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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