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F e d e r a lr e s e r v e a n k
B
OF DALLAS
WILLIAM H. WALLACE
F IR S T V IC E P R E S ID E N T

DALLAS, TEXAS 75222

November 21, 1985

Circular 85-136

TO:

The Chief Executive Officer of all
depository institutions in the
Eleventh Federal Reserve District
SUBJECT

Proposal to consolidate the noncash collection activities of the
Federal Reserve Bank of San Francisco with those activities of the Federal
Reserve Bank of Minneapolis.
DETAILS
The Board of Governors of the Federal Reserve System is requesting
comments on a proposal to consolidate the noncash collection activities of the
Federal Reserve Bank's of San Francisco and Minneapolis at the Federal Reserve
Bank of Minneapolis. The proposal raises the issue of consolidation of
activities across District lines with one Reserve Bank ceasing to provide a
service completely.
ATTACHMENTS
Attached is a copy of the Board's request for comment on the issue of
consolidating the provision of Federal Reserve Bank priced service activities.
MORE INFORMATION
For further information, please contact Tyrone Gholson (214) 651-6263
at the Head Office; Robert W. Schultz (915) 544-4730 at the El Paso Branch;
Luke E. Richards (713) 659-4433 at the Houston Branch; or Tony Valencia (512)
224-2141 at the San Antonio Branch.
Sincerely yours,

For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are
encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

Federal Register / Vol. 50, No. 214 / Tuesday, November 5, 1985 / Notice*

[Dockat No. R-0555]

Federal Reserve Bank Services
a g e n c y : Board of Governors of the
Federal Reserve System.
a c tio n : Request for comment.
su m m ary : The Board is requesting

comment on the issue of Consolidating
the provision of Federal Reserve Bank
priced service activities. The general
issue is presented by a proposal to
consolidate the noncash collection
activities of the Federal Reserve Banks
of San Francisco and Minneapolis at the
Federal Reserve Bank of Minneapolis.
d a te : Comments must be received by
November 29,1985.
a d d r e s s : Comments, which should refer
to Docket No. R-0555, may be mailed to
Mr. William W. Wiles, Secretary, Board
of Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW., Washington, D.C. 20551,
or delivered to Room B-2223 between
8:45 a.m. and 5:15 p.m. Comments
received may be inspected at Room B1122 between 8:45 a.m. and 5:15 pjn.,
except as provided in S 281.6(a) of die
Board’s Rules Regarding Availability of
Information, 12 C.F.R. §201.6(a).
FOR FURTHER INFORMATION CONTACT.

Elliott C. McEntee, Associate Director
(202/452-2231) or Gerald D. Manypenny,
Manager (202/452-3954), Division of
Reserve Bank Operations; Daniel L
Rhoads, Senior Attorney (202/452-3711)
Legal Division; or Joy W. O'Connell,
Telecommunication Device for the Deaf
(202/452-3244), Board of Governors of
the Federal Reserve System,
Washington, D.C 20551.
SUPPLEMENTARY INFORMATION: The
Federal Reserve System, in the past, has
realized some important benefits from
intradistrict consolidation of selected
sem ce activities. Based on System
experience to date, the Board believes
that in certain circumstances
consolidation presents a meaningful
opportunity to contain or reduce costs
while continuing to provide an
appropriate level of service to
depository institutions nationwide. First,
where local conditions such as fixed
costs, wage structures, et cetera make it
more costly to provide a service at one
location than it is to provide the same
level of service from another location, it
may be appropriate to consolidate the
activity at the lower-cost office.
Similarly, consolidation of an activity at
one office may result in economies of
scale not possible if two or more officers
are providing the same service. Also,
geographic, and therefore

transportation, considerations may
suggest consolidation efforts and cross­
zone provision of services in order to
promote the efficiency of the payments
mechanism.
The consolidation process for priced
services may take several forms. One
activity could be provided across
District or Territory lines with or
without all Federal Reserve offices
continuing to perform the service, or one
office could cease to provide one service
but continue to provide other priced
services. In the letter case, die
discontinued service would be provided
by another Federal Reserve office. This
latter type of consolidation could occur
intra- or interdistrrct but has only taken
place on a intra-district level to date.
The Minneapolis and San Francisco
Reserve Banks plan to consolidate
Twelfth District noncash collection
activities at the Minneapolis Reserve
Bank. This plan raises the issne of
consolidation of activities across
District lines with one Reserve Bank
ceasing to provide a service completely.
The service involved in this
consolidation is noncash collection,
which consists primarily of collecting
maturing municipal notes and bonds and
interest coupons from paying agents.
This activity is expected to experience
volume declines over time as a result of
the registration requirements in the Tax
Equity and Fiscal Responsibility Act
(“TEFRA”) and the industry movement
to immobilization and book-entry
securities systems. As volume declines,
difficulties in achieving cost-revenue
matches may be created by costs that do
not decline as rapidly since a significant
portion of the costs are fixed costs (e.g.,
vault space) or are incurred as a result
of System custody standards.
It is anticipated that the San
Francisco Reserve Bank would have to
increase its fees substantially in 1988 in
order to continue providing noncash
collection. Consolidating this activity in
Minneapolis will result in greater
efficiency and facilitate continuing to
provide noncash collection on a national
basis. The Minneapolis Reserve Bank
has already been providing this system
on a pilot basis and believes that
appropriate procedures are now in place
to ensure that cost/revenue concerns
will be met and that the level of service
provided will meet System standards.
Minneapolis will charge a separate
fee for collection of Twelfth District
noncash items which, together with
separate availability, schedules,
recognizes the costs incurred in
providing the service. Minneapolis’
proposed Twelfth District coupon
collection fee of $4.00 per coupon

envelope (including postage and
insurance) would be lower than the
current fee charged by the Twelfth
District for m-District collections. This
lower fee recognizes the economies of
scale that the Minneapolis office will
realize by processing vohuns previously
distributed over the fire offices of die
Twelfth District The Minneapolis
Reserve Bank would also provide a
guaranteed credit availability schedule
which reflects the collection experience
that it has gained under the pilot
program.
The Board believes that the
consolidation of operations or p ro v isio n
of services across District lines to an
issue that might have a significant
longer-run effect on the nation's
payment system and the Federal
Reserve’s role in that system. As
changes in the payments system occur,
it may be appropriate to consolidate
some activities at a District or regional
level either to reduce costs or to provide
improves to the payments mechanism.
For certain depository institutions, this
would entail dealing directly in some
services with Reserve Banks other than
the Reserve Bank of their District The
Board has therefore determined to
request public comment on the general
issue of consolidation of operations as
well as the specific proposal to
consolidate die noncash collection
activities of the Federal Reserve Banks
of San Francisco and Minneapolis at the
Minneapolis Reserve Bank. Commenters
are asked to discuss what restrictions, if
any, should be placed on future
consolidation proposals and any other
factors that should be considered in
reviewing these proposals.
By order of the Board of Governors of ths
Federal Reserve System, October 30,1985.
William W. WUes,

Secretary of the Board.
[FR Doc. 85-28325 Filed 11-4-85; 8:45 am]
SILLING CODE 6210-01-M


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102