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Federal R eserve Bank OF DALLAS HELEN E. HOLCOMB FI R S T V I C E P R E S ID E N T A N D C H IE F O P E R A T I N G O F F I C E R DALLAS, TEXAS M&V 10 1996 * 7526 5-5 906 ’ Notice 96-45 TO: The Chief Operating Officer of each financial institution in the Eleventh Federal Reserve District SUBJECT Cash Access Policy DETAILS The Board of Governors of the Federal Reserve System has approved a new cash access policy for the Federal Reserve Banks. The new policy will provide- greater consistency in the cash service levels provided by the Federal Reserve Banks to deposito ry institutions. The new policy becomes effective on May 1, 1998. ATTACHMENT A copy of the Board’s notice as it appears on pages 19062-64, Vol. 61, No. 84, of the Federal Register dated April 30, 1996, is attached. MORE INFORMATION For more information, please contact Don Curtis, (214) 922-6808, at the Dallas Office; Susanna A. Jimenez, (915) 521-8266, or Dieter Stanchos, (915) 521-8265, at the El Paso Office; Victoria Johnson, (713) 652-1636, at the Houston Office; or John Davenport (210) 978-1302, at the San Antonio Office. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely, 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) 19062 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices [Docket No. R-0922] Federal Reserve Uniform Cash Access Policy Board of Governors of the Federal Reserve System. ACTION: Policy statement. AGENCY: The Board has revised its cash access policy to provide greater consistency in Federal Reserve Bank cash service levels. The policy provides for a base level of free currency access to all depository institutions, but restricts the num ber of offices served and the frequency of access. Depository institution offices that meet minimum volume thresholds will be able to obtain more frequent free access. Additional access, beyond the free service level, w ill be priced. EFFECTIVE DATE: May 1,1998. FOR FURTHER INFORMATION CONTACT: Jon J. Cameron, Manager (202/452-2220) or Kathleen M. Connor, Senior Financial' Services Analyst (202/452-3917), Cash Section, Division of Reserve Bank Operations and Payment Systems; for the hearing impaired only: Telecommunications Device for the Deaf, Dorothea Thompson (202/4523544). SUMMARY: SUPPLEMENTARY INFORMATION: I. Background The Federal Reserve Banks supply currency and coin to depository institutions throughout the nation. Reserve Banks provided cash services to Federal Reserve member banks at no explicit fee (beyond the face value of cash orders or deposits) from 1914 to 1981. Nonmember institutions received cash services from the Treasury Department until the transfer of its Subtreasury functions to the Federal Reserve Banks in 1920. As a result, nonmember institutions generally met their cash needs through correspondent member banks from 1920 to 1980. During this period, member banks could request the Federal Reserve to provide cash services to a nonmember institution. The member’s reserve account would reflect the transaction, including a charge to reimburse the Federal Reserve for the cash transportation cost. The Monetary Control Act of 1980 authorized the Federal Reserve Banks to offer priced services to both member and nonmember institutions, and included currency and coin services in its list of priced Federal Reserve Bank services. The Board determined in the development of its pricing principles that “currency and coin processing (paying, receiving and verifying both coin and currency, and issuing, processing, canceling, and destroying currency) are governmental functions and would not be priced.” The Board noted, however, that “the Reserve Banks may impose reasonable lim itations on frequency of service, num ber of offices served and size of orders/deposits.” (45 FR 56893, September 4,1980) As part of the Federal Reserve’s im plem entation of the Monetary Control Act, the Board adopted a policy in November 1981 to provide standard access nationwide to every depository institution that requested coin and currency directly from the Federal Reserve. (46 FR 55152, November 6, 1981) Under the policy, the Board required that all Federal Reserve offices provide access to, at a minim um , one office per depository institution or one office of a depository institution per municipality, subject to adjustment where special circumstances apply. In 1982, the Board adopted fee schedules for currency and coin transportation and coin wrapping services. (47 FR 58364, December 30,1982) In 1984, the Board adopted uniform cash service standards (UCSS) for Federal Reserve Banks and most recently revised the UCSS in 1987. The UCSS provide a common framework for Federal Reserve cash services. The UCSS address packaging standards, handling and verification requirements, access frequency, and depository institution service levels. The UCSS allow normal service to each authorized depository institution or office once per week and recognizes that certain depository institution offices may call for more frequent service where volume and cost justify more frequent service. Under the UCSS, Reserve Banks that w ish to provide access exceeding the basic frequency may do so as a priced service but are not required to price the service. In 1987, the Federal Reserve Bank of M inneapolis and the Detroit Branch of the Federal Reserve Bank of Chicago established access fees for additional cash services in excess of the free weekly service allowed by the UCSS. In March 1996, the Federal Reserve Bank of San Francisco modified its cash service structure to restrict the frequency of access. Under the modified structure, a depository institution must meet a minimum bundle threshold to qualify for more frequent access.1 Additional access is priced if the bundle threshold is not met. Currently, there is a lack of consistency in the cash service levels provided by the Reserve Banks. Some Reserve Bank offices limit access to cash services to as few as five offices per depository institution, while other offices allow unrestricted access (up to 400 offices). While some Reserve Bank offices perm it unrestricted frequency of access, other offices limit frequency based on parameters such as dollar values, volumes, and location. As noted above, only a few offices offer additional priced access. Consistency in Federal Reserve policies and service levels will become increasingly im portant as an increasing num ber of depository institutions have a presence in m ultiple Federal Reserve districts. II. Uniform Cash Access Policy The Board has approved a new cash access policy, w hich was developed w ithin the following framework: (1) the structure of cash services should include a common, base level of free services to achieve greater uniformity in Federal Reserve cash service levels; (2) the base level of free cash services should be consistent w ith a wholesale role for the Reserve Banks, w hich implies that a large depository institution is responsible for servicing its own branch network; and (3) Reserve Banks that choose to provide cash services exceeding the base level may do so as a priced service, where demand exists. The new policy imposes more uniformity on the provision of cash services than currently exists. While the policy reflects the differing operating capabilities of the various Federal Reserve Bank offices, the Board’s intent is to move to full uniformity w ithin two years of implementation of this policy. The Board will review the Reserve Banks’ initial experience w ith this policy and assess w hether there are impediments to moving to a fully uniform- policy. Based on the results of the review, the Board may modify the policy to achieve Systemwide uniformity w ith respect to volume thresholds, pricing, and additional priced access. Following is a discussion of the new cash access policy and how and why it 1A bundle is a standard unit of 1000 currency notes of the same denomination. Deposits of lower denomination notes generally are made in bundle increments. Deposits of higher denomination notes (e.g., $50s or $100s) generally are m ade in strap increments (100 currency notes). Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices differs from the current policy provisions. that the provision of ten free endpoints would result in the least disruption to . the current level of free cash services. A. Number o f Depository Institution The Reserve Banks estimate that 95 Offices Eligible for Free Access percent of depository institutions would Under the new policy, each continue to receive their current level of depository institution w ith a banking cash services free of charge. The policy presence in a Federal Reserve office would affect primarily branch networks territory can designate up to ten offices of large depository institutions. The to receive free cash access (deposit and policy would result in a reduction of order) service from the local Reserve approximately 8,700 endpoints from the Bank office. Beyond the ten offices, Current base of 29,500 endpoints that Reserve Bank offices w ill provide free currently receive free cash services (a cash access to large offices whose reduction of approximately 26 percent). volumes exceed a specified threshold The Board believes implementation of and that satisfy the local Reserve Bank office’s denom ination bundle standard.2 the policy w ill not materially affect the Reserve Banks’ costs of providing cash Each district w ill set a “high bundle services. Aggregate cash receipts and threshold,” w ithin the range of fifty to disbursements are expected to remain one hundred bundles, to accommodate unchanged. the needs of the geographic area being The Reserve Banks will establish serviced by a particular office w ithin procedures to ensure that, if a their district. During initial depository institution receives free im plem entation of die policy, access to more than ten offices, all depository institutions w ill include the known large offices exceeding the “high endpoints m ust meet the high bundle threshold. In addition, the Reserve bundle threshold” in the original ten Banks have developed adm inistrative designated offices to receive free access guidelines to accommodate mergers and to cash services. The current policy requires Federal bank acquisitions. For one year after the Reserve Banks to provide free cash merger or acquisition, the merged access service to depository institutions institutions can receive the same level on an equal and impartial basis, of free access as they received at the consistent w ith their capabilities to time of the merger. After one year, the provide such service through maximum Reserve Banks will treat the merged utilization of available physical institutions as one entity for the facilities. The varying application of this purposes of this policy. provision by the Reserve Bank offices B. Frequency o f Access has resulted in inconsistent cash service levels throughout the System. Normal free access for each The new ten-office provision provides designated office of the depository uniformity in the provision of cash institution w ill continue to be once per services. The new provision is week. Access more frequent than once consistent w ith the wholesale role of the per week will be available free of charge Federal Reserve in providing cash to the designated endpoints whose services, particularly w ith respect to volumes exceed a twenty-bundle large institutions. The policy encourages aggregate threshold and that satisfy the large institutions to consolidate deposit local Reserve Bank office’s and cash ordering functions and denomination bundle standard. imposes reasonable limitations on the These provisions impose reasonable number of offices served. limitations on the frequency of service The provision for ten free endpoints and standardize System service levels. may provide many smaller depository They are consistent with the current institutions w ith complete coverage of cross-shipping policy, which will their branch network. The Board continue under the new cash access considered developing a formula to set policy.3 Elimination of the cross the number of endpoints eligible to shipping policy could result in some receive free service based on the depository institutions relying on'the institution’s deposit size and total Reserve Banks as money distribution num ber of endpoints. The Board centers, w hich would be inconsistent concluded that such a formula would with the Federal Reserve’s wholesale prove too difficult to adm inister and role. 2 The Reserve Banks make payments and accept deposits in standard units as defined by the UCSS. The denom ination bundle standard is set by the individual Reserve Bank office to reflect the operating needs of the office. Each Reserve Bank’s denomination bundle standard is included in its cash operating circular. 3 The cross shipm ent policy states that cross shipment (deposit of excess fit currency and reorder of the same denom ination w ithin five business days) should be elim inated at the depositing-office level, and m inimized, or eliminated where practicable, at the depositing-institution level. 19063 C. Priced Additional Access The new policy requires that Reserve Banks price additional cash services. Under the current policy, Reserve Banks that provide access exceeding the basic frequency can do so as a priced service but are not required to price the service. The Board anticipates that all Reserve Banks will offer priced cash services except for those offices that can demonstrate that operational limitations prevent them from doing so. The pricing of additional service will recover the cost of access to the Federal Reserve cash vault only and will not reflect the costs of the governmental aspects of the Reserve Banks’ cash services, such as vault storage and processing of currency. Preliminary estimates of the range of Reserve Bank fees for additional access are $20-$100 per deposit or order. D. Delegation o f Authority The Board believes that flexibility is desirable in the administration of future routine changes to the policy. The Board, therefore, has delegated authority to the Director of the Division of Reserve Bank Operations and Payment Systems to (1) approve changes in the base number of free endpoints and the volume thresholds; and (2) waive the policy for a limited period if warranted by special circumstances, such as a natural disaster or the introduction of new currency. III. Effective Date The new cash access policy becomes effective on May 1, 1998. The Board believes that two years is adequate time for financial institutions to make the necessary preparations to implement the policy. IV. Competitive Impact Analysis The Board assesses the competitive impact of changes that may have a substantial effect on payment system participants. In particular, the Board assesses w hether a proposed change would have a direct and material adverse effect on the ability of other service providers to compete effectively with the Federal Reserve Banks in providing similar services and whether such effects are due to legal differences or due to a dom inant market position deriving from such legal differences. The Reserve Banks will continue to perform the governmental functions of currency and coin processing. While private-sector service providers cannot duplicate the entire range of Federal Reserve cash functions, these providers can supply and accept coin and currency. In addition, private-sector service providers offer an array of value- 19064 Federal Register / Vol. 61, No. 84 / Tuesday, April 30, 1996 / Notices added cash services that the Federal Reserve Banks do not provide. For example, some private-sector service providers m aintain automated teller m achines for depository institutions and offer specific retail services for the depository institutions’ customers. Therefore, it is unlikely that the policy w ill result in any significant shift to Federal Reserve cash services away from private-sector providers. The Board’s policy, as revised, does not adversely affect the ability of depository institutions or service providers to compete w ith the Federal Reserve Banks te provide cash services. V. Federal Reserve Cash Service Access Policy The Board has adopted the following Federal Reserve cash access policy: 1. Number o f endpoints eligible for free cash access. Each depository institution w ith a banking presence in a Federal Reserve office territory can designate up to ten offices in that territory to receive free cash access (deposit and order) service from the local Reserve Bank office. Beyond the ten offices, Reserve Bank offices w ill provide free cash access to endpoints whose volumes exceed a specified threshold and that satisfy*the local Reserve Bank office’s denom ination bundle standard. Each Reserve Bank office will set a “high bundle threshold,” w ithin the range of fifty to one hundred bundles, to accommodate the needs of the geographic area being serviced w ithin that Federal Reserve office territory. If a depository institution receives free access for more than ten endpoints, all endpoints m ust meet the high bundle threshold. 2. Frequency of access. Normal free access for each designated office of the depository institution will be once per week. Access more frequent than once per week will be available free of charge to each designated office whose volume exceeds a twenty-bundle aggregate threshold and that satisfies the local Reserve Bank office’s denom ination bundle standard. 3. Priced access. Reserve Bank offices may choose to accommodate additional access where the dem and exists subject to the constraints of the physical facilities at each Reserve Bank office. Reserve Banks must price access to cash services beyond the free service described above, if offered. 4. Delegation of authority. The Director of the Division of Reserve Bank Operations and Payment Systems, under delegated authority, may (1) approve changes in the base num ber of free endpoints and the volume thresholds; and (2) waive the policy for a limited period if warranted by special circumstances, such as a natural disaster or the introduction of new currency. By order o f the Board of Governors of the Federal Reserve System. Dated: April 24,1996. W il l i a m W . W ile s , Secretary o f the Board. [FR Doc. 96-10606 Filed 4-29-96; 8:45 am] BILLING CODE 6 2 1 0 -0 1 -P
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