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F ederal R eser v e Bank
OF DALLAS
TONY
F IR S T
J . S A L V A G G IO
vice
P R E S ID E N T
June 18, 1993
DALLAS, TEXAS 7 5 2 2 2
Notice 93-66
TO:
The Chief Operating O f f i c e r of
each f i n a n c i a l i n s t i t u t i o n in the
Eleventh Federal Reserve D i s t r i c t
SUBJECT
Adoption of New and Enhanced
Federal Reserve Bank Check Services
DETAILS
The Federal Reserve Board has announced adoption o f new and enhanced
Federal Reserve Bank s e r v i c e s to f a c i l i t a t e implementation o f same-day
s e t t l e m e n t o f checks.
The s e r v i c e s l i s t e d below w il l be implemented by each Federal
Reserve Bank. A n o t i c e w il l be s e n t announcing th e a v a i l a b i l i t y o f t h e s e
s e r v i c e s w it h in th e Eleventh D i s t r i c t .
•
Primary and a l t e r n a t e presentment p o in t s e r v i c e s f o r payor banks;
•
Supplementary payor bank infor ma tion s e r v i c e s f o r checks not
c o l l e c t e d through th e Reserve Banks; and
•
A new Fedwire product code to f a c i l i t a t e s e t t l e m e n t f o r checks
p r e s e n te d t o payor banks d i r e c t l y by p r i v a t e - s e c t o r banks. The
new Fedwire product code w il l not be a v a i l a b l e f o r use u n t i l
Janua ry 3, 1994.
The s e r v i c e s are designed t o f a c i l i t a t e a paying bank’ s r e s p o n s i b i l
i t y t o s e t t l e f o r checks p re s en te d by p r i v a t e - s e c t o r p r e s e n t i n g banks and to
enable paying banks to c on tin u e t o provide ti m e ly cash management infor mation
t o t h e i r c o r p o r a t e customers.
The fe e s t r u c t u r e s f o r th e presentment p o i n t and infor ma tion
s e r v i c e s in c lu d e v a r i a b l e fe e s per d e p o s i t o r s u b j e c t to a d a i l y minimum.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
ATTACHMENTS
A copy o f t h e Board’ s n o t i c e as i t appears on pages 31525-32, Vol.
58, No. 105, o f t h e Federal R e g i s t e r dated June 3, 1993, i s a t t a c h e d .
Ad di tio n a l documentation e x p l a i n i n g th e same-day s e t t l e m e n t s e r v i c e s
is also attached.
MORE INFORMATION
For more in fo r m a ti o n , p l e a s e c o n t a c t Terry Campbell, (214) 922-6603,
a t t h e D a ll a s O f f i c e ; E l o is e Guinn, (915) 521-8201, a t th e El Paso Branch;
Luke R ic har ds, (713) 652-1544, a t th e Houston Branch; or Herb Barbee, (210)
978-1402, a t t h e San Antonio Branch.
For a d d i t i o n a l c op ie s o f t h i s Bank’ s n o t i c e , p le a s e c o n t a c t th e
Pu bli c A f f a i r s Department a t (214) 922-5254.
Sincerely,
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
31525
FEDERAL RESERVE SYSTEM
Federal Reserve Bank Services
[ D o c k * N o. R -0 7 2 7 ]
Board of Governors of the
Federal Reserve System.
ACTION: Notice.
AGENCY:
The Board has approved new
Federal Reserve Bank services related to
checks not collected through the Federal
Reserve Banks and enhancements to the
Federal Reserve Banks’ funds transfer
service. The services are designed to
facilitate a paying bank’s responsibility
to settle for checks presented by privatesector presenting banks and to enable
paying banks to continue to provide
timely cash management information to
their corporate customers. Specifically,
the Board has approved presentment
point services that could increase the
efficiency of making private-sector
presentments, payor bank services for
checks not collected through the
Reserve Banks, and a new Fedwire
product code to facilitate settlement for
checks presented by private-sector
banks. The Board has not approved
development of a Federal Reserve Bank
bilateral settlement service because
other settlement mechanisms
adequately meet the needs of paying
banks and presenting banks.
DATES: The information in this notice is
effective as of May 26,1993.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Florence M. Young, Assistant Director
(202/452-2745) or Thomas C. Luck,
Senior Financial Services Analyst (202/
452-3935), Division of Reserve Bank
Operations and Payment Systems. For
the Hearing impaired only:
Telecommunication Device for the Deaf,
Dorothea Thompson (202/452-3544).
31526
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
SUPPLEMENTARY INFORMATION:
Background
The Federal Reserve Banks currently
provide a variety of services to banks,1
including check collection and net
settlement services. The Federal Reserve
Banks assess fees to banks using their
services. In March 1991, the Board
proposed new and enhanced services
that the Federal Reserve Banks could
offer in light of the same-day settlement
rule that the Board had proposed in
January 1991 (56 FR 10429, March 12,
1991).
On September 30, 1992, the Board
approved amendments to Regulation CC
that provide for same-day settlement by
paying banks for checks presented by
private-sector banks (57 FR 46956,
October 14,1992). Under the same-day
settlement rule, a paying bank is
required to settle for checks presented
by private-sector banks on the day of
presentment, if specified conditions are
met. The amendments provide an 8 a.m.
(local time at the place of presentment)
presentment deadline for same-day
settlement. A check would qualify for
same-day settlement if it were presented
at a location designated by the paying
bank that is consistent with the check
processing region associated with the
routing number encoded on the check.
Under ths amendments, if a bank
presents a check in accordance with the
time and location requirements for
same-day settlement, the paying bank
either must settle for the check on the
business day it receives the check
without charging a presentment fee or
must return the check prior to the time
for settlement. The settlement must be
in the form of a credit to the presenting
bank’s account (or the account of a
correspondent settlement agent) at a
Federal Reserve Bank. Regulation CC
permits banks to vary provisions of the
regulation by agreement. Thus, a paying
bank could agree with a presenting bank
to accept checks for same-day
settlement at a presentment deadline
other than 8 a.m., or a presenting bank
may accept settlement in another form
agreeable to it.
Summary
The Board proposed that the Reserve
Banks offer several new or enhanced
services to facilitate the implementation
of the same-day settlement rule. The
1Regulation CC (12 CFR part 229) defines bank
to include all depository institutions—commercial
banks, savings institutions, and credit unions. A
paying bank is a bank, by, at, or through which a
check is payable and to which it is sent for payment
or collection. The Uniform Commercial Code
defines presenting bank as a bank, other than the
paying bank, that presents a check.
proposal included offering (1) a
presentment point service under which
a paying bank could designate its local
Federal Reserve office as a presentment
point for checks presented to it by a
private-sector bank, and (2) information
services to payor banks that would
provide data on checks that are not
collected through the Federal Reserve.
The Board also proposed that the
Reserve Banks make certain
enhancements to the Fedwire format to
enable banks to identify, on an
automated basis, those funds transfers
related to settlement for check
presentments and associated adjustment
activity. Further, the Board requested
comment on whether the Federal
Reserve Banks should offer a new
bilateral settlement service.
The Board received 58 comments in
response to the proposed services to be
offered by the Federal Reserve Banks in
a same-day settlement environment.2
The breakdown of commenters is:
Commenter
Count
Commercial Banks/BHCs................
Savings Banks................................
Credit Unions..................................
Trade Associations..........................
Clearing Houses.............................
Miscellaneous.................................
36
7
5
4
3
3
Total ........................................
58
The majority of the commenters
supported the Federal Reserve’s
proposed presentment point service and
information services for payor banks.
Most commenters also favored the
proposed enhancement of the Fedwire
format. On the other hand, most
commenters indicated that a bilateral
settlement service would not be utilized
because it was perceived to be
cumbersome and costly. Commenters
stated that other existing settlement
options, including the enhanced
Fedwire service, would be adequate to
enable paying banks to settle timely for
checks presented by private-sector
banks.
The Board approved the Federal
Reserve Banks’ offering presentment
point services and certain electronic
information services related to checks
not collected through the Federal
Reserve. These new services are
intended to provide an alternate
location at which a paying bank may
receive check presentments and to
facilitate a paying bank’s continued
ability to provide timely cash
management information to its
corporate customers. The Board also
2Two Reserve Banks submitted comments on the
Board's proposal. Those comments were not
included in the analysis of public comments.
approved a new Fedwire product code
to facilitate payments and requests for
payment for checks presented by
private-sector banks under the same-day
settlement rule. Because of the high cost
and lack of interest from banks, the
Board has decided not to implement a
Federal Reserve bilateral settlement
service for checks presented by privatesector presenting banks.
Following is a summary of the
comments received on the proposed
services, other issues raised by
respondents, and a description of the
services that the Board approved.
New Federal Reserve Services
Presentment Point Service. The Board
proposed that the Federal Reserve Banks
offer a new service under which a
paying bank could designate its local
Federal Reserve office as a presentment
point for same-day settlement checks
presented to the paying bank by a
private-sector bank. The proposed new
service would allow a private-sector
presenting bank to deliver checks to the
paying bank’s local Federal Reserve
office for subsequent pick-up by the
paying bank. Under the proposal,
presentment of checks would occur at
the time the Federal Reserve office
received the checks. The paying bank
would be responsible for settling with
the presenting bank for the checks. The
presentment point service, as originally
proposed, would have required paying
banks to negotiate agreements with
presenting banks to designate the paying
bank’s local Federal Reserve office as an
alternate presentment location.
The Board received 53 comments on
the proposed presentment point service.
While some commenters stated that they
would not need such a service, the
majority of commenters supported the
Federal Reserve’s offering a presentment
point service.
Many commenters indicated that a
paying bank should have the right to
designate the place of presentment for
its checks. Some commenters indicated
that demand for the proposed service
would be greater if a paying bank could
unilaterally designate the Federal
Reserve office as its place of
presentment. This position was
supported by several commenters who
believed that smaller paying banks may
find the service beneficial. On the other
hand, one commenter stated that the
presentment point service would not be
beneficial to community banks. In
addition, several commenters stated that
the service would not appeal to banks
that were members of clearinghouse
arrangements.
The Board believes that some banks
would consider designating a Federal
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
Reserve office as the exclusive location
for same-day settlement presentments
(i.e., the "primary” presentment point).
In adopting the same-day settlement
rule, the Board approved provisions that
allow a paying bank to designate a
location, including its local Federal
Reserve office, as a presentment point.
Thus, if a paying bank designates its
Federal Reserve office as a presentment
point for same-day settlement checks,
any presenting bank must present such
checks at that location to qualify for
same-day settlement and may also
present other checks (i.e., not for sameday settlement) drawn on the paying
bank at that location as well.
Under the Uniform Commercial Code
(UCC), presentments to a designated
presentment point may be made by a
private-sector presenting bank until the
paying bank’s cut-off hour, which is
normally 2 p.m. local time. Thus,
checks presented after 8 a.m. local time
but before the UCC cut-off hour would
be subject to the settlement and return
provisions of the UCC.3 Of particular
concern to a paying bank would be the
provisions regarding the time-frame
within which checks presented after 8
a.m. must be returned. Because some
paying banks may prefer to receive
checks that are presented after the sameday settlement deadline at their own
facilities, or may wish to vary the sameday settlement rule with certain
presenting banks, the Reserve Banks
have developed an alternate
presentment point service, which would
be offered in addition to the primary
presentment point service. Under this
service, a paying bank would agree with
a presenting bank that checks delivered
to a particular Federal Reserve office—
either the paying bank’s local Reserve
office or another Reserve office—would
constitute presentment. In such an
arrangement, the agreement between the
paying bank and the presenting bank
would establish, among other things, the
time and terms of presentment,
settlement arrangements, and the
handling of returned checks.4
5 The pre-1990 version of the UCC. In effect In
most states, permits settlement for checks by cash,
or, if accepted by the presenting bank, by credit to
a Federal Reserve or correspondent account or by
a remittance draft. The 1990 version permits
settlement by cash or credit to a Federal Reserve
account as well as other means accepted by the
presenting bank. The time of settlement under the
UCC is midnight on the day of presentment, rather
than the close of Fedwire as provided for same-day
settlement checks.
4 A paying bank that uses the Federal Reserve’s
alternate presentment point service could also
designate another location as its "primary”
presentment point for same-day settlement for those
presenting banks with whom the paying bank does
not have an agreement. If the paying bank does not
designate a "prim ary" presentment point, those
To facilitate use of the two
presentment point services by paying
banks, the Reserve Banks developed an
optional, enhanced service that would
provide information on checks that are
delivered to Federal Reserve offices. The
information provided to the paying bank
would include the identification of the
collecting bank, the amount of the
checks, and the time the checks were
received at the Federal Reserve office.
The Board approved the Federal
Reserve Banks’ offering two new
services, a primary presentment point
service and an alternate presentment
point service, under which a paying
bank could designate its local Federal
Reserve office—or, in the case of the
alternate presentment point service,
agree with presenting banks on any
Federal Reserve office—as a place of
presentment for checks presented by a
private-sector presenting bank. The
Board also approved an optional service
that could be used in conjunction with
the presentment point services that
would provide information on checks
that are presented at a Federal Reserve
office.
Some commenters believed that
standards should be established for
banks using the Federal Reserve's
presentment point service. The Board
considered the need for standards for
checks presented by private-sector
presenting banks in adopting the sameday settlement rule. The Board
concluded that presenting banks and
paying banks could address these issues
more effectively within the context of
the good faith standard.
To use the primary presentment point
servico, a paying bank must enter into
an agreement with its local Federal
Reserve office. The Reserve office will
accept cash letters from presenting
banks, time-stamp the incoming
deliveries, provide verification of
receipt to the delivering agent,
physically control the cash letters, and
provide verification of the time of
receipt to the paying bank or its
designated agent. The Federal Reserve
office will incur no liability or
accountability for the checks other than
that associated with its duty to exercise
ordinary care while the checks are in
the possession of the Federal Reserve
office.
Presenting banks must package and
label separately all same-day settlement
cash letters presented at Federal Reserve
offices to distinguish them from other
checks being deposited for collection
presenting banks with whom it does not have an
agreement could present checks to* same-day
settlement at any location identified in $ 229.36(b)
of Regulation CC (12 CFR 229.36(b)).
31527
through the Federal Reserve. If a Federal
Reserve office receives checks for a
paying bank that does not subscribe to
the presentment point service, it would
treat those checks as if they were a finesort deposit at the Federal Reserve for
the next available fine-sort deadline
The Federal Reserve will not be
responsible for monitoring any
presentment deadline agreed to by the
paying bank and the presenting bank. A
paying bank will be required to provide
the Federal Reserve office advance
notice before commencement or
termination of the agreement.
To use the alternate presentment
point service, a paying bank must enter
into an agreement with a Federal
Reserve office, local or in another
territory, and agreements with each
presenting bank. Agreements between a
paying bank and a presenting bank
might specify (1) the time(s) of delivery
of checlw to the Federal Reserve office,
(2) any restrictions on the types of
presentments, and (3) settlement
arrangements.
The Reserve office would time-stamp
and control incoming deliveries. If a
Reserve office receives checks for a
paying bank that does not have an
agreement with a bank attempting to
present checks to it, the Reserve office
would treat the checks as a fine-sort
deposit for collection by the Federal
Reserve at the next available deadline.
Under the enhanced presentment
point service, a paying bank may elect
to receive, via voice maii, fax, or
telephone, the following information for
each presentment made at a Federal
Reserve office: (1) The collecting bank
identification, (2) the time of delivery,
and (3) the dollar amount of the checks.
The Board also requested comment on
a proposed fee structure for presentment
point services. Specifically, the Board
proposed that a fixed foe, which was
estimated to be in the range of $15 to
$25 per day, be charged to the paying
bank for the presentment point service.
The Board questioned whether a portion
of the costs of providing the
presentment point service should be
recovered through a fee assessed to the
presenting bank.
Several commenters stated that the
proposed fixed daily fee was an
appropriate approach. Three
commenters discussed alternatives to
the proposed fee structure. Two
commenters indicated that the fee
should be based on the number of
packages handled by the Federal
Reserve office. One commenter stated
that, for an intercept processor, the daily
fixed fee should be applied per location,
rather than per paying bank.
31528
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
Thirty-one commenters responded to
the Board’s question concerning
assessing the presenting bank a portion
of the fee. Seventeen commenters
indicated that only the paying bank
should be charged, eight commenters
preferred charging the presenting bank,
and six commenters stated that the fee
should be shared by the presenting bank
and the paying bank. Two commenters,
who favored the Federal Reserve’s
charging the paying bank, indicated that
the paying bank and the presenting bank
would negotiate which party would
ultimately bear the cost of the
settlement.
The Board believes it is appropriate
that only the paying bank be assessed
the fee because under the same-day
settlement rule a presenting bank may
not have an option as to where it must
make presentment. The Reserve Banks
have further analyzed the costs of
providing presentment point services
and have concluded that there are fix=id
overhead costs associated with receiving
presentments for each paying bank, and
there are also variable costs associated
with handling presentments received
from each presenting bank. As a result,
the Board adopted a fee structure that
includes a daily minimum fee and a
variable fee for each bank presenting
checks to a paying bank.
The fees for the alternate presentment
point service would be higher than the
fees for the primary presentment point
service, in order to recover the costs of
monitoring the source of receipt of
presentments. Fees for the enhanced
presentment point services would be
higher than for the basic presentment
point services (primary and alternate) to
reflect the cost of providing additional
information to payor banks. The
following table illustrates the fee
structure and expected range of prices
for the presentment point services. The
actual fees will be announced by each
Reserve Bank following the Board’s
approval of the Reserve Banks’ 1994 fees
for the check service in October 1993.
F ee S chedule for P resentment
P oint S ervices
Service
Minimum
fee
Variable
fee5
Basic Primary ..
Basic Alternate
$5.00-$8.00
$6.00$10.00.
$10.00$16.00.
$12.00$18.00.
$0.50-$1.00
Enhanced Pri
mary.
Enhanced Alter
nate.
$1.00-$2.00
s Fee assessed for each bank presenting
checks to the paying bank.
Supplemental Payor Bank Services.
The Federal Reserve Banks currently
offer services to payor banks with
respect to checks collected through the
Reserve Banks. These services, which
include account totals, MICR capture,
special sort, and electronic
presentment,® are offered to (1)
accelerate availability, in the case of
truncation and extended-MICR services,
(2) assist paying banks in assembling
payment data to facilitate the provision
of corporate cash management services,
and (3) reduce the paying bank’s
operating costs.
The Board proposed that the Federal
Reserve Banks offer supplemental payor
bank services for checks presented by
private-sector banks either at a Federal
Reserve office designated by the paying
bank as a presentment point, or
presented to another designated
presentment point and subsequently
delivered to the Federal Reserve office.
Two types of services were proposed—
regular and premium. Under the regular
service, the presenting bank or the
paying bank would deliver the checks to
the Federal Reserve, generally by the
latest deadlines established by the
Federal Reserve office for the deposit of
checks drawn on the paying bank. The
Federal Reserve office would
intermingle checks received under the
regular service with checks being
collected through the Federal Reserve
that are designated for payor bank
services. Under the premium service,
the Federal Reserve would accept
checks from presenting or paying banks
at a later presentment deadline and
would provide information to the
paying bank based on agreements with
that bank.
The Board requested comment on
whether presenting banks would
present checks at the paying bank’s
Federal Reserve office, even if they had
to agree with the paying bank to present
the checks earlier than 8 a.m. Under the
proposed premium service, at the option
of the paying bank, Federal Reserve
• The account totals service provides paying
banks with the dollar total and the number of
checks being presented for specific individual
accounts, or for a grouping of accounts. The MICR
capture service provides paying banks, via tape or
transmission, the MICR-line data from checks being
presented to the paying banks. The special sort
service provides paying banks with a specified
subset of its checks, outsorted and presented
separately from the remainder of its checks. The
electronic presentment services, such as extended
MICR capture and truncation, provide paying banks
with MICR-line data from checks presented to the
paying banks through the Federal Reserve.
Presentment occurs when the data are delivered
electronically to the paying bank. The physical
checks may be retained at the Federal Reserve office
for several days in order to provide return services
before they are delivered to the paying bank or they
may be safekept by the Reserve office.
offices would accept checks from
presenting banks or paying banks at a
presentment deadline later than that
established for the regular service.
Because of this later receipt, checks
would not be intermingled with those
being collected through the Federal
Reserve.
The Board received 47 comments on
the proposed supplemental payor bank
services. Most commenters supported
the Federal Reserve’s offering the
proposed services. Many commenters
pointed out that these services would be
most beneficial to banks offering
corporate cash management services.
There was no consensus among the
commenters as to whether early
presentment at a Federal Reserve office
would be acceptable, although the
responses seemed to focus on the cost
effectiveness of such a practice from the
presenting bank perspective. For
example, one commenter said it would
be willing to present earlier in order to
take advantage of lower courier costs in
presenting to a single location. Another
commenter argued that the 8 a.m.
deadline should be uniform and,
therefore, it would be unwilling to
deliver prior to that time.
Based on the positive response from
commenters and the efficiencies
associated with the use of payor bank
services, the Board approved the
Federal Reserve Banks’ offering
supplemental payor bank services to a
paying bank for checks presented to its
local, or an alternate, Federal Reserve
office as a presentment point or for
checks delivered to the Federal Reserve
office by the payor bank. The
supplemental payor bank services that
will be offered will include account
totals, MICR capture, and special sort
services as well as “delayed delivery"
and "safekeeping” services. These latter
services will mirror the current
extended MICR capture and truncation
services, respectively, in all aspects
except that delivery of the electronic
data from checks that have been
previously presented to the paying bank
(either directly or via the Federal
Reserve’s presentment point service)
does not constitute presentment to the
paying bank by the Federal Reserve
Bank.
The information from checks that are
delivered to a Federal Reserve office up
to two hours after the appropriate fine
sort deadline for city, RCPC, or country
items, respectively, or by 6 a.m.,
whichever is earlier, will be included in
the first transmission. For checks
received after this cut-off time, but by 8
a.m. local time, the payor bank service
information will be transmitted no
earlier than 9:30 a.m. Eastern Time.
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
Payor bank service information on
supplemental payor bank services will
checks received after 8 a.m. local time
be comparable to the fees currently
will be transmitted later in the day by
charged for payor bank services.
special agreement.
Because the supplemental payor bank
Because the paying bank is
services are similar to fine-sort deposits,
responsible for settlement with the
a per item fee will be assessed to cover
presenting bank under the same-day
the cost of opening and processing the
settlement rule, the Federal Reserve will checks. In addition, the paying bank
perform neither settlement nor
would pay the current payor bank
subsequent adjustment functions
service fees associated with the specific
involving the checks for which it
payor bank products used. Further, if a
provides supplemental payor bank
paying bank designates the Federal
services. A paying bank will receive all
Reserve as a presentment point, it
the relevant settlement data on the day
would be assessed a daily minimum fee
checks are presented. Due to the timing
equal to the daily minimum fee(s) for
of processing, the data provided for a
the payor bank product(s) used plus
given day’s checks may not include all
$1.00 to $10.00, depending upon the
adjustment information, which may be
type of presentment point service used.
provided with reconcilement
As with regular payor bank services,
information on the next business dav
Reserve offices may establish peak and
it is important to note that the Feaeral off-peak variable fees for supplemental
Reserve would not act as a collecting
or bank services.
bank with respect to checks for which
ome Reserve Banks have received
it provides supplemental payor bank
requests to provide certain payor bank
services. The paying bank, however,
services for checks not collected
must agree to indemnify the Federal
through the Federal Reserve before the
Reserve from any losses in connection
same-day settlement rule becomes
with the provision of this service
effective. It is anticipated that
because the Federal Reserve may be
individual Reserve Bank proposals may
characterized as a collecting bank,
be submitted to the Director of the
notwithstanding its disclaimer of that
Division of Reserve Bank Operations
status. The timing of implementation of end Payment Systems for approval
supplemental payor bank services at
under delegated authority. The Reserve
individual Federal Reserve offices will
Banks will provide a 30-day notice
vary based on demand for the product
before offering new services. In the
by local paying banks and resources
majority of cases, Reserve Bank fees for
available in each office.
these services will be announced by
The Board’s proposal estimated that
each Reserve Bank following the Board’s
the total fees for regular supplemental
approval of the Reserve Banks’ 1994 fees
payor bank services would be
for the check service in October 1993.
approximately the same as the sum of
Enhancements to the Fedwire Format
the fees for providing payor bank
to Facilitate Settlement. The Board
services on fine-sort checks collected
proposed that the Reserve Banks
through the Federal Reserve, plus the
enhance the Fedwire format so that
fine-sort collection fee. Fees for the
banks could identify, on an automated
proposed premium service were
basis, those funds transfers related to
estimated to be higher than the fees for
settlement for check presentments and
the regular service because the checks
associated adjustment activity.
would have been run during peak
Specifically, the Board envisioned that
processing times. The Board requested
designating certain Fedwire funds
comment on whether a portion of the
transfers as check settlement or
fee for the supplemental payor bank
adjustment transfers could be
service should be charged to the
accomplished by establishing a new
presenting bank, or whether the entire
product code7 for differentiation of
fee should be assessed to the paying
those transfers from other funds
bank. Twenty-seven commenters
transfers. By using the existing Fedwire
responded to the Board’s question.
“bank-to-bank information” (BBI) field,
Twenty favored charging the paying
a paying bank could explain any
bank, and four indicated that the fee
difference between the transfer amount
should be shared by the presenting and
and the cash letter total, identify
paying banks. Three banks believed that adjustment activity, or detail individual
the fee should be apportioned based on
cash letter totals, if the transfer amount
the benefits received.
The Board believes that the paying
7A product code is a code which enables the
receiver of the message to determine the purpose of
bank should be assessed the entire fee
the transfer. Currently, the valid product codes are:
for the supplemental payor bank
Transfer, beneficiary is a bank; CTR/
services because it is the bank receiving BTR/Bank
Customer Transfer, beneficiary is a non-bank; DEP/
the benefit of the services. The fees
Deposit to Sender’s account; DRW/Drawdown; FFR/
Fed Funds Returned; and FFS/Fed Funds Sold.
ssessed by the Reserve Banks for
31529
represented settlement for multiple cash
letters. In addition, the Board requested
the public’s views on which particular
structured third-party field should be
used to convey detailed information
related to the transfer amount.
Similarly, the Board envisioned that
use of the "request for credit transfer”
(subtype code 31), which is a non-value
message that requests the receiver to
originate a value transfer to the
designated party, could facilitate
notification by a presenting bank to a
paying bank of the amount of
presentments. For example, if the
checks are presented to a service bureau
for processing, the presenting bank m ay
wisn ta“use a request for credit transfer
message to notify the paying bank o f the
amount of the cash letter.
Finally, comments were requested on
other changes to the Fedwire funds
transfer service that would be desirable
to facilitate the settlement of checks.
The Board received 46 comments that
responded directly to its proposal to
enhance the Fedwire funds transfer
format to differentiate check same-day
settlement transfers from other funds
transfers. None of the commenters
opposed the use of the funds transfer
service to settle check presentments on
a same-day basis. Commenters generally
indicated that the existing format, w ith
enhancements, would facilitate the
settlement process and allow efficient
automated processing of check
settlement transactions. Moreover,
several commenters noted that they
currently settle cash letters by Fedwire
and that they believe it is an effective
mechanism. These commenters noted,
however, that the proposed
enhancements to differentiate checkrelated transfers would be very valuable.
A few commenters indicated that, the
current funds transfer format could
adequately accommodate check
settlement transactions without further
enhancement, but did not specifically
object to any of the proposed
enhancements. These commenters also
noted that significant increases in the
volume of check same-day settlement
transfers would increase the need for
the proposed enhancements.
Commenters overwhelmingly
endorsed the Board’s proposal to
identify a new product code for check
same-day settlement transfers. Several
commenters noted that it is easy to
modify the product code field and to
edit it without extensive automated
system changes. Conversely, one
commenter was concerned that the
existing Fedwire format could not be
changed enough to identify check
settlement transactions uniquely,
particularly if an obsolete code was
31530
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
reactivated for same-day settlement
meet certain criteria and must be subject
purposes. That commenter suggested a
to a competitive impact analysis based
new Fedwire format be developed.
on the procedures set forth in that
Several commenters noted that adding a policy statement.
First, new or enhanced services must
new product code would require some
meet the following tests: (1) Projected
system changes and requested that
banks be notified well in advance of the revenues must fully recover the costs of
providing the service, (2) the service
implementation date.
All commenters supported the use of
must provide a clear public benefit, and
the “bank-to-bank information" field to
(3) the service must be one that other
convey detailed information related to
providers alone cannot be expected to
check settlement transactions. Several
provide. In its request for comment, the
commenters noted that field size
Board questioned whether the proposed
limitations could be overcome by
presentment point and supplemental
supplemental messages, facsimiles or
payor bank services meet the criterion
telephone communication. A few
that private-sector providers alone
commenters suggested that the field be
cannot be expected to provide such
structured to facilitate editing.
services with reasonable effectiveness,
Based on the comments received, the
scope and equity.
Board believes that the existing Fedwire
Most of the 10 commenters addressing
format can be used to settle same-day
the question agreed that the proposed
settlement transactions. The Board
services met the Board's criterion. A
approved the Reserve Banks’ plans to
majority of the commenters believed
enhance the Fedwire funds transfer
that similar services would be offered by
format to provide a new product code,
private-sector service providers if there
CKS/Check Settlement, so that banks
were a demand for the services. Some
can identify, on an automated basis,
commenters noted that development of
those funds transfers related to the
a capebility to offer payor bank services
settlement of check presentments and
would be expensive and that it would
associated adjustment activity. The
be more economical for the Federal
Board also endorses the use of the
Reserve Banks to offer such services.
existing BBI field to convey the details
One commenter stated that the proposed
of the dieck settlement transaction.
supplemental services again would
Structuring of the BBI field will not be
place the private sector and the public
mandatory, but may be used on a
sector in direct competition on a service
voluntary basis. The Federal Reserve
where the public sector determines the
Banks will not reject messages that do
rules.
The range of fees proposed by the
not comply with the voluntary
Reserve Banks for the presentment point
structuring of the BBI field. Existing
services reflects their estimates of the
transaction codes also will be used:
Check same-day settlement transactions costs of providing the services.
should be marked “settlement transfer” Additional cost and usage information
should be available when the Reserve
(type code 16) with “normal transfer"
Banks set 1994 check fees. This
(subtype code 00) to remit settlement
proceeds, or “request for credit transfer” information will be used to establish
specific 1994 fees, with the objective of
(subtype code 31) to initiate settlement
recovering the costs of providing the
requests and the “funds transfer
presentment point services. As
honoring a request for credit transfer”
experience is gained with these services,
(subtype code 32) to respond. The
fees will be adjusted to reflect actual
regular funds transfer fee (currently
experience. The proposed fees for the
$0.53) will be assessed to both the
originating bank and the receiving bank supplemental payor bank services are
for a check same-day settlement transfer consistent with the Reserve Banks'
through the Fedwire funds transfer
current payor bank service fees, which
service. The new product code will be
are recovering the costs of providing the
available when the same-day settlement services.
Offering the presentment point
rule is effective, January 3,1994.®
Evaluation o f Proposed Changes. The services should yield public benefits
because the service will permit multiple
Board’s March 1990 policy statement,
paying banks to use one presentment
"The Federal Reserve in the Payments
System,” indicates that all new services location. Unlike the locations of other
service providers, Reserve Bank
or major service enhancements
locations currently are served on regular
proposed by the Federal Reserve must
transportation routes and are convenient
“Fedline users will be able to input the new
for many presenting banks because they
product code by data entry in January 1994; the
may also deposit checks at Federal
Fedline multiple-choice menu will be updated
Reserve offices. As a result, offering the
during early 1994. Details concerning use of the
services should reduce the
new product code will be incorporated in the
Reserve Banks' operating circulars.
transportation resources that would
otherwise be necessary for presenting
banks to transport checks to paying
banks. In addition, it is likely that other
service providers would offer
presentment point services, but would
most likely offer them only in
conjunction with other services. The
Board believes, therefore, that it is
unlikely that the needs of all banks
interested in designating a presentment
point will be met by private-sector
service providers.
Supplemental payor bank services
provide public benefits by supporting
effective account management by
corporate cash managers. Facilitating
cash management through payor bank
services on checks presented by privatesector presenting banks allows for more
efficient use of corporate funds. In
addition, the supplemental payor bank
services would enable paying banks to
receive payor bank service
transmissions from one source, which
may facilitate their internal corporate
cash management operations.
Similar services are not widely
offered by the private sector today
because some paying banks currently
impose barriers to presentment by
private-sector presenting banks, if such
presentments would impede their
ability to provide cash management
services or would otherwise adversely
affect their operations. The Board
believes that private-sector service
providers may be reluctant to offer
similar services immediately since
significant capital investment may be
necessary. Without immediate and
widespread response from the private
sector, a level of service that would
allow the product to be available with
reasonable effectiveness, scope and
equity may not be available without
Federal Reserve Bank participation. The
Board believes that, initially, the supply
of the services that the private-sector
firms would offer would not be
sufficient to satisfy the demands of
payor banks. The Board, therefore,
believes that the Reserve Banks should
offer payor bank information services.
In assessing the competitive impact of
the presentment point and
supplemental payor bank services,
consideration was given to whether the
services 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 and, if they
did, whether the effects are due to legal
differences or to a dominant market
position deriving from such legal
differences. The comments received on
the Board's proposal did not raise any
issues that indicated that private-sector
service providers would be unable to
Federal Register / Vol. 58, No. 105 / Thursday, June 3, 1993 / Notices
compete effectively with the Federal
Reserve.
The Board believes that the Federal
Reserve’s offering presentment point
services would not affect adversely
private-sector entities that could be
designated as presentment points by
paying banks. The Federal Reserve’s
services do not rely on the existence of
legal differences between the Federal
Reserve Banks and other service
providers. Typically, a paying bank
would designate as a presentment point
the location of a data processing firm or
a correspondent bank that performs
demand deposit accounting for the
checks drawn on the paying bank. The
Federal Reserve Banks do not provide
demand deposit accounting services and
do not have any inherent advantages in
providing presentment point services,
with the possible exception of the
convenience of a location where checks
are already delivered and picked up by
collecting banks and paying banks.
Although the Federal Reserve is
currently a dominant provider of payor
bank services, the implementation of the
same-day settlement rule, which
provides private-sector banks the right
to obtain same-day settlement for checks
directly presented to paying banks,
should enable private-sector banks to
compete effectively with the Federal
Reserve. There are, however, no legal
differences that would prevent privatesector banks from providing services to
paying banks that are similar to the
services provided by the Reserve Banks.
Generally, a presenting bank, because it
has possession of the checks, would
have an advantage in offering timely
and cost-effective payor bank services to
the paying bank.
The Federal Reserve service would
allow the paying bank to incorporate
checks collected through private-sector
channels with the checks that are
eligible for the Federal Reserve’s current
payor bank services. Because of the
requirement for timeliness of the data by
the paying bank, and in light of the
current base of payor bank services
being performed by the Federal Reserve
Banks, paying banks may choose the
Federal Reserve as the supplier of payor
bank services for all of the checks on
which a paying bank desires to receive
payor bank services.
authorize the Federal Reserve to settle
for checks presented by the presenting
bank and for subsequent adjustments
through accounts maintained at the
Federal Reserve. The presenting bank
would initiate the settlement entry by
transmitting payment information to the
Federal Reserve. Under the proposal,
the Federal Reserve would function
settlement entries to specified reserve
accounts during two cycles each day,
with provision for reversal of erroneous
entries.
The Board received 40 comments on
the bilateral settlement service. The
proposed service was viewed by nearly
all of the commenters as costly,
complicated, and more risky than other
available forms of settlement. Twentysix of the 31 commenters that addressed
the demand for a Federal Reserve
bilateral settlement service believed that
such a service would not be useful to
banks and that existing alternative
settlement mechanisms were adequate
to meet same-day settlement
requirements. For example, several
commenters stated that the proposed
service offered few additional benefits
and that current options are adequate to
meet the needs of banks. One
commenter concluded that the proposed
service was too cumbersome, costly, and
entailed unacceptable risks.
Three check clearinghouses indicated
that the bilateral settlement service was
unnecessary and unlikely to be utilized
extensively. These commenters
recommended that the Federal Reserve
propose a multilateral settlement service
under which a presenting bank would
provide a settlement agent, such as a
clearinghouse, with settlement data for
each paying bank to which a presenting
bank had presented checks. The
settlement agent would prepare a file
containing a net debit or net credit for
each participating bank and notify the
Federal Reserve of the settlement
amounts. The Federal Reserve would
function the settlement entries, much as
it does for local settlement
arrangements. The commenters
envisioned that the multilateral
settlement arrangements could be local,
regional or nationwide.
Four commenters supported further
development of a bilateral settlement
service. One commenter believed that a
bilateral settlement service could be
Services Not Approved by the Board
superior to Fedwire funds transfer
Bilateral Settlement Service. The
settlement, and that an effective,
Board requested comment on whether
reasonably priced settlement system is
the Federal Reserve Banks should offer
required to achieve more balanced
a new bilateral settlement service for the competition between private collecting
settlement of checks not collected
banks and the Federal Reserve Banks.
Based on the comments received, it
through the Federal Reserve. Under a
appears that the demand for a bilateral
bilateral settlement service, the paying
settlement service would be limited.
bank and the presenting bank could
31531
Because the potential cost of developing
the service are high, it is unlikely that
the Reserve Banks would be able to
recover the costs of providing such a
service. The Board, therefore, believes
the bilateral settlement service should
not be pursued further at this time. The
Board notes that the Federal Reserve
Banks currently provide multilateral net
settlement services to over 100 check
clearing arrangements. Conceptually, a
settlement agent, such as a
clearinghouse, could obtain any
necessary agreements from the
participants in the settlement
arrangement and arrange with the
Federal Reserve Bank to function net
entries to the accounts of the
participants at the Federal Reserve. The
Reserve Banks would consider requests
for new check settlement arrangements
proposed by groups of banks interested
in improving the efficiency of settling
for checks cleared in the private sector.
Other Potential Federal Reserve
Services. In its request for comment, the
Board discussed several new or
enhanced services that the Reserve
Banks might offer in a same-day
settlement environment but that the
Board rejected, at this time, for a
number of reasons. Following is a
summary of the comments received by
the Board on those services.
Transportation Services. The Board
considered whether three types of
transportation services might be offered
by the Reserve Banks in conjunction
with implementing the same-day
settlement rule: (1) Requiring Reserve
Banks to permit conjunctive business on
intradistrict transportation networks, (2)
permitting conjunctive business on the
Federal Reserve Banks’ Interdistrict
Transportation System (ITS), and (3)
arranging transportation for the delivery
«f same-day settlement checks to paying
banks. In each case, the Board
determined that no significant public
benefit would be realized from offering
these services. In the first case, couriers
are permitted to seek conjunctive
business when it is operationally
feasible and does not jeopardize the
expeditious delivery of checks by the
Federal Reserve Banks. In the second
case, the Board believed that the timecritical nature of the interdistrict check
collection system required the Federal
Reserve Banks to maintain control of
ITS.
Five commenters discussed
transportation services. Four
commenters indicated that the Federal
Reserve Banks should offer local
transportation services for checks
processed by private-sector banks.
These commenters reasoned that the
Federal Reserve Banks would continue
31532
Federal Register / Vol. 58, No. 105 / Thursday. June 3, 1993 / Notices
and another commenter suggested that a
to transport checks they collect and,
thus, were in a good position to offer the priced adjustment service is necessary
service to private-sector banks. One
because the good faith standard is not
commenter stated that the Federal
sufficient for resolving all adjustment
Reserve Banks’ experience with the
issues. Another commenter suggested
issue of transportation services was
that the Federal Reserve should offer an
outdated and the concerns raised by the adjustment service, at least during the
Federal Reserve Banks no longer exist.
initial implementation of same-day
Another commenter suggested that the
settlement. One commenter, however,
Federal Reserve request comment on an stated that there is no need for a Federal
interdistrict delivery service because the Reserve Bank adjustment service if the
decade-old experience may not be
settlement service is adequate to handle
relevant now. This commenter also
adjustments.
suggested that the Federal Reserve
The Board attempted to incorporate
authorize a pilot project to test such a
procedures for handling adjustments
new transportation service. During the
between private-sector banks in the
late 1970s, the Federal Reserve Bulks
design of the bilateral settlement
experimented with conjunctive business service. The commenters on that service
on the ITS network and the delays
found the procedures to be complicated
experienced in delivering checks caused and cumbersome, and believed that
float to rise to high levels. Because of
alternative settlement arrangements
the divided loyalties of couriers and the were adequate. As a result, the Board
inherent decentralized decision-making, did not approve implementing an
the Federal Reserve Banks were unable
adjustment service at this time.
to obtain reliable delivery of their
By order of the Board of Governors of the
checks at scheduled times. The Board
Federal Reserve System, May 27,1993.
believes that the Reserve Banks’
William W. Wiles,
experience with conjunctive business
Secretary o f the Board.
on the ITS network during the 1970s is
[FR Doc. 93-13027 Filed 6-2-93; 8:45 am)
likely to be indicative of the control
problems that would become evident in BILLING CODE < 210-01-*
the current environment.
The Board continues to believe that
no clear public benefit would be
realized by offering conjunctive
business on the Federal Reserve’s ITS
network nor in offering other
transportation services at this time.
Moreover, these services are readily
available and do not require Federal
Reserve involvement to ensure banks
are able to obtain services.
Adjustment Service. The Board
evaluated whether the Federal Reserve
Banks should offer a new priced
adjustment service to handle
adjustments for checks not collected
through the Federal Reserve. Currently,
the Reserve Banks handle adjustments
only for checks collected or returned
through the Federal Reserve. Because
there appear to be no significant public
benefits associated with the Federal
Reserve Banks’ offering a new
adjustments service and because other
providers can serve as intermediaries in
exchanges of adjustment documentation
or as arbiters for check adjustments, the
Board determined that the Federal
Reserve Banks should not offer such a
service.
Several commenters stated that the
Federal Reserve should offer an
adjustment service. They saw the
existence of a structured, automated,
Fed-administered system as critical to
the success of same-day settlement. One
commenter stated that a priced
adjustment service merits further review
FEDERAL RESERVE SERVICES TO FACILITATE SAME DAY SETTLEMENT
Presentment Point Services
All Federal Reserve offices will offer two presentment point services:
1.)
Primary Presentment Point Services
A paying bank may designate its local Federal Reserve office as a place of
presentment for all collecting banks, which may deposit forward and/or return checks. The
paying bank must have a contractual agreement with its Federal Reserve office for this
service.
The Reserve office accepting same day settlement (SDS) checks from collecting banks
will receive the checks, time stamp their receipt, and store them in an appropriate facility
allocated to the paying bank.
The paying bank will have the responsibility for the
arrangements for transportation of these items from the Reserve office.
Paying banks will settle for these same day settlement items directly with the collecting
banks, and make any necessary adjustments.
If a Reserve office receives checks designated as SDS items directed to a payor bank
with which it does not have an agreement, it will treat such items as a fine sort deposit for
collection by the Federal Reserve at the next available deadline. It also will treat SDS checks
that the collector has not labelled according to Federal Reserve specifications as a fine sort
deposit.
•
Pricing
Reserve offices will charge the paying bank a variable fee per depositor, subject to
a daily minimum. (As an example, a paying bank receiving 9 SDS packages at $0.50
per depositor would receive a charge of $5.00, the daily minimum, which is higher
than $4.50
(9 x $0.50).
'as defined by Regulation CC.
2.)
Alternate Presentment Point Service
A paying bank may designate a Federal Reserve office, local or in another territory,
as an alternate presentment point for collecting banks with which it has established a mutual
agreement.
For example, a paying bank might designate its location as the primary
presentment point, but designate a Fed office as an alternate point for certain collecting
banks. It would have a contractual agreement with the collecting bank on the time(s) of
delivery of SDS items at the Fed office and on any other conditions pertaining to this
presentment. For example, a paying bank could restrict presentments to forward items only.
The paying bank also would have a contractual agreement with its Reserve office in order to
designate it as an alternate presentment point.
The Reserve office would have to know which collecting banks could deliver checks
to it in its capacity as an alternate presentment point. The Reserve office would monitor
such presentments. If a Reserve office were to receive SDS items from a collecting bank
destined to a payor that does not have an agreement with that collecting bank, it would treat
these items as a fine sort deposit for collection by the Federal Reserve at the next available
deadline. Also, it would treat incorrectly labelled (SDS) checks as a fine sort deposit.
The Reserve office will receive SDS items from collectors who have agreements with
paying banks, time stamp their receipt, and store them in an appropriate facility allocated to
the paying bank. The paying bank will have the responsibility for the arrangements for
transportation of these items from the Fed office. Paying banks will settle for the SDS checks
directly with the collecting banks, and make any necessary adjustments.
•
Pricing
For the alternate presentment point service, Reserve office will charge the
same fee per depositor that it charges for the primary presentment point service, but
2
subject it to a higher minimum fee to reflect the monitoring required. As an example,
the Reserve office might charge $0.50 per depositor subject to a daily minimum of
$5.00 for the primary presentment point service and $0.50 per depositor subject to a
$7.00 daily minimum for the alternate service.
3.)
Enhanced Presentment Point Services
To facilitate use of these presentment point services, Reserve offices will offer an
information enhancement. At the option of the paying bank, the Reserve office will provide
the paying bank the following information for each SDS deposit: 1.) the collecting bank ID;
2). the time o f delivery; 3.) and the dollar amount o f SDS checks. It will charge a variable fee,
applying it to each depositor that is higher than that for the basic presentment point services
(primary and alternate) and subject it to higher minimum fees. Reserve offices will deliver
this information via voice mail, fax, or telephone. Reserve offices would not expect paying
banks to perform settlement on the basis of this information.
The following table illustrates the pricing structure and proposed ranges:
Pricing Schedule for Presentment Point Services
Basic Service
Minimum Fee
• Primary
• Alternate
$5.00 - $8.00
$6.00 - $10.00
Variable Fee
{ $.50 - $1.00
Enhanced
• Primary
• Alternate
4.)
$10.00 - $16.00
$12.00 - $18.00
Same Day Settlement - Payor Bank Services (SDS-PBS)
Reserve offices currently offer a range of Payor Bank Services (PBS) such as MICR
detail, Account Totals, Extended MICR, Truncation, etc., on checks collected through the
3
Federal Reserve. Federal Reserve offices also will offer essentially the same services, with
the exception of settlement and adjustments, for Same Day Settlement checks. SDS checks
may include those presented to the Fed as a presentment point or delivered to the Fed after
presentment directly to the paying bank. Currently, Reserve offices will handle only forward
collection items for SDS-PBS.
At the request of the paying bank, Reserve offices will open SDS packages and
process them to capture MICR information to provide PBS services to paying banks. Since
the paying bank is responsible for settlement with the collecting bank under the Same Day
Settlement rule, and for subsequent adjustments, the Federal Reserve will not perform any
settlement or adjustment services involving the crediting/debiting of collectors/payors engaged
in SDS presentments. However, Reserve offices will provide all the relevant reconcilement
data to the paying bank necessary for its settlement with the collecting bank. This data may
not include all adjustment information for a given day’s SDS deposits. Reserve offices may
provide adjustment information on a lagged basis with subsequent SDS reconcilement
information.
•
Pricing
Pricing for SDS payor bank services will follow the same structure of variable
fees for the basic service subject to a daily minimum as exists for regular payor bank
services. If a payor uses payor bank services, but not presentment point services, Fed
offices will charge the regular PBS variable fees subject to the appropriate daily
minimum plus a fee for opening and processing SDS packages equal to, or above, the
appropriate peak or off-peak fine sort inclusion fee.
The following fee structure will apply if a paying bank uses payor bank services in
conjunction with a presentment point service (primary or alternate):
4
1.)
A Reserve office may charge a combined daily minimum for these services
used jointly.The combined daily minimum will range from a low equal to the
regular PBS daily minimum (for MICR, E-MICR, Truncation, or Account
Totals, etc.) plus $1.00 to a high equal to the sum of the presentment point
service daily minimum plus the regular PBS daily minimum.
Example: If a Reserve office’s regular Truncation service daily minimum is
$10.00 and its primary presentment point service minimum is $5.00, the range
of its combined daily minimum equals $11.00 (low) to $15.00 (high).
2.)
A Reserve office will subject the regular PBS MICR/Account Total variable
fees plus the presentment point service per depositor variable fees to the
combined minimum to determine the total fees paid for the combined
services.
3.)
Reserve offices also will charge a fee for opening and processing SDS
packages equal to, or above, the appropriate peak or off-peak fine sort
inclusion fee.
Timing of SDS-PBS transmissions
If a Reserve office receives SDS items by a time 2 hours after the universal
fine sort deadline for city, RCPC, or country items, respectively, or by 6:00 a.m.,
whichever is earlier, it will include payor service information for these items in the
first transmission.
For items received after this cut-off time, but before 8:00 a.m., it will include
payor information no earlier than the 9:30 a.m. (ET) transmission. The Reserve
office will transmit information on SDS items received after 8:00 a.m. later in the day.
5
4.)
Fedwire Format Changes to Support Same-Day Settlement (SDS)
The Federal Reserve will facilitate the settlement for SDS presentments by providing
a new Fedwire code. Use of the new product code is at the option of the paying bank.
Fedwire transfers for check settlements will incur the standard funds transfer fees (ie., $0.53
to sender and receiver). Settlement specifications are as follows:
•
A new product code, CKS, to identify check settlement messages.
•
Type code 16 recommended for all CKS transfers; type code 10 is also applicable, but
Reserve offices will accept only type 16 wires after the close of the third-party window
(normally 6:00 p.m. ET) until Fedwire closing time (normally 6:30 p.m. ET). Off-line
hours may vary from on-line hours, as defined by Reserve Bank operating circulars.
•
Information pertaining to settlement for SDS cash letters may appear in the BBI field.
The provisions for this information will include:
code CL- for current cash letter settlements, including adjustments to current
cash letters.
code AD- to indicate adjustments to previous cash letters. Adjustments may
be negative or positive.
these codes should follow the BBI= field tag to indicate to the receiver the
use of this structure.
a series of subfields containing cash letter information within the BBI field.
A paying bank should indicate omitted subfields by consecutive slashes, except
for that (those) at the end of a cash letter (ie., adjustment amount(s)) which
does (do) not need to have their space held by a slash,
subfields are: Cash Letter ID; Cash Letter Date; Presenting Bank Account
Number; Current Cash Letter Amount; Adjustment Amount. (An example
6
of the use of the BBI field and the above subfields is:
BBI = CL - Cash Letter ID/Cash Letter Date/Account Number/Current CL
Amount/Adjustment Amount/CL - Cash Letter ID/.../AD-Cash Letter ID/Cash
Letter Date/Account Number/Original CL Amount/Adjustment Amount,
use of the ORG = field tag for the paying bank and the BNF = field tag for
the presenting bank in the cases where they do not represent the receiver or
the sender of the cash letter, respectively.
the OBI = (originator to beneficiary) field tag and the RFB = (reference for
beneficiary) will accommodate other information the paying bank may want
to include.
Presenting banks may send wires with subtype code 31 to request payment for cash
letter presentments. Subtype 31 wires will use the CKS product code and any other
field tags that are appropriate. Paying banks need to be careful not to pay both on
a request for payment wire, via a responding subtype 32 wire, and also on the
physical cash letter or receipt of reconcilement/settlement information from the
Federal Reserve.
The Federal Reserve encourages the use of the new product code and related
structure for SDS payments. However, it will not edit or reject messages based on
adherence with the recommended structure for information in the BBI field.
@FedFRASER