Full text of Federal Reserve Notes : December 1984

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Federal Re/erve Bq^^of /an Franci/co • December 1984
/erving flla/ka, flrizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, Si UJa/hington

POLICY DEVELOPMENTS
Discount Rate
Lowered

On November 21, 1984, the Federal Reserve Board approved the reduction in the discount rate from

9 percent to 8/2 percent requested by the Reserve Banks. The discount rate is the rate charged
depository institutions for borrowings from Federal Reserve Banks.

In making its decision, the Board considered that the M1 and M2 monetary aggregates were in the
lower part of their target ranges, that the pace of business expansion had moderated, that producer
and commodity prices in recent months had remained relatively stable, that wages and costs were
following a restrained trend, and that the dollar continued to be strong in the foreign exchanges.
Shortfalls and

Surpluses from
Federal Reserve
Priced Services

The Federal Reserve Board has issued a policy statement on "Surpluses and Shortfalls that Arise
from the Provision of Federal Reserve Priced Services". In sum, the policy states that Reserve Bank
fees for Federal Reserve services will be established to generate sufficient revenue to cover the antic

ipated costs of providing services to depository institutions for the current calendar year, rather
than to offset prior years' surpluses and shortfalls.

Copies of the Board's Policy Statement are available from Corporate Services at (415) 974-2752.
REGULATIONS AND OPERATIONS UPDATE
Automated

Beginning February 7, 1985, all ACH paper return items and notifications of change deposited with

Processing of
ACH Paper

the Federal Reserve will be converted to an automated form at the Federal Reserve office of first

Return Items

deposit. This improvement should almost totally eliminate the return of paper items to originating
depository institutions and speed the availability of paper return items.

In conjunction with the change, the deposit closing time for paper items will be0300 (PST). Settle
ment for all items, both intra- and interregional, received by this time will be processed on the same
day. All paper return items received after this closing time will be settled on the next banking day.
Effective July 1, 1985, originating institutions will no longer be allowed to receive return items and
notifications of change in paper form when all other ACH payments are delivered to them in machinereadable form. Also, a fee of $2.50 will be assessed to the returning institution for each commercial
paper return item and notification of change deposited with the Federal Reserve.

These changes are intended to contribute to the continued evolution of the ACH toward a fully elec
tronic payments mechanism. For details, please contact the Financial Services Officerat the Federal
Reserve Branch serving your territory.
Permitted Uses
of Fedwire

Circular 3, Wire Transfers of Funds, has been amended to clarify that a Reserve Bank has no respon

sibility for completing a transfer in a timely manner if delay is due to impeding uses of the com
munication link by the receiving depository institution.

In addition, language in the San Francisco Reserve Bank's current FedLine, OnLine, and Computer
Interface Agreements that restrains depository institutions from using rented equipment "for any
application offered by a source other than the FRB that is also available from the FRB via telecom
munication" has been deleted.

For further information, please contact the Financial Services Officer at the Federal Reserve Branch
serving your territory.

REGULATIONS AND OPERATIONS UPDATE (continued)

Regulations G.T & U
List of Marginable

A revised list of over-the-counter (OTC) stocks subject to its margin regulations has been published
by the Federal Reserve Board and took effect November 13, 1984.

OTC Stocks

For the first time, the list includes all securities qualified for trading in the National Market System
portion of NASDAQ as well as other over-the-counter securities designated by the Board. The
Board will publish its OTC list on a quarterly basis.
For further information, please contact David Vandre in Consumer Affairs at (415) 974-2965.
FOR PUBLIC COMMENT

Definitive Securities

Safekeeping and
Non-Cash Collection
Services Fees

The Federal Reserve Board has requested public comment by December 28, 1984, on changes in the
structure of fees charged for Federal Reserve Banks' definitive securities safekeeping and non-cash
collection services:

Definitive Securities Safekeeping: (1) Introduction of a re-registration fee (to recover the cost of
sending a registered security to a transfer agent for re-registration) and (2) an additional fee for
maintaining coupon-bearing securities. Since the San Francisco Reserve Bank does not offer any
definitive securities safekeeping services except under certain collateral arrangements, these fees
would not be implemented in the Twelfth District.
Non-Cash Collection: (1) Introduction of a fee charged the depositor for any coupon deposit that is

returned as uncollectible; (2) the option for a Reserve Bank to adopt a mixed deposit program,
which allows a depository institution to deposit all of its coupons in one mixed deposit; and (3) the
option for a Reserve Bank to charge a higher fee to recover the additional costs of collecting non
cash items payable at country endpoints. The Twelfth District would charge the depositor a $10 fee
for each coupon deposit returned as uncollectible, but presently has no plans for making use of the
two proposed options.
Copies of the Board's notice are available from Corporate Services at (415) 974-2752. For further in
formation, please contact David Kerr at (415) 974-2345.

Two-Tier Pricing
for Checks

The Board is requesting public comment by January 11, 1985, on a proposal to assess different fees
for certain checks deposited with Reserve Banks for collection. The difference in fees would depend
upon whether the checks are destined for high- or low-volume endpoints. Unit costs generally are
higher for items destined for low-volume endpoints because transportation and fixed processing
costs, which do not vary with volume, are spread across fewer items. Under the current fee struc
ture, Reserve Banks assess the same fee for all checks drawn on institutions within the same
availability zone.

Copies of the Board's notice are available from Corporate Services at (415) 974-2752. For further in
formation, please contact Anne Wright in Checks Services at (415) 974-3291.

Regulation Z
Truth-in-Lending

The Federal Reserve Board is asking for public comment by January 30, 1985, on proposed changes
to the official staff commentary on Regulation Z —Truth-in-Lending. The proposed changes pertain
to questions that have arisen about the regulation, including new interpretations and changes to
existing interpretations.
The Board's notice is available from Corporate Services at (415) 974-2752. For further information,
please contact David Vandre in Consumer Affairs at (415) 974-2965.