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DALLAS
Federal Reserve Bank of Dallas

April 1983

Board Approves Float Reduction Programs
The Federal Reserve Board of Gover­
nors has approved a program designed
to reduce and price Federal Reserve in­
terterritory check float and holdover
check float. Federal Reserve float is
the value of checks for which the Fed
has given credit to financial institu­
tions depositing checks for collection,
but for which the Fed has not yet
received payment.
interierritory float
Interterritory float occurs primarily
as a result of interdistrict transporta­
tion delays. The interterritory check
float portion of the program will be im­
plemented on July 1, 1983. On that
date, all Reserve Banks will offer fixed
and fractional availability crediting op­
tions with various methods of payment
for float. Current fixed availability,
whereby credit is given to institutions
according to a predetermined sched­
ule, will be continued. Fractional
availability, whereby partial credit is
given to institutions based on the
Fed’s actual past delivery experience,
will be introduced as a new crediting
option. All interterritory check deposits
will be processed in order of receipt
and will be subject to the same credit­
ing procedures regardless of whether
they are processed at the sending or
receiving Federal Reserve office.
Holdover float
Holdover float occurs when a
Reserve Bank receives a check ship­
ment by its deposit deadline, but is

unable to process it for collection on a
timely basis. Generally this float oc­
curs as a result of sharp daily fluctua­
tions and check processing equipment
malfunctions. The pricing of holdover
float will be phased in from February
24 through October 1,1983. During this
phase-in period, the cost associated
with holdover float will be gradually in­
corporated in the cost of check ser­
vices until, on October 1, the cost of all
holdover float will be added to the cost
of check services.
For several years, the Federal
Reserve System has been taking ac­
tion to reduce float. Steps previously
taken to reduce float have included
later deadlines for presentment of
checks and improved availability and
efficiency in the Federal Reserve’s In­

terdistrict Transportation Network. The
chart accompanying this article shows
that, in 1979, daily average Federal
Reserve float was $6.7 billion. By the
end of 1982, that figure had been
reduced to $2.3 billion. Implementation
of float pricing is expected to make fur­
ther substantial reductions in daily
float averages.

INSIDE
• Book-entry Prices
• Account Changes
• EFT Outlook

No Change in Transfer, Net Settlement Fees
The Federal Reserve Board has an­
nounced that there will be no increase
in the fee schedules currently charged
for wire transfer of funds and net set­
tlement services.
The current fee schedules for these
services, printed in a table accompany­
ing this article, were put into effect
April 29, 1982. Because revenues from
these services are currently sufficient
for covering the costs of providing the
services, the Board decided not to
change the fee schedules for the year
1983. Changes to these schedules will
be re-evaluated again in 1984 and any
changes, if necessary, will be im­
plemented at that time.
The Monetary Control Act of 1980 re­
quired that fee schedules be developed
for services offered by the Federal
Reserve Banks. The fee schedules for
these two services first became effec­
tive January 29, 1981.

1983 FEE SCHEDULE

Net Settlement

Wire Transfer of Funds
O n-Lin e T ran sfe r:
O rig in a to r

$0.65

R eceiver

$0.65

$1.30

O ff-L in e Surcharges:
O rig in a to r

$3.50

Per S e ttle m e n t

$5.00

R eceiver

$2.25

Telep hone A d vice

$2.25

Prices Announced

Two Publications Available
Copies of two publications are currently available from the Dallas
Fed. The 1982 Annual Report for the Federal Reserve Bank of
Dallas provides financial and operating data for the year as well as
background information on Federal Reserve endeavors in the areas
of operations, supervision, and monetary policy.
A summary of the Federal Reserve Board’s
February 16, 1983, report to Congress titled
“ Monetary Policy Objectives for 1983” is also
available. This report, required by the Full
Employment and Balanced Growth Act
of 1978, is made twice yearly and
discusses the state of the economy and
the course of monetary policy for the
coming months.
Copies of these publica­
tions are available, upon
request, from the Public
Affairs Department at
the Dallas Fed.

S e ttle m e n t E n tries

SI

A new fee schedule for book-entry
Treasury securities will become effec­
tive for all Federal Reserve Banks April
28, 1983. The fee schedule has been
revised to recover the costs of pro­
viding the services and to add a mon­
thly fee for each issue held in an ac­
count. Prior experience has shown that
the costs of maintaining a book-entry
account are directly related to the
number of issues held in that account.
For example, accounts with a large
number of issues are more costly to
maintain than accounts with only a few
issues. Addition of a per-issue fee will
more accurately reflect the costs of
maintaining a multiple issue account.
The transaction fee for on-line
origination has been increased from $2
to $3 per transfer at all Federal Reserve
Banks except New York. Fees for off­
line originations and receipts at all
Feds are now priced at $10 per
transfer. The account maintenance fee
has been established at $15 per ac­
count per month, with a 50<c charge per
month for each issue in an account.

Deposit Accounts to Change in April, May
Several modifications to existing
time deposit instruments offered by
commercial banks and savings and
loan associations will take effect dur­
ing April and May as part of an overall
interest rate deregulation plan an­
nounced last year by the Depository In­
stitutions Deregulation Committee
(DIDC). The committee decided in its
March 1 meeting that the plan should
be implemented as originally an­
nounced March 22, 1982.
According to the plan, on April 1,
1983, the term to maturity for the
31/2-year or longer ceilingless time
deposit will be reduced to 21/z years or
longer. Other characteristics of this
time deposit category will remain the
same. Also on April 1, the term to
maturity for the 21/z-year to less than

31/2-year “Small Saver” certificate will
be reduced to 11/z years to less than
2 Vi years. The interest rate ceiling for
these certificates will be indexed to the
1Vz-year yield on Treasury securities
announced by the Treasury every two
weeks instead of the 21/2-year yield
which was used previously. Other
characteristics of the accounts will re­
main unchanged, including the 25
basis point differential between the
rate banks and savings and loans may
pay.
The DIDC’s plan calls for elimination
of the ceiling rate differential for the
91-day certificate of deposit beginning
May 1. At that time, the ceiling rate for
all institutions will be indexed to the
91-day Treasury bill rate announced
every week. The 91-day certificates

were first authorized by the DIDC May
1,1982, with the stipulation that the in­
terest rate differential remain in effect
for a one-year period only.
The major features of accounts with
variable interest rate ceilings and of
accounts not subject to interest rate
ceilings are summarized in the table
accompanying this article. In addition
to these account instruments, other
types of time deposit accounts, sav­
ings accounts, and regular NOW ac­
counts are subject to fixed interest
rate ceilings. The payment of interest
on demand deposits is not allowed. All
interest rate ceilings for member
banks are outlined by the Fed’s
Regulation Q and in similar regulations
of other agencies for other types of
institutions.

MAJOR CHARACTERISTICS OF DEPOSIT INSTRUMENTS
Deposit Accounts Subject to Variable Ceiling Rates
1’/ 2 -year to less than
2 V r -year Small Saver
91-day Certificate

6-month Money Market Certificate

Certificate

Index rate

91-d ay T -b ill ra te

182-day T -b ill ra te o r 4 -w e ek a verag e,
w h ic h e v e r is g re a te r

1 V z-year y ie ld on
T re a s u ry s e c u r itie s

Commercial bank ceiling

In d e x ra te
(a fte r M a y 1. 1983)

In d e x ra te p lu s .25 o r 7 .7 5 % ,
w h ic h e v e r is g re a te r

In d e x ra te m in u s .25 o r
9 .2 5 % , w h ic h e v e r is g re a te r

Thrift ceiling

In d e x ra te

Index rate:

Ceiling:

7 .2 5 % o r b e lo w

7 .7 5 %

A b o v e 7 .2 5 % , b u t b e lo w 8 .5 %

In d e x ra te p lu s .5

8 .5 % o r ab ove, b u t b e lo w 8 .7 5 %

9 .0 0 %

8 .7 5 % o r ab o ve

In d e x ra te p lu s .25

In d e x ra te o r 9 .5 0 % ,
w h ic h e v e r is g re a te r

How often changed

E ve ry w e e k

Every w e e k

Minimum denomination

$2,500

$2,500

N o ne

Early withdrawal penalty

L o s s o f e a rn e d in te re s t

L o s s o f th re e m o n th 's in te re s t

L o s s o f s ix m o n th 's in te re s t

Compounding allowed

No

No

Yes

Negotiability allowed

Yes

No

No

Transactions allowed

No

No

No

Every tw o w e e k s

Deposit Accounts Not Subject to Interest Rate Ceilings

“ Super NOW” Account

Money Market
Deposit Account

7-31 day
Deposit Account

2 ’A-year or longer
Time Deposit

Minimum denomination

$2,500

$2,500

$2,500

N o ne, b u t a $500
d e n o m in a tio n re q u ire d

Early withdrawal penalty

N/A

N /A

Yes

L o s s o f s ix m o n th 's in te re s t

Compounding allowed

N/A

N /A

Yes

Yes

Negotiability allowed

N /A

N /A

No

Yes

Transactions allowed

U n lim ite d

6 p re a u th o riz e d per
m o n th , no m o re th a n
3 by c h e c k o r d ra ft

No

No

Wallace Speech Addresses EFT Growth
The incentive to develop new and
more e ffe ctive electronic funds
transfer (EFT) systems will vary direct­
ly with the level of interest rates
according to William H. Wallace, first
vice president of the Dallas Fed.
Speaking before executive seminars at
Golembe Associates, Inc. in Houston,
Wallace stated that, as the time value
of money increases, the desire to col­
lect and invest it faster becomes a very
powerful motive. “Therefore, some of
the explosive growth we have seen in
interbank transfers will moderate to a
certain degree as a result of a less in­
flationary environment and lower in­
terest rates,” Wallace said.
Wallace went on to say, however,
that less expensive EFT technology,
changing attitudes on the part of the
consumer, and more expensive alter­
natives to EFT will tend to make such
systems more attractive and will con­
tribute to a significant growth in EFT

over the next several years.
The areas of interbank transactions,
including the Federal Reserve’s Fedwire system, and automated clear­
inghouse networks are two aspects of
EFT which have witnessed extensive
development and growth. Wallace also
cited corporate cash management,
where EFT has enabled corporations to
expedite the collection, concentration,
and investment of funds as well as
control disbursement to manage float,
as a significant EFT development.
Check truncation will emerge within
the next three to five years and will
have the potential of improving the
payments system primarily through
elimination of the costly task of
transporting paper, Wallace said.
Wallace also addressed a few “flags
of caution” which he feels must be
discussed in conjunction with EFT.
These include inherent risks in elec­
tronic payments that are not present in

I

traditional techniques such as instan­
taneous and irrevocable transactions,
potential disruption of systems due to
power outages or computer break­
downs, and fraudulent use of EFT
system s. Adequate m o n itorin g
mechanisms and advance preparation
are necessary to prevent these types of
problems, Wallace said.
The Federal Reserve System is par­
ticularly interested in another issue,
that of the impact EFT might have on
monetary policy. “ From the standpoint
of central banking, these develop­
ments will certainly make the defini­
tion of the money supply more difficult,
and the volatility of whatever we define
as money will make it considerably
more difficult to control,” Wallace
said. “We believe on balance, however,
that the advantages that EFT offers
from the standpoint of efficiency
justify our meeting these issues headon and resolving them.”

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