Full text of Federal Reserve Bank of New York Circulars : 10812. Federal Reserve Priced Services

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FEDERAL RESERVE BANK
OF NEW YORK

Circular No. 10812
November 14, 1995

[

“I

FEDERAL RESERVE PRICED SERVICES
1996 Fee Schedules and Private Sector Adjustment Factor (PSAF)
To All Depository Institutions, and Others
Concerned, in the Second Federal Reserve District:

T h e B oard o f G ov ern o rs o f th e F ed eral R eserv e S ystem has an n o u n ced the ad o p tio n o f 1996
fee schedules, an d th e P rivate S ecto r A d ju stm en t F acto r (P S A F), fo r services provided by the
F e d e ra l R e s e rv e B a n k s , e ffe c tiv e Ja n u a ry 2, 1996. F o llo w in g is th e te x t o f th e B o a rd ’s
announcem ent:
The Federal Reserve Board has announced the 1996 fee schedules for services provided by
the Federal Reserve Banks.
The fees become effective January 2, 1996.
The fees apply to the check, automated clearing house, funds transfer and net settlement,
book-entry securities, noncash collection, and special cash services, as well as electronic
connections to the Federal Reserve. The 1996 fees are available from the Reserve Banks.
In 1996, total costs for priced services, including float, a portion of special project costs,
and the private sector adjustment factor (PSA F), are projected to be $749.3 million. Total revenue
is projected to be $791.6 million, resulting in net income of $42.3 million, compared with a
targeted return on equity of $36.7 million.
At the same time, the Board has approved the 1996 PSA F for Reserve Bank priced services
o f $85.8 million, a decrease of $8.9 million, or 9.4 percent compared with the 1995 PSAF of
$94.7 million.
The PSA F is an allowance for the taxes and other imputed costs that would have been paid
and the return on capital that would have been earned had the Federal Reserve’s priced services
been provided by a private business firm.

P rin ted on the fo llo w in g pag es is th e tex t o f the B o ard ’s o fficial notice in this m atter, as
p u b lish ed in the Federal Register. Q u estions regarding o u r priced services m ay b e directed to yo ur
A cco u n t M an a g er (Tel. N o. 21 2 -7 2 0-6600 at the H ead O ffice; Tel. N o. 716-849-5085 at the
B u ffalo B ranch).

il l ia m

J. M c D o n o u g h ,

President.

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

56591

Reserve Bank Operations and Payment
Systems. For users of
Telecommunications Device for the Deaf
only, please contact Dorothea
Thompson (202/452-3544).

Copies of the 1996 fee schedules for
the check, automated clearing house
(ACH), funds transfer and net
settlement, book-entry securities,
noncash collection, and special cash
services, as well as electronic
connections to Reserve Banks, are
available from the Reserve Banks.
SUPPLEMENTARY INFORMATION:

FEDERAL RESERVE SYSTEM
[Docket No. R-0899]

Federal Reserve Bank Services

Board of Governors of the
Federal Reserve System.
ACTION: Notice.
AGENCY:

The Board has approved a
private sector adjustment factor (PSAF)
for 1996 of $85.8 million, as well as fee
schedules for Federal Reserve priced
services and electronic connections.
These actions were taken in accordance
with the requirements of the Monetary
Control Act of 1980, which requires
that, over the long run, fees for Federal
Reserve priced services be established
on the basis of all direct and indirect
costs, including the PSAF.
DATES: The PSAF and the fee schedules
become effective January 2,1996.
FOR FURTHER INFORMATION CONTACT: For
questions regarding the private sector
adjustment factor: Elizabeth Tacik,
Accounting Analyst (202/452-2303),
Division of Reserve Bank Operations
and Payment Systems: for questions
regarding fees schedules: Scott
Knudson, Senior Financial Services
Analyst, ACH Payments (202/4523959), Michele Braun, Senior Financial
Services Analyst, Check Payments (202/
452-2819), Darrell Mak, Financial
Services Analyst, Funds Transfer and
Book-Entry Securities Services, (202/
452-3223), Ken Buckley, Manager,
Information Technology (electronic
connections), (202/452-3646), Michael
Bermudez, Financial Services Analyst,
(202/452-2216), or Marianne Hansberry,
Financial Services Analyst, Cash
Section, (202/452-2760), Division of
SUMMARY:

I. Private Sector Adjustment Factor
A.
Overview—The Board has
approved a 1996 PSAF for Federal
Reserve priced services of $85.8 million.
This amount represents a decrease of
$8.9 million or 9.4 percent from the
PSAF of $94.7 million targeted for 1995.
As required by the Monetary Control
Act (MCA) (12 U.S.C. 248a), the Federal
Reserve’s fee schedules for priced
services include “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.” These imputed costs are
based on data developed in part from a
model comprised of the nation’s 50
largest (in asset size) bank holding
companies (BHCs).
The methodology first entails
determining the value of Federal
Reserve assets that will be used in
producing priced services during the
coming year. Short-term assets are
assumed to be financed by short-term
liabilities; and long-term assets are
assumed to be financed by a
combination of long-term debt and
equity derived from the BHC model. For
1995, the mix of long-term debt and
equity was modified slightly to ensure
an imputed equity to asset ratio of 4
percent as required for adequately
capitalized institutions under
provisions of Regulation F (12 CFR
206.5). This was not necessary for 1996.
Imputed capital costs are determined
by applying related interest rates and
rates of return on equity (ROE) derived
from the BHC model to assets used in
providing priced services. The rates
drawn from the BHC model are based on
consolidated financial data for the 50
largest BHCs in each of the last five
years. Because short-term debt, by
definition, matures within one year,
only data for the most recent year are
used for computing the short-term debt
rate.
In addition to capital costs, the PSAF
includes imputed sales taxes, expenses
of the Board of Governors related to
priced services, and an imputed Federal

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

56592

Deposit Insurance Corporation (FDIC)
insurance assessment on clearing
balances held with the Federal Reserve
to settle transactions.
B. Asset Base—The estimated value of
Federal Reserve assets to be used in
providing priced services in 1996 is
reflected in table A -l. Table A -2 shows
that the assets assumed to be financed
through debt and equity are projected to
total $637.3 million. As shown in table
A-3, this represents a net increase of
$14.4 million or 2.3 percent from 1995.
This increase results primarily from a
higher priced asset base at the Reserve
Banks. A decrease of $10.6 million or
14.3 percent in the FRAS priced asset
base due to a reduction in capital
purchases and a reduction in the FRAS
priced percentage sightly offset the
increase in Reserve Bank asset levels.
C. Cost o f Capital, Taxes, and Other
Imputed Costs—Table A-3 shows the
financing and tax rates, as well as the
other required PSAF recoveries
proposed for 1996, and compares the
1996 rates with the rates used for
developing the PSAF for 1995. The pre
tax return on equity rate increased from
12.1 percent in 1995 to 14.2 percent for
1996. The increase is a result of stronger
1994 BHC financial performance
included in the 1996 BHC model,
relative to the 1989 BHC financial
performance in the 1995 BHC model.
T

able

The decrease in the FDIC insurance
assessment from $19.0 million in 1995
to $2.2 million in 1996, as shown in
table A-3, is attributable to the impact
of the new lower rate for deposit
insurance and lower clearing balances.
The FDIC rate of $0.26 for every $100
in clearing balances was reduced to
$0.04 as of June 1,1995.
D.
Capital Adequacy —As shown on
table A-4, the amount of capital
imputed for the proposed 1996 PSAF
totals 34.4 percent of risk-weighted
assets, well in excess of the 8 percent
capital guideline for state member banks
and BHCs.
II. Priced Services
A. Overview—Over the period 1985
through 1994, the Reserve Banks
recovered 100.7 percent of the total
costs of providing priced services,
including special project costs that were
budgeted for recovery and targeted
ROE.1 Table 1 summarizes the cost and
revenue performance for priced services
since 1985.
B. 1995 Performance—The 1995 fees
approved by the Board were expected to
recover 100.6 percent of the costs of
providing priced services, including
imputed expenses, automation
consolidation special project costs
budgeted for recovery, and targeted
ROE. Through August 1995, the System
recovered 98.7 percent of total priced
services expenses, including automation

1 .— P

rm a

o st and

evenue

consolidation special project costs and
targeted ROE. The Reserve Banks now
estimate that priced services revenues
will yield a net income of $25.8 million
for the year, compared with a targeted
ROE of $31.5 million. The recovery rate
after ROE is expected to be 99.3 percent.
Approximately $19.8 million in
automation consolidation special
project costs will be recovered in 1995,
leaving $36.0 million in accumulated
costs to be financed and recovered
later.2
The variation in the cost recovery
performance from the original 1995
projections can be attributed to the
following major factors. First, the pre
tax credits arising from accounting for
pensions under the Financial
Accounting Standards Board's
Statement of Financial Accounting
Standards No. 87 (SFAS 87) were
revised downward by $16.1 million
from the estimate used to set 1995 fees.
This reduction was due primarily to a
lower return on assets in 1994 and a
slightly lower discount rate for valuing
pension plan assets. On the other hand,
the FDIC insurance assessment was
reduced, which lowered imputed
expenses by $9.4 million. If these two
changes had not occurred, the Reserve
Banks’ estimated 1995 recovery rate
would have been 99.8 percent, or 0.5
percentage points higher than now
forecast.

erform ance

(a )

[$ millions]
Y ear

1
Revenue

2
Operating
costs and
imputed ex
penses

3
Special
project
costs recov
ered

4
Total ex
pense

5
N et income
(R O E )

6
T arget R O E

7
Recovery
rate after
target R O E
(percent)

8
Special
project
costs de
ferred and
financed

(b)

(c)

(d)

[2+3]

[1-^1

(e)

[1/(4+6)l

61 3 .8
62 7 .7
6 4 9 .7
66 7 .7
718.6
74 6 .5
75 0 .2

55 5 .3
57 1 .6
59 8 .2
641.1
692.1
698.1
71 0 .0

0.0
0.0
0.0
3.2
4 .6
2.8
1.6

1993 ........................................
1994 ........................................

76 0 .8
77 4 .5
76 7 .2

73 1 .0
72 2 .4

11.2
27.1
8.8

1995 (Est) .............................

75 7 .7

19.8

1985
1986
1987
1988
1989
1990
1991
1992

........................................
........................................
........................................
........................................
........................................
........................................
........................................
........................................

1Certain offsets to costs and certain costs are
treated differently in the pro forma income
statement for Federal Reserve priced services that
is published in the Board’s Annual Report than they
are for purposes of setting fees. For example, off
sets to costs associated with the transition to and
retroactive application of the Financial Accounting
Standards Board's Statement of Financial
Accounting Standards No. 87 (SFAS 87), pension

74 8 .3
712.1

5 5 5 .3
5 7 1 .6
59 8 .2
6 4 4 .3
69 6 .7
7 0 0 .9
7 1 1 .6
7 4 2 .2
7 4 9 .5
757.1

58.5
56.1
51.5
2 3.4
2 1.9
4 5.6
3 8.6
18.6
2 5.0
10.1

7 3 1 .9

25.8

3 1.5

accounting, and SFAS 106, other post-retirement
employee benefits accounting, have not been
considered in setting fees for priced services. Under
the procedures used to prepare the pro forma
income statement, the Reserve Banks recovered
101.4 percent of the expenses incurred in providing
priced services, including targeted ROE, from 1985
through 1994.

2 3 .9
2 7 .3
2 9.3
3 2 .7
3 2.9
33.6

106.0
104.8
103.5
9 8 .6
9 8 .5
101.6

3 2.5

100.8

2 6 .0
2 4.9
3 4.6

9 9 .0
100.0
96.9
9 9 .3

0.0
0.0
0.0
0.0
0.0
0 .0
0.0
1.6
12.5
33.9
3 6.0

2In 1981, the Board adopted a policy that permits
the Reserve Banks to defer and finance
development costs if the development costs would
have a material effect on unit costs, provided a
conservative time period is set for full cost recovery
and a financing factor is applied to the deferred
portion of development costs.

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices
Table 1.—Pro Forma Cost

and

56593

Revenue Performance (a)— Continued

[$ millions]
Y ear

1996 (Bud) ............................

1
Revenue

2
Operating
costs and
imputed ex
penses

3
Special
project
costs recov
ered

4
Total ex
pense

5
Net income
(R O E )

6
T arget R O E

7
Recovery
rate after
target R O E
(percent)

8
Special
project
costs de
ferred and
financed

(b)

(c)

(d)

[2+3]

[1 -4 ]

(e)

[1/(4+6)J

72 3 .7

791.6

2 5 .5

7 4 9 .3

4 2 .3

3 6 .7

100.7

33.1

(a) Details may not sum to totals because of rounding. The revenues and expenses for 1985 through 1993 include the definitive safekeeping
service, which was discontinued in 1993. The table includes revised revenue and expense data for 1992 and 1993.
(b) Beginning in 1987, net income on clearing balances is included in revenue.
(c) Imputed expenses include interest on debt, taxes, F D IC insurance, and the cost of float. Credits for prepaid pension costs under S F A S 87
and the charges for post-retirem ent benefits in accordance with S F A S 106 are included beginning in 1993.
(d) Special project costs include Electronic Paym ent System (E P S ) costs from 1988 through 1990, check im age project costs from 1988
through 1993, and certain categories of automation consolidation costs from 1992 through 1996.
(e) Targeted R O E is based on the R O E included in the PS A F and has been adjusted for taxes, which a re included in column 2. Targeted R O E
has not been adjusted to reflect automation consolidation special project costs deferred and financed. T he R eserve Banks plan to recover these
costs in the future.
(f) Totals are cumulative and include financing costs.

Second, for the second year, the check
service’s volume losses were greater
than anticipated, reflecting increasing
use of direct presentments and
continuing consolidation in the banking
industry. The Reserve Banks’ current
estimates indicate that check revenues
will be about $10.0 million lower than
original projections. Conversely, ACH
volume has grown more rapidly than
the Reserve Banks initially projected
and revenues are nearly $4.0 million
higher than anticipated.
C.
1996 Projection—In 1996, all
priced services expect to recover

operating costs and imputed expenses,
including targeted ROE. Total revenues
in 1996 are projected to increase 4.5
percent compared with 1995 estimated
revenues.3 Based on the Reserve Banks’
budgeted costs, volumes, and revenues,
the proposed 1996 fees will yield net
income of $42.3 million for the year,
compared with a targeted ROE of $36.7
million. These estimates result in a
100.7 percent cost recovery rate,
including automation consolidation
special project costs budgeted for
recovery and targeted ROE. Priced
services expenses before special project

Table 2.—C heck Pro Forma Cost

and

costs are projected to increase 1.6
percent compared with estimated 1995
levels. Approximately $25.5 million in
automated consolidation special project
costs will be recovered, leaving $33.1
million of accumulated special project
costs to be recovered in the future. The
following sections discuss the 1994 and
1995 year-to-date performance for each
priced service, as well as the changes to
fees that were approved by the Board.
D.
Check—Table 2 presents the actual
1994, estimated 1995, and projected
1996 cost recovery performance for the
check service.

Revenue Performance

[$ millions]
Y ear

1994 ........................................
1995 (Est) .............................
1996 (Bud) ............................

1
Revenue

2
Operating
costs and
imputed ex
penses

3
Special
project
costs recov
ered

5 7 9 .8
54 8 .9
56 1 .3

0.0
5.3
5.6

582.4
569.2
595.0

1. 1994 Performance—The check
service recovered 96.1 percent of total
expenses in 1994, including targeted
ROE. The volume of checks collected
decreased 13.3 percent from 1993 levels
as a result of the implementation of the
same-day settlement regulation, as well
as bank consolidation and merger
activity. Return item volume decreased
1.7 percent.
2. 1995 Performance—Through
August 1995, the check service
The projected revenues include net income on
clearing balances.

4
Total ex
pense

[2+3]
5 79.8
554.2
566.9

5
N et income
(R O E )

6
Target R O E

[1 ^ ]

recovered 98.2 percent of total expenses,
including automation consolidation
special projects costs and targeted ROE,
compared with the targeted 1995
recovery rate of 100.0 percent. The
volume of checks collected decreased
7.0 percent from 1994 levels, reflecting
a 3.7 percent decrease in processed
volume and a 19.2 percent decrease in
fine sort volume. Return item volume
increased 2.6 percent.

2 .6
15.0
28.1

2 6 .3
2 4 .0
2 8 .0

7
Recovery
rate after
target R O E
(percent)

(1/(4+6)]
96.1
9 8 .4
100.0

8
Special
project
costs de
ferred and
financed

11.3
12.0
10.9

The Reserve Banks now estimate that
1995 net income will amount to $15.0
million, compared with the $24.0
million budgeted. Two significant
factors contribute to the variation. First,
the decline in check collection volume
experienced through August is expected
to accelerate. The Reserve Banks now
expect volume to decline by 9.3 percent
for the year, versus the budgeted volume
loss of 2.4 percent. As a result, check
revenues are expected to be

56594

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

approximately $10 million lower than
the Reserve Banks’ original projections.
Second, although the Reserve Banks
took steps to reduce production costs,
those steps were largely offset by a net
increase in other expenses of $5.2
million. This increase is due to a $12.4
million pre-tax reduction in pension
credits, which increased expenses,
offset by a $7.2 million reduction in the
FEHC insurance assessment. As a result,
several Reserve Banks implemented
selective price increases during the year
to address the revenue shortfall. On a
volpme-weighted average basis, forward
collection and return check fees were
increased by about 1.5 percent and
about 9.5 percent, respectively, since
January 1995.
In addition, the Federal Reserve Bank
of Chicago opened a new check
processing facility in Peoria, Illinois in
September, which is expected to
contribute to processing efficiency over
the long run.
3.
1996 Issues—As in 1995, the
Reserve Banks will be challenged by the
changes occurring in the check
processing environment. In particular,
the evolution to interstate banking is
likely to lead to significant changes in
the interbank check collection market.
To ensure that the Reserve Banks will be
able to provide efficient, fairly priced
check services and to contribute to
improving the efficiency of the
payments system, the Banks will (1)
emphasize the use of electronic check
products that increase the efficiency of
the check collection process, (2)
introduce a set of consistent national
products, and (3) continue to pursue
operational efficiencies.
To encourage the use of electronics,
the Reserve Banks will continue to
promote electronic check presentment
(ECP) products. In addition, by year-end

1996, all Reserve offices will offer
electronic cash letter (ECL) deposit
products. These products reduce
Reserve Bank operating costs by
reducing manual processing. As a result,
the Reserve Banks will offer ECL deposit
products at lower per-item fees or later
deposit deadlines than traditional check
deposit products. The Reserve Banks
believe that widespread use of ECL and
ECP products ultimately will reduce the
costs incurred in transporting and
handling paper checks and, thus, will
reduce the total costs of the check
collection system.
To address the needs of multi-district
depository institutions, the Reserve
Banks will implement a set of national
core check products. The core products
will have identical features and names,
although fees for the products will be
set at the local office level to reflect the
difference in the Reserve Banks’ cost
structures. In addition, Reserve Banks
are expanding the use of tiered prices to
ensure that fees take into consideration
the cost of collecting checks drawn on
various paying institutions, adding lowpriced group sort products to provide
depositing institutions increased
options for reducing check collection
costs, and improving deposit deadlines
to improve funds availability.
Several Reserve Banks are also
introducing digital image technology
into their commercial check operations
and offering image-enhanced check
products to payor banks. The use of
image technology has the potential to
reduce Reserve Banks’ operating costs
and increase the acceptance of ECP and
check truncation.

Total check service operating costs
plus imputed expenses are projected to
increase by $12.4 million, or 2.3 percent
above estimated 1995 expenses. Total
check collection volume is expected to

decline by 1.1 percent in 1996. The
Reserve Banks project an increase of
approximately 0.7 percent in processed
volume, a decrease of 9.5 percent in fine
sort volume, and a decrease of 1.1
percent in return item volume.
4.
1996 Fees—The check fees
approved -by the Board reflect more
accurately the fixed and variable costs
of providing check services. In addition,
the fees reflect the Reserve Banks’
continued efforts to encourage the use of
electronics to improve the efficiency of
the check collection mechanism.
Overall, 1996 fees for forward
collection products will increase by
about 1.8 percent on a volume-weighted
average basis, compared with current
prices.4 The most significant increases
are in processed cash-letter and fine sort
per-item fees, which are increasing 10.6
percent and 5.9 percent, respectively.
Forward processed per-item fee
increases are modesi. Of the 2,166
forward collection and fine sort fees,
about 69 percent will remain
unchanged, 22 percent will increase, 5
percent will be for new products, and 4
percent will be reduced. About 125 fees
that were in place in 1995 will be
discontinued.
Compared with current prices, the
volume-weighted average increase in
fees for return item products will
increase approximately 4.0 percent.3 Of
the 1,442 return item fees, 63 percent
will remain unchanged, 34 percent will
increase, 2 percent will be for new
products, and 1 percent will decline.
About 76 fees that were in place in 1995
will be discontinued. No changes m the
fees for the Interdistrict Transportation
Service (ITS) are recommended.
Table 3 highlights selected 1995 and
1996 check fees.

T able 3 —Selected C heck Fees
Products

1995 price ranges

Items:
(per item)
(per item)
Forward processed
C it y ................................................................................................................................................................ $ 0 ,0 0 3 to 0 .0 4 9 ..........
Regional Check Procesing C enter (R C P C ) .................................................................................... 0 .0 0 3 to 0 .0 6 9 ............
Fine Sort
C it y ................................................................................................................................................................ 0 .0 0 2 to 0 .0 1 2 ............
0 .0 0 2 to 0 .0 1 7 ............
R C P C ............
.....................
........................................................................- ...............
Qualified return items
C it y ...................
....................
.......................................................................................... 0 .1 0 0 to 0 .7 4 0 ............
R C P C ........................................................................................................................................................... 0 .1 2 0 to 1.040 ............
R aw return items
C i t y ...............................................................................................................................................................
0 .5 8 0 to 2 .1 8 0 ............
R C P C ........................................................................................................................................................... 0 .8 0 0 to 2 .1 8 0 ............

4 Selected price increases were implemented
during 1995. Combining the Reserve Banks
recommended price changes for January 1996 with
the price increases that were implemented since
January 1995. the volume-weighted average

increase in fees for forward collection products is
approximately 3 percent.
5Combining the Reserve Banks’ recommended
price changes for January 1996 with the price

1996 price ranges

$ 0,003 to 0 .0 8 0
0.0 03 to 0.079
0.003 to 0.012
0.002 to 0.0 17
0.100 to 1.110
0.120 to 1.560
0.580 to 4.000
0.900 to 4.000

increases that were implemented since January
1995, the volume-weighted average increase in
return fees is about 14 percent.

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

56595

Table 3 —S elected C heck Fees—Continued
Products

1995 price ranges

Cash letters:
Forward processed ...............................................................................................................
Forward fine-sort package.....................................................................................................
Return items: raw and qualified.............................................................................................

(per cash letter)
$1.50 to 8.00 ............
2.50 to 11.00 ............
1.50 to 8 00

Pavor bank service revenue is
expected to grow by approximately 22
percent in 1996, primarily due to more
widespread acceptance of the Reserve
Banks’ electronic presentment and
image-enhanced check products.
The Reserve Banks project that the
check service will recover 100 percent
of total costs, including $5.6 million in
automation consolidation special
project costs and targeted ROE.
Approximately $10.9 million in

automation consolidation special
project costs will be deferred and
financed for recovery in future years.
While most Reserve Banks’ plans for
1996 are conservative, several Reserve
Banks have adopted fairly aggressive
pricing and product development
strategies and plan significant
operational changes aimed at improving
efficiency and reducing costs. Because
of the aggressiveness of some plans, the
Board believes that there are risks in

Table 4.—ACH Pro Forma Cost

and

1996 price ranges
(per cash letter)
51.50 to 9.00
2.50 to 11.00
1.50 to 8.00

achieving the Reserve Banks’ aggregate
volume projections, in particular.
Because additional steps could be taken
during 1996 to reduce operating costs if
volume projections were not met, the
Board approved the 1996 check fees
proposed by the Reserve Banks.
E.
Automated Clearing House
(ACH)—Table 4 presents the actual
1994, estimated 1995, and projected
1996 cost recovery performance for the
commercial ACH service.

Revenue Performance

[$ millions]
Year

1994 ................................
1995 (Est) ........................
1996 (Bud) .......................

1
Revenue

2
Operating
costs and
imputed ex
penses

66.9
74.7
78.9

1. 1994 Performance—Revenues from
the ACH service recovered 98.3 percent
of total expenses, including targeted
ROE, during 1994. The factors
contributing to the net revenue shortfall
included the costs associated with the
transition to FRAS and Fednet and the
expenses associated with the
development of the new Fed ACH
application software. Commercial ACH
volume increased by 16.8 percent over
the 1993 volume level.
2. 1995 Performance —Through
August 1995, the ACH service recovered
103.2 percent of total expenses,
including automation consolidation
special project costs and targeted ROE,
compared with the targeted 1995
recovery rate of 100.0 percent. The
higher cost recovery rate is due
primarily to a higher than expected
commercial volume growth rate. Yearto-date commercial ACH volume
increased 18.4 percent over the 1994
level, compared with the projected 1995
increase of 12.9 percent. The Reserve
Banks now project net income of $4.5
million, compared with, the $3.1 million
budgeted for 1995. Commercial ACH

64.6
66.3
66.0

3
Special
project
costs recov
ered

0.0
4.0
9.2

4
Total ex
penses

5
Net income
(ROE)

[2+3]

[1-4]

64.6
70.2

762

volume is expected to increase 17.5
percent over the 1994 level.
3. 1996 Issues—During 1996, the
Reserve Banks plan to complete
implementation of the Fed ACH
application software, which was
developed over the last several years.
Because no Reserve Banks had
completed their transition to Fed ACH
when the 1996 budgets were prepared,
there is some uncertainty about the
ongoing costs of operating the new
software in the FRAS automation
environment. The projected commercial
volume growth rate of 17.5 percent may
be aggressive in light of the continuing
consolidation in the banking industry.
The Reserve Banks believe, however,
that their marketing efforts with the
National Automated Clearing House
Association have the potential to spur
volume growth.
4. 1996 Fees—The ACH service is
capital intensive and demonstrates
increasing returns to scale over wide
volume ranges. As a result, the volume
growth realized over the last several
years has resulted in declining per-item
processing costs. The Board anticipates
that per-item costs will decline further

6
Target ROE

7
Recovery
rate after
Target ROE
(percent)

8
Special
project
costs de
ferred and
financed

[1/(4+6)l
2.3
4.5
3.6

3.4
3.1
3.6

98.3
101.9
100.0

19.6
21.5
17.3

after all ACH processing is consolidated,
following the implementation of Fed
ACH. The Board has approved several
modifications to the current ACH fees
for 1996. These modifications are shown
in table 5.

T able 5
Fee category
Interdistrict Items .....
Presorted Items .......
Interdistrict Addenda .
Account Servicing
Fee .......................
Nonautomated Serv
ices .......................

Current
fees

Fees as
of Janu
ary 1996

$0,014
$0,012
$0,005

$0,012
$0,010
$0,004

$20.00

$25.00

$10.00

$15.00

As table 5 indicates, the Board has
approved per-item fees reductions for
unsorted and presorted interdistrict
transactions of $0,002. In addition, the
interdistrict fee for addenda items,
which provide supplementary paymentrelated data, will be reduced by $0,001,
eliminating the differential between
local and interdistrict addenda items.
Because of the high fixed costs

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

56 5 9 6

associated with providing the ACH
service, the Board has approved an
increase of $5.00 per month in the
account servicing fee. Finally, the Board
has approved a $5.00 increase in the
fees for paper return items and
notifications of change (NOC),
government paper NOCs, telephone
return items, and telephone advices to
reflect the labor intensive nature of
processing, and to provide an incentive
for depository institutions to automate
these processes.
After the Reserve Banks have fully
implemented Fed ACH, they plan to
propose further reductions in per-item

fees and to offer a number of new
products, including products designed
to assist receiving institutions, as well
as products designed to permit highvolume originating institutions to obtain
lower fees by sorting transactions before
transmitting them to the Federal
Reserve. The Board anticipates that it
will be requested to approve additional
fee reductions and service
enhancements in mid-1996.
Based on the fee schedule proposed
by the Reserve Banks, they are
projecting that the ACH service will
recover 100.0 percent of costs, including
$9.2 in automation consolidation

Ta ble 6 .— F unds T r a n sfe r P ro F orm a C o st

and

special project costs and targeted ROE.
Approximately $17.3 million in
automation consolidation special
project costs will continue to be
deferred and financed for recovery in
future years. The Board has approved
the 1996 fees proposed by the Reserve
Banks.
F.
Funds Transfer and Net
Settlem ent —Table 6 presents the actual
1994, estimated 1995, and projected
1996 cost recovery performance for the
funds transfer and net settlement
service.

R even ue P erfo rm a n c e

[Dollars in millions]
Y ear

1
Revenue

1994 ........................................
1995 (Est) ..............................
1 9 9 6 (Bud) ............................

2
Operating
costs and
imputed ex
penses

3
Special
project
costs recov
ered

1. 1994 Perform ance —For 1994, the
funds transfer and net settlement service
recovered 101.7 percent of total
expenses, including automation
consolidation special project costs and
targeted ROE. The net revenue surplus
was largely due to lower data
communications and accounting
overhead costs. Funds transfer volume
increased 3.4 perceni over the 1993
volume level.
2. 1995 Performance —Through
August 1995, the funds transfer and net
settlement service recovered 99.2
percent of total expenses, including
automation consolidation special
project costs and targeted ROE,
compared with the targeted 1995
recover}' rate of 106.5 percent. The
lower cost recovery rate is due in part

5
Net income
(R O E )

[2+3]

[1 -1 ]

7.1
9 .7
9.3

79.1
73.2
71.8

91.6
89.0
90.5

4
Total ex
pense

86.2
82.9
81.1

T a b le 7 .— B o o k - E n try S

e c u r it ie s

P ro F orm a C o st

and

7
Recovery
rate after
target R O E
(percent)

8
Special
project
costs d e
ferred and
financed

[1/(4+6)]
5.4
6.1
9.4

to the lower than expected pension
credit and delays in the conversion of
several Reserve Banks to the centralized
funds transfer application software. This
conversion has now been completed.
The Reserve Banks now project net
income of $6.1 million, compared with
the $8.2 million budgeted for 1995.
Funds transfer volume is expected to
increase 3.1 percent over the 1994
volume level, which is consistent with
the growth rate through August.
3.
1996 Issues —The Reserve Banks
expect continuing consolidation of the
banking industry to affect funds transfer
volume growth. For 1996, an increase of
2.1 percent over the 1995 level is
projected, which is somewhat lower
than historical trends. The Reserve
Banks project that operating costs will

6
Target R O E

101.7
103.1
106.6

3.8
3.4
3.8

2.1
0.0
0.0

decline modestly, reflecting the full year
effect of consolidated processing.
4.
1996 Fees —Based on retaining the
1995 fee schedule, the Reserve Banks
project that revenues will recover 106.6
percent of total expenses, including $9.3
million in automation consolidation
special project costs and targeted ROE.
Although the Reserve Banks’ net income
projection exceeds the targeted ROE by
$5.6 million, lower than projected
volume growth could reduce revenues
significantly. The Board has approved
retaining the 1995 funds transfer fees for
1996.
G.
Book-Entry S ecu rities6—Table 7
presents the actual 1994, estimated
1995, and projected 1996 cost recovery
performance for the book-entry
securities service.

R even u e P erfo rm a n c e

[In millions of dollars]
Y ear

1
Revenue

1994 ........................................
1995 (Est) ..............................
1 9 9 6 (Bud) ............................

Includes Purchase and Sale Activity.

15.8
15.8
15.8

2
Operating
costs and
imputed ex
penses

13.7
14.2
13.6

3
Special
project
costs recov
ered

1.7
0.9
1.4

4
Total ex
pense

5
Net income
(R O E )

[2+3]

[1 -4 ]

15.4
15.1
15.0

6
Target R O E

7
Recovery
rate after
target R O E
(percent)

8
Special
project
costs d e
ferred and
financed

(17(4+6)]
0.4
0.7
0.7

0.7
0.7
0.8

98.1
100.1
100.0

1.2
2.5
4.5

56597

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices
1. 1994 Performance—Revenues from
the book-entry securities service
recovered 98.1 percent of total expenses,
including automation consolidation
special project costs and targeted ROE
during 1994. Book-entry securities
transfer volume increased only 1.6
percent over 1993 levels due to a sharp
decline in trading activity associated
with increasing mortgage interest rates
in mid-1994.
2. 1995 Performance—Through
August 1995, the book-entry securities
service recovered 99.3 percent of total
expenses, including automation
consolidation special project costs and
targeted ROE, compared with the
targeted 1995 recovery rate of 100.1
percent. During the same period, bookentry securities transfer volume
decreased 4.2 percent compared with
the 1994 level, reflecting the continuing
decline in the volume of mortgagebacked securities activity. Although
operating expenses are now expected to
be slightly higher than originally
projected, the Reserve Banks expect to
achieve their targeted recovery rate for
1995. This projection is based on two
factors. First, the volume of book-entry
securities transfers, which declined
through mid-1995, has begun to increase
over 1994 levels. The Reserve Banks
now project a decrease in book-entry
securities transfers of only 0.8 percent
for the year. Second, the number of
accounts maintained and securities
T a b l e 8 .— N

oncash

securities service will recover 100.0
percent of costs, including $1.4 million
in automation consolidation special
project costs and targeted ROE. The
Board has approved retaining the 1995
book-entry securities fees for 1996.
H. Electronic Connections—The
Federal Reserve Banks charge fees for
the electronic connections used by
depository institutions to access priced
services. The costs and revenues
associated with electronic connections
are allocated to the various priced
services based on the relative number of
connections that are used to access each
service.
In 1995, the Federal Reserve Board
increased fees for several types of
electronic connections due to the
increasing costs of implementing
Fednet. The Board also approved two
new categories of electronic
connections—(1) high-speed dedicated
leased-line connections of 128 kilobits
per second (kbps) and 256 kbps and (2)
standard dedicated and shared options
to support contingency testing by
depository institutions with dedicated
leased-line connections.
The Board has approved retaining the
1995 fees for electronic connections
during 1996.
I. Noncash Collection—Table 8
presents the actual 1994, estimated
1995, and projected 1996 cost recovery
performance for the noncash collection
service.

issues held, as well as the volume of off
line transfers, are expected to be higher
than budgeted.
3. 1996 Issues—The Reserve Banks
expect book-entry securities transfer
volume to remain at approximately the
1995 level. Participants Trust Company
(PTC) announced its intent to expand its
mortgage-backed securities business to
include securities issued by the Federal
Home Loan Mortgage Corporation and
the Federal National Mortgage
Association. PTC, however, has not
indicated when these securities will be
included in their system. The Reserve
Banks anticipate that the effect on 1996
volume will be minimal, but the effect
on volume levels in the future could be
substantial.
The Reserve Banks plan to begin their
conversion to the National Book-Entry
System (NBES) in April 1996. Once the
conversion is complete, the Reserve
Banks expect to reduce data processing
costs substantially. Unlike the current
system, the NBES requires that
securities held as collateral be held in
separate securities accounts, rather than
combined into one account. The Reserve
Banks plan to analyze the effect of this
change and recommend that the Board
approve a modified fee in mid-1996.
4. 1996 Fees—Although there are
uncertainties with respect to volume
projections beyond 1996, based on the
approved fee schedule, the Reserve
Banks project that the book-entry
C

o l l e c t io n

rm a

o st and

evenue

erform ance

[$ millions]
Y ear

1994 ........................................
1995 (Est) .............................
1996 (Bud) ............................

1
Revenue

2
Operating
costs and
imputed ex
penses

4.1
3.8
4.8

1. 1994 Performance—Revenues from
the noncash collection service recovered
80.1 percent of total expenses, including
targeted ROE, in 1994. The revenue
shortfall is attributed to the costs
associated with consolidating
operations and a volume decline of
approximately 37 percent from 1993
levels.
2. 1995 Performance—Through
August 1995, the noncash collection
service recovered 81.8 percent of total
expenses including targeted ROE,
compared with the targeted 1995
recovery rate of 91.4 percent. The

4.9
4.2
4.5

3
Special
project
costs recov
ered

0.0
0.0
0.0

4
Total ex
pense

5
N et income
(R O E )

[2+3]

[1 -4 ]
4.9
4.2
4.5

volume of noncash collection items
increased 12.2 percent, compared with
the projected 1995 increase of 21.6
percent. A recovery rate of 86.3 percent
is now projected for 1995. The
improvement compared with year-todate performance reflects the Reserve
Banks’ projection of higher volume
levels during the fourth quarter of 1995
because one of the major noncash
collection service providers withdrew
from the business in August. In
addition, the consolidation of noncash
collection operations at the Cleveland
and Jacksonville offices was completed

6
T arget R O E

7
Recovery
rate after
target R O E
(percent)

, 8
Special
project
costs de
ferred and
financed

[1/(4+6)]

(0.8)
(0-4)
0.2

0.2
0.2
0.2

80.1
86.3
100.0

0.2
0.2
0.2

in July and should assist in controlling
operating costs.
3.
1996 Issues—The Reserve Banks
are projecting an increase of 22.5
percent in noncash collection volume
for 1996. Several factors may affect 1996
volume growth. All of the major service
providers discontinued providing
noncash collection services during
1995. At the same time, several smaller
entities continue to provide noncash
collection services. In addition, the
Depository Trust Company (DTC), the
largest national securities depository,
has proposed to collect municipal

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

56598

coupons on behalf of its participants.
While some volume may shift to the
Reserve Banks, the DTC’s potential
presence complicates forecasting 1996
volume levels.
Because of the changing environment,
the Board believes that the Reserve
Banks’ presence in the business
provides a degree of stability. In early
1996, the Reserve Banks plan to modify
the geographical areas serviced by the
two processing sites to increase
processing efficiency and maintain high
quality.

4.
1996 Fees—The Reserve Banks
proposed adoption of a national fee
schedule for the noncash collection
service. To standardize fees, the local
and interregional coupon fees assessed
by the Cleveland office will be increased
by $0.50. In addition, to reflect more
accurately the cost of collecting matured
bonds, the bond collection fee will be
increased from $40 to $50. Based on the
proposed fee schedule, the Reserve
Banks are projecting that the noncash
collection service will recover 100.0
percent of total costs, including targeted
ROE. The Board has approved the

Table 9.—C ash Pro Forma Cost

and

national fee schedule proposed by the
Reserve Banks for the noncash
collection service.
J. Cash Services—Cash services
provided by the Federal Reserve Banks
include cash transportation, coin
wrapping, nonstandard packaging of
currency orders and deposits, and
nonstandard frequency of access to cash
services.
Table 9 presents actual 1994
performance, estimated 1995, and
projected 1996 cost recovery
performance for the priced cash
services.

Revenue Performance

[$ millions]
Y ear

1994 ........................................
1995 (Est) .............................
1996 (Bud) ............................

1
Revenue

2
Operating
costs and
imputed ex
penses

6.4
5.2
6.7

6.0
5.1
6.3

The Reserve Banks expect that 1996
revenues will recover all costs for cash
services, including targeted ROE.
Projected revenues and costs are higher
for 1996 because the San Francisco
District will begin to charge fees for
access to cash services beyond the basic
service level.
111. Competitive Impact Analysis
All operational and legal changes
considered by the Board that have a
substantial effect on payment system
participants are subject to the
competitive impact analysis described
in the March 1990 policy statement

T able A-1.—Comparison

3
Special
project
costs recov
ered

0.0
0.0
0.0

4
Total ex
pense

5
N et income
(R O E )

[2+3]

[1 -4 ]
6 .0
5.1
6.3

for

7
Recovery
rate after
target R O E
(percent)

8
Special
project
costs de
ferred and
financed

[1/(4+6)]
0.4
0.1
0.4

“The Federal Reserve in the Payments
System.” In this analysis, the Board
assesses whether the proposed change
would have a direct and material
adverse effect on the ability of other
service providers to compete effectively
with the Federal Reserve in providing
similar services due to differing legal
powers or constraints, or due to a
dominant market position of the Federal
Reserve deriving from such legal
differences.
The Board believes that the
recommended price and service level
changes would not have a substantial

Pro Forma Balance Sheets

6
Target R O E

0.2
0.1
0.2

102.6
99.5
102.2

0 .0
0 .0
0 .0

effect on payments system participants,
and would not have a direct and
material effect on the ability of other
service providers to compete effectively
with the Federal Reserve in providing
similar services. The 1996 fees approved
by the Board result in a projected return
on equity that meets the target return on
equity based on the 50 bank holding
company model. Therefore, the Board
believes that approval of the proposed
fees would not have an adverse effect on
the ability of other service providers to
compete with the Reserve Banks.
Attachments

Federal Reserve Priced S ervices

[Millions of dollars— average for year]

1996

1995

Short-term assets:
Imputed reserve requirement on clearing b a la n c e s .....
Investment in m arketable securities ....................... ..........
R e ceivab les1 .............................................................................
M aterials and sup plies1 .........................................................
Suspense & D ifferen ce1 ........................................................
Prepaid e x p e n s e s 1 ..................................................................
Items in process of collection ..............................................
Total short-term assets ......................................................
Long-term assets:
P re m is e s 1 2 .................................................................................
Furniture and equ ipm ent1 .....................................................
Leasehold improvements and long-term prepaym ents1
Capital leases ............................................................................

$ 4 0 9 .6
3 ,6 8 6 .7
64.4

$ 619.8
5 ,577.9
62.8
5.7

8.6
0.0
13.9
2 ,4 1 3 .2

0.1
16.1
2 ,592.5
$ 8 ,87 4 .9

$ 6 ,59 6 .4
$ 34 6 .4
189.4
14.6
2.3

$ 337.7
187.8
12.6
3.8

56 5 9 9

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices
T

able

A -1 — C

o m p a r is o n

Fo r m a Ba la n c e S

heets

fo r

ederal

Reser

r ic e d

e r v ic e s

—

Continued

[Millions of dollars— average for year]
1996

1995

Total long-term assets
Total assets
Short-term liabilities:
Clearing balances and balances arising from early credit of uncollected it e m s ...........................
Deferred credit items ........................................................................................................................................
Short-term d e b t3 ................................................................................................................................................

5 5 2 .7

541.9

$7,149.1

$9,41 6 .8

$ 4 ,0 9 6 .3
2 ,4 1 3 .2
8 6 .8

Total short-term liabilities .......
Long-term liabilities:
Obligations under capital leases
Long-term d e b t3 ............................

...........

$ 6 ,1 9 7 .7
2 ,5 9 2 .5
84.7
$ 6 ,5 9 6 .3

...................

$ 2 .3
1 82.7

$8,874.9

$ 3.8
161.6

Total long-term liabilities

165.4

185.0

Total liabilities
Equity3 ..........

$ 6 ,7 8 1 .3
3 6 7 .8

Total liabilities and equity

$7,149.1

...... „ .........
...................

$9,040.3
376.5
$ 9 ,416.8

1 Financed through P S A F; other assets are self-financing.
2 Includes allocations of Board of Governors’ assets to priced services of $ 0 .5 million for 1996 and $ 0 .4 million for 1995.
3 Imputed figures represent the source of financing for certain priced services assets.
N ote: Details may not add to totals due to rounding.
T able

A-2.—D e r i v a t i o n

o f

the

1996 PSAF

[Millions of dollars]
A. Assets to be F in a n c e d :1
S h o rt-te rm ..................................
Long-term 2 ................................
B. W eighted A verage Cost:
1. Capital Structure 3
Short-term Debt ...................
Long-term D e b t ....................

Equity .....................................
2. Financing R a tes/C o sts3
Short-term Debt ................. .
Long-term D e b t ....................
Pre-tax Equity4 ....................
3. Elements of Capital Costs
Short-term D ebt ..................
Long-term D e b t ...................
Equity .....................................

$8 6 .9
5 5 0 .4

$637.3

13.6%
2 8 .7 %
5 7 .7%
3.9%
7.6%
14.2%
$8 6 .9
182.7
36 7 .8

x 3 .9 % =
x 7 .6 % =
x 14 .2% =

$3.4
13.8
52.3
$69.5

Other Required P S A F Recoveries:
Sales T a x e s ...................................................
Federal Deposit Insurance Assessment
Board of Governors E x p e n s e s ...............

$ 1 1 .3

2.2
2 .8

Total PSAF Recoveries
As a percent of capital ..........................................................................................................................................................................................................
As a percent of e x p e n s e s 5 ..................................................................................................................................................................................................

$16.3
$ 85.8
13.5%
14.1%

1 Priced service asset base is based on the direct determination of assets method.
2 Consists of total long-term assets, including the priced portion of F R A S assets, less self financing capital leases.
3 All short-term assets are assum ed to be financed by short-term debt. O f the total long-term assets, 3 3 percent are assum ed to be financed
by long-term debt and 67 percent by equity.
4 T he pre-tax rate of return on equity is based on the average after-tax rate of return on equity, adjusted by the effective tax rate to yield the
pre-tax rate of return on equity for each bank holding com pany for each year. These data are then averaged over five years to yield the pre-tax
return on equity for use in the PSAF.
5 Systemwide 1995 budgeted priced service expenses less shipping are $ 6 1 0 .3 million.

Federal Register / Vol. 60, No. 217 / Thursday, November 9, 1995 / Notices

56600

Table A-3.—C omparison Between 1996

and

1995 PSAF Components
1995

1996
A. Assets to be Financed (millions of dollars):
S h o rt-te rm ........................................................................................................................................................................................................
Long-term ........................................................................................................................................................................................................
Total ..............................................................................................................................................................................................................
B. Cost of Capital:
Short-term Debt R ate ..................................................................................................................................................................................
Long-term Debt Rate ...................................................................................................................................................................................
Pre-tax Return on E q u ity ............................................................................................................................................................................
W eighted A verage Long-term Cost of Capital .............................................................. .....................................................................
C. Tax Rate .............................................................................................................................................................................................................
D. Capital Structure:
Short-term Debt .............................................................................................................................................................................................
Long-term D e b t ..............................................................................................................................................................................................
E q u ity .................................................................................................................................................................................................................
E. O ther Required PS A F Recoveries (millions of dollars):
Sales T a x e s ....................................................................................................................................................................................................
Federal Deposit Insurance Assessment ...............................................................................................................................................
Board of Governors Expenses .................................................................................................................................................................
F. Total PSAF:
Required R e c o v e r y .......................................................................................................................................................................................
As Percent of Capital ..................................................................................................................................................................................
As Percent of Expenses .............................................................................................................................................................................

Table A-4—C omputation

Capital Adequacy

for

$ 86.9
550.4

$ 84.7
538.2

$6 3 7.3

$622.9

3.9%
7.6%
14.2%
12.0%
29.9%

3 .5 %
8 .2 %
12.1%
10.9%
31.0%

13.6%
2 8 .7%
57 .7%

15.4%
25 .4%
59 .2%

$1 1 .3
2.2
2.8

$11.3
19.0
2.7

$85.8
13.5%
14.1%

$94.7
15.2%
15.7%

Federal Reserve Priced S ervices

[millions of dollars]

Assets
Imputed reserve requirem ent on clearing balances .............................................................................................................
Investment in m arketable securities ..........................................................................................................................................
R e c e iv a b le s ........................................................................................................................................................................................
M aterials and supplies ...................................................................................................................................................................
Suspense & Difference ..................................................................................................................................................................
Prepaid expenses ............................................................................................................................................................................
Items in process of collection ......................................................................................................................................................
Premises .............................................................................................................................................................................................
Furniture and e q u ip m e n t................................................................................................................................................................
Leases & long-term p re p a y m e n ts ...............................................................................................................................................

$ 4 0 9.6
3 ,6 86 .7
64.4
8.6
0 .0
13.9
2 ,4 1 3 .2
34 6 .4
189.4
16.9

Total ........................................................................................................................................................................................
Imputed Equity for 1995 .............................................. .................................................................................................................
Capital to Risk-W eighted Assets ................................................................................................................................................
Capital to Total A s s e ts ...................................................................................................................................................................

$7,149.1
$ 3 6 7 .8
3 4 .4 %
5 .1 %

By order of the Board of Governors of the
Federal Reserve System, November 2 ,1995.

William W. Wiles,

Secretary of the Board.
[FR Doc. 95-27631 Filed 1 1 -8 -9 5 ; 8:45 am]
BILUNG CODE 6210-01-P

Risk
weight
0.0
0.0
0.2
1.0
0.2
1.0
02
1.0
1.0
1.0

Weigh* od
assets
$0.0
0.0
12.9
8.6
0 .0
13.9
48 2 .6
34 6 .4
189.4
16.9
$ 1 ,07 0 .7

Federal Reserve Bank

N e w Yo r k

N E W Y O R K , N. Y . 1 0 0 4 5 - 0 0 0 1
AREA CODE
FACSIMILE

h e s t e r

212
2 12

720-6375
720-8742

e l d b e r g

E x e c u t iv e V ice P r e s i d e n t

November 9, 1995
To:

The Chief Executive Officer of Each Member Bank

Subject:

Annual Reporting and Disclosure Requirements for Member
Bank's Executive Officers and Principal Shareholders
Subject to the Board's Regulation O (Form FFIEC 004)

Since 1979, member banks have been subject to certain
reporting and disclosure requirements set forth under the Board's
Regulation O. These requirements were established in Titles VIII
and IX of the Financial Institutions Regulatory and Interest Rate
Control Act of 1978 (FIRA), as amended by the Garn-St Germain
Depository Institutions Act of 1982.
A copy of form FFIEC 004 is enclosed to assist your
bank and your bank's executive officers and principal
shareholders in complying with the requirements set forth in
Regulation 0. Please duplicate the form, which has been approved
by the FFIEC, in accordance with your needs. You should note
however, that executive officers and principal shareholders may
provide the required information on other forms, if they wish.
Executive officers and principal shareholders subject
to the reporting requirements must file annual reports concerning
their indebtedness and the indebtedness of their related
interests to the correspondent banks of the member bank. These
reports should be filed with the member bank's board of directors
by January 31 of each year. The 1996 report covers the period
January 1 to December 31, 1995.
Each member bank should notify its executive officers
and principal shareholders of the reporting requirements. The
persons notified should include any person who was an executive
officer or principal shareholder of the member bank during the
period January 1 to December 31, 1995, since all of these persons
are subject to reporting requirements if they were indebted to a
correspondent bank of the member bank during this period.
Each member bank is also required to make available to
its executive officers and principal shareholders a list of the
member bank's correspondent banks. A correspondent bank is
defined as a bank that maintains one or more correspondent
accounts for a member bank during the calendar year that, when
aggregated, exceed certain amounts specified in the regulation.

(Over)

Form FFIEC 004, or a similar form that is filed byexecutive officers and principal shareholders, must be kept on
file at the member bank for a period of three years. These
reports are not required to be made available to the public;
however, the reports will be reviewed by examiners during the
course of an examination of the member bank. The reports filed by
executive officers and principal shareholders are not required to
be filed with the Reserve Bank or Deputy Comptroller.
Any questions your bank may have on the current forms
or the regulation should be directed to John Greco, Examining
Officer, Financial Examinations Function at (212) 720-8398.

Sincerely,

Chester B. Feldberg
Executive Vice President

Enclosure

General Instructions
1. P erso n s R e q u ire d to F ile R e p o rt

A Report on Indebtedness to Correspondent Banks (Form FFIEC 004),
or a similar form containing identical information, must be completed by
each executive officer and each principal shareholder of an insured bank
who was indebted, or whose related interests were indebted, during the
calendar year for which the report is being submitted to a correspon
dent bank of their bank. All insured banks are required by law to make
available to their executive officers and principal shareholders a list of
the bank’s correspondent banks. “Correspondent bank” means gener
ally a bank that maintains a correspondent account in excess of a cer
tain amount for the officer’s or shareholder’s bank.
The executive officer or principal shareholder must file a separate
report concerning the indebtedness of the officer or shareholder to each
correspondent bank and a separate report concerning the indebted
ness of each of the related interests of the officer or shareholder to
each correspondent bank. For example, if an executive officer is
indebted to two correspondent banks, the officer must file two reports,
one for each correspondent bank. If the executive officer has two
related interests that were also both indebted to two correspondent banks,
the officer would file six reports, two for the officer’s own indebtedness
and four for the indebtedness of the officer’s related interests. If the
executive officer is not indebted to a correspondent bank, but a related
interest of the officer is indebted to a correspondent bank, the executive
officer must file a report concerning the indebtedness of the officer’s
related interest to the correspondent bank.
2. W h e re an d W h e n R e p o rts a re to be Filed

The executive officer or principal shareholder must submit the report on
indebtedness to correspondent banks to the board of directors of the
reporting person’s bank for each calendar year by January 31 of the
next year.

In determining the maximum amount of indebtedness of a principal share
holder, the indebtedness of a member of the shareholder’s immediate
family is to be treated as indebtedness of the principal shareholder.
Each maximum amount of indebtedness reported may include several
separate extensions of credit. The reporting person must report sepa
rately the terms and conditions of each of these extensions of credit.

“Immediate family” means the spouse of an individual, the individual’s
minor children, and any of the individual’s children (including adults)
residing in the individual’s home. For reporting purposes, only one
individual in the immediate family must file reports if that individual’s
reports include the information on indebtedness of the individual’s
immediate family.

Each report on indebtedness to each correspondent bank must also
include the amount of indebtedness outstanding to the correspondent
bank ten business days before the date on which the report on indebt
edness is filed. If the information on the amount of indebtedness out
standing to a correspondent bank ten business days before the filing of
the report is not available or cannot be readily ascertained by the filing
date, an estimate of the amount of such indebtedness may be filed,
provided that the actual amount of such indebtedness is submitted to
the bank’s board of directors within the next thirty days.

c. Control of a company is defined in section 215.2 of Regulation O as
ow nership or control of 25 percent or more of a com pany’s
outstanding voting shares; however, the regulation presumes control
in some cases where less than 25 percent ownership or control
exists.

4. D e fin itio n s

The following definitions are intended to provide general guidance in
completing this report. For precise definitions, see the Federal Reserve
Board’s Regulation O (12 CFR Part 215) and Part 349 of the FDIC’s
Rules and Regulations (12 CFR Part 349).
a. “Executive officer” is defined in section 215.2 of Regulation O and
means generally a person who participates or who has authority to
participate (other than in the capacity of a director) in m ajor
policymaking functions of the company or bank. Certain officers ( e.g .,
vice presidents) are presumed in Regulation O to be executive offic
ers unless they are excluded by resolution of the board of directors
or by the bylaws of the bank or company from participation in major
policymaking functions of the bank or company and do not partici
pate therein.

3. W h a t M u st be R e p o rte d

The reporting person must include in each report on indebtedness to
each correspondent bank: (a) the maximum amount of indebtedness
outstanding during the calendar year, and (b) the terms and conditions
of each extension of credit included in the maximum amount reported.
The terms and conditions to be reported are: (1) the original amount
and date; (2) the maturity date; (3) the payment terms; (4) the range of
interest rates charged during the calendar year; (5) whether the exten
sion of credit is secured or unsecured; (6) if secured, a description of
the collateral and its value; and (7) any unusual terms or conditions.

d. “Related interest” means (1) a company that is controlled by a per
son or (2) a political or campaign committee that is controlled by a
person or the funds or services of which will benefit a person.

b. “Principal Shareholder” means any person (other than an insured
bank, or a foreign bank) that, directly or indirectly, owns, controls, or
has the power to vote more than 10 percent of any class of voting
securities of the bank. The term includes a person that controls a
principal shareholder {e.g., a person that controls a bank holding
company).
For the purpose of determining who is a principal shareholder, shares
owned or controlled by a member of the individual’s immediate fam
ily are presumed to be controlled by the individual.

e. “Indebtedness” includes any extension of credit (as defined in sec
tion 215.22 of Regulation O), but does not include:

i. commercial paper, bonds and debentures issued in the ordinary
course of business; and
ii. consumer credit in an aggregate amount of $5,000 or less from
each correspondent bank, provided the credit is incurred under
terms that are not more favorable than those offered the general
public.

f. “Maximum amount of indebtedness” means, at the option of the
reporting person, either (i) the highest outstanding indebtedness dur
ing the calendar year for which the report is made, or (ii) the highest
end of the month indebtedness outstanding during the calendar year
for which the report is made. The method chosen should be consis
tently used for all indebtedness to the same correspondent bank.
The reporting person must indicate on the report whether the maxi
mum amount was determined as of the end of the month or on a
daily basis.

g. “Correspondent bank,” “company,” and other terms pertinent to this
report are defined in the Board’s Regulation 0 , 12 CFR Part 215 and
Part 349 of the Federal Deposit Insurance Corporation’s Rules and
Regulations, 12 CFR Part 349.

Board of Governors of the Federal Reserve System
Office of the Comptroller of the Currency
Federal Deposit Insurance Corporation
Name of Executive Officer or Principal Shareholder Submitting Report

Report on Indebtedness of Executive Officers and
Principal Shareholders and their Related Interests
to Correspondent Banks

Name of Bank to which Report is Submitted
State

City

For the Calendar Year Ending December 31, 1 9 _____

Status of Reporting Person:

A. Maximum amount of indebtedness outstanding during the calendar year:

_____ Executive Officer
_____ Principal Shareholder
If the report is submitted for indebtedness of a related interest, name and
address of related interest for which the report is submitted:

Form FFIEC 004
g ^ Approved by the Federal Financial Institutions
Examination Council 11/15/79
OMB No. 7100-0034 (FRB) Expires 9/30/98
1557-0070 (OCC) Expires 9/30/98
3064-0023 (FDIC) Expires 9/30/98

To be submitted by executive officers and principal shareholders of insured banks to the boards of
directors of their banks in satisfaction of the reporting requirements of the Federal Reserve Board's
Regulation O (12 CFR Part 215) and Part 349 of the Federal Deposit Insurance Corporation’s Rules
and Regulations (12 CFR Part 349) with respect to indebtedness to correspondent banks.

D. Terms and Conditions of each extension of credit included as indebted
ness in the amount reported in Box A (see Instruction 3). Use additional
pages if indebtedness consists of more than three loans and/or more space
is needed to report terms and conditions:

(In thousands of dollars) $.
B. Method used to determine maximum amount of indebtedness oustanding
(check one):

Loan 1:

___ i. highest outstanding indebtedness during the calendar year
ii. highest end of the month indebtedness outstanding during the
calendar year

Name and address of the correspondent bank to which the executive officer,
principal shareholder, or related interest is indebted:

Loan 2:

C. Amount of indebtedness outstanding ten business days prior to the date
of filing this report:
Loan 3:

(In thousands of dollars) $.
I hereby certify that the information given above is complete, correct, and
true to the best of my knowledge.

Signature of official responsible for report

Date Signed

Disclosure of Estimated Burden

The burden associated with this information collection is estimated to vary from 1 to 2 hours per response, depending on individual circumstances. Burden estimates include the time for reviewing
instructions, gathering and maintaining data in the required form, and completing the information collection, but exclude the time for compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the Office of Information and Regulatory Affairs, Office of
Management and Budget, Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219

Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429

F ed era l R e se r v e B ank of New Y ork
New Y ork , N. Y . 10045-0001
AREACODE 212-720-5000

November 15, 1995

To:

All State Member Banks, Bank Holding Companies, U .S. Branches and
Agencies o f Foreign Banks, and Edge and Agreement Corporations in the
Second District

Subject:

New Suspicious Activity Report (SAR)

The Federal Reserve, the other federal financial institutions supervisory
agencies, the U .S. Department of the Treasury (Treasury) and the Financial Crimes
Enforcement Network o f Treasury (FinCEN) are working together to streamline the
process by which domestic and foreign banking organizations report suspected criminal
activity to the federal law enforcement agencies that investigate and prosecute criminal
offenses.
Planned changes include:

•

Adopting a single uniform interagency form;

•

Eliminating duplicative filing requirements by melding the
banking agencies’ criminal referral reporting rules with the
suspicious transaction reporting requirements on the current
Currency Transaction Report (CTR) and Treasury’s proposed
suspicious transaction reporting regulation so that the filing
of the single uniform interagency form fulfills all reporting
obligations;

•

Requiring the filing o f only one form with a single repository,
FinCEN, which will oversee distribution to the various
federal law enforcement and banking agencies;

•

Eliminating the need to provide supporting documentation
with the SAR;

•

Providing computer software to assist in the preparation and
filing of the SAR; and

•

Raising the mandatory reporting thresholds and thereby
reducing the number of referrals that have to be filed.

FEDERAL RESERVE BANK OF NEW YORK

One o f the principal benefits o f the new interagency suspicious activity
reporting system is the use of a single uniform reporting form that would be adopted by
each o f the banking agencies and Treasury and sent to a single location. A new
Suspicious Activity Report is being developed to replace the Criminal Referral Form.
An advance copy o f the SAR and the draft instructions are enclosed. The prototype of
the SAR should not be used until vou receive instructions to do so from this Reserve
Bank.
Work also continues on the development of software that will enable your
institution to file the SAR on various forms o f magnetic media, such as disk or tape.
Once completed, this new software will be distributed to your institution by the Federal
Reserve at no charge. Should you wish to use your own in-house computer system to
prepare the appropriate information for fling SARs by magnetic media, rather than using
a hard copy o f the new SAR or our software, you may do so by using specifications that
will be available shortly. You may obtain these specifications by writing or calling
Barbara Rosenberg, IRS Detroit Computing Center, 985 Michigan Avenue, Detroit,
Michigan 48226, at (313) 234-1422. Those banking organizations that already file CTRs
by magnetic tape will be receiving the specifications from the IRS Detroit Computing
Center automatically.
We anticipate that, within the next 60 days, the Federal Reserve, along
with the other banking agencies and Treasury, will be issuing final suspicious activity
reporting rules, distributing a final SAR, and inaugurating the new reporting system.
Until the new reporting system and SAR are finalized, vour institution should continue
to use the current Criminal Referral Form and to follow its instructions. These forms
should be sent to:
Joseph L. Galati II
Manager
Advisory and Technical Services Function
Federal Reserve Bank o f New York
33 Liberty Street
New York, NY 10045
Also, because you can no longer report suspicious currency transactions to
the Treasury on that agency’s CTR form as o f October 1, 1995, due to a change in that
form, your organization should use the current Criminal Referral Form to report
suspicious financial transactions that would have previously been reported by checking
the "suspicious” box on the old CTR form.

FEDERAL RESERVE BANK OF NEW YORK

If you have any questions concerning the new form or reporting
requirements, please contact Joseph E. Buckley, Supervising Examiner at (212) 720-2393
or Raymond J. Beers, Supervising Examiner at (212) 720-5924 o f the Advisory and
Technical Services Function.
Sincerely,

Christine M. Cumming
Senior Vice President
Enclosure

Suspicious
A ctivity Report

FR 22 3 0
67 1 0 /0 6 A

FRB:
FDIC:

OMB No. 7 1 00 -021 2
OMB No. 3 0 64 -007 7

OCC:
80 10 -9,80 10-1
OTS:
366
NCUA:
2362
TREASURY: XXXXXXXXXX
Expires September 30 , 1998

ALWAYS COMPLETE ENTIRE REPORT

OMB
OMB
OMB
OMB

No. 1557-0180
No. 1 5 5 0 0 0 0 3
No. 3 1 3 3 -0 0 9 4
No. XXXX-XXXX

1 Check appropriate box:
a

EH Initial Report

EH Corrected Report

EH Supplemental Report

Reporting Financial Institution Information

Part I
2

Name of Financial Institution

Address of Financial Institution

City

Address of Branch Office(s) where activity occured

State

_ L

City

Account number(s) affected, if any

State

EH Federal Reserve

□

NCUA

OCC

1
A t»|5|pize of financial institution

y||
*

EH FDIC

Zip Code

________

Primary Federal Regulator

Zip Code

•;
j.lk ,

J fj|

^ 3 ** If institution closed^ia§|£iosed
(M M DDYY)

_________L _ _ .

Have>any,pf the^i^btution's^crxiunts related to this'
'

If yes, identify

j±

Part II
16

Last Name or N

City

*22
\.S, V -/F ;> .rV ' 3

State

)

O c c u p a tio n s *^

Zip Code

Middle Initial

SSN or TIN (as applicable)

Date of Birth (M M DDYY)

#
26

Phone Number - ResidenceXinclOde~area code)

(

First Name

Phone Number - W ork (include area code)

(

)

8
28

Form*apQldentification for Suspect:

n ^

a LJ Driver's License
e
29

b I_I Passport

Num ber________________________

EH Alien Registration

Issuing Authority___

□

Other

Relationship to Financial Institution:
a
b

c
30

EH Accountant
EH Agent
EH Appraiser

d EH Attorney
e [13 Borrower
f EH Broker

g
h
i

EHCustomer j EH O fficer
k EH Shareholder
EH Director
EHEmployee I EH Other______
31

Is suspect still affiliated w ith the financial institution?

a □
b

Yes

EH No

)f nQ specjfjy /

c □

t. d

Suspended

EH Terminated

e □

Resigned

Date of Suspension,
32 Admission/Confession
Termination, Resigna
a
Yes
b
No
tion (MMDDYY)

Part III
33

Suspicious A ctivity Information

2
34

Date of suspicious activity (M M DDYY)

Dollar amount involved in known or suspicious activity
$

35 Summary characterization of suspicious activity:
a
Bank Secrecy Act/Structuring/
g
Counterfeit Check

Money Laundering

0
CD Counterfeit Credit/Debit Card

b CD Bribery/Gratuity

i d ] Counterfeit Instrument (other)

c O

Check Fraud

CD Check Kiting

e Q

Commercial Loan Fraud

CD Consumer Loan Fraud

CD Other

Amount of loss prior to recovery
(if applicable)

d ] Credit Card Fraud

o
p

a CD Yes

CD Mortgage Loan Fraud
CD Mysterious Disappearance

q EH W ire Transfer Fraud

Has the institution's bonding company been notified?

Misuse of Position or
Self-Dealing

CD Debit Card Fraud
CD Defalcation/Embezzlement

Dollar amount of recovery
(if applicable)

CD False Statement

n O

Has the suspicious activity had a
m aterial impact on or otherwise affected
the financial soundness of the institution?

ED Y e s ^ b ED No

b Q No

P repare^ nfo rm at io n

Part V

First Name

Middle Initial

Title

Date (MMDDYY)

Part VI

Contact for Assistance (If different than preparer information in Part V)

Last Name

Title

Phone Number (include area code)
(
)

First Name

Phone Number (include area code)

(
68

Agency (If applicable)

)

Middle Initial

Date (MMDDYY)

Part V II Suspicious Activity information Expianation/Description
Exptanation/description o f known or suspected violation o f law or
suspicious financial transaction. This section of the referral is
critical. The care w ith which it is w ritten may make the
difference in whether or not the described conduct and its
possible criminal nature are clearly understood. Provide below a
chronological and complete account of the possible violation of
law, including w hat is unusual, irregular or suspicious about the
transaction, using the following checklist as you prepare your
account. If necessary, continue the narrative on a duplicate of
this page.
a Describe supporting documentation end retain for 10 years,
b Explain who benefited, financialty or otherw ise, from the
transaction, how much, and how.
Retain any confession, admission, or explanation of the
transaction provided by the suspect and indicate to
whom and when it was given.
Retain any confession, admission, or explanation of the
transaction provided by any other person and indicate
to whom and when it was given.

Retain any evidence of cover-up or evidence o f an attempt
to deceive federal or state examiners or others,
f Indicate where the possible violation of law took place
(e.g ., main office, branch, other),
g Indicate whether the possible violation of law is an isolated
incident or relates to another transaction
h Indicate whether there is any related litigation; if so,
specify.
i Recommend any further investigation that might assist law
enforcement authorities.
j Indicate whether any information has been excluded from
this referral; if so, why?
For Bank Secrecy Act/Structuring/M oney Laundering reports,
include the following additional information:
k
I

indicate whether currency and/or monetary instruments
were involved. If so, provide the amount and/or description.
Indicate any account number th at may be involved or
affected.
"***

Suspicious Activity Report
Instructions
Federal law (31 U .S.C . 5318(g)(2) and (3)) provides that financial institutions, and their directors, officers,
employees and agents, that disclose possible violations of law or regulation, including in connection w ith the
preparation of suspicious activity reports, 'sh all not be liable to any person under any law or regulation of the United
States or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure or for
any failure to notify the person involved in the transaction or any other person of such disclosure.' This law prohibits ’
financial institutions, and their directors, officers, employees, and agents, from communicating that a disclosure of
possible violations of the law or regulation has been made and the contents of such disclosure, including information
reported in a suspicious activity report, to any person involved in the reported transaction.

In situations involving violations requiring immediate attention, such as when a reportable violation is
ongoing, the financial institution shall immediately notify, by telephone, the appropriate law
enforcement authority in addition to filing a tim ely suspicious activity report.
WHEN TO MAKE A REPORT:
1. AH financial institutions operating in the United States, including insur^Jb^ks
associations, credit unions, bank holding companies, nonbank subsi^
companies, savings and loan service corporations, Edgi
and agencies of foreign banks, are required to make

avings and loan
and thrift holding
ns, and U.S. branches
very of:

criminal wol
attem
a. Suspected insider abuse involving any amount.
ion or involvin'
nducted
of criminal violations, committed against tl
ution has a subst^t%SKIfe|re*fbr identifying
through the financial institution, wh
r other institution-affrliatedro^ies (as defined in
one of its directors, officers, ei
) and (5)) asJi^ a n ^ & n jn itte d or aided in the
12 U.S.C. 1 7 8 6 (r), or 18 i a ( j ^ n 9 k l i i a f ^
he amount in v o lv e s fS R ^ ro la tio n .
commission of a crimin

more wh<
be identified. Any known or
^or pattern of
orations, committed against the financial
transaction or
ahsk:onducted through the financial institution and
jgjgpigating $ 5 ,0 0 0 or rmresuwiypas or other assets, where the financial institution
w as either an actfl|J o ^ g fe n tia l victim of a criminal violation, or series of criminal
or th a t the f i n a ^ i ^ ^ ^ u t i o n w as used to facilitate a criminal transaction, and that the
financial institution has a& ^s& intial basis for identifying a possible suspect or group of suspects. If it
is determined ^riog^^ilingronis report th at the identified suspect or group of suspects has used an
"alias," t h § j i m ^ ^ n o n regarding the true identity of the suspect or group of suspects, as well as
** ' J
^ rs,TUJnibers and telephone numbers must be reported.

b. Transactioi
suspr

c. Transactions aggregating $ 2 5 ,0 0 0 or more regardless of potential suspects. Any known or suspected
criminal violation, or pattern of criminal violations, committed against the financial institution or
involving a transaction or transactions conducted through the financial institution and involving or
. aggregating $ 2 5 ,0 0 0 or more in funds or other assets, where the financial institution believes th at it
was either an actual or potential victim of a criminal violation, or series of criminal violations, or that
the financial institution was used to facilitate a criminal transaction, even though there is no basis for
identifying a possible suspect or group of suspects.
d. Money laundering, suspicious financial transactions, or violations of the Bank Secrecy Act. Any
transaction conducted or attempted, at or through the financial institution, where the institution
knows, suspects, or has reason to suspect th at, regardless of the identification of a potential
suspect, whether currency was involved, or the amount involved in the transaction:
i. The transaction involves funds derived from illegal activities or is intended or conducted in order to
hide or disguise funds or assets derived from illegal activities (including, without limitation, the
ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate
or evade any law or regulation or to avoid any transaction reporting requirement under federal law;

ii. The transaction is designed to evade any regulations promulgated under the Bank Secrecy Act; or
iii. The transaction or its details appear to have no business purpose, the transaction varies from the
normal methods of financial commerce, or the transaction is not the sort in which the particular
customer or class of customer would normally be expected to engage, and, in each case, the
institution knows of no reasonable explanation for the transaction.
The Bank Secrecy A ct requires ail financial institutions to file currency transaction reports (CTRs) in
accordance with the Department of the Treasury's implementing regulations (31 CFR Part 103).
These regulations require a financial institution to file a CTR whenever a currency transaction exceeds
$ 1 0 ,0 0 0 . If a currency transaction exceeds $ 1 0 ,0 0 0 and is suspicious, the institution must file both a
CTR (reporting the currency transaction) and a suspicious activity report (reporting the suspicious
criminal aspect of the transaction). If a currency transaction equals or is below $ 1 0 ,0 0 0 and is
suspicious, the institution should only file a suspicious activity report.
2 . Financial institutions are required to file this form no later than 3 0 calendar days after the date of initial
ions, or suspicious
detection of the known or suspected criminal violation or series of crimin
incident triggering
financial transaction. If no suspect was identified on the date of d
suspicious activity
the filing of this suspicious activity report, a financial iostitutio
wever, in no case
report for an additional 3 0 calendar days after the id e r ^ r ^ u o ^ N th ^ g b S p e c t
the known)
shall reporting be delayed more than 6 0 calendar daysg fter th<
V
&1
ancial transaction.
suspected criminal violation or series of criminal violations, oi
3 . This form does not need to be filed for.
authorities, or for lost, missing, coqqte;
requirements of 17 CFR 2 4 Q J 7<

ies and Durglaries th at arc
securities that are repbrte

rtecL

ursuant to the

H O W TO MAKE
Q p to:
C, PO Box 3 2 6 2 1 ,
do not applytor&fbi^which information is not available, leave blank.
3. Complete
entirety, each
even fo
when the form is a correction or supplement.
4 . Do n o tfn d ^ & s u p p o rtin g documentation with the form. Identify and retain a copy of the form and all
origi^TS u B ^ m n g documentation for 10 years from the date of the form. All supporting documentation
should&&*made available to the appropriate authorities upon request.
5 . If the form is prepared by an agency examiner, send completed form, with a copy of related supporting
documentation, to.your supervisor. The supervisor will ensure that the completed form is filed.
6. If more space is needed to complete an item (for example, to report an additional suspect or witness),
a copy of the page containing the item should be used to provide the information.
7. Financial institutions are encouraged to provide copies of suspicious activity reports to state and local
authorities, where appropriate.
Paperwork Reduction Act Notice: The purpose of this form is to provide an effective and consistent means for financial institutions to notify appropriate law enforcement
agencies of known or suspected criminal activities that take place at or were perpetrated against financial institutions. This report is required by law. Information collected on
this form is confidential (S U.S.C. 552(b)(7) and S52a(k){2), and 31 U.S.C. 5318(g)). The Federal financial institutions regulatory agencies and the U.S. Departments of Justice
and Treasury may use and share the information. Public reporting and recordkeeping burden far this information cotoction is estimated to average 4 0 minutes per response, and
includes time to gather and maintain data in the required form, review the instructions, and complete the information collection. Send comments regarding this burden estimate,
including suggestions for reducing the burden, to the Office of Management and Budget. Paperwork Reduction Protect, Washington, DC 2 0 5 0 3 and. depending on your primary
Federal regulatory agency, to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 2 0 5 5 1 ; or Assistant Executive Secretary, Federal Deposit Insurance
Corporation. Washington, DC 2 0 4 2 9 ; or Legislative and Regulatory Analysis Division. Office of the Comptroller of the Currency. Washington, DC 2 0 2 1 9 : or Office of Thrift
Supervision, Enforcement Office. Washington. DC 2 0 5 5 2 ; or National Credit Union Administration. 1 7 7 5 Duke Street. Alexandria. VA 2 2 3 1 4 ; or Office of the Director, Financial
Crimes Enforcement Network, Department of the Treasury, 20 7 0 Chain Bridge Road. Vienna. VA 2 2 1 8 2 .

Full text of Federal Reserve Bank of New York Circulars : 10812. Federal Reserve Priced Services

FRASER