Full text of Federal Reserve Notes : September 1985

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Federal Re/erve Bonk of /on Fronci/co • /eptemberl985
/erving flla/ka, flrizono, California, Hawaii, Idaho, Nevada, Oregon, Utah, & UJa/hington

NEW SERVICES

Regulation J —
Implementation of

Large-Dollar Return
Item Notification
Service

The Federal Reserve Board has amended Regulation J to improve the system of notification of non
payment of checks of $2500 or more, effective October 1, 1985. The Federal Reserve Bank of San
Francisco will expand its Large-Dollar Return Item Notification service on that date. The expanded
service will accommodate these methods of notification through the Reserve Bank: electronic
access through the use of the Fedwire Funds Transfer Network, telephone notice, and return of the
physical item. All Fedwire users will be able to originate and receive return item notifications elec
tronically regardless of their access mode: dial-up, online, or computer interface.
Two informational brochures —an executive summary and a reference manual — along with con
forming amendments to Circular 1, Collection of Cash Items, are available. Institutions wishing to
participate in the program will need to complete an agreement with the San Francisco Reserve Bank.
For more information, please contact the Payments Services Officer serving your institution:

FedLine Return
Item Notification

Douglas 0. Knudsen

San Francisco

Ross G. Ashman

Los Angeles

(213) 683-8351

Dean C. Gonnerman

Portland

(503) 221-5903

Robert R. Richards

Salt Lake City

(801) 322-7887

Edward A. Bonheur

Seattle

(206) 442-5105

(415) 974-2069

Starting in the first quarter of 1986, the San Francisco Reserve Bank will be introducing a new
FedLine Return Item Notification product. This new application will work on a FedLine terminal to
permit depository institutions to segregate their return item notification operation from their wire
room activity. It offers several advantages:
• Origination and receipt of return item notifications on a microcomputer situated in a Check Serv
ices Department
•

Restricted access to funds transfer transactions, thereby reducing risk and security requirements

•

Simplicity of use (a tutorial will be provided)

The only fees associated with the product will be the standard FedLine access fee and the return
item notification transaction charges.
For more information, please contact the Payments Services Officer serving your institution.
POLICY DEVELOPMENTS

ACH Research Report In January and February of this year, the Federal Reserve System conducted a nationwide ACH
market research survey to determine current uses and perceptions of the ACH service and to learn
about desires for new ACH services and enhancements.

The findings have provided the System with meaningful insights into the practices, needs and future
requirements of depository institutions with regard to ACH. For further information, or a copy of the
Executive Overview of the ACH Research Report, please contact Forest Harrison at (415) 974-2879.

POLICY DEVELOPMENTS (continued)

Advisory Board on
The Federal Reserve Board has appointed a 14-member panel to assist in the development of its
Large-Dollar Payment program to reduce risk on large-dollar transfer systems. Roland K. Bullard III, Executive Vice
Systems Risk
President of the Philadelphia National Bank, has agreed to serve as chairman of the group, called
the Large Dollar Payment Systems Advisory Group.
Fraudulent Electronic
Funds Transfer

Attempts

The Federal Reserve Bank of San Francisco is asking participants in its wire transfer programs to
review their operating procedures as a guard against fraudulent electronic funds transfer attempts.
Institutions handling electronic transactions should pay particular attention to the following:
• Authentication routines and test word procedures should be secured and not exposed for
unauthorized persons to see, copy, or steal. Authentication routines should not be discussed
without prior management approval.

• All telephone requests for transfers from customers should either be authenticated or verified by
a routine method.

•

Funds for incoming transfers should not be paid out to customers unless either a hard copy advice
has been received from the Federal Reserve or other positive information has been received and
verified.

•

Employees should be; instructed not to give out any information on customers, controls, internal
operating procedures, or the authentication methods used in transferring funds.

The Wire Transfer and Data Security Departments of the San Francisco Reserve Bank will assist
depository institutions with wire transfer and electronic security matters. For assistance, please call
C. Rand Burr, Wire Transfer Department, at (41b) 974- 2319 about wire transfer matters, and James
M. Abernathy, Data Security Administrator, at (415) 974-3040 about security matters.

Interstate Relocation
of Subsidiary Banks

On August 12, the Federal Reserve Board issued an interpretation that a bank holding company may
not relocate a subsidiary bank from one state to another state without prior approval under the Bank
Holding Company Act and compliance with the requirements of the Douglas Amendment to the
Act, which limits the interstate expansion of holding companies.

For a copy of the Boaid's ruling, please contact Corporate Services at (415) 974-2752.
REGULATIONS AND OPERATIONS UPDATE
Check Collection

Since the last announcement of changes in deposit deadlines, availabilities, and fee schedules for

Service — Changes in

check collection services on June 1 /, 1985, the San Francisco Reserve Bank has made some further

Deadlines and

changes. Some deadlines and availabilities for consolidated deposit service for interterritory items
have been revised to improve availability to several Reserve cities from the Seattle, Los Angeles, and
fici
rhis has also ei tailed a number of changes in deposit cut-off times. The

Availabilities

revised deposit deadlines arid availabilities took effect on August 15, 1985.
List of Marginable
OTC Stocks

The Fedeial Reseive Board has published a revised list ol over-the-counter (OTC) stocks subject to
its margin : |ulal ns. The list took effect August 13, 1985. For copies, please contact Corporate
Services at (415) 974 2/5? f or furthei information, plea ;e i all David Vandre in Consumer Affairs at
(415) 974-2965.

For furthei information, please contact the Payments Services Officer serving your institution.
MONETARY POLICY OBJECTIVES FOR 1985 AND 1986

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rem the Public Information De|
Box //02, San I

CA 94120 Phone (415) 9/ ! 2246.