Federal Reserve Bank Services, 75058-75088 [2016-26068]

Download as PDF 75058 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 24. For a thorough discussion of the prohibition of certain communications during the incentive auction, please refer to the Prohibited Communications Public Notice, 80 FR 63216, October 19, 2015. 25. Making Modifications to Applications. The Task Force and Bureau remind each reverse and forward auction applicant that the Commission’s rules require an applicant to maintain the accuracy and completeness of information furnished in its application to participate in Auctions 1001 and 1002, respectively. Each applicant should amend its application to furnish additional or corrected information within five days of a significant occurrence, or no more than five days after the applicant becomes aware of the need for an amendment. Any applicant that needs to make changes must do so using the procedures described in the Auction 1000 Application Procedures Public Notice and the Auction 1002 Qualified Bidders Public Notice. 26. To make changes to its FCC Form 177 or FCC Form 175 while the Auction System is available, the applicant must make those changes electronically using the Auction System and submit a letter briefly summarizing the changes to its FCC Form 177 by email to auction1001@fcc.gov, or to its FCC Form 175 by email to auction1002@fcc.gov. To make changes at a time when the Auction System is unavailable, the applicant must make those changes using the procedures described in the Auction 1000 Application Procedures Public Notice. All changes are subject to review by Commission staff. Federal Communications Commission. Gary D. Michaels, Deputy Chief, Auctions and Spectrum Access Division, WTB. [Docket No. OP–1552] Sinthorntham, Senior Financial Analyst, (202) 452–2864, Division of Reserve Bank Operations and Payment Systems. For users of Telecommunications Device for the Deaf (TDD) only, please call (202) 263–4869. Copies of the 2017 fee schedules for the check service are available from the Board, the Federal Reserve Banks, or the Reserve Banks’ financial services Web site at www.frbservices.org. Federal Reserve Bank Services SUPPLEMENTARY INFORMATION: AGENCY: Board of Governors of the Federal Reserve System. ACTION: Notice. I. Private Sector Adjustment Factor, Priced Services Cost Recovery, and Overview of 2017 Price Changes The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2017 of $16.6 million and the 2017 fee schedules for Federal Reserve priced services and electronic access. These actions were taken in accordance with the Monetary Control Act of 1980, which requires that, over the long run, fees for Federal Reserve priced services be established on the basis of all direct and indirect costs, including the PSAF. DATES: The new fee schedules become effective January 3, 2017. FOR FURTHER INFORMATION CONTACT: For questions regarding the fee schedules: Susan V. Foley, Senior Associate Director, (202) 452–3596; Linda Healey, Senior Financial Services Analyst, (202) 452–5274, Division of Reserve Bank Operations and Payment Systems. For questions regarding the PSAF: Gregory L. Evans, Deputy Associate Director, (202) 452–3945; Lawrence Mize, Deputy Associate Director, (202) 452–5232; Max A. Overview—Each year, as required by the Monetary Control Act of 1980, the Reserve Banks set fees for priced services provided to depository institutions. These fees are set to recover, over the long run, all direct and indirect costs and imputed costs, including financing costs, taxes, and certain other expenses, as well as the return on equity (profit) that would have been earned if a private business firm provided the services. The imputed costs and imputed profit are collectively referred to as the PSAF. From 2006 through 2015, the Reserve Banks recovered 102.6 percent of their total expenses (including imputed costs) and targeted after-tax profits or return on equity (ROE) for providing priced services.1 Table 1 summarizes 2015 actual, 2016 estimated, and 2017 budgeted costrecovery rates for all priced services. Cost recovery is estimated to be 103.6 percent in 2016 and budgeted to be 100.0 percent in 2017. [FR Doc. 2016–26196 Filed 10–27–16; 8:45 am] BILLING CODE 6712–01–P FEDERAL RESERVE SYSTEM SUMMARY: TABLE 1—AGGREGATE PRICED SERVICES PRO FORMA COST AND REVENUE PERFORMANCE A [Dollars in millions] 1b Revenue Year 2c Total expense 3 Net income (ROE) 4d Targeted ROE [1–2] 2015 (actual) ........................................................................ 2016 (estimate) .................................................................... 2017 (budget) ....................................................................... 429.1 432.5 439.4 397.8 413.3 434.8 5e Recovery rate after targeted ROE (%) [1/(2+4)] 31.3 19.1 4.6 5.6 4.1 4.6 106.4 103.6 100.0 a Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding. includes imputed income on investments when equity is imputed at a level that meets minimum capital requirements and, when combined with liabilities, exceeds total assets. c The calculation of total expense includes operating, imputed, and other expenses. Imputed and other expenses include taxes, Board of Governors’ priced services expenses, the cost of float, and interest on imputed debt, if any. Credits or debits related to the accounting for pension plans under FAS 158 [ASC 715] are also included. d Targeted ROE is the after-tax ROE included in the PSAF. mstockstill on DSK3G9T082PROD with NOTICES b Revenue 1 The 10-year recovery rate is based on the pro forma income statements for Federal Reserve priced services published in the Board’s Annual Report. Effective December 31, 2006, the Reserve Banks implemented the Financial Accounting Standard Board’s (FASB) Statement of Financial Accounting VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 Standards (SFAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (codified in FASB Accounting Standards Codification (ASC) Topic 715 (ASC 715), Compesation-Retirement Benefits), which resulted in recognizing a cumulative reduction in equity PO 00000 Frm 00033 Fmt 4703 Sfmt 4703 related to the priced services’ benefit plans. Including this cumulative reduction in equity from 2006 to 2015 results in cost recovery of 92.8 percent for the ten-year period. This measure of long-run cost recovery is also published in the Board’s Annual Report. E:\FR\FM\28OCN1.SGM 28OCN1 75059 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices e The recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be recognized in accordance with FAS 158 [ASC 715]. Future gains or losses, and their effect on cost recovery, cannot be projected. Table 2 provides an overview of costrecovery budgets, estimates, and performance for the 10-year period from 2006 to 2015, 2015 actual, 2016 budget, 2016 estimate, and 2017 budget by priced service. TABLE 2—PRICED SERVICES COST RECOVERY [Percent] Priced service 2006–2015 All services ........................................................................... Check ................................................................................... FedACH ............................................................................... Fedwire Funds and NSS ..................................................... Fedwire Securities ............................................................... 2015 Actual 102.6 103.6 99.5 101.8 102.7 2016 Budget a 2016 Estimate 2017 Budget b 101.4 105.7 99.5 99.4 97.5 103.6 109.7 98.8 103.2 97.6 100.0 104.5 95.5 101.0 97.5 106.4 113.0 100.7 103.9 108.2 a The 2016 budget figures reflect the final budgets as approved by the Board in December 2015. b The 2017 budget figures reflect preliminary budget information from the Reserve Bank. The Reserve Banks will submit final budget data to the Board in November 2016, for Board consideration in December 2016. mstockstill on DSK3G9T082PROD with NOTICES 1. 2016 Estimated Performance—The Reserve Banks estimate that they will recover 103.6 percent of the costs of providing priced services in 2016, including total expense and targeted ROE, compared with a 2016 budgeted recovery rate of 101.4 percent, as shown in table 2. Overall, the Reserve Banks estimate that they will fully recover actual and imputed costs and earn net income of $19.1 million, compared with the targeted ROE of $4.1 million. The Reserve Banks estimate that the check service and the Fedwire® Funds and National Settlement Service will achieve full cost recovery; however, the Reserve Banks estimate that the FedACH® Service and the Fedwire Securities Service will not achieve full cost recovery because of investment costs associated with multiyear technology initiatives to modernize their processing platforms.2 These investments are expected to enhance efficiency, the overall quality of operations, and the Reserve Banks’ ability to offer additional services to depository institutions. Greater-thanexpected check volume processed by the Reserve Banks has been the single most significant factor influencing priced services cost recovery. 2. 2017 Private-Sector Adjustment Factor—The 2017 PSAF for Reserve Bank priced services is $16.6 million. 2 The Reserve Banks have been engaged in a multiyear technology initiative to modernize the FedACH processing platform by migrating the service from a mainframe system to a distributed computing environment. In 2016, the Reserve Banks chose a commercially available option as their processing solution to modernize the FedACH platform. The Reserve Banks completed a multiyear technology initiative to modernize the processing platform for the Fedwire Securities Services in 2015. The capitalized software costs of this initiative will be amortized until October 2020 and thus remain a primary factor in the cost recovery calculation for these services in 2016. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 This amount represents an increase of $3.5 million from the 2016 PSAF of $13.1 million. This increase is primarily the result of an increase in the total cost of capital, which includes cost of debt and targeted return on equity. 3. 2017 Projected Performance—The Reserve Banks project a priced services cost-recovery rate of 100.0 percent in 2017, with both net income and targeted ROE of $4.6 million. The Reserve Banks project that the price changes will result in a 3.2 percent average price increase for customers. The Reserve Banks project that the check service and the Fedwire Funds and National Settlement Service will fully recover their costs; however, the Reserve Banks project that the FedACH Service and the Fedwire Securities Service will not achieve full cost recovery. Although FedACH is not budgeted to fully recover its costs in 2017, the Reserve Banks are expected to fully recover FedACH costs following finalization of the FedACH technology modernization project and over the long run. In addition, the Board believes the Reserve Banks’ 2017 FedACH fee increases are consistent with a multiyear strategy to minimize pricing volatility and provide long-term price stability for customers while undertaking the ongoing technology upgrade that will result in FedACH incurring higher expenses over the next few years. Although the Fedwire Securities Service is not budgeted to fully recover its costs in 2017, the Board believes the Reserve Banks are expected to fully recover Fedwire Securities Service costs over the long run following a few years of under recovery. As a result of an expected decrease in volume as well as the advancement of new initiatives to improve resiliency and operational functionality, the Reserve Banks plan to increase fees gradually over a multi-year period to PO 00000 Frm 00034 Fmt 4703 Sfmt 4703 avoid the dramatic impact of a sharp one-year increase. The primary risks to the Reserve Banks’ ability to achieve their targeted cost-recovery rates are unanticipated volume and revenue reductions and the potential for cost overruns with the technology modernization initiatives. In light of these risks, the Reserve Banks will continue refining their business and operational strategies to manage operating costs, to increase product revenue, and to capitalize on efficiencies gained from technology initiatives. 4. 2017 Pricing—The following summarizes the Reserve Banks’ fee schedules for priced services in 2017: Check • The Reserve Banks announced in July 2016, restructured FedForward®, FedReturn®, and FedReceipt® fee schedules to reflect today’s electronic check-processing environment and announced in October 2016 a minor additional modification.3 These previously announced fees, discussed in attachment II, will be effective in January 2017, consistent with the fee schedules for other priced services. The Reserve Banks announced the restructured fee schedules earlier in the year to provide customers with sufficient notice. FedACH • The Reserve Banks will increase the minimum monthly fee for FedACH origination from $45 to $50 and the minimum monthly fee for FedACH receipt from $35 to $40. • The Reserve Banks will increase the FedACH Account Servicing fee from 3 For the July announcement, see https:// www.frbservices.org/files/servicefees/pdf/071116_ 2017_check_pricing_customer_letter.pdf. For the October announcement, see https:// frbservices.org/files/communications/pdf/check/ 100316-check-modification-announcement.pdf. E:\FR\FM\28OCN1.SGM 28OCN1 75060 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices • The Reserve Banks will increase the surcharge for offline transactions from $55 to $60. National Settlement Services • The Reserve Banks will keep prices at existing levels for the priced National Settlement Services. Fedwire Securities • The Reserve Banks will increase the online agency transfer fee from $0.65 to $0.77. • The Reserve Banks will increase the offline origination and receipt surcharge transfer fee from $66 to $80. • The Reserve Banks will increase the monthly agency issues maintenance fee from $0.65 to $0.77. • The Reserve Banks will increase the monthly account maintenance fee from $48.00 to $57.50. • The Reserve Banks will increase the joint custody origination surcharge from $44 to $46. • The Reserve Banks will increase the claims adjustment fees from $0.75 to $0.80. FedLine® Access Solutions • The Reserve Banks will increase five existing monthly fees: (1) The FedLine Web® Plus fee from $140 to $160, (2) the FedLine Direct® Premier fee from $6,500 to $6,700, (3) the FedComplete® 200 Plus fee from $1,300 to $1,350, (4) the FedComplete 200 Premier fee from $1,375 to $1,425, and (5) the FedMail® Fax a la carte fee from $70 to $100. • The Reserve Banks will implement a legacy software fee to encourage FedLine Direct customers to migrate to a new messaging solution. The fee will be introduced in July 2017 at $5,000 per month and will increase in steps to $20,000 per month by the end of 2017. • The Reserve Banks will remove the legacy email service from all FedLine Web, Advantage®, Command®, and Direct packages and introduce a $20per-month fee to purchase an a la carte subscription to this service. • The Reserve Banks will modify the E-Payments Routing Directory and make 4 The per-item preincentive fee is the fee that the Reserve Banks charge for transfers that do not qualify for incentive discounts. The Tier 1 per-item preincentive fee applies to the first 14,000 transfers, the Tier 2 per-item preincentive fee applies to the mstockstill on DSK3G9T082PROD with NOTICES $45 to $58. The Reserve Banks will also change the name of the FedACH Account Servicing fee to the FedACH Participation fee. • The Reserve Banks will eliminate the on-us receipt credit of $0.0032 per item. • The Reserve Banks will increase the FedACH Information Extract File fee from $100 to $150 per file. • The Reserve Banks will increase the FedPayments Reporter fee approximately 10 percent rounded to the nearest $5 for each level of the tiered package pricing. The Reserve Banks also will introduce a new top tier, with a $1,800 monthly fee, for a package that includes more than 10,000 reports. • The Reserve Banks will introduce a fixed monthly fee and a volume-based tiered pricing structure for the FedGlobal ACH service. The tiered pricing structure will include per-item surcharges that are in addition to the standard FedACH origination fee of $0.0032 and vary according to the transaction’s destination, as seen in table 9. The top tier will cover monthly origination volume of more than 500 items and include a $185 fixed monthly fee and a per-item surcharge that is $0.12 lower than current per-item fees. The next tier will cover monthly origination volume between 161 and 500 items and include a $60 fixed monthly fee and a per-item surcharge that is $0.13 higher than current peritem fees. The bottom tier will cover monthly origination volume between 0 and 160 items and include a $20 fixed monthly fee and a per-item surcharge that is $0.38 higher than current peritem fees. Fedwire Funds • The Reserve Banks will increase the Tier 1 per-item preincentive fee from $0.790 to $0.820 per transaction, increase the Tier 2 per-item preincentive fee from $0.240 to $0.245, and increase the Tier 3 per-item preincentive fee from $0.155 to $0.170 per transaction.4 next 76,000 transfers, and the Tier 3 per-item preincentive fee applies to any additional transfers. The Reserve Banks apply an 80 percent incentive discount to transfers over 60 percent of a customer’s historic benchmark volume. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00035 Fmt 4703 Sfmt 4703 associated changes to FedLine packages and fees. A new automated download directory service will be introduced and available only to subscribers of plusand premier-level FedLine packages. A la carte fees for additional directory download codes, ranging from $75 to $2,000 per month, will also be introduced. In addition, the new lineup of FedLine Exchange packages, discussed below, will allow customers that do not use FedLine for Federal Reserve Financial Services to access the directory. • The Reserve Banks will introduce a new FedLine Exchange® service, along with two new associated packages: A base-level and premier-level. The base package will be priced at $40 per month and include the manual download directory service. The premier package will be priced at $125 per month and include both the manual and automated download directory services. • The Reserve Banks will introduce a new FedMail package, priced at $85 per month, which will include the same services as those included in the existing FedLine Exchange package to ensure continuity of this service. All existing FedLine Exchange subscribers will be transitioned to the new FedMail package and experience a fee increase of $45. 5. 2017 Price Index—Figure 1 compares indexes of fees for the Reserve Banks’ priced services with the GDP price index.5 The price index for Reserve Bank priced services is projected to decrease less than 1 percent in 2017 from the 2016 level. The price index for Check 21 services is projected to decrease approximately 3 percent. The price index for the FedACH Service is projected to increase nearly 1 percent. The price index for the Fedwire Funds and National Settlement Services is projected to increase approximately 2 percent. The price index for the Fedwire Securities Services is projected to increase nearly 1 percent. For the period 2007 to 2017, the price index for total priced services is expected to decrease approximately 19 percent. 5 For the period 2007 to 2015, the GDP price index increased 13 percent. E:\FR\FM\28OCN1.SGM 28OCN1 B. Private Sector Adjustment Factor— The imputed debt financing costs, targeted ROE, and effective tax rate are based on a U.S. publicly traded firm market model.6 The method for calculating the financing costs in the PSAF requires determining the appropriate imputed levels of debt and equity and then applying the applicable financing rates. In this process, a pro forma balance sheet using estimated assets and liabilities associated with the Reserve Banks’ priced services is developed, and the remaining elements that would exist are imputed as if these priced services were provided by a private business firm. The same generally accepted accounting principles that apply to commercialentity financial statements apply to the relevant elements in the priced services pro forma financial statements. 6 Data for U.S. publicly traded firms is from the Standard and Poor’s Compustat® database. This database contains information on more than 6,000 U.S. publicly traded firms, which approximates the entirety of the U.S. market. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 The portion of Federal Reserve assets that will be used to provide priced services during the coming year is determined using information about actual assets and projected disposals and acquisitions. The priced portion of these assets is determined based on the allocation of depreciation and amortization expenses of each asset class. The priced portion of actual Federal Reserve liabilities consists of postemployment and postretirement benefits, accounts payable, and other liabilities. The priced portion of the actual net pension asset or liability is also included on the balance sheet.7 The equity financing rate is the targeted ROE produced by the capital asset pricing model (CAPM). In the CAPM, the required rate of return on a firm’s equity is equal to the return on a risk-free asset plus a market risk premium. The risk-free rate is based on 7 The pension assets are netted with the pension liabilities and reported as a net asset or net liability as required by ASC 715 Compensation—Retirement Benefits. PO 00000 Frm 00036 Fmt 4703 Sfmt 4703 75061 the three-month Treasury bill; the beta is assumed to be equal to 1.0, which approximates the risk of the market as a whole; and the market risk premium is based on the monthly returns in excess of the risk-free rate over the most recent 40 years. The resulting ROE reflects the return a shareholder would expect when investing in a private business firm. For simplicity, given that federal corporate income tax rates are graduated, state income tax rates vary, and various credits and deductions can apply, an actual income tax expense is not explicitly calculated for Reserve Bank priced services. Instead, the Board targets a pretax ROE that would provide sufficient income to fulfill the priced services’ imputed income tax obligations. To the extent that performance results are greater or less than the targeted ROE, income taxes are adjusted using the effective tax rate. Capital structure. The capital structure is imputed based on the imputed funding need (assets less E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.038</GPH> mstockstill on DSK3G9T082PROD with NOTICES Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 75062 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES liabilities), subject to minimum equity constraints. Short-term debt is imputed to fund the imputed short-term funding need. Long-term debt and equity are imputed to meet the priced services long-term funding need at a ratio based on the capital structure of the U.S. publicly traded firm market. The level of equity must meet the minimum equity constraints, which follow the FDIC requirements for a well-capitalized institution. The priced services must maintain equity of at least 5 percent of total assets and 10 percent of riskweighted assets.8 Any equity imputed that exceeds the amount needed to fund the priced services’ assets and meet the minimum equity constraints is offset by a reduction in imputed long-term debt. When imputed equity is larger than what can be offset by imputed debt, the excess is imputed as investments in Treasury securities; income imputed on these investments reduces the PSAF. Application of the Payment System Risk (PSR) Policy to the Fedwire Services. The Board’s PSR policy reflects the new international standards for financial market infrastructures (FMIs) developed by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions in the Principles for Financial Market Infrastructures. The revised policy retains the expectation that the Fedwire Services meet or exceed the applicable risk-management standards. Principle 15 states that an FMI should identify, monitor, and manage general business risk and hold sufficient liquid net assets funded by equity to cover potential general business losses so that it can continue operations and services as a going concern if those losses materialize. Further, liquid net assets should at all times be sufficient to ensure a recovery or orderly wind-down of critical operations and services. The Fedwire Services do not face the risk that a business shock would cause the service to wind down in a disorderly manner and disrupt the stability of the financial system. In order to foster competition with private-sector FMIs, however, the 8 The FDIC rule, which was adopted as final on April 14, 2014, requires that well-capitalized institutions meet or exceed the following standards: (1) Total capital to risk-weighted assets ratio of at least 10 percent, (2) tier 1 capital to risk-weighted assets ratio of at least 8 percent, (3) common equity tier 1 capital to risk-weighted assets ratio of at least 6.5 percent, and (4) a leverage ratio (tier 1 capital to total assets) of at least 5 percent. Because all of the Federal Reserve priced services’ equity on the pro forma balance sheet qualifies as tier 1 capital, only requirements 1 and 4 are binding. The FDIC rule can be located at https://www.fdic.gov/news/ board/2014/2014-04-08_notice_dis_c_fr.pdf. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 Reserve Banks’ priced services will hold six months of the Fedwire Funds Service’s current operating expenses as liquid financial assets and equity on the pro forma balance sheet.9 Current operating expenses are defined as normal business operating expenses on the income statement, less depreciation, amortization, taxes, and interest on debt. The Fedwire Funds Service’s six months of current operating expenses are computed based on its preliminary 2017 budget at $53.9 million. In 2017, $14.1 million of equity was imputed to meet the FDIC capital requirements. No additional imputed equity was necessary to meet the PSR policy requirement. Effective tax rate. Like the imputed capital structure, the effective tax rate is calculated based on data from U.S. publicly traded firms. The tax rate is the mean of the weighted average rates of the U.S. publicly traded firm market over the past 5 years. Debt and equity financing. The imputed short- and long-term debt financing rates are derived from the nonfinancial commercial paper rates from the Federal Reserve Board’s H.15 Selected Interest Rates release (AA and A2/P2) and the annual Merrill Lynch Corporate & High Yield Index rate, respectively. The rates for debt and equity financing are applied to the priced services estimated imputed short-term debt, long-term debt, and equity needed to finance short- and long-term assets and meet equity requirements. The increase in the 2017 PSAF to $16.6 million from $13.1 million in 2016 is primarily attributable to a $2.0 million increase in the cost of debt and a $1.0 million increase in the return on equity offset by a $0.3 million decrease in the incremental return on imputed equity necessary for PSR policy compliance, all three of which were driven primarily by increased imputed funding needs arising from higher retail float asset balances. Projected 2017 Federal Reserve priced-services assets, reflected in table 3, have increased $143.1 million from 2016. This increase is primarily due to a $234.0 million increase in the balance of imputed investments in federal funds and a net $42.8 million increase in longterm assets, inclusive of pension, Bank premises, furniture and equipment, and leasehold improvements and long-term prepayments. The increase was partially 9 This requirement does not apply to the Fedwire Securities Service. There are no competitors to the Fedwire Securities Service that would face such a requirement, and imposing such a requirement when pricing the securities services could artificially increase the cost of these services. PO 00000 Frm 00037 Fmt 4703 Sfmt 4703 offset by an $80.0 million decrease in items in process of collection and a $55.8 million decrease in imputed investments in Treasury securities. The significant increase in the imputed investments in federal funds balance is related to a reduction in debit float due to new deposit deadlines associated with the Endpoint-Culled ICL deposit option deadlines implemented in July 2016, which are intended to reduce float and items in process of collection. These balances had increased significantly as a result of the PSR policy implementation in 2015. The Endpoint-Culled ICL deposit option defers the portion of deposits the Federal Reserve is unable to present after a specific deadline during the processing cycle to limit instances where same-day credit is offered under the PSR policy for items that cannot be collected same day. The resulting balance of 2017 imputed investments in federal funds was sufficient to comply with the PSR policy expectations for Fedwire Funds, and no additional costs were incurred. As shown in table 3, imputed equity for 2017 is $58.6 million, an increase of $4.8 million from the equity imputed for 2016. In accordance with ASC 715, this amount includes an accumulated other comprehensive loss of $635.1 million. Table 4 reflects the portion of shortand long-term assets that must be financed with actual or imputed liabilities and equity. Debt and equity imputed to fund the 2017 priced services assets within the observed market leverage ratio produced an equity level that did not meet the FDIC minimum equity requirements. As a result, additional equity was imputed to meet the FDIC requirements, and imputed long-term debt was reduced. The ratio of capital to risk-weighted assets meets the required 10 percent of risk-weighted assets, and equity exceeds 5 percent of total assets (table 6). In 2017, long-term debt and equity was imputed to meet the asset funding requirements and reflects the leverage ratio observed in the market; additional equity of $14.1 million was required (table 5) to meet the market leverage ratio. Table 5 shows the derivation of the 2017 and 2016 PSAF. Financing costs for 2017 are $2.7 million higher than in 2016. In addition to the increase in the levels of debt and equity mentioned above, the cost of equity increased in 2017 to 41.6 percent from 41.5 percent in 2016. The increased equity balance and the slightly higher cost of equity result in a pretax ROE that is $1.0 million higher than the 2016 pretax ROE. Imputed sales taxes increased to E:\FR\FM\28OCN1.SGM 28OCN1 75063 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices $3.2 million in 2017 from $2.8 million in 2016. The priced services portion of the Board’s expenses increased $0.4 million to $5.4 million in 2017. The effective income tax rate used in 2017 increased to 22.7 percent from 21.6 percent in 2016. TABLE 3—COMPARISON OF PRO FORMA BALANCE SHEETS FOR BUDGETED FEDERAL RESERVE PRICED SERVICES [Millions of dollars—projected average for year] 2017 Short-term assets: Receivables .......................................................................................................................... Materials and supplies .......................................................................................................... Prepaid expenses ................................................................................................................. Items in process of collection 10 ........................................................................................... 2016 Change $36.6 0.6 11.2 241.0 $35.6 0.5 10.2 321.0 $1.1 0.1 1.0 (80.0) 289.4 367.2 (77.9) ........................ 245.0 55.8 11.0 (55.8) 234.0 Total imputed investments ............................................................................................ Long-term assets: Premises 12 ........................................................................................................................... Furniture and equipment ...................................................................................................... Leasehold improvements and long-term prepayments ........................................................ Pension asset ....................................................................................................................... Deferred tax asset ................................................................................................................ 245.0 66.8 178.2 128.7 39.0 104.8 10.9 186.1 111.0 38.5 89.5 ........................ 187.9 17.7 0.5 15.3 10.9 (1.8) Total long-term assets ................................................................................................... 469.6 426.8 42.8 Total assets ............................................................................................................ 1,003.9 860.9 143.1 Short-term liabilities: Deferred credit items ............................................................................................................ Short-term debt ..................................................................................................................... Short-term payables ............................................................................................................. 486.0 18.1 30.2 332.0 19.0 27.2 154.0 (0.9) 3.0 Total short-term assets ................................................................................................. Imputed investments: 11 Imputed investment in Treasury Securities .......................................................................... Imputed investment in Fed Funds ........................................................................................ Total short-term liabilities .............................................................................................. Long-term liabilities: Pension liability ..................................................................................................................... Long-term debt ..................................................................................................................... Postemployment/postretirement benefits and net pension liabilities 13 ................................ 534.4 387.2 156.1 ........................ 48.4 362.5 17.6 0.0 411.3 (17.6) 48.4 48.7 Total liabilities ......................................................................................................... Equity 14 ....................................................................................................................................... 945.3 58.6 807.1 53.8 138.3 4.8 Total liabilities and equity ..................................................................................................... 1,003.9 860.9 143.1 TABLE 4—IMPUTED FUNDING FOR PRICED-SERVICES ASSETS [Millions of dollars] 2017 A. Short-term asset financing: Short-term assets to be financed: Receivables ............................................................................................................................................... Materials and supplies .............................................................................................................................. Prepaid expenses ...................................................................................................................................... mstockstill on DSK3G9T082PROD with NOTICES Total short-term assets to be financed ............................................................................................................ Short-term payables .................................................................................................................................. Net short-term assets to be financed ............................................................................................................... Imputed short-term debt financing 15 ................................................................................................................ B. Long-term asset financing: Long-term assets to be financed: Premises .................................................................................................................................................... 10 Credit float, which represents the difference between items in process of collection and deferred credit items, occurs when the Reserve Banks debit the paying bank for transactions prior to providing credit to the depositing bank. Float is directly estimated at the service level. 11 Consistent with the Board’s PSR policy, the Reserve Banks; priced services will hold six months of the Fedwire Funds Service’s current operating expenses as liquid net financial assets and equity on the pro forma balance sheet. Six months of the VerDate Sep<11>2014 19:26 Oct 27, 2016 Jkt 241001 Fedwire Funds Service’s projected current operating expenses is $53.9 million. In 2017, $58.6 million of equity was imputed to meet the regulatory capital requirements. 12 Includes the allocation of Board of Governors assets to priced services of $1.2 million for 2017 and $1.3 million for 2016. 13 Includes the allocation of Board of Governors liabilities to priced services of $0.6 million for 2017 and 2016. PO 00000 Frm 00038 Fmt 4703 Sfmt 4703 2016 $36.6 0.6 11.2 $35.6 0.5 10.2 48.4 30.2 18.1 18.1 46.2 27.2 19.0 19.0 ........................ 128.7 111.0 14 Includes an accumulated other comprehensive loss of $635.1 million for 2017 and $666.1 million for 2016, which reflects the ongoing amortization of the accumulated loss in accordance with FAS 158 [ASC 715]. Future gains or losses, and their effects on the pro forma balance sheet, cannot be projected. See table 5 for calculation of required imputed equity amount. E:\FR\FM\28OCN1.SGM 28OCN1 75064 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices TABLE 4—IMPUTED FUNDING FOR PRICED-SERVICES ASSETS—Continued [Millions of dollars] 2017 2016 Furniture and equipment ........................................................................................................................... Leasehold improvements and long-term prepayments ............................................................................. Pension asset ............................................................................................................................................ Deferred tax asset ..................................................................................................................................... 39.0 104.8 10.9 186.1 38.5 89.5 ........................ 187.9 Total long-term assets to be financed .............................................................................................................. Pension liability .......................................................................................................................................... Postemployment/postretirement benefits and net pension liabilities ........................................................ Net long-term assets to be financed ......................................................................................................... Imputed long-term debt 15 ......................................................................................................................... Imputed equity 15 ....................................................................................................................................... 469.6 ........................ 362.5 107.0 48.4 58.6 426.8 17.6 411.3 (2.0) ........................ 53.8 Total long-term financing ................................................................................................................... 107.0 53.8 TABLE 5—DERIVATION OF THE 2017 AND 2016 PSAF [Dollars in millions] 2017 Debt A. Imputed long-term debt and equity: Net long-term assets to finance ....................................... Capital structure observed in market ............................... 2016 Equity Debt Equity C. Incremental cost of PSR policy: Equity to meet policy ........................................................ D. Other required PSAF costs: Sales taxes ....................................................................... Board of Governors expenses ......................................... mstockstill on DSK3G9T082PROD with NOTICES E. Total PSAF: As a percent of assets ..................................................... As a percent of expenses ................................................ F. Tax rates: ............................................................................ 15 See table 5 for calculation. minimum equity constraints are not met after imputing equity based on the capital structure observed in the market, additional equity is imputed to meet these constraints. The long-term funding need was met by imputing long-term debt and equity based on the capital structure observed in the market (see tables 4 and 6). In 2017, the amount of imputed equity exceeded the minimum equity requirements for risk-weighted assets. 16 If VerDate Sep<11>2014 19:26 Oct 27, 2016 Jkt 241001 $(2.0) 58.5% $(2.0) 41.5% $62.5 $44.5 $(1.2) $(0.8) .............................. 58.6 .............................. 51.1 (14.1) — — 14.1 58.6 — 1.2 — — (1.2) (2.0) 53.1 $48.4 $58.6 — $51.1 $18.1 × 0.6% = 48.4 × 4.0% = 58.6 × 10.2% = $0.1 1.9 6.0 $19.0 × 0.3% = — × 4.2% = 51.1 × 9.8% = $0.1 — 5.0 $8.0 .............................. $5.1 $ — × 10.2% = $— $2.7 × 9.8% = $0.3 $3.2 5.4 .............................. .............................. .............................. 8.6 $2.8 5.0 .............................. .............................. .............................. 7.8 .............................. Total imputed long-term debt and equity ........... B. Cost of capital: Elements of capital costs: Short-term debt 19 ...................................................... Long-term debt 19 ...................................................... Equity 20 ..................................................................... $107.0 41.6% .............................. Pre-adjusted long-term debt and equity ........................... Equity adjustments: 16 Equity to meet capital requirements ......................... Adjustment to debt and equity funding given capital requirements 17 ...................................................... Adjusted equity balance ............................................ Equity to meet capital requirements 18 ...................... $107.0 58.4% $16.6 .............................. $13.1 .............................. .............................. .............................. 1.7% 3.9% 22.7% .............................. .............................. .............................. 1.5% 3.6% 21.6% 17 Equity adjustment offsets are due to a shift of long-term debt funding to equity in order to meet FDIC capital requirements for well-capitalized institutions. 18 Additional equity in excess of that needed to fund priced services assets is offset by an asset balance of imputed investments in treasury securities. 19 Imputed short-term debt and long-term debt are computed at table 4. PO 00000 Frm 00039 Fmt 4703 Sfmt 4703 20 The 2017 ROE is equal to a risk-free rate plus a risk premium (beta * market risk premium). The 2017 after-tax CAPM ROE is calculated as 0.30% + (1.0 * 7.59%) = 7.89%. Using a tax rate of 22.7%, the after-tax ROE is converted into a pretax ROE, which results in a pretax ROE of (7.89%/(1–22.7%)) = 10.21%. Calculations may be affected by rounding. E:\FR\FM\28OCN1.SGM 28OCN1 75065 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices TABLE 6—COMPUTATION OF 2017 CAPITAL ADEQUACY FOR FEDERAL RESERVE PRICED SERVICES [Dollars in millions] Assets Risk weight Weighted assets ($) Imputed investments: 1-Year Treasury securities 21 ................................................................................................ Federal funds 22 .................................................................................................................... $— 245.0 — 0.2 — 49.0 Total imputed investments ............................................................................................ Receivables ................................................................................................................................. Materials and supplies ................................................................................................................. Prepaid expenses ........................................................................................................................ Items in process of collection ...................................................................................................... Premises ...................................................................................................................................... Furniture and equipment ............................................................................................................. Leasehold improvements and long-term prepayments ............................................................... Pension asset .............................................................................................................................. Deferred tax asset ....................................................................................................................... 245.0 36.6 0.6 11.2 241.0 128.7 39.0 104.8 10.9 186.1 ........................ 0.2 1.0 1.0 0.2 1.0 1.0 1.0 1.0 1.0 49.0 7.3 0.6 11.2 48.2 128.7 39.0 104.8 10.9 186.1 Total ...................................................................................................................................... Imputed equity: Capital to risk-weighted assets ............................................................................................ Capital to total assets ........................................................................................................... 1,003.9 ........................ 585.8 C. Check Service — Table 7 shows the 2015 actual, 2016 estimated, and 2017 10.0% 5.8% budgeted cost-recovery performance for the commercial check service. TABLE 7—CHECK SERVICE PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] 1 2015 (actual) ........................................................................ 2016 (estimate) .................................................................... 2017 (budget) ....................................................................... mstockstill on DSK3G9T082PROD with NOTICES 1. 2016 Estimate—The Reserve Banks estimate that the check service will recover 109.7 percent of total expenses and targeted ROE, compared with a 2016 budgeted recovery rate of 105.7 percent. Greater-than-expected check volumes processed by the Reserve Banks and lower-than-expected costs have influenced significantly the check service’s cost recovery. The decline in Reserve Bank check volume, which is attributable to the 21 If minimum equity constraints are not met after imputing equity based on all other financial statement components, additional equity is imputed to meet these constraints. Additional equity imputed to meet minimum equity requirements is invested solely in Treasury securities. The imputed investments are similar to those for which rates are available on the Federal Reserve’s H.15 statistical release, which can be located at http:// www.federalreserve.gov/releases/h15/data.htm. 22 The investments are imputed based on the amounts arising from the collection of items prior to providing credit according to established availability schedules. VerDate Sep<11>2014 19:26 Oct 27, 2016 Jkt 241001 Total expense 2 3 160.6 152.9 141.2 140.2 138.1 133.7 decline in the number of checks written generally, was not as great as anticipated. Through August, total commercial forward check volume is 3.9 percent lower and total commercial return check volume is 3.3 percent lower than for the same period last year. For full-year 2016, the Reserve Banks estimate that their total forward check volume will decline 5.2 percent (compared with a budgeted decline of 6.2 percent) and their total return check volume will decline 6.8 percent (compared with a budgeted decline of 12.7 percent) from 2015 levels.23 2. 2017 Pricing—The Reserve Banks expect the check service to recover 104.5 percent of total expenses and targeted ROE in 2017. The Reserve Banks project revenue to be $141.2 23 Total Reserve Bank forward check volumes are expected to drop from 5.5 billion in 2015 to 5.2 billion in 2016. Total Reserve Bank return check volumes are expected to drop from 33.2 million in 2015 to 30.9 million in 2016. PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 20.4 14.8 7.5 Targeted ROE Recovery rate after targeted ROE (%) [1/(2 + 4)] 4 Revenue Year Net income (ROE) [1–2] 5 2.0 1.3 1.4 113.0 109.7 104.5 million, a decline of 7.7 percent from the 2016 estimate. This decline is driven largely by the Reserve Banks’ restructured FedForward, FedReturn, and FedReceipt fee schedules, discussed below.24 Total expenses for the check service are projected to decrease to $133.7 million, a decline of $4.4 million, or 3.2 percent, from 2016 expenses primarily due to reduced operating costs, including cost savings associated with increased efficiencies of the Reserve Banks’ customer support services for the FedACH and check service lines. 24 This decline is also driven, in part, by anticipated continuing decline in the number of checks written generally. The Reserve Banks estimate that total commercial forward check volumes in 2017 will decline 5.0 percent, to 4.9 billion, and total commercial return check volumes will decline 10.1 percent to 27.8 million in 2017. E:\FR\FM\28OCN1.SGM 28OCN1 75066 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES In July 2016, the Reserve Banks announced restructured FedForward, FedReturn and FedReceipt fee schedules designed to reflect the efficiencies of electronic check processing and better serve the needs of the marketplace in today’s electronic environment.25 The Reserve Banks announced the restructured fee schedules earlier in the year to provide customers with sufficient notice.26 Specifically, the Reserve Banks announced simplified FedFoward and FedReturn deposit products. The simplified deposit products will offer two fixed-fee options: a per-image cash letter (ICL) fee and a daily subscription fee.27 Both options will offer standard and premium variations, with premium variations offering higher fixed and lower per-item fees than the standard variations. Both options will also include per-item fees, based on a modified volume-based tiered pricing structure, with tiers defined by volume of items received by a chartered institution from the Reserve Banks.28 Tiers for the three premium variations of the daily subscription fee deposit options, FedFoward Premium Daily Fee A, B, and C and FedReturn Premium Daily Fee A, will be based only on volume received by a chartered institution from a subset of the Reserve Banks’ customers.29 The volumes used to define all tiers will be evaluated and set annually as part of the Board’s approval of annual fee schedules.30 The Premium Daily Fee deposit options will include a fifth tier, Tier 0, comprised of routing numbers for which the Reserve Banks currently receive little to no volume from the specified subset of Reserve Bank customers (and therefore cannot currently be assigned to the other tiers with sufficient certainty). Tier 0 will also be evaluated annually, along with all other tiers, so that if volume migrates to routing numbers in tier 0 (enabling more information on which to assign a tier) those routing numbers will be moved to the appropriate tier. In October 2016, the Reserve Banks announced minor modifications to the Premium Daily Fee products.31 To clarify Tier 0’s transitional purpose, the Reserve Banks announced that routing numbers cannot be placed in Tier 0 if they have previously been assigned to one of the other tiers. Based on additional review of Tier 0’s composition, the Reserve Banks also announced that a routing number will only be assigned to Tier 0 if the chartered institution receives a minimum of 150 items daily.32 As a result, the Reserve Banks determined that approximately 3,800 routing numbers initially included in Tier 0 could more appropriately be placed in another tier, Tier 4.33 The Reserve Banks also announced that most sorted-deposit options will be eliminated, including the Fine Sort ICL, Deferred Fine Sort ICL, and Fixed Mixed ICL deposit options.34 The Reserve Banks announced that they will not, however, modify the EndpointCulled ICL deposit option, the Dollar Cut Mixed ICL (renamed ‘‘Dollar-Culled ICL’’) option, or the Deferred Mixed ICL (renamed ‘‘Deferred ICL’’) option.35 The Reserve Banks will continue to allow separately sorted Treasury Check, Postal Money Order, and Savings Bond ICLs. Finally, the Reserve Banks announced modifications to their FedReceipt product, including reduced FedReceipt fees for forward and return items and elimination of the FedReceipt Plus Deposit Discount for both FedForward and FedReturn deposits.36 The Reserve Banks also announced that they will modify volume tiers for their Courtesy Delivery service (renamed ‘‘Accelerated Delivery Service’’) and that the Retail Payments Premium Receiver discount will be applied to items deposited by a chartered institution rather than on items received. Both products remain otherwise unchanged. The Reserve Banks estimate that the price changes will result in a 3.5 percent average price decrease for check customers. The primary risks to the Reserve Banks’ ability to achieve budgeted 2017 cost recovery for the check service include lower-than-expected check volume due to reductions in check writing overall and competition from correspondent banks, aggregators, and direct exchanges, which would result in lower-than-anticipated revenue. D. FedACH Service—Table 8 shows the 2015 actual, 2016 estimate, and 2017 budgeted cost-recovery performance for the commercial FedACH service. 25 As part of the Board’s approval of the Reserve Banks’ 2016 check fee schedules, the Board noted that the Reserve Banks would announce changes to the check service to reflect the efficiencies of today’s electronic check processing environment. 79 FR 65937, 70785 (Nov. 16, 2015). 26 A full summary of the modifications was included with Reserve Bank’s announcement and is available at https://frbservices.org/files/servicefees/ pdf/071116_2017_check_pricing_summary_of_ changes.pdf. The Reserve Banks’ modified fee schedules are available at https:// www.frbservices.org/servicefees/check_services_ 2016.html. 27 The per-ICL fee structure offers a fixed fee for each deposited image cash letter and a per-item fee for each item in the cash letter. The subscription structure offers a daily subscription fee and a peritem fee for each item. Per-item fees are determined by the Reserve Banks’ volume-based tiered pricing structure. 28 Under the tiered pricing structure, depositors pay a variable per-item fee based on the endpoint to which an item is being delivered. Tiers are currently determined at the individual routing number. 29 The Reserve Banks believe the top 15 customers, which account for approximately 33 percent of the Reserve Banks’ deposit volume, represent the most-likely users of the Premium Daily Fee deposit options because of the high daily fixed fees and lower per-item fees. 30 The tiers for 2017 are available at https:// www.frbservices.org/servicefees/check21_endpoint_ listing.html. 31 For the announcement, see https:// frbservices.org/files/communications/pdf/check/ 100316-check-modification-announcement.pdf. 32 The Reserve Banks determined after further analysis that a floor of 150 items daily was appropriate to avoid placing small institutions in Tier 0 because of limited total volumes (institutions below the floor receive an average of only 47 items daily). 33 To minimize any customer impact of these changes, the Reserve Banks also reduced the Tier 4 per-item fees and daily fixed fees for two of the Premium Daily Fee deposit options. 34 In a paper check processing environment, the fine-sort products allowed the Reserve Banks to gain efficiencies because the checks did not require processing on reader-sorters. In today’s electronic check processing environment, all ICLs are processed through the Reserve Banks’ electronic system in the same manner, and the Reserve Banks do not gain any efficiencies by having the depositing bank fine-sort electronic checks before deposit. 35 Under the Endpoint-Culled ICL deposit option (offered only at 12:00 p.m. ET), items drawn on routing numbers enrolled in the Reserve Banks’ Premium Presentment service and those presented as substitute checks are culled from the cash letter by the Reserve Banks and placed into a Deferred Imaged Cash Letter, with depositors receiving nextday credit availability on those items. The product allows the Reserve Banks to limit instances where same-day credit is offered for items that cannot be collected same day (the Reserve Banks similarly cull items deposited on the 12:00 p.m. ET deposit deadline offered as part of the Premium Daily Fee deposit options). Under the Deferred ICL deposit option, credit for all items deposited is deferred until the next business day. Under the DollarCulled ICL deposit option, items written for less than $1,000, plus all items for $1,000 or more that are drawn on a substitute check endpoint, are culled from the cash letter by the Reserve Banks and placed into a Deferred Imaged Cash Letter, with depositors receiving the next-day credit availability of that deposit option. Items of $1,000 or more (except for those that will be presented as substitute checks) are kept in the original cash letter, with same-day credit availability at the next deadline according to the Federal Reserve Policy on Payment System Risk. 36 The Reserve Banks implemented the deposit discount structure to encourage banks to transition from paper to electronic items. With the Reserve Banks presenting and returning more than 99 percent of items electronically, the discount is no longer necessary to encourage banks to move away from paper. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1 75067 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices TABLE 8—FEDACH SERVICE PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] Total expense 1 2 3 2015 (actual) ........................................................................ 2016 (estimate) .................................................................... 2017 (budget) ....................................................................... 1. 2016 Estimate—The Reserve Banks estimate that the FedACH service will recover 98.8 percent of total expenses and targeted ROE, compared with a 2016 budgeted recovery rate of 99.5 percent. Through August, FedACH commercial origination and receipt volume was 5.8 percent higher than it was during the same period last year. For full-year 2016 the Reserve Banks estimate that FedACH commercial origination and receipt volume will increase 4.9 percent, compared with a budgeted increase of 4.5 percent. Although volume is higher than originally projected, the Reserve Banks estimate lower-than-budgeted 2016 cost recovery due to higher than anticipated environmental costs such as an increase in pension expense and refinement in the accounting treatment between capital and expenses for the FedACH technology modernization program.37 2. 2017 Pricing—The Reserve Banks expect the FedACH service to recover 95.5 percent of total expenses and targeted ROE in 2017. FedACH commercial origination and receipt volume is projected to grow 5.7 percent, contributing to an increase of $9.7 125.5 130.7 140.4 122.8 131.0 145.4 million in total revenue from the 2016 estimate. Total expenses are budgeted to increase $14.4 million from 2016 expenses, primarily because of costs associated with the development of a new FedACH technology platform. The Reserve Banks will increase the minimum monthly fee for forward origination from $45 to $50 and the minimum monthly fee for receipt from $35 to $40.38 The Reserve Banks also will increase the FedACH Account Servicing Fee from $45 to $58 and change the fee name to the ‘‘FedACH Participation fee,’’ to reflect more accurately the intention of the fee, which is to recover fixed costs related to participation in the FedACH network. The Reserve Banks also will eliminate the on-us receipt credit of $0.0032 per item. All on-us items will be charged the current FedACH receipt per-item fee of $0.0032 per item. The Reserve Banks will increase the FedACH Information Extract File fee from $100 to $150 per file. The Reserve Banks also will increase the FedPayments Reporter fee approximately 10 percent rounded to the nearest $5 for each level of the tiered Targeted ROE Recovery rate after targeted ROE %, [1/(2 + 4)] 4 Revenue Year Net income (ROE) [1–2] 5 2.7 ¥0.3 ¥5.1 1.8 1.3 1.6 100.7 98.8 95.5 package pricing. They also will introduce a new top tier, with a $1,800 monthly fee, for a package that includes more than 10,000 reports. Further, the Reserve Banks will introduce a fixed monthly fee and a volume-based tiered pricing structure for the FedGlobal ACH service.39 The tiered pricing structure will include peritem surcharges that are in addition to the standard FedACH origination fee of $0.0032 and vary according to the transaction’s destination, as seen in table 9. The top tier will cover monthly origination volume over 500 items and include a $185 fixed monthly fee and a per-item surcharge that is $0.12 lower than current per-item fees. The next tier will cover monthly origination volume between 161 and 500 items and include a $60 fixed monthly fee and a per-item surcharge that is $0.13 higher than current per-item fees. The bottom tier will cover monthly origination volume between 0 and 160 items and include a $20 fixed monthly fee and a per-item surcharge that is $0.38 higher than current per-item fees. TABLE 9—FEDGLOBAL ACH SERVICE VOLUME-BASED ORIGINATION SURCHARGES 40 Volume (items) Fixed monthly fee More than 500 .................................................. 161–500 ........................................................... 0–160 ............................................................... Canada (per transaction) Mexico (per transaction) Panama (per transaction) Europe (per transaction) $0.50 0.75 1.00 $0.55 0.80 1.05 $0.60 0.85 1.10 $1.13 1.38 1.63 $185 60 20 mstockstill on DSK3G9T082PROD with NOTICES The Reserve Banks estimate that the price changes will result in a 5.3 percent average price increase for FedACH customers. While the Reserve Banks are not budgeted to fully recover costs in 2017, they are expected to fully recover costs 37 The Reserve Banks have been engaged in a multiyear technology initiative to modernize the FedACH processing platform by migrating the service from a mainframe system to a distributed computing environment. In 2016, the Reserve Banks chose a commercially available option as their processing solution to modernize the FedACH platform. 38 Any originating depository financial institution (ODFI) incurring less than $50 for the following fees will be charged the difference to reach the minimum: Forward value and nonvalue item origination fees, FedGlobal ACH origination surcharges, and FedACH SameDay forward origination surcharges. Any receiving depository financial institution (RDFI) that incurs less than $40 in receipt fees and originates forward value and nonvalue items incurring less than $50 in origination fees will only be charged the difference in the origination fee to reach the minimum monthly origination fee of $50. Any RDFI that incurs less than $40 in receipt fees and is not originating forward value and nonvalue items will incur the $40 minimum monthly fee for receipt. 39 The FedGlobal ACH pricing changes meet the Federal Reserve Board’s guidance on the Reserve Banks’ use of volume-based pricing for electronic payment services and products. 62 FR 14146 (March 25, 1997) (FRB Docket No. R–0967). 40 These per-item surcharges are in addition to the standard domestic FedACH origination fees. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1 75068 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices following finalization of the FedACH technology modernization project. The Reserve Banks’ FedACH fee increases balance raising fees dramatically during a temporary period of increased costs associated with a defined technology upgrade that will be expected to result in significant over recovery following this defined period. The approach to moderately increase fees only is consistent with a multi-year strategy to minimize pricing volatility and provide long-term price stability for customers while undertaking the ongoing technology upgrade that will result in FedACH incurring higher expenses over the next few years. The primary risks to the Reserve Banks’ ability to achieve budgeted 2017 cost recovery for the FedACH service are cost overruns associated with unanticipated problems related to efforts to modernize the FedACH processing platform and higher-thanexpected support and overhead costs. Other risks include lower-than-expected volume and associated revenue due to unanticipated mergers and acquisitions and loss of market share due to direct exchanges and a shift of volume to the private-sector operator. E. Fedwire Funds and National Settlement Services—Table 10 shows the 2015 actual, 2016 estimate, and 2017 budgeted cost-recovery performance for the Fedwire Funds and National Settlement Services. TABLE 10—FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] 1 2015 (actual) ........................................................................ 2016 (estimate) .................................................................... 2017 (budget) ....................................................................... Total expense 2 3 116.0 123.1 128.8 110.1 118.0 126.3 5.9 5.1 2.6 Targeted ROE Recovery rate after targeted ROE (%) [1/(2 + 4)] 4 Revenue Year Net income (ROE) [1–2] 5 1.6 1.3 1.3 103.9 103.2 101.0 mstockstill on DSK3G9T082PROD with NOTICES 1. 2016 Estimate—The Reserve Banks estimate that the Fedwire Funds and National Settlement Services will recover 103.2 percent of total expenses and targeted ROE, compared with a 2016 budgeted recovery rate of 99.4 percent. Through August, Fedwire Funds Service online volume was 3.6 percent higher than for the same period last year. For full-year 2016, the Reserve Banks estimate Fedwire Funds Service online volume to increase 1.9 percent from 2015 levels, compared with the 0.3 percent volume decrease that had been budgeted. The Reserve Banks do not expect the volume growth in 2015 and early 2016 to continue at that level through year-end. Through August, National Settlement Service settlement file volume was 1.0 percent lower than for the same period last year, and settlement entry volume was 3.0 percent lower. For the full year, the Reserve Banks estimate that settlement file volume will decrease 1.1 percent (compared with a budgeted 5.3 percent increase) and settlement entry volume will decrease 4.0 percent from 2015 levels (compared with a budgeted 0.8 percent decrease). NSS settlement file and entry volumes are anticipated to be lower than budgeted, as the onboarding of a new arrangement originally expected to occur in the fourth quarter of 2016 has now been delayed until 2017. 2. 2017 Pricing—The Reserve Banks expect the Fedwire Funds and National Settlement Services to recover 101.0 percent of total expenses and targeted ROE. Revenue is projected to be $128.8 million, an increase of 4.6 percent from the 2016 estimate. The Reserve Banks project total expenses to be $8.3 million higher than the 2016 expenses, primarily because of capitalized software costs associated with the Fedwire Funds modernization program that will be amortized until January 2022 and other costs related to new resiliency initiatives. The Reserve Banks will adjust the incentive pricing fees for the Fedwire Funds Service by increasing the Tier 1 per-item preincentive fee (the fee before volume discounts are applied) from $0.790 to $0.820, increasing the Tier 2 per-item preincentive fee from $0.240 to $0.245, and increasing the Tier 3 peritem preincentive fee from $0.155 to $0.170.41 The Reserve Banks also will increase the surcharge for offline transactions from $55 to $60. The Reserve Banks estimate that the price changes will result in a 3.3 percent average price increase for Fedwire Funds customers. The Reserve Banks will not change National Settlement Service fees for 2017. The primary risks to the Reserve Banks’ ability to achieve budgeted 2017 cost recovery for these services are cost overruns from new initiatives to improve resiliency and operational functionality. F. Fedwire Securities Service—Table 11 shows the 2015 actual, 2016 estimate, and 2017 budgeted cost recovery performance for the Fedwire Securities Service.42 41 The per-item preincentive fee is the fee that the Reserve Banks charge for transfers that do not qualify for incentive discounts. The Tier 1 per-item preincentive fee applies to the first 14,000 transfers, the Tier 2 per-item preincentive fee applies to the next 76,000 transfers, and the Tier 3 per-item preincentive fee applies to any additional transfers. The Reserve Banks apply an 80 percent incentive discount to transfers over 60 percent of a customer’s historic benchmark volume. 42 The Reserve Banks provide transfer services for securities issued by the U.S. Treasury, federal government agencies, government-sponsored enterprises, and certain international institutions. The priced component of this service consists of revenues, expenses, and volumes associated with the transfer of all non-Treasury securities. For Treasury securities, the U.S. Treasury assesses fees for the securities transfer component of the service. The Reserve Banks assess a fee for the funds settlement component of a Treasury securities transfer; this component is not treated as a priced service. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 E:\FR\FM\28OCN1.SGM 28OCN1 75069 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices TABLE 11—FEDWIRE SECURITIES SERVICE PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] 1 mstockstill on DSK3G9T082PROD with NOTICES 2015 (actual) ........................................................................ 2016 (estimate) .................................................................... 2017 (budget) ....................................................................... 1. 2016 Estimate—The Reserve Banks estimate that the Fedwire Securities Service will recover 97.6 percent of total expenses and targeted ROE, close to the 2016 budgeted recovery rate of 97.5 percent. Through August, Fedwire Securities Service online agency transfer volume was 13.1 percent lower than during the same period last year. For full-year 2016, the Reserve Banks estimate Fedwire Securities Service online agency transfer volume will decline 13.5 percent from 2015 levels, compared with a budgeted decline of 5.4 percent. The lower-than-expected online agency transfer volume resulted from lowerthan-projected Agency debt issuance, as Fannie Mae and Freddie Mac continue to reduce the overall size of their portfolios in accordance with Federal Housing Finance Agency guidelines. In addition, new mortgage originations and mortgage paydowns from refinancing activity are expected to decline before year-end if interest rates rise in the fourth quarter, which will result in falling levels of issuance and settlement activity for agency mortgage-backed securities over Fedwire Securities. Through August, account maintenance volume was 4.4 percent lower than during the same period last year. For the full year 2016, the Reserve Banks estimate that account maintenance volume will decline 5.0 percent over 2015 levels, compared with a budgeted decline of 8.8 percent. The higher account maintenance volume is the result of conservative estimates for customer account closures that have not materialized. 2. 2017 Pricing—The Reserve Banks expect the Fedwire Securities Service to recover 97.5 percent of total expenses and targeted ROE in 2017. The Reserve Banks project that online agency transfer activity will decline 7.5 percent in 2017, the number of accounts maintained will decrease 7.4 percent, and the number of agency issues VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 Total expense 2 3 27.1 25.8 29.0 24.7 26.2 29.4 maintained will decrease 2.4 percent.43 The projected decline in both online transfer and account maintenance volume in 2017 reflects, in part, an anticipated drop in demand resulting from JP Morgan Chase’s exit from the U.S. government securities clearing and settlement business for its broker-dealer services by mid-2018.44 Moreover, as in 2016, the Reserve Banks continue to project a decrease in online transfers as interest rates may possibly increase, leading to less mortgage refinancing, and, in turn, reducing issuances of mortgage-backed securities. In addition, the reduction in agency debt issuance will continue to reflect a reduction in government-sponsored enterprise portfolios, as required by the U.S. Treasury and the Federal Housing Finance Agency, leading to a reduced funding need for new debt issuance.45 New settlement logic launched by the Fixed Income Clearing Corporation in January 2016, and further changes in mid-2017 are also expected to reduce the number of agency debt transfers over the Fedwire Securities Service.46 Revenue is projected to be $29.0 million, an increase of 12.4 percent from the 2016 estimate; this projected rise in revenue results from higher fees, 43 The online transfer fee, monthly account maintenance fee, and monthly issue maintenance fee accounted for approximately 93 percent of total Fedwire Securities Service revenue through June 2016. 44 JP Morgan Chase announced in July 2016, its intent to exit the government securities clearing and settlement business. It is expected that the exit will result in significant reductions of transfer volume over Fedwire Securities as more transactions shift to in-house activity at the remaining custodian banks. 45 Government-sponsored enterprises are reducing their retained portfolio by 15 percent annually through 2018, as mandated by the Senior Preferred Stock Purchase Agreements, until each portfolio reaches a target level of $250 billion. Further information on these agreements can be found at: http://www.fhfa.gov/Conservatorship/ Pages/Senior-Preferred-Stock-PurchaseAgreements.aspx. 46 Information on the Fixed Income Clearing Corporation’s new settlement logic can be found at http://www.dtcc.com/∼/media/Files/pdf/2015/6/22/ GOV045-15.pdf. PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 2.4 ¥0.4 ¥0.4 Targeted ROE Recovery rate after targeted ROE (%) [1/(2 + 4)] 4 Revenue Year Net income (ROE) [1–2] 5 0.3 0.3 0.3 108.2 97.6 97.5 discussed below, that offset the anticipated online transfer and account maintenance volume declines. The Reserve Banks also project that 2017 expenses will increase by $3.2 million, compared with 2016 expenses, reflecting higher expected operating costs. Higher operating costs in 2017 reflect the amortization of capital software costs from completed modernization initiatives as well as the advancement of new initiatives to improve resiliency and operational functionality. The Reserve Banks will increase the online agency transfer fee from $0.65 to $0.77 and increase the offline origination and receipt surcharge transfer fee from $66 to $80. The Reserve Banks also will increase the monthly agency issues maintenance fee from $0.65 to $0.77 and will increase the monthly account maintenance fee from $48 to $57.50. Moreover, the Reserve Banks will increase the joint custody origination surcharge from $44 to $46. Finally, the Reserve Banks will increase the claims adjustment fees from $0.75 to $0.80. The Reserve Banks estimate that the price changes will result in an 18.0 percent average price increase for Fedwire Securities customers. The primary risks to the Reserve Banks’ ability to achieve budgeted 2017 cost recovery for these services are lower-than-expected volume resulting from the pace of structural changes in government securities settlement, and cost overruns from new initiatives to improve resiliency and operational functionality. G. FedLine Access—The Reserve Banks charge fees for the electronic connections that depository institutions use to access priced services and allocate the costs and revenue associated with this electronic access to the various priced services. There are currently five FedLine channels through which customers can access the Reserve Banks’ priced services: FedMail, FedLine Web, FedLine Advantage, FedLine Command, and FedLine E:\FR\FM\28OCN1.SGM 28OCN1 75070 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES Direct.47 The Reserve Banks package these channels into nine FedLine packages, described below, that are supplemented by a number of premium (or a la carte) access and accounting information options. In addition, the Reserve Banks offer FedComplete packages, which are bundled offerings of a FedLine Advantage connection and a fixed number of FedACH, Fedwire Funds, and Check 21-enabled services. Six attended access packages offer manual access to critical payment and information services via a web-based interface. The FedLine Exchange package provides access to basic information services via email, while two FedLine Web packages offer an email option plus online attended access to a range of services, including cash services, FedACH information services, and check services. Three FedLine Advantage packages expand upon the FedLine Web packages and offer attended access to critical transactional services: FedACH, Fedwire Funds, and Fedwire Securities. Three unattended access packages are computer-to-computer, IP-based interfaces. The FedLine Command package offers an unattended connection to FedACH, as well as most accounting information services. The two remaining options are FedLine Direct packages, which allow for unattended connections at one of two connection speeds to FedACH, Fedwire Funds, and Fedwire Securities transactional and information services and to most accounting information services.48 For the 2017 FedLine fees, the Reserve Banks will increase five existing monthly fees: (1) The FedLine Web Plus fee from $140 to $160, (2) the FedLine Direct Premier fee from $6,500 to $6,700, (3) the FedComplete 200 Plus fee from $1,300 to $1,350, (4) the FedComplete 200 Premier fee from $1,375 to $1,425, and (5) the FedMail Fax a la carte fee from $70 to $100. As in previous years, the Reserve Banks will introduce new fees on legacy services. In particular, the Reserve Banks will implement a legacy software fee to encourage FedLine Direct customers to migrate to an enhanced 47 FedMail, FedLine Web, FedLine Advantage, FedLine Command, and FedLine Direct are registered trademarks of the Federal Reserve Banks. 48 None of the FedLine packages offer an unattended connection to check services. The Reserve Banks offer an unattended check product, Check 21 Large File Delivery, outside of the FedLine suite that allows a depository institution to upload and download check image cash letters automatically via a direct network connection to the Reserve Banks. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 messaging solution.49 To provide customers sufficient time to migrate, the fee will not become effective until the third quarter of 2017. The fee will be introduced on July 1, 2017, at $5,000 per month and will increase in steps to $20,000 per month by the end of 2017.50 In addition, the Reserve Banks will remove the legacy email service from all FedLine Web, Advantage, Command, and Direct packages and introduce a $20-per-month fee to purchase an a la carte subscription to this service. Customers in these packages that currently use the email service will have the opportunity to cancel the service to avoid the a la carte fee. In addition, the Reserve Banks will modify the E-Payments Routing Directory and make several associated changes to FedLine packages and fees.51 Currently, all FedLine Web, Advantage, Command, and Direct packages include two services to download the directory: manual and automated.52 The Reserve Banks will introduce a new automated download service that will allow subscribers to provide access to the directory to their customers (that is, non-financial institutions that require access to the directory). Access to the directory will be controlled through the use of download codes, and financial institutions will be responsible for distributing the codes to their respective customers. Additionally, the Reserve Banks will include the automated download service in only plus- and premier-level FedLine packages.53 Five download codes will be included in these packages, and additional codes will be available to purchase through an a la carte option (codes will be available in bundles ranging in price from $75 to $2,000 per month). To accommodate the enhancements to the E-payments Directory, the Reserve Banks will introduce a new FedLine Exchange service, along with a new set 49 To avoid the fee, FedLine Direct customers will need to configure their systems to run a supported version of the MQ platform. MQ is a critical messaging component that facilitates the exchange of information between applications, systems, services and files. 50 The fee will increase to $10,000 per month on September 1, 2017, and to $20,000 per month on November 1, 2017. 51 E-Payments Routing Directory provides basic routing information for Fedwire Funds, Fedwire Securities, and FedACH transactions. 52 The manual service allows subscribers to download the directory in a manual fashion via a web-based interface. The automated service allows subscribers to schedule daily, weekly, or monthly automated (unattended) downloads of the directory. 53 Plus- and premier-level packages are FedLine Web Plus, FedLine Advantage Plus and Premier, FedLine Command Plus, and FedLine Direct Plus and Premier. In addition the new FedLine Exchange Premier package will have access to the automated service. PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 of associated packages. Currently, the FedLine Exchange service is an emailbased interface, and there is only one package available. The new FedLine Exchange service—which will be a webbased interface (that is, accessible via a web browser rather than email)—will allow customers that do not use FedLine for Federal Reserve Financial Services to access the E-Payments Routing Directory.54 The new service will be available in two packages: A base-level and premier-level. The base package, priced at $40 per month, will include the manual download directory service. The premier package, priced at $125 month, will include both the manual and automated download directory services.55 To ensure continuity of service, the services available in the existing FedLine Exchange package will continue to be available through a new package, FedMail, as discussed below. The Reserve banks will introduce a new FedMail package, priced at $85 per month, which will include the same email-based services included in the existing FedLine Exchange package.56 Subscribers of the existing FedLine Exchange package will be transitioned to the new FedMail package and experience a fee increase of $45.57 The Reserve Banks estimate that the price changes will result in an 8.1 percent average price increase for FedLine customers. II. Analysis of Competitive Effect All operational and legal changes considered by the Board that have a substantial effect on payment system participants are subject to the competitive impact analysis described in the March 1990 policy ‘‘The Federal Reserve in the Payments System.’’ 58 Under this policy, the Board assesses whether proposed changes will have a direct and material adverse effect on the ability of other service providers to compete effectively with the Federal 54 Customers that do not use FedLine to access Federal Reserve Financial Services are generally small financial institutions that partner with a payment processor or other third party for transactional processing. 55 FedLine Exchange customers will need to request credentials to access the manual directory download service. These credentials will be billed via a FedMail-FedLine Exchange Subscriber 5-pack. The automated download directory service under the FedLine Exchange Premier package includes five download codes so a separate subscriber 5-pack is not required. 56 The addition of the FedMail package and the FedLine Exchange Premier package will increase the total number of FedLine packages from nine to eleven. 57 The $45 increase represents the difference in price between the new FedMail package ($85) and the existing FedLine Exchange package ($40). 58 Federal Reserve Regulatory Service (FRRS) 9– 1558. E:\FR\FM\28OCN1.SGM 28OCN1 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES Reserve in providing similar services because of differing legal powers or constraints or because of a dominant market position deriving from such legal differences. If any proposed changes create such an effect, the Board must further evaluate the changes to assess whether the benefits associated with the changes—such as contributions to VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 payment system efficiency, payment system integrity, or other Board objectives—can be achieved while minimizing the adverse effect on competition. The 2017 fees, fee structures, and changes in service will not have a direct and material adverse effect on the ability of other service providers to PO 00000 Frm 00046 Fmt 4703 Sfmt 4703 75071 compete effectively with the Reserve Banks in providing similar services. The changes should permit the Reserve Banks to earn a ROE that is comparable to overall market returns and provide for full cost recovery over the long run. III. 2017 Fee Schedules BILLING CODE 6210–01–P E:\FR\FM\28OCN1.SGM 28OCN1 75072 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices FEDACH SERVICE 2017 FEE SCHEDULE EFFECTIVE JANUARY 3, 2017. BOLD INDICATES CHANGES FROM 2016 PRICES Fee FedACH minimum monthly fee Originating Depository Financial Institution (ODFI/9 Receiving Depository Financial Institution (RDFI) 6 $50.00 $40.00 Origination (per item or record) Forward or return items $0.0032 SameDay Service- forward item 61 $0.0010 surcharge $0.00 15 Addenda record FedLine Web®-originated returns and notification of change (NOC) 62 $0.35 63 Facsimile exception returns/NOC ............................................................................ $45.00 Automated NOC ........................................................................................................... $0.20 Volume-based discounts (based on monthly billed origination volume) per item when origination volume is: 750,001 to 1,500,000 items per month .................................................... $0.0005 discount more than 1,500,000 items per month ..................................................... $0.0007 discount Volume-based discounts (based on monthly billed receipt volume) per item when receipt volume is 64 : 59 Any ODFI incurring less than $50 in forward value and nonvalue item origination fees will be charged a variable amount to reach the minimum monthly origination fee. 60 Any RDFI not originating forward value and nonvalue items and incurring less than $40 in receipt fees will be charged a variable amount to reach the minimum monthly receipt fee. Any RDFI that originates forward value and nonvalue items incurring less than $50 in forward value and nonvalue item origination fees will only be charged a variable amount to reach the minimum monthly origination fee. 61 This surcharge is assessed on all forward items that qualify for same-day processing and settlement and is incremental to the standard origination item fee. 62 The fee includes the item and addenda fees in addition to the conversion fee. 63 The fee includes the item and addenda fees in addition to the conversion fee. Reserve Banks also assess a $30 fee for every government paper return/NOC they process. Origination discounts based on monthly volume apply only to those items received by FedACH receiving points and are available only to Premium Receivers (institutions receiving volume above a specified threshold through FedACH). VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00047 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.039</GPH> mstockstill on DSK3G9T082PROD with NOTICES 64 75073 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 10,000,001 to 15,000,000 items per month $0.0002 discount more than 15,000,000 items per month discount $0.0003 Receipt (per item or record) Forward Item .................................................................................................. $0.0032 Return Item .................................................................................................... $0.007 5 Addenda record ............................................................................................. $0.00 15 Volume-based discounts Non-Premium Receivers-RDFis receiving less than 90 percent of total network volume through FedACH per item when volume is: 750,001 to 12,500,000 items per month 65 ............................................ $0.0014 discount more than 12,500,000 items per month 66 ............................................. $0.0016 discount Premium Receivers, Level One-RDFis receiving at least 90 percent ofFedACHoriginated volume through FedACH per item when volume is: 750,001 to 1,500,000 items per month65 .............................................. $0.0014 discount 1,500,001 to 2,500,000 items per month66 ........................................... $0.0014 discount 2,500,001 to 12,500,000 items per month66 ......................................... $0.0015 discount more than 12,500,000 items per month66 ............................................. $0.0017 discount Premium Receivers, level two-RDFis receiving at least 90 percent of ACH volume originated through FedACH or EPN per item when volume is 750,001 to 1,500,000 items per month65 .............................................. $0.0014 discount 1,500,001 to 2,500,000 items per month66 ........................................... $0.0014 discount 2,500,001 to 12,500,000 items per month66 ......................................... $0.0016 discount more than 12,500,000 items per month66 ............................................. $0.0018 discount FedACH Bundled Service Discount Monthly Bundled Service Package Discount 67 ............................................ $20.00 discount Monthly FedACH Risk® Management fees 68 65 This per-item discount is a reduction to the standard receipt fees listed in this fee schedule. 66 Receipt volumes at these levels qualify for the waterfall discount, which includes all FedACH receipt items. 67 This monthly billing discount is available for any customer that (1) pays the FedACH minimum monthly fee; (2) purchases a FedLine Web Plus or higher package; and (3) subscribes to either FedACH RDFI Alert, FedACH Risk Origination Monitoring, or FedPayments Reporter. Criteria may be set for both the origination monitoring service and the RDFI alert service. Subscribers with no criteria set up will be assessed the $35 monthly package fee. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00048 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.040</GPH> mstockstill on DSK3G9T082PROD with NOTICES 68 75074 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices Risk Origination Monitoring Service/RDFI Alert Service package pricing ......................... . For up to 5 criteria sets .......................................................................................... $35.00 For 6 through 11 criteria sets ................................................................................ $70.00 For 12 through 23 criteria sets ............................................................................ $125.00 For 24 through 47 criteria sets ............................................................................ $150.00 For 48 through 95 criteria sets ............................................................................ $250.00 For 96 through 191 criteria sets .......................................................................... $425.00 For 192 through 383 criteria sets ........................................................................ $675.00 For 384 through 584 criteria sets ........................................................................ $850.00 For more than 585 criteria sets ......................................................................... $1, 100.00 Risk origination monitoring batch (based on total monthly volume) For 1 through 100,000 batches (per batch) ........................................................... $0.007 For more than 100,000 batches (per batch) ........................................................ $0.0035 Monthly FedPayments Reporter Service . 69 R ece1ver setup report FedPayments Reporter Service package pricing includes Standard reports 70 ACH received entries detail- customer and depository financial institution ACH volume summary by SEC code report - customer On Demand Surcharge 71 ........................................................................................... 1.00 Report delivery via FedLine file access solution (monthly fee) For up to 50 reports ...................................................................................... $40.00 For 51 through 150 reports .......................................................................... $60.00 For 151 through 500 reports ...................................................................... $110.00 For 501 through 1,000 reports ................................................................... $200.00 For 1,001 through 1,500 reports ................................................................ $285.00 For 1,501 through 2,500 reports ................................................................ $460.00 69 The Receiver Setup Report is provided as part of the FedPayments Reporter service and is free of charge to customers that subscribe to FedLine Web Plus, FedLine Advantage Plus, FedLine Advantage Premier, FedLine Command Plus, FedLine Direct Plus, or FedLine Direct Premier. Customers who receive the Receiver Setup Report only are not charged FedPayments Reporter package fees and are instead only charged FedLine access fees (see Attachment VI: FedLine Access Solutions). 70 71 The on demand surcharge applies to standard reports (as defined in the previous footnote), ACH received entries detail reports, and ACH volume summary by SEC code reports. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00049 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.041</GPH> mstockstill on DSK3G9T082PROD with NOTICES Standard reports include Customer Transaction Activity, Death Notification, International (IAT), Notification of Change, Payment Data Information File, Remittance Advice Detail, Remittance Advice Summary, Return Item, Return Ratio, Social Security Beneficiary, Originator Setup Reports, and Report Delivery via FedLine Access Solution. Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices For 2,501 For 3,501 For 4,501 For 5,501 For 7,001 For 8,501 For more 75075 through 3,500 reports ................................................................ $640.00 through 4,500 reports ................................................................ $820.00 through 5,500 reports ................................................................ $995.00 through 7,000 reports ............................................................. $1,225.00 through 8,500 reports ............................................................. $1,440.00 through 10,000 reports ........................................................... $1,650.00 than 10,000 reports ................................................................. $1,800.00 Premier reports (per report generated) 72 ACH volume summary by SEC code report - depository financial institution For 1 through 5 reports ............................................................................. $1 0. 00 For 6 through 10 reports ............................................................................. $6.00 For 11 or more reports ................................................................................ $1.00 On Demand Surcharge ................................................................................ $1.00 ACH volume summary by SEC code report- customer On Demand Surcharge ................................................................................ $1.00 Monthly ACH routing number activity report For 1 through 5 reports ............................................................................. $10.00 For 6 through 10 reports ............................................................................. $6.00 For 11 or more reports ................................................................................ $1.00 On Demand Surcharge ................................................................................ $1.00 Same Day Originated Batch Report (FedPayments Reporter Subscribers) .... $10.00 Same Day Originated Batch Report (non-FedPayments Reporter Subscribers)$30.00 On-us inclusion Participation (monthly fee per RTN) .............................................................. $10.00 Per-item ......................................................................................................... $0.0030 Per-addenda ................................................................................................... $0.0015 Report delivery via encrypted email (per email) ......................................................... $0.20 Other fees Monthly fee (per routing number) Participation fee 73 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $58.00 SameDay service origination participation fee 74 ................................. $10.00 surcharge FedACH settlement 75 ............................................................................................ $55.00 72 Premier reports generated on demand are subject to the package/tiered fees plus a surcharge. 73 The Participation fee applies to routing numbers that have received or originated FedACH transactions. Institutions that receive only U.S. government transactions through the Reserve Banks or that elect to use a private-sector operator exclusively are not assessed this fee. 74 This surcharge is assessed to any routing number that originates at least one item meeting the criteria for same-day processing and settlement in a given month and is incremental to the standard Participation fee. The FedACH settlement fee is applied to any routing number with activity during a month, including routing numbers of institutions that elect to use a private-sector operator exclusively but also have items routed to or from customers that access the ACH network through FedACH. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00050 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.042</GPH> mstockstill on DSK3G9T082PROD with NOTICES 75 75076 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices FedACH information extract file .................................................................... $150.00 IAT Output File Sort ............................................................................................. $75.00 Automated NOC participation fee 76 ....................................................................... $5.00 Non-electronic input/output fee 77 CD/DVD (CD or DVD) ........................................................................................ $50.00 Paper (file or report) .............................................................................................. $50.00 Fees established by NACHA 78 NACHA Same Day Entry fee (per item) .............................................................. $0.052 NACHA Same Day Entry credit (per item) ............................................. $0.052 (credit) NACHA Unauthorized Entry fee (per item) ........................................................... $4.50 NACHA Unauthorized Entry credit (per item) .......................................... $4.50 (credit) NACHA Admin Network fee (monthly fee per RTN) ......................................... $18.00 NACHA Admin Network fee (per entry) ....................................................... $0.000162 FedGlobal ACH Payments 79 Fixed Monthly Fee 80 Monthly origination volume more than 500 items .................................. $185.00 Monthly origination volume between 161 and 500 items................... $60.00 Monthly origination volume less than 161 items ........................................ $20.00 Per-item Origination Fee for Monthly Volume more than 500 Items (surcharge) 81 Canada service ............................................................................................... $0.50 Mexico service ................................................................................................. $0.55 Panama service ................................................................................................ $0.60 Europe service ................................................................................................. $1.13 Per-item Origination Fee for Monthly Volume between 161 and 500 items (surcharge) 81 Canada service ............................................................................................... $0.75 This fee does not apply to routing numbers that use the Reserve Banks for only U.S. government transactions. 76 The notification-of-change fee will be assessed only when automated NOCs are generated. 77 Limited services are offered in contingency situations. 78 The fees listed are collected from the ODFI and credited to NACHA (admin network fees) or to the RDFI (same-day entry fee and unauthorized entry fee) in accordance with the ACH Rules. 79 The international fees and surcharges vary from country to country because these are negotiated with each international gateway operator. The fixed monthly fee is a single monthly fee based on total FedGlobal ACH Payments origination volume. 81 This per-item surcharge is in addition to the standard domestic origination fees. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00051 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.043</GPH> mstockstill on DSK3G9T082PROD with NOTICES 80 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 75077 Mexico service ................................................................................................. $0.80 Panama service ................................................................................................ $0.85 Europe service ................................................................................................. $1.38 Per-item Origination Fee for Monthly Volume Less than 160 items (surcharge) 81 Canada service ............................................................................................... $1.00 Mexico service ................................................................................................. $1.05 Panama service ................................................................................................ $1.10 Europe service ................................................................................................ $1.63 Other FedGlobal ACH Payments Fees Canada service Return received from Canada 82 ................................................................... $0.99 Item trace at receiving gateway ................................................................... $5.50 Item trace not at receiving gateway ............................................................. $7.00 Mexico service fee Return received from Mexico 82 ................................................................... $0.91 Foreign currency to foreign currency (F3X) item originated to Mexico 81 .. $0.67 Item trace ................................................................................................... $13.50 Panama service fee Return received from Panama82 ................................................................... $1.00 NOC ............................................................................................................. $O.n Item trace ..................................................................................................... $7.00 Europe service fee F3X item originated to Europe 81 .................................................................. $1.25 Return received from Europe 82 .................................................................... $1.35 Item trace ..................................................................................................... $7.00 82 This per-item surcharge is in addition to the standard domestic receipt fees. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00052 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.044</GPH> mstockstill on DSK3G9T082PROD with NOTICES (This space is intentionally blank) 75078 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES EFFECTIVE JANUARY 2017 FEE SCHEDULE 3, 2017. BOLD INDICATES CHANGES FROM 2016 PRICES. Fedwire Funds Service Fee Monthly Participation Fee ................................................................................................. $95.00 Basic volume-based preincentive transfer fee (originations and receipts)- per transfer for: the first 14,000 transfers per month ........................................................................ $0.820 additional transfers up to 90,000 per month .......................................................... $0.245 every transfer over 90,000 per month ..................................................................... $0.170 Volume-based transfer fee with the incentive discount (originations and receipts)- per eligible transfer for: 83 the first 14,000 transfers per month ........................................................................ $0.164 additional transfers up to 90,000 per month .......................................................... $0.049 every transfer over 90,000 per month ..................................................................... $0.034 Surcharge for Off-line Transfers (Originations and Receipts) ................................... $60.00 Surcharge for End-of-Day Transfer Originations 84 ............................................................ $0.26 Monthly FedPayments Manager import/export fee 85 ....................................................... $50.00 Surcharge for high-value payments: > $10 million ................................................................................................................. $0.14 83 The incentive discounts apply to the volume that exceeds 60 percent of a customer's historic benchmark volume. Historic benchmark volume is based on a customer's average daily activity over the previous five calendar years. If a customer has fewer than five full calendar years of previous activity, its historic benchmark volume is based on its daily activity for as many full calendar years of data as are available. If a customer has less than one year of past activity, then the customer qualifies automatically for incentive discounts for the year. The applicable incentive discounts are as follows: $0.656 for transfers up to 14,000; $0.196 for transfers 14,001 to 90,000; and $0.136 for transfers over 90,000. 84 This surcharge applies to originators of transfers that are processed by the Reserve Banks after 5:00p.m. eastern time. This fee is charged to any Fedwire Funds participant that originates a transfer message via the FedPayments Manager (FPM) Funds tool and has the import/export processing option setting active at any point during the month. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00053 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.045</GPH> mstockstill on DSK3G9T082PROD with NOTICES 85 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 75079 > $100 million ............................................................................................................... $0.36 Surcharge for Payment Notification: Origination Surcharge 86 ................................................................................................ $0.20 National Settlement Service Basic Settlement Entry Fee ..................................................................................................... $1.50 Settlement File Fee ..................................................................................................... $30.00 Surcharge for Off-line File Origination 87 ......................................................................... $45.00 Minimum Monthly Fee (account maintenance) 88 ............................................................. $60.00 Special Settlement Arrangements (fee per day) 89 ........................................................... $150.00 (This space is intentionally blank) 86 Payment Notification and End-of-Day Origination surcharges apply to each Fedwire funds transfer message. 87 Offline files will be accepted only on an exception basis when a settlement agent's primary and backup means of transmitting settlement files are both unavailable. 88 Any customer account with total settlement charges less than $60 during a calendar month will be assessed a variable amount to reach the minimum monthly account maintenance fee. Special settlement arrangements use Fedwire Funds transfers to effect settlement. Participants in arrangements and settlement agents are also charged the applicable Fedwire Funds transfer fee for each transfer into and out of the settlement account. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00054 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.046</GPH> mstockstill on DSK3G9T082PROD with NOTICES 89 75080 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices FEDWIRE SECURITIES SERVICE 2017 FEE SCHEDULE (NON-TREASURY SECURITIES) EFFECTIVE JANUARY 3, 2017. BOLD INDICATES CHANGES FROM 2016 PRICES. Fee Basic Transfer Fee Transfer or reversal originated or received ............................................................. $0.77 Surcharge Offline origination & receipt surcharge ................................................................. $80.00 Monthly Maintenance Fees Account maintenance (per account) ........................................................................ $57.50 Issues maintained (per issue/per account) ................................................................ $0.77 Claim Adjustment Fee ............................................................................................................ $0.80 GNMA Serial Note Stripping or Reconstitution Fee 90 ............................................................ $9.00 Joint Custody Origination Surcharge 91 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $46.00 Delivery of Reports- Hard Copy Reports to On-Line Customers ......................................... $50.00 This service was formerly called the GNMA Serial Note CUSIP Fee. 91 Fedwire Securities Service charges customers the Joint Custody Origination Surcharge for both Agency and Treasury securities. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00055 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.047</GPH> mstockstill on DSK3G9T082PROD with NOTICES 90 75081 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices FEDLINE 2017 FEE SCHEDULE EFFECTIVE JANUARY 3, 2017. BOLD INDICATES CHANGES FROM 2016 PRICES. Fee FedComplete Packages (monthly) 92 FedComplete 100 Plus .......................................................................................................... $775.00 includes FedLine Advantage Plus package FedLine subscriber 5-pack FedMail-FedLine Exchange subscriber 5-pack 93 7,500 FedForward transactions 70 FedReturn transactions 14,000 FedReceipt® transactions 35 Fedwire funds origination transfers 3 5 F edwire funds receipt transfers Fedwire participation fee 1,000 FedACH origination items FedACH minimum fee 7,500 FedACH receipt items FedACH receipt minimum fee 10 F edACH web return/NOC 500 FedACH addenda originated 1,000 FedACH addenda received FedACH account servicing FedACH settlement FedComplete 100 Premier ................................................................................................... $850.00 includes FedLine Advantage Premier package Volumes included in the FedComplete 100 Plus package (This space is intentionally blank) 92 93 FedComplete customers that use the email service will be charged the FedMail Email ala carte fee. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00056 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.048</GPH> mstockstill on DSK3G9T082PROD with NOTICES FedComplete packages are all-electronic service options that bundle payment services with an access solution for one monthly fee. 75082 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices Fed Complete 200 Plus ................................................................................................... .$1,350.00 includes FedLine Advantage Plus package FedLine subscriber 5-pack FedMail-FedLine Exchange subscriber 5-pack 94 25,000 FedForward transactions 225 FedReturn transactions 25,000 FedReceipt transactions 100 Fedwire funds origination transfers 100 F edwire funds receipt transfers Fedwire participation fee 2,000 FedACH origination items FedACH minimum fee 25,000 FedACH receipt items FedACH receipt minimum fee 20 F edACH web return/NOC 750 FedACH addenda originated 1,500 FedACH addenda received FedACH account servicing FedACH settlement Fed Complete 200 Premier ............................................................................................. .$1,425.00 includes FedLine Advantage Premier package Volumes included in the FedComplete 200 Plus package FedComplete Excess Volume Surcharge 95 FedForward ..................................................................................................... $0.01/item FedReturn .................................................................................................... $0.7500/item Fedwire Funds Origination .......................................................................... $0.7000/item FedACH Origination ................................................................................... $0.0025/item 94 95 Per-item surcharges are in addition to the standard fees listed in the applicable priced services fee schedules. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00057 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.049</GPH> mstockstill on DSK3G9T082PROD with NOTICES FedComplete customers that use the email service will be charged the FedMail Email ala carte fee. Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 75083 FedComplete package credit incentive 96 ........................................................................ ($1,500.00) F edComplete credit adjustment ............................................................................................. various F edComplete debit adjustment .............................................................................................. various FedLine Customer Access Solutions (monthly/7 FedMail 98 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $85.00 includes FedMail access channel FedACH Advice and Settlement Information Fedwire Funds Offline Advices Check 21 Services Check 21 Duplicate Notification Service Check Adjustments Accounting Statements Daylight Overdraft Reports Billing Statement 96 New FedComplete package customers with a new FedLine Advantage connection are eligible for a one-time $1,500 credit applied to their Federal Reserve service charges. Customers receiving credit must continue using the FedComplete package for a minimum of six months or forfeit the $1,500 credit. 97 VPN hardware for FedLine Advantage and FedLine Command is billed directly by the vendor. A current list of fees can be found at http :1/www. frb services. org/fil es/ servi cefees/pdf/access/vendor_fees. pdf FedMail and FedLine Exchange packages do not include user credentials, which are required to access priced services and certain informational services. Credentials are sold separately in packs of five via the FedMail-FedLine Exchange Subscriber 5-pack. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00058 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.050</GPH> mstockstill on DSK3G9T082PROD with NOTICES 98 75084 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices FedLine Exchange98 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $40.00 includes E-Payments Routing Directory (manual download) FedLine Exchange Premier98 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $125.00 includes FedLine Exchange package E-Payments Routing Directory (auto download) FedLine Web 99 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $110.00 includes FedLine Web access channel Services included in the FedLine Exchange package Check FedForward, FedReturn and FedReceipt services Check Adjustments FedACH Information Services & Derived Returns/NOCs FedACH Risk Services (includes RDFI Alert and Returns Reporting) FedCash Services Service Charge Information FedLine Web Plus 99 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $160.00 includes FedLine Web package FedACH Risk Origination Monitoring Service FedACH FedPayments Reporter Service Check Large Dollar Return Check Fedlmage Services Account Management Information Various accounting and inquiry services (ABMS inquiry, IAS/PSR inquiry, lAS detailed inquiries, notifications and advices, end-of-day accounting file (PDF)) E-Payments Routing Directory (auto download) FedLine Advantage99 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $380.00 includes: FedLine Advantage access channel Services included in the FedLine Web package FedACH transactions FedLine Web and Advantage packages do not include user credentials, which are required to access priced services and certain informational services. Credentials are sold separately in packs of five via the FedLine Subscriber 5-pack. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00059 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.051</GPH> mstockstill on DSK3G9T082PROD with NOTICES 99 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 75085 Fedwire Funds transactions Fedwire Securities transactions National Settlement Service transactions Check Large Dollar Return Check Fedlmage Services Account Management Information with Intra-Day Download Search File Various accounting and inquiry services (ABMS inquiry, IAS/PSR inquiry, lAS detailed inquiries, notifications and advices, end-of-day accounting file (PDF)) FedLine Advantage Plus99 ..................................................................................................... $425.00 includes FedLine Advantage package FedACH Risk Origination Monitoring Service FedACH FedPayments Reporter Service Fedwire Funds FedPayments Manager Import/Export (less than 250 Fedwire transactions and one routing number per month) FedTransaction Analyzer® (less than 250 Fedwire transactions and one routing number per month) E-Payments Routing Directory (auto download) FedLine Advantage Premier99 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $500.00 includes FedLine Advantage Plus package Secondary VPN device Fedwire Funds FedPayments Manager Import/Export (more than 250 Fedwire transactions or more than one routing number in a given month) FedTransaction Analyzer (more than 250 Fedwire transactions or more than one routing number per month) F edLine Command Plus ..................................................................................................... $1,000.00 includes FedLine Command access channel Services included in the FedLine Advantage Plus package Two FedLine Command server certificates Fedwire Statement Services Fedwire Funds FedPayments Manager Import/Export (more than 250 Fedwire transactions or more than one routing number in a given month) Intra-Day File (1-Day CI File) Statement of Account Spreadsheet File (SASF) VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00060 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.052</GPH> mstockstill on DSK3G9T082PROD with NOTICES FedTransaction Analyzer (more than 250 Fedwire transactions or more than one routing number per month) 75086 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices Financial Institution Reconcilement Data File (FIRD) Billing Data Format File (BDFF) FedLine Direct Plus ........................................................................................................... $3,600.00 includes FedLine Direct access channel 256K Dedicated WAN Connection Services included in the FedLine Command Plus package Two FedLine Direct server certificates Treasury Check Information System (TCIS) FedLine Direct Premier ................................................................................................... $6, 700.00 includes FedLine Direct Plus package T1 dedicated WAN connection Secondary VPN device Cash Management Services Plus Own Report (No Respondent/Subaccount activity) Ala carte options (monthly) 100 Electronic Access FedMail- FedLine Exchange Subscriber 5-pack ........................................................... $15.00 FedLine Subscriber 5-pack (access to Web and Advantage) .............................................. $80.00 Additional FedLine Command Certificate 101 .................................................................... $100.00 Additional FedLine Direct Certificate 102 ........................................................................... $100.00 Additional VPNs- Maintenance Fee 103 ............................................................................... $60.00 Additional dedicated connections 256K ........................................................................................................ $2,500.00 T1 ........................................................................................................ $3,200.00 FedLine International Setup (one-time fee) .................................................................... $5,000.00 FedLine Custom Implementation Fee 104 ............................................................................ various 100 These add-on services can be purchased only with a FedLine Customer Access Service option. 101 Additional FedLine Command Certificates available for FedLine Command and Direct packages only. Additional FedLine Direct Certificates available for FedLine Direct packages only. 103 Additional VPNs are available for FedLine Advantage, FedLine Command, and FedLine Direct packages only. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00061 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.053</GPH> mstockstill on DSK3G9T082PROD with NOTICES 102 Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices 75087 FedLine Direct Contingency Solution ............................................................................ $1,000.00 Check 21 Large File Delivery 105 ....................................................................................... various FedMail Email (for FedLine customers) ......................................................................... $20.00 FedMail Fax ..................................................................................................................... $100.00 VPN Device Modification ................................................................................................. $200.00 VPN Device Missed Activation Appointment. .................................................................. $175.00 VPN Device Expedited Hardware Surcharge .................................................................... $100.00 VPN Device Replacement or Move ................................................................................... $300.00 E-Payments Automated Download (1-5 Add'l Codes) ........................................................ $75 E-Payments Automated Download (6-20 Add'l Codes) .................................................... $150 E-Payments Automated Download (21-50 Add'l Codes) .................................................. $300 E-Payments Automated Download (51-100 Add'l Codes) ................................................ $500 E-Payments Automated Download (101-250 Add'l Codes) ........................................... $1,000 E-Payments Automated Download (>250 Add'l Codes) ................................................ $2,000 Electronic Access Training Learning Center Certificate Retrieval Download Tutorial complimentary complimentary Accounting Information Services Cash Management System (CMS) Plus- Own report- up to six files with: 106 no respondent/sub-account activity ............................................................................. $60.00 less than 10 respondent and/or sub-accounts ............................................................ $125.00 10-50 respondent and/or sub-accounts ...................................................................... $250.00 51-100 respondents and/or sub-accounts .................................................................. $500.00 101-500 respondents and/or sub-accounts ................................................................ $750.00 >500 respondents and/or sub-accounts .................................................................. $1,000.00 End-of-Day Financial Institution Reconcilement Data File 107 .......................................... $150.00 104 The FedLine Custom Implementation Fee is $2,500 or $5,000 based on the complexity of the setup. 105 The fee ranges from $1,400 to $20,725 depending on the size, speed, and location ofthe connection. 106 Cash Management Service options are limited to plus and premier packages. The End of Day Reconcilement File option is available for FedLine Web Plus, FedLine Advantage Plus, and Premier packages. It is available for no extra fee in FedLine Command Plus and Direct packages. VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 PO 00000 Frm 00062 Fmt 4703 Sfmt 4725 E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.054</GPH> mstockstill on DSK3G9T082PROD with NOTICES 107 75088 By order of the Board of Governors of the Federal Reserve System, October 25, 2016. Robert deV. Frierson, Secretary of the Board. [FR Doc. 2016–26068 Filed 10–27–16; 8:45 am] BILLING CODE 6210–01–C DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services mstockstill on DSK3G9T082PROD with NOTICES [CMS–1667–FN] Medicare Program; Approval of Request for an Exception to the Prohibition on Expansion of Facility Capacity Under the Hospital Ownership and Rural Provider Exceptions to the Physician SelfReferral Prohibition Centers for Medicare & Medicaid Services (CMS), HHS. AGENCY: VerDate Sep<11>2014 18:12 Oct 27, 2016 Jkt 241001 ACTION: Final notice. This final notice announces our decision to approve the request of Deaconess Women’s Hospital of Southern Indiana doing business as (d/ b/a) The Women’s Hospital (The Women’s Hospital) for an exception to the prohibition on expansion of facility capacity. DATES: Effective Date: This notice is effective on October 28, 2016. FOR FURTHER INFORMATION CONTACT: POH-ExceptionRequests@ cms.hhs.gov. SUPPLEMENTARY INFORMATION: SUMMARY: I. Background Section 1877 of the Social Security Act (the Act), also known as the physician self-referral law—(1) prohibits a physician from making referrals for certain ‘‘designated health services’’ (DHS) payable by Medicare to an entity with which he or she (or an immediate PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 family member) has a financial relationship (ownership or compensation), unless the requirements of an applicable exception are satisfied; and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payer) for those DHS furnished as a result of a prohibited referral. Section 1877(d)(2) of the Act provides an exception, known as the rural provider exception, for physician ownership or investment interests in rural providers. In order for an entity to qualify for the rural provider exception, the DHS must be furnished in a rural area (as defined in section 1886(d)(2)(D) of the Act) and substantially all the DHS furnished by the entity must be furnished to individuals residing in a rural area. Section 1877(d)(3) of the Act provides an exception, known as the hospital ownership exception, for physician ownership or investment interests held E:\FR\FM\28OCN1.SGM 28OCN1 EN28OC16.055</GPH> Federal Register / Vol. 81, No. 209 / Friday, October 28, 2016 / Notices

Agencies

[Federal Register Volume 81, Number 209 (Friday, October 28, 2016)]
[Notices]
[Pages 75058-75088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26068]


=======================================================================
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FEDERAL RESERVE SYSTEM

[Docket No. OP-1552]


Federal Reserve Bank Services

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
has approved the private sector adjustment factor (PSAF) for 2017 of 
$16.6 million and the 2017 fee schedules for Federal Reserve priced 
services and electronic access. These actions were taken in accordance 
with the Monetary Control Act of 1980, which requires that, over the 
long run, fees for Federal Reserve priced services be established on 
the basis of all direct and indirect costs, including the PSAF.

DATES: The new fee schedules become effective January 3, 2017.

FOR FURTHER INFORMATION CONTACT: For questions regarding the fee 
schedules: Susan V. Foley, Senior Associate Director, (202) 452-3596; 
Linda Healey, Senior Financial Services Analyst, (202) 452-5274, 
Division of Reserve Bank Operations and Payment Systems. For questions 
regarding the PSAF: Gregory L. Evans, Deputy Associate Director, (202) 
452-3945; Lawrence Mize, Deputy Associate Director, (202) 452-5232; Max 
Sinthorntham, Senior Financial Analyst, (202) 452-2864, Division of 
Reserve Bank Operations and Payment Systems. For users of 
Telecommunications Device for the Deaf (TDD) only, please call (202) 
263-4869. Copies of the 2017 fee schedules for the check service are 
available from the Board, the Federal Reserve Banks, or the Reserve 
Banks' financial services Web site at www.frbservices.org.

SUPPLEMENTARY INFORMATION:

I. Private Sector Adjustment Factor, Priced Services Cost Recovery, and 
Overview of 2017 Price Changes

    A. Overview--Each year, as required by the Monetary Control Act of 
1980, the Reserve Banks set fees for priced services provided to 
depository institutions. These fees are set to recover, over the long 
run, all direct and indirect costs and imputed costs, including 
financing costs, taxes, and certain other expenses, as well as the 
return on equity (profit) that would have been earned if a private 
business firm provided the services. The imputed costs and imputed 
profit are collectively referred to as the PSAF. From 2006 through 
2015, the Reserve Banks recovered 102.6 percent of their total expenses 
(including imputed costs) and targeted after-tax profits or return on 
equity (ROE) for providing priced services.\1\
---------------------------------------------------------------------------

    \1\ The 10-year recovery rate is based on the pro forma income 
statements for Federal Reserve priced services published in the 
Board's Annual Report. Effective December 31, 2006, the Reserve 
Banks implemented the Financial Accounting Standard Board's (FASB) 
Statement of Financial Accounting Standards (SFAS) No. 158, 
Employers' Accounting for Defined Benefit Pension and Other 
Postretirement Plans (codified in FASB Accounting Standards 
Codification (ASC) Topic 715 (ASC 715), Compesation-Retirement 
Benefits), which resulted in recognizing a cumulative reduction in 
equity related to the priced services' benefit plans. Including this 
cumulative reduction in equity from 2006 to 2015 results in cost 
recovery of 92.8 percent for the ten-year period. This measure of 
long-run cost recovery is also published in the Board's Annual 
Report.
---------------------------------------------------------------------------

    Table 1 summarizes 2015 actual, 2016 estimated, and 2017 budgeted 
cost-recovery rates for all priced services. Cost recovery is estimated 
to be 103.6 percent in 2016 and budgeted to be 100.0 percent in 2017.

                  Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance \a\
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                  5 \e\ Recovery
                                                    2 \c\ Total    3 Net income   4 \d\ Targeted    rate after
              Year                 1 \b\ Revenue      expense          (ROE)            ROE        targeted  ROE
                                                                                                        (%)
                                                                           [1-2]                       [1/(2+4)]
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................           429.1           397.8            31.3             5.6           106.4
2016 (estimate).................           432.5           413.3            19.1             4.1           103.6
2017 (budget)...................           439.4           434.8             4.6             4.6           100.0
----------------------------------------------------------------------------------------------------------------
\a\ Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding.
\b\ Revenue includes imputed income on investments when equity is imputed at a level that meets minimum capital
  requirements and, when combined with liabilities, exceeds total assets.
\c\ The calculation of total expense includes operating, imputed, and other expenses. Imputed and other expenses
  include taxes, Board of Governors' priced services expenses, the cost of float, and interest on imputed debt,
  if any. Credits or debits related to the accounting for pension plans under FAS 158 [ASC 715] are also
  included.
\d\ Targeted ROE is the after-tax ROE included in the PSAF.

[[Page 75059]]

 
\e\ The recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be
  recognized in accordance with FAS 158 [ASC 715]. Future gains or losses, and their effect on cost recovery,
  cannot be projected.

    Table 2 provides an overview of cost-recovery budgets, estimates, 
and performance for the 10-year period from 2006 to 2015, 2015 actual, 
2016 budget, 2016 estimate, and 2017 budget by priced service.

                                     Table 2--Priced Services Cost Recovery
                                                    [Percent]
----------------------------------------------------------------------------------------------------------------
                                                                    2016 Budget                     2017 Budget
         Priced service              2006-2015      2015 Actual         \a\        2016 Estimate        \b\
----------------------------------------------------------------------------------------------------------------
All services....................           102.6           106.4           101.4           103.6           100.0
Check...........................           103.6           113.0           105.7           109.7           104.5
FedACH..........................            99.5           100.7            99.5            98.8            95.5
Fedwire Funds and NSS...........           101.8           103.9            99.4           103.2           101.0
Fedwire Securities..............           102.7           108.2            97.5            97.6            97.5
----------------------------------------------------------------------------------------------------------------
\a\ The 2016 budget figures reflect the final budgets as approved by the Board in December 2015.
\b\ The 2017 budget figures reflect preliminary budget information from the Reserve Bank. The Reserve Banks will
  submit final budget data to the Board in November 2016, for Board consideration in December 2016.

    1. 2016 Estimated Performance--The Reserve Banks estimate that they 
will recover 103.6 percent of the costs of providing priced services in 
2016, including total expense and targeted ROE, compared with a 2016 
budgeted recovery rate of 101.4 percent, as shown in table 2. Overall, 
the Reserve Banks estimate that they will fully recover actual and 
imputed costs and earn net income of $19.1 million, compared with the 
targeted ROE of $4.1 million. The Reserve Banks estimate that the check 
service and the Fedwire[supreg] Funds and National Settlement Service 
will achieve full cost recovery; however, the Reserve Banks estimate 
that the FedACH[supreg] Service and the Fedwire Securities Service will 
not achieve full cost recovery because of investment costs associated 
with multiyear technology initiatives to modernize their processing 
platforms.\2\ These investments are expected to enhance efficiency, the 
overall quality of operations, and the Reserve Banks' ability to offer 
additional services to depository institutions. Greater-than-expected 
check volume processed by the Reserve Banks has been the single most 
significant factor influencing priced services cost recovery.
---------------------------------------------------------------------------

    \2\ The Reserve Banks have been engaged in a multiyear 
technology initiative to modernize the FedACH processing platform by 
migrating the service from a mainframe system to a distributed 
computing environment. In 2016, the Reserve Banks chose a 
commercially available option as their processing solution to 
modernize the FedACH platform.
    The Reserve Banks completed a multiyear technology initiative to 
modernize the processing platform for the Fedwire Securities 
Services in 2015. The capitalized software costs of this initiative 
will be amortized until October 2020 and thus remain a primary 
factor in the cost recovery calculation for these services in 2016.
---------------------------------------------------------------------------

    2. 2017 Private-Sector Adjustment Factor--The 2017 PSAF for Reserve 
Bank priced services is $16.6 million. This amount represents an 
increase of $3.5 million from the 2016 PSAF of $13.1 million. This 
increase is primarily the result of an increase in the total cost of 
capital, which includes cost of debt and targeted return on equity.
    3. 2017 Projected Performance--The Reserve Banks project a priced 
services cost-recovery rate of 100.0 percent in 2017, with both net 
income and targeted ROE of $4.6 million. The Reserve Banks project that 
the price changes will result in a 3.2 percent average price increase 
for customers. The Reserve Banks project that the check service and the 
Fedwire Funds and National Settlement Service will fully recover their 
costs; however, the Reserve Banks project that the FedACH Service and 
the Fedwire Securities Service will not achieve full cost recovery. 
Although FedACH is not budgeted to fully recover its costs in 2017, the 
Reserve Banks are expected to fully recover FedACH costs following 
finalization of the FedACH technology modernization project and over 
the long run. In addition, the Board believes the Reserve Banks' 2017 
FedACH fee increases are consistent with a multi-year strategy to 
minimize pricing volatility and provide long-term price stability for 
customers while undertaking the ongoing technology upgrade that will 
result in FedACH incurring higher expenses over the next few years. 
Although the Fedwire Securities Service is not budgeted to fully 
recover its costs in 2017, the Board believes the Reserve Banks are 
expected to fully recover Fedwire Securities Service costs over the 
long run following a few years of under recovery. As a result of an 
expected decrease in volume as well as the advancement of new 
initiatives to improve resiliency and operational functionality, the 
Reserve Banks plan to increase fees gradually over a multi-year period 
to avoid the dramatic impact of a sharp one-year increase.
    The primary risks to the Reserve Banks' ability to achieve their 
targeted cost-recovery rates are unanticipated volume and revenue 
reductions and the potential for cost overruns with the technology 
modernization initiatives. In light of these risks, the Reserve Banks 
will continue refining their business and operational strategies to 
manage operating costs, to increase product revenue, and to capitalize 
on efficiencies gained from technology initiatives.
    4. 2017 Pricing--The following summarizes the Reserve Banks' fee 
schedules for priced services in 2017:
    Check
     The Reserve Banks announced in July 2016, restructured 
FedForward[supreg], FedReturn[supreg], and FedReceipt[supreg] fee 
schedules to reflect today's electronic check-processing environment 
and announced in October 2016 a minor additional modification.\3\ These 
previously announced fees, discussed in attachment II, will be 
effective in January 2017, consistent with the fee schedules for other 
priced services. The Reserve Banks announced the restructured fee 
schedules earlier in the year to provide customers with sufficient 
notice.
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    \3\ For the July announcement, see https://www.frbservices.org/files/servicefees/pdf/071116_2017_check_pricing_customer_letter.pdf.
    For the October announcement, see https://frbservices.org/files/communications/pdf/check/100316-check-modification-announcement.pdf.
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    FedACH
     The Reserve Banks will increase the minimum monthly fee 
for FedACH origination from $45 to $50 and the minimum monthly fee for 
FedACH receipt from $35 to $40.
     The Reserve Banks will increase the FedACH Account 
Servicing fee from

[[Page 75060]]

$45 to $58. The Reserve Banks will also change the name of the FedACH 
Account Servicing fee to the FedACH Participation fee.
     The Reserve Banks will eliminate the on-us receipt credit 
of $0.0032 per item.
     The Reserve Banks will increase the FedACH Information 
Extract File fee from $100 to $150 per file.
     The Reserve Banks will increase the FedPayments Reporter 
fee approximately 10 percent rounded to the nearest $5 for each level 
of the tiered package pricing. The Reserve Banks also will introduce a 
new top tier, with a $1,800 monthly fee, for a package that includes 
more than 10,000 reports.
     The Reserve Banks will introduce a fixed monthly fee and a 
volume-based tiered pricing structure for the FedGlobal ACH service. 
The tiered pricing structure will include per-item surcharges that are 
in addition to the standard FedACH origination fee of $0.0032 and vary 
according to the transaction's destination, as seen in table 9. The top 
tier will cover monthly origination volume of more than 500 items and 
include a $185 fixed monthly fee and a per-item surcharge that is $0.12 
lower than current per-item fees. The next tier will cover monthly 
origination volume between 161 and 500 items and include a $60 fixed 
monthly fee and a per-item surcharge that is $0.13 higher than current 
per-item fees. The bottom tier will cover monthly origination volume 
between 0 and 160 items and include a $20 fixed monthly fee and a per-
item surcharge that is $0.38 higher than current per-item fees.
    Fedwire Funds
     The Reserve Banks will increase the Tier 1 per-item 
preincentive fee from $0.790 to $0.820 per transaction, increase the 
Tier 2 per-item preincentive fee from $0.240 to $0.245, and increase 
the Tier 3 per-item preincentive fee from $0.155 to $0.170 per 
transaction.\4\
---------------------------------------------------------------------------

    \4\ The per-item preincentive fee is the fee that the Reserve 
Banks charge for transfers that do not qualify for incentive 
discounts. The Tier 1 per-item preincentive fee applies to the first 
14,000 transfers, the Tier 2 per-item preincentive fee applies to 
the next 76,000 transfers, and the Tier 3 per-item preincentive fee 
applies to any additional transfers. The Reserve Banks apply an 80 
percent incentive discount to transfers over 60 percent of a 
customer's historic benchmark volume.
---------------------------------------------------------------------------

     The Reserve Banks will increase the surcharge for offline 
transactions from $55 to $60.
    National Settlement Services
     The Reserve Banks will keep prices at existing levels for 
the priced National Settlement Services.
    Fedwire Securities
     The Reserve Banks will increase the online agency transfer 
fee from $0.65 to $0.77.
     The Reserve Banks will increase the offline origination 
and receipt surcharge transfer fee from $66 to $80.
     The Reserve Banks will increase the monthly agency issues 
maintenance fee from $0.65 to $0.77.
     The Reserve Banks will increase the monthly account 
maintenance fee from $48.00 to $57.50.
     The Reserve Banks will increase the joint custody 
origination surcharge from $44 to $46.
     The Reserve Banks will increase the claims adjustment fees 
from $0.75 to $0.80.
    FedLine[supreg] Access Solutions
     The Reserve Banks will increase five existing monthly 
fees: (1) The FedLine Web[supreg] Plus fee from $140 to $160, (2) the 
FedLine Direct[supreg] Premier fee from $6,500 to $6,700, (3) the 
FedComplete[supreg] 200 Plus fee from $1,300 to $1,350, (4) the 
FedComplete 200 Premier fee from $1,375 to $1,425, and (5) the 
FedMail[supreg] Fax a la carte fee from $70 to $100.
     The Reserve Banks will implement a legacy software fee to 
encourage FedLine Direct customers to migrate to a new messaging 
solution. The fee will be introduced in July 2017 at $5,000 per month 
and will increase in steps to $20,000 per month by the end of 2017.
     The Reserve Banks will remove the legacy email service 
from all FedLine Web, Advantage[supreg], Command[supreg], and Direct 
packages and introduce a $20-per-month fee to purchase an a la carte 
subscription to this service.
     The Reserve Banks will modify the E-Payments Routing 
Directory and make associated changes to FedLine packages and fees. A 
new automated download directory service will be introduced and 
available only to subscribers of plus- and premier-level FedLine 
packages. A la carte fees for additional directory download codes, 
ranging from $75 to $2,000 per month, will also be introduced. In 
addition, the new lineup of FedLine Exchange packages, discussed below, 
will allow customers that do not use FedLine for Federal Reserve 
Financial Services to access the directory.
     The Reserve Banks will introduce a new FedLine 
Exchange[supreg] service, along with two new associated packages: A 
base-level and premier-level. The base package will be priced at $40 
per month and include the manual download directory service. The 
premier package will be priced at $125 per month and include both the 
manual and automated download directory services.
     The Reserve Banks will introduce a new FedMail package, 
priced at $85 per month, which will include the same services as those 
included in the existing FedLine Exchange package to ensure continuity 
of this service. All existing FedLine Exchange subscribers will be 
transitioned to the new FedMail package and experience a fee increase 
of $45.
    5. 2017 Price Index--Figure 1 compares indexes of fees for the 
Reserve Banks' priced services with the GDP price index.\5\ The price 
index for Reserve Bank priced services is projected to decrease less 
than 1 percent in 2017 from the 2016 level. The price index for Check 
21 services is projected to decrease approximately 3 percent. The price 
index for the FedACH Service is projected to increase nearly 1 percent. 
The price index for the Fedwire Funds and National Settlement Services 
is projected to increase approximately 2 percent. The price index for 
the Fedwire Securities Services is projected to increase nearly 1 
percent. For the period 2007 to 2017, the price index for total priced 
services is expected to decrease approximately 19 percent.
---------------------------------------------------------------------------

    \5\ For the period 2007 to 2015, the GDP price index increased 
13 percent.

---------------------------------------------------------------------------

[[Page 75061]]

[GRAPHIC] [TIFF OMITTED] TN28OC16.038

    B. Private Sector Adjustment Factor--The imputed debt financing 
costs, targeted ROE, and effective tax rate are based on a U.S. 
publicly traded firm market model.\6\ The method for calculating the 
financing costs in the PSAF requires determining the appropriate 
imputed levels of debt and equity and then applying the applicable 
financing rates. In this process, a pro forma balance sheet using 
estimated assets and liabilities associated with the Reserve Banks' 
priced services is developed, and the remaining elements that would 
exist are imputed as if these priced services were provided by a 
private business firm. The same generally accepted accounting 
principles that apply to commercial-entity financial statements apply 
to the relevant elements in the priced services pro forma financial 
statements.
---------------------------------------------------------------------------

    \6\ Data for U.S. publicly traded firms is from the Standard and 
Poor's Compustat[supreg] database. This database contains 
information on more than 6,000 U.S. publicly traded firms, which 
approximates the entirety of the U.S. market.
---------------------------------------------------------------------------

    The portion of Federal Reserve assets that will be used to provide 
priced services during the coming year is determined using information 
about actual assets and projected disposals and acquisitions. The 
priced portion of these assets is determined based on the allocation of 
depreciation and amortization expenses of each asset class. The priced 
portion of actual Federal Reserve liabilities consists of 
postemployment and postretirement benefits, accounts payable, and other 
liabilities. The priced portion of the actual net pension asset or 
liability is also included on the balance sheet.\7\
---------------------------------------------------------------------------

    \7\ The pension assets are netted with the pension liabilities 
and reported as a net asset or net liability as required by ASC 715 
Compensation--Retirement Benefits.
---------------------------------------------------------------------------

    The equity financing rate is the targeted ROE produced by the 
capital asset pricing model (CAPM). In the CAPM, the required rate of 
return on a firm's equity is equal to the return on a risk-free asset 
plus a market risk premium. The risk-free rate is based on the three-
month Treasury bill; the beta is assumed to be equal to 1.0, which 
approximates the risk of the market as a whole; and the market risk 
premium is based on the monthly returns in excess of the risk-free rate 
over the most recent 40 years. The resulting ROE reflects the return a 
shareholder would expect when investing in a private business firm.
    For simplicity, given that federal corporate income tax rates are 
graduated, state income tax rates vary, and various credits and 
deductions can apply, an actual income tax expense is not explicitly 
calculated for Reserve Bank priced services. Instead, the Board targets 
a pretax ROE that would provide sufficient income to fulfill the priced 
services' imputed income tax obligations. To the extent that 
performance results are greater or less than the targeted ROE, income 
taxes are adjusted using the effective tax rate.
    Capital structure. The capital structure is imputed based on the 
imputed funding need (assets less

[[Page 75062]]

liabilities), subject to minimum equity constraints. Short-term debt is 
imputed to fund the imputed short-term funding need. Long-term debt and 
equity are imputed to meet the priced services long-term funding need 
at a ratio based on the capital structure of the U.S. publicly traded 
firm market. The level of equity must meet the minimum equity 
constraints, which follow the FDIC requirements for a well-capitalized 
institution. The priced services must maintain equity of at least 5 
percent of total assets and 10 percent of risk-weighted assets.\8\ Any 
equity imputed that exceeds the amount needed to fund the priced 
services' assets and meet the minimum equity constraints is offset by a 
reduction in imputed long-term debt. When imputed equity is larger than 
what can be offset by imputed debt, the excess is imputed as 
investments in Treasury securities; income imputed on these investments 
reduces the PSAF.
---------------------------------------------------------------------------

    \8\ The FDIC rule, which was adopted as final on April 14, 2014, 
requires that well-capitalized institutions meet or exceed the 
following standards: (1) Total capital to risk-weighted assets ratio 
of at least 10 percent, (2) tier 1 capital to risk-weighted assets 
ratio of at least 8 percent, (3) common equity tier 1 capital to 
risk-weighted assets ratio of at least 6.5 percent, and (4) a 
leverage ratio (tier 1 capital to total assets) of at least 5 
percent. Because all of the Federal Reserve priced services' equity 
on the pro forma balance sheet qualifies as tier 1 capital, only 
requirements 1 and 4 are binding. The FDIC rule can be located at 
https://www.fdic.gov/news/board/2014/2014-04-08_notice_dis_c_fr.pdf.
---------------------------------------------------------------------------

    Application of the Payment System Risk (PSR) Policy to the Fedwire 
Services. The Board's PSR policy reflects the new international 
standards for financial market infrastructures (FMIs) developed by the 
Committee on Payment and Settlement Systems and the Technical Committee 
of the International Organization of Securities Commissions in the 
Principles for Financial Market Infrastructures. The revised policy 
retains the expectation that the Fedwire Services meet or exceed the 
applicable risk-management standards. Principle 15 states that an FMI 
should identify, monitor, and manage general business risk and hold 
sufficient liquid net assets funded by equity to cover potential 
general business losses so that it can continue operations and services 
as a going concern if those losses materialize. Further, liquid net 
assets should at all times be sufficient to ensure a recovery or 
orderly wind-down of critical operations and services. The Fedwire 
Services do not face the risk that a business shock would cause the 
service to wind down in a disorderly manner and disrupt the stability 
of the financial system. In order to foster competition with private-
sector FMIs, however, the Reserve Banks' priced services will hold six 
months of the Fedwire Funds Service's current operating expenses as 
liquid financial assets and equity on the pro forma balance sheet.\9\ 
Current operating expenses are defined as normal business operating 
expenses on the income statement, less depreciation, amortization, 
taxes, and interest on debt. The Fedwire Funds Service's six months of 
current operating expenses are computed based on its preliminary 2017 
budget at $53.9 million. In 2017, $14.1 million of equity was imputed 
to meet the FDIC capital requirements. No additional imputed equity was 
necessary to meet the PSR policy requirement.
---------------------------------------------------------------------------

    \9\ This requirement does not apply to the Fedwire Securities 
Service. There are no competitors to the Fedwire Securities Service 
that would face such a requirement, and imposing such a requirement 
when pricing the securities services could artificially increase the 
cost of these services.
---------------------------------------------------------------------------

    Effective tax rate. Like the imputed capital structure, the 
effective tax rate is calculated based on data from U.S. publicly 
traded firms. The tax rate is the mean of the weighted average rates of 
the U.S. publicly traded firm market over the past 5 years.
    Debt and equity financing. The imputed short- and long-term debt 
financing rates are derived from the nonfinancial commercial paper 
rates from the Federal Reserve Board's H.15 Selected Interest Rates 
release (AA and A2/P2) and the annual Merrill Lynch Corporate & High 
Yield Index rate, respectively. The rates for debt and equity financing 
are applied to the priced services estimated imputed short-term debt, 
long-term debt, and equity needed to finance short- and long-term 
assets and meet equity requirements.
    The increase in the 2017 PSAF to $16.6 million from $13.1 million 
in 2016 is primarily attributable to a $2.0 million increase in the 
cost of debt and a $1.0 million increase in the return on equity offset 
by a $0.3 million decrease in the incremental return on imputed equity 
necessary for PSR policy compliance, all three of which were driven 
primarily by increased imputed funding needs arising from higher retail 
float asset balances.
    Projected 2017 Federal Reserve priced-services assets, reflected in 
table 3, have increased $143.1 million from 2016. This increase is 
primarily due to a $234.0 million increase in the balance of imputed 
investments in federal funds and a net $42.8 million increase in long-
term assets, inclusive of pension, Bank premises, furniture and 
equipment, and leasehold improvements and long-term prepayments. The 
increase was partially offset by an $80.0 million decrease in items in 
process of collection and a $55.8 million decrease in imputed 
investments in Treasury securities. The significant increase in the 
imputed investments in federal funds balance is related to a reduction 
in debit float due to new deposit deadlines associated with the 
Endpoint-Culled ICL deposit option deadlines implemented in July 2016, 
which are intended to reduce float and items in process of collection. 
These balances had increased significantly as a result of the PSR 
policy implementation in 2015. The Endpoint-Culled ICL deposit option 
defers the portion of deposits the Federal Reserve is unable to present 
after a specific deadline during the processing cycle to limit 
instances where same-day credit is offered under the PSR policy for 
items that cannot be collected same day. The resulting balance of 2017 
imputed investments in federal funds was sufficient to comply with the 
PSR policy expectations for Fedwire Funds, and no additional costs were 
incurred. As shown in table 3, imputed equity for 2017 is $58.6 
million, an increase of $4.8 million from the equity imputed for 2016. 
In accordance with ASC 715, this amount includes an accumulated other 
comprehensive loss of $635.1 million.
    Table 4 reflects the portion of short- and long-term assets that 
must be financed with actual or imputed liabilities and equity. Debt 
and equity imputed to fund the 2017 priced services assets within the 
observed market leverage ratio produced an equity level that did not 
meet the FDIC minimum equity requirements. As a result, additional 
equity was imputed to meet the FDIC requirements, and imputed long-term 
debt was reduced. The ratio of capital to risk-weighted assets meets 
the required 10 percent of risk-weighted assets, and equity exceeds 5 
percent of total assets (table 6). In 2017, long-term debt and equity 
was imputed to meet the asset funding requirements and reflects the 
leverage ratio observed in the market; additional equity of $14.1 
million was required (table 5) to meet the market leverage ratio.
    Table 5 shows the derivation of the 2017 and 2016 PSAF. Financing 
costs for 2017 are $2.7 million higher than in 2016. In addition to the 
increase in the levels of debt and equity mentioned above, the cost of 
equity increased in 2017 to 41.6 percent from 41.5 percent in 2016. The 
increased equity balance and the slightly higher cost of equity result 
in a pretax ROE that is $1.0 million higher than the 2016 pretax ROE. 
Imputed sales taxes increased to

[[Page 75063]]

$3.2 million in 2017 from $2.8 million in 2016. The priced services 
portion of the Board's expenses increased $0.4 million to $5.4 million 
in 2017. The effective income tax rate used in 2017 increased to 22.7 
percent from 21.6 percent in 2016.
---------------------------------------------------------------------------

    \10\ Credit float, which represents the difference between items 
in process of collection and deferred credit items, occurs when the 
Reserve Banks debit the paying bank for transactions prior to 
providing credit to the depositing bank. Float is directly estimated 
at the service level.
    \11\ Consistent with the Board's PSR policy, the Reserve Banks; 
priced services will hold six months of the Fedwire Funds Service's 
current operating expenses as liquid net financial assets and equity 
on the pro forma balance sheet. Six months of the Fedwire Funds 
Service's projected current operating expenses is $53.9 million. In 
2017, $58.6 million of equity was imputed to meet the regulatory 
capital requirements.
    \12\ Includes the allocation of Board of Governors assets to 
priced services of $1.2 million for 2017 and $1.3 million for 2016.
    \13\ Includes the allocation of Board of Governors liabilities 
to priced services of $0.6 million for 2017 and 2016.
    \14\ Includes an accumulated other comprehensive loss of $635.1 
million for 2017 and $666.1 million for 2016, which reflects the 
ongoing amortization of the accumulated loss in accordance with FAS 
158 [ASC 715]. Future gains or losses, and their effects on the pro 
forma balance sheet, cannot be projected. See table 5 for 
calculation of required imputed equity amount.

          Table 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal Reserve Priced Services
                                [Millions of dollars--projected average for year]
----------------------------------------------------------------------------------------------------------------
                                                                       2017            2016           Change
----------------------------------------------------------------------------------------------------------------
Short-term assets:
    Receivables.................................................           $36.6           $35.6            $1.1
    Materials and supplies......................................             0.6             0.5             0.1
    Prepaid expenses............................................            11.2            10.2             1.0
    Items in process of collection \10\.........................           241.0           321.0          (80.0)
                                                                 -----------------------------------------------
        Total short-term assets.................................           289.4           367.2          (77.9)
Imputed investments: \11\
    Imputed investment in Treasury Securities...................  ..............            55.8          (55.8)
    Imputed investment in Fed Funds.............................           245.0            11.0           234.0
                                                                 -----------------------------------------------
        Total imputed investments...............................           245.0            66.8           178.2
Long-term assets:
    Premises \12\...............................................           128.7           111.0            17.7
    Furniture and equipment.....................................            39.0            38.5             0.5
    Leasehold improvements and long-term prepayments............           104.8            89.5            15.3
    Pension asset...............................................            10.9  ..............            10.9
    Deferred tax asset..........................................           186.1           187.9           (1.8)
                                                                 -----------------------------------------------
        Total long-term assets..................................           469.6           426.8            42.8
                                                                 -----------------------------------------------
            Total assets........................................         1,003.9           860.9           143.1
                                                                 ===============================================
Short-term liabilities:
    Deferred credit items.......................................           486.0           332.0           154.0
    Short-term debt.............................................            18.1            19.0           (0.9)
    Short-term payables.........................................            30.2            27.2             3.0
                                                                 -----------------------------------------------
        Total short-term liabilities............................           534.4           387.2           156.1
Long-term liabilities:
    Pension liability...........................................  ..............            17.6          (17.6)
    Long-term debt..............................................            48.4             0.0            48.4
    Postemployment/postretirement benefits and net pension                 362.5           411.3            48.7
     liabilities \13\...........................................
                                                                 -----------------------------------------------
            Total liabilities...................................           945.3           807.1           138.3
Equity \14\.....................................................            58.6            53.8             4.8
                                                                 -----------------------------------------------
    Total liabilities and equity................................         1,003.9           860.9           143.1
----------------------------------------------------------------------------------------------------------------


           Table 4--Imputed Funding for Priced-Services Assets
                          [Millions of dollars]
------------------------------------------------------------------------
                                               2017            2016
------------------------------------------------------------------------
A. Short-term asset financing:
    Short-term assets to be financed:
        Receivables.....................           $36.6           $35.6
        Materials and supplies..........             0.6             0.5
        Prepaid expenses................            11.2            10.2
                                         -------------------------------
    Total short-term assets to be                   48.4            46.2
     financed...........................
        Short-term payables.............            30.2            27.2
    Net short-term assets to be financed            18.1            19.0
    Imputed short-term debt financing               18.1            19.0
     \15\...............................
B. Long-term asset financing:
    Long-term assets to be financed:      ..............
        Premises........................           128.7           111.0

[[Page 75064]]

 
        Furniture and equipment.........            39.0            38.5
        Leasehold improvements and long-           104.8            89.5
         term prepayments...............
        Pension asset...................            10.9  ..............
        Deferred tax asset..............           186.1           187.9
                                         -------------------------------
    Total long-term assets to be                   469.6           426.8
     financed...........................
        Pension liability...............  ..............            17.6
        Postemployment/postretirement              362.5           411.3
         benefits and net pension
         liabilities....................
        Net long-term assets to be                 107.0           (2.0)
         financed.......................
        Imputed long-term debt \15\.....            48.4  ..............
        Imputed equity \15\.............            58.6            53.8
                                         -------------------------------
            Total long-term financing...           107.0            53.8
------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \15\ See table 5 for calculation.
    \16\ If minimum equity constraints are not met after imputing 
equity based on the capital structure observed in the market, 
additional equity is imputed to meet these constraints. The long-
term funding need was met by imputing long-term debt and equity 
based on the capital structure observed in the market (see tables 4 
and 6). In 2017, the amount of imputed equity exceeded the minimum 
equity requirements for risk-weighted assets.
    \17\ Equity adjustment offsets are due to a shift of long-term 
debt funding to equity in order to meet FDIC capital requirements 
for well-capitalized institutions.
    \18\ Additional equity in excess of that needed to fund priced 
services assets is offset by an asset balance of imputed investments 
in treasury securities.
    \19\ Imputed short-term debt and long-term debt are computed at 
table 4.
    \20\ The 2017 ROE is equal to a risk-free rate plus a risk 
premium (beta * market risk premium). The 2017 after-tax CAPM ROE is 
calculated as 0.30% + (1.0 * 7.59%) = 7.89%. Using a tax rate of 
22.7%, the after-tax ROE is converted into a pretax ROE, which 
results in a pretax ROE of (7.89%/(1-22.7%)) = 10.21%. Calculations 
may be affected by rounding.

                                  Table 5--Derivation of the 2017 and 2016 PSAF
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                      2017                                  2016
                                     ---------------------------------------------------------------------------
                                             Debt              Equity              Debt              Equity
----------------------------------------------------------------------------------------------------------------
A. Imputed long-term debt and
 equity:
    Net long-term assets to finance.             $107.0             $107.0             $(2.0)             $(2.0)
    Capital structure observed in                 58.4%              41.6%              58.5%              41.5%
     market.........................
                                     ---------------------------------------------------------------------------
    Pre-adjusted long-term debt and               $62.5              $44.5             $(1.2)             $(0.8)
     equity.........................
    Equity adjustments: \16\
        Equity to meet capital        .................               58.6  .................               51.1
         requirements...............
        Adjustment to debt and                   (14.1)               14.1                1.2              (1.2)
         equity funding given
         capital requirements \17\..
        Adjusted equity balance.....                 --               58.6                 --              (2.0)
        Equity to meet capital                       --                 --                 --               53.1
         requirements \18\..........
                                     ---------------------------------------------------------------------------
            Total imputed long-term               $48.4              $58.6                 --              $51.1
             debt and equity........
B. Cost of capital:
    Elements of capital costs:
        Short-term debt \19\........     $18.1 x 0.6% =               $0.1     $19.0 x 0.3% =               $0.1
        Long-term debt \19\.........      48.4 x 4.0% =                1.9        -- x 4.2% =                 --
        Equity \20\.................     58.6 x 10.2% =                6.0      51.1 x 9.8% =                5.0
                                     ---------------------------------------------------------------------------
                                      .................               $8.0  .................               $5.1
C. Incremental cost of PSR policy:
    Equity to meet policy...........     $ -- x 10.2% =               $ --      $2.7 x 9.8% =               $0.3
                                     ---------------------------------------------------------------------------
D. Other required PSAF costs:
    Sales taxes.....................               $3.2  .................               $2.8  .................
    Board of Governors expenses.....                5.4  .................                5.0  .................
                                      .................                8.6  .................                7.8
                                     ---------------------------------------------------------------------------
                                      .................              $16.6  .................              $13.1
E. Total PSAF:
    As a percent of assets..........  .................               1.7%  .................               1.5%
    As a percent of expenses........  .................               3.9%  .................               3.6%
F. Tax rates:.......................  .................              22.7%  .................              21.6%
----------------------------------------------------------------------------------------------------------------


[[Page 75065]]


                Table 6--Computation of 2017 Capital Adequacy for Federal Reserve Priced Services
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Weighted
                                                                      Assets        Risk weight     assets ($)
----------------------------------------------------------------------------------------------------------------
Imputed investments:
    1-Year Treasury securities \21\.............................            $ --              --              --
    Federal funds \22\..........................................           245.0             0.2            49.0
                                                                 -----------------------------------------------
        Total imputed investments...............................           245.0  ..............            49.0
Receivables.....................................................            36.6             0.2             7.3
Materials and supplies..........................................             0.6             1.0             0.6
Prepaid expenses................................................            11.2             1.0            11.2
Items in process of collection..................................           241.0             0.2            48.2
Premises........................................................           128.7             1.0           128.7
Furniture and equipment.........................................            39.0             1.0            39.0
Leasehold improvements and long-term prepayments................           104.8             1.0           104.8
Pension asset...................................................            10.9             1.0            10.9
Deferred tax asset..............................................           186.1             1.0           186.1
                                                                 -----------------------------------------------
    Total.......................................................         1,003.9  ..............           585.8
Imputed equity:
    Capital to risk-weighted assets.............................           10.0%
    Capital to total assets.....................................            5.8%
----------------------------------------------------------------------------------------------------------------

    C. Check Service -- Table 7 shows the 2015 actual, 2016 estimated, 
and 2017 budgeted cost-recovery performance for the commercial check 
service.

                          Table 7--Check Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense   (ROE)  [1-2]    Targeted ROE   ROE (%)  [1/(2
                                                                                                       + 4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................           160.6           140.2            20.4             2.0           113.0
2016 (estimate).................           152.9           138.1            14.8             1.3           109.7
2017 (budget)...................           141.2           133.7             7.5             1.4           104.5
----------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the check service 
will recover 109.7 percent of total expenses and targeted ROE, compared 
with a 2016 budgeted recovery rate of 105.7 percent. Greater-than-
expected check volumes processed by the Reserve Banks and lower-than-
expected costs have influenced significantly the check service's cost 
recovery.
---------------------------------------------------------------------------

    \21\ If minimum equity constraints are not met after imputing 
equity based on all other financial statement components, additional 
equity is imputed to meet these constraints. Additional equity 
imputed to meet minimum equity requirements is invested solely in 
Treasury securities. The imputed investments are similar to those 
for which rates are available on the Federal Reserve's H.15 
statistical release, which can be located at http://www.federalreserve.gov/releases/h15/data.htm.
    \22\ The investments are imputed based on the amounts arising 
from the collection of items prior to providing credit according to 
established availability schedules.
---------------------------------------------------------------------------

    The decline in Reserve Bank check volume, which is attributable to 
the decline in the number of checks written generally, was not as great 
as anticipated. Through August, total commercial forward check volume 
is 3.9 percent lower and total commercial return check volume is 3.3 
percent lower than for the same period last year. For full-year 2016, 
the Reserve Banks estimate that their total forward check volume will 
decline 5.2 percent (compared with a budgeted decline of 6.2 percent) 
and their total return check volume will decline 6.8 percent (compared 
with a budgeted decline of 12.7 percent) from 2015 levels.\23\
---------------------------------------------------------------------------

    \23\ Total Reserve Bank forward check volumes are expected to 
drop from 5.5 billion in 2015 to 5.2 billion in 2016. Total Reserve 
Bank return check volumes are expected to drop from 33.2 million in 
2015 to 30.9 million in 2016.
---------------------------------------------------------------------------

    2. 2017 Pricing--The Reserve Banks expect the check service to 
recover 104.5 percent of total expenses and targeted ROE in 2017. The 
Reserve Banks project revenue to be $141.2 million, a decline of 7.7 
percent from the 2016 estimate. This decline is driven largely by the 
Reserve Banks' restructured FedForward, FedReturn, and FedReceipt fee 
schedules, discussed below.\24\ Total expenses for the check service 
are projected to decrease to $133.7 million, a decline of $4.4 million, 
or 3.2 percent, from 2016 expenses primarily due to reduced operating 
costs, including cost savings associated with increased efficiencies of 
the Reserve Banks' customer support services for the FedACH and check 
service lines.
---------------------------------------------------------------------------

    \24\ This decline is also driven, in part, by anticipated 
continuing decline in the number of checks written generally. The 
Reserve Banks estimate that total commercial forward check volumes 
in 2017 will decline 5.0 percent, to 4.9 billion, and total 
commercial return check volumes will decline 10.1 percent to 27.8 
million in 2017.

---------------------------------------------------------------------------

[[Page 75066]]

    In July 2016, the Reserve Banks announced restructured FedForward, 
FedReturn and FedReceipt fee schedules designed to reflect the 
efficiencies of electronic check processing and better serve the needs 
of the marketplace in today's electronic environment.\25\ The Reserve 
Banks announced the restructured fee schedules earlier in the year to 
provide customers with sufficient notice.\26\
---------------------------------------------------------------------------

    \25\ As part of the Board's approval of the Reserve Banks' 2016 
check fee schedules, the Board noted that the Reserve Banks would 
announce changes to the check service to reflect the efficiencies of 
today's electronic check processing environment. 79 FR 65937, 70785 
(Nov. 16, 2015).
    \26\ A full summary of the modifications was included with 
Reserve Bank's announcement and is available at https://frbservices.org/files/servicefees/pdf/071116_2017_check_pricing_summary_of_changes.pdf. The Reserve Banks' 
modified fee schedules are available at https://www.frbservices.org/servicefees/check_services_2016.html.
---------------------------------------------------------------------------

    Specifically, the Reserve Banks announced simplified FedFoward and 
FedReturn deposit products. The simplified deposit products will offer 
two fixed-fee options: a per-image cash letter (ICL) fee and a daily 
subscription fee.\27\ Both options will offer standard and premium 
variations, with premium variations offering higher fixed and lower 
per-item fees than the standard variations. Both options will also 
include per-item fees, based on a modified volume-based tiered pricing 
structure, with tiers defined by volume of items received by a 
chartered institution from the Reserve Banks.\28\ Tiers for the three 
premium variations of the daily subscription fee deposit options, 
FedFoward Premium Daily Fee A, B, and C and FedReturn Premium Daily Fee 
A, will be based only on volume received by a chartered institution 
from a subset of the Reserve Banks' customers.\29\ The volumes used to 
define all tiers will be evaluated and set annually as part of the 
Board's approval of annual fee schedules.\30\
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    \27\ The per-ICL fee structure offers a fixed fee for each 
deposited image cash letter and a per-item fee for each item in the 
cash letter. The subscription structure offers a daily subscription 
fee and a per-item fee for each item. Per-item fees are determined 
by the Reserve Banks' volume-based tiered pricing structure.
    \28\ Under the tiered pricing structure, depositors pay a 
variable per-item fee based on the endpoint to which an item is 
being delivered. Tiers are currently determined at the individual 
routing number.
    \29\ The Reserve Banks believe the top 15 customers, which 
account for approximately 33 percent of the Reserve Banks' deposit 
volume, represent the most-likely users of the Premium Daily Fee 
deposit options because of the high daily fixed fees and lower per-
item fees.
    \30\ The tiers for 2017 are available at https://www.frbservices.org/servicefees/check21_endpoint_listing.html.
---------------------------------------------------------------------------

    The Premium Daily Fee deposit options will include a fifth tier, 
Tier 0, comprised of routing numbers for which the Reserve Banks 
currently receive little to no volume from the specified subset of 
Reserve Bank customers (and therefore cannot currently be assigned to 
the other tiers with sufficient certainty). Tier 0 will also be 
evaluated annually, along with all other tiers, so that if volume 
migrates to routing numbers in tier 0 (enabling more information on 
which to assign a tier) those routing numbers will be moved to the 
appropriate tier.
    In October 2016, the Reserve Banks announced minor modifications to 
the Premium Daily Fee products.\31\ To clarify Tier 0's transitional 
purpose, the Reserve Banks announced that routing numbers cannot be 
placed in Tier 0 if they have previously been assigned to one of the 
other tiers. Based on additional review of Tier 0's composition, the 
Reserve Banks also announced that a routing number will only be 
assigned to Tier 0 if the chartered institution receives a minimum of 
150 items daily.\32\ As a result, the Reserve Banks determined that 
approximately 3,800 routing numbers initially included in Tier 0 could 
more appropriately be placed in another tier, Tier 4.\33\
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    \31\ For the announcement, see https://frbservices.org/files/communications/pdf/check/100316-check-modification-announcement.pdf.
    \32\ The Reserve Banks determined after further analysis that a 
floor of 150 items daily was appropriate to avoid placing small 
institutions in Tier 0 because of limited total volumes 
(institutions below the floor receive an average of only 47 items 
daily).
    \33\ To minimize any customer impact of these changes, the 
Reserve Banks also reduced the Tier 4 per-item fees and daily fixed 
fees for two of the Premium Daily Fee deposit options.
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    The Reserve Banks also announced that most sorted-deposit options 
will be eliminated, including the Fine Sort ICL, Deferred Fine Sort 
ICL, and Fixed Mixed ICL deposit options.\34\ The Reserve Banks 
announced that they will not, however, modify the Endpoint-Culled ICL 
deposit option, the Dollar Cut Mixed ICL (renamed ``Dollar-Culled 
ICL'') option, or the Deferred Mixed ICL (renamed ``Deferred ICL'') 
option.\35\ The Reserve Banks will continue to allow separately sorted 
Treasury Check, Postal Money Order, and Savings Bond ICLs.
---------------------------------------------------------------------------

    \34\ In a paper check processing environment, the fine-sort 
products allowed the Reserve Banks to gain efficiencies because the 
checks did not require processing on reader-sorters. In today's 
electronic check processing environment, all ICLs are processed 
through the Reserve Banks' electronic system in the same manner, and 
the Reserve Banks do not gain any efficiencies by having the 
depositing bank fine-sort electronic checks before deposit.
    \35\ Under the Endpoint-Culled ICL deposit option (offered only 
at 12:00 p.m. ET), items drawn on routing numbers enrolled in the 
Reserve Banks' Premium Presentment service and those presented as 
substitute checks are culled from the cash letter by the Reserve 
Banks and placed into a Deferred Imaged Cash Letter, with depositors 
receiving next-day credit availability on those items. The product 
allows the Reserve Banks to limit instances where same-day credit is 
offered for items that cannot be collected same day (the Reserve 
Banks similarly cull items deposited on the 12:00 p.m. ET deposit 
deadline offered as part of the Premium Daily Fee deposit options). 
Under the Deferred ICL deposit option, credit for all items 
deposited is deferred until the next business day. Under the Dollar-
Culled ICL deposit option, items written for less than $1,000, plus 
all items for $1,000 or more that are drawn on a substitute check 
endpoint, are culled from the cash letter by the Reserve Banks and 
placed into a Deferred Imaged Cash Letter, with depositors receiving 
the next-day credit availability of that deposit option. Items of 
$1,000 or more (except for those that will be presented as 
substitute checks) are kept in the original cash letter, with same-
day credit availability at the next deadline according to the 
Federal Reserve Policy on Payment System Risk.
---------------------------------------------------------------------------

    Finally, the Reserve Banks announced modifications to their 
FedReceipt product, including reduced FedReceipt fees for forward and 
return items and elimination of the FedReceipt Plus Deposit Discount 
for both FedForward and FedReturn deposits.\36\ The Reserve Banks also 
announced that they will modify volume tiers for their Courtesy 
Delivery service (renamed ``Accelerated Delivery Service'') and that 
the Retail Payments Premium Receiver discount will be applied to items 
deposited by a chartered institution rather than on items received. 
Both products remain otherwise unchanged.
---------------------------------------------------------------------------

    \36\ The Reserve Banks implemented the deposit discount 
structure to encourage banks to transition from paper to electronic 
items. With the Reserve Banks presenting and returning more than 99 
percent of items electronically, the discount is no longer necessary 
to encourage banks to move away from paper.
---------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in a 
3.5 percent average price decrease for check customers.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 cost recovery for the check service include lower-than-expected 
check volume due to reductions in check writing overall and competition 
from correspondent banks, aggregators, and direct exchanges, which 
would result in lower-than-anticipated revenue.
    D. FedACH Service--Table 8 shows the 2015 actual, 2016 estimate, 
and 2017 budgeted cost-recovery performance for the commercial FedACH 
service.

[[Page 75067]]



                         Table 8--FedACH Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE   ROE %, [1/(2 +
                                                                                                        4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................           125.5           122.8             2.7             1.8           100.7
2016 (estimate).................           130.7           131.0            -0.3             1.3            98.8
2017 (budget)...................           140.4           145.4            -5.1             1.6            95.5
----------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the FedACH 
service will recover 98.8 percent of total expenses and targeted ROE, 
compared with a 2016 budgeted recovery rate of 99.5 percent. Through 
August, FedACH commercial origination and receipt volume was 5.8 
percent higher than it was during the same period last year. For full-
year 2016 the Reserve Banks estimate that FedACH commercial origination 
and receipt volume will increase 4.9 percent, compared with a budgeted 
increase of 4.5 percent. Although volume is higher than originally 
projected, the Reserve Banks estimate lower-than-budgeted 2016 cost 
recovery due to higher than anticipated environmental costs such as an 
increase in pension expense and refinement in the accounting treatment 
between capital and expenses for the FedACH technology modernization 
program.\37\
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    \37\ The Reserve Banks have been engaged in a multiyear 
technology initiative to modernize the FedACH processing platform by 
migrating the service from a mainframe system to a distributed 
computing environment. In 2016, the Reserve Banks chose a 
commercially available option as their processing solution to 
modernize the FedACH platform.
---------------------------------------------------------------------------

    2. 2017 Pricing--The Reserve Banks expect the FedACH service to 
recover 95.5 percent of total expenses and targeted ROE in 2017. FedACH 
commercial origination and receipt volume is projected to grow 5.7 
percent, contributing to an increase of $9.7 million in total revenue 
from the 2016 estimate. Total expenses are budgeted to increase $14.4 
million from 2016 expenses, primarily because of costs associated with 
the development of a new FedACH technology platform.
    The Reserve Banks will increase the minimum monthly fee for forward 
origination from $45 to $50 and the minimum monthly fee for receipt 
from $35 to $40.\38\ The Reserve Banks also will increase the FedACH 
Account Servicing Fee from $45 to $58 and change the fee name to the 
``FedACH Participation fee,'' to reflect more accurately the intention 
of the fee, which is to recover fixed costs related to participation in 
the FedACH network. The Reserve Banks also will eliminate the on-us 
receipt credit of $0.0032 per item. All on-us items will be charged the 
current FedACH receipt per-item fee of $0.0032 per item.
---------------------------------------------------------------------------

    \38\ Any originating depository financial institution (ODFI) 
incurring less than $50 for the following fees will be charged the 
difference to reach the minimum: Forward value and nonvalue item 
origination fees, FedGlobal ACH origination surcharges, and FedACH 
SameDay forward origination surcharges.
     Any receiving depository financial institution (RDFI) that 
incurs less than $40 in receipt fees and originates forward value 
and nonvalue items incurring less than $50 in origination fees will 
only be charged the difference in the origination fee to reach the 
minimum monthly origination fee of $50. Any RDFI that incurs less 
than $40 in receipt fees and is not originating forward value and 
nonvalue items will incur the $40 minimum monthly fee for receipt.
---------------------------------------------------------------------------

    The Reserve Banks will increase the FedACH Information Extract File 
fee from $100 to $150 per file. The Reserve Banks also will increase 
the FedPayments Reporter fee approximately 10 percent rounded to the 
nearest $5 for each level of the tiered package pricing. They also will 
introduce a new top tier, with a $1,800 monthly fee, for a package that 
includes more than 10,000 reports.
    Further, the Reserve Banks will introduce a fixed monthly fee and a 
volume-based tiered pricing structure for the FedGlobal ACH 
service.\39\ The tiered pricing structure will include per-item 
surcharges that are in addition to the standard FedACH origination fee 
of $0.0032 and vary according to the transaction's destination, as seen 
in table 9. The top tier will cover monthly origination volume over 500 
items and include a $185 fixed monthly fee and a per-item surcharge 
that is $0.12 lower than current per-item fees. The next tier will 
cover monthly origination volume between 161 and 500 items and include 
a $60 fixed monthly fee and a per-item surcharge that is $0.13 higher 
than current per-item fees. The bottom tier will cover monthly 
origination volume between 0 and 160 items and include a $20 fixed 
monthly fee and a per-item surcharge that is $0.38 higher than current 
per-item fees.
---------------------------------------------------------------------------

    \39\ The FedGlobal ACH pricing changes meet the Federal Reserve 
Board's guidance on the Reserve Banks' use of volume-based pricing 
for electronic payment services and products. 62 FR 14146 (March 25, 
1997) (FRB Docket No. R-0967).

                                         Table 9--FedGlobal ACH Service Volume-Based Origination Surcharges \40\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Fixed  monthly     Canada  (per      Mexico  (per      Panama  (per      Europe  (per
                        Volume  (items)                                fee          transaction)      transaction)      transaction)      transaction)
--------------------------------------------------------------------------------------------------------------------------------------------------------
More than 500.................................................              $185             $0.50             $0.55             $0.60             $1.13
161-500.......................................................                60              0.75              0.80              0.85              1.38
0-160.........................................................                20              1.00              1.05              1.10              1.63
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in a 
5.3 percent average price increase for FedACH customers.
---------------------------------------------------------------------------

    \40\ These per-item surcharges are in addition to the standard 
domestic FedACH origination fees.
---------------------------------------------------------------------------

    While the Reserve Banks are not budgeted to fully recover costs in 
2017, they are expected to fully recover costs

[[Page 75068]]

following finalization of the FedACH technology modernization project. 
The Reserve Banks' FedACH fee increases balance raising fees 
dramatically during a temporary period of increased costs associated 
with a defined technology upgrade that will be expected to result in 
significant over recovery following this defined period. The approach 
to moderately increase fees only is consistent with a multi-year 
strategy to minimize pricing volatility and provide long-term price 
stability for customers while undertaking the ongoing technology 
upgrade that will result in FedACH incurring higher expenses over the 
next few years.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 cost recovery for the FedACH service are cost overruns associated 
with unanticipated problems related to efforts to modernize the FedACH 
processing platform and higher-than-expected support and overhead 
costs. Other risks include lower-than-expected volume and associated 
revenue due to unanticipated mergers and acquisitions and loss of 
market share due to direct exchanges and a shift of volume to the 
private-sector operator.
    E. Fedwire Funds and National Settlement Services--Table 10 shows 
the 2015 actual, 2016 estimate, and 2017 budgeted cost-recovery 
performance for the Fedwire Funds and National Settlement Services.

                             Table 10--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
                                                                  [Dollars in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Recovery rate
                                                                                              Net income                    after targeted
                           Year                                 Revenue      Total expense   (ROE)  [1-2]    Targeted ROE    ROE (%) [1/(2
                                                                                                                                 + 4)]
                                                                         1               2               3               4               5
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015 (actual).............................................           116.0           110.1             5.9             1.6           103.9
2016 (estimate)...........................................           123.1           118.0             5.1             1.3           103.2
2017 (budget).............................................           128.8           126.3             2.6             1.3           101.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the Fedwire Funds 
and National Settlement Services will recover 103.2 percent of total 
expenses and targeted ROE, compared with a 2016 budgeted recovery rate 
of 99.4 percent. Through August, Fedwire Funds Service online volume 
was 3.6 percent higher than for the same period last year. For full-
year 2016, the Reserve Banks estimate Fedwire Funds Service online 
volume to increase 1.9 percent from 2015 levels, compared with the 0.3 
percent volume decrease that had been budgeted. The Reserve Banks do 
not expect the volume growth in 2015 and early 2016 to continue at that 
level through year-end. Through August, National Settlement Service 
settlement file volume was 1.0 percent lower than for the same period 
last year, and settlement entry volume was 3.0 percent lower. For the 
full year, the Reserve Banks estimate that settlement file volume will 
decrease 1.1 percent (compared with a budgeted 5.3 percent increase) 
and settlement entry volume will decrease 4.0 percent from 2015 levels 
(compared with a budgeted 0.8 percent decrease). NSS settlement file 
and entry volumes are anticipated to be lower than budgeted, as the 
onboarding of a new arrangement originally expected to occur in the 
fourth quarter of 2016 has now been delayed until 2017.
    2. 2017 Pricing--The Reserve Banks expect the Fedwire Funds and 
National Settlement Services to recover 101.0 percent of total expenses 
and targeted ROE. Revenue is projected to be $128.8 million, an 
increase of 4.6 percent from the 2016 estimate. The Reserve Banks 
project total expenses to be $8.3 million higher than the 2016 
expenses, primarily because of capitalized software costs associated 
with the Fedwire Funds modernization program that will be amortized 
until January 2022 and other costs related to new resiliency 
initiatives.
    The Reserve Banks will adjust the incentive pricing fees for the 
Fedwire Funds Service by increasing the Tier 1 per-item preincentive 
fee (the fee before volume discounts are applied) from $0.790 to 
$0.820, increasing the Tier 2 per-item preincentive fee from $0.240 to 
$0.245, and increasing the Tier 3 per-item preincentive fee from $0.155 
to $0.170.\41\ The Reserve Banks also will increase the surcharge for 
offline transactions from $55 to $60. The Reserve Banks estimate that 
the price changes will result in a 3.3 percent average price increase 
for Fedwire Funds customers.
---------------------------------------------------------------------------

    \41\ The per-item preincentive fee is the fee that the Reserve 
Banks charge for transfers that do not qualify for incentive 
discounts. The Tier 1 per-item preincentive fee applies to the first 
14,000 transfers, the Tier 2 per-item preincentive fee applies to 
the next 76,000 transfers, and the Tier 3 per-item preincentive fee 
applies to any additional transfers. The Reserve Banks apply an 80 
percent incentive discount to transfers over 60 percent of a 
customer's historic benchmark volume.
---------------------------------------------------------------------------

    The Reserve Banks will not change National Settlement Service fees 
for 2017.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 cost recovery for these services are cost overruns from new 
initiatives to improve resiliency and operational functionality.
    F. Fedwire Securities Service--Table 11 shows the 2015 actual, 2016 
estimate, and 2017 budgeted cost recovery performance for the Fedwire 
Securities Service.\42\
---------------------------------------------------------------------------

    \42\ The Reserve Banks provide transfer services for securities 
issued by the U.S. Treasury, federal government agencies, 
government-sponsored enterprises, and certain international 
institutions. The priced component of this service consists of 
revenues, expenses, and volumes associated with the transfer of all 
non-Treasury securities. For Treasury securities, the U.S. Treasury 
assesses fees for the securities transfer component of the service. 
The Reserve Banks assess a fee for the funds settlement component of 
a Treasury securities transfer; this component is not treated as a 
priced service.

[[Page 75069]]



                   Table 11--Fedwire Securities Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense    (ROE) [1-2]    Targeted ROE   ROE (%)  [1/(2
                                                                                                       + 4)]
                                               1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2015 (actual)...................            27.1            24.7             2.4             0.3           108.2
2016 (estimate).................            25.8            26.2            -0.4             0.3            97.6
2017 (budget)...................            29.0            29.4            -0.4             0.3            97.5
----------------------------------------------------------------------------------------------------------------

    1. 2016 Estimate--The Reserve Banks estimate that the Fedwire 
Securities Service will recover 97.6 percent of total expenses and 
targeted ROE, close to the 2016 budgeted recovery rate of 97.5 percent.
    Through August, Fedwire Securities Service online agency transfer 
volume was 13.1 percent lower than during the same period last year. 
For full-year 2016, the Reserve Banks estimate Fedwire Securities 
Service online agency transfer volume will decline 13.5 percent from 
2015 levels, compared with a budgeted decline of 5.4 percent. The 
lower-than-expected online agency transfer volume resulted from lower-
than-projected Agency debt issuance, as Fannie Mae and Freddie Mac 
continue to reduce the overall size of their portfolios in accordance 
with Federal Housing Finance Agency guidelines. In addition, new 
mortgage originations and mortgage paydowns from refinancing activity 
are expected to decline before year-end if interest rates rise in the 
fourth quarter, which will result in falling levels of issuance and 
settlement activity for agency mortgage-backed securities over Fedwire 
Securities. Through August, account maintenance volume was 4.4 percent 
lower than during the same period last year. For the full year 2016, 
the Reserve Banks estimate that account maintenance volume will decline 
5.0 percent over 2015 levels, compared with a budgeted decline of 8.8 
percent. The higher account maintenance volume is the result of 
conservative estimates for customer account closures that have not 
materialized.
    2. 2017 Pricing--The Reserve Banks expect the Fedwire Securities 
Service to recover 97.5 percent of total expenses and targeted ROE in 
2017. The Reserve Banks project that online agency transfer activity 
will decline 7.5 percent in 2017, the number of accounts maintained 
will decrease 7.4 percent, and the number of agency issues maintained 
will decrease 2.4 percent.\43\ The projected decline in both online 
transfer and account maintenance volume in 2017 reflects, in part, an 
anticipated drop in demand resulting from JP Morgan Chase's exit from 
the U.S. government securities clearing and settlement business for its 
broker-dealer services by mid-2018.\44\ Moreover, as in 2016, the 
Reserve Banks continue to project a decrease in online transfers as 
interest rates may possibly increase, leading to less mortgage 
refinancing, and, in turn, reducing issuances of mortgage-backed 
securities. In addition, the reduction in agency debt issuance will 
continue to reflect a reduction in government-sponsored enterprise 
portfolios, as required by the U.S. Treasury and the Federal Housing 
Finance Agency, leading to a reduced funding need for new debt 
issuance.\45\ New settlement logic launched by the Fixed Income 
Clearing Corporation in January 2016, and further changes in mid-2017 
are also expected to reduce the number of agency debt transfers over 
the Fedwire Securities Service.\46\
---------------------------------------------------------------------------

    \43\ The online transfer fee, monthly account maintenance fee, 
and monthly issue maintenance fee accounted for approximately 93 
percent of total Fedwire Securities Service revenue through June 
2016.
    \44\ JP Morgan Chase announced in July 2016, its intent to exit 
the government securities clearing and settlement business. It is 
expected that the exit will result in significant reductions of 
transfer volume over Fedwire Securities as more transactions shift 
to in-house activity at the remaining custodian banks.
    \45\ Government-sponsored enterprises are reducing their 
retained portfolio by 15 percent annually through 2018, as mandated 
by the Senior Preferred Stock Purchase Agreements, until each 
portfolio reaches a target level of $250 billion. Further 
information on these agreements can be found at: http://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-Stock-Purchase-Agreements.aspx.
    \46\ Information on the Fixed Income Clearing Corporation's new 
settlement logic can be found at http://www.dtcc.com/~/media/Files/
pdf/2015/6/22/GOV045-15.pdf.
---------------------------------------------------------------------------

    Revenue is projected to be $29.0 million, an increase of 12.4 
percent from the 2016 estimate; this projected rise in revenue results 
from higher fees, discussed below, that offset the anticipated online 
transfer and account maintenance volume declines. The Reserve Banks 
also project that 2017 expenses will increase by $3.2 million, compared 
with 2016 expenses, reflecting higher expected operating costs. Higher 
operating costs in 2017 reflect the amortization of capital software 
costs from completed modernization initiatives as well as the 
advancement of new initiatives to improve resiliency and operational 
functionality.
    The Reserve Banks will increase the online agency transfer fee from 
$0.65 to $0.77 and increase the offline origination and receipt 
surcharge transfer fee from $66 to $80. The Reserve Banks also will 
increase the monthly agency issues maintenance fee from $0.65 to $0.77 
and will increase the monthly account maintenance fee from $48 to 
$57.50. Moreover, the Reserve Banks will increase the joint custody 
origination surcharge from $44 to $46. Finally, the Reserve Banks will 
increase the claims adjustment fees from $0.75 to $0.80. The Reserve 
Banks estimate that the price changes will result in an 18.0 percent 
average price increase for Fedwire Securities customers.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2017 cost recovery for these services are lower-than-expected volume 
resulting from the pace of structural changes in government securities 
settlement, and cost overruns from new initiatives to improve 
resiliency and operational functionality.
    G. FedLine Access--The Reserve Banks charge fees for the electronic 
connections that depository institutions use to access priced services 
and allocate the costs and revenue associated with this electronic 
access to the various priced services. There are currently five FedLine 
channels through which customers can access the Reserve Banks' priced 
services: FedMail, FedLine Web, FedLine Advantage, FedLine Command, and 
FedLine

[[Page 75070]]

Direct.\47\ The Reserve Banks package these channels into nine FedLine 
packages, described below, that are supplemented by a number of premium 
(or a la carte) access and accounting information options. In addition, 
the Reserve Banks offer FedComplete packages, which are bundled 
offerings of a FedLine Advantage connection and a fixed number of 
FedACH, Fedwire Funds, and Check 21-enabled services.
---------------------------------------------------------------------------

    \47\ FedMail, FedLine Web, FedLine Advantage, FedLine Command, 
and FedLine Direct are registered trademarks of the Federal Reserve 
Banks.
---------------------------------------------------------------------------

    Six attended access packages offer manual access to critical 
payment and information services via a web-based interface. The FedLine 
Exchange package provides access to basic information services via 
email, while two FedLine Web packages offer an email option plus online 
attended access to a range of services, including cash services, FedACH 
information services, and check services. Three FedLine Advantage 
packages expand upon the FedLine Web packages and offer attended access 
to critical transactional services: FedACH, Fedwire Funds, and Fedwire 
Securities.
    Three unattended access packages are computer-to-computer, IP-based 
interfaces. The FedLine Command package offers an unattended connection 
to FedACH, as well as most accounting information services. The two 
remaining options are FedLine Direct packages, which allow for 
unattended connections at one of two connection speeds to FedACH, 
Fedwire Funds, and Fedwire Securities transactional and information 
services and to most accounting information services.\48\
---------------------------------------------------------------------------

    \48\ None of the FedLine packages offer an unattended connection 
to check services. The Reserve Banks offer an unattended check 
product, Check 21 Large File Delivery, outside of the FedLine suite 
that allows a depository institution to upload and download check 
image cash letters automatically via a direct network connection to 
the Reserve Banks.
---------------------------------------------------------------------------

    For the 2017 FedLine fees, the Reserve Banks will increase five 
existing monthly fees: (1) The FedLine Web Plus fee from $140 to $160, 
(2) the FedLine Direct Premier fee from $6,500 to $6,700, (3) the 
FedComplete 200 Plus fee from $1,300 to $1,350, (4) the FedComplete 200 
Premier fee from $1,375 to $1,425, and (5) the FedMail Fax a la carte 
fee from $70 to $100. As in previous years, the Reserve Banks will 
introduce new fees on legacy services. In particular, the Reserve Banks 
will implement a legacy software fee to encourage FedLine Direct 
customers to migrate to an enhanced messaging solution.\49\ To provide 
customers sufficient time to migrate, the fee will not become effective 
until the third quarter of 2017. The fee will be introduced on July 1, 
2017, at $5,000 per month and will increase in steps to $20,000 per 
month by the end of 2017.\50\ In addition, the Reserve Banks will 
remove the legacy email service from all FedLine Web, Advantage, 
Command, and Direct packages and introduce a $20-per-month fee to 
purchase an a la carte subscription to this service. Customers in these 
packages that currently use the email service will have the opportunity 
to cancel the service to avoid the a la carte fee.
---------------------------------------------------------------------------

    \49\ To avoid the fee, FedLine Direct customers will need to 
configure their systems to run a supported version of the MQ 
platform. MQ is a critical messaging component that facilitates the 
exchange of information between applications, systems, services and 
files.
    \50\ The fee will increase to $10,000 per month on September 1, 
2017, and to $20,000 per month on November 1, 2017.
---------------------------------------------------------------------------

    In addition, the Reserve Banks will modify the E-Payments Routing 
Directory and make several associated changes to FedLine packages and 
fees.\51\ Currently, all FedLine Web, Advantage, Command, and Direct 
packages include two services to download the directory: manual and 
automated.\52\ The Reserve Banks will introduce a new automated 
download service that will allow subscribers to provide access to the 
directory to their customers (that is, non-financial institutions that 
require access to the directory). Access to the directory will be 
controlled through the use of download codes, and financial 
institutions will be responsible for distributing the codes to their 
respective customers. Additionally, the Reserve Banks will include the 
automated download service in only plus- and premier-level FedLine 
packages.\53\ Five download codes will be included in these packages, 
and additional codes will be available to purchase through an a la 
carte option (codes will be available in bundles ranging in price from 
$75 to $2,000 per month).
---------------------------------------------------------------------------

    \51\ E-Payments Routing Directory provides basic routing 
information for Fedwire Funds, Fedwire Securities, and FedACH 
transactions.
    \52\ The manual service allows subscribers to download the 
directory in a manual fashion via a web-based interface. The 
automated service allows subscribers to schedule daily, weekly, or 
monthly automated (unattended) downloads of the directory.
    \53\ Plus- and premier-level packages are FedLine Web Plus, 
FedLine Advantage Plus and Premier, FedLine Command Plus, and 
FedLine Direct Plus and Premier. In addition the new FedLine 
Exchange Premier package will have access to the automated service.
---------------------------------------------------------------------------

    To accommodate the enhancements to the E-payments Directory, the 
Reserve Banks will introduce a new FedLine Exchange service, along with 
a new set of associated packages. Currently, the FedLine Exchange 
service is an email-based interface, and there is only one package 
available. The new FedLine Exchange service--which will be a web-based 
interface (that is, accessible via a web browser rather than email)--
will allow customers that do not use FedLine for Federal Reserve 
Financial Services to access the E-Payments Routing Directory.\54\ The 
new service will be available in two packages: A base-level and 
premier-level. The base package, priced at $40 per month, will include 
the manual download directory service. The premier package, priced at 
$125 month, will include both the manual and automated download 
directory services.\55\ To ensure continuity of service, the services 
available in the existing FedLine Exchange package will continue to be 
available through a new package, FedMail, as discussed below.
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    \54\ Customers that do not use FedLine to access Federal Reserve 
Financial Services are generally small financial institutions that 
partner with a payment processor or other third party for 
transactional processing.
    \55\ FedLine Exchange customers will need to request credentials 
to access the manual directory download service. These credentials 
will be billed via a FedMail-FedLine Exchange Subscriber 5-pack. The 
automated download directory service under the FedLine Exchange 
Premier package includes five download codes so a separate 
subscriber 5-pack is not required.
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    The Reserve banks will introduce a new FedMail package, priced at 
$85 per month, which will include the same email-based services 
included in the existing FedLine Exchange package.\56\ Subscribers of 
the existing FedLine Exchange package will be transitioned to the new 
FedMail package and experience a fee increase of $45.\57\
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    \56\ The addition of the FedMail package and the FedLine 
Exchange Premier package will increase the total number of FedLine 
packages from nine to eleven.
    \57\ The $45 increase represents the difference in price between 
the new FedMail package ($85) and the existing FedLine Exchange 
package ($40).
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    The Reserve Banks estimate that the price changes will result in an 
8.1 percent average price increase for FedLine customers.

II. Analysis of Competitive Effect

    All operational and legal changes considered by the Board that have 
a substantial effect on payment system participants are subject to the 
competitive impact analysis described in the March 1990 policy ``The 
Federal Reserve in the Payments System.'' \58\ Under this policy, the 
Board assesses whether proposed changes will have a direct and material 
adverse effect on the ability of other service providers to compete 
effectively with the Federal

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Reserve in providing similar services because of differing legal powers 
or constraints or because of a dominant market position deriving from 
such legal differences. If any proposed changes create such an effect, 
the Board must further evaluate the changes to assess whether the 
benefits associated with the changes--such as contributions to payment 
system efficiency, payment system integrity, or other Board 
objectives--can be achieved while minimizing the adverse effect on 
competition.
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    \58\ Federal Reserve Regulatory Service (FRRS) 9-1558.
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    The 2017 fees, fee structures, and changes in service will not have 
a direct and material adverse effect on the ability of other service 
providers to compete effectively with the Reserve Banks in providing 
similar services. The changes should permit the Reserve Banks to earn a 
ROE that is comparable to overall market returns and provide for full 
cost recovery over the long run.

III. 2017 Fee Schedules

BILLING CODE 6210-01-P

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    By order of the Board of Governors of the Federal Reserve 
System, October 25, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-26068 Filed 10-27-16; 8:45 am]
 BILLING CODE 6210-01-C