To the Chief Operations Officer of Each Depository Institution
in the Second Federal Reserve District:

The Federal Reserve Banks have amended Operating Circular 2 ("OC2"), Cash Services, primarily to implement the Federal Reserve Currency Recirculation Policy (the "Policy").

The Policy consists of two components: (1) a custodial inventory program which permits eligible depository institutions to transfer a percentage of the $10 and $20 notes in their vaults to the books of the Federal Reserve Bank, and (2) a recirculation fee which will be charged to depository institutions that deposit fit $10 or $20 notes at a Reserve Bank and order the same denomination, above a de minimis amount, during the same business week.

The Reserve Banks expect to begin accepting requests to participate in the custodial inventory program in May 2006, with program operations beginning in July 2006. The assessment of recirculation fees is expected to begin in July 2007.

Changes to OC2 to implement the Policy include

• revised language in Section 3.3 (Cross-Shipping) of OC2 to implement the Policy and to provide for the assessment of recirculation fees beginning in July 2007, and
• a new Appendix 1 (Custodial Inventory Program), which, together with the revised OC2, set forth the terms and conditions applicable to the custodial inventory program pursuant to which eligible depository institutions can hold currency in $10 or $20 denominations in its vaults on behalf of the Reserve Bank.

Other changes have been made to OC2 as well, including revised definitions, an indemnification provision and updated food coupon provisions. Review the revised OC2 to familiarize yourself with these changes.

The amendments to OC2 are effective May 1, 2006. Your continued use of the Reserve Bank’s cash services on or after that date will constitute agreement to the new terms of the operating circular.

See the operating circulars page of the Federal Reserve Financial Services website for the full official version of the amended circular. To request a paper copy of operating circulars, contact your Customer Contact Center.

Federal Reserve Currency Recirculation Policy

Public Information
general.info@ny.frb.org
(212) 720-6130

Contact:
Public Affairs
(212) 720-6130
general.info@ny.frb.org