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FEDERAL RESERVE BANK OF N EW YORK r Circular No. 5947*t 1967 I February 21, J Collection of Items Requiring Special Handling as Noncash Items To All Banking Institutions, and Others Concerned, in the Second Federal Beaerve Distriet : In our Circular No. 5849, dated August 5, 1966, we informed you that, effective September 1, 1967, the Federal Reserve Banks will classify as items requiring special handling all checks, drafts, and similar items received by them on which the payor’s routing symbol-transit number has not been preprinted, or postencoded before their receipt by a Federal Reserve office, in E-13B magnetic ink characters in the manner prescribed and in the location assigned by The American Bankers Association. We further informed you that, on and after such effective date, all such items sent as cash items will be handled by the receiving Federal Reserve office as follows: (a ) Items o f $1,000 or more received from banks located outside the city o f the receiving Federal Re serve office will be charged back and entered fo r collection as noncash item s; and (b ) A ll other items will be charged back and returned. We have been most gratified to note the progress made since the above announcement by the commercial banks in increasing the proportion of checks drawn on them which bear the payor’s routing symbol-transit number in magnetic ink encoding. A one-day survey completed in January 1967 at all Federal Reserve Banks and Branches, which survey involved the inspection of almost 18 million items, revealed that 97.1 per cent of the items were properly encoded; a copy of the survey results is printed on the reverse side of this circular. Of the items that were not encoded, 35 per cent represented checks drawn by corporations, 21 per cent comprised checks drawn by individuals, and 24 per cent were made up of “ counter” checks or “ scratched” checks— checks designed for drawing on a particular account or bank but used for drawing on another account or bank. Multiple-drawee items (3 per cent), preauthorized life insurance-premium drafts (6 per cent), municipal warrants (5 per cent), and transfer or depository drafts (2 per cent) were the largest other individual categories. As compared with the 97.1 per cent encoded as shown in the January survey, the last previous survey, in February 1965, had disclosed that only 92.3 per cent were properly encoded. We are particularly pleased that banks in this District lead the country with less than 0.8% of the checks drawn on them being unencoded. We appreciate the support of the banks in the action they have taken to date, and we know that continued progress will be forthcoming. Nevertheless, much remains to be done. For this reason the Federal Reserve Banks now believe it appropriate to call their September 1, 1967 change in collection practices again to the attention of all banks. To achieve maximum benefits in the mechanization of check-colleetion and demand-deposit accounting procedures, and to obtain the full benefits of the Magnetic Ink Character Recognition program, we again urge banks, and through them their depositors, to arrange to have the payor’s routing symbol-transit number imprinted in magnetic ink on all items. In addition, banks are urged to implement, if they have not already done so, the basic concept of The American Bankers Association MICR program that envisages the dollar amount being encoded on all checks by the first bank of deposit. Additional copies of this circular will be furnished upon request. A lfred H ayes, President. ( over) FEDERAL RESERVE SYSTEM'S SURVEY OF INTRADISTRICT ITEMS RECEIVED NOT BEARING MAGNETIC INK CHARACTERS OF PAYOR JANUARY 1967 FEDERAL RESERVE BANK OR BRANCH TOTAL ITEMS REVIEWED NONCOMPLYING ITEMS Percent Of All Items Total Reviewed BOSTON 1,354,187 15,157 1.12 NEW YORK Buffalo 2,669,064 158,453 2,827,517 21,048 1,237 22,285 .79 .78 .79 PHILADELPHIA 1,040,000 10,626 1.02 CLEVELAND Cincinnati Pittsburgh 569,637 308,000 368,691 1,246,328 7,939 5,215 16,168 29,322 1.39 1.69 4.39 2.35 RICHMOND Baltimore Charlotte 631,718 336,000 218.000 1,185,718 27,000 2,583 16,409 45,992 4.27 .77 7.53 3.88 ATLANTA Birmingham Jacksonville Nashville New Orleans 373,033 189,832 367,741 183,761 196.191 1,310,558 8,054 10,352 5,739 7,570 17,529 49,244 2.16 5.45 1.56 4.12 8.93 3.76 CHICAGO Detroit 2,019,603 610.000 2,629,603 52,586 11,394 63,980 2.60 1.87 2.43 ST. LOUIS Little Rock Louisville Memphis 547,862 104,088 165,166 124.605 941,721 45,472 11,581 5,617 16.348 79,018 8.30 11.13 3.40 13.12 8.39 MINNEAPOLIS Helena 611,306 101,404 712.710 11,580 2,691 14,271 1.89 2.65 2.00 KANSAS CITY Denver Oklahoma City Omaha 578,755 263,065 248,000 234.091 1,323,911 28,906 4,758 22,525 13.136 69,325 4.99 1.81 9.08 5.61 5.24 DALLAS El Paso Houston San Antonio 622,867 69,420 242,500 207,541 1.142,328 55,597 4,555 18,600 13.986 92,738 8.93 6.56 7.67 6.74 8.12 SAN FRANCISCO Los Angeles Portland Salt Lake City Seattle 361,000 713,169 282,167 182,213 439,300 1,977,849 5,870 8,203 3,437 5,034 7,822 30,366 1.63 1.15 1.22 2.76 1.78 '1.54 17,692,430 522,324 2.95 System
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