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FEDERAL RESERVE BAS^SK
OF MEW YORK
[
Circular No. 9944
November 6, 1985
1
J
Comment Invited on Consolidation of Federal Reserve
Priced Services Activities
To All Depository Institutions, and Others Concerned,
in the Second Federal Reserve District:
As indicated in our Circular No. 9943, dated November 1, 1985, the Board of
Governors of the Federal Reserve System is publishing for comment a proposal to
consolidate the noncash collection activities of the Federal Reserve Banks of San
Francisco and Minneapolis at the Minneapolis Reserve Bank. The text of the
Board’s proposal is printed on the following pages.
You will note that the Board is also inviting comments on the general issue of
consolidating the provision of Federal Reserve priced services generally.
Your comments should be submitted by November 29, 1985, and may be sent
to Carol W. Barrett, Vice President.
E.
G
er a ld
C
o r r ig a n
,
President.
FE DERAL RESERVE SYSTE M
[Docket No,
R-0555]
FEDERAL RE SERVE BANK SERVICES
AGE N C Y §
Bo ard of Go ve r n or s of the Fe deral Reserve
ACTIONS
R eq ues t for c o m m e n t »
SUMMARY?
The
c on s ol i da ti n g
service
the
is
to
Fed era l
requ es tin g
p ro vis io n
activities,,
pr o p os a l
the
Board
The
consolidate
Reserve
of
comment
Federal
general
the
Banks
of
San
the
Reserve
issue
noncash
on
is
System0
issue
Bank
priced
pres en ted
coll ec tio n
Fr an c i sc o
and
of
by
a
ac ti vities
of
M i nn ea pol is
at
the F ed er a l Reserve Bank of M i n n e a p o l i s 0
DATE?
C o mm e nt s must be r e cei ve d by November
ADDRESS?
may
be
C o m m e n t s , which
ma ile d
Go ve r no rs
of
to Mr 0 W i l l i a m
the
Federal
C o n s t i t u t i o n Avenue,
to
Room
received
5 ?15
Rules
should
between
may be
inspected
Re garding
as
W„
Re serve
8?45
to
Wiles,
a 0m 0 and
Availability
No„
Secretary,
D,Co
20th
p 0m 0
Board
or
§ 2 6 1 c6(a)
of
of
Information,
of
and
delivered
Comments
between 8?45
in
R-0555,
Street
20551,
5 ?15
at Room B-1122
p r ov id ed
1985»
Docket
System,
N o W 0 , Washington,
B-=2223
p em 0, except
refer
29,
the
12
a 0m 0 and
Board's
C,FoR,
§ 2 6 1 06 {a ) .
FO R F U R T H E R IN FOR MA TIO N CONTACT?
Director
(202/452-2231)
(202/452“3954) , Division
E l li ot t
or
Ge rald
D0
of
Reserve
Bank
2
C,
McEntee,
Manypenny,
Assoc ia te
Manager
Operations,0 Daniel
L,
Rhoads,
Wo
Senior
A t t or ne y
O'Connell,
T el ec o mm u n i c a t i o n
(202/452-3244),
System,
past,
has
re alized
ex perie nce
level
nationwide*
First,
structures,
service
from
conso li da te
co ns ol id a ti on
economies
of
providing
the
promote
and
Board
cete ra
scale
same
Reserve
at
it
the
not
cross-zone
one
if
or
the
provide
same
office*
may
more
suggest
of
an
fixed costs,
to
geographic,
may
pro vision
as
a
level of
appro pr iat e
office
two
Also,
conside ra ti on s
such
be
oppor tu nit y
provide
costly
l ow er- co st
possible
service*
may
System
institutions
to provide
it
at
to
on
certain
me an in g fu l
more
the
intradistrict
in
d ep osi to ry
it is
activity
a
in
to
Similarly,
result
in
offices
are
and
therefore
con so lid at ion
services
in
order
to
the ef fic i en cy of the pa yments mechanism*
forms*
or Te rr ito ry
co ntinu ing
Joy
Deaf
Based
that
cond it ion s
location,
The consol ida ti on
several
or
System,
from
conti nu ing
to
make
than
activity
an
be lieves
while
local
Reserve
activities0
pre se nts
service
where
et
of
transportation,
efforts
of
another
the
the
Fe deral
benefits
service
costs
at one location
service
for
the
Federal
important
the
reduce
a pp ro pr iat e
wage
some
The
con sol id ati on
or
of
Division;
D«C0 20551o
date,
c ir cu ms ta nce s
Legal
Device
Go ve r n or s
of selected
to
contain
of
INFORMATION?
c on so li da ti o n
to
Board
Wa shington,
SU P PLE MEN TA RY
(202/452-3711)
One
lines
process
act ivi ty could
with
or w i th ou t
to pe r f or m the service,
3
for
priced
be
provided
all
Federal
services
across
Reserve
or one office
could
may
take
District
offices
cease
to
provide
one
serviceso
service but continue
to provide
other
priced
In the latter case, the discontinued service would
be provided by another Federal Reserve office,,
This latter
type of consolidation could occur intra- or interdistrict but
has only taken place on a intra-district level to dateG
The
Minneapolis and San Francisco Reserve Banks plan to consolidate
Twelfth
District
Minneapolis
noncash
Reserve
collection
Bank„
activities
This plan raises
at
the
the
issue of
consolidation of activities across District lines with one
Reserve Bank ceasing to provide a service completely,.
The service involved in this consolidation is noncash
collection,
which consists primarily of collecting maturing
municipal notes and bonds and
agentSo
This
activity
is
interest coupons
expected
to
from paying
experience
volume
declines over time as a result of the registration requirements
in the Tax Equity and Fiscal Responsibility Act (!8TEFRA") and
the
industry
securities
movement
systems.
to
As
immobilization
volume
declines,
and
book-entry
difficulties
in
achieving cost-revenue matches may be created by costs that do
not decline as rapidly since a significant portion of the costs
are fixed costs (e0 g 0i, vault space) or are incurred as a result
of System custody standards,,
It
would
to
have
continue
ac ti vi ty
is an tic ipated
to
increase
providing
its
that
the
fees
s u b s t an t i a ll y
noncash
in M in ne ap ol is
will
San
F r an c i s co
collection,,
resul t
4
in
Reserve
in 1986
in order
Co ns o l id a t in g
greater
Bank
ef fi ci en cy
this
and
facilitate
n at io na l
cont inu in g
basis0
pro vi di n g
this
ap p ro pr iat e
to
The Mi nn ea po li s
service
on
proce dur es
c os t/ re ven ue
pro vi de
a
noncash
Reserve
pilot
are
now
Bank
basis
in
concerns will be met
c ol lec ti on
and
place
and
has
on
al ready
be lieves
to
ensure
that the
a
level
been
that
that
of service
pr o vid ed will meet System standards,,
M in ne ap oli s
will
charge
of Twel ft h D i s tr ic t noncash
av ai la bi l it y
pr ovidi ng
coupon
schedules,
the
fee of
insurance)
$4„00
and
charged
by
the
Twelfth
lower
fee
recognizes
Mi nn ea p ol i s office
dis tr ib ut e d over
would
that
op er ati ons
issue
would
which
under
Board
payment
system,.
As
for
app ropriate
to
level
a
economies
in
Dis tr ict
(including
current
fee
collections,,
scale
that
the
by p ro ces si ng volume pr e v i ou s ly
of
the Twelfth
also provide
that
s i g n if i c a nt
the
co nso lidate
either
Twelfth
the
of
separate
the
District,,
a gu ar anteed
coll ec tio n
The
credit
experience
the pi lot program,,
system and
in
with
en velope
than
co ll ection
incurred
in -D istrict
re flects
believes
have
changes
costs
coupon
lower
for
together
the
or provision of services
na tion's
the
will realize
schedule
that might
regional
be
the five of fices
it has gained
The
per
D i st r i c t
Mi n ne ap oli s Re serve Bank
a v ai la b il i ty
which,
fee
M i n n e a p o l i s 8 proposed
postage
This
items
r e co gn iz es
service,,
c oll ec tio n
a separate
to
the
across
some
system
costs
or
role
occur,
at
a
to
of
lines
effect
Reserve's
activities
reduce
5
D i str ic t
longer-run
the Fe de ral
payments
con so lid at ion
is an
on
the
in
that
it may
be
D i str ic t
or
provide
improvements
to the payments
institutions,
this
services
Reserve
their
with
Districto
pu blic
c om men t
op e ra ti ons
noncash
should
other
on
be
Banks
the
as
collection
C o m me n t e r s
entail
The Board
as well
San F ra n c i s c o
would
mechanism0
than
issue
specif ic
certain
di r ec t l y
the
therefore
general
the
dealing
other
has
For
of
d et erm in ed
pr oposal
Federal
and Mi n n ea pol is
at
the
M in nea po lis
placed
factors
on
that
di scuss
future
should
what
be
cons id ere d
of
to request
Reserve
of
proposals
in
Banks
Re se rve
restrictions,
co ns o l id a t i on
Bank
to c o ns ol ida te
the
to
some
c o ns ol ida ti on
of
asked
in
Reserve
ac ti vities
are
deposi to ry
if
of
Bank0
any,
and
re viewing
the
any
these
pr op osa ls 0
By
Reserve
order
System,
of
the
October
Board
30,
of
Gove rn ors
of
the
Federal
1985c
William W 0 Wiles
Secretary of the Board
6
@FedFRASER