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F E D E R A L R E S E R V E B A N K OF D A L L A S
Station K, Dallas, Texas 7 5 2 2 2

C i r c u l a r No. 84-27
February 22, 1984

TO:

All d epo si tor y i n s t i t u t i o n s and o th er s concerned in the
Eleventh Federal Reserve D i s t r i c t

ATTENTION:

Chief Executive O f fi ce r

SUBJECT:

Amendment to Regulation J — Collection of Checks and
Other Items

SUMMARY:

The Board of Governors of the Federal Reserve System
has approved an amendment to Subpart A of Regulation J ,
e f f e c t i v e April 2, 1984, to permit a Reserve Bank to
charge a paying bank f o r checks i t d e l i v e r s or makes
a v a i l a b l e to an i n s t i t u t i o n which is closed r e g u l a r l y
on a weekday when i t s Reserve Bank is open.
A paying
bank would not be required to open or begin processing
checks on such a midweek clo sin g day because the time
f o r r e t u rn of the items would not begin u n t i l the
paying bank's next banking day.
The Board also has
provided an a l t e r n a t i v e t h a t enables paying banks to be
charged for the value of f l o a t cre ate d by t h e i r r eg u la r
midweek clo sin g r a t h e r than be charged f o r the value of
the checks on t h a t day.
The Board decided not to take s i m i l a r a c t i o n - - a s
proposed e a r l i e r - - a f f e c t i n g i n s t i t u t i o n s closed on a
nonstandard holiday (a s t a t e or local holiday on which
i t s D i s t r i c t Reserve Bank i s open f or bu si n e ss ) .
In st ea d , Reserve Banks will be permitted
to defer
giving c r e d i t to sending i n s t i t u t i o n s f o r one day, fo r
checks
drawn
on
paying i n s t i t u t i o n s closed on
nonstandard hol idays.

ATTACHMENTS:

Board's press r e l e a s e
and m aterial
p u b l i c a t i o n in the Federal Register

MORE INFORMATION:

Robert
L.
Whitman, (214)
698-4357 a t the Head
Offic e; Robert W. S chu lt z, (915)
544-4370 a t the El
Paso Branch; Vernon
L. Bartee,
(713) 659-4433a t
the Houston Branch;
or John
A. Bullock,
(512)
224-2141 a t the San Antonio Branch

ADDITIONAL COPIES:

Public A f f a i r s Department, Extension 6289

as

submitted f o r

Banks and others are encouraged to use the follow ing incom ing WATS numbers in con tacting this Bank: 1-800-442-7140
(intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the exte nsion referred to above.

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

FEDERAL RESERVE press release

For immediate r e l e a s e

January 30, 1984

The Federal Reserve Board today announced an amendment to i t s
Regulation J - - c o l l e c t i o n of checks and ot her items and wire t r a n s f e r of funds—
t o permit a Reserve Bank t o charge for checks t h a t i t d e l i v e r s or makes
a v a i l a b l e to an i n s t i t u t i o n t h a t i s closed r e g u l a r l y on a weekday when i t s
Reserve Bank i s open.

I t i s estimated t h a t t h i s ac ti on will el i m i n at e

approximately $110 m i l l i o n d a il y average in Federal Reserve check f l o a t .
The amendment becomes e f f e c t i v e April 2, 1984.
The Board acted a f t e r c o n s id er at io n of comment received on proposals
published in September.
The amendment a f f e c t s i n s t i t u t i o n s t h a t choose to cl os e on a weekday.
Such c l o s i n g s may r e s u l t in Federal Reserve f l o a t - - t h e value of checks f o r which
the Federal Reserve has given c r e d i t to the i n s t i t u t i o n t h a t sent the checks to
i t for c o l l e c t i o n (the sending i n s t i t u t i o n ) but for which t h e Federal Reserve has
not y e t c o l l e c t e d from t h e i n s t i t u t i o n on which the checks are drawn (t he paying
institution).
The Board gave paying i n s t i t u t i o n s the a l t e r n a t i v e of being charged
for t h e value of f l o a t cr ea te d in t h i s way r a t h e r than being charged for th e
value of the checks on t h a t day.

(over)

The Board decided not to take s i m i l a r a c t i o n - - a s e a r l i e r proposed-a f f e c t i n g i n s t i t u t i o n s closed on a nonstandard holiday (a S t at e or local holiday
on which i t s D i s t r i c t Reserve Bank i s open f o r b u s i n e s s ) .

I n s te a d , Reserve Banks

will be permitted to def er for a day giving c r e d i t to sending i n s t i t u t i o n s , for
checks drawn on paying i n s t i t u t i o n s closed on nonstandard ho li d a y s.

The value of

any remaining f l o a t a r i s i n g from nonstandard holidays will be added to the co st
base f o r the check c o l l e c t i o n s e r v i c e .
The Board took th es e ac ti on s pursuant to pro vision s of the Monetary
Control Act of 1980 r e q u i ri n g the Federal Reserve to eli m in at e or charge for
Federal Reserve f l o a t .
The Board's n o ti ce is a t t a c h e d .
-0-

Attachment

FEDERAL RESERVE SYSTEM
12 CFR Part 210
(Docket No. R-0481)
Regulation J, Collection of Checks and Other Items
and Wire Transfer of Funds
Midweek Closing and Nonstandard Holidays.

AGENCY:

Board of Governors.

ACTION:

Final Rule.

SUMMARY:

The Board has approved an amendment

Regulation

J,

governing

items by Reserve Banks,

the

collection

checks

to permit a Reserve Bank

paying bank for checks made available
on a weekday that

of

to Subpart A of

is a banking day

and

other

to charge

a

to it by a Reserve Bank

for

the Reserve

where the paying bank is regularly closed.

Bank

but

A paying bank would

not- be required to open or begin processing the checks on such
a midweek closing day because the time for return of the
would

not begin

to run

day.

The Board has

until

also provided

paying banks to be charged
by

their

those

midweek

instances

the paying

closing.
where

bank's

These

a paying

next banking

an alternative

for the value of
actions

bank

is

the

will

closed

that enables
float created

not

apply

because

state or local holida y but on which the Reserve Bank
(nonstandard h o l i d a y s ) .

With regard

to Federal

float arising from nonstandard holidays,
to

permit

Reserve

Banks

to

defer

items

to

of

a

is open

Reserve

check

the Board has decided

credit

to

depositing

-2-

institutions
nonstandard
of

any

for

checks

holidays

remaining

nonstandard

drawn

where

Federal

holidays

on

operationally
Reserve

will

institutions

be

feasible.

check

added

to

closed

float

the

on

The

value

generated

cost

base

by

for

the

check collection service.
EFFECTIVE DATE:
FOR

FURTHER

Director

April 2, 1984.

INFORMATION

L.

Division

Rhoads,

Alexander,
Governors

John

(202/452-27 39) or Morgan J.

(202/452-3878),
Daniel

CONTACT:

Federal

Attorney

Attorney
of

of

the

Sobala,

Hallmon,
Reserve

(202/452-3711),

(202/452-2489),

Federal

F.

Reserve

Legal
System,

Assistant

Program Manager,
Bank
or

Operations;
Joseph

Division,

R.

Board

Washington,

of

D.C.

20551.
SUPPLEMENTARY

INFORMATION:

Monetary

Control

requires

that

services,

Act

fees

of

be

1980

(12

established

Section

U.S.C.
for

§

107

248a)

Federal

of

the

("MCA")

Reserve

Bank

including Federal Reserve float.
In April 1982,

proposal

Ba ckg rou nd.

to

amend

the Board requested public comment on a

Regulation

J

to

require

a

depository

institution to pay for checks delivered or made available to it
on days the institution is closed and on which the Reserve Bank
is open.

47 F.R.

15349

(April 9, 1982).

"midweek closing days"

(regular weekdays

institution

close

chooses

to

"nonstandard holidays"

Such days consist
on which

as permitted

by

of

a depository

state

law)

and

(days on which the paying institution is

closed because of a state or local holiday).

The proposal was

-3-

intended

to

closings.

eliminate

the

A total of

that

results

150 comments were

of midweek closings:
were opposed.

float

59 commenters

from

received on

these
the

favored the proposal and 91

There were 82 comments received on the

nonstandard holidays:

issue

19 commenters

favored

the

issue of

proposal

and

63 were opposed.
After
raised therein,
the proposed

review of the comments
the Board,

amendment;

in April

instead,

Banks with three options

received and

1983,

the

decided not

Board

to eliminate

or price

1983).

First,

a

Reserve

Bank

issues

to adopt

provided

Reserve

float

from midweek closings and nonstandard holidays.
(May 9,

the

arising

48 F.R.

could

modify

20802

its

availability schedules for deposits of local depositors so that
credit

for

deferred
modify
account
closed.

checks

one

drawn

additional

on

closed

day.

institutions

Second,

its current practice of posting
of

the

Third,

institutions

on

the

a

Reserve

would
Bank

funds received

day

the

be
could

for the

institution

is

a Reserve Bank could price all or any remaining

.float arising from midweek closings and nonstandard holidays by
adding the value of this float to the cost base
collection service.

These procedures were

for the check

scheduled

to become

effective October 1, 1983.
As
procedures,

preparations
depository

of the Board's action.
the alternatives.

were

begun

institutions

to

implement

requested

these

reconsideration

Concerns were expressed about each of

With regard to the alternative of modifying

-4-

availability schedules for local depositors to delay credit for
checks

they

deposit

concerns were
depositors

that

raised as

relative

alternative,

a

local

are

drawn

to the

to

on

closed

institutions,

inequitable treatment

other

depositors.

depositor

would

receive

of local

Under

this

credit

for

its

deposit of a check drawn on a closed institutions one day later
than would a non-local depositor of a check drawn on the same
institution.

There

was

also

some

indication

alternative could result in circuitous
on

closed

banks

are

sent

for

that

this

routing as checks drawn

collection

through

non-local

depository institutions for whom credit would not be deferred.
Equity considerations also were raised concerning the
alternative of adding the value of this float to the cost base
of the check collection service.
was unfair

for depository

close midweek to bear
of

midweek

closings

Concern was expressed that it

institutions

that

do not

a substantial portion of the
simply

because

they

are

in

choose

to

float cost

a

Reserve

District with a disproportionately large number of institutions
that voluntarily close midweek.
depository institutions

For example,

that close midweek are located

Chicago Federal Reserve District,

a disproportionate

cost

because

most

of

amount

the

of

checks

in the

and 35 percent are located in

the Atlanta Federal Reserve District.
bear

40 percent of the

the

Local

institutions would

midweek

deposited

with

closing
the

float

Federal

Reserve for collection are drawn on another institution located
in the same Federal Reserve office territory.

-5-

With
received
closed,
avoid

for

regard

to

the

alternative

deferring

credit

the account of the institution on the day

it was suggested that closed
this

of

deferral

by

directing

it

is

institutions could easily
their

credits

through

c orr es po nd en ts .
The
comment

the

Reserve

Bank

Board

therefore

proposed
to

amendment

charge

a

(September
substantial
float

19,

holidays.The

from

in

to it on days

the

amount

midweek

Board

J

the

that

of

to permit

that

the

for

is

41776

there had been
Reserve

a

check

nonstandard

concerns

with the three options approved by the Board

a

checks

48 F.R.

Federal
and

for

institution

is open.

closings

believed

republish

institution

The Board noted

reduction

to

Regulation

the Reserve Bank

1983).

arising

to

depository

delivered or made available
closed and on which

determined

expressed

for the treatment

of this float and the significant decline in the levels of this
float

warranted

re-publication

of

Regulation J to permit depository
to reassess

the impact of

the

proposed

amendment

to

institutions the opportunity

the proposed amendment.

The

Board

also decided to solicit comment on the option of

JL'
In 1982, daily average float arising from midweek
closings was estimated to be $160 million, while daily average
float from nonstandard holidays was estimated to be $110
million.
By the third quarter of 1983, float resulting from
midweek closings had declined to an estimated daily average of
$110 million and float resulting from nonstandard holidays had
declined to an estimated daily average of $10 million.

-6-

permitting

paying

additional

day for

are

closed where

Federal

Reserve

institutions
checks made

the Reserve
for

the

to

defer

available

Bank

float

the

an

to them on days

is open

caused

charge

by

and

the

institutions would be charged for this float

compensate

deferral.

they
the

Paying

in the same manner

2/
as is done currently for inter territory check float.—
Analysis
on

its

of

C o mmen ts.

midweek

Comments

The Board

closing

favoring

the

were

and

bank

were

100

comment

holiday

also

letters

proposal.

received

from

ten

(These comments are not included in the

analysis.)

banks

nonstandard

proposal

Federal Reserve Banks.
following

and

received

The majority
holding

(87 percent)

companies,

with

of

more

commenters
than

40

percent of the comments from institutions with deposits of less
than

$200

million

and

31

percent

deposits of $1 billion or more.
depository

institutions were

from

institutions

with

The majority of comments

from

received from institutions located

3/
in the Federal Reserve Districts of Atlanta and Chicago.—
A.
midweek

closings,

Midweek
53

Clo s i n g s .

(approximately

58

Of the 91 commenters discussing
percent)

favored

the

proposal to charge paying institutions for checks made

V

Cha rges could be made by an "as of" adjustment to the
i n s ti tut ions 1 reserve or clearing account, or by explicit
charge.

2/
Seventy-five percent of the institutions that regularly
close midweek are located in these two Districts and generate
almost 90 percent of the $110 million daily average float
attributable to midweek closings.

available

to them on the days

of

commenters

these

same-day

credit

supported

the

that

conditioned

for

Saturday

proposal

on

their

the

4/
closed.—

support

deposits,

Reserve authorize all collecting
institutions on days

they are

and

condition

one

receiving
commenter

that the Federal

institutions

they are closed.

on

Three

to charge closed

Commenters

in

favor of

the proposal generally indicated that the cost of float

should

be borne by those institutions responsible for creating it,
that

the proposal

institutions

was equitable since

to be

required

to

pay

it was

for

float

institutions which close midweek voluntarily.
indicated

further

implement,

that

the

unfair

proposal was

and

for open

generated

by

These commenters

feasible,

easy

to

and that the float payment option would minimize the

operational

impact

of

the

These comments were similar

proposal

on

closed

institutions.

to those presented when the Board

previously requested comment in April 1982.
Thirty-eight
were

opposed

to

the

commenters
proposal.

(approximately
These

commenters

42

percent)

generally

stated that it was unfair to charge institutions when they are
closed

and

that

institutions

would

management problems under the proposal.

ZJ

experience

account

Two commenters argued

When the Board previously published this proposal in
April 1982, 59 (39%) of 150 comments received favored the
proposal and 91 (61%) were opposed.

-8-

that

the

proposal

would

competitive advantage.

give

the

Federal

Reserve

an

unfair

Seven commenters suggested alternatives

to the proposal.
Twenty-six

commenters

stated

that

the

proposal

was

unfair and that it would affect disproportionately the earnings
of

small

institutions.

These

commenters

stated

that

small

institutions closed midweek in order to open on Saturdays and
provide

full banking

being charged
are

closed

services

and

that

for checks made available to them on days

they

midweek

commenters

would

stated that

to

their

increase

communities,

their

costs.

they would have to absorb

Eight
the

cost

of

float or incur additional operating costs to process the checks
on the days they are closed.
might

reduce

the

level

of

As a result,

service

they

Six commenters stated that management
would

be

more

proposal.
forecast
the

and

provide

of their

expensive

under

accurately the
Reserve,

dollar

they

to avoid account

additional

expense

value of

would

have

overdrafts

in having

checks
to

or,

employees

at

stated

that

competitively
communities.

the

increased

relative
Three

to

costs

may

institutions

commenters

Saturday.

money position
midweek

they could not
expected

maintain

the

also believed

incur

institution

on

Two commenters

disadvantage
in

from

excess

alternatively,

the closed day to manage their mo ney position.
also

on

the

These commenters argued that because

Federal

balances

difficult

some indicated they

them

neighboring
that

this

could

-9-

adversely

affect

communities
commenters

in

commenters
of

economies

which

stated

institutions

cost

the

these

that

the

outweighed

stated

this

that

float by

of

the

small

and

institutions

are

cost

proposal

any

of

the

possible

including

it

located.

benefits,

the Federal Reserve

rural
Five

to

small

and

two

should

recover

in the costs of

the

the check

collection service.
After
has

full consideration of

determined

float

on

charging
it.

As

that

depositing
the paying

the burden

of

institutions
institution

indicated previously,

if

value of this float to the check
be

impacted

in

midweek.

disproportionate
checks
Reserve

two

Reserve

for

the

outweighs

for

checks

Local

institutions

amount of

the float

institutions

would

available

Banks
check

would

added

to
the

costs would

bear

that

a

cost because most of the

institution with

the

institutions
Further,

item check fees would be

and

of

institutions

the same Federal Reserve office territory.

other

this

the disproportionate

of

collection are drawn on other

this float through per

of

impact

made

cost base,

the Board

cost

the

the Reserve

Districts

deposited by a depository

comments,

imposing

disproportionately because of

concentration
close

these

represent

institutions which close voluntarily since
the full burden of float generated by their

a

Federal
within

recovering

inequitable

subsidy

to

to

they would not bear
voluntary closing.

By placing the float burden upon those institutions that can be

-Id­

eas i ly identified as responsible for generating

the

Board also believes that the amendment

the efficiency

of

the

payments

enhanced.

mechanism

since

payment

for

checks

While the amendment may increase costs

these closed institutions,
that

improves

regularly close

incur the cost.

float,

the

is

somewhat

for

the Board believes that institutions

midweek

Further,

are

the

appropriate

parties

to

the option of deferring the charge to

closed institutions for one day with the institutions and being
charged for the float incurred should minimize
burdens on these closed institutions.
this

option

also

addresses

expressed by commenters.

the

the operational

The Board believes

money

management

In addition,

these

that

concerns

institutions

can

call their local Federal Reserve office to determine the value
of checks that will be charged to their accounts.

Wi th regard

to the concern about the adverse impact of the proposal on the
economies

of

indication

small

that

the

and

rural

large

communities,

majority

of

there

institutions

communities will not continue to provide

is

no

in

these

full banking services

on Saturday.
Two commenters believed
an

unfair

use

of

enhance

funds

Reserve

services.

institutions
services,
be

able

Reserve

availability
These

would

since,
to

Federal

be

for

disadvantaged

closed

the proposal

regulatory

institutions

commenters

unlike Federal

charge

that

argued
in

institutions.

authority
using

that

The

to

Federal

correspondent

offering

Reserve Banks,

represented

competitive

they would
Board

does

not
not

-11-

believe
the

that

the amendment

competitive

balance

correspondents.
availability
the

will

have

between

the

a material
Federal

as

not

a result

affect

from current

the

levels.

of

this

midweek

Further,

is quite

some

amendment.

Additionally,

small

correspondent

respondents for

Reserve

availability

that the percentage of checks drawn upon
closed

effect

upon
and

the Reserve Banks will not change their

schedules

amendment

depositors

First,

would

funds

to

the Board notes

institutions that are

relative
banks

of

Thus,

to

total

already

clearings.

charge

such checks on a day the respondent

their
chooses

to

close.
Commenters
proposed
that

amendment

the

Federal

suggested

of Regulation
Reserve

midweek

closings

since

banking

services

to small

considered

a social

mechanism.

action

Reserve

not

it

is

J.

alternatives
One

recover

float

incidental

and

rural

commenter

to

the

at

the

suggested

attributable
the

to

provision

communities

cost of maintaining

to

and

nation's

of

should be
payments

Five commenters also stated that the decline

level of midweek
take

several

in the

closing float makes the need for the Board

this

is required

time

less

urgent.

However,

to eliminate or price all

the

to

Federal

Federal Reserve

float.
One commenter
obtain

voluntary

authorizing
available

on

the

suggested

agreements

Federal

closed

from

Reserve

days.

that

The

to

the Reserve
closed
charge

Board

does

Banks

should

institutions
for

checks

not,

made

however,

-12-

believe that voluntary agreements between the Reserve Banks and
depository

institutions

closing floats.
agents
would

there

all

is

little

the

Banks

suggested

However,
Board

is

to

there

uniform

efforts

all

midweek

charge

to

Another

not

their

accounts.

Reserve authorize

paying

institutions

authorize

question
all

commenter

as

on
to

collecting

suggested

institutions work

presentment

would

charge

-institutions

institutions for checks presented

Federal Reserve and depository

Such

or

paying

the Federal

empowered

closing days.

developing

most

is a substantial

institutions to charge paying
on midweek

that

to

that

institutions

closed days.
whether

likelihood

Reserve

commenter

collecting

eliminate

Since Federal Reserve Banks are only collecting

authorize

Another

would

rules

enable

the

for

all

Federal

that the

jointly toward
institutions.

Reserve

to

move

expeditiously to recover fully the cost of this float.
One commenter
credit

one

day

institutions,
with

suggested that the Federal Reserve defer

to all

depositors

of

checks

drawn

the practice

of

the private

sector.

The

for checks

institutions

would

complex

availability

schedules.

be

depository

closed

arguing that this alternative would be consistent

that deferring credit to depositors

would

on

extremely

result

in

more

Implementation

burdensome

institutions

since

for
every

checks with the Federal Reserve,

the

of

Board

drawn on closed

Federal
these

Reserve

institution

as well

believes

Reserve
schedules

Banks

and

depositing

as the Reserve Banks,

would have to keep track of virtually every institution that is

-13-

closed

midweek.

available
likely

to

Moreover,

their

separately

requiring

in

order

customers,
sort

substantial

to

delay

depository

checks

drawn

on

making

credit

institutions

closed

would

institutions,

and

expensive

modifications

commenters

suggested

that

to existing

check sorting patterns.
Seven

the

pass credit to depositors on a six day basis,

Federal

Reserve

and one commenter

suggested that all depository institutions be required to clear
checks on Saturdays.

In their opinion,

this would increase the

efficiency of the payments mechanism.
these

suggestions,

it

would

be

To implement

necessary

for

the

either

of

Federal

Reserve and perhaps the entire banking system to remain open on
Saturdays.
midweek

Such an alternative is well beyond the scope of the

closing

proposal

and

would

require

extensive

consideration and analysis.
One

trade

institutions

association

should be exempted

suggested
from

the

that

small

proposal.

However,

since most float from midweek closings is attributable to small
institutions,

such

an

exemption

would

not

accomplish

the

objective of eliminating this float.
B.

Nonstandard

discussing
charging

nonstandard

for

nonstandard
their

checks

mandatory

made

holidays.

support
and

on the

holidays,

Of

Federal

voluntary

41

available
these

holidays.

to

(63

nonstandard

the

percent)

five

commenters

closed

on

conditioned

differentiating
holidays,

65

favored

institutions

commenters,

Reserve

Of

and

between
three

-14-

conditionally
provided

supported

credit

depository

on

the

days

the

institutions

proposal

generally

considerations,

proposal
Reserve

are

based

observing

if

open.

Banks

Reserve

are

support

and

favoring

on

closing was

Banks

closed

Commenters

their
that

the

the

equity

optional

for

many

nonstandard holidays.
Twenty-four
proposal.

Eight

unfair

charge

to

commenters

commenters

stated

institutions

percent)
their

for

observed nonstandard holidays.
the proposal would have

(37

opposed

belief

mandatory

Twelve

a negative

that

or

on

it

is

uniformly

commenters

impact

the

stated

their

that

earnings,

and 11 commenters suggested alternatives to the proposal.
Seven commenters
for

nonstandard

holidays

stated that
when

it was unfair

depository

institutions

required by state or local law to be closed.
that

a distinction

should be made

arising from mandatory closings.
holidays,

in the
However,

to charge
are

The Board agrees

treatment

of

float

for many nonstandard

it is unclear as to whether an institution is require

or merely permitted to be closed.

In view of

and burden in making

this distinction

holidays,

believes

the

appropriate

Board

to treat

that,

for all
at

this

the

complexity

state and local
time,

all nonstandard holidays as

it

is

if they were

mandatory.
Twelve commenters indicated that the proposal would be
operationally burdensome or costly to implement

since a closed

institution would have to have staff present on closed days

or

-15-

maintain

excess

indicated
would

balances

to

in the discussion

have

had

offices defer
institutions

the

avoid

of midweek

option

of

having

for one day charges
compensating

account

overdrafts.

closings,

their

institutions

Federal

Reserve

to their accounts,

the

Federal

stated

that

Reserve

As

with the

for

the

float

unfair

for

i nc urre d.
Two

commenters

it

is

the

Federal Reserve to charge for nonstandard holidays when Federal
Reserve
Ten

Banks

themselves

commenters

suggested

standardize hol id ay
the

Reserve

Banks

that are open on
Banks

are

do

not

that

observe
the

schedules.

should

Federal

One

credit

One

the accounts

commenter

Reserve

should work with

holid ay

schedule.

The

the

industry

Board

agrees

should

suggested
of

on which

suggested

uniformly.

Reserve

commenter

nonstandard holidays

closed.

holidays

that

institutions
their

that

the

Reserve
Federal

to develop a universal
that

uniform

holiday

schedules could contribute substantially to a further reduction
in

nonstandard

holiday

float.

However,

this

would

extensive analysis by the Federal Reserve System and

require
is beyond

the scope of the proposed amendment.
Three commenters stated their belief that the proposal
would

provide

located
These

in

the

a

competitive
same

commenters

state

argued

advantage

as

their

that

those

to

some

Federal

institutions

Reserve

institutions

charged for fewer nonstandard holidays

than other

within the same territory because their Federal

office.

would

be

institutions

Reserve office

-16-

also

observes

however,
being

most

of

these

holidays.

The

Board

believes,

that there is no competitive advantage with respect to

charged

on nonstandard

holidays

since

would be charged when their Reserve Banks

all

institutions

are open

and would

not be charged when their Reserve Banks are closed.
Two commenters stated that

the Board's proposal

provide an unfair competitive advantage
correspondent

institutions

could

not

would

to Reserve Banks

make

similar

since

charges.

Another commenter stated that the Federal Reserve would achieve
a competitive advantage because the cost to the Federal Reserve
to implement

the proposal

is small

private sector competitors.

One

relative

commenter

to

the

costs

suggested

Federal Reserve should work with the private sector
uniform

presentment

commenter

suggested

rules

for

voluntary

all

institutions

presentment

for

that

the

to develop

and

another

agreements.

Given

the small amount of float involved in nonstandard holidays
million),
there

($10

even if the proposal were adopted it is unlikely that

will

be

a material

impact

on

the

competitive

balance

between Reserve Banks and correspondents.
Citing

the decline

commenters suggested that
and

that

However,

it

therefore

this

in nonstandard holiday

the

amount

should

alternative

is

be

of

this

excluded

impractical

float,

float
from

since

was

two

small

pricing.
the

Federal

Reserve is required to eliminate or price Federal Reserve float.
It was suggested by three commenters
Reserve

should

defer

credit

to

collecting

that the Federal

institutions

for

-17-

nonstandard
often

holidays.

observe

Since

nonstandard

institutions

holidays

in

the

uniformly,

same

it

state

may

be

possible to identify readily such institutions and defer credit
to depositors
where

for

checks

operationally

drawn

feasible,

on

these

Reserve

institutions.

Banks

will

be

Thus,

provided

the option of deferring credit in such instances.
Five

commenters

suggested

that

the

value

of

nonstandard hol ida y float should be recovered through per
fees,

since

the

amount

of

this

float

is

small.

item

Ideally the

burden of float should be placed on the institution responsible
for generating

it.

However,

nonstandard

holiday

appropriate

that

given

proposal,

the

value

remaining after operational

the

the

of

issues

Board

believes

nonstandard

changes

raised

the

it

h ol id ay

are made be

by

is

float

added

to

the

check collection cost base.
C.

Float

specifically

discussed

the

Payment

Option.

option

of

Seventeen

permitting

commenters

paying

institutions to compensate the Federal Reserve for the value of
midweek
being

closings

charged

commenters

present

for

faced

e.g.,
on

the

nonstandard

their

generally

difficulties
position,

and

by

checks

stated
an

avoiding
closed

hol ida y

when

that

they

it

float
are

would

rather

closed.
minimize

institution

in

managing

the

of

having

day.

expense
One

of

these

its

an

than
These
the
money

employee

commenters

conditionally supported the float payment option,

provided the

Reserve Banks pass credit when they are closed and depository

-18-

institutions are open.

The Board agrees that the float payment

option would make the midweek closing amendment to Regulation J
less burdensome operationally,

and

therefore

this

option

will

be available at all Reserve Banks.
Board A c t i o n .
After

review

of

issues raised therein,

the

comments

and

analysis

of

the

the Board has determined to approve the

amendment to Regulation J to give the Reserve Banks the ability
to charge institutions regularly closed midweek for checks made
available to them by
closed,
which

effective

the

the

April

institution

Reserve
2,

Banks

1984.

on

Such days

regularly closes

closings are characterized as

the days

such closings are clearly voluntary

include

midweek

"holidays"

even

in all

charged

midweek

for

closing

the

in the

interterritory check
of

the

Board

value

Regulatory
considered

same

float.

of

the

manner

as

on

law since

cases.

The

Board

institutions

created

by

their

is currently done

for

In accordance with the provisions

Flexibility Act,
the

float

days

if these

under State

has also approved the option of permitting closed
to be

they are

alternatives

5 U.S.C.
outlined

§§

601-612,

above

to

the impact of the amendment on small institutions.

the

minimize

However,

it

is appropriate that the institution that is closed midweek bear
the

cost

closing.

of

the

The

float

Board

that

is

believes

created
that

the

as

a result

option

to

of

its

allow

institutions to be charged for the value of float will minimize
the impact of the amendment on small institutions by permitting

-19-

banks

regularly closed midweek to avoid the

that might otherwise be
that

the amendment

incurred.

It

is

operational

the Board's

is the most effective and

with which to eliminate or price Federal

costs

opinion

equitable manner

Reserve

float

created

by midweek closings.
The

Board has

also determined

that

the

amendment

to

Regulation J should not apply at this time to those nonstandard
holidays
Reserve

where
Bank

a

is

depository
open.

institution

The

Board

has

is

closed

decided

but

its

therefore

to

permit Reserve Banks to defer credit to depositing institutions
for checks drawn on institutions closed on nonstandard holidays
where operationally feasible.
arising

The value of any remaining float

from nonstandard holidays

will

be

added

to

the

cost

base for the check collection service.
List of Subjects in 12 C.F.R.

Part 210

Banks, banking? Federal Reserve System.
Effective
authority
U.S.C.

under

§ 342),

April

section

2,
13

1984,
of

pursuant

the

Federal

to

the

Board's

Reserve

Act

section 16 of the Federal Reserve Act

§§ 248(o),

360),

and section

(12 U.S.C.

§ 248(i)),

(12 C.F.R.

Part

210)

ll(i)

paragraph

of the Federal

(a)

items.",

redesignating

(i),

(ii) and

(iii)

subparagraphs

respectively,
subparagraph

(12 U.S.C.

Reserve Act

in § 210.9 of Regulation J

is amended by inserting

Cash

(12

"(1)" after

(1),

(2)

and

"(a)

(3)

as

designating the undesignated

paragraph

following

(iii)

as

"(2)"

paragraph

(2) of section 210.9 to read as follows:

and

revising

-20-

SECTION 210.9 —
(a)

Cash items.
(i)

(1) * * *

* * *

(ii)

* * *

(iii)
(2)
available

to

the

PAYMENT

* * *

The

proceeds

Reserve

Bank

of

by

any payment

the

close

of

shall

the

be

Reserve

Bank's banking day on the banking day of receipt of the item by
the paying

bank.

If

the banking

day

of receipt

banking day for the Reserve Bank,

payment

next

for

day

that

is

a banking day

not

a

shall be made on the

the

Reserve

close of the Reserve Bank's banking day.
closes regularly on a weekday which

is

Bank

A paying

bank

is a banking day

Reserve Bank shall either pay on that day by

by

the
that

for

the

the close of the

Reserve Bank's banking day for cash items that the Reserve Bank
makes available to the paying bank on that day,

or compensate

the Reserve Bank for the value of the float associated with the
items

in accordance

Bank's operating
bank

is

not

with

procedures

circular;

considered

to

provided

in

in such

circumstances,

receive

the

item

its

until

Reserve

the paying
its

next

banking day.
*

By

*

*

Order of the Board of Governors,

January 30,

(signed) William W. Wiles

William W. Wiles
Secretary of the Board

1984.