Full text of Federal Reserve Notes : September 1984

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Fecjjrol Reserve Dote/
Federal Rqyeei^fe Bonk of /on Fronci/co • /eptember 1984
/erving flla/ka, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, & UJa/hington

POLICY DEVELOPMENTS

"As-Of" Adjustments Effective October 11,1984, all Federal Reserve Banks will implement uniform policies in issuing and
applying adjustments to reserve and clearing accounts held for depository institutions. Such adjust
ments are commonly called "as-of" adjustments and are made to correct the cumulative effect of
errors made either by Reserve Banks or by depository institutions, or to compensate the Federal
Reserve for float incurred. In addition to achieving more uniformity among Reserve Banks, imple

menting these policies is intended to minimize the effect of the adjustments on the overall availability
of total reserves. The following lists "as-of" adjustment policies to be followed by all Reserve Banks.
General Provisions

In general, adjustments to correct for transaction-related errors will be made only when the original
transaction amount is $10,000 or more. Where offsetting "as-of" adjustments are to be made to the
accounts of two depository institutions, the adjustments ordinarily will be applied simultaneously.
Adjustments for Transaction Errors

Errors made by Reserve Banks - In addition to correcting the underlying error by making a debit
or credit accounting entry, the Reserve Bank will also issue an "as-of" adjustment to correct the
cumulative effect of the error. Such adjustments will be limited to covering a maximum period of 45
calendar days from the date of the error to the date the depository institution notifies the Reserve
Bank. If, after notification, additional time is required to resolve the error, the amount of the "as-of"
adjustment will be increased to cover this period.
Errors made by depository institutions - In cases where both depository institutions agree to
accept offsetting adjustments in the same reserve maintenance period, "as-of" adjustments may be
made to correct errors of record —for example, when a depository institution transfers funds to the
wrong institution. "As-of" adjustments generally will not be made to correct errors of omission
unless the circumstances involved are clearly exceptional. "As-of" adjustments will not be issued to
reverse the effect of earlier "as-of" adjustments or to move excess reserves from one reserve period
to another.

Adjustments for Data Reporting Errors

If correcting an error in the deposit record that a depository institution submits to the Federal
Reserve changes the reserve balance requirements for that institution, the Reserve Bank may issue
an "as-of" adjustment. These will be applied to future reserve maintenance periods so that the
depository institution will have advance notice of the effect on its reserve position.
Holiday Variances Between Reserve Banks

In processing interdistrict cash letters, Federal Reserve System policy provides that an "as-of"
adjustment be madeto covercash lettercredits when the Reserve Bank serving the receiving deposi
tory institution is closed on a holiday that is not observed by the processing Reserve Bank. The "asof" adjustment ordinarily will be applied to the depository institution's account in the current
reserve maintenance period.

For further information on "as-of" adjustment policies for data reporting errors, contact Mary

Wujek at (415) 974-3151. For further information on other aspects of the policies, pleasecontact the
Accounting Department officer at your local Federal Reserve office.

POLICY DEVELOPMENTS (continued)

Marginal Reserve
Requirement
Adjustment to
Earnings Credits

Effective October 25,1984, all Federal Reserve Banks will implement changes to the procedures by
which earnings credits are calculated on clearing balances. The changes will incorporate an adjust
ment for an imputed marginal reserve requirement of the Federal Reserve and for the marginal
reserve requirement of each institution maintaining a clearing balance with the Federal Reserve. This
adjustment is intended to make the earnings credits calculated for a depository institution on clear
ing balances held equivalent to the Federal Reserve to the return the institution would earn had it

maintained those balances with a correspondent. Each respondent's clearing balance will be
reduced by its net interbank reserve requirement— the correspondent rate of 12 percent less the
respondent marginal reserve requirement (0, 3 or 12 percent).

If you have any questions regarding these procedures, please contact the Accounting Department
or the following Financial Services officer at your local Federal Reserve office: Martha Perry in San
Francisco at (415) 974-2127; Mary Ellen Martin in Los Angeles at (213) 683-8318; Susan Robertson
in Portland at (503) 221-5909; Andrea Wolcott in Salt Lake City at (801) 322-7927; William Ferensen
in Seattle at (206) 442-2754.
Fed's Role in

The Federal Reserve has approved the following two policy papers available through Corporate

Payments Mechanism Services at (415) 974-2752.

and in Providing
Bank Services

The Federal Reserve in the Payment System presents the rationale for the Federal Reserve's
participation in the payments mechanism, describes the System's procedures for evaluating Federal

Reserve priced services, and states the System's objectives, including cost-recovery, for the pricing
of such services.

Standards Related to Priced Services Activities of the Federal Reserve Banks is concerned

with System safeguards for avoiding any internal conflict of interest between the exercise of the
Federal Reserve's responsibilities for providing priced services to depository institutions and its

other responsibilities in the fields of monetary policy, bank supervision and lending to depository
institutions.

REGULATIONS AND OPERATIONS UPDATE

Regulations G,T,U

The Federal Reserve Board has adopted amendments to Regulations G, T, and U to automatically
permit brokers and dealers to lend on over-the-counter securities designated for trading in the
National Market System portion of NASDAQ in conformance with the Board's margin re
quirements. The amendments are effective November 13, 1984. Copies of 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.

Reporting
Differences in

New Currency

The Bureau of Engraving and Printing has issued new procedures for considering differences in new
currency transactions. These procedures, which change the section "Differences in New Currency"
in Circular 9, affect both Federal Reserve Banks and depository institutions. For further information
on the San Francisco Reserve Bank's procedures in this area, please contact the Cash Services
Department at your local Federal Reserve office.

FOR PUBLIC COMMENT

Reducing
Payments Risk

The growth in the amount of funds transferred over large-dollar funds transfer networks has resulted
in some banks having intraday net debit positions far in excess of their capital. If an institution
should fail unexpectedly during the course of the day, and thus be unable to cover its position, the
Federal Reserve and other network participants could suffer serious financial loss. Moreover, the
failure could disrupt the smooth operation of the entire payments system.
The Federal Reserve has proposed several methods for reducing such payments risk and requested
public comment by October 29,1984 (Dockets R0515 and R0516). To ensure full understanding of
the issues and the methods proposed for comment and to encourage careful review of the pro
posals, the Federal Reserve System and the American Bankers Association co-sponsored three
seminars attended by about 400 representatives from all types of depository institutions in Los
Angeles, San Francisco and Seattle on September 18, 19, and 20, respectively. Respondents, in
cluding those at the seminars, are urged to ascertain the impact of the proposals on their particular
institutions and to comment in writing both to the Federal Reserve Board of Governors and to their
trade associations which also will comment to the Board of Governors.