The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK
OF NEW YORK
I- Circular No. 9464 ~|
March 11, 1983
CHECK FLOAT
Program To Reduce and Price Federal Reserve Float
To All Depository Institutions in the Second
Federal Reserve District, and Others Concerned:
Following is the text of a statement issued by the Board of Governors of the Federal Reserve System:
The Federal Reserve Board has approved a program that represents a combination of changes in Federal Reserve
operating procedures to reduce and to price Federal Reserve interterritory check float and Federal Reserve check holdover
float.
The Board acted under the provisions of the Monetary Control Act of 1980 which require the Federal Reserve to
charge for its services. The Monetary Control Act requires that any. Federal Reserve float that remains after operational
improvements also be priced. Federal Reserve float is the value of checks for which the Federal Reserve has given credit to
the institution that deposited the checks with the Federal Reserve for collection, but for which the Federal Reserve has not
yet received payment.
On November 1, 1982, the Board published for comment three proposals to eliminate or price about 80 percent of
Federal Reserve float. The three proposals published for comment included: (1) changing crediting procedures for
interterritory check deposits; (2) adopting a new accounting procedure to eliminate float associated with large dollar
interterritory returned checks; and (3) pricing holdover and intraterritory check float.
After reviewing the comments, the Board approved a Reserve Bank program to reduce and to price interterritory and
holdover check float. The interterritory check float program calls for:
— all Reserve Banks to offer fixed and fractional availability crediting options with various methods of payment for
float in connection with these crediting options.
— all Reserve Banks to offer the same crediting options for interterritory check deposits at the same time.
— all interterritory check deposits (whether processed at the sending or receiving Federal Reserve office) to be
subject to the same crediting procedures.
— all interterritory check deposits to be processed in order of receipt.
Because of the time needed by depository institutions and Reserve Banks to make changes to their systems, this
portion of the program will be implemented on July 1, 1983.
Due to the operational changes resulting from the check float program, the pricing of holdover float will be phased in
as follows:
During this period the cost of holdover float above 1 percent of the value of checks
February 24 — July 1, 1983
collected daily by the Federal Reserve Banks will be incorporated in the cost
of check services to be recovered in 1983.
2
July 1 — September 30, 1983 During this period the cost of holdover float above V percent of the value of checks
collected daily by the Federal Reserve Banks will be incorporated in the cost
of check services to be recovered in 1983.
At this time the cost of all holdover float will be added to the cost of check services.
October 1, 1983
(OVER)
E n c l o s e d , f o r d e p o s i t o r y i n s t i t u t i o n s i n t h i s D i s t r i c t , i s a c o p y o f t h e B o a r d ’s o f f i c i a l n o t i c e i n t h i s m a t t e r ; i t w i l l
b e p u b l i s h e d i n t h q Federal
Register,
a n d a d d it io n a l c o p i e s m a y b e o b t a in e d f r o m o u r C ir c u la r s D i v i s i o n ( T e l . N o .
2 1 2 -7 9 1 -5 2 1 6 ).
Q u e s t i o n s o n c h e c k f l o a t s h o u l d b e d i r e c t e d , i f y o u a r e in t h i s B a n k ’s H e a d O f f i c e t e r r i t o r y , t o J a m e s O . A s t o n ,
V ic e P r e s id e n t ( T e l. N o . 2 1 2 - 7 9 1 - 6 3 3 4 ) o r J o h n F . S o b a la , A s s is t a n t V ic e P r e s id e n t ( T e l. N o . 2 1 2 - 7 9 1 - 5 9 9 7 ) . In th e
B u f f a lo B r a n c h te r r ito r y , s u c h q u e s t io n s s h o u ld b e d ir e c te d to P e te r D . L u c e , A s s is t a n t V ic e P r e s id e n t ( T e l. N o .
7 1 6 - 8 4 9 - 5 0 1 3 ) o r R o b e r t J. M c D o n n e ll, O p e r a tio n s O f f ic e r ( T e l. N o . 7 1 6 - 8 4 9 - 5 0 2 2 ) .
A
nthony
M . So l o m o n ,
President.
FEDERAL RESERVE SYSTEM
[Docket Ktoc R-0433]
Reduction And Pricing Of Federal Reserve Float
AGENCY?
Board of Governors of the Federal Reserve System.,
ACTIONS
Approval of proposals to reduce and price Federal Reserve float0
SUMMARY?
The Board of Governors has approved a program to reduce and price
Federal Reserve interterritory and holdover check float0 The program for
pricing Federal Reserve interterritory float will be implemented on July 1,
1983? and the program to price Federal Reserve holdover float will be phased
in beginning February 24? 1983„
The phase-in will be completed on
October 1? 1983? when the full cost of all holdover float will be added to
the cost of check services.,
EFFECTIVE DATE?
February 24? 1983„
On that date? Reserve Banks will begin
phasing in pricing of check holdover float0 On July 1? 1983? Reserve Banks
will implement the program to reduce and/or price interterr itory check float.,
FOR FURTHER INFORMATION CONTACT?
Elliott Co McEntee? Assistant Director
(202/452-2231) or Morgan J„ Ballmon? Program Manager? Payments Mechanism
Planning (202/452-3878)? Division of Federal Reserve Bank Operations?
Gilbert To Schwartz?
Associate
General
Counsel
(202/452-3625)?
Daniel Lo Rhoads? Attorney (202/452-3711)? or Robert G 0 Ballen? Attorney
(202/452-3265)? Legal Division? Board of Governors of the Federal Reserve
System? Washington? Do Co 20551o
SUPPLEMENTARY INFORMATION?
The Monetary Control Act of 1980 (P. L a 96-221)
("MCA") requires that fees be established for Federal Reserve Bank services
and that the Board shall begin putting into effect a schedule of fees not
later than September 1? 19-810 The MCA sets forth specific services to be
priced and requires the Board to establish principles on which the schedules
of fees for priced services are to be basedo
The MCA requires that the
Reserve Banks price for Federal Reserve float that remains after operational
means to reduce float are implemented 0
—/
On December 31? 1980? the Board adopted a set of pricing principles
and fee schedules for certain Federal Reserve services.
Subsequently? the
Board adopted fee schedules for Reserve Bank services in accordance with the
MCAo
In its December 31? 1980? action? the Board determined?’in response to
comments received on the Board's proposals to reduce and price float
(45 FoRo 58689)? to proceed with internal operational improvements with high
benefit/cost ratios to reduce float before initiating changes in
availability schedules and explicitly pricing float,,
i/l26 Congo Rec„ S3167
Proxmire)0
[Enc. Cir. No. 9464]
(daily ed„ March 27?
1980)
(statement of Senator
=2
■=
On November ls 1982, the Board requested comment on proposals to
eliminate or price approximately 80 percent of Federal Reserve float by:
(1) changing crediting procedures for interterritory check deposits; (2)
adopting a new accounting procedure to eliminate float associated with large
dollar interterritory returned items; and (3) pricing holdover and other
intraterritory check floats 47 F.R. 50342 (November 5, 1982).
Under the proposal to change crediting procedures for
interterritory check deposits, Reserve Banks would offer two or more of the
following options for eliminating and/or pricing interterritory check float:
1. Credit would be given on the day the checks are received on a
timely basis by the collecting Federal Reserve Bank ("actual availability");
Credit would be given on the basis of a fixed availability
schedule (unique to each institution) so that part of an institution’s
credit for a deposit is deferred an additional day, and, on average, float
is zero ("fractional availability"); and
2 o
3.
Credit would be given on the basis of a fixed availability
schedule, with compensation for float being made through either:
a. "as of" adjustments to correct for float after it occurs
("fixed availability with 'as of’ adjustments"); or
b 0 earnings credits on a clearing balance maintained by the
depository institution at the Federal Reserve, with the value of
float determined at the federal funds rate..
Under the proposal for large dollar interterritory returned items,
changes would be made to Federal Reserve Bank accounting procedures in order
to eliminate such float by charging the depositing institution’s account for
large dollar interterritory returned items on the basis of a wire
notification..
The depositing institution whose account was being charged
would receive from its Reserve Bank the wire notifications as they become
available, but in no event later than 3:00 p.m. local time,.
As an
alternative to having its account debited immediately, a depository
institution could compensate the Federal Reserve for returned item float
through an "as of" adjustment to its account.
Currently, the institution
depositing the check is not charged for a returned item until the item is
received by that institution..
The third proposal was to price, at the federal funds rate,
holdover and other intraterritory float.
Holdover float occurs when a
Reserve Bank receives a check shipment by its deposit deadline but is unable
to process the shipment for collection on a timely basis.
Generally,
holdover float occurs as a result of sharp daily volume fluctuations and
check processing equipment malfunctions. Other intraterritory float occurs
primarily as a result of local transportation delays. The value of both
types of float would be added to the costs of the check collection service.
-3 -
Summary of Comments.
The Board received 173 comments on the proposals..
Crediting procedures for interterritory check deposits.
. The
majority of commenters that discussed the crediting options for
interterritory check deposits were in favor of the Reserve Banks9 providing
interterritory crediting options.. Commenters in favor of options indicated
that this approach permitted institutions with different accounting
procedures and systems to select the option that best met their needs *
Fixed availability with "as of" adjustments received more support than the
other proposed interterritory crediting options <
>
Fifty-four commenters were opposed to all of the proposed
interterritory crediting options, stating that less costly alternatives were
available, such as changing availability schedules or explicitly pricing,
float.. Commenters also expressed concern about the lack of uniformity among
the crediting options to be offered by Reserve Banks, the difference in
treatment of float arising from consolidated shipments and direct-send
deposits, and the lack of clarity regarding the crediting procedures for
mixed and other Fed cash letterso
New accounting procedures on large dollar returned items. Most of
the commenters that discussed the proposal for wire notification of charge
on large dollar interterritory returned items supported the option.
However, many of these commenters expressed reservations about the adequacy
of data to be supplied by the notification and about their legal
liabilities, as well as those of the Reserve BanksIn addition, those
commenters who discussed the option of using "as of" adjustments favored it
over the proposed immediate charge.
Institutions opposed to this proposal cited operational and legal
concernsFor example, many of the commenters questioned their legal
authority to charge a customer's account prior to receipt of the returned
itemIn addition, these commenters offered alternatives to the Federal
Reserve's proposal that would involve establishing availability schedules
for returned items, or explicitly charging for returned item processing.
Holdover and other intraterritory check float- More than 70
commenters favored the proposal to charge explicitly for holdover and other
intraterritory float- These commenters believed that the proposal was fair
and reasonable, that it provided incentives to Reserve Banks to reduce float
and encourage competition, and that it was consistent with private sector
procedures -
-4 Many commenters opposed to explicitly pricing holdover and other
intraterritory float felt that the Federal Reserve should consider these
float components as a cost of doing business and stated that the Federal
Reserve should not price this float category*. Some stated that the proposal
was premature in light of the recently adopted proposal to accelerate the
collection of checks.. Alternatives suggested by commenters included:
(l)
excluding this float from pricing; (2) pricing only a portion of this float;
or (3) changing availability schedules to compensate for this float*.
Discussion =
After consideration of the comments on these proposals and
further analysis, the Board has determined to approve implementation of a
program with regard to interterritory and holdover float. Action on the
proposal to change crediting procedures for large dollar interterritory
returned items (the second proposal) and the proposal with regard to other
intraterritory float, is being delayed pending further analysis of the
issues raised by the commenters*. It is anticipated that these issues will
be presented to the Board in April, 1983*.
Interterritory crediting options* A number of commenters suggested
.
alternatives to the Board's proposals,.
Some commenters suggested that
interterritory check float be priced by including the cost of float in the
per item fee for check collection services < They argue that assessing float
>
costs through per item fees would be less burdensome operationally than the
proposed options * This method of pricing would, however, create equity
.
problems because float costs are a function of the dollar value of the
checks rather than the number of checks cleared*. For example, the cost of
one day’s float at a federal funds rate of 8.25 per cent is approximately
$220 for a $1 million check and 11 cents for a $500 check (the average
dollar value of all checks deposited at Reserve Banks)*. Since a relatively
small percentage of checks account for a large percentage of interterritory
check float, unless each check had a separate price, a per item charge for
float would represent a subsidy by institutions and their customers
collecting small dollar checks to institutions collecting large dollar
checks <
>
Another alternative suggested by some commenters was for the
Federal Reserve to change availability schedules in whole-day increments to
eliminate float since, in their opinion, the proposed crediting procedures
were designed to compensate for availability schedules that could not be
achieved consistently*,
The on-time performance of the Federal Reserve’s
Interdistrict Transportation System (ITS) exceeds 95 percent, and checks
sent by direct sending institutions generally are received on a timely
basis.
Based upon these factors, the Board believes that Federal Reserve
availability schedules are, on the whole, reasonable.
If Federal Reserve
availability schedules were changed in whole day Increments as suggested by
these commenters, significant amounts of credit float would result.
This
would inappropriately increase costs to collecting institutions.
~5~
About 60 percent of the commenters expressed views on the actual
availability option,
Commenters favoring this option stated that this
approach is used in their own correspondent-respondent relationships,
Several of these commenters also indicated that this option would provide an
effective method for allocating float back to the appropriate customers,
The majority of these commenterss however, expressed concern with this
option primarily because it would not provide them with the degree of
predictability they find necessaryo
Commenters also stated that crediting
information must be provided by the Reserve Banks early in the day if timely
investment decisions are to be made,
The cash letter monitoring system
developed by the Reserve Banks is designed to provide the necessary
information by midday; however, based on comments received, it is likely
that banks would not regard this as early enough to meet their needs. Thus,
it is anticipated that institutions would choose other options that they
perceive as better meeting their needs.
Many of the larger institutions (over §3 billion in deposits) and
some of the smaller institutions (under §50 million in deposits) supported
the fractional availability option because' it allows an institution to
determine float costs at the time interterritory checks are deposited with
the Federal Reserve. In addition, these institutions often indicated that
this option would make it easier to allocate the cost of float to individual
customers than would the other options, Nevertheless, many depository
institutions commenting on the fractional availability option opposed it
because of concern about the costly and complex system changes that a
depository institution would have to make and concern with the number of
fractions that would be used and the frequency with which the fractions
would be calculated and applied.
Fractional availability is the only crediting option that allows a
depository institution, £ priori, to determine those float costs associated
with interterritory check shipments.
Also, fractional availability
maintains the same basic features of existing Reserve Bank availability
schedules in that the availability granted for check deposits is
predetermined. Thus, it is possible for depository institutions to assess
the precise availability obtained for each customer.
The cost and
complexity of implementing this option would depend upon how a depository
institution applies it in allocating float to its customers.
Furthermore,
the cost to depository institutions of using this option can be reduced by
minimizing the number of fractions and the frequency with which those
fractions are changed. The current reliability of the ITS network and the
on-time performance of most direct sending institutions suggest that the
number of fractions and the frequency of change should be relatively small.
The majority of commenters who addressed the fixed availability
crediting option with "as of” adjustments supported it as being inexpensive
to implement and use, Commenters opposed to this option indicated concern
about the difficulties inherent in processing "as of" adjustments on a
lagged basis.
They stated that using "as of" adjustments would require
depository Institutions to either absorb the float costs, allocate float
costs arbitrarily over their entire customer base, or develop expensive and
de
complex allocation procedures. These commenters also expressed concern that
this option could increase problems in managing reserve accounts.
The "as of” approach would require no significant changes in
current check clearing procedures by either Reserve Banks or depository
institutions.
If receipt of a check shipment were delayed and credit were
deferred, the deferral would be made through an "as of” adjustment in
whole-day increments.
The "as of" adjustment procedure is a
well-established accounting practice between the Reserve Banks and
depository institutions since it is currently used to correct for errors in
cash letter handling.
Although "as of" adjustments would be made on a
lagged basis, depository institutions would be informed of the float
generated by particular check deposits on the day the float was created.
Fixed availability with "as of" adjustments also would not make the
task of reserve management more difficult under either the current lagged
reserve requirement system or the contemporaneous reserve requirement system
scheduled for implementation in February 1984. The adjustments to required
reserve balances would generally be known in advance because the collecting
institution would be notified promptly of the receipt or non-receipt of cash
letters.
Commenters that favored the option of fixed availability with
payment for float through earnings credits on a required clearing balance
cited operational simplicity as a primary reason for their support. Many
commenters, however, expressed concern about the feasibility of charging the
appropriate depositors' accounts and the difficulty in managing required
balances at Reserve Banks with this option. They also stated their belief
that this option would provide a competitive advantage to Reserve Banks
since it would increase the difficulty of comparing the costs of check
collection services provided by both Reserve Banks and the private sector.
Some commenters suggested that this option would be more attractive if they
were permitted to pay for float through explicit charges to their reserve or
clearing accounts instead of with credits earned on a clearing balance.
The use of clearing balances to pay for float charges should not
complicate price comparisons between the Federal Reserve and correspondent
banks, however, since it is common practice in the banking industry to use
balances to compensate for services provided by correspondents.
Further,
the monthly statement provided by the Reserve Banks will show explicitly the
float charges assessed during the billing cycle. As discussed previously,
this payment method should not increase a depository institution’s
difficulty in managing required balances or in making necessary adjustments
to depositors’ accounts.
A number of commenters indicated that, unless all Reserve Banks
offered the same crediting options, a depository institution could be
competitively disadvantaged, particularly if the crediting options offered
by its local Federal Reserve office did not include those desired by its
corporate customers. Concern was expressed that, in such cases, a customer
” 7-
might transfer its account to an institution in a Federal Reserve District
offering the desired option. Furthers a depository institution may not be
able to take advantage of its least cost option if that option is not
offered by its local Federal Reserve office.
Based upon the comments
received, the Board has determined that Reserve Banks should offer identical
options o
A number of commenters stated that there are significant
differences between users of Federal Reserve transportation (consolidated
shipments) and users of privately arranged transportation (direct shipments)
that justify different crediting procedures.
Direct senders state that,
when they meet deposit deadlines of the receiving Federal Reserve office,
they should receive 100 percent availability.
Under all of the proposed
crediting options, direct senders meeting the deposit deadlines of the
receiving Reserve office would receive the benefit of their on-time
performance and would incur no float charges.
A number of commenters expressed concern that the proposals were
not in compliance with the MCA and represented unfair competition.
In
addition to several of the issues previously discussed, concern was
expressed that: (l) the Federal Reserve would shift overhead costs to float
charges resulting in generally lower prices for services; (2) the Reserve
Banks would use clearing balances to provide mixed check depositors with 100
percent guaranteed availability, thus creating float and using earnings
credits on clearing balances to compensate for the float created; and (3)
the Federal Reserve was competing unfairly because it was both a regulator
and a competitor.
With regard to the concern that overhead costs will be shifted to
float charges, the MCA sets forth the standards on which fees are to be
based.
Further, the Board’s Pricing Principle 5 states that the Board
intends that fees be set so that revenues for major service categories match
costs (46 F.R. 1338 (January 6, 1981)), and there are extensive mechanisms
in place throughout the System for determining costs and establishing fee
schedules.
Additionally, the General Accounting Office has audited such
pricing to ensure compliance with the MCA.
The concerns that Reserve Banks would provide mixed check
depositors with 100 percent guaranteed availability and that no charges
would be assessed for float arising from items sent between Reserve Banks
stem from a misunderstanding of the proposals.
It was intended that
interterritory transportation float generated by Other Fed items and mixed
check deposits be priced in the same manner as float arising from other
interterritory check shipments.
Reserve Banks would therefore have no
competitive advantage with regard ,
to pricing of float arising from these
deposits.
The concern that the Federal Reserve has a competitive advantage
because it is both regulator and competitor was carefully reviewed.
This
action does not, however, represent any regulatory change and is being
8implemented in accordance with the pricing requirements of the MCA* With
regard to the more specific issue that the crediting of earnings credits on
clearing balances at the federal funds rate (unadjusted for required
reserves) provides Reserve Banks a competitive advantage, the Federal
Reserve does not believe that, on balance, such an advantage exists.. The
competitive impact of paying an earnings credit rate unadjusted for reserves
is minimized by several factors:
(1) respondents may deduct balances "due
from" their correspondents from their gross transaction accounts while
balances "due from" the Federal Reserve may not be deducted by respondents;
(2) significant restrictions are placed on the administration of clearing
balances for monetary policy reasons (e.g., balances must be maintained on a
weekly average basis); (3) Reserve Banks do not pay earnings credits on
balances in excess of those required as correspondents typically do; and (4)
Reserve Banks do not offer the broad range of commercial services to
depository institutions that correspondent banks offer*
Several commenters also suggested that the Board’s request for
comment on the proposals did not contain sufficient information to enable
them to comment on the proposals in a meaningful way* After a review of
this matter, the contents of the notice requesting comment on the proposals,
the diversity of commenters and the scope of their responses, the Board has
concluded that the notice and comment procedures adopted by the Board fully
complied with applicable law*
Holdover float* About half of the one hundred and forty-three
commenters that discussed this issue were generally in favor of the proposal
to price check holdover float explicitly at the federal funds rate* They
stated their belief that it was reasonable and appropriate to allocate
holdover float to overhead costs and to recover the costs through per item
prices* Some commenters stated that the proposal provided incentives to the
Reserve Banks to reduce float and that the proposal was consistent with the
method used by the private sector to recover float costs*
Seventy-two commenters expressed concern about pricing holdover
float*
Some commenters opposed this proposal because they believe that
pricing holdover float, which is due to Federal Reserve operations, is
unfair; others argued that pricing of holdover float could lead to Reserve
Bank operating inefficiencies unless holdover targets were established.
Some commenters stated that the proposal was contrary to the intent of
Congress and would represent another "tax" on banks, that pricing
holdover1 float would result in higher Reserve Bank prices and could diminish
the Federal Reserve’s role in the payments mechanism, or that the proposal
was premature and deserved more study in light of other Reserve Bank
changes, such as uniform later presentment and new deposit deadlines*
Reflecting the sizable gains in the effectiveness of check
operations in the Federal Reserve Banks over the past few years, holdover
float is currently small and represents only about 1 percent of the value of
checks collected daily by the Federal Reserve Banks.
While continuing
-9efforts should be made to reduce even further the amount of holdover float,
further significant reductions could be expensive to achieveo
In view of the small amount of float involved, the Board believes
it is appropriate to add the cost of holdover float to check collection
charges in general rather than attempt to allocate it back to specific
depositors. Further, since holdover float primarily occurs as a result of
Federal Reserve equipment breakdown and fluctuation in volume, it is
appropriate to consider holdover float as a cost of doing business and
include it in the check collection charges.
Reserve Banks will also be
provided the incentive to monitor the cost impact of holdover float on unit
fees and to make operational changes when such action will reduce float
costs o
The changed deposit and presentment hours implemented by the
Federal Reserve Banks on February 24, 1983, should not increase daily
average holdover float because of several factors. First, the reconfigured
ITS network has been operational since August 1982, and the network is
expected to continue to operate in a reliable manner.
Second, the Reserve
Banks have estimated that the new program will have minimal impact on
volume. Finally, in many cases premium prices will be charged for checks
deposited at the later deadlines.
These higher prices will act as an
incentive for institutions to limit the number of checks deposited at the
later deadlines. Reserve Banks have the flexibility to increase the premium
prices if the volume deposited during the later deadlines results in
increased holdover float.
After review of the comments, the Board has determined to approve
the following program to reduce and/or price interterritory check float and
holdover float.
1.
Interterritory Check Float
a.
All Reserve Banks will offer the same crediting options for
interterritory check deposits.
Further, each option will be
made available by all Reserve Banks with the same effective
date.
b.
Mixed deposits and Other Fed deposits will be subject to the
same interterritory crediting procedures applicable to
consolidated and direct send deposits, with Reserve Banks
having the same options for crediting as are available to
depository Institutions.
c.
When consolidated and/or direct shipments arrive at the
receiving Federal Reserve office after the published deposit
deadline but in time for same-day processing, such shipments
will continue to be processed in order of receipt.
“ 10d o
Although actual availability is conceptually attractive to
some depository institutions, as a practical matter, it is
unlikely that many institutions would utilize ito
Accordingly, this option will not be offered at this time but
will be reconsidered at some future dateo
e.
Because
fractional
availability
provides
depository
institutions with a predictable basis for determining the
amount of credit they will receive when they make a deposit
and because it provides an effective mechanism for depository
institutions to pass float costs to depositors, all Reserve
Banks will offer this option..
fo
Because depository institutions are familiar with fixed
availability schedules, all Reserve Banks will offer this
optiono
go
The comments did not indicate a clear consensus on the best
method of paying for float. Therefore, all Reserve Banks will
offer the following payment methods in connection with the
crediting options:
For depository institutions choosing the fractional
availability option, payment could be made by deferring
for an additional day a fraction of an institution's
credit.
For depository , institutions
electing
the
fixed
availability option, payment could be made through an
"as of" adjustment to their reserve or clearing accounts
to correct for float after it has occurred.
--
Under either crediting option, depository institutions
could choose to pay for float by an explicit charge.
Under either crediting option, depository institutions
could pay for float with credits earned on their required
clearing balances.
h.
2.
Because of the amount of time needed by depository
institutions and Reserve Banks to make changes to their
systems, this program will be implemented July 1, 1983.
Holdover Float
A significant amount of holdover float has been eliminated as a
result of Reserve Bank operational improvements, and such improvements will
continue to be emphasized in the future. In view of the operational changes
arising from implementation of the check float program, holdover float
pricing will be phased in as follows:
-1 1 February 24 - July 1, 1983
—
During this period, the cost of holdover
float above 1 percent of the value of
checks collected daily by the Federal
Reserve Banks will be incorporated in the
cost of check services to be recovered in
1983 o
July 1 ~ September 30, 1983
—
During this period, the cost of holdover
float above 1/2 percent of the value of
checks collected daily by the Federal
Reserve Banks will be incorporated in the
cost of check services to be recovered in
1983,
October 1, 1983
—
At this time the cost of all holdover float
will be added to the cost of check services.
By order of the Board of Governors of the Federal Reserve System,
March 8, 1983»
(signed) William W. Wiles
William W. Wiles
Secretary of the Board
[SEAL]
@FedFRASER