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federal
reserve
Bank of Dallas
DALLAS, TEXAS
75222
Circular No. 82-40
April 7, 1982
REVISIONS TO THE SERVICE CHARGE
SCHEDULE FOR WIRE TRANSFERS OF FUNDS
AND NET SETTLEMENT CHARGES
TO ALL DEPOSITORY INSTITUTIONS IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
Enclosed is the text of a press release and Federal Register
document issued recently announcing revisions of the service charge to
depository institutions for wire transfers of funds and net settlement
services effective April29, 1982.
The new fee structure isexplained in
both the press release and the Federal Register document.
Questions regarding the changes in the fee structure should be
directed to Thomas H. Rust of this Bank, Ext. 6333; William L. Wilson, El
Paso Branch, (915) 544-4730; Sammie C. Clay, Houston Branch, (713) 659
4433; or Tony G. Valencia, San Antonio Branch, (512) 224-2141.
Additional copies of this circular and enclosure will be
furnished upon request to the Department of Communications, Financial
and Community Affairs, Ext. 6289.
Sincerely yours,
William H. Wallace
First Vice President
Enclosure
Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension 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 release
The
March 25, 1982
Federal Reserve Board today announced revision, effective
April 29, 1982, of its charges to depository institutions for wire transfer
of funds and net settlement services.
The
January.
Board acted after reviewing comment on proposals published in
The
Board is pricing its services to banks and other depositories in
compliance with the Monetary Control Act of 1980.
The Act requires that the
Federal Reserve charge explicitly for its services and that the charges recover
the System's costs of providing the priced services plus an adjustment— ^ for
costs that would have been incurred if the services had been provided by a
private business firm.
The fees are in accordance with pricing principles
established by the Board and published in December 1980.
The 1982 fees for wire transfer services are generally above those for
1981, reflecting increased costs.
The private sector adjustment factor adopted
by the Board in January 1982 for use in determining 1982 prices, is 16 percent.
There is, in addition, a structural change, imposing a charge on receivers of
wire transfers.
The 1982 wire transfer fee schedule is as follows:
1.
2.
The receiver of a wire transfer will also pay 65 cents.
3.
—
The originator of a wire transfer will pay 65 cents pertransfer.
Surcharges for off-line origination of a wire transfer and
telephone advice of a wire transfer will be $3.50 and $2.25
respectively.
for
The Private Sector Adjustment Factor (PSAF) — An allocation of imputed costs
taking into account taxes that would have been paid and the return on capital
that would have been provided had the services been rendered in the private
sector.
-2The Board regards division of charges for wire transfers equally
among senders and receivers as appropriate since receivers benefit from the
wire transfer by immediate availability and irrevocability of funds, receivers
may request that senders use wire transfer and because the private sector wire
transfer service most comparable to that of the Federal Reserve charges both
senders and receivers.
The 1982 fee schedule for net settlement service is as follows:
$1.30 per settlement entry, plus
$5.00 per off-line settlement, plus
$2.25 per telephone advice (if requested).
Reserve banks have the option of charging higher fees for net
settlement amounts that result in higher or unusual costs.
The Board's fee schedule is set forth in detail in the accompanying
notice.
Also attached is a copy of the Board's pricing principles.
ATTACHMENT
-
0
-
Principles and Determinants of Pricing
for Federal Reserve Services
The Board has adopted the following principles as the basis
for Federal Reserve fees:
1.
All Federal Reserve Bank services covered by the
fee schedule shall be priced explicitly.
2.
All Federal Reserve Bank services covered by the fee
schedule shall be available to nonmember depository
institutions and such services shall be priced at the
same fee schedule applicable to member banks, except
that nonmembers shall be subject to any other terms,
including a requirement of balances sufficient for
clearing purposes, that the Board may determine are
applicable to member banks.
3.
Over the long run, fees shall be established on
the basis of all direct and indirect costs actually
incurred in providing the Federal Reserve services
priced, including interest on items credited prior
to actual collection, overhead, and an allocation
of imputed costs which takes into account the taxes
that would have been paid and the return on
capital that would have been provided had the
services been furnished by a private business firm,—
except that the pricing principles shall give due
regard to competitive factors and the provision of
an adequate level of such services nationwide.
4.
Interest on items credited prior to collection shall
be charged at the current rate applicable in the
market for Federal funds.
In addition, the Board has adopted the following pricing principles,
in view of the recognition in the Monetary Control Act and its legislative
history of the importance of encouraging competition and providing for an
adequate level of services nationwide.
5.
The Board intends that fees be set so that revenues
for major service categories match costs (inclusive
of a private sector mark-up). During the initial
start-up period, however, new operational require
ments and variations in volume may temporarily
change unit costs for some service categories.
It
is the System's intention to match revenues and
costs as soon as possible and the Board will
i/private Sector Adjustment Factor (PSAF)
-2 -
monitor the System's progress in meeting this goal
by reviewing regular reports submitted by the
Reserve Banks. If, in the interest of providing
an adequate level of services nationwide, the
Board determines to authorize a fee schedule for a
service below cost, it will announce its decision.
6.
Service arrangements and related fee schedules
shall be responsive to the changing needs for
services in particular markets. Advance notice
will be given for changes in fees and significant
changes in service arrangements to permit orderly
adjustments by users and providers of similar
services.
7.
The structure of fees and service arrangements
may be designed both to improve the efficient
utilization of Federal Reserve services and
to reflect desirable longer-run improvements in
the nation's payments system. Public comment
will be requested when changes in fees and
service arrangements are proposed that would
have significant longer-run effects on the
nation's payments system.
The Board has adopted the following price determinants:
— A Private Sector Adjustment Factor as a mark-up to the
Federal Reserve's cost of providing services. This
factor --16 percent for 1982— will be reviewed annually
and changed as appropriate.
— Prices will be based on full long-run costs, reviewed
at least annually in the light of estimated costs for
the ensuing year, using the Federal Reserve's Planning
and Control System (PACS) to determine full costs.
— Fees will be national for services that are uniform
across the Federal Reserve System. These are
generally capital intensive items, and include wire
transfer, automated clearing house services, net
settlement and on-line securities transfer services.
— Where there are significant differences in costs
among Federal Reserve Districts
(or offices),
differing District or office schedules will be used.
Such prices include coin wrapping, and securities
and noncash collection at the District level and
currency and coin shipping at the office level.
The Reserve Banks have the option of setting fees for check services
on either a District or office basis.
-0 -
FEDERAL RESERVE SYSTEM
(Docket No. R-0382)
FEE SCHEDULES FOR FEDERAL RESERVE BANK SERVICES
AGENCY:
Board of
ACTION:
1982
Governors
Fee Schedules
of the Federal Reserve System.
for Wire Transfer and Net Settlement Services.
SUMMARY: The Monetary Control Act of 1980 (Title I of Public Law 96
221) requires that schedules of fees be established for Federal Reserve
Bank services. The Board proposed revisions to the 1981 fee schedule
for wire transfer and net settlement services on January 7, 1982. The
Board has now adopted a new fee structure and prices for these services.
EFFECTIVE DATE:
April 29, 1982.
FOR FURTHER INFORMATION CONTACT: Lor in S. Meeder, Associate Director
for Federal Reserve Bank Operations (202/452-2738); Earl G. Hamilton,
Assistant Director for Federal Reserve Bank Operations (202/452-3879);
Elliott C. McEntee, Assistant Director for Federal Reserve Bank Oper
ations (202/452-2231); Daniel L. Rhoads, Attorney (202/452-3 711); Robert
G. Ballen, Attorney (202/452-3265).
SUPPLEMENTARYINFORMATION: The Monetary Control Act of 1980
("Act")
requires that fee schedules be developed for Federal ReserveBank services
based on pricing principles established by the Board. The Board, in
accordance with the requirements of the Act, published for comment
proposed pricing principles and fee schedules for services on August 28,
1980 (45 FR 58689). On December 30, 1980, after considering the comments
received from the public, the Board adopted revised pricing principles
and fee schedules for wire transfer and net settlement services (46 FR 1338)
The wire transfer and net settlement fee schedules were effective January 29
1981. The 1981 fee schedule for the wire transfer service provided
for a basic origination charge of $0.80 per origination plus a $2.70
surcharge for off-line origination and a $1.80 surcharge for telephone
advice, when requested. A charge of $1.80 for telephone advice to off
line receivers became effective March 26, 1981. The net settlement
fee schedule paralleled the fee schedule for wire transfers with a basic
settlement charge of $0.80 per settlement entry and a surcharge of $2.70
when the settlement is originated off-line. A surcharge of $1.80 was
established where telephone advice was requested.
The Board published for comment a new fee structure and new
prices for wire transfer and net settlement services to be implemented
in 1982 on January 7, 1982 (47 FR 2790). The proposed 1982 fee schedule
for the wire transfer service provided for a basic charge of $0.65 per
-2 -
transfer on both the originator and the receiver of a wire transfer,
a $0.15 surcharge per interdistrict transfer on the originator, a $3.50
surcharge for off-line origination, and a $2.25 surcharge for telephone
advice, when requested. The proposed 1982 fee schedule for the net
settlement service provided for a basic charge of $1.30 per intradistrict
settlement entry or $1.45 per interdistrict entry, plus a $5.00 surcharge
per off-line settlement and a $2.25 surcharge for telephone advice,
when requested.
The Act requires that "[ojver the long run, fees shall be
established on the basis of all direct and indirect costs actually
incurred in providing the Federal Reserve services priced . . . except
that the pricing principles shall give due regard to competitive factors
and the provision of an adequate level of such services nationwide."
The Act also requires that fees for Federal Reserve services take into
account "the taxes that would have been paid and the return on capital
that would have been provided had the services been furnished by a
private business firm." This markup is referred to as the private
sector adjustment factor (PSAF). In establishing 1981 prices for
Federal Reserve services, the Board used a private sector adjustment
factor of 16 percent based on methodology explained in the Board's
announcement of December 31, 1980. At that time, the Board stated that
it would review the PSAF annually and would adjust it as appropriate.
Using a methodology substantially similar to that used to derive the
1981 PSAF, the Board adopted a private sector adjustment factor on
January 7, 1982 of 16 percent to be used in developing 1982 fee schedules
for priced Federal Reserve services. This PSAF of 16 percent was used
to develop the 1982 fee schedules for wire transfer and net settlement
services.
The 1982 fees for the wire transfer services reflect estimated
1982 costs of providing the service plus a 16 percent PSAF. In general,
1982 wire transfer fees will increase fran 1981 fees. Additionally,
the 1982 fee schedule for the wire transfer service reflects the following
structural change fran the 1981 fee schedule.
The Board proposed to charge both the originator and the
receiver for each wire transfer of funds. Respondents were generally
opposed to the proposal because they believe that the originator, not
the receiver, generally makes the decision to use the Federal Reserve's
wire transfer service. Furthermore, respondents noted that two private
networks charge only the sender, and that it would be oostly for users
of the Federal Reserve's service to change their internal operations
to accommodate this fee structure. After consideration of the comments
received, the Board has adopted the proposal to charge both the originator
and the receiver for each wire transfer. The Board believes that imposition
of a charge on receivers is appropriate since receivers benefit fran
the Federal Reserve's wire transfer service in the form of immediate
availability and irrevocability of funds transferred by wire. Additionally,
receivers may have input into the decision to use the Federal Reserve
-3-
wire transfer service to transfer funds, such as by requesting that
senders use the Federal Reserve's service. Further, correspondent banks
may charge both parties involved in the transfer, and CHIPS, the private
network that provides wire transfer services that are fairly comparable
to the Federal Reserve's wire transfer service, charges both the originator
and the receiver of a funds transfer. The Federal Reserve's charge
for receivers is based on an even sharing between receivers and originators
of the Reserve Banks' costs plus PSAF in providing basic wire transactions.
The Board also proposed a surcharge for interdistrict wire
transfers. Respondents generally opposed this proposal because, in
their opinion, the surcharge would be arbitrary since it is based upon
Federal Reserve District boundaries that are arbitrary. Respondents
also stated that the surcharge would be inconsistent with the principal
of dividing the basic fee equally between the originator and the receiver
because it would be imposed only upon the originator. Furthermore,
respondents believed that the surcharge would regionalize the wire transfer
service by penalizing institutions for making interdistrict transfers,
no other wire service imposes such a fee, custaners of banks most likely
would not understand the variation in fees between intradistrict and
interdistrict transfers, and the surcharge will cause users of the
Federal Reserve wire transfer service substantial expense in making
the requisite adjustments to their accounting and record keeping systems.
Upon consideration of these comments, the Board has decided not to adopt
the proposed surcharge for interdistrict transfers.
The fee structure adopted by the Board for the Federal Reserve's
wire transfer service for 1982 is as follows:
(1)
Originator pays $0.65 per transfer.
()
2
Receiver pays $0.65 per transfer.
(3)
Surcharges for off-line origination and telephone advice
will be increased to $3.50 and $2.25, respectively.
The
1981 feeschedule for the net settlement
service paralleled
the 19B1 fee schedule for the wire transfer service. The Board believes
it is appropriate to separate the fee schedules for these two services
in recognition of the fact that these services create different rights
and responsibilities for the System and its customers. The Board proposed
the following
1982 feeschedule for the net settlement
service:
(1) $1.30 per intradistrict settlement entry
or $1.45 per interdistrict entry, plus
(2) $5.00 per off-line settlement, plus
(3) $2.25 per telephone advice (if requested).
-4 -
The Board has determined not to adopt the proposed higher
price for interdistrict settlements. The Board believes that the rationale
for not adopting a surcharge on interdistrict wire transfers is appli
cable to interdistrict net settlements. Otherwise, the Board has deter
mined to adopt the fee schedule for the net settlement service as proposed.
This 1982 fee schedule is based on estimated 1982 costs of providing
the service plus a 16 per cent PSAF. The Board has also determined
to allow Reserve Banks to negotiate higher fees for those net settlement
arrangements that create unique or unusual expenses, subject to review.
The fee structure adopted by the Board for the Federal Reserve's
net settlement service for 1982 is as follows:
(1) $1.30 per
settlement entry, plus
(2 $5.00 per
)
off-line settlement, plus
(3 $2.25 per
)
telephone advice (if requested).
By order of the Board of Governors of the Federal Reserve
System, March 24, 1982.
►»
(Signed) William W. Wiles
William W. Wiles
Secretary of the Board
[SEAL]
*
