Circular
Federal Reserve Priced Services
January 28, 2000
Circular No. 11226

Fee Schedules and Private Sector Adjustment Factor for 2000 Effective April 3, 2000

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System has approved fee schedules for priced services and electronic connections, as well as the private sector adjustment factor (PSAF) used in setting the fees, effective April 3, 2000. The following is from the Board's announcement:

Depository institutions that use the Federal Reserve Banks' electronic payment services will benefit from continued price reductions in 2000 under the fee schedules approved by the Federal Reserve Board. The effective date of all fees has been delayed until April 3, 2000, to minimize change during the period surrounding the rollover to 2000.

Prices across all electronic payment services will decline nearly 5 percent in 2000, reflecting lower prices for Fedwire funds, book-entry securities, and automated clearinghouse (ACH) transactions. The savings reflect continued efficiencies gained from consolidating the Federal Reserve's automated processing facilities. Since 1996, prices for all electronic payment services have declined more than 38 percent.

In the aggregate, prices for Reserve Bank priced services are projected to increase 1.3 percent in 2000. The 2000 price increase is attributable to a 3.6 percent increase across paper payment services, reflecting higher fees for check products.

For 2000, the Reserve Banks will reduce the basic fee for on-line Fedwire funds by 11.9 percent, and for book-entry securities transfers by 17.6 percent. ACH origination fees will be reduced as much as 18.2 percent. Fees for paper check products will increase 3.3 percent, while fees for payor bank services will increase 11 percent. The increase in check service fees reflects, in part, increased investments in check automation and electronic check technologies and national standardization of payor bank product and pricing structures.

The 2000 priced services fee schedules are available from the Reserve Banks.

The Reserve Banks project that they will recover 99.0 percent of their priced services costs for 2000, including imputed expenses, leaving net income of $88.7 million compared with $98.4 million of the targeted return on equity. The Reserve Banks estimate that they will recover 102.8 percent of their costs in 1999. The Monetary Control Act of 1980 requires the Federal Reserve to recover the costs of providing certain payment services over the long term. During the period 1989 to 1998, the Reserve Banks recovered 99.9 percent of the costs of priced services, including the targeted return on equity.

The Board also approved a 2000 private sector adjustment factor (PSAF) for Reserve Bank priced services of $192.6 million, an increase of $76.8 million or 66.3 percent over the 1999 PSAF of $115.8 million. The large increase in the PSAF for 2000 is due mainly to including additional pension assets and benefit liabilities in the PSAF balance sheet. The PSAF is an allowance for taxes and other imputed expenses that would have been paid and a return on capital that would have been earned had the Federal Reserve's priced services been provided by a private business firm.

The Board's official notice (pdf - 417kb) in this matter, as published in the Federal Register of January 5, is available as a PDF file. Questions regarding our priced services may be directed to your account manager (Tel. No. 212-720-6600 at the Head Office; Tel. No. 315-768-2225 at the Utica Office).