[Federal Register: November 9, 2004 (Volume 69, Number 216)]
[Notices]
[Page 64933-64954]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no04-66]
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FEDERAL RESERVE SYSTEM
[Docket No. OP-1216]
Federal Reserve Bank Services
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice.
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SUMMARY: The Board has approved the 2005 fee schedules for Federal
Reserve priced services and electronic access and a private-sector
adjustment factor (PSAF) for 2005 of $161 million. These actions were
taken in accordance with the requirements of the Monetary Control Act
of 1980, which requires that, over the long run, fees for Federal
Reserve priced services be established on the basis of all direct and
indirect costs, including the PSAF. The Board has also approved
changing the earnings credit rate on clearing balances from 90 percent
of the three-month Treasury bill rate to 80 percent of the three-month
Treasury bill rate.
DATES: The new fee schedules become effective January 3, 2005, except
Fedwire funds transaction fees, which become effective July 1, 2005.
The change in the earnings credit rate on clearing balances becomes
effective January 6, 2005.
FOR FURTHER INFORMATION CONTACT: For questions regarding the fee
schedules: Jack K. Walton II, Assistant Director, (202/452-2660);
Gregory E. Cannella, Financial Services Analyst, (202/530-6214),
Division of Reserve Bank Operations and Payment Systems. For questions
regarding the PSAF and earnings credits on clearing balances: Gregory
L. Evans, Manager, Financial Accounting, (202/452-3945); or Brenda
Richards, Financial Project Leader, (202/452-2753); or Jonathan
Mueller, Financial Analyst, (202/530-6291), 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 2005
fee schedules for the check service are available from the Board, the
Federal Reserve Banks, or the Reserve Banks' financial services Web
site at http://www.frbservices.org.
SUPPLEMENTARY INFORMATION:
I. Priced Services
A. Discussion--From 1994 through 2003, the Reserve Banks recovered
97.8 percent of their total costs for providing priced services,
including special project costs, imputed expenses, and targeted after-
tax profits or return on equity (ROE).\1\
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\1\ These imputed expenses, such as taxes that would have been
paid, and the return on equity that would have to be earned had the
services been furnished by a private business firm, are referred to
as the private-sector adjustment factor (PSAF). The ten-year
recovery rate is based upon the pro forma income statements for
Federal Reserve Banks' priced services published in the Board's
Annual Report. Beginning in 2000, the PSAF has included additional
financing costs associated with pension assets attributable to
priced services. This ten-year cost recovery rate has been computed
as if these costs were not included in the PSAF calculations prior
to 2000. If these costs were included in the calculations, and
assuming that the Reserve Banks would not have made any
contemporaneous cost or revenue adjustments, the ten-year recovery
rate would be 96.9 percent.
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Table 1 summarizes 2003 actual, 2004 estimated, and 2005 budgeted
cost recovery rates for priced services. Cost recovery is estimated to
be 94.6 percent in 2004 and budgeted to be 100.1 percent in 2005. The
performance of the check service heavily influences the aggregate cost
recovery rates, and accounts for approximately 80 percent of the total
cost of priced services. The electronic services (FedACH, Fedwire funds
and national settlement (NSS), and Fedwire securities) account for
approximately 20 percent of costs, while the noncash collection service
represents a de minimis amount.
Table 1.--Pro Forma Cost and Revenue Performance a
[$ millions]
----------------------------------------------------------------------------------------------------------------
5 Recovery
2 \c\ Total 3 Net income 4 \d\ Target rate after
Year 1 \b\ Revenue expense (ROE) [1-2] ROE target ROE [1/
(2+4)]
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2003\e\......................... 881.7 931.3 -49.6 104.7 85.1%
2004 (Estimate)................. 910.8 850.6 60.2 112.4 94.6%
2005 (Budget)................... 900.6 796.9 103.7 102.9 100.1%
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\a\ Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding.
\b\ Revenue includes net income on clearing balances (NICB). For 2003, clearing balances, net of imputed reserve
requirements and balances used to finance priced services assets, are assumed to be invested in three-month
Treasury bills. For 2004 and 2005, net clearing balances are assumed to be invested in a broader portfolio of
investments. Based on the historical average return on the broader portfolio, income is imputed as a constant
return over the rate used to determine the cost of clearing balances. NICB equals the imputed income from
these investments less earnings credits granted to holders of clearing balances. For 2003, the cost of
clearing balances was based on the federal funds rate, and for 2004 and 2005 the cost is based on the
discounted three-month Treasury bill rate.
\c\ The calculation of total expense includes operating, imputed, and other expenses. Imputed and other expenses
include taxes, FDIC insurance, Board of Governors' priced services expenses, the cost of float, and interest
on imputed debt, if any. Credits or debits related to the accounting for pensions under FAS 87 are also
included.
\d\ Target ROE is the after-tax ROE included in the PSAF.
\e\ 2003 calculations include special cash services, which are no longer offered by the Reserve Banks.
Table 2 presents an overview of the 2003 actual, 2004 budget, 2004
estimate, and 2005 budget cost recovery performance by priced service.
[[Page 64934]]
Table 2.--Priced Services Cost Recovery
[percent]
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2004 2005 Budget
Priced service 2003 2004 Budget Estimate \a\
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All services................................................ 85.1 92.9 94.6 100.1
Check....................................................... 82.7 91.5 93.5 100.0
FedACH...................................................... 100.3 99.7 101.0 100.4
Fedwire funds & NSS......................................... 97.4 100.9 98.1 100.0
Fedwire securities.......................................... 106.1 104.0 102.4 102.3
Noncash collection.......................................... 123.1 112.0 110.2 76.0
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\a\ 2005 budget figures reflect the latest data from Reserve Banks. Reserve Banks will report final budget data
to the Board by the end of November 2004.
1. 2004 Estimated Performance--In 2004, the Reserve Banks estimate
that they will recover 94.6 of the costs of providing priced services,
including imputed expenses and targeted ROE, compared with a targeted
recovery rate of 92.9 percent, as shown in table 2. The Reserve Banks
exceeded the 2004 budget targets for the check and FedACH services. The
98.1 percent estimated recovery rate for the Fedwire funds and national
settlement service, however, is below the targeted recovery rate of
100.9 percent. This difference is due to both lower revenue, associated
with less-than-anticipated volume growth, and greater costs, associated
with a movement to an Internet-based distribution channel for these and
other electronic services. While achieving full cost recovery, the
Fedwire securities and noncash collection services' shortfalls relative
to the budgeted recovery rates are primarily attributed to lower-than-
expected volume. Although the estimated 2004 overall recovery rate for
priced services is below 100 percent, the Reserve Banks estimate that
they will fully recover actual and imputed expenses and earn net income
of $60.2 million compared with a targeted ROE of $112.4 million. This
ROE shortfall is largely driven by the accrual of one-time costs
associated with the second round of Reserve Banks' check restructuring
efforts, lower-than-expected check service revenues due to a greater-
than-anticipated decline in check volumes, and by lower-than-expected
net income from clearing balances (NICB).\2\
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\2\ The first round of the Reserve Banks' check restructuring
initiative will have reduced Federal Reserve check processing
locations from 45 to 32 sites and streamlined check adjustments
functions by the end of 2004. Additionally, in August 2004, the
Reserve Banks announced further changes to increase the efficiency
of their check processing operations and will reduce further the
number of check operations from 32 to 23 sites by early 2006. (See
http://www.federalreserve.gov/boarddocs/press/other/2004/20040802/default.htm.
)
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Recent anecdotal information from the industry suggests that check
use in the United States continues to decline.\3\ Additionally, an
increasing proportion of checks are being converted to automated
clearinghouse transactions at retail lockboxes, which results in fewer
interbank checks. As a result of these factors, check volume processed
by the Reserve Banks has declined about 10 percent year-to-date. In
response to volume declines, the Reserve Banks have continued to
restructure their check processing operations and in 2004 incurred
additional one-time costs associated with further restructurings in
2005. This initiative will provide ongoing operational and cost
efficiencies for the Reserve Banks and is expected to enable the
Reserve Banks to achieve full cost recovery in 2005.
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\3\ The Federal Reserve's 2001 retail payments research
indicated that check use began declining in the mid 1990s. See
Gerdes, Geoffrey R. and Jack K. Walton II, ``The Use of Checks and
Other Noncash Payment Instruments in the United States,'' Federal
Reserve Bulletin, August 2002, pp. 360-374. (See http://www.federalreserve.gov/pubs/bulletin/default.htm.
) This study is
being updated and the results are forthcoming by early December
2004.
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2. 2005 Projected Performance--For 2005, the Reserve Banks project
a priced services cost recovery rate of 100.1 percent. The 2005 fees
for priced services are projected to result in a net income of $103.7
million or $0.8 million above the targeted ROE. The primary risks to
the Reserve Banks' ability to achieve their budget targets are (1)
greater-than-expected costs associated with the check restructuring
initiatives, (2) a greater falloff in the Reserve Banks' check volume
than the projected 15.8 percent decrease, and (3) a greater-than-
expected shift from higher margin products to lower margin products. In
light of these risks and the changing payments landscape, the Reserve
Banks will continue to modify their business and operational strategies
to improve efficiency, reduce excess capacity and other costs, and
position themselves to achieve their financial and payment system
objectives and statutory requirements over the long term.
3. 2005 Pricing--The following summarizes the changes in the
Reserve Banks' fee structures and levels for priced services in 2005,
and indicates the overall experience with prices in each service line
since 1996: \4\
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\4\ Data elements used in calculating the price index for 2003
and previous years include explicit fee revenue from priced services
and volumes associated with those services. For 2004 and 2005, the
year-over-year percentage changes are based on comparisons of the
2003 results, 2004 estimates, and 2005 projections.
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Check
The Reserve Banks will raise fees for forward-collection
check products 7.9 percent, return-check products 8.1 percent, and
payor bank check products 2.8 percent compared with January 2004 fees.
With the 2005 fee changes, the price index for the check
service will have increased 40 percent since 1996.
FedACH
The Reserve Banks will retain fees at their current
levels.
With the 2005 fee changes, the price index for the FedACH
service will have decreased 66 percent since 1996.
Fedwire funds and national settlement
The Reserve Banks will increase Fedwire funds per transfer
fees by one cent in all volume tiers, effective July 1, 2005.
With the 2005 fee changes, the price index for the Fedwire
funds and national settlement service will have decreased 59 percent
since 1996.
Fedwire Securities
The Reserve Banks will increase the off-line surcharge
from $28 to $33 per transfer and increase the joint custody surcharge
from $30 to $35. The Reserve Banks will retain all other fees at their
current levels.
With the 2005 fee changes, the price index for the Fedwire
securities service will have decreased 43 percent since 1996.
[[Page 64935]]
4. 2005 Price Index--Figure 1 compares indexes of fees for the
Federal Reserve's priced services with the GDP price deflator. Compared
with the price index for 2004, the price index for all Federal Reserve
Bank priced services is projected to increase 7.3 percent in 2005. The
price index for electronic payment services (FedACH, Fedwire funds and
national settlement, Fedwire securities, and electronic check
products), as well as electronic access to Federal Reserve Banks'
priced services, is projected to increase 2.6 percent in 2005. The
price index for paper-based payment services (check and noncash
collection) is expected to increase 7.9 percent in 2005. Since 1996,
the price index for all priced services has increased a total of 10.6
percent.
BILLING CODE 6210-01-P
[GRAPHIC] [TIFF OMITTED] TN09NO04.000
BILLING CODE 6210-01-C
[[Page 64936]]
B. Earnings Credits on Clearing Balances--The Board has approved
changing the rate used in calculating earnings credits on clearing
balances from 90 percent of the three-month Treasury bill rate to 80
percent of the three-month Treasury bill rate, effective January 6,
2005.\5\ This change will lower the Reserve Banks' cost of clearing
balances.
Clearing balances were introduced in 1981, as a part of the Board's
implementation of the Monetary Control Act, to facilitate access to
Federal Reserve priced services by institutions that did not have
sufficient reserve balances to support the settlement of their payment
transactions. Beginning in 2004, the earnings credit calculation was
changed from using the federal funds rate to using a percentage
discount on a rolling thirteen-week average of the annualized coupon
equivalent yield of three-month Treasury bills in the secondary market.
Earnings credits can be used only to offset charges for priced
services, are calculated monthly, and expire if not used within one
year.\6\
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\5\ Two adjustments are applied to the earnings credit rate so
that the return on clearing balances at the Federal Reserve is
comparable to what the depository institution would have earned had
it maintained the same balances at a private-sector correspondent.
The ``imputed reserve requirement'' adjustment is made because a
private-sector correspondent would be required to hold reserves
against the respondent's balance with it. As a result, the
correspondent would reduce the balance on which it would base
earnings credits for the respondent because it would be required to
hold a portion, determined by its marginal reserve ratio, in the
form of non-interest-bearing reserves. For example, if a depository
institution held $1 million in clearing balances with a
correspondent bank and the correspondent had a marginal reserve
ratio of 10 percent, then the correspondent bank would be required
to hold $100,000 in reserves, and it would grant credits to the
respondent based on 90 percent of the balance, or $900,000. This
adjustment imputes a marginal reserve ratio of 10 percent to the
Reserve Bank.
The ``marginal reserve requirement'' adjustment accounts for the
fact that the respondent can deduct balances maintained at a
correspondent, but not the Federal Reserve, from its reservable
liabilities. This reduction has value to the respondent when it
frees up balances that can be invested in interest-bearing
instruments, such as federal funds. For example, a respondent
placing $1 million with a correspondent rather than the Federal
Reserve would free up $30,000 if its marginal reserve ratio were 3
percent.
The formula used by the Reserve Banks to calculate earnings
credits can be expressed as e = [b * (1-FRR) * r] + [b * (MRR) * f]
Where e is total earnings credits, b is the average clearing
balance maintained, FRR is the assumed Reserve Bank marginal reserve
ratio (10 percent), r is the earnings credit rate, MRR is the
marginal reserve ratio of the depository institution holding the
balance (either 0 percent, 3 percent, or 10 percent), and f is the
average federal funds rate. A depository institution that meets its
reserve requirement entirely with vault cash is assigned a marginal
reserve requirement of zero.
\6\ A band is established around the contracted clearing balance
to determine the maximum balance on which credits are earned as well
as any deficiency charges. The clearing balance allowance is 2
percent of the contracted amount, or $25,000, whichever is greater.
Earnings credits are based on the period-average balance maintained
up to a maximum of the contracted amount plus the clearing balance
allowance. Deficiency charges apply when the average balance falls
below the contracted amount less the allowance, although credits are
still earned on the average maintained balance.
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C. Check--Table 3 below shows the 2003, 2004 estimate, and 2005
budgeted cost recovery performance for the check service.
Table 3.--Check Pro Forma Cost and Revenue Performance
[$ millions]
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5 Recovery
2 Total 3 Net income rate after
Year 1 Revenue expense (ROE) [1-2] 4 Target ROE target ROE [1/
(2+4)]
----------------------------------------------------------------------------------------------------------------
2003............................ 737.9 803.2 -65.3 89.4 82.7%
2004 (Estimate)................. 756.0 714.9 41.1 93.6 93.5%
2005 (Budget)................... 731.6 649.2 82.4 82.0 100.0%
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1. 2004 Estimate--For 2004, the Reserve Banks estimate that the
check service will recover 93.5 percent of total expenses, including
imputed expenses, and targeted ROE, compared with the budgeted recovery
rate of 91.5 percent (see table 4). Through August 2004, the check
service has recovered 94.3 percent of total costs, including imputed
expenses, and targeted ROE. For the full year, the Reserve Banks expect
to recover all actual and imputed expenses of providing check services
and earn net income of $41.1 million, representing a portion of the
targeted ROE.
Table 4.--Check 2004 Budget vs. 2004 Estimate
[millions of dollars]
------------------------------------------------------------------------
2004
2004 Budget Estimate Variance
------------------------------------------------------------------------
Service revenue.................. 727.1 718.1 -9.0
NICB............................. 43.6 37.9 -5.7
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Total revenue................ 770.7 756.0 -14.7
==================================
Local operating costs............ 506.7 472.0 -34.7
Other operating costs............ 224.7 225.3 0.6
RPO initiatives\a\............... 29.0 24.0 -5.0
Pension credits.................. -11.4 -6.4 5.0
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Total expense................ 749.0 714.9 -34.1
==================================
Net Income................... 21.7 41.1 19.4
==================================
Target ROE....................... 93.6 93.6
[[Page 64937]]
Recovery rate (percent).......... 91.5 93.5
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\a\ These are primarily check restructuring and Check 21-related
expenses.
The higher-than-budgeted cost recovery is the result of lower-than-
anticipated costs of $34.1 million that were partially offset by
revenue shortfalls of $14.7 million. The lower costs were largely due
to Reserve Banks reducing local operating costs by $34.7 million. The
shortfall in revenue is due to lower-than-anticipated service revenue
and NICB. Service revenue is estimated to be $9.0 million below budget
due to a greater-than-anticipated decline in check volumes.
The volume of checks handled by the Reserve Banks has declined (as
shown in table 5), reflecting broader market trends including
alternative clearing methods and less frequent use of checks. Forward-
collection check volume through August, excluding electronic fine sort
volume, declined 10.5 percent.\7\ For full-year 2004, the Reserve Banks
estimate that forward-collection volume will decline 10.1 percent,
compared with a budgeted decline of 8.9 percent. Return check volume
has declined 11.7 percent through August 2004. The Reserve Banks expect
that return check volume will decline 8.3 percent for the full year,
compared with a budgeted decline of 7.0 percent. The Reserve Banks
anticipate higher forward and return volume growth for the remainder of
the year based additional new customer volumes. Board staff believes
that these volume expectations for full-year 2004 may be somewhat
optimistic.
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\7\ Two Reserve Banks offer an electronic fine-sort product,
which allows depository institutions to exchange fine-sort
information electronically between themselves with paper checks to
follow.
Table 5.--Paper Check Product Volume Changes
[percent]
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Year-to-date Estimated
Budgeted 2004 change through 2004
change August 2004 change
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Total forward-collection\a\.. -8.9 -10.5 -10.1
Forward-processed........ -8.9 -9.9 -9.7
Fine-sort \a\............ -8.1 -19.6 -16.7
Returns...................... -7.0 -11.7 -8.3
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\a\ These rates exclude electronic fine-sort volume. Including the
electronic fine-sort product, fine-sort volume was budgeted to decline
32.9 percent in 2004 and is now estimated to decline 11.3 percent.
Electronic check presentment volumes are estimated to decline for
full-year 2004, as summarized in table 6. Reserve Banks provide paying
banks with electronic check data or images for approximately 41 percent
of the checks they collect. Image volumes are estimated to decline 4.7
percent to approximately 1.4 billion check images, which represent
about 10.7 percent of all checks collected by the Reserve Banks. The
aggregate decline in electronic check data and image volumes is less
than that of check volume more generally, and as a proportion of total
check volume, the use of electronic check data and images is growing.
Table 6.--Electronic Check Product Share and Volume Changes
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Share of
Volume change Estimated 2004 checks
through change collected
August 2004 (percent) through August
(percent) 2004 (percent)
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Electronic check presentment \a\................................ -10.2 -8.3 24.2
Truncation.................................................. -11.1 -9.9 5.7
Non-truncation.............................................. -9.9 -7.7 18.6
Electronic check information.................................... -12.7 -11.2 6.4
Images.......................................................... -1.6 -4.7 10.7
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\a\ ECP consists of truncated and non-truncated checks. Non-truncated checks include checks presented through
the MICR presentment and MICR presentment plus products.
2. 2005 Projection--The Reserve Banks are planning to return to
full cost recovery in 2005 by focusing on further opportunities to
streamline check processing and administrative activities across the
System, as well as expanding their Check 21-related product offerings.
A number of cost reduction initiatives have been identified and are
currently in various stages of implementation. In 2005, the service
will achieve the full cost savings with the decisions made in
[[Page 64938]]
2003 and 2004 to discontinue processing checks at thirteen sites
nationwide. The Reserve Banks will eliminate nine more processing sites
by early 2006, reducing excess processing capacity and lowering ongoing
operating costs by $14 million. Additionally, the Reserve Banks are in
the process of centralizing their float management function and their
pricing and product management activities.
The Reserve Banks plan to offer a comprehensive suite of Check 21-
related products in 2005. These products will include image cash letter
receipt and delivery products as well as substitute check printing. The
pricing of these products will reflect the value to customers of later
deposit deadlines and improved availability. The Reserve Banks will
also modify the pricing structure of existing paper products to
encourage the use of the new Check 21-related products. As the Check
21-related products mature, the pricing of paper products will be
strategically raised to encourage adoption of electronic collection and
presentment alternatives.
There is also a continuing effort in 2005 to set fees to achieve
greater pricing consistency across Reserve Bank product lines. Reserve
Banks will also increase prices of selected products in 2005 to enhance
service revenue. Most of the price increases are targeted at markets
that are costly for the Reserve Banks to serve. Fees to present and
return checks to depository institutions that are distant from Federal
Reserve check processing offices will be increased to better align with
the Reserve Banks' costs to deliver checks to these institutions. The
fee changes will enhance the Reserve Banks' ability to recover costs,
while maintaining the competitiveness of these products.
For 2005, the Reserve Banks are targeting an overall price increase
of 7.9 percent, as shown in table 7. This increase consists of a 7.9
percent increase in forward check-collection fees, composed of a 7.6
percent increase in forward cash letter fees and a 7.9 percent increase
in per-item fees. Fees for return services will increase by 8.1
percent, which is composed of a 4.8 percent increase in return cash
letter fees and an 8.7 percent increase in per-item fees. The average
volume-weighted fees for payor bank services will increase 2.8 percent
compared with current fees.
Table 7.--2005 Fee Changes
[percent]
------------------------------------------------------------------------
Product Fee change
------------------------------------------------------------------------
Total check service........................................ 7.9
Forward-collection......................................... 7.9
Cash letter.............................................. 7.6
Item..................................................... 7.9
Returns.................................................... 8.1
Cash letter.............................................. 4.8
Item..................................................... 8.7
Payor bank services...................................... 2.8
------------------------------------------------------------------------
3. 2005 Cost Recovery--For 2005, projected cost recovery will be
100.0 percent of total costs, including imputed expenses, and targeted
ROE.
Table 8.--Check 2004 Estimate vs. 2005 Budget
[millions of dollars]
------------------------------------------------------------------------
2004
Estimate 2005 Budget Variance
------------------------------------------------------------------------
Service revenue.................. 718.1 681.9 -36.2
NICB............................. 37.9 49.7 11.8
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Total revenue................ 756.0 731.6 -24.4
dLocal operating costs........... 472.0 349.9 -122.1
Other operating costs............ 225.3 295.6 70.3
RPO initiativesa................. 24.0 10.0 -14.0
Pension credits.................. -6.4 -6.3 0.1
--------------
Total expense................ 714.9 649.2 -65.7
dNet Income.................. 41.1 82.4 41.3
dTarget ROE...................... 93.6 82.0
Recovery rate (percent).......... 93.5 100.0
------------------------------------------------------------------------
a These are primarily check restructuring and Check 21-related expenses.
Total expenses are projected to decrease approximately $65.7
million, or 9.2 percent, from the 2004 estimate. The decrease owes
largely to the decline in local operating costs, which are expected to
decrease $122.1 million, or 25.9 percent. This decline reflects
significant reductions in personnel costs, full-year savings associated
with discontinuing the processing of checks at thirteen Federal Reserve
offices as well as partial-year savings associated with discontinuing
the processing of checks at six offices, and a shift of adjustment
costs resulting from a transition to the national management of the
adjustments function. Additional reductions include centralizing float
management and check product development and pricing activities.
Total check revenue is projected to decline $24.4 million, or 3.2
percent, compared with the 2004 estimate. The revenue decline is driven
by a $36.2 million, or 5.0 percent, reduction in service revenue,
largely attributable to a continued downtrend in the Reserve Banks'
check volumes due to the nationwide decline in check use. The price
changes will somewhat attenuate the effect of volume losses on check
revenue. Also partially offsetting the decline in service revenue is a
projected $11.8 million increase in NICB.
In 2005, forward-processed check volume is projected to be 10.6
billion, a decrease of 15.8 percent compared with the 2004 estimate.
The decline in the volume of checks is attributed to the continued
decline in the use of paper checks in the United States, the increasing
use of the ACH to collect payments that were previously processed as
checks, price increases, and the reduction in the number of check
processing sites. Fine-sort check volume is expected to decline 16.7
percent from the 2004 estimate. Total return volume is projected to
decrease 10.1 percent compared with the 2004 estimate.
[[Page 64939]]
The Reserve Banks expect payor bank volumes to decrease. Electronic
presentment volume is expected to decline 6.1 percent in 2005. Image
volume is projected to decline 1.8 percent in 2005, compared with
estimated 2004 volumes. The proportion of processed checks that the
Reserve Banks provide to paying banks with electronic data or images is
projected to rise in 2005 to about 47 percent.
The primary risks to the Reserve Banks' ability to achieve their
budget targets are (1) greater-than-expected costs associated with the
restructuring initiatives, (2) a steeper decline in the Reserve Banks'
check volume than the projected 15.8 percent decrease, and (3) a
greater-than-expected shift from higher margin products to lower margin
products.
D. Automated Clearinghouse (FedACH)--Table 9 below shows the 2003,
2004 estimate, and 2005 budgeted cost recovery performance for the
commercial FedACH service.
Table 9.--FedACH Pro Forma Cost and Revenue Performance
[$ millions]
----------------------------------------------------------------------------------------------------------------
5 Recovery
2 Total 3 Net income rate after
Year 1 Revenue expense (ROE) [1-2] 4 Target ROE target ROE [1/
(2+4)]
----------------------------------------------------------------------------------------------------------------
2003............................ 68.2 60.5 7.7 7.5 100.3%
2004 (Estimate)................. 74.9 65.2 9.7 8.9 101.0%
2005 (Budget)................... 82.1 71.8 10.3 10.0 100.4%
----------------------------------------------------------------------------------------------------------------
1. 2004 Estimate--For 2004, the Reserve Banks estimate that the
FedACH service will recover 101.0 percent of total expenses, including
imputed expenses, and targeted ROE, compared with the budgeted recovery
rate of 99.7 percent. Both ACH revenue and cost estimates were better
than budgeted. Total revenue is estimated to be $0.1 million greater
than budgeted, and total expenses are lower than budgeted by about $0.9
million. Through August 2004, origination volume was 3.1 percent higher
than budgeted.
2. 2005 Pricing--The Reserve Banks project that the FedACH service
will recover 100.4 percent of costs in 2005, including imputed
expenses, and targeted ROE. The Reserve Banks' fees for the FedACH
service will remain unchanged. The Reserve Banks consider continued
price stability important to remaining competitive in the ACH market.
Total revenue is budgeted to increase $7.2 million over the 2004
estimate, reflecting an increase in electronic access fees and service
revenues. Total expenses, including imputed expenses, and targeted ROE
are budgeted to increase $7.6 million over the 2004 estimate because of
an increase in the cost of national support projects, specifically
costs associated with the movement to the Internet-based distribution
channel. In addition, the Reserve Banks have budgeted increased costs
for product development and service initiatives, including FedACH
International and FedACH risk-management services.
The Reserve Banks estimate that national ACH volume will grow 20
percent in 2005. This growth is largely attributable to new one-time
ACH debit transactions, such as check conversion and Internet-initiated
payments. The Reserve Banks, however, generally believe that FedACH
origination volume will grow at a slower rate of 7.7 percent as a
greater proportion of volume shifts to the private-sector ACH operator.
E. Fedwire Funds and National Settlement Service--Table 10 below
shows the 2003, 2004 estimate, and 2005 budgeted cost recovery
performance for the Fedwire funds and national settlement service.
Table 10.--Fedwire Funds and National Settlement Service Pro Forma Cost and Revenue Performance
[$ millions]
----------------------------------------------------------------------------------------------------------------
5 Recovery
2 Total 3 Net income rate after
Year 1 Revenue expense (ROE) [1-2] 4 Target ROE target ROE [1/
(2+4)]
----------------------------------------------------------------------------------------------------------------
2003............................ 51.1 47.1 4.0 5.4 97.4%
2004 (Estimate)................. 57.5 51.8 5.7 6.8 98.1%
2005 (Budget)................... 64.2 56.3 7.9 7.9 100.0%
----------------------------------------------------------------------------------------------------------------
1. 2004 Estimate--For 2004, the Reserve Banks estimate that the
Fedwire funds and national settlement service will recover 98.1 percent
of total expenses, including imputed expenses, and targeted ROE,
compared with a 2004 budgeted recovery rate of 100.9 percent. The
underrecovery is primarily attributed to lower-than-expected on-line
funds transfer volume. Funds transfer volume through August 2004 has
increased 0.2 percent relative to the same period in 2003. The Reserve
Banks had originally projected a 6.8 percent growth in on-line funds
volume for 2004, which was based on historical volume growth. Volume
growth has been weaker than expected, and the Reserve Banks experienced
a slight loss of market share in 2004 to a competitor. For the full
year, the Reserve Banks estimate that volume will increase 2.0 percent
compared with 2003. With respect to the national settlement service,
the Reserve Banks estimate that the volume of settlement entries
processed during 2004 will be slightly higher than the 2004 budget
projection.
2. 2005 Pricing--The Reserve Banks will increase on-line transfer
fees for each Fedwire funds service price tier $0.01, effective July 1,
2005. The surcharge for off-line Fedwire funds transfers and fees for
the national settlement service will remain unchanged.
The Reserve Banks project that the Fedwire funds and national
settlement service will recover 100.0 percent of
[[Page 64940]]
total costs in 2005, including imputed expenses, and targeted ROE.
Total costs for 2005, including imputed expenses, and targeted ROE are
expected to increase $5.6 million from the 2004 estimate primarily
because of rising national costs associated with a movement to an
Internet-based distribution channel, as well as a higher PSAF. Funds
transfer volume for 2005 is expected to increase 2.8 percent compared
with the 2004 estimate. National settlement volume for 2005 is expected
to remain flat compared with the 2004 estimate. The Reserve Banks
project 2005 total revenue to increase by $6.7 million over the 2004
estimate primarily because of mid-year price increases, modest volume
growth, increased NICB, and higher electronic access revenue.
F. Fedwire Securities Service--Table 11 below shows the 2003, 2004
estimate, and 2005 budgeted cost recovery performance for the Fedwire
securities service.\8\
---------------------------------------------------------------------------
\8\ The Reserve Banks provide transfer services for securities
issued by the U.S. Treasury, federal government agencies,
government-sponsored enterprises, and certain international
institutions. The priced component of this service, reflected in
this memorandum, consists of revenues, expenses, and volumes
associated with the transfer of all non-Treasury securities. For
Treasury securities, the U.S. Treasury assesses fees for the
securities transfer component of the service. The Reserve Banks
assess a fee for the funds settlement component of a Treasury
securities transfer; this component is not treated as a priced
service.
Table 11.--Fedwire Securities Service Pro Forma Cost and Revenue Performance
[$ millions]
----------------------------------------------------------------------------------------------------------------
5 Recovery
2 Total 3 Net income rate after
Year 1 Revenue expense (ROE) [1-2] 4 Target ROE target ROE [1/
(2+4)]
----------------------------------------------------------------------------------------------------------------
2003............................ 21.8 18.3 3.4 2.2 106.1%
2004 (Estimate)................. 20.7 17.3 3.4 2.9 102.4%
2005 (Budget)................... 21.4 18.1 3.3 2.9 102.3%
----------------------------------------------------------------------------------------------------------------
1. 2004 Estimate--For 2004, the Reserve Banks estimate that the
Fedwire securities service will recover 102.4 percent of total
expenses, including imputed expenses, and targeted ROE, compared with a
2004 budgeted recovery rate of 104.0 percent. Through August 2004, the
Fedwire securities service recovered 100.6 percent of total costs,
including imputed expenses, and targeted ROE. The lower-than-budgeted
recovery is primarily attributed to lower-than-expected revenue from
transfer volume. Through August 2004, total Fedwire securities transfer
volume has decreased 8.8 percent relative to the same period in 2003.
For the full year, the Reserve Banks estimate that total Fedwire
securities volume will decrease 8.8 percent from 2003, compared with a
2004 budget estimate of 6.8 percent volume growth. The lower-than-
expected volume growth is primarily attributed to the slowdown in the
growth of the mortgage financing market.
2. 2005 Pricing--The Reserve Banks will raise the off-line transfer
origination and receipt surcharge from $28 to $33 and raise the joint
custody origination surcharge from $30 to $35. The Reserve Banks will
retain all other fees at their current levels. The surcharge increases
will more closely align the fee with the costs of these transactions.
The Reserve Banks project that the Fedwire securities service will
recover 102.3 percent of costs in 2005, including imputed expenses, and
targeted ROE. Total costs, including imputed expenses, and targeted ROE
are expected to increase $0.8 million from the 2004 estimate. The
Reserve Banks project that total securities volume in 2005 will
increase 2.0 percent from the 2004 estimate. Total revenue is projected
to increase $0.8 million from the 2004 estimate primarily due to
projected modest volume increases, as well as higher NICB.
G. Noncash Collection--Table 12 below shows the 2003, 2004
estimate, and 2005 budgeted cost recovery performance for the noncash
collection service.
Table 12.--Noncash Collection Pro Forma Cost and Revenue Performance
[$ millions]
----------------------------------------------------------------------------------------------------------------
5 Recovery
2 Total 3 Net income rate after
Year 1 Revenue expense (ROE) [1-2] 4 Target ROE target ROE [1/
(2+4)]
----------------------------------------------------------------------------------------------------------------
2003............................ 2.3 1.7 .6 .2 123.1%
2004 (Estimate)................. 1.7 1.4 .3 .2 110.2%
2005 (Budget)................... 1.3 1.5 -.2 .2 76.0%
----------------------------------------------------------------------------------------------------------------
1. 2004 Estimate--For 2004, the Reserve Banks estimate that the
noncash collection service will recover 110.2 percent of costs,
including imputed expenses, and targeted ROE, compared with the
budgeted recovery rate of 112.0 percent. This lower-than-budgeted
recovery is due to higher-than-expected volume declines. Through August
2004, noncash collection volume decreased 24.3 percent compared with
volume during the same period in 2003, and the service recovered 126.4
percent of its costs. For the full year, the Reserve Banks estimate
that 2004 volume will decrease 28.2 percent from 2003, compared with a
2004 budgeted decline of 18.9 percent.
2. 2005 Pricing--The Board recently requested comment on a proposal
to withdraw from the noncash collection service at year-end 2005(69 FR
60496, October 19, 2004). The Reserve Banks' fees for the noncash
collection service will remain unchanged from 2004. New issues of
bearer municipal securities effectively ceased in 1983 after the Tax
[[Page 64941]]
Equity and Fiscal Responsibility Act of 1982 removed tax advantages for
investors. As the number of outstanding physical municipal securities
continues to decline, the volume of coupons and bonds presented for
collection also will decline. The Reserve Banks project that volume
will decrease 31.8 percent from the 2004 estimate. In 2005, the Reserve
Banks project that the noncash collection service will recover 76.0
percent of total costs, including imputed expenses, targeted ROE, and
costs associated with exiting the business.
H. Electronic Access--There are four types of electronic access
options through which depository institutions can access the Reserve
Banks' priced services: FedLine, FedMail, FedPhone, and computer
interface (mainframe to mainframe).\9\ The Reserve Banks allocate the
costs and revenues associated with these electronic access options to
the Reserve Banks' priced services.\10\ For 2005, the Reserve Banks
will change the FedLine connection fees only. Depository institutions
currently use DOS-based terminals with either a dial connection or a
frame relay connection to access the Reserve Banks' services. The
Reserve Banks are in the process of migrating their customers to a
tiered web-based access. This migration is scheduled to be completed by
mid-year 2006. At that time, FedLine customers will only be able to
access services via web-based applications.
---------------------------------------------------------------------------
\9\ These connections may also be used to access non-priced
services provided by the Reserve Banks. No fee is assessed if a
particular connection is used only to access non-priced services.
\10\ The remaining costs are allocated to non-priced services
that use electronic access options.
---------------------------------------------------------------------------
In the interim, those customers that have not yet migrated to the
web-based access can continue to use DOS-based terminals. For customers
selecting a dial connection, the Reserve Banks bundle a FedLine DOS
connection and web-based access into a single FedLine Select package,
which includes one DOS-based FedLine dial connection and FedLine Web
institution-level access with three digital certificates for individual
subscribers. In this arrangement, customers will use their DOS-based
connection to access transaction services and FedLine Web to access
information services. The Reserve Banks will increase the FedLine
Select fee from $150 to $200. For customers selecting a frame relay
connection, the Reserve Banks will raise the connection fee from $500
to $825.
Those customers using the tiered web-based access can choose either
FedLine Web to access information services or FedLine Advantage to
access both transaction services and information services. The Reserve
Banks will increase the standalone FedLine Web fee from $25 to $50 per
month. FedLine Advantage offers customers access to value-transaction
applications.\11\ A FedLine Advantage subscription will include the
FedLine Advantage institution fee and three FedLine Advantage digital
certificates for individual subscribers. The Reserve Banks will
introduce FedLine Advantage at a monthly fee of $250. FedLine Select
and FedLine Advantage support the Reserve Banks' strategic direction of
moving to web-based electronic access, consistent with and in response
to customers' preferences.
---------------------------------------------------------------------------
\11\ FedLine Advantage offers customers access to the Reserve
Banks' value-transaction applications: FedACH, the Fedwire funds and
the national settlement service, and the Fedwire securities service.
---------------------------------------------------------------------------
II. Private-Sector Adjustment Factor
A. Background--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 return
on equity (profit) that would have been earned if a private business
firm provided the services. These imputed costs are based on data
developed in part from a model comprising consolidated financial data
for the nation's fifty largest bank holding companies (BHCs).\12\ The
imputed costs and imputed profit are collectively referred to as the
PSAF. In a comparable fashion, investment income is imputed and netted
with related direct costs associated with clearing balances to estimate
net income on clearing balances (NICB).
---------------------------------------------------------------------------
\12\ The peer group of the fifty largest bank holding companies
is selected based on total deposits.
---------------------------------------------------------------------------
The method for calculating the financing and equity costs in the
PSAF requires determining the appropriate levels of debt and equity to
impute and then applying the applicable financing rates. This process
requires developing a pro forma priced services balance sheet using
estimated Reserve Bank assets and liabilities associated with priced
services and imputing the remaining elements that would exist if the
Reserve Banks' priced services were provided by a private business
firm.
The amount of the Reserve Banks' assets that will be used to
provide priced services during the coming year is determined using
Reserve Bank information on actual assets and projected disposals and
acquisitions. The priced portion of mixed-use assets is determined
based on the allocation of the related depreciation expense. The priced
portion of actual Reserve Bank liabilities consists of balances held by
Reserve Banks for clearing priced services transactions (clearing
balances), projected based on historical data, and other liabilities
such as accounts payable and accrued expenses.
Long-term debt is imputed only when core clearing balances and
long-term liabilities are not sufficient to fund long-term assets or if
the interest rate risk sensitivity analysis, which measures the
interest rate effect of the difference between interest rate sensitive
assets and liabilities, indicates that a 200 basis point change in
interest rates would change cost recovery more than two percentage
points.13, 14 Short-term debt is imputed only when short-
term liabilities and clearing balances not used to finance long-term
assets are insufficient to fund short-term assets. Equity is imputed to
meet the FDIC definition of a well-capitalized institution, which is
currently 5 percent of total assets and 10 percent of risk-weighted
assets.
---------------------------------------------------------------------------
\13\ A portion of clearing balances is used as a funding source
for priced services assets. Long-term assets are partially funded
from core clearing balances, currently $4 billion. Core clearing
balances are considered the portion of the balances that has
remained stable over time without regard to the magnitude of actual
clearing balances.
\14\ The PSAF methodology includes an analysis of interest rate
risk sensitivity, which compares rate-sensitive assets with rate-
sensitive liabilities and measures the change in cost recovery of a
change in interest rates of up to 200 basis points.
---------------------------------------------------------------------------
1. Financing rates--Equity financing rates are based on the average
of the return on equity (ROE) results of three economic models using
data from the BHC peer group.15, 16 For simplicity, given
that federal corporate tax rates are graduated, state tax rates vary,
and various credits and deductions can apply, a specific tax rate is
not calculated for Reserve Bank priced services. Instead, imputed taxes
are captured using a pre-tax ROE. The resulting ROE influences the
dollar level of the PSAF and Federal Reserve price levels because this
is the return a shareholder would expect in order to invest in a
private business firm. The
[[Page 64942]]
use of the pre-tax return on equity assumes 100 percent recovery of
expenses, including imputed costs and the targeted return on equity.
The PSAF is, therefore, based on a matching of revenues with actual and
imputed costs. If the pre-tax earnings are less than the targeted ROE,
imputed expenses are adjusted for the tax savings associated with the
adjusted recovery. The imputed tax rate is the median of the rates paid
by the BHCs over the past five years adjusted to the extent that BHCs
have invested in tax-free municipal bonds.
---------------------------------------------------------------------------
\15\ The pre-tax ROE is determined using the results of the
comparable accounting earnings model (CAE), the discounted cash-flow
model (DCF), and the capital asset pricing model (CAPM). Within the
CAPM and DCF models, the ROE is weighted based on market
capitalization, and within the CAE model, the ROE calculation is
equally weighted. The results of the three models are averaged to
impute the PSAF pre-tax ROE.
\16\ When needed to impute short- and long-term debt, the debt
rates are derived based on the short-term debt and long-term debt
elements in the BHC peer group.
---------------------------------------------------------------------------
2. Other Costs--The PSAF also includes the estimated priced
services-related expenses of the Board of Governors and imputed sales
taxes based on Reserve Bank estimated expenditures. An assessment for
FDIC insurance, when required, is imputed based on current FDIC rates
and projected clearing balances held with the Federal Reserve.
B. Net Income on Clearing Balances--The NICB calculation is made
each year along with the PSAF calculation and is based on the
assumption that Reserve Banks invest clearing balances net of imputed
reserve requirements and balances used to finance priced-services
assets. Based on these net clearing balance levels, Reserve Banks
impute a constant spread, determined by the return on a portfolio of
investments, over the three-month Treasury bill rate.17, 18
The calculation also involves determining the priced services cost of
earnings credits (amounts available to offset future service fees) on
contracted clearing balances held, net of expired earnings credits,
based on a discounted Treasury bill rate. Beginning in 2005, rates and
clearing balance levels used in the NICB estimate are based on the most
recent rates and clearing balance levels. Recent clearing balance
levels are adjusted using historical data on depository institution
clearing balance management in a changing interest rate environment and
applying the constant spread to the most recent three-month Treasury
bill rate prior to the calculation date.\19\ Because clearing balances
are held for clearing priced services transactions or offsetting priced
services fees, they are directly related to priced services. The net
earnings or expense attributed to the imputed Treasury-bill investments
and the cost associated with holding clearing balances, therefore, are
considered net income for priced services activities.
---------------------------------------------------------------------------
\17\ The investment portfolio is composed of investments
comparable to a BHC's investment holdings. In 2005, these
investments were limited to federal funds, Treasury securities,
government agency securities, commercial paper, municipal bonds, and
money market and mutual funds.
\18\ The 2004 constant spread was revised from 35 basis points
to 30 basis points after correcting an error in the NICB portfolio
model. The revised constant spread decreased the projected 2004
final NICB from $52.7 million to $47.6 million. Using the average
spread of 29 basis points over the three-month Treasury bill,
applied to the clearing balance levels and rate assumptions used in
the 2005 pricing process, NICB is projected to be $61.3 million for
2005.
\19\ Previously, the projected balances were based on the
average of the most recent six months of data prior to NICB
calculation date and the projected T-bill rate was the rolling 13-
week average of the three-month T-bill rate.
---------------------------------------------------------------------------
C. Discussion--The decrease in the 2005 PSAF is primarily due to a
decrease in clearing balances on which investments are imputed and the
resulting decrease in total assets. Since required imputed equity is
based on five percent of total assets, priced services equity and the
cost of equity also decreased proportionally.
1. Asset Base--The estimated Federal Reserve assets in 2005 to
provide priced services, reflected in table 13, have decreased $1,056.0
million, or 6.1 percent. The decline in total assets is primarily a
result of a decrease in imputed investments in marketable securities of
$1,064.3 million and a decrease in imputed reserve requirements of $119
million. These elements are imputed based on the estimated level of
clearing balances. As a result of consolidation and restructuring of
several System functions, Bank premises assets are projected to
decrease $38.8 million and leasehold improvements and long-term
prepayments are projected to decrease $15.7 million. Offsetting these
decreases in assets is an increase in items in process of collection of
$201.1 million based on higher estimated float receivables.
As shown in table 14, the assets financed through the PSAF have
decreased. Short-term assets funded with short-term payables and
clearing balances total $38.9 million. This amount represents a
decrease of $1.4 million, or 3.5 percent, from the short-term assets
funded in 2004. Long-term assets funded with long-term liabilities,
equity, and core clearing balances are projected to total $361.7
million. This amount represents a decrease of $5.2 million or 1.4
percent from the long-term assets funded in 2004.
2. Debt and Equity Costs and Taxes--As previously mentioned, core
clearing balances are available as a funding source for priced service
assets. Table 14 shows that $400.6 million in clearing balances is used
to fund priced services assets in 2005. The interest rate sensitivity
analysis in table 15 indicates that a 200 basis point decrease in
interest rates affects the ratio of rate-sensitive assets to rate-
sensitive liabilities and produces a decrease in cost recovery of 0.8
percentage points, while an increase of 200 basis points in interest
rates increases cost recovery by 0.7 percentage points. The established
threshold for a change in cost recovery is two percentage points;
therefore, interest rate risk associated with using these balances is
within acceptable levels and no long-term debt is imputed.
Table 16 shows the imputed PSAF elements, the pre-tax ROE, and
other required PSAF recoveries for 2004 and 2005. The decrease in
clearing balances from which investments are imputed decreases total
assets. The decrease in total assets, and the resulting decrease in
imputed equity, decreases the estimated cost of equity in 2005. As
indicated previously, the pre-tax return on equity is calculated using
the combined results of three models. Contributing to the decrease in
the overall imputed cost of equity is a decrease in the DCF component
of the ROE calculation, resulting in the pre-tax ROE decreasing from
18.6 percent in 2004 to 18.1 percent in 2005. Sales taxes decreased
from $12.0 million in 2004 to $8.2 million in 2005. The effective
income tax rate used in 2005 also decreased to 29.6 percent from 29.8
percent in 2004. The priced service portion of the Board's expenses
decreased $1 million from $7.6 million in 2004 to $6.6 million in 2005.
3. Capital Adequacy and FDIC Assessment--As shown in table 13, the
amount of equity imputed for the 2005 PSAF is $808.0 million, a
decrease of $52.8 million from imputed equity of $860.8 million in
2004. As noted above, equity is based on 5 percent of total assets, as
required by the FDIC for a well-capitalized institution, as defined for
purposes of assessing insurance premiums. In both 2005 and 2004, the
capital to risk-weighted asset ratio and the capital to total assets
ratio both exceed regulatory guidelines. As a result, no FDIC
assessment is imputed for either year.
III. Analysis of Competitive Effect
All operational and legal changes considered by the Board that have
a substantial effect on payments system participants are subject to the
competitive impact analysis described in the March 1990 policy
statement, ``The Federal Reserve in the Payments System.'' \20\ Under
this policy, the Board assesses whether the change would have
[[Page 64943]]
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 the change creates such an effect, the Board must
further evaluate the change to assess whether its benefits--such as
contributions to payment system efficiency, payment system integrity,
or other Board objectives--can be retained while minimizing the adverse
effect on competition.
---------------------------------------------------------------------------
\20\ Federal Reserve Regulatory Service (FRRS) 9-1558.
---------------------------------------------------------------------------
The Board believes that the 2005 fees and changes to the earnings
credits on clearing balances will not 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. The
changes will permit the Federal Reserve Banks to earn an ROE similar to
that earned by the fifty largest BHCs.
BILLING CODE 6210-01-P
[[Page 64944]]
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[[Page 64945]]
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[[Page 64946]]
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[[Page 64947]]
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[[Page 64948]]
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[[Page 64949]]
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[[Page 64950]]
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[[Page 64951]]
[GRAPHIC] [TIFF OMITTED] TN09NO04.008
[[Page 64952]]
[GRAPHIC] [TIFF OMITTED] TN09NO04.009
[[Page 64953]]
[GRAPHIC] [TIFF OMITTED] TN09NO04.010
BILLING CODE 6210-01-C
[[Page 64954]]
Federal Reserve Electronic Access Fee Schedule
[Effective January 3, 2005. Bold indicates changes from 2004 prices]
------------------------------------------------------------------------
----------------------------------------------------------
FedLine
FedLine[reg] Select $200.00
Package (monthly)
Includes:
One dial--DOS-
based FedLine
One FedLine Web
institution
fee
Three
individual
subscriptions
Additional 15.00
FedLine Web
individual
subscriber fee
(monthly).....
Additional DOS- 100.00
based FedLine--
Dial (monthly)
Additional DOS- 825.00
based FedLine--
Frame Relay
less than 56
kbps (monthly)
Test and
Contingency
Options for
Frame Relay:
Full 825.00
Circuit
Backup
\52\--less
than 56
kbps
(monthly).
Frame 693.00
Connection
Only \53\--
less than
56 kbps
(monthly).
Redundant 155.00
Component
Set \54\--
less than
56 kbps
(monthly).
FedLine[reg] Web 50.00
(monthly)
Set-up fee (one 50.00
time).........
Individual 15.00
subscriber fee
(monthly).....
FedLine[reg] 250.00
Advantage
(monthly)
Includes:
One FedLine
Advantage
institution
fee
Three FedLine
Advantage
individual
subscriber
digital
certificates
Set-up fee (one 400.00
time).........
VPN (monthly).. 50.00
Individual 100.00
subscriber fee
beyond first
three (one
time).........
Individual 20.00
subscriber fee
(monthly).....
FedPhone & FedMail
FedMail[reg] Fax 15.00
(monthly per fax
line) \55\
Computer Interface
\56\
Frame Relay- 1,000.00
Computer Interface
(monthly)
256 kbps (monthly)
Frame Relay-CI T1 2,500.00
(monthly)
------------------------------------------------------------------------
Test and Contingency Options for Frame Relay
------------------------------------------------------------------------
Full Frame
Connection type circuit connection
backup \52\ only \53\
------------------------------------------------------------------------
CI T1......................................... 2,230 2,010
------------------------------------------------------------------------
By order of the Board of Governors of the Federal Reserve
System, November 4, 2004.
---------------------------------------------------------------------------
\52\ This option applies to test systems or contingency systems
that are located at separate facilities, including another bank
office or a third-party contingency site. Prices shown are for full-
circuit backup only located at the customer site. Multiple customers
sharing a single disaster-recovery connection at a third-party
provider require custom implementations.
\53\ This option applies to test systems or contingency systems
that are located at separate facilities. The institution uses a
frame relay link connection with no ISDN dial-up backup. Prices
shown are for frame connection only located at the customer site.
Multiple customers sharing a single disaster recovery connection at
a third-party provider require custom implementations.
\54\ Includes a Cisco router, a digital service unit, and a link
encryptor.
\55\ FedPhone and FedMail e-mail are free options.
\56\ Some large computer interface customers may be required to
ensure that their contingency connections to the Federal Reserve are
diversely routed, and they will be expected to defray the costs
incurred by the Federal Reserve of providing this network diversity.
Depending on the cost of providing specific circuits, one of five
tiered price points would apply: $250/$500/$1,000/$2,000/$2,500 per
month. Additionally, a group of the Reserve Banks' largest frame
relay customers will incur a $1,000 per circuit supplemental fee to
recover the additional costs associated with this effort. The
Reserve Banks began charging this select group on September 30,
2004.
---------------------------------------------------------------------------
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04-24967 Filed 11-8-04; 8:45 am]
BILLING CODE 6210-01-P