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Not issued by Circulars Division. Handled by Bank Relations Office FEDERAL RESERVE BANK OF NEW YORK /ft February 2, 1979 NEW BOOKLET DESCRIBING PRINCIPAL SERVICES OF THIS BANK To the Chief Executive Officer of Each Member Bank in the Second Federal Reserve District: Enclosed is a new looseleaf booklet entitled “FRBNY SERVICES”. The booklet describes, in non-technical terms, the principal services this Bank currently makes available to Second District member banks. There is a limited supply of additional copies of “FRBNY SERVICES”. If you would like to receive extra copies for your bank, please contact Franklin T. Love, Bank Relations Officer (Tel. No. 212-791-6070) or, at the Buffalo Branch, Robert J. McDonnell, Operations Officer (Tel. No. 716-849-5022).In the meantime, we plan to keep the booklet current by sending revised pages reflecting any changes that may occur in available services. P a u l A. V o l c k e r , President. Table of Contents Sections Page Introduction..................................... 1 Check Processing............................. 2 Currency and C o in .......................... 3 Discount W indow ............................. 4 Noncash C ollections...................... 5 Purchase and Sale of Securities . . . 6 Safekeeping, Handling and Shipment of Securities............... 7 Wire Transfers of F u n d s .................. 8 Public Inform ation.......................... 9 Technical Assistance S u rv e y s ___ 10 Other Surveys.................................... 11 Functional Cost A nalysis................ 12 January 1979 Second Federal Reserve District The Second Federal Reserve District includes all of New York State, the twelve northern counties of New Jersey, Fairfield County in Connec ticut and Puerto Rico and the Virgin Islands. All member banks are served by the Head Office in New York City except banks located in the fourteen western counties of New York State which are served by the Reserve Bank’s Buffalo Branch. Introduction This booklet provides a description of services offered by the Federal Re serve Bank of New York to member banks. The purpose of this plain lan guage description of Fed services is to enable bankers to have, in one pack age, a handy summary of available services. The terms and conditions under which these services are offered are set forth in Federal Reserve and Treasury regulations and in our oper ating circulars, supplem ented, in some cases, by written agreements w ith banks. All members in the Second Dis trict, depending on location, have di rect access to these services through either the Head Office or the Buffalo Branch. Check processing services are also provided at Cranford, New Jersey and Jericho and Utica, New York. If you have questions about these services or other matters, please call the Bank R elations O ffice , (212) 791-6600 or your Special Representa tive at the Head O ffic e or (716) 849-5085 at the B u ffa lo Branch. 1 Check Processing The Federal Reserve System provides nationwide check collection facilities. Checks and other cash items that member banks deposit at the Federal Reserve Bank of New York are pro cessed and presented for payment. Depositing banks are given imme diate credit for most checks. On others, there is a wait of one or two business days. Immediate credit availability will be given for the follo w in g item s received at the Head O ffice in accord ance with our schedules: • checks drawn on banks in New York City and Northern New Jersey with routing symbols 0210, 0260, 2260, 0270 and 0280 • checks on the United States Treasury, postal money orders, and food coupons • checks drawn on the Federal Reserve Bank of New York. The New York Fed now operates five regional check processing centers (RCPCs) w hich provide overnight check clearance and settlement in im mediately available funds for the entire D istrict (except Puerto Rico and the Virgin Islands). These RCPCs and the areas which they serve are: 1. Downstate New York RCPC, Jericho, LI.: 7 downstate coun ties of New York 2. Long Island RCPC, Jericho, LI.: Nassau and Suffolk counties 3. Northeastern New York RCPC, Utica, New York: 34 north eastern counties of New York 4. North Jersey RCPC, Cranford, New Jersey: 12 northern coun ties of New Jersey 5. W estern New York RCPC, Buffalo, New York: 14 western counties of New York The costs relating to the estab lishm ent and operation of these RCPCs are borne by the Federal Reserve Bank. Member banks receive im m ediate credit for cash letters deposited at each RCPC containing items drawn on banks in its service area. Items may also be deposited at the RCPCs for shipment to other offices of this Bank in the Head Office Territory. In addition to the RCPC program, the Head O ffice conducts three spe cial collection arrangements for mem ber banks, one fo r che cks drawn on banks located w ith in New York C ity 2 which are not members of the New York Clearing House, another for checks drawn on certain banks in Northern New Jersey and a third for checks drawn on thrift institutions. The Head Office and the Buffalo Branch also participate in special arrangements as a member of the New York Clearing House Association and the B u ffa lo C learing House A ssociatio n, respectively. M em ber banks may deposit checks drawn on participants in these arrangements for im m ediate credit availability. This Bank presents these items to the parti cipants each business day and makes the resulting accounting entries to their accounts or the accounts of their correspondents. Direct consolidated shipments of checks are made daily to all other Re serve Banks and o ffice s by the System’s Interdistrict Transportation System. Most of these shipments are made by air. The credit availability of deposits to member banks is acceler ated by this operation. The Federal Reserve Bank of New York also participates in the Federal Recurring Payments Program. This program, which processes Govern ment payments (Air Force payroll, Social Security, Railroad Retirement, Civil Service Retirement, etc.) by elec tronic means, reduces paper volume and is a generally more efficient means of making payments. (For additional details, refer to the Federal Reserve Bank of New York’s operating circulars #4, 5, 6 and 11.) 2.1 Currency and Coin Reserve Banks are the channels through which practically all cash moves into and out of circulation. Federal Reserve Notes make up over 99 percent of the total dollar am ount of paper currency in general circulation in the United States today. Currency and coin are received from and distributed to Second Dis trict member banks by armored carrier and by registered mail, or, in the case of coin, insured fourth class mail. As a service to members, the New York Reserve Bank absorbs the cost of transporting regularly scheduled ship ments to and from country member banks located outside New York City. The Bank also assumes the risk of loss on cash shipments received from and sent to country member banks by armored car services under contract w ith us, or by registered or insured fourth class mail. Canadian currency and coin are accepted from member banks located outside New York City and the city of Buffalo for conversion into United States funds. The proceeds of the con version are credited to the member bank’s reserve account. Shipping costs on these foreign cash deposits are absorbed by the Federal Reserve Bank of New York. For additional details, refer to the Federal Reserve Bank of New York’s operating circular #3.J 3 Discount Window An important benefit of membership is the privilege of borrowing funds from the Federal Reserve Bank at the dis c o u n t w in d o w . The p riv ile g e is intended to help member banks meet a variety of unusual or unexpected circumstances. The principal type of discount window credit is short-term adjust ment credit, which is available to member banks experiencing unex pected decreases in deposits or in creases in loans. W ith such discount window credit, these banks are afford ed the tim e necessary to make their own internal adjustm ents in their assets and liabilities structure to meet the changed circumstances. Member banks may also appropriately look to the discount window for assistance when funds are not readily available in the money markets. The Federal Reserve Act requires that all advances at the discount window be secured. Most discount window loans are secured by U.S. G o ve rn m e n t o b lig a tio n s , ag e n cy issues guaranteed by the U.S. Govern ment, and short-term custom er notes. Such loans are made at the basic dis count rate. Loans may also be secured by certain other forms of collateral, such as m unicipal securities and longer-term custom er notes, but these loans carry a discount rate one-half of one percentage point higher than the basic rate. S m aller c o u n try and regional banks generally use U.S. Gov ernment and agency securities as col lateral, while the larger money market banks prim arily use custom er notes. It has been the general practice at the New York Reserve Bank to lim it matur ities on discount window advances to tw o weeks for smaller banks, to the end of the reserve period for larger banks, and to overnight for the largest banks. Since 1973, the Reserve Banks have also offered seasonal credit at the discount window to those banks with significant recurring variations in their loans or deposits for a month or more during the year. Banks with deposits of $500 m illion or less may be eligible for the privilege. Banks serving agricultural or tourist areas or com munities subject to municipal financ ing pressures have been the principal 4 users of seasonal credit. Since 1976, a bank borrowing under a seasonal line may be a net seller of Federal funds during the period of its borrowing as long as such sales are consistent with its past operating practices. Once a borrowing resolution and continuing lending agreement are properly executed and on file at the Reserve Bank, an authorized officer of the member bank can telephone the Discount Division at the Head Office or, for those banks located in the Branch territory, the Buffalo Branch Collection, Loans and Fiscal Agency Division, to request discount window advances. (For additional details, refer to the Federal Reserve Bank of New York’s operating circulars ft 12 and 13.) 4.1 Noncash Collections Noncash collection provides a clear inghouse service to member banks through which bond and coupon pay ments are processed and appropriate a c c o u n tin g e n trie s e ffe c te d to member bank accounts. Additionally, certain wire services related to col lection activities are available with fees ranging from no charge to $1.50 per wire. W ith the exception of coupons payable in New York City, all noncash items are handled on a collection basis (final payment). Noncash collec tion is a special service requiring indi vidual handling of each item. Credit is passed when payment is received in actually and finally collected funds. Postage and insurance costs incurred in forwarding the collecting items to payees outside a Reserve City are charged to the member bank. Coupons payable in New York City are processed on a cash basis (time schedule). This cash collection service provide s fo r bu lk h a n d lin g w ith provisional credit on a fixed tim e schedule. (For additional details, refer to the Federal Reserve Bank of New York’s operating circular #S.J 5 Purchase and Sale of Securities ■ The New York Reserve Bank provides smaller member banks located out side of New York City facilities for pur chasing and selling, primarily for the bank’s own account, U.S. Treasury and Federal Agency securities in the open market. This service is limited to banks that do not have ready access to the securities markets and do not make frequent or large transactions. (For additional details, refer to the Federal Reserve Bank of New York’s operating circular ft 14.) 6 Safekeeping, Handling and Shipment o f Securities The New York Reserve Bank offers member banks located outside of the central financial district of New York City free safekeeping facilities for phy sical securities and commercial paper owned outright. For those member banks with an office in the central fi nancial district, it w ill accept and hold in safekeeping only physical secur ities pledged for specific purposes. The New York Reserve Bank will cut and co lle ct coupons, and collect maturing securities and commercial paper. Member banks are charged for out-of-pocket expenses, such as ship ping, postage and insurance charges on certain outgoing shipments. No charge is made for collecting matur ing coupons detached from securities held in safekeeping. In addition, the New York Reserve Bank w ill hold on a book-entry basis, w ithout charge, Treasury or eligible Federal agency securities deposited by any member bank that are its own property or held by it on account for its custom ers. Interest and prin cipal amounts on these book-entry holdings w ill be credited autom atically to the member banks’ reserve accounts as they become payable, with the excep tion that book-entry securities main tained for collateral-pledge purposes may be held beyond the m aturity date if substitution is not made in a tim ely manner. (For additional details, refer to the Federal Reserve Bank of New York's operating circulars #14 and 21.) 7 Wire Transfers of Funds The Federal Reserve Com m unications System, popularly known as the Fed Wire, is a computerized com m uni cations network. The System, which has automated sw itching facilities lo cated in Culpepper, Virginia, speeds payments by providing member banks with a means of electronically trans ferring funds around the country. A num ber of Second D is tric t member banks are directly linked to the New York Reserve Bank’s com puter (the District Switch); this enables those banks to transfer funds directly to other member banks in this District or in other D istricts in the country. In addition, member banks not directly linked to the New York Reserve Bank’s com puter may also use the network by com m unicating transfer requests to the Head Office or Buffalo Branch of this Bank by telephone. Member banks may transfer bal ances of $1,000 or over to other member banks nationwide w ithout charge. Transfers may contain instruc tions to the receiving bank to make payments to a third party, providing the instructions do not exceed four 80-character lines. W hile these trans fers w ill be paid only to member banks, third party instructions enable member banks to make transfers to or from accounts of any bank, individual, firm or corporation. Telephone requests for transfers may be made to us “ collect” . On re quest, immediate credit advices are given w ithout charge by telephone or telegraph to member banks receiving credits for transfers. (For additional details, refer to the Federal Reserve Bank of New York's operating circular ft 10.) Public Information The New York Reserve Bank’s Public Inform ation Departm ent w ill send Second D istrict member banks up to 100 copies each of a wide variety of publications w ithout charge. Addi tional free copies are available for edu cational purposes. These publications include booklets dealing w ith various aspects of the Federal Reserve’s func tions and responsibilities. They are in tended for use by bankers, business people, students and the general public. Also, single copies of a select number of publications from other Federal Reserve Banks and the Board of Governors are available. Three audio-visual educational kits about monetary policy, check clea ring and in te rn a tio n a l trade, aimed at high school and jun io r college level audiences, are available at nominal cost. Further, the Bank can som etimes provide speakers for meetings on sub jects related to the Federal Reserve. Many of the above services are also available from the Bank Relations and Public Information staff at the Buffalo Branch. 9 Technical Assistance Surveys On request, the Technical Assistance D ivision at the Head O ffice w ill conduct, cost free, an operational su rve y fo r any S e co n d D is tric t member bank. O p e ra tio n a l surveys are c o n ducted by Technical Representatives trained in com mercial bank opera tions, systems and procedures. On request, a representative w ill visit a member bank and discuss specific operational problems with the appro priate officers or other personnel. A survey of one or more operating areas w ill then be scheduled for a mutually convenient time. Surveys usually require about three to five days to complete. About half of that tim e is spent questioning clerical and supervisory personnel to determine the bank’s procedures. The remainder is devoted to studying workflow, volume, use of equipment and other operational aspects. At the conclusion of the survey, a presentation is made to the appro priate bank officials to discuss the results of the survey and any sug gested m odifications in operations. A written report is also forwarded to the bank as soon as possible. The Technical A s s is ta n c e D ivision is staffed to survey the following types of o p e ra tio n s (tw o or three c lo se ly related surveys can be conducted simultaneously): Teller Operations E m phasis is placed on e ffic ie n t custom er services through sim pli fication of teller window procedures leading, at some banks, to improved internal controls and reduced cash dif ferences. Proof-Transit W hile m ost banks are m achineequipped, optimal benefits of mecha nization are rarely realized. The repre sentative w ill seek to eliminate dupli c a tio n , e n co u ra g e a c e n tra liz e d machine proof where practical, and recom m end m ethods of realizing various additional equipment benefits by changing machine pocket align ment. Bookkeeping A review of this operation covers the flow of work from the proof through filing checks and statement mailings. When com puter processing is used, special attention is given to the input and output procedures and documents. 10 Installment Loan Credit File Review Recommendations for improving this operation are designed to take ad v a n ta g e o f re p e titiv e re p a ym e n t schedules and fixed dollar payments, to sim plify posting of payments. Often a rearrangement of ledgers is sug gested so th a t in fo rm a tio n (past due, loan type, etc.) can easily be determined. A representative w ill set up sample c r e d it f ile s a n d in s t r u c t b a n k p e rs o n n e l in th e te c h n iq u e s o f maintaining and using the files. The representative w ill also assist in train ing personnel in the procedures for g a the ring and recording fin a n c ia l in fo rm a tio n . The Federal Reserve Bank of New York d istrib u te s the sim plified farm and com mercial credit files designed by the New York State Bankers Association. Note Cage and Loan Department Demand and tim e loan operations do not fully lend themselves to routine, but review of the loan cage function often leads to simpler yet effective pro cessing methods. The representative w ill first determine loan volume, equip ment lim itations, record keeping prac tices, and forms used, then recom mend ways to process loan trans a c tio n s and record keeping w ith m axim um accuracy and m inim um e ffo rt. Loan a c c ru a l a c c o u n tin g methods are usually included in this survey. Audit and Control The representative w ill review the audit program and related internal controls. In banks w ithout an internal auditor, a sim plified audit program may be established and internal con trols strengthened. Accruals Automation A representative w ill review several of the pros and cons involved in con verting a manual operation to a com puter operation. Em phasis w ill be placed on som e of the im po rta nt changes automation w ill require else where in the bank. Account number ing, volume of activity, contractual arrangements, and time schedules w ill be discussed as well as on-premise or off-premise options. Other Technical Assistance Surveys Am ong other areas w hich can be reviewed are: Account Coding Branch Operations Reserve Requirements Check Clearing General Ledger A representative w ill recommend ways to in s ta ll an a ccru a l a c c o u n tin g system to satisfy regulatory or internal reporting requirements. Emphasis is placed on sim plicity and the relative im p o r ta n c e o f e a c h a c c r u a l established. 10.1 Other Surveys Other areas of the New York Reserve Bank’s Head O ffice w ill also provide member banks with assistance. Areas covered include: Survey of Trust Department and Electronic Data Processing Operations Trust Department Income and Expense Survey On request, members of our Bank Examination Department w ill conduct surveys of district member banks’ trust department and electronic data processing operations. These surveys, which aim at increasing member bank operating efficiency, are independent of the examination process. At the conclusion of each survey the results are presented both orally and in writing. In cooperation with the Trust Division of the New York State Bankers Associ ation, the Bank Examination Depart ment makes an annual survey of trust departm ent incom e and expense. Participating banks furnish the survey data and the results, together with ratios for individual participants, are sent to all participating institutions. The latter are also furnished with income and expense data for the trust departments of four comparable, but unidentified, banks, so management can compare results. Officers’ Salaries Survey On request, the Bank Analysis Depart ment surveys officers’ salaries and directors’ fees in comparable banks for second district member banks. Operating Ratios The Banking Studies Department pre pares an annual study of Second Dis trict member bank operating ratios, in cluding the principal items of income, expense, losses, and net earnings. This report provides m anagem ent w ith a tool to analyze an individual bank’s operating performance and comparing it with the average results for banks of sim ilar size and character. 11 Functional Cost Analysis All member banks are eligible to par tic ip a te in th e F u n c tio n a l C o st Analysis (FCA) program. Each partici pating bank subm its calendar year financial inform ation plus certain a c tiv ity fig u re s and incom e and expense allocations. A detailed report comparing year to year results, costs, etc., plus a comparison w ith several other banks is returned to the partici pant. Two meetings a year are held and individual visits to banks can be ar ranged. A representative of the Tech nical Assistance Division of the Bank Relations O ffice is available to as sist new participants in gathering the inform ation required and in inter preting the results of the bank’s report. 12 ..... a
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