsets are due to a shift of long-term
debt funding to equity in order to meet FDIC capital requirements
for well-capitalized institutions.
\19\ Additional equity in excess of that needed to fund priced
services assets is offset by an asset balance of imputed investments
in treasury securities.
\20\ Imputed short-term debt and long-term debt are computed at
table 4.
\21\ The 2019 ROE is equal to a risk-free rate plus a risk
premium (beta * market risk premium). The 2019 after-tax CAPM ROE is
calculated as 2.01% + (1.0 * 8.32%) = 10.33%. Using a tax rate of
22.2%, the after-tax ROE is converted into a pretax ROE, which
results in a pretax ROE of (10.33%/(1-22.2%)) = 13.27%. Calculations
may be affected by rounding.
\22\ 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.
\23\ The investments are imputed based on the amounts arising
from the collection of items prior to providing credit according to
established availability schedules.
Table 5--Derivation of the 2019 and 2018 PSAF
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
2019 2018
---------------------------------------------------------------------
Debt Equity Debt Equity
----------------------------------------------------------------------------------------------------------------
A. Imputed long-term debt and equity:
Net long-term assets to finance....... $31.3 $31.3 $134.8 $134.8
Capital structure observed in market.. 58.3% 41.7% 58.2% 41.8%
---------------------------------------------------------------------
Pre-adjusted long-term debt and equity $18.2 $13.1 $78.4 $56.4
Equity adjustments: \17\
Equity to meet capital ................. 51.8 ................. 57.8
requirements.....................
Adjustment to debt and equity (18.2) 18.2 (1.5) 1.5
funding given capital
requirements \18\................
Adjusted equity balance........... ................. 31.3 ................. 57.8
Equity to meet capital ................. 20.5 ................. ..............
requirements \19\................
---------------------------------------------------------------------
Total imputed long-term debt ................. $51.8 $76.9 $57.8
and equity...................
=====================================================================
B. Cost of capital:
Elements of capital costs:
Short-term debt \20\.............. $13.5 x 2.3% = $0.3 $14.5 x 1.3% = $0.2
Long-term debt \23\............... 3.9% = .............. 76.9 x 3.8% = 3.0
Equity \21\....................... 51.8 x 13.3% = 6.8 57.8 x 11.7% = 6.7
---------------- ---------------
................. $7.1 ................. $9.9
C. Incremental cost of PSR policy:
Equity to meet policy................. 13.3% = .............. 11.7% = ..............
---------------- ---------------
D. Other required PSAF costs:
Sales taxes........................... $3.7 .............. $3.9 ..............
[[Page 1133]]
Board of Governors expenses........... 7.0 .............. 5.1 ..............
------------------- -------------------
................. 10.7 ................. 9.0
---------------- ---------------
................. $17.8 ................. $18.9
================ ===============
E. Total PSAF:
As a percent of assets................ ................. 2.1% ................. 2.3%
As a percent of expenses.............. ................. 3.3% ................. 4.1%
F. Tax rates.............................. ................. 22.2% ................. 22.7%
----------------------------------------------------------------------------------------------------------------
Table 6--Computation of 2019 Capital Adequacy for Federal Reserve Priced Services
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Weighted
Assets Risk weight assets
----------------------------------------------------------------------------------------------------------------
Imputed investments:
1-Year Treasury securities \22\............................. $20.5 .............. ..............
Federal funds \23\.......................................... 253.0 0.2 $50.6
-----------------------------------------------
Total imputed investments............................... 273.5 .............. 50.6
Receivables..................................................... 36.7 0.2 7.3
Materials and supplies.......................................... 0.6 1.0 0.6
Prepaid expenses................................................ 11.1 1.0 11.1
Items in process of collection.................................. 95.0 0.2 19.0
Premises........................................................ 104.2 1.0 104.2
Furniture and equipment......................................... 32.8 1.0 32.8
Leasehold improvements and long-term prepayments................ 87.7 1.0 87.7
Net pension asset............................................... 23.6 1.0 23.6
Deferred tax asset.............................................. 181.4 1.0 181.4
-----------------------------------------------
Total....................................................... 846.6 .............. 518.3
===============================================
Imputed equity:
Capital to risk-weighted assets............................. 10.0% .............. ..............
Capital to total assets..................................... 6.1% .............. ..............
----------------------------------------------------------------------------------------------------------------
C. Check Service--Table 7 shows the 2017 actual, 2018 estimated,
and 2019 budgeted cost-recovery performance for the commercial check
service.
Table 7--Check Service Pro Forma Cost and Revenue Performance
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Recovery rate
Year Revenue Total expense Net income Targeted ROE after targeted
(ROE) ROE (%)
1 2 3 4 5
[1 - 2] [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2017 (actual)................... 142.0 131.3 10.7 1.4 107.0
2018 (estimate)................. 133.2 129.5 3.8 1.5 101.7
2019 (budget)................... 128.3 124.8 3.4 1.5 101.5
----------------------------------------------------------------------------------------------------------------
1. 2018 Estimate--The Reserve Banks estimate that the check service
will recover 101.7 percent of total expenses and targeted ROE, compared
with a 2018 budgeted recovery rate of 101.6 percent. The expected
decline in check volumes processed by the Reserve Banks continues to
influence the check service's cost recovery.
Through August, total commercial forward and total commercial
return check volumes were 7.6 percent and 7.2 percent lower,
respectively, than they were during the same period last year.
Consistent with anticipated fourth-quarter declines, for full-year
2018, the Reserve Banks estimate that their total forward check volume
will decline 7.6 percent (compared with a budgeted decline of 4.7
percent) and their total return check volume will decline 7.7
[[Page 1134]]
percent (compared with a budgeted decline of 3.5 percent) from 2017
levels.\24\ While these volume declines will affect budgeted total
revenue, the Reserve Banks estimate that total expenses will also be
lower given the decline in those expenses directly correlated with
volumes as well as the continued recognition of operational
efficiencies. This has allowed for close alignment between budgeted and
estimated 2018 cost recovery.
---------------------------------------------------------------------------
\24\ Total Reserve Bank forward check volumes are expected to be
4.8 billion in 2018. Total Reserve Bank return check volumes are
expected to be 28.9 million in 2018.
---------------------------------------------------------------------------
2. 2019 Pricing--The Reserve Banks expect the check service to
recover 101.5 percent of total expenses and targeted ROE in 2019. The
Reserve Banks project revenue to be $128.3 million, a decline of 3.7
percent from the 2018 estimate. This decline is driven in part by
anticipated accelerating decline in the overall number of checks
written, as well as by competition from correspondent banks,
aggregators, and direct exchanges.\25\ Total expenses for the check
service are projected to be $124.8 million, a decrease of $4.7 million,
or 3.6 percent, from 2018 expenses, primarily because of reduced
operating costs, including cost savings associated with the Reserve
Banks' customer support services.
---------------------------------------------------------------------------
\25\ The Reserve Banks estimate that total commercial forward
check volumes in 2019 will decline 8.5 percent, to 4.4 billion, and
total commercial return check volumes will decline 7.5 percent, to
26.7 million in 2019.
---------------------------------------------------------------------------
The Reserve Banks evaluate and set tier assignments annually based
on changes in the volume of items received by endpoints. In 2019, the
Reserve Banks will reassign the tier placement of 1,116 forward and 240
return endpoints in the FedForward and FedReturn products,
respectively.\26\ Based on these 2019 tier assignments, the Reserve
Banks will increase the FedForward Premium Daily Fee A, B, and C per
item fees by $0.001 for Tier 3 and $0.003 for Tier 4, while also
increasing to the Premium Daily Fee C daily fixed fee by $200, from
$3,500 to $3,700. These price increases are intended to better align
pricing between premium daily and standard deposit options.
---------------------------------------------------------------------------
\26\ The tiers for 2019 are available at https://www.frbservices.org/resources/fees/check-2019.html.
---------------------------------------------------------------------------
The Reserve Banks will also lower the average daily forward receipt
and return volume thresholds by approximately 6.0 percent for tiers 1,
2, 3, and 4 for FedForward[supreg] and FedReturn[supreg] image cash
letter and daily fee deposit options based on the 2019 tier
assignments.\27\ These changes are intended to account for the
anticipated continued decline in check deposit volumes. Tables 8, 9,
10, and 11 show the 2018 volume thresholds and the 2019 thresholds for
the four tiered pricing structures.
---------------------------------------------------------------------------
\27\ As part of the Reserve Banks' 2016 restructured FedForward
and FedReturn fee schedules, the Reserve Banks use a volume-based
tiered pricing structure to determine per-item fees based on the
average daily receipt or return volume an endpoint receives from
chartered institutions through the Reserve Banks. Tiers for the
three premium variations of the Reserve Banks' daily subscription
fee deposit options (FedForward Premium Daily Fee A, B, and C) are
based only on volume received by the Reserve Banks' top 15
customers, which represent the likely users of the deposit options.
These premium daily fee options include a fifth tier, Tier 0,
composed of routing numbers for which the Reserve Banks currently
receive little to no volume from the specified subset of Reserve
Bank customers (and which therefore cannot currently be assigned to
the other tiers with sufficient predictability). Tier 0 is evaluated
annually, along with all other tiers and endpoints, and endpoints
cannot be placed in Tier 0 if they have previously been assigned to
one of the other tiers.
Table 8--FedForward Standard Deposit Tier Volume Thresholds
[Applicable to Standard ICL, Premium ICL, Deferred ICL, Dollar-Culled
ICL, Endpoint-Culled ICL, Standard Daily Fee A, and Standard Daily Fee B
deposit options]
------------------------------------------------------------------------
2018 Average daily 2019 Average daily
Tier forward receipt volume forward receipt volume
items/day items/day
------------------------------------------------------------------------
1...................... Over 65,000............ Over 61,000.
2...................... 10,001-65,000.......... 9,401-61,000.
3...................... 750-10,000............. 700-9,400.
4...................... Less than 750.......... Less than 700.
------------------------------------------------------------------------
Table 9--FedForward Premium Daily Deposit Option Tier Volume Thresholds
[Applicable to Premium Daily Fee A, Premium Daily Fee B, and Premium
Daily Fee C deposit options]
------------------------------------------------------------------------
2018 Average daily 2019 Average daily
Tier forward receipt volume forward receipt volume
items/day items/day
------------------------------------------------------------------------
0...................... See explanation below * See explanation
below.*
1...................... Over 25,000............ Over 23,500.
2...................... 3,301-25,000........... 3,101-23,500.
3...................... 750-3,300.............. 700-3,100.
4...................... Less than 750.......... Less than 700.
------------------------------------------------------------------------
* Tier 0 consists of financial institutions that meet both of the
following criteria:
1. Less than 10 percent of their Reserve Bank forward receipt volume was
deposited with the Reserve Banks by Premium Daily Fee depositors
during the sample period, and
2. Their average daily Reserve Bank forward receipt volume exceeded 150
items per day during the sample period.
Tier 0 is intended to be a transitional tier: Once a financial
institution is assigned to tier 1-4 or the substitute check tier, it
cannot be assigned to tier 0.
Table 10--FedReturn Standard Deposit Tier Volume Thresholds
[Applicable to Standard ICL deposit option]
------------------------------------------------------------------------
2018 Average daily 2019 Average daily
Tier return receipt volume return receipt volume
items/day items/day
------------------------------------------------------------------------
1...................... Over 3,000............. Over 2,820.
2...................... 1,001-3,000............ 941-2,820.
3...................... 100-1,000.............. 94-940.
4...................... Less than 100.......... Less than 94.
------------------------------------------------------------------------
[[Page 1135]]
Table 11--FedReturn Premium Daily Deposit Option Tier Volume Thresholds
[Applicable to Premium Daily Fee A deposit option]
------------------------------------------------------------------------
2018 Average daily 2019 Average daily
Tier return receipt volume return receipt volume
items/day items/day
------------------------------------------------------------------------
0...................... See explanation below * See explanation
below.*
1...................... Over 1,500............. Over 1,410.
2...................... 501-1,500.............. 471-1,410.
3...................... 100-500................ 94-470.
4...................... Less than 100.......... Less than 94.
------------------------------------------------------------------------
* Tier 0 consists of financial institutions with less than 10 percent of
their Reserve Bank return receipt volume deposited with the Reserve
Banks by Premium Daily Fee depositors during the sample period.
Tier 0 is intended to be a transitional tier: once a financial
institution is assigned to tier 1-4 or the substitute check tier, it
cannot be assigned to tier 0.
The Reserve Banks will increase cash letter fees by $0.50 for all
deadlines on the FedForward Standard, Deferred, Dollar-Culled, and
Endpoint-Culled image cash letters and FedReturn Standard image cash
letters. The Reserve Banks will also increase the FedReceipt Premium
Delivery 8:00 a.m. EST target per-item fee by $0.006 and the Premium
Delivery 10:00 a.m. target and 12:00 noon target per-item fees by
$0.002.\28\ Further, the Reserve Banks will increase FedReceipt
Electronic Reject Repair fees by $0.05, increasing the Basic repair fee
from $0.15 per item to $0.20 per item and increasing the Premium repair
fee from $0.25 per item to $0.30 per item. Together, these changes are
intended to facilitate longer-term cost recovery for the check service
by increasing the proportion of fixed revenue while still providing
price stability for customers in light of the anticipated continued
decline in check volumes.
---------------------------------------------------------------------------
\28\ The 8:00 a.m. delivery target is expressed in eastern time,
while the 10:00 a.m. and 12:00 noon targets are local time.
---------------------------------------------------------------------------
The Reserve Banks will continue increasing fees to encourage
depositors to shift volume away from legacy paper-related products in
light of today's electronic check-processing environment. Specifically,
the Reserve Banks will increase all fees for the FedImage product and
certain truncation fees by approximately 10.0 percent.\29\ Table 12
shows the 2019 FedImage and Electronic Check Services fees.
---------------------------------------------------------------------------
\29\ Because of rounding, the individual price increases range
from 8.3 percent to 12.5 percent.
Table 12--FedImage and Electronic Check Services and Fees
----------------------------------------------------------------------------------------------------------------
Fixed fee Per item fee
----------------------------------------------------------------------------------------------------------------
Image Archive:
Image Capture + 7 business day archive.... $6.00........................................... $0.0090
Image Capture On-Us Surcharge............. ................................................ 0.0212
30 business day archive................... ................................................ 0.0011
60 business day archive................... ................................................ 0.0013
7-year archive/11-year archive............ ................................................ 0.0020
Dual archive (Transition period up to 120 ................................................ 0.0012
days).
Extended dual archive (More than 120 days) ................................................ 0.0121
Back File Conversion...................... $4.25........................................... 0.0121
Electronic On-Us Service.................. $4.25........................................... 0.0121
Extended RAID Storage
61 days to 6 months................... ................................................ 0.0010
61 days to 12 months.................. ................................................ 0.0024
61 days to 24 months.................. ................................................ 0.0061
Image Retrievals:
Retrievals to view via FedLine Web[supreg] ................................................ 0.4300
inquiry.
Retrievals to email via FedLine Web:
Request via FedLine Web inquiry....... ................................................ 0.4300
Recurring request..................... ................................................ 0.4300
Image Access and Retrievals through a ................................................ 0.4300
Gateway.
Subscription Retrievals............... ................................................ 0.0026
Manual FedImage Requests (requests ................................................ 7.2500
performed by FRB staff).
Image Delivery:
Physical Media:
CD-ROM Select Accounts Service--RAID.. $18.15/CD-ROM................................... 0.00190
CD-ROM--Tape.......................... $18.15/CD-ROM................................... 0.1200
Truncation:
Image Enhanced Truncation................. $6.60........................................... 0.0110
Return Item Retrieval--Fedline............ ................................................ 1.2700
----------------------------------------------------------------------------------------------------------------
Finally, the Reserve Banks will introduce two new fees as
incentives to financial institutions to reduce errors in adjustment
case submissions. The Reserve Banks will introduce a $0.50 fee for
encoding error and duplicate payment adjustment cases caused by the
depositary bank's incorrect encoding or duplicate deposit of an item.
The
[[Page 1136]]
Reserve Banks will also introduce a $2.50 fee for automated adjustment
case types that require manual intervention by Reserve Bank staff
because of error on the part of the adjusting bank.\30\ These new fees
are intended to help drive efficiencies throughout the industry's check
collection process by providing an incentive to financial institutions
to improve the quality of their check deposit processing. In addition,
the $2.50 fee will cover the staffing costs associated with manually
handling cases that should have been automatically resolved. Table 13
shows the 2019 fees under Quality Improvement Initiatives for
Electronic Check Collection.
---------------------------------------------------------------------------
\30\ This fee is charged to a financial institution that
provides incorrect or incomplete information when opening an
adjustment case with the Reserve Banks. The fee is only applicable
to adjustment cases that would have resolved automatically had the
case been submitted correctly (investigation types ENC, PAID, NCH,
DISP, SOR and LNE).
Table 13--Quality Improvement Initiatives
------------------------------------------------------------------------
Per case/ item
Product fee
------------------------------------------------------------------------
Check Adjustments--Deposit Quality Issues............... $0.50
Check Adjustments--Incorrect/Incomplete Case Opening.... 2.50
Return Deposit Exceptions--Items Qualified to the 15.00
Federal Reserve as BOFD \31\...........................
------------------------------------------------------------------------
The Reserve Banks estimate that the announced price changes will
result in a 4.0 percent average price increase for check customers.
---------------------------------------------------------------------------
\31\ This existing fee was previously located in the FedReturn
section of the Electronic Check Collection Fee.
---------------------------------------------------------------------------
The primary risks to the Reserve Banks' ability to achieve budgeted
2019 cost recovery for the check service include greater-than-expected
declines in check volume due to the general reduction in check writing
and increased competition from correspondent banks, aggregators, and
direct exchanges, which would result in lower-than-anticipated revenue.
D. FedACH Service--Table 14 shows the 2017 actual, 2018 estimate,
and 2019 budgeted cost-recovery performance for the commercial FedACH
service.
Table 14--FedACH Service Pro Forma Cost and Revenue Performance
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Recovery rate
Year Revenue Total expense Net income Targeted ROE after targeted
(ROE) ROE (%)
1 2 3 4 5
[1 - 2] [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2017 (actual)................... 141.3 140.0 1.3 1.6 99.8
2018 (estimate)................. 149.2 150.4 -1.2 1.9 98.0
2019 (budget)................... 152.0 147.4 4.6 1.9 101.8
----------------------------------------------------------------------------------------------------------------
1. 2018 Estimate--The Reserve Banks estimate that the FedACH
service will recover 98.0 percent of total expenses and targeted ROE,
compared with a 2018 budgeted recovery rate of 96.1 percent. Through
August, FedACH commercial origination and receipt volume was 7.5
percent higher than it was during the same period last year. For full-
year 2018, the Reserve Banks estimate that FedACH commercial
origination and receipt volume will increase 6.1 percent from 2017
levels, in line with the budgeted increase of 5.2 percent. However,
investment costs associated with the multiyear technology initiative to
modernize the FedACH processing platform are driving the overall under
recovery rate.
2. 2019 Pricing--The Reserve Banks expect the FedACH service to
recover 101.8 percent of total expenses and targeted ROE in 2019.
FedACH commercial origination and receipt volume is projected to grow
3.3 percent, which, combined with anticipated incremental revenue from
new services, is expected to contribute to an increase of $2.8 million
in total revenue from the 2018 estimate. Total expenses are projected
to decrease $3.0 million from 2018 expenses, primarily because of the
reduction in costs associated with the development and expected
completion in 2019 of the new FedACH technology platform.
The Reserve Banks will introduce a new Exception Resolution Service
that provides an automated means for participants to manage ACH
exceptions for entries settled through FedACH.\32\ The Reserve Banks
expect that automation of exception cases will improve efficiency of
FedACH payments by streamlining existing time-consuming manual
processes that banks use to manage exception cases. The Service is
optional; customers will be able to originate an exception case
directly through FedLine, through a third-party agent on their behalf,
or through a Federal Reserve Bank on their behalf.
---------------------------------------------------------------------------
\32\ Specifically, the service is designed to handle disputes,
notifications, questions, or requests for additional information
from a financial institution either for their own use or on behalf
of their account holder. Eight of the most common exception requests
between financial institutions will be able to be managed through
the service initially: (1) Written statement of unauthorized debit
copy, (2) converted check copy, (3) ODFI request for return, (4)
RDFI request for late return acceptance, (5) request for proof of
debit authorization, (6) originator contact information, (7) payment
trace request, and (8) general inquiries (used to contact another
institution for information exchange).
The ERS product will not be available to customers on January
2nd, 2019.The Reserve Banks will provide notice to customers,
regarding the availability of the product, once an implementation
date has been determined.
---------------------------------------------------------------------------
The Reserve Banks will not change fees for existing FedACH priced
services.
The primary risks to the Reserve Banks' ability to achieve budgeted
2019 cost recovery for the FedACH service are unanticipated cost
overruns associated with the FedACH technology modernization project
and unanticipated volume reductions.
[[Page 1137]]
E. Fedwire Funds and National Settlement Services--Table 15 shows
the 2017 actual, 2018 estimate, and 2019 budgeted cost-recovery
performance for the Fedwire Funds and National Settlement Services.
Table 15--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Recovery rate
Year Revenue Total expense Net income Targeted ROE after targeted
(ROE) ROE (%)
1 2 3 4 5
[1 - 2] [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2017 (actual)................... 129.7 120.8 8.9 1.3 106.2
2018 (estimate)................. 132.2 124.4 7.8 1.5 105.0
2019 (budget)................... 133.6 131.1 2.5 1.6 100.7
----------------------------------------------------------------------------------------------------------------
1. 2018 Estimate--The Reserve Banks estimate that the Fedwire Funds
and National Settlement Services will recover 105.0 percent of total
expenses and targeted ROE, compared with a 2018 budgeted recovery rate
of 103.9 percent. Through August, Fedwire Funds Service online volume
was 5.1 percent higher than it was during the same period last year.
For full-year 2018, the Reserve Banks estimate that Fedwire Funds
Services online volume will increase 3.2 percent from 2017 levels,
compared with the 0.8 percent volume decrease that had been budgeted.
Through August, the National Settlement Service (NSS) settlement file
volume was 3.6 percent higher than it was during the same period last
year, and settlement entry volume was 1.1 percent higher. For the full
year, the Reserve Banks estimate that settlement file volume will
increase 1.5 percent (in line with a budgeted increase of 1.3 percent)
and settlement entry volume will decrease 2.3 percent from 2017 levels
(compared with a budgeted 0.7 percent increase).
2. 2019 Pricing--The Reserve Banks expect the Fedwire Funds and
National Settlement Services to recover 100.7 percent of total expenses
and targeted ROE. Revenue is projected to be $133.6 million, an
increase of 1.1 percent from the 2018 estimate. The Reserve Banks
project total expenses to be roughly $6.7 million higher than 2018
expenses, primarily reflecting investments in new initiatives to
improve resiliency and operational functionality.
The Reserve Banks will increase the offline send surcharge and
offline receive surcharge for the Fedwire Funds Service from $60.00 to
$65.00 in order to offset project costs related to the automation of
Office of Foreign Asset Control (OFAC) screening within the offline
process. The Reserve Banks estimate that the price changes, along with
an expected increase in incentive discount-eligible volume, will
ultimately result in an overall 2.0 percent average price increase for
Fedwire Funds customers.
The Reserve Banks will not change NSS fees for 2019.
The primary risk to the Reserve Banks' ability to achieve budgeted
2019 cost recovery for these services is an overrun in costs from new
initiatives to improve resiliency and operational functionality.
Unanticipated decreases in volume may also negatively impact cost
recovery.
F. Fedwire Securities Service--Table 16 shows the 2017 actual, 2018
estimate, and 2019 budgeted cost-recovery performance for the Fedwire
Securities Service.\33\
---------------------------------------------------------------------------
\33\ 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 16--Fedwire Securities Service Pro Forma Cost and Revenue Performance
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Recovery rate
Year Revenue Total expense Net income Targeted ROE after targeted
(ROE) ROE (%)
1 2 3 4 5
[1 - 2] [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2017 (actual)................... 28.6 27.3 1.3 0.3 103.6
2018 (estimate)................. 27.1 27.7 -0.7 0.3 96.5
2019 (budget)................... 26.4 27.5 -1.1 0.3 94.7
----------------------------------------------------------------------------------------------------------------
1. 2018 Estimate--The Reserve Banks estimate that the Fedwire
Securities Service will recover 96.5 percent of total expenses and
targeted ROE, compared with a 2018 budgeted recovery rate of 97.6
percent. The Reserve Banks estimate revenue to be $27.1 million, a
decrease of 5.3 percent from the 2018 budget. Total expenses are
projected to be $27.7 million for full-year 2018, an increase of 1.7
percent from the 2018 budget.
Through August, Fedwire Securities Service online agency transfer
volume was 2.3 percent lower than it was during the same period last
year. For full-year 2018, the Reserve Banks estimate that Fedwire
Securities Service online agency transfer volume will decline 4.8
percent from 2017 levels, compared with a budgeted decline of
[[Page 1138]]
15.4 percent. This decrease in online agency transfer volume primarily
reflects two market trends. First, a continuation of interest rate
increases in 2018 has led to a decrease in mortgage refinance volume
and issuance, which in turn has led to a decrease in settlement
activity for agency mortgage-backed securities over Fedwire Securities.
Second, JP Morgan Chase (JPMC) has recently completed its exit from the
broker-dealer services business, resulting in Bank of New York Mellon
generally serving as the sole clearing bank for government securities.
As a result of this market shift, online agency transfer volume is
expected to decrease through year-end 2018. These structural changes
within the government securities clearing and settlement market are
expected to continue to affect online transfer volumes through 2019.
For full-year 2018, volumes for the Fedwire Securities' two largest
revenue-generating services--account maintenance and issue
maintenance--are expected to decline from 2017 levels. Through August,
account maintenance volume was 5.3 percent lower than it was during the
same period last year. For full-year 2018, the Reserve Banks estimate
that account maintenance volume will decline 5.0 percent from 2017
levels, compared with a budgeted decline of 3.2 percent. The higher-
than-expected account maintenance volume decline is largely the result
of joint custody account closures. Through August, the number of agency
issues maintained was 3.9 percent lower than it was during the same
period last year. For full-year 2018, the Reserve Banks estimate that
the number of agency issues maintained will decline 4.7 percent from
2017 levels, compared with a budgeted decline of 1.4 percent.
2. 2019 Pricing--The Reserve Banks expect the Fedwire Securities
Service to recover 94.7 percent of total expenses and targeted ROE in
2019. Revenue is projected to be $26.4 million, a decrease of 2.6
percent from the 2018 estimate. The Reserve Banks also project that
2019 expenses will remain relatively flat, decreasing by $0.2 million
from the 2018 estimate. Significant drivers of 2019 operating costs
include investments to advance new initiatives to improve resiliency
and operational functionality.
As JPMC finalizes its reallocation of holdings and ongoing market
changes reach steady state, the Reserve Banks project that online
agency transfer volume will remain relatively flat, with a slight
increase of 0.8 percent in 2019. Additionally, the volume of accounts
maintained will likely decrease 5.6 percent, and the volume of agency
issues maintained will likely decrease 15.5 percent.\34\ Account
maintenance volume is expected to continue to decline in 2019 because
of ongoing joint custody account closures driven by state-level
collateral program changes. Issue maintenance volume is expected to
decline because of cost allocation adjustments necessitated by the
completion of the Fedwire Modernization Program, and new securities
related to the Federal Home Loan Mortgage Corporation's securities
exchange program in advance of the Federal Housing Finance Agency's
Single Security Initiative.
---------------------------------------------------------------------------
\34\ The online transfer fee, monthly account maintenance fee,
and monthly issue maintenance fee accounted for more than 94 percent
of total Fedwire Securities Service revenue through August 2018.
---------------------------------------------------------------------------
The Reserve Banks will increase the online agency transfer fee from
$0.77 to $0.98. Processing costs for online agency transfers and online
Treasury transfers are nearly identical, yet the corresponding fees are
different; therefore, the fee change is intended to bring the two fees
into better alignment.\35\ Additionally, the Reserve Banks will
increase the automated claims adjustment processing fee from $0.80 to
$1.00. This fee increase will offset costs associated with the
automated claims adjustment processing expansion project, which is
scheduled to go live at year-end 2019. The Reserve Banks estimate that
the combined price changes will result in a 6.0 percent average price
increase for Fedwire Securities customers.
---------------------------------------------------------------------------
\35\ Treasury online transfer fees are set by and remitted to
the U.S. Department of the Treasury, except for a funds movement fee
of $0.11, which is set and retained by the Federal Reserve Banks for
their direct, support, and overhead costs of settling on their books
the payment associated with the transfer of a Treasury security
between securities accounts.
---------------------------------------------------------------------------
The primary risks to the Reserve Banks' ability to achieve budgeted
2019 cost recovery for these services are lower-than-expected volume
resulting from the pace of structural changes in government securities
clearing and settlement, and higher-than-expected costs from new
initiatives to improve resiliency and operational functionality.
G. FedLine Access--The Reserve Banks charge fees for the electronic
connections that depository institutions use to access priced services
and allocate the costs and revenue associated with this electronic
access to the various priced services. There are currently six FedLine
channels through which customers can access the Reserve Banks' priced
services: FedMail, FedLine Exchange, FedLine Web, FedLine Advantage,
FedLine Command, and FedLine Direct.\36\ The Reserve Banks bundle these
channels into eleven FedLine packages, described below, that are
supplemented by a number of premium (or [agrave] la carte) access and
accounting information options. In addition, the Reserve Banks offer
FedComplete packages, which are bundled offerings of FedLine
connections and a fixed number of FedACH, Fedwire Funds, and Check 21-
enabled transactions.
---------------------------------------------------------------------------
\36\ FedMail, FedLine Exchange, FedLine Web, FedLine Advantage,
FedLine Command, and FedLine Direct are registered trademarks of the
Federal Reserve Banks.
---------------------------------------------------------------------------
Eight attended access packages offer manual access to critical
payment and information services via a web-based interface. The FedMail
package provides access to basic information services via email, while
the two FedLine Exchange packages are designed to provide certain
services, such as the E-Payments Routing Directory, to customers that
otherwise do not use FedLine for any payment services. The two FedLine
Web packages offer online attended access to a range of services,
including cash services, FedACH information services, and Check
services. Three FedLine Advantage packages expand upon the FedLine Web
packages and offer attended access to critical transactional services:
FedACH, Fedwire Funds, and Fedwire Securities.
Three unattended access packages are computer-to-computer, IP-based
interfaces. The FedLine Command package offers an unattended connection
to FedACH as well as to 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.\37\
---------------------------------------------------------------------------
\37\ The Reserve Banks offer an unattended check product, Check
21 Large File Delivery, that allows a depository institution to
upload and download check image cash letters automatically via a
direct network connection to the Reserve Banks.
---------------------------------------------------------------------------
In 2019, the Reserve Banks will offer upgraded FedLine Direct Plus
and FedLine Direct Premier packages, at monthly fees of $5,500 and
$10,500 respectively, in order to reflect improved network resiliency,
efficiency in supporting all payments traffic, and availability of
higher network speeds.\38\ Historically, the Reserve Banks' FedLine
[[Page 1139]]
Direct connections were not able to support all payment traffic
including Check Services because of limitations in network speed and
ability to manage bandwidth.
---------------------------------------------------------------------------
\38\ As of July 16, 2018, 256K and T1 line speed connections are
no longer offered to new customers as part of the FedLine Direct
Plus and FedLine Direct Premier packages.
---------------------------------------------------------------------------
The Reserve Banks will also increase the monthly fee for the
current (legacy) FedLine Direct Plus solution by $350, from $3,650 to
$4,000. Existing customers can use the current (legacy) FedLine Plus
and Premier solutions and Check 21 Large File Delivery but will
eventually need to convert to the enhanced FedLine Direct Solutions.
Existing users should expect the legacy solutions to be retired and
plan migration efforts to the new service packages beginning in late
2018. The Reserve Banks will also increase the [agrave] la carte
Network Diversity monthly fee by $500, from $2,000 to $2,500.\39\
---------------------------------------------------------------------------
\39\ Network Diversity refers to a method for improving the
resiliency of a computing network by using two or more
telecommunication paths with different characteristics so that the
first remains unaffected by events interrupting traffic on the
second and vice versa.
---------------------------------------------------------------------------
Table 17 provides a summary of the attributes and 2019 pricing for
legacy and upgraded FedLine Direct packages:
---------------------------------------------------------------------------
\40\ Available only to existing customers prior to 2019.
\41\ Available to new and existing customers starting 2019.
Table 17--FedLine Direct Packages
----------------------------------------------------------------------------------------------------------------
Legacy \40\ 2019 \41\
----------------------------------------------------------------------------------------------------------------
FedLine Direct Plus:
Connection Speed................ 256 Kbps................... 2 Mbps.
Dual Vendors.................... N/A........................ Included.
Check 21 Services............... Available [agrave] la carte Included.
Server Certificates............. Two included............... Included.
Network Diversity............... None included.............. None included.
Contingency Solution............ Available [agrave] la carte Included.
Additional WANs................. None included.............. None included.
VPNs............................ One included............... One included.
Bundled FedLine Channels........ Web, Advantage, Command.... Web, Advantage, Command.
Price........................... $4,000.00.................. $5,500.00.
FedLine Direct Premier:
Connection Speed................ 1.5 Mbps................... 2 Mbps.
Dual Vendors.................... N/A........................ Included.
Check 21 Services............... Available [agrave] la carte Included.
Server Certificates............. Two included............... Included.
Network Diversity............... None included.............. One included.
Contingency Solution............ Available [agrave] la carte Included.
Additional WANs................. None included.............. One included.
VPNs............................ Two included............... Two included.
Bundled FedLine Channels........ Web, Advantage, Command.... Web, Advantage, Command.
Price........................... $6,800.00.................. $10,500.00.
----------------------------------------------------------------------------------------------------------------
In addition, the Reserve Banks will eliminate specific [agrave] la
carte fees and services for current FedLine packages. The Reserve Banks
will discontinue offering FedLine Command server certificates as a
separate monthly fee. FedLine Command server certificates will be
included in FedLine Command packages for no additional cost. Including
these certificates in FedLine Command packages is similar to current
practices for upgraded FedLine Direct packages and will result in a
consistent customer experience across both product lines. The Reserve
Banks will also discontinue offering the Accounting Totals by Service
(ACTS) report as an Accounting Service option for customers, because of
low usage. In addition, the Reserve Banks will discontinue offering new
FedMail Fax subscriptions to customers, in order to encourage them to
move to more modern and secure technology that meets industry standards
and enhances their experience.
The Reserve Banks estimate that the price changes will result in a
7.5 percent average price increase for FedLine customers. This increase
is primarily driven by the changes to FedLine Direct Plus and Premier
packages that provide enhanced network options.
II. Analysis of Competitive Effect
All operational and legal changes considered by the Board that have
a substantial effect on payment system participants are subject to the
competitive impact analysis described in the March 1990 policy ``The
Federal Reserve in the Payments System.'' \42\ Under this policy, the
Board assesses whether proposed changes would have a direct and
material adverse effect on the ability of other service providers to
compete effectively with the Federal Reserve in providing similar
services because of differing legal powers or constraints or because of
a dominant market position deriving from such legal differences. If any
proposed changes create such an effect, the Board must further evaluate
the changes to assess whether the benefits associated with the
changes--such as contributions to payment system efficiency, payment
system integrity, or other Board objectives--can be achieved while
minimizing the adverse effect on competition.
---------------------------------------------------------------------------
\42\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------
The 2019 fees, fee structures, and changes in service will not have
a direct and material adverse effect on the ability of other service
providers to compete effectively with the Reserve Banks in providing
similar services. The changes should permit the Reserve Banks to earn a
ROE that is comparable to overall market returns and provide for full
cost recovery over the long run.
III. 2019 Fee Schedules
[[Page 1140]]
FedACH Service 2019 Fee Schedule
[Effective January 2, 2019. Bold indicates changes from 2018 prices]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
FedACH minimum monthly fee:
Originating Depository Financial Institution $50.00.
(ODFI) \43\.....................................
Receiving Depository Financial Institution (RDFI) $40.00.
\44\............................................
Origination (per item or record):
Forward or return items.......................... $0.0035.
SameDay Service--forward item \45\............... $0.0010
surcharge.
Addenda record................................... $0.0015.
FedLine Web-originated returns and notification $0.35.
of change (NOC) \46\............................
Facsimile Exception Return/NOC \47\.............. $45.00.
SameDay Exception Return......................... $45.00.
Automated NOC.................................... $0.20.
Volume-based discounts (based on monthly billed
origination volume) \48\ per item when
origination volume is:
750,001 to 1,500,000 items per month......... $0.0008 discount.
more than 1,500,000 items per month.......... $0.0010 discount.
Volume-based discounts (based on monthly billed
receipt volume) \49\ per item when receipt
volume is:
10,000,001 to 15,000,000 items per month..... $0.0002 discount.
more than 15,000,000 items per month......... $0.0003 discount.
Receipt (per item or record):
Forward Item..................................... $0.0035.
Return Item...................................... $0.0075.
Addenda record................................... $0.0015.
Volume-based discounts:
Non-Premium Receivers \50\ per item when
volume is:
750,001 to 12,500,000 items per month $0.0017 discount.
\51\....................................
more than 12,500,000 items per month \52\ $0.0019 discount.
Premium Receivers, Level One \53\ per item when
volume is:
750,001 to 1,500,000 items per month \51\.... $0.0017 discount.
1,500,001 to 2,500,000 items per month \52\.. $0.0017 discount.
2,500,001 to 12,500,000 items per month \52\. $0.0018 discount.
more than 12,500,000 items per month \52\.... $0.0020 discount.
Premium Receivers, Level Two \54\ per item when
volume is:
750,001 to 1,500,000 items per month \51\.... $0.0017 discount.
1,500,001 to 2,500,000 items per month \52\.. $0.0017 discount.
2,500,001 to 12,500,000 items per month \52\. $0.0019 discount.
more than 12,500,000 items per month \52\.... $0.0021 discount.
FedACH Bundled Package Pricing Discount:
Monthly Bundled Service Package Discount \55\.... $20.00 discount.
Monthly FedACH Risk[supreg] Management fees: \56\
For up to 5 criteria sets.................... $35.00.
For 6 through 11 criteria sets............... $70.00.
For 12 through 23 criteria sets.............. $125.00.
For 24 through 47 criteria sets.............. $150.00.
For 48 through 95 criteria sets.............. $250.00.
For 96 through 191 criteria sets............. $425.00.
For 192 through 383 criteria sets............ $675.00.
For 384 through 584 criteria sets............ $850.00.
For more than 584 criteria sets.............. $1,100.00.
Risk origination monitoring batch (based on total
monthly volume):
For 1 through 100,000 batches (per batch).... $0.007.
For more than 100,000 batches (per batch).... $0.0035.
Monthly FedPayments[supreg] Reporter Service:
FedPayments Reporter Service package pricing
includes:
ACH Received Entries Detail--Customer and
Depository Financial Institution............
ACH Return Reason Report--Customer and
Depository Financial Institution............
ACH Volume Summary by SEC Code--Customer.....
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..................
Originator Setup.............................
Report Delivery via FedLine Access Solution..
On Demand Surcharge.......................... $1.00.
------------------------------------------------------------------------
[[Page 1141]]
FedACH Service 2019 Fee Schedule--Continued
[Effective January 2, 2019. Bold indicates changes from 2018 prices]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Report delivery via FedLine file access
solution (monthly fee):
For up to 50 reports..................... $40.00.
For 51 through 150 reports............... $60.00.
For 151 through 500 reports.............. $110.00.
For 501 through 1,000 reports............ $200.00.
For 1,001 through 1,500 reports.......... $285.00.
For 1,501 through 2,500 reports.......... $460.00.
For 2,501 through 3,500 reports.......... $640.00.
For 3,501 through 4,500 reports.......... $820.00.
For 4,501 through 5,500 reports.......... $995.00.
For 5,501 through 7,000 reports.......... $1,225.00.
For 7,001 through 8,500 reports.......... $1,440.00.
For 8,501 through 10,000 reports......... $1,650.00.
For more than 10,000 reports............. $1,800.00.
Premier reports (per report generated): \57\
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 11 or more reports....................... $1.00.
On Demand Surcharge.......................... $1.00.
ACH Routing Number Activity Report:
For 1 through 5 reports...................... $10.00.
For 6 through 10 reports..................... $6.00.
For 11 or more reports....................... $1.00.
On Demand Surcharge.......................... $1.00.
ACH Originated Batch Report (monthly):
For 1 through 5 reports...................... $10.00.
For 6 through 10 reports..................... $6.00.
For 11 or more reports....................... $1.00.
On Demand Surcharge.......................... $1.00.
ACH Originated Batch Report (daily):
Scheduled Report............................. $0.65.
On Demand Surcharge.......................... $1.00.
On-us inclusion:
Participation (monthly fee per RTN).......... $10.00.
Per-item..................................... $0.0030.
Per-addenda.................................. $0.0015.
Report delivery via encrypted email (per email).. $0.20.
Other Fees and Discounts:
Monthly fee (per RTN):
FedACH Participation Fee \58\................ $65.00.
SameDay Service Origination Participation Fee $10.00.
\59\........................................
FedACH Settlement Fee \60\................... $55.00.
FedACH Information File Extract Fee.......... $150.00.
IAT Output File Sort Fee..................... $75.00.
Fixed Participation Fee--Automated NOCs \61\. $5.00.
Non-Electronic Input/Output fee: \62\
CD/DVD (CD or DVD)........................... $50.00.
Paper (file or report)....................... $50.00.
Fees and Credits Established by NACHA: \63\
NACHA Same Day Entry fee (per item).......... $0.052.
NACHA Same Day Entry credit (per item)....... $0.052 (credit).
NACHA Unauthorized Entry fee (per item)...... $4.50.
NACHA Unauthorized Entry credit (per item)... $4.50 (credit).
NACHA Admin Network fee (monthly fee per RTN) $22.00.
NACHA Admin Network fee (per entry).......... $0.000185.
FedGlobal[supreg] ACH Payments: \64\
Fixed Monthly Fee (per RTN): \65\
Monthly origination volume more than 500 $185.00.
items.......................................
Monthly origination volume between 161 and $60.00.
500 items...................................
Monthly origination volume less than 161 $20.00.
items.......................................
Per-item Origination Fee for Monthly Volume more
than 500 Items (surcharge): \66\
Canada service............................... $0.50.
Mexico service............................... $0.55.
Panama service............................... $0.60.
Europe service............................... $1.13.
Per-item Origination Fee for Monthly Volume
between 161 and 500 items (surcharge): \66\
Canada service............................... $0.75.
Canada service............................... $1.00.
Mexico service............................... $1.05.
Panama service............................... $1.10.
------------------------------------------------------------------------
[[Page 1142]]
---------------------------------------------------------------------------
\43\ Any ODFI incurring less than $50 for the following fees
will be charged a variable amount to reach the minimum: Forward
value and non-value item origination fees, and FedGlobal ACH
origination surcharges.
\44\ Any RDFI not originating forward value and non-value items
and incurring less than $40 in receipt fees will be charged a
variable amount to reach the minimum. Any RDFI that originates
forward value and nonvalue items incurring less than $50 in forward
value and nonvalue item origination fees will only be charged a
variable amount to reach the minimum monthly origination fee.
\45\ This surcharge is assessed on all forward items that
qualify for same-day processing and settlement and is incremental to
the standard origination item fee.
\46\ The fee includes the item and addenda fees in addition to
the conversion fee.
\47\ The fee includes the item and addenda fees in addition to
the conversion fee. Reserve Banks also assess a $45 fee for every
government paper return/NOC they process.
\48\ Origination volumes at these levels qualify for a waterfall
discount which includes all FedACH origination items.
\49\ Origination discounts based on monthly billed receipt
volume apply only to those items received by FedACH receiving points
and are available only to Premium Receivers.
\50\ RDFIs receiving through FedACH less than 90 percent of
their FedACH-originated items.
\51\ This per-item discount is a reduction to the standard
receipt fees listed in this fee schedule.
\52\ Receipt volumes at these levels qualify for a waterfall
discount which includes all FedACH receipt items.
\53\ RDFIs receiving through FedACH at least 90 percent of their
FedACH-originated items, but less than 90 percent of all of their
ACH items originated through any operator.
\54\ RDFIs receiving through FedACH at least 90 percent of all
of their ACH items originated through any operator.
\55\ To qualify for the discount, a financial institution must
meet all of the following criteria in a given month: (1) Be charged
the minimum monthly fee--forward origination (57208); (2) subscribe
to FedLine Web Plus or any higher FedLine[supreg] access solution;
and (3) subscribe to the FedPayments Reporter service, the FedACH
RDFI Alert service, or the FedACH Risk Origination Monitoring
service.
\56\ Criteria may be set for both the Origination Monitoring
Service and the RDFI Alert Service. Subscribers with no criteria set
up will be assessed the $35 monthly package fee.
\57\ Premier reports generated on demand are subject to the
package/tiered fees plus a surcharge.
\58\ The fee applies to RTNs that have received or originated
FedACH transactions during a month. Institutions that receive only
U.S. government transactions or that elect to use a private sector
operator exclusively are not assessed the fee.
\59\ This surcharge is assessed to any RTN that originates at
least one item meeting the criteria for same-day processing and
settlement in a given month.
\60\ The fee is applied to any RTN with activity during a month,
including RTNs of 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 RTNs that use the Reserve Banks for only U.S. government
transactions.
\61\ Fee will be assessed only when automated NOCs are
generated.
\62\ Limited services are offered in contingency situations.
\63\ The fees and credits listed are collected from the ODFI and
credited to NACHA (admin network) or to the RDFI (same-day entry and
unauthorized entry) in accordance with the ACH Rules.
\64\ The international fees and surcharges vary from country to
country as these are negotiated with each international gateway
operator.
\65\ A single monthly fee based on total FedGlobal ACH Payments
origination volume.
\66\ This per-item surcharge is in addition to the standard
domestic origination fees listed in this fee schedule.
\67\ This per-item surcharge is in addition to the standard
domestic receipt fees listed in this fee schedule.
\68\ The associated fees are effective upon availability of the
product.
\69\ A customer that opens at least 1,000 cases in a given month
will receive a 50% discount on the fixed fee for that month.
\70\ The per case fees are rolled up to the parent RTN, such
that a customer that opens a total of 100 cases per month under two
separate RTNs would pay a total of $112.50 ($1.25 for the first 50
cases and $1.00 for the next 50 cases) in addition to the fixed
fees.
FedACH Service 2019 Fee Schedule--Continued
[Effective January 2, 2019. Bold indicates changes from 2018 prices]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Europe service............................... $1.63.
Other FedGlobal ACH Payments Fees:
Canada service:
Return received from Canada \67\............. $0.99
(surcharge).
Trace of item at receiving gateway........... $5.50.
Trace of item not at receiving gateway....... $7.00.
Mexico service:
Return received from Mexico \67\............. $0.91
(surcharge).
Item trace................................... $13.50.
Foreign currency to foreign currency (F3X) $0.67
item originated to Mexico \66\.............. (surcharge).
Panama service:
Return received from Panama \67\............. $1.00
(surcharge).
Item trace................................... $7.00.
NOC.......................................... $0.72.
Europe service:
F3X item originated to Europe \66\........... $1.25
(surcharge).
Return received from Europe \67\............. $1.35
(surcharge).
Item trace................................... $7.00.
Exception Resolution Service: \68\
Fixed Fee per RTN: \69\
Self-Managed Cases........................... $10.00.
Agent-Managed Cases.......................... $10.00.
Federal Reserve Bank-Managed Cases........... $60.00.
Federal Reserve Bank-Managed Cases
Case Open Fee................................ $5.00.
Case Response Fee............................ $5.00.
Variable Case Open Fees (applies to self-managed
and agent-managed cases only at the parent RTN):
\70\
1-50 cases................................... $1.25.
51-100 cases................................. $1.00.
101-500 cases................................ $0.75.
501-1,000 cases.............................. $0.50.
1,001-5,000 cases............................ $0.25.
5,001-10,000 cases........................... $0.20.
10,001-99,999,999 cases...................... $0.10.
------------------------------------------------------------------------
[[Page 1143]]
Fedwire Funds and National Settlement Services 2019 Fee Schedule
[Effective January 2, 2019. Bold indicates changes from 2018 prices.]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Fedwire Funds Service
------------------------------------------------------------------------
Monthly Participation Fee............................ $95.00
Basic volume-based pre-incentive transfer fee 0.820
(originations and receipts)--per transfer for the
first 14,000 transfers per month....................
additional transfers up to 90,000 per month...... 0.245
every transfer over 90,000 per month............. 0.160
Volume-based transfer fee with the incentive discount
(originations and receipts)--per eligible transfer
for: \71\
the first 14,000 transfers per month............. 0.164
additional transfers up to 90,000 per month...... 0.049
every transfer over 90,000 per month............. 0.032
Surcharge for Offline Transfers (Originations and 65.00
Receipts)...........................................
Surcharge for End-of-Day Transfer Originations \72\.. 0.26
Monthly FedPayments Manager import/export fee \73\... 50.00
Surcharge for high-value payments:
>$10 million..................................... 0.14
>$100 million.................................... 0.36
Surcharge for Payment Notification:
Origination Surcharge \74\....................... 0.01
Receipt Volume \75\.............................. N/A
Delivery of Reports--Hard Copy Reports to On-Line 50.00
Customers...........................................
Special Settlement Arrangements (charge per 150.00
settlement day) \76\................................
------------------------------------------------------------------------
National Settlement Service
------------------------------------------------------------------------
Basic:
Settlement Entry Fee............................. 1.50
Settlement File Fee.............................. 30.00
Surcharge for Offline File Origination \77\.......... 45.00
Minimum Monthly Fee \78\............................. 60.00
------------------------------------------------------------------------
---------------------------------------------------------------------------
\71\ The incentive discounts apply to the volume that exceeds 60
percent of a customer's historic benchmark volume. Historic
benchmark volume is based on a customer's average daily activity
over the previous five calendar years. If a customer has fewer than
five full calendar years of previous activity, its historic
benchmark volume is based on its daily activity for as many full
calendar years of data as are available. If a customer has less than
one year of past activity, then the customer qualifies automatically
for incentive discounts for the year. The applicable incentive
discounts are as follows: $0.656 for transfers up to 14,000, $0.196
for transfers 14,001 to 90,000, and $0.128 for transfers over
90,000.
\72\ This surcharge applies to originators of transfers that are
processed by the Reserve Banks after 5:00 p.m. eastern time.
\73\ This fee is charged to any Fedwire Funds participant that
originates a transfer message via the FedPayments Manager Funds tool
and has the import/export processing option setting active at any
point during the month.
\74\ Payment Notification and End-of-Day Origination surcharges
apply to each Fedwire funds transfer message.
\75\ Provided on billing statement for informational purposes
only.
\76\ This charge is assessed to settlement arrangements that use
the Fedwire Funds Service to effect the settlement of interbank
obligations (as opposed to those that use the National Settlement
Service). With respect to such special settlement arrangements,
other charges may be assessed for each funds transfer into or out of
the accounts used in connection with such arrangements.
\77\ Offline 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.
\78\ Any settlement arrangement that accrues less than $60
during a calendar month will be assessed a variable amount to reach
the minimum monthly fee.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
\79\ This surcharge is set by the Federal Reserve Banks. It is
in addition to any basic transfer or reversal fee.
\80\ The Federal Reserve Banks offer an automated claim
adjustment process only for Agency mortgage-backed securities.
\81\ This fee is set by and remitted to the Government National
Mortgage Association (GNMA).
\82\ The Federal Reserve Banks charge participants a Joint
Custody Origination Surcharge for both Agency and Treasury
securities.
Fedwire Securities Service 2019 Fee Schedule (Non-Treasury Securities)
[Effective January 2, 2019. Bold indicates changes from 2018 prices.]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
Basic Transfer Fee:
Transfer or reversal originated or received...... $0.98
Surcharge: \79\
Offline origination & receipt surcharge.......... 80.00
Monthly Maintenance Fees:
Account maintenance (per account)................ 57.50
Issue maintenance (per issue/per account)........ 0.77
Claims Adjustment Fee \80\........................... 1.00
GNMA Serial Note Stripping or Reconstitution Fee \81\ 9.00
Joint Custody Origination Surcharge \82\............. 46.00
Delivery of Reports--Hard Copy Reports to On-Line 50.00
Customers...........................................
------------------------------------------------------------------------
[[Page 1144]]
FedLine 2019 Fee Schedule
[Effective January 2, 2019. Bold indicates changes from 2018 prices.]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
FedComplete Packages (monthly) 83 84 85
------------------------------------------------------------------------
FedComplete 100A Plus................................ $825.00.
includes:
FedLine Advantage Plus package...................
FedLine subscriber 5-pack........................
7,500 FedForward transactions....................
46 FedForward Cash Letter items..................
70 FedReturn transactions........................
14,000 FedReceipt[supreg] transactions...........
35 Fedwire Funds origination transfers...........
35 Fedwire Funds receipt transfers...............
Fedwire participation fee........................
1,000 FedACH origination items...................
FedACH minimum fee--Forward Origination..........
7,500 FedACH receipt items.......................
FedACH receipt minimum fee.......................
10 FedACH web return/NOC.........................
500 FedACH addenda originated....................
1,000 FedACH addenda received....................
100 FedACH Same-Day origination items............
FedACH account servicing.........................
FedACH settlement................................
FedACH Same-Day origination participation fee....
FedComplete 100A Premier............................. $900.00.
includes:
FedLine Advantage Premier package................
Volumes included in the FedComplete 100A Plus
package.........................................
FedComplete 100C Plus................................ $1,375.00.
includes:
FedLine Command Plus package.....................
Volumes included in the FedComplete 100A Plus
package.........................................
FedComplete 200A Plus................................ $1,350.00.
includes:
FedLine Advantage Plus package...................
FedLine subscriber 5-pack........................
25,000 FedForward transactions...................
46 FedForward Cash Letter items..................
225 FedReturn transactions.......................
25,000 FedReceipt transactions...................
100 Fedwire Funds origination transfers..........
100 Fedwire Funds receipt transfers..............
Fedwire participation fee........................
2,000 FedACH origination items...................
FedACH minimum fee--forward origination..........
25,000 FedACH receipt items......................
FedACH receipt minimum fee.......................
20 FedACH web return/NOC.........................
750 FedACH addenda originated....................
1,500 FedACH addenda received....................
200 FedACH Same-Day origination items............
FedACH account servicing.........................
FedACH settlement................................
FedACH Same-Day origination participation fee....
FedComplete 200A Premier............................. $1,425.00.
includes:
FedLine Advantage Premier package................
Volumes included in the FedComplete 200A Plus
package.........................................
FedComplete 200C Plus................................ $1,900.00.
includes:
FedLine Command Plus package.....................
Volumes included in the FedComplete 200A Plus
package.........................................
FedComplete Excess Volume and Receipt Surcharge: \86\
FedForward \87\.................................. $0.037/item.
FedReturn........................................ $0.8200/item.
FedReceipt....................................... $0.00005/item.
Fedwire Funds Origination........................ $0.8200/item.
Fedwire Funds Receipt............................ $0.082/item.
FedACH Origination............................... $0.0035/item.
FedACH Receipt................................... $0.00035/item.
FedComplete credit adjustment........................ various.
FedComplete debit adjustment......................... various.
------------------------------------------------------------------------
FedLine Customer Access Solutions (monthly)
------------------------------------------------------------------------
FedMail \88\......................................... $85.00.
includes:
FedMail access channel...........................
Check FedFoward, Fed Return and FedReceipt
Services........................................
FedACH Download Advice and Settlement Information
[[Page 1145]]
Fedwire Funds Offline Advices....................
Check 21 Duplicate Notification Service..........
Check Adjustments................................
Funds Offline Advices............................
Daily Statement of Account (Text)................
Daylight Overdraft Reports.......................
Monthly Statement of Service Charges (Text)......
Electronic Cash Difference Advices...............
FedLine Exchange \88\................................ $40.00.
includes:
E-Payments Directory (via manual download).......
FedLine Exchange Premier \88\........................ $125.00.
includes:
FedLine Exchange package.........................
E-Payments Routing Directory (via auto download).
FedLine Web \89\..................................... $110.00.
includes:
FedLine Web access channel.......................
Services included in the FedLine Exchange package
Check FedForward, FedReturn and FedReceipt
services........................................
Check 21 Duplicate Notification Service..........
Check Adjustments................................
FedACH Derived Returns and NOCs..................
FedACH File, Batch and Item Detail Information...
FedACH Customer Profile Information..............
FedACH Returns Activity Statistics...............
FedACH Risk RDFI Alert Service...................
FedACH Risk Returns Reporting Service............
FedCash[supreg] Services.........................
FedLine Web Plus \89\................................ $160.00.
includes:
FedLine Web package..............................
FedACH Risk Origination Monitoring Service.......
FedACH FedPayments Reporter Service..............
Check Large Dollar Return........................
Check FedImage Services..........................
Account Management Information (AMI).............
Daily Statement of Account (PDF, Text)...........
Monthly Account Services (SCRD File, Monthly
Statement of Service Charges....................
(PDF), Monthly Statement of Service Charges
(Text)).........................................
E-Payments Routing Directory (auto download).....
FedLine Advantage \89\............................... $415.00.
includes:
FedLine Advantage access channel.................
One VPN device...................................
Services included in the FedLine Web package.....
FedACH transactions..............................
Fedwire Originate and Receive Funds Transfer.....
Fedwire Originate and Receive Securities Transfer
National Settlement Service transactions.........
Check Large Dollar Return........................
Check FedImage Services..........................
Account Management Information with Intra-Day
Download Search File............................
Daily Statement of Account (PDF, Text)...........
Monthly Account Services (SCRD File, Monthly
Statement of Service Charges....................
(PDF), Monthly Statement of Service Charges
(Text)).........................................
FedLine Advantage Plus \89\.......................... $460.00.
includes:
FedLine Advantage package........................
One VPN device...................................
FedACH Risk Origination Monitoring Service.......
FedACH FedPayments Reporter Service..............
Fedwire Funds FedPayments Manager Import/Export
(less than or equal to 250......................
Fedwire transactions and one routing number per
month)..........................................
FedTransaction Analyzer[supreg] (less than 250 or
equal to Fedwire transactions and one routing
number per month)...............................
E-Payments Routing Directory (via auto download).
FedLine Advantage Premier \89\....................... $570.00.
includes:
FedLine Advantage Plus package...................
Two VPN devices..................................
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................................. $1,035.00.
includes:
FedLine Command access channel...................
Services included in the FedLine Advantage Plus
package.........................................
One VPN device...................................
FedLine Command server certificates..............
Fedwire Statement Services.......................
[[Page 1146]]
Fedwire Funds FedPayments Manager Import/Export..
FedTransaction Analyzer..........................
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 (Legacy) \90\.................... $4,000.00.
includes:
FedLine Direct access channel....................
One VPN device...................................
256K Dedicated WAN Connection....................
Services included in the FedLine Command Plus
package.........................................
Two FedLine Direct server certificates...........
Daily Overdraft Reports..........................
Treasury Check Information System (TCIS).........
FedLine Direct Plus.................................. $5,500.00.
includes:
FedLine Direct access channel....................
One VPN device...................................
2 Mbps Dedicated WAN Connection..................
Services included in the FedLine Command Plus
package.........................................
FedLine Direct server certificates...............
Treasury Check Information System (TCIS).........
Dual Vendors.....................................
FedLine Direct Contingency Solution (ACH)........
Check 21 Services................................
FedLine Direct Premier (Legacy) \90\................. $6,800.00.
includes:
FedLine Direct Plus package (legacy).............
T1 dedicated WAN connection......................
Two VPN devices..................................
FedLine Direct Premier............................... $10,500.00.
includes:
FedLine Direct Plus package (new)................
One additional dedicated WAN connection..........
One Network Diversity............................
Two VPN devices..................................
------------------------------------------------------------------------
A la carte options (monthly) \91\
------------------------------------------------------------------------
Electronic Access:
FedMail--FedLine Exchange Subscriber 5-pack...... $15.00.
FedLine Subscriber 5-pack (access to Web and $80.00.
Advantage)......................................
Additional FedLine Direct Certificate \92\....... $100.00.
Additional VPNs \93\............................. $100.00.
Additional WAN connections.......................
256K(Legacy) \90\............................ $2,500.00.
T1 (Legacy) \90\............................. $3,200.00.
2 Mbps....................................... $3,000.00.
WAN Connection Upgrade:
10 Mbps \94\................................. $1,700.00.
30 Mbps \94\................................. $3,000.00.
50 Mbps \94\................................. $4,000.00.
100 Mbps \94\................................ $7,000.00.
200 Mbps \94\................................ $11,000.00.
FedLine International Setup (one-time fee)....... $5,000.00.
FedLine Custom Implementation Fee \95\........... various.
Network Diversity................................ $2,500.00.
FedLine Direct Contingency Solution \96\......... $1,000.00.
Check 21 Large File Delivery \97\................ various.
FedMail Email (for customers with FedLine Web and $20.00.
above) \98\.....................................
FedMail Fax \99\................................. $100.00.
VPN Device Modification.......................... $200.00.
VPN Device Missed Activation Appointment......... $175.00.
VPN Device Expedited Hardware Surcharge.......... $100.00.
VPN Device Replacement or Move................... $300.00.
E-Payments Automated Download (1-5 Add'l Codes).. $75.00.
E-Payments Automated Download (6-20 Add'l Codes). $150.00.
E-Payments Automated Download (21-50 Add'l Codes) $300.00.
E-Payments Automated Download (51-100 Add'l $500.00.
Codes)..........................................
E-Payments Automated Download (101-250 Add'l $1,000.00.
Codes)..........................................
E-Payments Automated Download (>250 Add'l Codes). $2,000.00.
Accounting Information Services (monthly):
Cash Management System (CMS) Plus--Own report--up
to six files with: \100\
no respondent/sub-account activity........... $60.00.
less than 9 respondent and/or sub-accounts... $125.00.
10-50 respondent and/or sub-accounts......... $250.00.
------------------------------------------------------------------------
[[Page 1147]]
---------------------------------------------------------------------------
\83\ FedComplete packages are all-electronic service options
that bundle payment services with an access solution for one monthly
fee.
\84\ Packages with an 'A' include the FedLine Advantage channel,
while packages with `C' include the FedLine Command channel.
\85\ FedComplete customers that use the email service would be
charged the FedMail Email a la carte fee and for all FedMail-FedLine
Exchange Subscriber 5-packs.
\86\ Per-item surcharges are in addition to the standard fees
listed in the applicable priced services fee schedules.
\87\ FedComplete customers will be charged $4 for each
FedForward cash letter over the monthly package threshold. This
activity will appear under billing code 51998 in Service Area 1521
on a month-lagged basis.
\88\ FedMail and FedLine Exchange packages do not include user
credentials, which are required to access priced services and
certain informational services. Credentials are sold separately in
packs of five via the FedMail-FedLine Exchange Subscriber 5-pack.
\89\ FedLine Web and Advantage packages do not include user
credentials, which are required to access priced services and
certain informational services. Credentials are sold separately in
packs of five via the FedLine Subscriber 5-pack.
\90\ Limited to installed base only. All customers with 256K or
T1 connections will need to upgrade to a minimum 2Mbps Ethernet line
speed connection.
\91\ These add-on services can be purchased only with a FedLine
Customer Access Service option.
\92\ Additional FedLine Direct Certificates available for
FedLine Direct packages (legacy) only.
\93\ Additional VPNs are available for FedLine Advantage,
FedLine Command, and FedLine Direct packages only.
\94\ These upgrades are only available for the new FedLine
Direct packages and the Add'l 2M WAN connection. Fee is in addition
to the FedLine Direct package fees or additional WAN fees.
\95\ The FedLine Custom Implementation Fee is $2,500 or $5,000
based on the complexity of the setup.
\96\ Fee only applies to customers in a legacy FedLine Direct
package. This feature is included in the monthly fee for customers
in the new FedLine Direct packages.
\97\ Limited to installed base only. The fee currently ranges
from $1,400 to $20,725 depending on the size, speed, and location of
the connection. All customers will eventually need to upgrade to a
minimum 2 Mbps Ethernet line speed connection with the associated
FedLine Direct package.
\98\ Available only to customers with a priced FedLine package.
\99\ Limited to installed base only.
\100\ Cash Management Service options are limited to plus and
premier packages.
\101\ The End of Day Reconcilement File option is available for
FedLine Web Plus, FedLine Advantage Plus, and Premier packages. It
is available for no extra fee in FedLine Command Plus and Direct
packages.
\102\ The Statement of Account Spreadsheet File option is
available for FedLine Web Plus, FedLine Advantage Plus, and Premier
packages. It is available for no extra fee in FedLine Command Plus
and Direct packages.
\103\ The Intra-day Download Search File option is available for
the FedLine Web Plus package. It is available for no extra fee in
FedLine Advantage and higher packages.
FedLine 2019 Fee Schedule--Continued
[Effective January 2, 2019. Bold indicates changes from 2018 prices.]
------------------------------------------------------------------------
Fee
------------------------------------------------------------------------
51-100 respondents and/or sub-accounts....... $500.00.
101-500 respondents and/or sub-accounts...... $750.00.
>500 respondents and/or sub-accounts......... $1,000.00.
End-of-Day Financial Institution Reconcilement $150.00.
Data (FIRD) File \101\..........................
Statement of Account Spreadsheet File \102\...... $150.00.
Intra-day Download Search File (with AMI) \103\.. $150.00.
Other
Software Certification........................... $0.00 to
$8,000.00.
Vendor Pass-Through Fee.......................... various.
Electronic Access Credit Adjustment.............. various.
Electronic Access Debit Adjustment............... various.
------------------------------------------------------------------------
By order of the Board of Governors of the Federal Reserve
System, November 15, 2018.
Ann Misback,
Secretary of the Board.
[FR Doc. 2019-00624 Filed 1-31-19; 8:45 am]
BILLING CODE 6210-01-P
