The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
Modifications to the Method for Imputing Priced-Service Income from Clearing-Balance Investments
October 28, 2003
Circular No. 11552
To All Depository Institutions and Others Concerned in the Second Federal Reserve District:
In a press release, the Federal Reserve Board announced modifications to the method for imputing priced-service income from clearing balance investments. The Federal Reserve Banks impute this income when setting fees and measuring actual priced-service cost recovery each year. The Board requested comment on the changes in May 2003.
Clearing balances held at Reserve Banks are similar to compensating balances held at correspondent banks. Beginning in January 2004, Reserve Banks will impute the income from clearing balance investments on the basis of a broader portfolio of investments than the three-month Treasury bills used today. This portfolio will be selected from instruments available to banks and subject to a risk-management framework that includes criteria consistent with those used by bank holding companies and regulators in evaluating investment risk.
The annual imputed investment return will be based on an underlying imputed investment portfolio, but will be implemented as a constant annual spread over the three-month Treasury bill rate.