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FEDERAL RESERVE BANK
OF MEW YORBC
[
Circular No. 1 0 2 6 8 1
November 16, 1988
J
1989 FEE SCHEDULES FOR PRICED SERVICES
— ACH, Fends Transfer and Net Settlement, Definitive Secerities Safekeeping,
Noncash Collection, Book-Entry Secerities Services, and Check Payor Bank Services
— Private Sector Adjestment Factor (PSAF)
To All Depository Institutions, and Others Concerned,
in the Second Federal Reserve District:
T h e B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m h a s a n n o u n c e d th e a d o p t io n o f n e w f e e s c h e d u le s f o r
s e r v ic e s p r o v id e d b y F e d e r a l R e s e r v e B a n k s , e f f e c tiv e J a n u a r y 1, 1 9 8 9 . F o llo w in g is th e te x t o f a s ta te m e n t is s u e d
b y th e B o a r d o f G o v e r n o r s in th a t r e g a r d , in c lu d in g n o tic e o f th e B o a r d ’s a p p r o v a l o f th e 1 9 8 9 P r iv a te S e c t o r A d
j u s t m e n t F a c t o r ( P S A F ) f o r F e d e r a l R e s e r v e p r ic e d s e rv ic e s :
The Federal Reserve Board has announced the 1989 fee schedules for services provided by the Reserve Banks. The
majority of the 1989 fees are the same as those currently imposed and they generally become effective January 1, 1989.
The fee schedules apply to check collection, automated clearing house, wire transfer of funds and net settlement,
definitive safekeeping, noncash collection, book-entry, and check payor bank services. The 1989 fee schedules are avail
able from the Reserve Banks.
In 1989 total costs for priced services, including the Private Sector Adjustment Factor (PSAF), are projected to be
$684.9 million. Total revenue is estimated at $707.8 million, resulting in a 103.4 percent recovery rate.
The 1989 recovery rate may be optimistic because costs for check services may be higher than anticipated as a result
of the impact of the Expedited Funds Availability Act and Regulation CC on Reserve Bank operations. The proposed
fees for 1989 are based on total costs, including the PSAF, but exclude special project costs.
At the same time, the Board approved the 1989 PSAF for Reserve Bank priced services of $69.7 million, a reduction
of $6.5 million or 8.5 percent from the $76.2 million targeted for 1988.
The PSAF is an allowance for the taxes that would have been paid and the return on capital that would have been
provided had the Federal Reserve’s priced services been furnished by a private business firm.
P r in t e d o n th e f o llo w in g p a g e s is th e te x t o f th e B o a r d ’s o f f ic ia l n o tic e in th is m a t t e r , w h ic h h a s b e e n r e p r in te d
f r o m th e Federal R egister o f N o v e m b e r 4 , 1 9 8 8 . R e q u e s t s f o r a d d itio n a l i n f o r m a ti o n r e g a r d in g o u r p r ic e d s e r v ic e s
m a y b e d ir e c te d to y o u r A c c o u n t M a n a g e r , T e l. N o . 2 1 2 - 7 2 0 - 6 6 0 0 (a t th e H e a d O f f i c e ) , o r T e l . N o . 7 1 6 - 8 4 9 - 5 1 0 8
(a t th e B u f f a lo B r a n c h ) .
E.
G erald Corrigan,
President.
[Docket Mo. ^=0S§1]
F@@ Schedules for Federal Reserve
Bank Priced Services
a g e n c y : B o a r d o f G o v e r n o r s o f th e
F ed era l R eserv e S y stem .
ACTION: Approval of a Private Sector
Adjustment Factor and fee schedules for
Federal Reserve Bank priced services
for 1989.
SUMMARY: The Board has approved a
Private Sector Adjustment Factor
(“PSAF”) for 1989 of $69.7 million. This
represents a decrease of $6.5 million, or
8.5 percent, from the 1988 target of $76.2
million. The PSAF is a recovery of
imputed costs that takes into account
the taxes that would have been paid and
the return on capital that would have
been provided had the Federal Reserve’s
priced services been furnished by a
private business firm. The Board has
also approved 1989 fee schedules for the
automated clearing house, wire transfer
of funds, net settlement, definitive
safekeeping, noncash collection, bookentry, and check payor bank services
offered by the Federal Reserve System.
These actions were taken in accordance
with the requirements of the Monetary
Control Act of 1980, which requires fees
for Federal Reserve priced services to be
established on the basis of all direct and
indirect costs, including the PSAF.
EFFECTIVE d a t e The Private Sector
Adjustment Factor and fee schedules
are effective January 1,1989, except for
the elimination of night cycle surcharges
for ACH return items which will be
effective April 10,1989.
FOP! FURTHER
CONTACT:
For questions regarding the Private
Sector Adjustment Factor Paul Bettge,
Program Leader (202/452-3174), Division
of Federal Reserve Bank Operations; for
questions regarding fee schedules:
Christine G. Slater, Senior Analyst,
Electronic Payments (202/452-2539),
Lisa Kemer, Analyst, Securities (202 /
452-3437), or Nalini Rogers, Analyst
Check Payments (202/452-3801),
D iv is io n o f F e d e r a l R e s e r v e B a n k
O p e r a t io n s ; f o r th e h e a r in g im p a ir e d
only: T e le c o m m u n ic a t io n s D e v ic e fo r
th e D e a f, E a m e s t in e H ill or D o r o th e a
T h o m p s o n (202/452-3544).
Copies of the 1989 fee schedules for
ACH, wire transfer of funds, net
settlement, definitive safekeeping,
noncash collection, book-entry
securities, and check payor bank
services are available from local Federal
Reserve Banks.
8MF>@§e£!3AT&®M:
P r iv a te S e c t o r A d j u s t m e n t F a c to r
(“ P S A F ”)
The Monetary Control Act of 1989
requires that fee schedules for the
Federal Reserve’s priced services
include an allocation of imputed costs
for taxes that would be paid and the
return on capital that would be provided
had the services been furnished by a
private business firm. Using the
methodology previously approved by
the Board, these imputed costs are
based on data developed in part from a
model comprised of the nation’s 25
largest bank holding companies.
Briefly stated, the methodology first
entails determining the value of Federal
Reserve assets that will be used directly
in producing priced services during the
coming year, including the net effect of
assets planned to be acquired or
disposed of during the year. Short-term
assets are assumed to be financed by
short-term liabilities; long-term assets
are assumed to be financed by a
combination of long-term debt and
equity.
Imputed capital costs are determined
by applying related interest rates and
rate of return on equity derived from the
bank holding company model to the
assumed debt and equity values. These
costs, together with imputations for
estimated sales taxes, FDIC insurance
assessment on clearing balances held
with the Federal Reserve to settle
transactions, and expenses of the Board
of Governors related to priced services,
comprise the PSAF.
D e t a il s r e g a r d in g th e d e r iv a t io n o f th e
P S A F a r e a s fo llo w s :
for the 1989 PSAF would result in a
PSAF that is significantly lower than the
proposed PSAF. A System Task Force is
also revisiting the PSAF methodology to
attempt to address the variability and
level of the PSAF over the long-term.
The Task Force proposes to present its
recommendations to the Board early
next year so that public comment may
be requested on a new methodology, if
necessary, and final Board action may
be taken in time for inclusion in the 1990
price-setting process.
Table 3 shows the interest, equity, and
tax rates for 1989 and compares them
with the rates used for developing the
PSAF for 1988. The sample of 25 bank
holding companies used to calculate the
rates for 1989 differs slightly from the
sample used for the 1988 PSAF in that
two bank holding companies replaced
others because of changes in relative
asset size. One large bank holding
company was again removed from the
sample because of unique government
oversight over bank management
decisions during the past few years, and
the twenty-sixth largest bank holding
company was substituted. The bank
holding companies with the highest and
lowest rates of return on equity before
taxes were also excluded, consistent
with the approved methodology for
determining the PSAF. Calculations
were then based on the remaining 23
bank holding companies.
Other Imputed Costs
Asset Base
The estimated value of Federal
Reserve assets used in providing priced
services in 1989 is reflected in Table 1.
Table 2 shows that the value of assets
assumed to be financed through debt
and equity are projected to total $445.2
million in 1989, an increase of $28.0
million or 6.7 percent from 1988. This
increase results largely from capital
expenditures for bank premises,
furniture, and equipment planned by the
Reserve Banks next year.
As shown in Table 3, other required
PSAF recoveries for 1989 for sales taxes,
FDIC insurance, and Board expenses
total $11.4 million, down $0.4 million
from 1988. The reduction is due to lower
imputed sales taxes, because of a
decline in projected capital expenditures
for 1989 from 1988. The decline is also
attributable to a reduction in Board staff
working directly on the development of
priced services, as the Board is
anticipating that staff will spend more
time on regulatory matters in 1989 as a
result of Regulation CC and the
Expedited Funds Availability Act
Cost of Capital and Taxes
1989 Fee Schedules
L a s t y e a r th e B o a r d a p p r o v e d
im p u tin g th e c o 9 t o f e q u it y c a p it a l fo r
th e P S A F u s in g a n a v e r a g e o f r a te s o f
re tu r n o n e q u it y d e r iv e d fro m th e m o d e l
in e a c h o f th e la s t th r e e y e a r s in o r d e r to
r e d u c e th e v a r ia b ilit y o f im p u te d retu rn
o n e q u it y c a u s e d b y flu c t u a t io n s in b a n k
h o ld in g c o m p a n y e a r n in g s . A s a r e s u lt
o f a b n o r m a lly l o w 1987 b a n k h o ld in g
c o m p a n y e a r n in g s , h o w e v e r , th e B o a r d
is u s in g a f iv e - y e a r a v e r a g e o f b a n k
h o ld in g c o m p a n y d a ta fo r th e 1989
P SA F . U s e o f th ree-y ea r a v e r a g e d a ta
T h e M o n e ta r y C o n tr o l A c t r e q u ir e s
th a t, o v e r th e lo n g ru n , f e e s fo r F e d e r a l
R e s e r v e p r ic e d s e r v i c e s b e e s t a b lis h e d
o n th e b a s i s o f a ll d ir e c t a n d in d ir e c t
c o s t s in c u r r e d in p r o v id in g th e p r ic e d
s e r v i c e s , in c lu d in g th e P S A F . T h e
B o a r d ’s p r ic in g p r in c ip le s s t a t e th a t f e e s
w ill b e s e t s o th a t th e r e v e n u e s fo r
m a jo r s e r v i c e c a t e g o r ie s m a t c h c o s t s ,
in c lu d in g th e P S A F . T h e B o a r d m a y s e t
f e e s fo r a s e r v i c e lin e th a t d o n o t fu lly
r e c o v e r c o s t s , in th e in t e r e s t o f
p r o v id in g a n a d e q u a t e l e v e l o f s e r v i c e s
PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 53, NO. 214, pp. 44661-44665
2
nationwide. The fees for each service
line, however, must recover all operating
costs, float costs, and certain imputed
costs of providing that service, as well
as contribute to the pre-tax return on
equity. Total revenue for all Federal
Reserve services must, in the aggregate,
recover all costs, including the PSAF.
Last year the Board approved fees for
priced services that were set to recover
101.8 percent of the cost of providing
such services in 1988, including the
PSAF and the cost of float. Through the
first eight months of 1988, the System
recovered 100.8 percent of total costs.
The Board estimates that toal costs for
1988, including the PSAF, will be $660.7
million. Total revenue is estimated to be
$664.0 million, resulting in a 100.5
percent recovery rate.
In 1989, the total costs of priced
services, including the PSAF, are
estimated to be $684.9 million. Total
revenue is estimated to be $707.8
million, resulting in a 103.4 percent
recovery rate. The Board believes that
the 1989 recovery rate may be optimistic
because costs for check services may be
higher than anticipated as a result of the
impact of Expedited Funds Availability
Act and Regulation CC on Reserve Bank
operations. The majority of the 1989 fees
that are being proposed are the same as
those currently in effect. Since 1984, as
the table below shows, the System has
made substantial progress in moving
closer to its target of a 100 percent
recovery.
T o t a l P r ic e d F in a n c ia l S e r v ic e s
[Dollars in millions]
Total
cost
1984..................
1985.................
1986..................
1987.................
1988 Est...........
3519.1
571.2
599.3
627.3
660.7
Total
revenue
3559.8
@03.8
627.7
649.7
634.0
Recovery
rats
(percent)
107.®
105.7
104.7
103.5
100.5
The Board has approved expenditures
for special research and development
efforts for 1988 which could have a
major beneficial effect on the payments
mechanism. While the magnitude of
expenditures may fluctuate significantly
from year to year, expenses for these
one-time special projects are considered
a temporary cost to priced services.
Projects are currently underway to
improve the reliability of electronic
payment services as well as to explore
the application of digital image
technology to the check service. Special
projects associated with the automated
clearing house, funds transfer, bookentry, and check services will cost an
estimated $2.3 million in 1988 and $4.3
million in 1989. The proposed fees for
1989 are based on total costs, including
the PSAF, but excluding special project
costs.
The following is a discussion of the
estimated 1988 and 1989 financial
performance, and 1989 fee schedules for
the individual priced services.
Automated Clearing House ( “.A CH”)
The table below shows the Federal
Reserve Banks’ estimated 1988 and
projected 1989 financial performance for
the ACH service.
A u t o m a t e d C le a r in g H o u s e
[Dollars in millions]
Total
cost
1988.................
1989.................
$42.2
46.9
Total
revenue
Recovery
rate
(percent)
$41.9
47.1
99.2
100.5
The total costs in the table do not
include special project costs, which
would reduce the 1988 and 1989
recovery rates to 99.1 percent and 99.2
percent respectively. The Board
estimates that total commercial costs,
including the PSAF, will increase 11.1
percent in 1989, while commercial ACH
volume will increase nearly 24 percent.
These cost and volume estimates reflect
continuing economies of scale in ACH
processing.
The Board believes the 1989 volume
projection for ACH may be
conservative, as actual volume growth
has generally exceeded budgeted
volumes. For example, through the first
eight months of 1988, ACH volume has
grown at more than 29 percent,
compared to a 24 percent budgeted
volume growth rate.
The Board has lowered the surcharges
for processing night cycle transactions
in 1989 to reflect reductions in float
costs and continued improvements in
the efficiency of night ACH operations.
These improvements would allow the
night cycle surcharge on debit
transactions to be reduced from 4.5
cents to 3.5 cents, and the night cycle
surcharge for next-day credit
transactions to be reduced from 2.0
cents to 1.5 cents.
To recover the costs associated with
providing labor-intensive services more
fully, the Board has increased the
nonautomated ACH fees. As these
prices continue to reflect the increased
cost of providing these labor-intensive
services and as additional institutions
convert from paper to electronics, the
fixed cost base for these nonautomated
services will be borne by fewer
institutions, resulting in higher prices.
Conversely, prices for automated
3
services are expected to decrease in
future years as volume grows and the
number of Federal Reserve ACH
processing sites is reduced.
The Board has approved two
additional price changes. First,
beginning in 1989, the Treasury has
required that government Notifications
of Change (“NOCs”) be submitted in
automated form. Institutions may either
automate the NOCs or deposit paper
NOCs with Reserve Banks for
conversion to electronic form. The Board
has approved a fee of $1.00 for each
paper NOC deposited.
Second, the Board has eliminated the
night cycle surcharges for return items,
effective April 10,1989, because little
float cost is associated with processing
return items and because of continuing
improvements in the efficiency of night
operations.
Funds Transfer and Net Settlement
The Federal Reserve Banks project
financial performance in the funds
transfer and net settlement service for
1988 and 1989 as shown below.
F u n d s T r a n s f e r a n d N e t S e t t le m e n t
[Dollars in millions]
Total
cost
1988...... ..........
1989..................
$70.0
74.0
Total
revenue
Recovery
rate
(percent)
$68.2
75.3
97.5
101.®
The total costs in the table do not
include special project costs, which
would reduce the 1988 and 1989
recovery rates to 97.3 percent and 100.2
percent respectively. In 1989, the Board
estimates that funds transfer costs,
including the PSAF, will increase by $4.0
million or about 5.7 percent over 1988.
The volume for basic funds transfers
originated is expected to increase by
four percent in 1989. With the new fee
changes discussed below, the projected
recovery rate for 1989 is 101.8 percent.
For 1989, the Board has increased the
basic funds transfer fee by three cents
and returned to its 1987 level of $0.50.a
The Board anticipates that as Reserve
Banks continue to take action to
improve contingency and availability of
funds transfer operations, similar
increases may be necessary in the next
one to two years to fund these
initiatives.
For net settlement and wire transfer
telephone advices, the Board has
increased the fee from $3.50 to $4.00,
1
H ie basic funds transfer fee is assessed to both
the originator and receiver of the funds transfer.
Currently, both originator and receiver pay 60.47 for
a funds transfer. Each will pay $0.03 more under the
revised fee ochedulo.
placing the fee on a similar level to that
charged for ACH telephone advices.
The Board has approved adjustments
to the 1989 fees for electronic
connections. The System has conducted
an extensive review of the pricing
structure and fees for electronic
connections and, as part of that study,
determined that the current fee structure
should be retained; however, fees
should be adjusted to recover more
accurately the full costs of providing
electronic access to depository
institutions. The Board has increased
the fee for dial connections from $80 to
$85 per month, increased the milti-drop
leased line fee from $250 to $300 per
month, and increased the dedicated
leased line fee from $400 to $800 per
month.
Definitive Safekeeping and Noncash
Collection
The table below shows the estimated
1988 and 1989 financial performance,
based on Federal Reserve Bank
projections for the definitive
safekeeping and noncash collection
service.
Definitive safekeeping and
noncash collection
($ millions)
Recovery
rate
Total Total (percent)
cost revenue
1988.......................... $18.8
1989.......................... 17.8
$18.3
17.7
97.3
99.2
Definitive safekeeping and noncash
collection costs are expected to
decrease by 5.4 percent in 1989 as
Reserve Banks continue to manage the
anticipated declines in volume. Total
revenue is expected to decrease 3.6
percent, even with the proposed price
increases. Volume declines are expected
to continue as remaining bearer
securities mature or are called.
In definitive safekeeping, volumes are
expected to decline about 13.7 percent in
1989. The Board has approved price
increases for six districts to offset
volume declines. The Board has
increased the current fees by $2.00 to
$5.00 for deposits and withdrawals; by
$0.25 to $1.00 for receipts/issues
maintained; by $1.00 to $10.00 for
purchases and sales and reregistrations;
and up to $0,001 per month per $1,000
par value maintained.
At the request of the Federal Reserve
Bank of Richmond, the Board approved
formations of nominee name
partnerships so that the Bank may hold
registered securities on behalf of
institutions in a nominee name. The
nominee name permits the Reserve Bank
to conduct transactions and collect
interest on these securities, as instructed
by the depositor, more quickly and
without the cumbersome legal
documentation necessary for
transactions of securities registered in
the depositor’s or the depositor’s
customer’s name. A similar service is
currently offered in some other districts,
but their costs are being recovered
through the monthly definitive
safekeeping account maintenance fee.
The Richmond Bank has identified a
need for this enhancement in the Fifth
District, but finds it necessary to charge
an explicit fee for its nominee name
component. The Board, has approved a
change of $2.85 per interest collection
transaction for nominee name securities;
this fee is the same as the fee that will
be charged by Richmond in 1989 to
process the payments for coupons
clipped from vault securities and
forwarded for in-district collection.
For the noncash collection service, the
Board has approved price increases for
eight districts to offset an anticipated 7.7
percent volume decline. The increases to
current fees range from $0 .10 to $1.00 per
envelope for collection of coupons, and
from $2.00 to $9.00 for return item and
bond collections.
Book-Entry
The Federal Reserve Banks estimate
1988 and 1989 financial performance in
the book-entry securities 2 service as
shown below.
Book-entry
($ millions)
Recovery
rate
Total Total (percent)
cost revenue
$9.1
9.7
1988..........................
1989..........................
$8.8
9.9
93.8
102.5
The total costs in the table do not
include special project costs, which
would reduce the 1988 and 1989
recovery rates to 93.2 percent and 99.1
percent respectively. For 1989, the Board
made no changes to the existing prices,
except for a fee to be assessed to
receivers of reversals. Reversals of
book-entry transfer transactions would
be priced on a per-item basis, to
distribute costs more equitably among
users of the service. The Board has
approved a reversal fee because the
receiver of a reversal originated the
initial securities transfer which
8 The financial performance reflects only bookentry transfers of government agency securities,
excluding Treasury securities but including
securities of international organizations that are
held in book-entry form at Federal R eseda Banka.
4
prompted the reversal. Reversals
account for approximately five percent
of securities transfer volume and the
per-item fee will provide approximately
six percent in additional transfer
revenue.
Volume is projected to increase 8.3
percent, resulting in a 12.7 percent gross
revenue growth in 1989. Costs are
projected to increase about 6.2 percent.
The Federal Reserve Banks, as fiscal
agents of the Treasury, also process
transfers of Treasury securities for
depository institutions. These
transactions, which are identical to
those for federal agency issues, are
subject to a fee assessed by the
Treasury. At the Treasury’s request, the
methodology utilized to determine the
detailed costs of these two components
of the book-entry service was reviewed
and modified, resulting in a projected
increase in costs to the Treasury for
1989 of 6.8 percent. Because the Reserve
Banks must also provide settlement for
these transfers, a funds settlement fee of
$0.75 is charged for each transfer. This
service, which is ancillary to the
Treasury securities transfer, is treated
as a non-priced service. As a result of
the cost reallocation, the Board has
reduced the funds settlement fee
associated with Treasury securities
transfers by $0.15 to $0.60.
Commercial Check
On June 18,1988, the Board approved
fee and deadline schedules for check
collection and returned check services,
effective September 1,1988, through
December 31,1989. The Board revised
check prices at that time in response to
the new returned check services that
were implemented by Federal Reserve
Banks on September 1 to facilitate bank
compliance with the requirements of the
Expedited Funds Availability Act and
Regulation CC. Under the revised fee
schedules, returned check services were
priced explicitly for the first time;
previously, the costs of providing return
services were incorporated in the
Federal Reserve’s forward collection
fees. Check collection and return fees
will be reviewed in the spring of 1989,
and the Board will make price
adjustments to be effective in mid-1989,
if warranted.
Comparison of the estimated cost
recovery performance for 1988 and the
projected cost recovery performance for
1989 are shown in the table below for
the commercial check service. The total
costs in the table do not include special
project costs, which would reduce the
1988 and 1989 recovery rates to 10Q.8
percent and 103.6 percent respectively.
Commercial
check
Recovery
($ millions)
rate
(percent)
Total Total
cost revenue
1988.—.......... ........... $506.5
1989.......................... 522.1
$512.4
543.1
T a b le 1 .— C o m p a r is o n o f P ro F o r m a
B a la n c e S h e e t s fo r F e d e r a l R e
s e r v e P r ic e d S e r v ic e s
[Millions of dollars—average for year]
101.2
104.0
1989
The check payor bank fee schedules
were not included in the package of
check services prices that was approved
by the Board in June 1988 because payor
bank services were not directly affected
by the September implementation of the
Expedited Funds Availability Act. The
Board has approved fee schedules
which would bring all districts into
compliance with the standard System
price structure for payor bank services.
In addition to the price structure
changes, the new fee schedule also
reflects the expansion of new services
either within an office o f to other offices
within a district, as well as a few
adjustments to existing payor bank
service prices.
Short-term assets:
Imputed reserve requirement
on clearing balances......... $283.3 $268.2
Investment in marketable
securities......................... 2,077.9 1,967.0
29.6
Receivables 1............... ........
28.0
7.1
6.4
Materials and supplies 1.......
6.2
5.8
Prepaid expenses *...............
Net items in process of col
lection (float)........... ......... 432.8 438.3
Total short-term assets..... 2,836.8 2,713.7
Long-term assets:
Premises * ,8..................
Furniture and equipment1
Capital leases.................
Leasehold improvements
Total long-term assets..
Total assets________
Cash
Cash
Recovery
(§ rralitens)
rate
Total Total (psresm®
cost rsvenua
814.4
14.7
259.9
137.9
1.1
4.7
245.4
129.5
2.5
2.2
403.6 379.6
3,240.3 3,093,3
Short-term liabSitiea:
Clearing balances.-------------- 2,361.2 2,235.2
Balances arising from early
credit of uncollected items.. 432.8 438.3
42.8
40.1
Short-term deb t______ __
Total short-term liabilities. 2,836.8 2,713.6
Financial performance for the cash
service is shown in the table below.
1983_____________ 814.1
______ 14.5
1SS0-
1988
Long-term liabilities:
Obligations unde? capital
leases._______________
Long-term debt8---------------
102.0
101.7
Total long-term liabilities.—
Total costs for cash services are
expected to increase by $341 thousand
or 2.4 percent in 1989s Changes in
prices for cash services are approved
under delegated authority.
1.1
156.8
158.0
2.5
136.3
138.0
Total BatoStfcs©_________ 2.904.7 2,852.5
Equity * _______________ 245.6 240.7
Total liabilities and equity-. 3,240.3 3,093.2
1 Financed through PSAF; other assets ar© sslffinandng.
8 Includes allocations in Board of Governors'
assets to priced services of $0.4 million for 1989
and §0.5 million for 1888.
3 Imputed figures; represent the source of financ
ing for certain priced services assets.
Ktet©.=“Details may not add to totals du® to
rounding.
By order of the Board of G overnors of the
Federal R eserve System , O ctober 28, 1988.
W illiam W . W iles,
S ecretary o f the Board.
3 The major cash services being priced are cash
transportation and coin wrapping, nonstandard
packaging of caresssey ordera and depurate, and
nonstandard frequency of access to cash oervieeo.
5
T able 2—Derivation o f t h e 1989 PSAF
[Millions o? Dollars])
A. Assets to b® Financed *:
S hort-term _________________________________ ________________________________________________
Long-term 2__ _________________________ __ _____________________________________________ __ ____
$42.8
402.4
§445.2
3 . Weighted Average Cost:
1. Capital Structure 3;
Short-term Debt............................................................................................................................................................................... ..
Long-term D e b t....................................................................................................................................................................................
Equity.................................................
2. Financing Ra’es/C csts3 Average rates paid by the bank holding companies included in the sample;
Short-term Debt........................................................................................................................... ........................................................
Long-term D e b t........................................................................
Pre-tax Equity 4...............................................................................................................................................................................................
3 Elements o< Capital Costs;
Short-term Debt........................ ............................... ............................................................................. ......... ........ .................... .......
Long-term D ebt....................................... ........................................................................... ........................ ....... ...... ........ .............
Equity.......................................................................................................................... ......... ............................................. ....................
9 .8 %
35.2%
552%
6 .6 %
5.0 %
16.9%
$42.0 X 6 8 % = $ 2.8
156.3 X 9 .0 % = 14.0
2 4 5 .6 X 1 6 .9 % = 41.4
$562
C Other Required PSAF Recoveries;
Safes Tares ......... ...................................
Federal Deposit Insurance Assessment__
Board of Governors Expenses......... ........
$6.0
1.9
_1.4_
$11.4
$69.7
D. Total PSAF Recoveries......................................................................................
15.7%
As a percent of capita!............................................................ ............ .........
13.6%
As a percent of expenses 5............................................................................
1 Poced sen/'ce asset base is based on direct determination of assets method.
2 Consists of total long-term assets less capital leases that are self-financing.
3 Ail short-term assets are assumed to be financed by short-term debt Of tna total long-term assets, 39 percent are assumed to be financed by long-term debt
and 61 percent by equity.
4 The pre-tax rate of return on equity is based on average after-tax rates of return on equity for the bank holding company sample, adjusted by the effective tax
rats to yield the pre-tax rate of return on equity. The 1989 figure for after-tax equity and the tax rate are based upon a five-year average of these rates.
3 Systemwide 1989 budgeted priced service expenses less shipping were $512.4 million.
T a b le
3—C h a n g e s b e t w e e n 1989 a n d 1988 PSAF C o m p o n e n t s
1989
A. Assets to be Financed (millions of dollars):
Short-term........................................... .......................................................................... ............... _........„ ..
Long-term.............................................................................._................................................ -............ „ ......
B. Cost of Capital;
Short-term Debt Rate................... .......................................... „.................... ..........
......... ..... ......
Long-term Debt Rate.............................................................................................. „..................„ .................
Pre-tax Return on Equity 1...... .... ..................... ...........„ ................................... . ... ___ . .. _
Weighted Average Cost of Capital..................................._................................... ................................. .......
D. Capital Structure;
Short-term DeM
.............................................................................................
Long-term Debt....... ....................
........................ ............... ............................ ....... ...
E Other Required PSAF Recoveries (millions of dollars);
Federal Deposit Insurance AsssaasrasnU
,..................
...............................................
Board of Governors Expanses.. . _
._ ...____ ___ ____ . ______ .... _ ____
F. Total PSAF Required Recovery.....„ ......... . ...................................... _....._........................... ..........
As Percent of Canitet
,,,
. .,
As Percent <jf Fxpene.es
......................... ......................
....... ,..............................
1988
$40.1
377.1
7.1%
9.7%
20.1%
15.4%
32.3%
9.0%
32.7%
57.7%
$8.2
12)
1.7
§75.2
18.3%
16.3%
$42.8
402.4
8.8%
9.0%
16.9%
13.8%
20.5%
9.6%
352%
552%
S8.6
1.9
1.4
§69.7
15.7%
13.8%
1 The 1989 figures for pre-tax equity and the test rate er® based on a five-yes? average of these rates;
1983
«
------------------—
23.4%
33.8%
- ................................ ..............—
[FR Doc. 88-25620 Filed 11-3-88; 8:45 am{
bsujw © coos
eaie-O T-n
6
1984
20.7%
36.5%
1985
21.1%
30.8%
1986
24.0%
39.0%
1837
-5.0%
-38.0%
Avsrcg®
18.9%
20.5%
@FedFRASER