Federal Reserve Bank Services, 66405-66425 [2019-26228]

Download as PDF 66405 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices Request for Comment ACTION: Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC’s functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record. Dated at Washington, DC, on November 27, 2019. Federal Deposit Insurance Corporation. Annmarie H. Boyd, Assistant Executive Secretary. [FR Doc. 2019–26170 Filed 12–3–19; 8:45 am] BILLING CODE 6714–01–P FEDERAL RESERVE SYSTEM [Docket No. OP–1687] Federal Reserve Bank Services Board of Governors of the Federal Reserve System. AGENCY: Notice. The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2020 of $18.9 million and the 2020 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 2, 2020. FOR FURTHER INFORMATION CONTACT: For questions regarding the fee schedules: David C. Mills, Deputy Associate Director, (202) 530–6265; Max Sinthorntham, Senior Financial Policy Analyst, (202) 452–2864; Amanda Holcombe, Financial Institution Policy Analyst, (202) 912–4625; Division of Reserve Bank Operations and Payment Systems. For questions regarding the PSAF: Casey Clark, Assistant Director/ Manager, (202) 452–5232; Grace Milbank, Senior Financial Institution Policy Analyst, (202) 263–4828, 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 2020 fee schedules for the SUMMARY: check service are available from the Board, the Federal Reserve Banks, or the Reserve Banks’ financial services website at www.frbservices.org. I. Supplementary Information Private Sector Adjustment Factor, Priced Services Cost Recovery, and Overview of 2020 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.1 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 will have been earned if a private business firm provided the services. The imputed costs and imputed profit are collectively referred to as the private-sector adjustment factor (PSAF). From 2009 through 2018, 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.2 Table 1 summarizes 2018 actual, 2019 estimated, and 2020 budgeted costrecovery rates for all priced services. Cost recovery is estimated to be 100.8 percent in 2019 and budgeted to be 100.2 percent in 2020. TABLE 1—AGGREGATE PRICED SERVICES PRO FORMA COST AND REVENUE PERFORMANCE a [Dollars in millions] Year 2018 (actual) ........................................................................ 2019 (estimate) .................................................................... 2020 (budget) ....................................................................... Revenue Total expense Net income (ROE) [1–2] Targeted ROE Recovery rate after targeted ROE [1/(2 + 4)](%) 1b 2c 3 4d 5e f $442.5 442.4 443.1 $428.1 433.4 436.3 $14.4 9.0 6.7 $5.2 5.4 5.9 102.1 100.8 100.2 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 (attachment 1). For 2020, the projected revenue assumes implementation of the fee changes. 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 ASC 715 are also included. d Targeted ROE is the after-tax ROE included in the PSAF. e The recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be recognized in accordance with ASC 715. Future gains or losses, and their effect on cost recovery, cannot be projected. f For 2019 and 2020, credits or debits related to the accounting for pension plans under ASC 715 include service cost only with the adoption of ASU 2017–07 Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). khammond on DSKJM1Z7X2PROD with NOTICES b Revenue 1 On August 5, 2019, the Federal Reserve Board announced that the Reserve Banks will develop the FedNowSM Service, an interbank real-time gross settlement (RTGS) service with integrated clearing functionality, to support the provision of end-toend faster payment services. The Board anticipates the FedNow Service will be available in 2023 or 2024. Following the introduction of the FedNow VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 Service, the Board will regularly disclose the service’s cost recovery and will monitor progress toward matching revenues and costs. 2 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. In accordance with Accounting Standards Codification (ASC) 715 Compensation—Retirement Benefits, the PO 00000 Frm 00032 Fmt 4703 Sfmt 4703 Reserve Banks recognized a cumulative reduction in equity related to the priced services’ benefit plans. Including this cumulative reduction in equity from 2009 to 2018 results in cost recovery of 104.1 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\04DEN1.SGM 04DEN1 66406 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices Table 2 provides an overview of costrecovery budgets, estimates, and performance for the 10-year period from 2009 to 2018, 2018 actual, 2019 budget, 2019 estimate, and 2020 budget by priced service. TABLE 2—PRICED SERVICES COST RECOVERY [Percent] Priced service 2009–2018 All services ........................................................................... Check ................................................................................... FedACH ............................................................................... Fedwire Funds and NSS ..................................................... Fedwire Securities ............................................................... 2018 actual 102.6 105.3 98.3 102.1 101.8 2019 budget a 2019 estimate 2020 budget b 100.8 101.9 101.3 100.5 95.1 100.8 102.9 98.6 102.4 96.8 100.2 102.8 100.3 98.2 98.6 102.1 102.7 99.2 105.8 98.7 a The 2019 budget figures reflect the final budgets as approved by the Board in December 2018. 2020 budget figures reflect preliminary budget information from the Reserve Banks. The Reserve Banks will submit final budget data to the Board in November 2019, for Board consideration in December 2019. khammond on DSKJM1Z7X2PROD with NOTICES b The 1. 2019 Estimated Performance—The Reserve Banks estimate that they will recover 100.8 percent of the costs of providing priced services in 2019, including total expense and targeted ROE, compared with a 2019 budgeted recovery rate of 100.8 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 $9.0 million, compared with the targeted ROE of $5.4 million. The Reserve Banks estimate that the check service and the Fedwire® Funds and National Settlement Services will achieve full cost recovery; however, the Reserve Banks continue to estimate that the FedACH® Service and the Fedwire Securities Service will not achieve full cost recovery in 2019. Consistent with recent years, the FedACH Service will not achieve full cost recovery because of investment costs associated with the multiyear technology initiative to modernize its processing platform.3 This investment is expected to enhance efficiency, the overall quality of operations, and the Reserve Banks’ ability to offer additional services to depository institutions. The Reserve Banks estimate that the Fedwire Securities Service will not achieve full cost recovery because of investment costs associated with initiatives to promote operational efficiency. 2. 2020 Private-Sector Adjustment Factor—The 2020 PSAF for Reserve Bank priced services is $18.9 million. This amount represents an increase of $1.1 million from the 2019 PSAF of $17.8 million. This increase is primarily the result of an increase in imputed return on equity and sales tax and partially offset by a decrease in Board of Governors expenses. 3 The Reserve Banks have been engaged in a multiyear technology initiative to modernize the FedACH processing platform capabilities. The implementation of this initiative has moved from 2019 to 2020. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 3. 2020 Projected Performance—The Reserve Banks project a priced services cost recovery rate of 100.2 percent in 2020, with a net income of $6.7 million and targeted ROE of $5.9 million. The Reserve Banks project that the price changes will result in a 2.4 percent average price increase for customers. The Reserve Banks project that each of the individual service lines, other than the Fedwire Securities Service and the Fedwire Funds Service, will fully recover their costs for 2020. The Fedwire Services’ underrecovery projections are largely driven by an anticipated decline in revenue due to a large Fedwire Funds participant’s upcoming transition of its transfer origination activity off the Fedwire Funds Service, anticipated modest volume declines in certain product lines for the Fedwire Securities Service, and ongoing System investments in projects to increase technological resiliency. Both the Fedwire Funds Service and Fedwire Securities Service are projected to fully recover costs in the long run.4 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 from new and ongoing improvement initiatives. In light of these risks, the Reserve Banks will continue to refine their business and operational strategies to manage operating costs, to increase product revenue, and to capitalize on efficiencies gained from technology initiatives. 4. 2020 Pricing—The following summarizes the Reserve Banks’ changes in fee schedules for priced services in 2020: 4 From 2011–2020, Fedwire Securities Service’s projected ten-year average recovery rate is 101.6 percent and Fedwire Funds Service’s projected tenyear average recovery rate is 102.4 percent. PO 00000 Frm 00033 Fmt 4703 Sfmt 4703 Check • The Reserve Banks will reassign the tier placement of 1,607 and 124 return endpoints in the FedForward® and FedReturn® products, respectively.5 In addition, the Reserve Banks will adjust the frequency of endpoint tier reassignments from annual to every other year. • The Reserve Banks will eliminate tier 0 for all FedForward® and FedReturn® Premium Daily deposit options.6 • The Reserve Banks will decrease per-item fees for the FedForward Premium Daily A deposit option by $0.004 for tier 1. The Reserve Banks will decrease per-item fees for the FedForward® Premium Daily B deposit option by $0.002 for tier 1. The Reserve Banks will decrease per-item fees for Premium Daily A, B, and C deposit options by $0.003 for tier 3 and tier 4. • The Reserve Banks will increase the Retail Payments Premium Receiver (RPPR) FedForward® discount by $0.001.7 • The Reserve Banks will introduce 4:00 p.m. eastern time (ET) deposit deadlines for Standard FedReturn® and Premium FedReturn® and accompanying fee schedules, which include per-item fees and fixed per-cash letter fees, as detailed in table 9 and 10, respectively. • The Reserve Banks will increase per-item fees for all other Standard FedReturn® deadlines (9:00 p.m. ET, 1:00 a.m. ET, and 12:30 p.m. ET) and Premium FedReturn® deadlines (1:00 a.m. ET and 12:30 p.m. ET) by $0.02. 5 The Reserve Banks evaluate and set tier assignments annually based on changes in the volume of items received by endpoints. 6 Tier 0 consists of financial institutions with less than 10 percent of their Reserve Bank return receipt volume deposited with the Reserve Banks by Premium Daily Fee depositors during the sample period. 7 For eligible customers that deposit over two million items per month. E:\FR\FM\04DEN1.SGM 04DEN1 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices • The Reserve Banks will increase per-item fees for paper/legacy services between 10 to 17 percent, as detailed in table 11. • The Reserve Banks will increase all fees for the FedImage® service 10 percent, as detailed in table 12. • The Reserve Banks will implement a fixed monthly Check 21 participation fee of $25 per parent customer. • The Reserve Banks will increase the per-item fee for the FedReceipt® Premium Delivery 8:00 a.m. ET Target by $0.003, per item fees for the Premium Delivery 10:00 a.m. Target by $0.002, and Premium Delivery 12:00 noon Target by $0.001.8 FedACH • The Reserve Banks will keep prices at existing levels for all existing priced FedACH products. Fedwire Funds • The Reserve Banks will increase the per-transfer fee for originations and receipts from $0.820 to $0.840 for tier 1 transfers, from $0.245 to $0.25 for tier 2 transfers, and from $0.160 to $0.165 for tier 3 transfers.9 • The Reserve Banks will increase the discounted (volume-based) per-transfer fee for originations and receipts from $0.164 to $0.168 for tier 1 transfers, from $0.049 to $0.050 for tier 2 transfers, and from $0.032 to $0.033 for tier 3 transfers.10 National Settlement Service (NSS) • The Reserve Banks will keep prices at existing levels for the priced NSS products. Fedwire Securities • The Reserve Banks will keep prices at existing levels for the priced Fedwire Securities products. khammond on DSKJM1Z7X2PROD with NOTICES FedLine® Solutions • The Reserve Banks will increase the FedMail Fax fee from $100 to $150.11 • The Reserve Banks will increase the FedMail Email (for customers with FedLine Web or above) fee from $20 to $40.12 8 The 8:00 a.m. delivery target is expressed in eastern time, while the 10:00 a.m. and 12:00 noon targets are local time. 9 Tiers are based on monthly total volume of originations and receipts. Tier 1 includes up to 14,000 transfers, tier 2 includes from 14,001 to 90,000 transfers, and tier 3 includes transfers over 90,000. 10 The tiered pricing structure is complemented by a volume-based incentive mechanism that provides discounts to customers that meet certain volume thresholds. 11 Limited to installed base only. 12 All customers with a FedMail Email (for FedLine customers) have a FedLine connection today. This service allows institution with a VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 • The Reserve Banks will increase the monthly fee for the legacy FedLine Direct Plus and Premier packages to $5,500 and $7,500, respectively. The Reserve Banks subsequently will increase prices for both packages to $10,000 in May and $20,000 in August.13 • The Reserve Banks will increase the monthly fee for Additional Legacy 256K and T1 Wide Area Network services connections to $3,500. The Reserve Banks subsequently will increase prices for these Additional Legacy connections to $5,000 in May and $10,000 in August. • The Reserve Banks will increase the monthly fees for legacy Check 21 Large File Delivery (C21 LFD) 20 percent. The Reserve Banks subsequently will increase prices 50 percent in May and 100 percent in August.14 • The Reserve Banks will update the FedComplete packages to incorporate other pricing and product changes.15 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.16 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 FedLine Web or higher solution to use FedMail Email, in addition to their FedLine solution. 13 The Reserve Banks will increase fees in mid2020 for those customers who have not yet converted to new FedLine Direct network routers and circuits. 14 The monthly fees for legacy C21 LFD fee ranges from $1,680 to $24,870 depending on the size, speed, and location of the connection. In order to avoid compounding increases, December 2019 will be the baseline for all 2020 price increases for any connection still needing to convert. 15 FedComplete package pricing will be updated to include the Check participation fee and the 4:00 p.m. FedReturn® deadline. Additionally, the Reserve Banks will update the FedComplete Excess Volume and Receipt Surcharge to reflect the fee increase to Fedwire Origination and Receipt. FedComplete packages include a Fedwire Funds volume overage surcharge equivalent to the regular unit cost for originated items and one-tenth of the regular unit cost for received items. 16 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 information for the entirety of the U.S. market. PO 00000 Frm 00034 Fmt 4703 Sfmt 4703 66407 relevant elements in the priced services pro forma financial statements. 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.17 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 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 17 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. E:\FR\FM\04DEN1.SGM 04DEN1 khammond on DSKJM1Z7X2PROD with NOTICES 66408 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices maintain equity of at least 5 percent of total assets and 10 percent of riskweighted assets.18 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 Funds Service. The Board’s PSR policy incorporates the 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 policy requires that the Fedwire Funds Service 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 Funds Service does 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 an amount equivalent to six months of the Fedwire Funds Service’s current operating expenses as liquid financial assets and equity on the pro forma balance sheet.19 Current operating expenses are defined as normal business operating expenses on the income statement, less depreciation, amortization, taxes, and interest on debt. Using the Fedwire Funds Service’s preliminary 2020 budget, six months of current operating expenses would be $56.0 million. In 2020, $41.6 million of equity was imputed to meet the FDIC capital requirements; however, an additional $7.1 million of equity was imputed to meet the PSR policy requirement and is allocated solely to the Fedwire Funds Service. 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 equity financing rate is described above. 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 2020 PSAF is $18.9 million, compared with $17.8 million in 2019. The increase of $1.1 million is attributable to a net $0.7 million increase in the cost of capital and a $0.7 million increase in sales tax, offset by a $0.3 million decrease in the Board’s costs. The net $0.7 million increase in cost of capital resulted from an incremental $1 million increase in return on imputed equity necessary for PSR Policy compliance partially offset by a $0.3 million decrease in the return on equity imputed to satisfy the FDIC requirements for a well-capitalized institution. The PSAF expense of $18.9 million, detailed in table 5, reflects $7.9 million for capital funding, $6.7 million for BOG expense, and $4.4 million in sales tax expense. As shown in table 3, 2020 total assets of $841.2 million decreased by $5.4 million from 2019. The net decrease in total assets reflects a $29.7 million decrease in long-term assets partially offset by a $24.3 million increase in short-term assets and imputed investments. The net long-term asset decrease of $29.7 million primarily consists of a $23.6 million decrease in the net pension asset and a combined $9.2 million decrease in Furniture and equipment and Leasehold improvements and long-term prepayments. The net pension asset decrease reflects lower plan contributions over the past two years, down from $240 million in 2018 to $180 million in 2019 and 2020, respectively. The decreases in Furniture and equipment and Leasehold improvements and long-term prepayments are mainly due to a lower allocation of Reserve Bank assets to the Federal Reserve’s priced services. The increase in the short-term assets is primarily driven by the imputed investments in Treasury securities from imputed equity required to meet FDIC capital requirements for a wellcapitalized institution and to comply with the PSR policy. The remaining net increases in short-term assets reflect a $34.1 million increase in items in process of collection resulting from relatively high balances in the value of foreign transactions offset by a $27.5 million decrease in imputed investments in Fed Funds. The capital structure of the 2020 pro forma balance sheet, provided in table 4, is composed of equity of $56.0 million, or 11.4 percent of the 2020 risk weighted assets detailed in table 6, and no long-term debt. The 2020 capital structure is similar to that of 2019, which was composed of $51.8 million of equity. The 2020 imputed equity required to fund assets and meet the publicly traded firm model capital requirements is $31.2 million. Longterm debt of $10.4 million was imputed at the observed market ratio of 58.4 percent. To meet the FDIC capital requirements for a well-capitalized institution, the $10.4 million of imputed long-term debt was substituted for equity, and additional $31.2 million equity was imputed. The resulting $49 million total level of equity was not sufficient to satisfy the $56.0 million equity requirement for the PSR policy requirements. An additional $7.1 million was imputed to comply with the PSR requirement. The net Accumulated Other Comprehensive Income loss is $625.2 million, compared with $624.3 million in 2019. The slight increase is primarily attributable to a higher discount rate. AOCI is in a net loss position and does not reduce the total imputed equity required to fund priced services assets or fulfill the FDIC equity requirements for a well-capitalized institution. 18 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. 19 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. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00035 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 66409 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices TABLE 3—COMPARISON OF PRO FORMA BALANCE SHEETS FOR BUDGETED FEDERAL RESERVE PRICED SERVICES a [Millions of dollars—projected average for year] 2020 Short-term assets: Receivables .......................................................................................................................... Materials and supplies .......................................................................................................... Prepaid expenses ................................................................................................................. Items in process of collection 20 ........................................................................................... 2019 Change $37.1 0.5 10.8 129.1 $36.7 0.6 11.1 95.0 $0.4 (0.1) (0.3) 34.1 Total short-term assets ................................................................................................. Imputed investments: 21 Imputed investment in Treasury Securities .......................................................................... Imputed investment in Fed Funds ........................................................................................ 177.5 143.4 34.1 38.2 225.5 20.5 253.0 17.7 (27.5) Total imputed investments ............................................................................................ Long-term assets: Premises 22 ........................................................................................................................... Furniture and equipment ...................................................................................................... Leasehold improvements and long-term prepayments ........................................................ Net pension asset ................................................................................................................. Deferred tax asset ................................................................................................................ 263.7 273.5 (9.8) 111.5 30.2 81.1 ........................ 177.2 104.2 32.8 87.7 23.6 181.4 7.3 (2.6) (6.6) (23.6) (4.2) Total long-term assets ................................................................................................... 400.0 429.7 (29.7) Total assets ............................................................................................................ 841.2 846.6 (5.4) Short-term liabilities: Deferred credit items ............................................................................................................ Short-term debt ..................................................................................................................... Short-term payables ............................................................................................................. 354.6 13.0 35.5 348.0 13.5 34.9 6.6 (0.5) 0.6 Total short-term liabilities .............................................................................................. Long-term liabilities: Pension liability ..................................................................................................................... Long-term debt ..................................................................................................................... Postemployment/postretirement benefits and net pension liabilities 23 ................................ 403.1 396.4 6.7 0.1 ........................ 382.0 ........................ ........................ 398.4 0.1 ........................ (16.4) Total liabilities ................................................................................................................ Equity 24 ......................................................................................................................... 785.2 56.0 794.8 51.8 (9.6) 4.2 Total liabilities and equity ....................................................................................... 841.2 846.6 (5.4) a Calculations in this table and subsequent PSAF tables may be affected by rounding. TABLE 4—IMPUTED FUNDING FOR PRICED-SERVICES ASSETS [Millions of dollars] khammond on DSKJM1Z7X2PROD with NOTICES 2020 2019 A. Short-term asset financing: Short-term assets to be financed: Receivables ............................................................................................................................................... Materials and supplies .............................................................................................................................. Prepaid expenses ...................................................................................................................................... $37.1 0.5 10.8 $36.7 0.6 11.1 Total short-term assets to be financed ............................................................................................................ Short-term payables .................................................................................................................................. 48.4 35.5 48.4 34.9 Net short-term assets to be financed ............................................................................................................... 13.0 13.5 20 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 before providing credit to the depositing bank. Float is directly estimated at the service level. 21 Consistent with the Board’s PSR policy, the Reserve Banks’ priced services will hold and amount equivalent to 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 VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 Funds Service’s projected current operating expenses is $56.0 million. In 2020, $41.6 million of equity was imputed to meet the regulatory capital requirements and $7.1 million of equity was imputed to satisfy PSR policy funding requirements. 22 Includes the allocation of Board of Governors assets to priced services of $3.1 million for 2020 and $2.9 million for 2019. 23 Includes the allocation of Board of Governors liabilities to priced services of $0.8 million for 2020 and $0.8 million for 2019. PO 00000 Frm 00036 Fmt 4703 Sfmt 4703 24 Includes an accumulated other comprehensive loss of $625.2 million for 2020 and $624.3 million for 2019, which reflects the ongoing amortization of the accumulated loss in accordance with 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\04DEN1.SGM 04DEN1 66410 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices TABLE 4—IMPUTED FUNDING FOR PRICED-SERVICES ASSETS—Continued [Millions of dollars] 2020 2019 Imputed short-term debt financing 25 ................................................................................................................ 13.0 13.5 B. Long-term asset financing: Long-term assets to be financed: Premises .................................................................................................................................................... Furniture and equipment ........................................................................................................................... Leasehold improvements and long-term prepayments ............................................................................. Net pension asset ..................................................................................................................................... Deferred tax asset ..................................................................................................................................... 111.5 30.2 81.1 ........................ 177.2 104.2 32.8 87.7 23.6 181.4 Total long-term assets to be financed .............................................................................................................. Postemployment/postretirement benefits and net pension liabilities ........................................................ 400.0 382.0 429.7 398.4 Net long-term assets to be financed ......................................................................................................... 17.8 31.3 Imputed long-term debt 20 ......................................................................................................................... Imputed equity 20 ....................................................................................................................................... ........................ 56.0 ........................ 51.8 Total long-term financing ................................................................................................................... 56.0 51.8 TABLE 5—DERIVATION OF THE 2020 AND 2019 PSAF [Dollars in millions] 2020 2019 Debt A. Imputed long-term debt and equity: Net long-term assets to finance ................................................... Capital structure observed in market ........................................... Pre-adjusted long-term debt and equity ....................................... Equity adjustments: 26 Equity to meet capital requirements ..................................... Adjustment to debt and equity funding given capital requirements 27 .............................................................................. Adjusted equity balance ........................................................ Equity to meet capital requirements 28 .................................. Debt Equity $17.8 58.4% $17.8 41.6% $31.3 58.3% $31.3 41.7% $10.4 $7.4 $18.2 $13.1 .............................. 49.0 .............................. 51.8 (10.4) .............................. .............................. 10.4 17.8 31.2 (18.2) .............................. .............................. 18.2 31.3 20.5 Total imputed long-term debt and equity ....................... B. Cost of capital: Elements of capital costs: Short-term debt 29 .................................................................. Long-term debt 29 .................................................................. Equity 30 ................................................................................. khammond on DSKJM1Z7X2PROD with NOTICES Equity $ $49.0 $13.0 × 2.3% = ¥ × 4.0% = 49.0 × 13.3% = $ $51.8 $0.3 ........................ 6.6 $13.5 × 2.3% = ¥ × 3.9% = 51.8 × 13.3% = $0.3 ........................ 6.8 $6.9 .............................. $7.1 C. Incremental cost of PSR policy: Equity to meet policy .................................................................... $7.1 × 13.5% = $1.0 $ ¥ × 13.3% = D. Other required PSAF costs: Sales taxes ................................................................................... Board of Governors expenses ..................................................... $4.4 6.7 ........................ ........................ $3.7 7.0 25 Imputed short-term debt financing is computed as the difference between short-term assets and short-term liabilities. As presented in table 5, the financing costs of imputed short-term debt, imputed long-term debt and imputed equity are the elements of cost of capital, which contribute to the calculation of the PSAF. 26 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 VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 and equity based on the capital structure observed in the market (see tables 4 and 6). In 2020, the amount of imputed equity met the minimum equity requirements for risk-weighted assets. 27 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. 28 Additional equity in excess of that needed to fund priced services assets is offset by an asset balance of imputed investments in treasury securities. PO 00000 Frm 00037 Fmt 4703 Sfmt 4703 $ ........................ ........................ 29 Imputed short-term debt and long-term debt are computed at table 4. 30 The 2020 ROE is equal to a risk-free rate plus a risk premium (beta * market risk premium). The 2020 after-tax CAPM ROE is calculated as 2.16% + (1.0 * 8.34%) = 10.50%. Using a tax rate of 22.1%, the after-tax ROE is converted into a pretax ROE, which results in a pretax ROE of (10.50%/(1– 22.1%)) = 13.48%. Calculations may be affected by rounding. E:\FR\FM\04DEN1.SGM 04DEN1 66411 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices TABLE 5—DERIVATION OF THE 2020 AND 2019 PSAF—Continued [Dollars in millions] 2020 Debt E. Total PSAF: As a percent of assets ................................................................. As a percent of expenses ............................................................ F. Tax rates ......................................................................................... 2019 Equity .............................. .............................. .............................. Debt Equity 11.1 .............................. 10.7 $18.9 .............................. $17.8 2.2% 3.4% 22.1% .............................. .............................. .............................. 2.1% 3.3% 22.2% TABLE 6—COMPUTATION OF 2020 CAPITAL ADEQUACY FOR FEDERAL RESERVE PRICED SERVICES [Dollars in millions] Assets Risk weight Weighted assets Imputed investments: 1-Year Treasury securities 31 ................................................................................................ Federal funds 32 .................................................................................................................... $38.2 225.5 ........................ 0.2 $ Total imputed investments ............................................................................................ Receivables ................................................................................................................................. Materials and supplies ................................................................................................................. Prepaid expenses ........................................................................................................................ Items in process of collection ...................................................................................................... Premises ...................................................................................................................................... Furniture and equipment ............................................................................................................. Leasehold improvements and long-term prepayments ............................................................... Deferred tax asset ....................................................................................................................... 263.7 37.1 0.5 10.8 129.1 111.5 30.2 81.1 177.2 ........................ 0.2 1.0 1.0 0.2 1.0 1.0 1.0 1.0 45.1 7.4 0.5 10.8 25.8 111.5 30.2 81.1 177.2 Total ...................................................................................................................................... 841.2 ........................ 489.7 Imputed equity: Capital to risk-weighted assets ............................................................................................ Capital to total assets ........................................................................................................... 11.4% 6.7% ........................ ........................ ........................ ........................ C. Check Service—Table 7 shows the 2018 actual, 2019 estimated, and 2020 45.1 budgeted cost-recovery performance for the commercial check service. TABLE 7—CHECK SERVICE PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] Year khammond on DSKJM1Z7X2PROD with NOTICES 2018 (actual) ........................................................................ 2019 (estimate) .................................................................... 2020 (budget) ....................................................................... Revenue Total expense Net income (ROE) Targeted ROE Recovery rate after targeted ROE (%) 1 2 3 [1–2] 4 5 [1/(2 + 4)] $132.9 126.7 119.4 $127.8 121.6 114.8 $5.1 5.2 4.6 $1.5 1.5 1.3 102.7 102.9 102.8 1. 2019 Estimate—The Reserve Banks estimate that the check service will recover 102.9 percent of total expenses and targeted ROE, compared with a 2019 budgeted recovery rate of 101.9 percent. Through August, total commercial forward and total commercial return check volumes were 8.1 percent and 7.1 percent lower, respectively, than they were during the same period last year. Consistent with anticipated fourthquarter declines, for full-year 2019, the Reserve Banks estimate that their total 31 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. 32 The investments are imputed based on the amounts arising from the collection of items before providing credit according to established availability schedules. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00038 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 66412 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices forward check volume will decline 7.8 percent (compared with a budgeted decline of 7.6 percent) and their total return check volume will decline 6.6 percent (compared with a budgeted decline of 7.7 percent) from 2018 levels.33 The Reserve Banks expect that check volumes will continue to decline, although uncertainty remains as to the rate of decline over the long term. In particular, the Reserve Banks’ check volumes are expected to decrease because of competitive pressures in the check-clearing market, and substitution away from checks to other payment instruments. While these volume declines will affect budgeted total revenue, the Reserve Banks estimate that total expenses will also be lower given the decline in those expenses directly correlated with volumes as well as the continued realization of operational efficiencies. These factors have allowed for close alignment between budgeted and estimated 2019 cost recovery. 2. 2020 Pricing—The Reserve Banks expect the check service to recover 102.8 percent of total expenses and targeted ROE in 2020. The Reserve Banks project revenue to be $119.4 million, a decline of 5.8 percent from the 2019 estimate. This decline is driven in part by an anticipated accelerating decline in the overall number of checks written, as well as by competition from correspondent banks, aggregators, and direct exchanges.34 Total expenses for the check service are projected to be $114.8 million, a decrease of $6.8 million, or 5.6 percent, from 2019 expenses, primarily because of reduced operating costs, including cost savings associated with the Reserve Banks’ customer support services. The Reserve Banks will introduce a fixed participation fee, which will be charged to any customer that receives FedReceipt volume on a monthly basis. In light of ongoing volume declines, the participation fee is intended to support revenue stability by increasing the proportion of fixed to variable fees. Additionally, this fee introduction aligns the check service with other priced services that offer similar monthly participation fees, such as FedACH and the Fedwire Funds Service. The Reserve Banks evaluate and set tier assignments annually based on changes in the volume of items received by endpoints. In 2020, the Reserve Banks will reassign the tier placement of 238 endpoints currently in tiers 1–4 to another tier.35 In addition, the Reserve Banks will eliminate tier 0 for all Forward and Return Premium Daily deposit options, and reassign all remaining tier 0 customers.36 This change is intended to reflect the fact that the Reserve Banks now have sufficient volume to appropriately assign the remaining 1,130 endpoints from tier 0 into tiers 1–4. In response to feedback from customers, the Reserve Banks will also evaluate and set tier assignments every other year instead of annually, to provide more certainty and price stability to the industry. As a result, the Reserve Banks will next reevaluate and set tier assignments in 2022.37 Based on the 2020 tier assignments and the elimination of tier 0, the Reserve Banks will include changes to FedForward Premium Daily Fees and the Retail Payments Premium Receiver (RPPR) discount structure. The Reserve Banks will lower the FedForward Premium Daily Fee A per item fees by $0.004 for tier 1, lower the FedForward Premium Daily Fee B per item fees by $0.002 for tier 1, and lower the FedForward Premium Daily Fee A, B, and C per item fees by $0.003 for tiers 3 and 4. The Reserve Banks also will include an increase to the RPPR discount of $0.001 for eligible customers that deposit over two million items per month. Table 8 shows the 2020 FedForward Premium Daily fees. TABLE 8—FEDFORWARD PREMIUM DAILY DEPOSIT [Applicable to Premium Daily Fee A, Premium Daily Fee B, and Premium Daily Fee C] Tier 38 Premium A Premium B Premium C Deposit Deadline of 5:00 a.m. EST M–F 0 1 2 3 4 5 ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... N/A $0.002 0.014 0.022 0.036 0.200 N/A $0.002 0.012 0.020 0.034 0.200 N/A $0.002 0.010 0.018 0.032 0.200 N/A 0.012 0.024 0.032 0.046 0.200 N/A 0.012 0.022 0.030 0.044 0.200 N/A 0.012 0.020 0.028 0.042 0.200 Deposit Deadline of 12:00 p.m. EST M–F khammond on DSKJM1Z7X2PROD with NOTICES 0 1 2 3 4 5 ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... In response to customer demand for intraday return options to match other clearing option capabilities, the Reserve Banks will introduce a new 4:00 p.m. ET FedReturn® deposit deadline. The deadline will accelerate the speed of 33 Total Reserve Bank forward check volumes are expected to be 4.4 billion in 2019. Total Reserve Bank return check volumes are expected to be 27.1 million in 2019. 34 The Reserve Banks estimate that total commercial forward check volumes in 2019 will decline 8.5 percent, to 4.0 billion, and total commercial return check volumes will decline 8.5 percent, to 24.8 million in 2019. 35 The tiers for 2019 are available at https:// www.frbservices.org/resources/fees/check2019.html. 36 Tier 0 was introduced as part of the Reserve Banks’ 2016 restructured FedForward and FedReturn fee schedules and is composed of routing numbers for which the Reserve Banks currently receive little to no volume from the specified subset of Reserve Bank customers (and which therefore cannot currently be assigned to the other tiers with sufficient predictability). Tier 0 was only available for FedForward and Return Premium Daily deposit options. 37 The tiers for 2020 are available at https:// www.frbservices.org/resources/fees/check2020.html. 38 Tier 5 for FedForward Daily Deposit is also referred to as Substitute Check Endpoints. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00039 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices payments by providing additional options for paying banks to return items earlier. The Reserve Banks will increase the tier pricing for the 9:00 p.m. ET, 1:00 a.m. ET, and 12:30 p.m. ET FedReturn deposit deadlines. Table 9 lists the fees for the Standard FedReturn® product, inclusive of 66413 current and new deposit deadlines. Table 10 lists the fees for the Premium FedReturn® product, inclusive of current and new deposit deadlines. TABLE 9—STANDARD FEDRETURN IMAGE CASH LETTER Tier 39 4:00 p.m. ET 1 ....................................................................................................................... 2 ....................................................................................................................... 3 ....................................................................................................................... 4 ....................................................................................................................... 5 ....................................................................................................................... 6 ....................................................................................................................... Cash Letter ...................................................................................................... 9:00 p.m. ET $0.120 0.180 0.590 0.790 1.000 1.500 4.50 1:00 a.m. ET $0.170 0.230 0.640 0.840 1.050 1.500 4.50 $0.470 0.530 0.940 1.140 1.350 1.500 6.50 12:30 p.m. ET $0.170 0.230 0.640 0.840 1.050 1.500 6.50 TABLE 10—PREMIUM FEDRETURN IMAGE CASH LETTER Tier 39 4:00 p.m. ET 0 ................................................................................................................................................... 1 ................................................................................................................................................... 2 ................................................................................................................................................... 3 ................................................................................................................................................... 4 ................................................................................................................................................... 5 ................................................................................................................................................... 6 ................................................................................................................................................... Daily Fixed Fee ............................................................................................................................ The Reserve Banks will increase to the per-item fee for all paper-related products, as well as large-dollar return item notification (LDRIN), and returns reclear services by 10 to 17 percent.40 The Reserve Banks will increase all FedImage® fees 10 percent. The Reserve Banks will continue increasing fees to encourage depositors to shift volume away from legacy paper-related 1:00 a.m. ET N/A $0.020 0.070 0.490 0.690 0.900 1.500 400.00 N/A $0.070 0.120 0.540 0.740 0.950 1.500 400.00 12:30 p.m. ET N/A $0.090 0.140 0.560 0.760 0.970 1.500 400.00 products in light of today’s electronic check-processing environment. Table 11 and 12 show these pricing changes. TABLE 11—PAPER CHECK FORWARD AND RETURN COLLECTION Paper services Fixed fee Canadian Items—U.S. Funds .................................................................................................................................. Canadian Items—Canadian Funds ......................................................................................................................... Canadian Cash Letter Correction Fee .................................................................................................................... Canadian Amount Encoding .................................................................................................................................... Foreign Items—GBP and Euro ................................................................................................................................ Foreign Items—All Other Items ............................................................................................................................... Foreign Items—Collection Items ............................................................................................................................. Mixed Forward Paper Deposits ............................................................................................................................... LDRIN—FedLine Web access solution ................................................................................................................... LDRIN—Telephone .................................................................................................................................................. LDRIN—Physical Item ............................................................................................................................................. Returns Item Reclear—Level 1 ............................................................................................................................... Returns Item Reclear—Level 2 ............................................................................................................................... Returns Item Reclear—Level 3 ............................................................................................................................... Returns Item Reclear—Level 4 ............................................................................................................................... Canadian Item—Return ........................................................................................................................................... Foreign Item—Return .............................................................................................................................................. Mixed Return Paper Deposits ................................................................................................................................. Return Item Qualification ......................................................................................................................................... $15.00 15.00 ........................ ........................ 15.00 15.00 15.00 15.00 ........................ ........................ ........................ 10.00 10.00 10.00 10.00 ........................ ........................ 15.00 ........................ Per item fee $5.50 5.50 22.00 1.65 22.00 22.00 88.00 4.00 4.00 22.00 28.00 0.70 0.80 0.90 1.00 16.50 44.00 7.00 8.25 khammond on DSKJM1Z7X2PROD with NOTICES TABLE 12—FEDIMAGE AND ELECTRONIC CHECK SERVICES AND FEES Fixed fee Image Archive: Image Capture + 7 business day archive ........................................................................................ 39 Tier 5 for FedReturn Daily Deposit is also referred to as PDF Endpoints. Tier 6 for FedReturn Daily Deposit is also referred to as Substitute Check Endpoints. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 40 LDRIN is a service in which the Reserve Banks, at the payor bank’s request, notifies the bank of first deposit (BOFD) that an item of $5,000 or more is being returned to them, to satisfy the payor bank’s Regulation CC requirement. Returns reclear is a PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 $6.60 .............................. Per item fee $0.010 service in which the Reserve Banks, at the BOFD’s request, will make a second attempt to clear a check that has been returned during the first clearing attempt. E:\FR\FM\04DEN1.SGM 04DEN1 66414 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices TABLE 12—FEDIMAGE AND ELECTRONIC CHECK SERVICES AND FEES—Continued Fixed fee Image Capture On-Us Surcharge .................................................................................................... 30 business day archive .................................................................................................................. 60 business day archive .................................................................................................................. 7-year archive/11-year archive ........................................................................................................ Dual archive (Transition period up to 120 days) ............................................................................. Extended dual archive (More than 120 days) ................................................................................. Back File Conversion ....................................................................................................................... Electronic On-Us Service ................................................................................................................. Extended RAID Storage 61 days to 6 months ................................................................................................................. 61 days to 12 months ............................................................................................................... 61 days to 24 months ............................................................................................................... Image Retrievals: Retrievals to view via FedLine Web® inquiry .................................................................................. Retrievals to email via FedLine Web Request via FedLine Web inquiry ............................................................................................ Recurring request ..................................................................................................................... Image Access and Retrievals through a Gateway ................................................................... Subscription Retrievals ............................................................................................................. Manual FedImage Requests (requests performed by FRB staff) ............................................ Image Delivery: Physical Media CD–ROM Select Accounts Service—RAID .............................................................................. CD–ROM—Tape ....................................................................................................................... Truncation: Image Enhanced Truncation ............................................................................................................ Return Item Retrieval—FedLine ...................................................................................................... The Reserve Banks will increase the per-item fee for the FedReceipt® Premium Delivery 8:00 a.m. ET Target by $0.003 to $0.026, for the 10:00 a.m. Target by $0.002 to $0.017, and for the 12:00 noon Target by $0.001 to $0.012.41 The fee increases are intended to maintain cost recovery of the Premium Delivery service in light of declining check volume. The primary risks to the Reserve Banks’ ability to achieve budgeted 2020 cost recovery for the check service include greater-than-expected declines in check volume due to the general reduction in check writing and Per item fee ........................................ ........................................ ........................................ ........................................ ........................................ ........................................ $4.70 .............................. $4.70 .............................. 0.0233 0.0012 0.0014 0.0022 0.0013 0.0133 0.0133 0.0133 ........................................ ........................................ ........................................ 0.0011 0.0026 0.0067 ........................................ 0.4700 ........................................ ........................................ ........................................ ........................................ ........................................ 0.4700 0.4700 0.4700 0.0029 8.0000 $20.00/CD–ROM ........... $20.00/CD–ROM ........... 0.0210 0.1300 $7.25 .............................. ........................................ 0.0120 1.4000 increased competition from correspondent banks, aggregators, and direct exchanges, which would result in lower-than-anticipated revenue. D. FedACH Service—Table 13 shows the 2018 actual, 2019 estimate, and 2020 budgeted cost-recovery performance for the commercial FedACH service. TABLE 13—FEDACH SERVICE PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] Year khammond on DSKJM1Z7X2PROD with NOTICES 2018 (actual) ........................................................................ 2019 (estimate) .................................................................... 2020 (budget) ....................................................................... Revenue Total expense Net income (ROE) Targeted ROE Recovery rate after targeted ROE (%) 1 2 3 [1–2] 4 5 [1/(2 + 4)] $149.7 152.7 157.6 $149.1 153.1 155.3 $0.6 ¥0.4 2.3 $1.9 1.9 1.9 99.2 98.6 100.3 1. 2019 Estimate—The Reserve Banks estimate that the FedACH service will recover 98.6 percent of total expenses and targeted ROE, compared with a 2019 budgeted recovery rate of 101.3 percent. Through August, FedACH commercial origination and receipt volume was 5.4 percent higher than it was during the same period last year. For full-year 2019, the Reserve Banks estimate that FedACH commercial origination and receipt volume will increase 5.8 percent from 2018 levels, compared with a 2019 budgeted increase of 3.3 percent. However, investment costs associated with a multiyear technology initiative to modernize the FedACH processing platform continue to drive the overall underrecovery rate. Although FedACH is estimated to not fully recover its costs in 2019, the Reserve Banks are expected to fully recover FedACH costs following the finalization of the FedACH technology modernization project. 2. 2020 Pricing—The Reserve Banks expect the FedACH service to recover 100.3 percent of total expenses and targeted ROE in 2020. FedACH commercial origination and receipt volume is projected to grow 4.2 percent, which is expected to contribute to an increase of $4.9 million in total revenue 41 FedReceipt services consist of the electronic presentment of an image cash letter to the paying bank that consists of all forward items deposited electronically. The 8:00 a.m. delivery target is expressed in eastern time, while the 10:00 a.m. and 12:00 noon targets are local time. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 66415 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices from the 2019 estimate. Total expenses are projected to increase $2.2 million from 2019 expenses, primarily because of testing and implementation costs associated with the introduction of the new FedACH technology platform, which is now expected in 2020. The Reserve Banks will not change fees for existing FedACH priced services. This is consistent with a multiyear strategy of providing price stability for customers in light of ongoing investments to upgrade the FedACH processing platform. The primary risks to the Reserve Banks’ ability to achieve budgeted 2020 cost recovery for the FedACH service are unanticipated cost overruns associated with the FedACH technology modernization project and unanticipated volume reductions. E. Fedwire Funds and National Settlement Services—Table 14 shows the 2018 actual, 2019 estimate, and 2020 budgeted cost-recovery performance for the Fedwire Funds and National Settlement Services. TABLE 14—FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] Year khammond on DSKJM1Z7X2PROD with NOTICES 2018 (actual) ........................................................................ 2019 (estimate) .................................................................... 2020 (budget) ....................................................................... 1. 2019 Estimate—The Reserve Banks estimate that the Fedwire Funds and National Settlement Services will recover 102.4 percent of total expenses and targeted ROE, compared with a 2019 budgeted recovery rate of 100.5 percent. Through August, Fedwire Funds Service online volume was 4.0 percent higher than it was during the same period last year. For full-year 2019, the Reserve Banks estimate that Fedwire Funds Services online volume will increase 4.5 percent from 2018 levels, compared with the 2.1 percent volume increase that had been budgeted. Through August, the National Settlement Service (NSS) settlement file volume was 4.8 percent lower than it was during the same period last year, and settlement entry volume was 4.2 percent lower. For the full year, the Reserve Banks estimate that settlement file volume will decrease 5.0 percent (slightly more than the budgeted decrease of 3.5 percent) and settlement entry volume will decrease 4.0 percent from 2018 levels (compared with a budgeted 3.0 percent decrease). 2. 2020 Pricing—The Reserve Banks expect the Fedwire Funds and National Settlement Services to recover 98.2 percent of total expenses and targeted ROE. Revenue is projected to be $139.9 million, an increase of 2.6 percent from the 2019 estimate. The Reserve Banks project total expenses to be roughly $8.4 million higher than 2019 expenses, primarily reflecting investments in initiatives to improve resiliency and operational functionality. The Reserve Banks will increase the per-transfer fee for originations and receipts from $0.820 to $0.840 for tier 1 transfers, from $0.245 to $0.250 for tier VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 Revenue Total expense Net income (ROE) Targeted ROE Recovery rate after targeted ROE (%) 1 2 3 [1–2] 4 5 [1/(2 + 4)] $132.4 136.4 139.9 $123.6 131.6 140.0 $8.8 4.8 ¥0.1 $1.5 1.6 2.4 105.8 102.4 98.2 2 transfers, and from $0.160 to $0.165 for tier 3 transfers.42 Correspondingly, the discounted per-transfer fee for originations and receipts will increase from $0.164 to $0.168 for tier 1 transfers, from $0.049 to $0.050 for tier 2 transfers, and from $0.032 to $0.033 for tier 3 transfers.43 The Reserve Banks will increase the per-transfer fee in order to offset an anticipated decline in revenue due to a large Fedwire Funds participant’s upcoming transition of its transfer origination activity off the Fedwire Funds Service, which is set to occur in 2020. This shift in volume is coupled with ongoing project costs associated with resiliency and operational objectives and increased investments in System technology infrastructure. The price increase has been structured to affect tier 3 (that is, high-volume) customers proportionally more than lower-volume customers. The structure was chosen because the ongoing project costs incurred by the Fedwire Funds Service are expected to be of greater benefit to tier 3 customers. Overall Fedwire Funds participants will experience an average price increase of 3.7 percent.44 The Reserve Banks will not change NSS fees for 2020. There are three primary risks to the Reserve Banks’ ability to achieve budgeted 2020 cost recovery for these services. First, the Fedwire Funds Service could experience a potential overrun in costs from ongoing technology initiatives to improve resiliency and operational functionality. Second, the services could experience lower–than-expected volume related to unforeseen market trends. Finally, the Fedwire Funds Service is reevaluating its current resource commitments and portfolio goals in order to better support any necessary strategic and development work related to emerging Systemwide initiatives, in addition to revisiting project implementation timelines in response to industry feedback.45 As a result, the Fedwire Funds Service future resource and project costs may shift and this may affect 2020 cost recovery. F. Fedwire Securities Service—Table 15 shows the 2018 actual, 2019 estimate, and 2020 budgeted cost- 42 Tiers are based on monthly total volume of originations and receipts. Tier 1 includes up to 14,000 transfers, Tier 2 includes from 14,001 to 90,000 transfers, and Tier 3 includes transfers over 90,000. 43 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. 44 The average price impact (increase) reflects both the price changes as well as an overall expected increase in the average benchmark volume required to receive discount pricing based on historic observed increases in customer benchmark volume year over year. 45 In response to industry feedback, the Federal Reserve Banks have decided to put on hold Phase 1 of the Fedwire Funds Service’s ISO 20022 migration strategy (originally scheduled for November 2020). The Federal Reserve will provide an update regarding its implementation plans after engaging with key stakeholders to reassess the Fedwire Funds Service’s migration strategy. See official press release for additional details (https:// frbservices.org/news/press-releases/092319-fedwirefunds-migration-iso20022-messages.html). PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 66416 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices recovery performance for the Fedwire Securities Service.46 TABLE 15—FEDWIRE SECURITIES SERVICE PRO FORMA COST AND REVENUE PERFORMANCE [Dollars in millions] Year khammond on DSKJM1Z7X2PROD with NOTICES 2018 (actual) ........................................................................ 2019 (estimate) .................................................................... 2020 (budget) ....................................................................... Revenue Total expense Net income (ROE) Targeted ROE Recovery rate after targeted ROE (%) 1 2 3 [1¥2] 4 5 [1/(2 + 4)] $27.5 26.6 26.1 $27.5 27.1 26.2 $0.0 ¥0.5 ¥0.1 $0.3 0.3 0.3 98.7 96.8 98.6 1. 2019 Estimate—The Reserve Banks estimate that the Fedwire Securities Service will recover 96.8 percent of total expenses and targeted ROE, compared with a 2019 budgeted recovery rate of 95.1 percent. The Reserve Banks estimate revenue to be $26.6 million, an increase of 0.8 percent from the 2019 budget. Total expenses are projected to be $27.1 million for full-year 2019, a decrease of 1.5 percent from the 2019 budget. Through August, Fedwire Securities Service online agency transfer volume was 6.6 percent lower than it was during the same period last year. For full-year 2019, the Reserve Banks estimate that Fedwire Securities Service online agency transfer volume will decline 11.1 percent from 2018 levels, compared with a budgeted decline of 4.7 percent. This decrease in online agency transfer volume primarily reflects JP Morgan Chase’s (JPMC) exiting the broker-dealer services business, which resulted in Bank of New York Mellon (BNYM) generally serving as the sole clearing bank for government securities. Activity between JPMC and BNYM that had previously settled over the Fedwire Securities Service is now concentrated within BNYM. The significant decline in agency transfer volume realized from JPMC’s exit was partially offset by a reorganization of BNYM’s broker-dealer activity and non-broker-dealer activity into separate securities accounts. This reorganization resulted in transfer activity that was previously conducted on BNYM’s books shifting to the Fedwire Securities Service. The Reserve Banks do not expect that there will be further significant changes in 2020 in online agency transfer volume related to the JPMC exit. For full-year 2019, volumes for the Fedwire Securities’ two largest revenuegenerating services—account maintenance and issue maintenance— are expected to decline from 2018 levels. Through August, account maintenance volume was 2.8 percent lower than it was during the same period last year. For full-year 2019, the Reserve Banks estimate that account maintenance volume will decline 2.8 percent from 2018 levels, compared with a budgeted decline of 5.8 percent. The account maintenance volume decline is largely the result of joint custody account closures. Through August, the number of agency issues maintained was 11.8 percent lower than it was during the same period last year. For full-year 2019, the Reserve Banks estimate that the number of agency issues maintained will decline 11.9 percent from 2018 levels, compared with a budgeted decline of 19.7 percent. 2. 2020 Pricing—The Reserve Banks expect the Fedwire Securities Service to recover 98.6 percent of total expenses and targeted ROE in 2020. Revenue is projected to be $26.1 million, a decrease of 1.9 percent from the 2019 estimate. The Reserve Banks also project that 2020 expenses will remain relatively flat, decreasing by $0.9 million from the 2019 estimate. Significant drivers of 2020 operating costs include investments to advance initiatives to improve resiliency and operational functionality. The Reserve Banks will not change Fedwire Securities Service fees for 2020. This is largely the result of a stable nearterm volume outlook across Fedwire Securities’ core products. Relevant cost drivers include ongoing project costs associated with resiliency and operational objectives and increased Systemwide investment in technology infrastructure. Of particular note, however, operating costs for the Fedwire Securities Service are expected to decrease in 2021, primarily due to Fedwire Securities Modernization Program-related costs being fully amortized. The Reserve Banks project that online agency transfer volume will remain relatively flat, with a slight decrease of 1.4 percent in 2020. As interest rates decline, an expected increase in refinancing activity will likely lead to higher mortgage-backed securities (MBS) issuance and a corresponding higher level of online MBS transfers. Conversely, agency debt transfers will likely decrease since the Federal Housing Finance Agency (FHFA) has mandated a decline in governmentsponsored enterprise retained portfolios. Thus, it is expected that there will be no significant volume changes in this category for 2020. The volume of accounts maintained will likely decrease 3.7 percent, and the volume of agency issues maintained will likely decrease 0.5 percent.47 Account maintenance volume is expected to continue to decline in 2020 because of ongoing joint custody account closures. The primary risk to the Reserve Banks’ ability to achieve budgeted 2020 cost recovery for these services is a potential overrun in costs from ongoing technology initiatives to improve resiliency and operational functionality 46 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, reflected in this memorandum, 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. 47 The online transfer fee, monthly account maintenance fee, and monthly issue maintenance fee accounted for more than 94 percent of total Fedwire Securities Service revenue through August 2019. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 66417 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices or lower-than-expected volume related to unforeseen market trends. G. FedLine Solutions—The Reserve Banks charge fees for the electronic connections that depository institutions use to access priced services and allocate the costs and revenues associated with this electronic access to the priced services.48 There are currently six FedLine channels through which customers can access the Reserve Banks’ priced services: FedMail, FedLine Exchange, FedLine Web, FedLine Advantage, FedLine Command, and FedLine Direct.49 The Reserve Banks bundle these channels into eleven 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 FedLine connections and a fixed number of FedACH, Fedwire Funds, and Check 21enabled transactions. Eight attended access packages offer manual access to critical payment and information services via a web-based interface. The FedMail package provides access to basic information services via email, while the two FedLine Exchange packages are designed to provide certain services, such as the E-Payments Routing Directory, to customers that otherwise do not use FedLine for any payment services. The two FedLine Web packages offer 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, Internet Protocol (IP)-based interfaces. The FedLine Command package offers an unattended connection to FedACH as well as to most accounting information services. The two remaining options are FedLine Direct packages, which allow for unattended connections at multiple connection speeds to Check, FedACH, Fedwire Funds, and Fedwire Securities transactional and information services and to most accounting information services.50 In 2020, the Reserve Banks will increase the monthly fees for legacy FedLine Direct (FLD) Plus and Premier, Additional Legacy 256K and T1 Wide Area Network (WAN) services, and Check 21 Large File Delivery (C21 LFD). The fee for legacy FLD Plus (Legacy 256K) package will increase by $1,500, from $4,000 to $5,500, and FLD Premier (Legacy T1) will increase by $700, from $6,800 to $7,500. The Reserve Banks also will increase the a` la carte monthly fee for the Additional Legacy 256K WAN by $1,000, from $2,500 to $3,500 and for the Additional Legacy T1 WAN by $300, from $3,200 to $3,500. In addition, the Reserve Banks will increase the C21 LFD fee by 20 percent.51 Starting in mid-2020 the Reserve Banks will include additional fee increases for these packages, as shown in table 16, to encourage customers to move to more modern and secure technology that meets industry standards.52 As previously announced, the Reserve Banks intend to sunset legacy FLD and C21 LFD services after all customers have converted to the new solution. Table 16 provides a summary of the services and 2020 pricing for FLD and C21 LFD services: TABLE 16—FEDLINE DIRECT AND CHECK 21 LARGE FILE DELIVERY LEGACY PRICE INCREASES Fee structure 2019 monthly fee Services FedLine Direct Plus (Legacy 256K) ........................................ FedLine Direct Premier (Legacy T1) ....................................... Additional Legacy 256K WAN Connection .............................. Additional Legacy T1 WAN Connection .................................. Check 21 Large File Delivery 53 .............................................. $4,000 6,800 2,500 3,200 Various January 1, 2010 monthly fee $5,500 (+37.5%) $7,500 (10.3%) $3,500 (+40.0%) $3,500 (+9.4%) +20.0% May 1, 2020 monthly fee $10,000 (+150.0%) $10,000 (+47.1%) $5,000 (+100.0%) $5,000 (+56.3%) * +50.0% August 1, 2020 monthly fee $20,000 $20,000 $10,000 $10,000 (+400.0%) (+194.1%) (+300.0%) (+212.5%) * +100.0% khammond on DSKJM1Z7X2PROD with NOTICES * (from Dec. 2019 fee). In addition, the Reserve Banks will increase the price for FedMail Fax and FedMail Email (for customers with FedLine Web or above).54 FedMail Fax will increase by $50, from $100 to $150. Additionally, FedMail Email (for customers with FedLine Web or above) will increase by $20, from $20 to $40. The price increases to FedMail Fax and FedMail Email are intended to move customers to more secure and contemporary solutions. The Reserve Banks will also update the existing FedComplete 100 and 200 (Plus and Premier) packages to incorporate other pricing and product changes.55 Although the Reserve Banks are not making changes to package fees, the content of the packages is being updated to reflect individual 2020 pricing and product changes. Specifically, the Reserve Banks will add the 2020 Check participation fee and the 4:00 p.m. FedReturn® deadline to FedComplete packages. The Reserve Banks will update the FedComplete Excess Volume and Receipt Surcharge to reflect the fee increase to Fedwire Origination and Receipt. The Reserve Banks estimate that the price changes will result in a 2.9 percent average price increase for FedLine customers. 48 FedLine Solutions provide customers with access to Reserve Bank priced services. As such, FedLine costs and revenue are allocated to the Reserve Banks’ priced services on an expense ratio basis. 49 FedMail, FedLine Exchange, FedLine Web, FedLine Advantage, FedLine Command, and FedLine Direct are registered trademarks of the Federal Reserve Banks. 50 In 2019, the Reserve Banks began offering Check 21 Large File Delivery services as part of modernized FedLine Direct Plus and FedLine Direct Premier connections. 51 The monthly fees for legacy C21 LFD fee ranges from $1,680 to $24,870 depending on the size, speed, and location of the connection. In order to avoid compounding increases, December 2019 will be the baseline for all 2020 price increases for any connection still needing to convert. 52 The Reserve Banks will increase fees further in mid-2020 for those customers who have not yet converted to newer FedLine Direct network routers and circuits. 53 To avoid compounding increases, the fee as of December 2019 will serve as the baseline for all 2020 price increases for any connection still needing to convert. 54 FedMail Email is only available to FedLine Web, Advantage, Command, and Direct customers. 55 FedComplete packages bundle certain payment services and are designed for institutions with lower transaction volumes that are interested in processing their own payments. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 66418 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices 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.’’ 56 Under this policy, the Board assesses whether proposed changes would have a direct and material adverse effect on the ability of other service providers to compete effectively with the Federal 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. The 2020 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 proposed 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. 2020 Fee Schedules FEDACH SERVICE 2020 FEE SCHEDULE [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee khammond on DSKJM1Z7X2PROD with NOTICES FedACH minimum monthly fee: Originating depository financial institution (ODFI) 57 .................................................................................................................................. Receiving depository financial institution (RDFI) 58 ................................................................................................................................... Origination (per item or record): Forward or return items .............................................................................................................................................................................. SameDay Service—forward item 59 ........................................................................................................................................................... Addenda record .......................................................................................................................................................................................... FedLine Web-originated returns and notification of change (NOC) 60 ...................................................................................................... Facsimile Exception Return/NOC 61 ........................................................................................................................................................... SameDay Exception Return ....................................................................................................................................................................... Automated NOC ......................................................................................................................................................................................... Volume discounts (based on monthly billed origination volume) 62 per item when origination volume is. 750,001 to 1,500,000 items per month ............................................................................................................................................... more than 1,500,000 items per month ............................................................................................................................................... Volume discounts (based on monthly billed receipt volume) 63 per item when receipt volume is. 10,000,001 to 15,000,000 items per month ........................................................................................................................................ more than 15,000,000 items per month ............................................................................................................................................. Receipt (per item or record): Forward Item .............................................................................................................................................................................................. Return Item ................................................................................................................................................................................................. Addenda record .......................................................................................................................................................................................... Volume discounts: Non-Premium Receivers 64 per item when volume is:. 750,001 to 12,500,000 items per month 65 .................................................................................................................................. more than 12,500,000 items per month 66 .................................................................................................................................. Premium Receivers, Level One 67 per item when volume is: 750,001 to 1,500,000 items per month 65 .................................................................................................................................... 1,500,001 to 2,500,000 items per month 66 ................................................................................................................................. 2,500,001 to 12,500,000 items per month 66 ............................................................................................................................... more than 12,500,000 items per month 66 .................................................................................................................................. Premium Receivers, Level Two 68 per item when volume is: 750,001 to 1,500,000 items per month 65 .................................................................................................................................... 1,500,001 to 2,500,000 items per month 66 ................................................................................................................................. 2,500,001 to 12,500,000 items per month 66 ............................................................................................................................... more than 12,500,000 items per month 66 .................................................................................................................................. FedACH Bundled Package Pricing Discount: Monthly Bundled Service Package Discount 69 ......................................................................................................................................... FedACH Risk® Management Services: 70 Monthly Package Fee (a single fee based on total number of criteria sets): For up to 5 criteria sets ....................................................................................................................................................................... For 6 through 11 criteria sets ............................................................................................................................................................. For 12 through 23 criteria sets ........................................................................................................................................................... 56 Federal Reserve Regulatory Service (FRRS) 9– 1558. 57 Any ODFI incurring less than $50 for the following fees will be charged a variable amount to reach the minimum: Forward value and non-value item origination fees, and FedGlobal ACH origination surcharges. 58 Any RDFI not originating forward value and non-value items and incurring less than $40 in receipt fees will be charged a variable amount to reach the minimum. 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. 59 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. 60 The fee includes the item and addenda fees in addition to the conversion fee. VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 61 The fee includes the item and addenda fees in addition to the conversion fee. Reserve Banks also assess a $45 fee for every government paper return/ NOC they process. 62 Origination volumes at these levels qualify for a waterfall discount which includes all FedACH origination items. 63 Origination discounts based on monthly billed receipt volume apply only to those items received by FedACH receiving points and are available only to Premium Receivers. 64 RDFIs receiving through FedACH less than 90 percent of their FedACH-originated items. 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 a waterfall discount which includes all FedACH receipt items. 67 RDFIs receiving through FedACH at least 90 percent of their FedACH-originated items, but less than 90 percent of all of their ACH items originated through any operator. PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 $50.00. $40.00. $0.0035. $0.0010 surcharge. $0.0015. $0.35. $45.00. $45.00. $0.20. $0.0008 discount. $0.0010 discount. $0.0002 discount. $0.0003 discount. $0.0035. $0.0075. $0.0015. $0.0017 discount. $0.0019 discount. $0.0017 $0.0017 $0.0018 $0.0020 discount. discount. discount. discount. $0.0017 $0.0017 $0.0019 $0.0021 discount. discount. discount. discount. $20.00 discount. $35.00. $70.00. $125.00. 68 RDFIs receiving through FedACH at least 90 percent of all of their ACH items originated through any operator. 69 To qualify for the discount, a financial institution must meet all of the following criteria in a given month: (1) Be charged the minimum monthly fee—forward origination (57208); (2) subscribe to FedLine Web Plus or any higher FedLine® access solution; and (3) subscribe to the FedPayments Reporter service, the FedACH RDFI Alert service, or the FedACH Risk Origination Monitoring service. 70 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. 71 Premier reports generated on demand are subject to the package/tiered fees plus a surcharge. 72 The fee applies to RTNs that have received or originated FedACH transactions during a month. Institutions that receive only U.S. government transactions or that elect to use a private-sector operator exclusively are not assessed the fee. E:\FR\FM\04DEN1.SGM 04DEN1 66419 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices FEDACH SERVICE 2020 FEE SCHEDULE—Continued [Effective January 2, 2020. Bold indicates changes from 2019 prices] khammond on DSKJM1Z7X2PROD with NOTICES Fee For 24 through 47 criteria sets ........................................................................................................................................................... For 48 through 95 criteria sets ........................................................................................................................................................... For 96 through 191 criteria sets ......................................................................................................................................................... For 192 through 383 criteria sets ....................................................................................................................................................... For 384 through 584 criteria sets ....................................................................................................................................................... For more than 584 criteria sets .......................................................................................................................................................... Batch/Item Monitoring (based on total monthly volume): For 1 through 100,000 batches (per batch) ........................................................................................................................................ For more than 100,000 batches (per batch) ....................................................................................................................................... Monthly FedPayments® Reporter Service: FedPayments Reporter Service monthly package includes the following reports ACH Received Entries Detail—Customer and Depository Financial Institution ACH Return Reason Report—Customer and Depository Financial Institution ACH Originated Entries Detail—Customer and Depository Financial Institution ACH Volume Summary by SEC Code—Customer ACH Customer Transaction Activity ACH Death Notification ACH International (IAT) ACH Notification of Change ACH Payment Data Information File ACH Remittance Advice Detail ACH Remittance Advice Summary ACH Return Item Report and File ACH Return Ratio ACH Social Security Beneficiary ACH Originator Setup ACH Report Delivery via FedLine Solution On Demand Report Surcharge 71 ....................................................................................................................................................... Monthly Package Fee (counts reflect reports generated as well as delivered via a FedLine Solution): For up to 50 reports ............................................................................................................................................................................ For 51 through 150 reports ................................................................................................................................................................. For 151 through 500 reports ............................................................................................................................................................... For 501 through 1,000 reports ............................................................................................................................................................ For 1,001 through 1,500 reports ......................................................................................................................................................... For 1,501 through 2,500 reports ......................................................................................................................................................... For 2,501 through 3,500 reports ......................................................................................................................................................... For 3,501 through 4,500 reports ......................................................................................................................................................... For 4,501 through 5,500 reports ......................................................................................................................................................... For 5,501 through 7,000 reports ......................................................................................................................................................... For 7,001 through 8,500 reports ......................................................................................................................................................... For 8,501 through 10,000 reports ....................................................................................................................................................... For more than 10,000 reports ............................................................................................................................................................. Premier reports (per report generated): 71 ACH Volume Summary by SEC Code Report—Depository Financial Institution: For 1 through 5 reports ................................................................................................................................................................ For 6 through 10 reports .............................................................................................................................................................. For 11 or more reports ................................................................................................................................................................ On Demand Surcharge ................................................................................................................................................................ ACH Routing Number Activity Report: For 1 through 5 reports ................................................................................................................................................................ For 6 through 10 reports .............................................................................................................................................................. For 11 or more reports ................................................................................................................................................................ On Demand Surcharge ................................................................................................................................................................ ACH Originated Batch Report (monthly): For 1 through 5 reports ................................................................................................................................................................ For 6 through 10 reports .............................................................................................................................................................. For 11 or more reports ................................................................................................................................................................ On Demand Surcharge ................................................................................................................................................................ ACH Originated Batch Report (daily): Scheduled Report ........................................................................................................................................................................ On Demand Surcharge ................................................................................................................................................................ On-us inclusion: Participation (monthly fee per RTN) ................................................................................................................................................... Per-item ............................................................................................................................................................................................... Per-addenda ........................................................................................................................................................................................ Report delivery via encrypted email (per email) ........................................................................................................................................ Other Fees and Discounts: Monthly fee (per RTN): FedACH Participation Fee 72 .............................................................................................................................................................. SameDay Service Origination Participation Fee 73 ............................................................................................................................. FedACH Settlement Fee 74 ................................................................................................................................................................. FedACH Information File Extract Fee ................................................................................................................................................. IAT Output File Sort Fee ..................................................................................................................................................................... Fixed Participation Fee—Automated NOCs 75 ................................................................................................................................... Non-Electronic Input/Output fee: 76 CD/DVD (CD or DVD) ......................................................................................................................................................................... Paper (file or report) ............................................................................................................................................................................ Fees and Credits Established by NACHA: 77 NACHA Same Day Entry fee (per item) ............................................................................................................................................. NACHA Same Day Entry credit (per item) ......................................................................................................................................... NACHA Unauthorized Entry fee (per item) ......................................................................................................................................... NACHA Unauthorized Entry credit (per item) ..................................................................................................................................... NACHA Admin Network fee (monthly fee per RTN) .......................................................................................................................... NACHA Admin Network fee (per entry) .............................................................................................................................................. FedGlobal® ACH Payments: 78 Fixed Monthly Fee (per RTN): 79 Monthly origination volume more than 500 items ............................................................................................................................... Monthly origination volume between 161 and 500 items ................................................................................................................... Monthly origination volume less than 161 items ................................................................................................................................ Per-item Origination Fee for Monthly Volume more than 500 Items (surcharge): 80 Canada service ................................................................................................................................................................................... Mexico service .................................................................................................................................................................................... VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00046 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 $150.00. $250.00. $425.00. $675.00. $850.00. $1,100.00. $0.007. $0.0035. $1.00. $40.00. $60.00. $110.00. $200.00. $285.00. $460.00. $640.00. $820.00. $995.00. $1,225.00. $1,440.00. $1,650.00. $1,800.00. $10.00. $6.00. $1.00. $1.00. $10.00. $6.00. $1.00. $1.00. $10.00. $6.00. $1.00. $1.00. $0.65. $1.00. $10.00. $0.0030. $0.0015. $0.20. $65.00. $10.00. $55.00. $150.00. $75.00. $5.00. $50.00. $50.00. $0.052. $0.052 (credit). $4.50. $4.50 (credit). $22.00. $0.000185. $185.00. $60.00. $20.00. $0.50. $0.55. 66420 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices FEDACH SERVICE 2020 FEE SCHEDULE—Continued [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee Panama service .................................................................................................................................................................................. Europe service .................................................................................................................................................................................... Per-item Origination Fee for Monthly Volume between 161 and 500 items (surcharge): 80 Canada service ................................................................................................................................................................................... Mexico service .................................................................................................................................................................................... Panama service .................................................................................................................................................................................. Europe service .................................................................................................................................................................................... Per-item Origination Fee for Monthly Volume less than 161 items (surcharge): 80 Canada service ................................................................................................................................................................................... Mexico service .................................................................................................................................................................................... Panama service .................................................................................................................................................................................. Europe service .................................................................................................................................................................................... Other FedGlobal ACH Payments Fees: Canada service: Return received from Canada 81 .................................................................................................................................................. Trace of item at receiving gateway ............................................................................................................................................. Trace of item not at receiving gateway ....................................................................................................................................... Mexico service: Return received from Mexico 81 ................................................................................................................................................... Item trace ..................................................................................................................................................................................... Foreign currency to foreign currency (F3X) item originated to Mexico 80 ................................................................................... Panama service: Return received from Panama 81 ................................................................................................................................................. Item trace ..................................................................................................................................................................................... NOC ............................................................................................................................................................................................. Europe service: F3X item originated to Europe 80 ................................................................................................................................................. Return received from Europe 81 ................................................................................................................................................... Item trace ..................................................................................................................................................................................... Exception Resolution Service: Fixed Fee per RTN 82 (monthly): Self-Managed Cases ........................................................................................................................................................................... Agent-Managed Cases ....................................................................................................................................................................... Offline Service Participant ................................................................................................................................................................... Variable Case Open Monthly Fees per Case (applies to self-managed and agent-managed cases only at the parent RTN): 83 1–50 cases .......................................................................................................................................................................................... 51–100 cases ...................................................................................................................................................................................... 101–500 cases .................................................................................................................................................................................... 501–1,000 cases ................................................................................................................................................................................. 1,001–5,000 cases .............................................................................................................................................................................. 5,001–10,000 cases ............................................................................................................................................................................ 10,001–99,999,999 cases ................................................................................................................................................................... Offline Service Participant—Case Fees: 84 Case Open Fee ................................................................................................................................................................................... Case Response Fee ........................................................................................................................................................................... surcharge is assessed to any RTN that originates at least one item meeting the criteria for same-day processing and settlement in a given month. 74 The fee is applied to any RTN with activity during a month, including RTNs 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. This fee does not apply to RTNs that use the Reserve Banks for only U.S. government transactions. 75 Fee will be assessed only when automated NOCs are generated. khammond on DSKJM1Z7X2PROD with NOTICES 73 This VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 76 Limited services are offered in contingency situations. 77 The fees and credits listed are collected from the ODFI and credited to NACHA (admin network) or to the RDFI (same-day entry and unauthorized entry) in accordance with the ACH Rules. 78 The international fees and surcharges vary from country to country as these are negotiated with each international gateway operator. 79 A single monthly fee based on total FedGlobal ACH Payments origination volume. 80 This per-item surcharge is in addition to the standard domestic origination fees listed in this fee schedule. 81 This per-item surcharge is in addition to the standard domestic receipt fees listed in this fee schedule. PO 00000 Frm 00047 Fmt 4703 Sfmt 4703 $0.60. $1.13. $0.75. $0.80. $0.85. $1.38. $1.00. $1.05. $1.10. $1.63. $0.99 (surcharge). $5.50. $7.00. $0.91 (surcharge). $13.50. $0.67 (surcharge). $1.00 (surcharge). $7.00. $0.72. $1.25 (surcharge). $1.35 (surcharge). $7.00. $10.00. $10.00. $60.00. $1.25. $1.00. $0.75. $0.50. $0.25. $0.20. $0.10. $5.00. $5.00. 82 Any financial institution that opens at least 1,000 Exception Resolution Service cases in a given month will receive a 50% discount on its Exception Resolution Service fixed fees for that month. 83 The per case fees are rolled up to the parent RTN, such that a customer that opens a total of 100 cases per month under two separate RTNs would pay a total of $112.50 ($1.25 for the first 50 cases and $1.00 for the next 50 cases) in addition to the fixed fees. 84 A depository institution may enroll in the Service as an offline Service Participant by designating the Reserve Bank to access and use the functionality of the application on behalf of the Offline Participant. E:\FR\FM\04DEN1.SGM 04DEN1 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices 66421 FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES 2020 FEE SCHEDULE [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee Fedwire Funds Service Monthly Participation Fee ..................................................................................................................................................................................................... Basic volume-based pre-incentive transfer fee (originations and receipts)—per transfer for: Tier 1: The first 14,000 transfers per month ............................................................................................................................................................. Tier 2: Additional transfers up to 90,000 per month ............................................................................................................................................... Tier 3: Every transfer over 90,000 per month ........................................................................................................................................................... Volume-based transfer fee with the incentive discount (originations and receipts)—per eligible transfer for: 85 Tier 1: The first 14,000 transfers per month ............................................................................................................................................................. Tier 2: Additional transfers up to 90,000 per month ............................................................................................................................................... Tier 3: Every transfer over 90,000 per month ........................................................................................................................................................... Surcharge for Offline Transfers (Originations and Receipt) ................................................................................................................................................. Surcharge for End-of-Day Transfer Originations 86 .............................................................................................................................................................. Monthly FedPayments Manager Import/Export fee 87 .......................................................................................................................................................... Surcharge for high-value payments: >$10 million .................................................................................................................................................................................................................... >$100 million .................................................................................................................................................................................................................. Surcharge for Payment Notification: Origination Surcharge 88 ................................................................................................................................................................................................ Receipt Volume 88 89 ...................................................................................................................................................................................................... Delivery of Reports—Hard Copy Reports to On-Line Customers ........................................................................................................................................ Special Settlement Arrangements (charge per settlement day) 90 ....................................................................................................................................... $95.00 0.840 0.250 0.165 0.168 0.050 0.033 65.00 0.26 50.00 0.14 0.36 0.01 N/A 50.00 150.00 National Settlement Service Basic: Settlement Entry Fee ..................................................................................................................................................................................................... Settlement File Fee ........................................................................................................................................................................................................ Surcharge for Offline File Origination 91 ............................................................................................................................................................................... Minimum Monthly Fee 92 ....................................................................................................................................................................................................... 1.50 30.00 45.00 60.00 FEDWIRE SECURITIES SERVICE 2020 FEE SCHEDULE (NON-TREASURY SECURITIES) [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee Fee: 93 khammond on DSKJM1Z7X2PROD with NOTICES Basic Transfer Transfer or reversal originated or received ................................................................................................................................................................... Surcharge: 94 Offline origination & receipt surcharge .......................................................................................................................................................................... Monthly Maintenance Fees: 93 Account maintenance (per account) .............................................................................................................................................................................. Issue maintenance (per issue/per account) .................................................................................................................................................................. Claims Adjustment Fee 93 95 ................................................................................................................................................................................................. GNMA Serial Note Stripping or Reconstitution Fee 96 .......................................................................................................................................................... Joint Custody Origination Surcharge 93 97 ............................................................................................................................................................................ Delivery of Reports—Hard Copy Reports to On-Line Customers 93 .................................................................................................................................... 85 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: $0.672 for transfers up to 14,000; $0.200 for transfers 14,001 to 90,000; and $0.132 for transfers over 90,000. 86 This surcharge applies to originators of transfers that are processed by the Reserve Banks after 5:00 p.m. eastern time. 87 This fee is charged to any Fedwire Funds participant that originates a transfer message via the VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 FedPayments Manager (FPM) Funds tool and has the import/export processing option setting active at any point during the month. 88 Payment Notification and End-of-Day Origination surcharges apply to each Fedwire funds transfer message. 89 Provided on billing statement for informational purposes only. 90 This charge is assessed to settlement arrangements that use the Fedwire Funds Service to effect the settlement of interbank obligations (as opposed to those that use the National Settlement Service). With respect to such special settlement arrangements, other charges may be assessed for each funds transfer into or out of the accounts used in connection with such arrangements. 91 Offline files will be accepted only on an exception basis when a settlement agent’s primary PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 $0.98 80.00 57.50 0.77 1.00 9.00 46.00 50.00 and backup means of transmitting settlement files are both unavailable. 92 Any settlement arrangement that accrues less than $60 during a calendar month will be assessed a variable amount to reach the minimum monthly fee. 93 These fees are set by the Federal Reserve Banks. 94 This surcharge is set by the Federal Reserve Banks. It is in addition to any basic transfer or reversal fee. 95 The Federal Reserve Banks offer an automated claim adjustment process only for Agency mortgage-backed securities. 96 This fee is set by and remitted to the Government National Mortgage Association (GNMA). 97 The Federal Reserve Banks charge participants a Joint Custody Origination Surcharge for both Agency and Treasury securities. E:\FR\FM\04DEN1.SGM 04DEN1 66422 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices FEDLINE 2020 FEE SCHEDULE [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee khammond on DSKJM1Z7X2PROD with NOTICES FedComplete Packages (monthly) 98 99 100 FedComplete 100A Plus ........................................................................................................................................................................... includes: FedLine Advantage Plus package FedLine subscriber 5-pack Check Participation Fee 7,500 FedForward transactions 46 FedForward Cash Letter items 70 FedReturn transactions 14,000 FedReceipt® transactions 35 Fedwire Funds origination transfers 35 Fedwire Funds receipt transfers Fedwire monthly participation fee 1,000 FedACH origination items FedACH monthly minimum fee—Forward Origination 7,500 FedACH receipt items FedACH monthly minimum fee—Receipt 10 FedACH web-originated return/NOC 500 FedACH addenda record originated 1,000 FedACH addenda record received 100 FedACH SameDay Service origination items FedACH Participation Fee FedACH settlement fee FedACH SameDay Service origination participation fee FedComplete 100A Premier ..................................................................................................................................................................... includes: FedLine Advantage Premier package Volumes included in the FedComplete 100A Plus package FedComplete 100C Plus .......................................................................................................................................................................... includes: FedLine Command Plus package Volumes included in the FedComplete 100A Plus package FedComplete 200A Plus ........................................................................................................................................................................... includes: FedLine Advantage Plus package FedLine subscriber 5-pack Check Participation Fee 25,000 FedForward transactions 46 FedForward Cash Letter items 225 FedReturn transactions 25,000 FedReceipt® transactions 100 Fedwire Funds origination transfers 100 Fedwire Funds receipt transfers Fedwire monthly participation fee 2,000 FedACH origination items FedACH monthly minimum fee—Forward Origination 25,000 FedACH receipt items FedACH monthly minimum fee—Receipt 20 FedACH web-originated return/NOC 750 FedACH addenda record originated 1,500 FedACH addenda record received 200 FedACH SameDay Service origination items FedACH Participation Fee FedACH settlement fee FedACH SameDay Service origination participation fee FedComplete 200A Premier ..................................................................................................................................................................... includes: FedLine Advantage Premier package Volumes included in the FedComplete 200A Plus package FedComplete 200C Plus .......................................................................................................................................................................... includes: FedLine Command Plus package Volumes included in the FedComplete 200A Plus package FedComplete Excess Volume and Receipt Surcharge: 101 FedForward 102 .................................................................................................................................................................................. FedReturn .......................................................................................................................................................................................... FedReceipt ........................................................................................................................................................................................ Fedwire Funds Origination ............................................................................................................................................................. Fedwire Funds Receipt ................................................................................................................................................................... FedACH Origination .......................................................................................................................................................................... FedACH Receipt ................................................................................................................................................................................ FedComplete credit adjustment ................................................................................................................................................................ FedComplete debit adjustment ................................................................................................................................................................. $825.00. $900.00. $1,375.00. $1,350.00. $1,425.00. $1,900.00. $0.037/item. $0.8200/item. $0.00005/item. $0.8400/item. $0.084/item. $0.0035/item. $0.00035/item. various. various. FedLine Customer Access Solutions (monthly) FedMail 103 ................................................................................................................................................................................................ includes: VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 $85.00. 66423 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices FEDLINE 2020 FEE SCHEDULE—Continued [Effective January 2, 2020. Bold indicates changes from 2019 prices] khammond on DSKJM1Z7X2PROD with NOTICES Fee FedMail access channel Check FedFoward, Fed Return and FedReceipt Services Check Adjustments FedACH Download Advice and Settlement Information Fedwire Funds Offline Advices Daily Statement of Account (Text) Daylight Overdraft Reports Monthly Statement of Service Charges (Text) Electronic Cash Difference Advices FedLine Exchange 103 ............................................................................................................................................................................... includes: E-Payments Directory (via manual download) FedLine Exchange Premier 103 ................................................................................................................................................................. includes: FedLine Exchange package E-Payments Directory (via automated download) FedLine Web 104 ....................................................................................................................................................................................... includes: FedLine Web access channel Services included in the FedLine Exchange package Check FedForward, FedReturn and FedReceipt services Check Adjustments FedACH Derived Returns and NOCs FedACH File, Batch and Item Detail Information FedACH Download Advice FedACH Settlement Information FedACH Customer Profile Information FedACH Returns Activity Statistics FedACH Risk RDFI Alert Service FedACH Risk Returns Reporting Service FedACH Exception Resolution Service FedCash® Services FedLine Web Plus 104 ............................................................................................................................................................................... includes: Services included in the FedLine Web package FedACH Risk Origination Monitoring Service FedACH FedPayments Reporter Service Check Large Dollar Return Check FedImage Services Account Management Information (AMI) Daily Statement of Account (PDF, Text) Daylight Overdraft Reports Monthly Account Services (SCRD) File Monthly Statement of Service Charges (PDF, Text) E-Payments Routing Directory (via automated download) FedLine Advantage 104 ............................................................................................................................................................................. includes: FedLine Advantage access channel One VPN device Services included in the FedLine Web package FedACH File Transmission To/From Federal Reserve FedACH Request Output File Delivery FedACH View File Transmission and Processing Status Fedwire Originate and Receive Funds Transfer Fedwire Originate and Receive Securities Transfer National Settlement Service Services Check Large Dollar Return Check FedImage Services Account Management Information with Intra-Day Download Search File Daily Statement of Account (PDF, Text) Daylight Overdraft Reports Monthly Account Services (SCRD) File Monthly Statement of Service Charges (PDF, Text) FedLine Advantage Plus 104 ..................................................................................................................................................................... includes: Services included in the FedLine Advantage package One VPN device FedACH Risk Origination Monitoring Service FedACH FedPayments Reporter Service Fedwire Funds FedPayments Manager Import/Export (less than or equal to 250 Fedwire transactions and one routing number per month) FedTransaction Analyzer® (less than 250 or equal to Fedwire transactions and one routing number per month) E-Payments Routing Directory (via automated download) FedLine Advantage Premier 104 ................................................................................................................................................................ includes: FedLine Advantage Plus package Two VPN devices 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) FedLine Command Plus ........................................................................................................................................................................... VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 $40.00. $125.00. $110.00. $160.00. $415.00. $460.00. $570.00. $1,035.00. 66424 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices FEDLINE 2020 FEE SCHEDULE—Continued [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee includes: FedLine Command access channel Services included in the FedLine Advantage Plus package One VPN device Additional FedLine Command server certificates Fedwire Statement Services Fedwire Funds FedPayments Manager Import/Export FedTransaction Analyzer Intra-Day File with Transaction Details (up to six times daily) Statement of Account Spreadsheet File (SASF) Financial Institution Reconcilement Data (FIRD) File (machine readable) FedLine Direct Plus (Legacy 256K) 105 ................................................................................................................................................. includes: FedLine Direct access channel One VPN device 256K Dedicated WAN Connection Services included in the FedLine Command Plus package Two FedLine Direct server certificates Daylight Overdraft Reports Treasury Check Information System (TCIS) FedLine Direct Plus 106 ........................................................................................................................................................................... includes: FedLine Direct access channel One VPN device 2 Mbps Dedicated WAN Connection Services included in the FedLine Command Plus package FedLine Direct server certificates Treasury Check Information System (TCIS) Dual Vendors FedLine Direct Contingency Solution Check 21 Services FedLine Direct Premier (Legacy T1) 105 ................................................................................................................................................ includes: FedLine Direct Plus package (legacy) T1 dedicated WAN connection Two VPN devices FedLine Direct Premier 106 ..................................................................................................................................................................... includes: FedLine Direct Plus package (new) Two 2 Mbps dedicated WAN Connections One Network Diversity Two VPN devices $5,500.00. $5,500.00. $7,500.00. $10,500.00. khammond on DSKJM1Z7X2PROD with NOTICES A la carte options (monthly) 107 Electronic Access: FedMail—FedLine Exchange Subscriber 5-pack .............................................................................................................................. FedLine Subscriber 5-pack (access to Web and Advantage) .......................................................................................................... Additional FedLine Direct Certificate 108 ............................................................................................................................................ Additional VPNs 109 ........................................................................................................................................................................... Additional WAN connections 106 256K (Legacy) 105 ...................................................................................................................................................................... T1 (Legacy) 105 .......................................................................................................................................................................... 2 Mbps ........................................................................................................................................................................................ WAN Connection Upgrade 10 Mbps 110 ................................................................................................................................................................................ 30 Mbps 110 ................................................................................................................................................................................ 50 Mbps 110 ................................................................................................................................................................................ 100 Mbps 110 .............................................................................................................................................................................. 200 Mbps 110 .............................................................................................................................................................................. FedLine International Setup (one-time fee) ...................................................................................................................................... FedLine Custom Implementation Fee 111 .......................................................................................................................................... Network Diversity ............................................................................................................................................................................... FedLine Direct Contingency Solution 112 ........................................................................................................................................... Check 21 Large File Delivery 113 ....................................................................................................................................................... FedMail Email (for customers with FedLine Web and above) 114 .............................................................................................. FedMail Fax 115 ................................................................................................................................................................................. VPN Device Modification ................................................................................................................................................................... VPN Device Missed Activation Appointment .................................................................................................................................... VPN Device Expedited Hardware Surcharge ................................................................................................................................... VPN Device Replacement or Move .................................................................................................................................................. E-Payments Automated Download (1–5 Add’l Codes) 116 ................................................................................................................ E-Payments Automated Download (6–20 Add’l Codes) 116 .............................................................................................................. E-Payments Automated Download (21–50 Add’l Codes) 116 ............................................................................................................ E-Payments Automated Download (51–100 Add’l Codes) 116 .......................................................................................................... E-Payments Automated Download (101–250 Add’l Codes) 116 ........................................................................................................ E-Payments Automated Download (>250 Add’l Codes) 116 .............................................................................................................. Accounting Information Services (monthly): Cash Management System (CMS) Plus—Own report—up to six files with 117 no respondent/sub-account activity ................................................................................................................................................... VerDate Sep<11>2014 21:17 Dec 03, 2019 Jkt 250001 PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 E:\FR\FM\04DEN1.SGM 04DEN1 $15.00. $80.00. $100.00. $100.00. $3,500.00. $3,500.00. $3,000.00. $1,700.00. $3,000.00. $4,000.00. $7,000.00. $11,000.00. $5,000.00. various. $2,500.00. $1,000.00. various. $40.00. $150.00. $200.00. $175.00. $100.00. $300.00. $75.00. $150.00. $300.00. $500.00. $1,000.00. $2,000.00. $60.00. 66425 Federal Register / Vol. 84, No. 233 / Wednesday, December 4, 2019 / Notices FEDLINE 2020 FEE SCHEDULE—Continued [Effective January 2, 2020. Bold indicates changes from 2019 prices] Fee less than 9 respondent and/or sub-accounts .................................................................................................................................... 10–50 respondent and/or sub-accounts ............................................................................................................................................ 51–100 respondents and/or sub-accounts ........................................................................................................................................ 101–500 respondents and/or sub-accounts ...................................................................................................................................... >500 respondents and/or sub-accounts ............................................................................................................................................ End-of-Day Financial Institution Reconcilement Data (FIRD) File 118 .............................................................................................. Statement of Account Spreadsheet File 119 ...................................................................................................................................... Intra-day Download Search File (with AMI) 120 ................................................................................................................................. Other: Software Certification ........................................................................................................................................................................ Vendor Pass-Through Fee ................................................................................................................................................................ Electronic Access Credit Adjustment ................................................................................................................................................ Electronic Access Debit Adjustment ................................................................................................................................................. By order of the Board of Governors of the Federal Reserve System, November 26, 2019. Ann Misback, Secretary of the Board. [FR Doc. 2019–26228 Filed 12–3–19; 8:45 am] BILLING CODE P khammond on DSKJM1Z7X2PROD with NOTICES 98 FedComplete packages are all-electronic service options that bundle payment services with an access solution for one monthly fee. 99 Packages with an ‘‘A’’ include the FedLine Advantage channel, and packages with ‘‘C’’ include the FedLine Command channel. 100 FedComplete customers that use the email service would be charged the FedMail Email a la carte fee and for all FedMail-FedLine Exchange Subscriber 5-packs. 101 Per-item surcharges are in addition to the standard fees listed in the applicable priced services fee schedules. 102 FedComplete customers will be charged $4 for each FedForward cash letter over the monthly package threshold. This activity will appear under billing code 51998 in Service Area 1521 on a month-lagged basis. 103 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. 104 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 21:17 Dec 03, 2019 Jkt 250001 105 Limited to installed base only. All customers with 256K or T1 connections will need to upgrade to a minimum 2Mbps Ethernet line speed connection associated with the FedLine Direct packages Effective May 1, 2020, package price will increase to $10,000 for FedLine Direct® Plus (Legacy 256K) and FedLine Direct Premier (Legacy T1). Effective August 1, 2020, package price will increase to $20,000 for FedLine Direct® Plus (Legacy 256K) and FedLine Direct Premier (Legacy T1). 106 Early termination fees and/or expedited order fees may apply to all FedLine Direct packages and FedLine Direct a la carte options. 107 These add-on services can be purchased only with a FedLine Solutions packages. 108 Fee applies only to customers in a legacy FedLine Direct package. Server certificates are included in the monthly fee for customers in the new FedLine Direct packages. 109 Additional VPNs are available for FedLine Advantage, FedLine Command, and FedLine Direct packages only. 110 These upgrades are only available for the new FedLine Direct packages and the Add’l 2M WAN connection. Fee is in addition to the FedLine Direct package fees or additional WAN fees. 111 The FedLine Custom Implementation Fee is $2,500 or $5,000 based on the complexity of the setup. 112 Fee only applies to customers in a legacy FedLine Direct package. This feature is included in the monthly fee for customers in the new FedLine Direct packages. 113 Limited to installed base only. The fee currently ranges from $1,400 to $20,725 depending PO 00000 Frm 00052 Fmt 4703 Sfmt 9990 $125.00. $250.00. $500.00. $750.00. $1,000.00. $150.00. $150.00. $150.00. $0.00 to $8,000.00. various. various. various. on the size, speed, and location of the connection. All customers will eventually need to upgrade to a minimum 2 Mbps Ethernet line speed connection with the associated FedLine Direct package. Effective January 2, 2020, fees will increase by 20.0 percent for Check 21 Large File Delivery. Effective May 1, 2020, fees will increase by 50.0 percent for Check 21 Large File Delivery. Effective August 1, 2020, fees will increase by 100.0 percent for Check 21 Large File Delivery. To avoid compounding increases, the fee as of December 2019 will serve as the baseline for all 2020 price increases for any Check 21 Large File Delivery connection. 114 Available only to customers with a priced FedLine package. 115 Limited to installed base only. 116 Five download codes are included at no cost in all Plus and Premier packages. 117 Cash Management Service options are limited to plus and premier packages. 118 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. 119 The Statement of Account Spreadsheet 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. 120 The Intra-day Download Search File option is available for the FedLine Web Plus package. It is available for no extra fee in FedLine Advantage and higher packages. E:\FR\FM\04DEN1.SGM 04DEN1

Agencies

[Federal Register Volume 84, Number 233 (Wednesday, December 4, 2019)]
[Notices]
[Pages 66405-66425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26228]


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

[Docket No. OP-1687]


Federal Reserve Bank Services

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

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

SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
has approved the private sector adjustment factor (PSAF) for 2020 of 
$18.9 million and the 2020 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 2, 2020.

FOR FURTHER INFORMATION CONTACT: For questions regarding the fee 
schedules: David C. Mills, Deputy Associate Director, (202) 530-6265; 
Max Sinthorntham, Senior Financial Policy Analyst, (202) 452-2864; 
Amanda Holcombe, Financial Institution Policy Analyst, (202) 912-4625; 
Division of Reserve Bank Operations and Payment Systems. For questions 
regarding the PSAF: Casey Clark, Assistant Director/Manager, (202) 452-
5232; Grace Milbank, Senior Financial Institution Policy Analyst, (202) 
263-4828, 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 2020 fee schedules for the check service 
are available from the Board, the Federal Reserve Banks, or the Reserve 
Banks' financial services website at www.frbservices.org.

I. Supplementary Information

Private Sector Adjustment Factor, Priced Services Cost Recovery, and 
Overview of 2020 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.\1\ 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 will have been earned if a private 
business firm provided the services. The imputed costs and imputed 
profit are collectively referred to as the private-sector adjustment 
factor (PSAF). From 2009 through 2018, 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.\2\
---------------------------------------------------------------------------

    \1\ On August 5, 2019, the Federal Reserve Board announced that 
the Reserve Banks will develop the FedNow\SM\ Service, an interbank 
real-time gross settlement (RTGS) service with integrated clearing 
functionality, to support the provision of end-to-end faster payment 
services. The Board anticipates the FedNow Service will be available 
in 2023 or 2024. Following the introduction of the FedNow Service, 
the Board will regularly disclose the service's cost recovery and 
will monitor progress toward matching revenues and costs.
    \2\ 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. In accordance with Accounting Standards 
Codification (ASC) 715 Compensation--Retirement Benefits, the 
Reserve Banks recognized a cumulative reduction in equity related to 
the priced services' benefit plans. Including this cumulative 
reduction in equity from 2009 to 2018 results in cost recovery of 
104.1 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 2018 actual, 2019 estimated, and 2020 budgeted 
cost-recovery rates for all priced services. Cost recovery is estimated 
to be 100.8 percent in 2019 and budgeted to be 100.2 percent in 2020.

                   Table 1--Aggregate Priced Services Pro Forma Cost and Revenue Performance a
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
                                                                    Net income                    after targeted
              Year                    Revenue      Total expense   (ROE)  [1-2]    Targeted ROE     ROE [1/(2 +
                                                                                                      4)](%)
                                           1 \b\           2 \c\               3           4 \d\            5e f
----------------------------------------------------------------------------------------------------------------
2018 (actual)...................          $442.5          $428.1           $14.4            $5.2           102.1
2019 (estimate).................           442.4           433.4             9.0             5.4           100.8
2020 (budget)...................           443.1           436.3             6.7             5.9           100.2
----------------------------------------------------------------------------------------------------------------
\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 (attachment 1). For 2020, the projected
  revenue assumes implementation of the fee changes.
\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 ASC 715 are also included.
\d\ Targeted ROE is the after-tax ROE included in the PSAF.
\e\ The recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be
  recognized in accordance with ASC 715. Future gains or losses, and their effect on cost recovery, cannot be
  projected.
\f\ For 2019 and 2020, credits or debits related to the accounting for pension plans under ASC 715 include
  service cost only with the adoption of ASU 2017-07 Improving the Presentation of Net Periodic Pension Cost and
  Net Periodic Postretirement Benefit Cost (Topic 715).


[[Page 66406]]

    Table 2 provides an overview of cost-recovery budgets, estimates, 
and performance for the 10-year period from 2009 to 2018, 2018 actual, 
2019 budget, 2019 estimate, and 2020 budget by priced service.

                                     Table 2--Priced Services Cost Recovery
                                                    [Percent]
----------------------------------------------------------------------------------------------------------------
                                                                    2019 budget                     2020 budget
         Priced service              2009-2018      2018 actual         \a\        2019 estimate        \b\
----------------------------------------------------------------------------------------------------------------
All services....................           102.6           102.1           100.8           100.8           100.2
Check...........................           105.3           102.7           101.9           102.9           102.8
FedACH..........................            98.3            99.2           101.3            98.6           100.3
Fedwire Funds and NSS...........           102.1           105.8           100.5           102.4            98.2
Fedwire Securities..............           101.8            98.7            95.1            96.8            98.6
----------------------------------------------------------------------------------------------------------------
\a\ The 2019 budget figures reflect the final budgets as approved by the Board in December 2018.
\b\ The 2020 budget figures reflect preliminary budget information from the Reserve Banks. The Reserve Banks
  will submit final budget data to the Board in November 2019, for Board consideration in December 2019.

    1. 2019 Estimated Performance--The Reserve Banks estimate that they 
will recover 100.8 percent of the costs of providing priced services in 
2019, including total expense and targeted ROE, compared with a 2019 
budgeted recovery rate of 100.8 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 $9.0 million, compared with the 
targeted ROE of $5.4 million. The Reserve Banks estimate that the check 
service and the Fedwire[supreg] Funds and National Settlement Services 
will achieve full cost recovery; however, the Reserve Banks continue to 
estimate that the FedACH[supreg] Service and the Fedwire Securities 
Service will not achieve full cost recovery in 2019. Consistent with 
recent years, the FedACH Service will not achieve full cost recovery 
because of investment costs associated with the multiyear technology 
initiative to modernize its processing platform.\3\ This investment is 
expected to enhance efficiency, the overall quality of operations, and 
the Reserve Banks' ability to offer additional services to depository 
institutions. The Reserve Banks estimate that the Fedwire Securities 
Service will not achieve full cost recovery because of investment costs 
associated with initiatives to promote operational efficiency.
---------------------------------------------------------------------------

    \3\ The Reserve Banks have been engaged in a multiyear 
technology initiative to modernize the FedACH processing platform 
capabilities. The implementation of this initiative has moved from 
2019 to 2020.
---------------------------------------------------------------------------

    2. 2020 Private-Sector Adjustment Factor--The 2020 PSAF for Reserve 
Bank priced services is $18.9 million. This amount represents an 
increase of $1.1 million from the 2019 PSAF of $17.8 million. This 
increase is primarily the result of an increase in imputed return on 
equity and sales tax and partially offset by a decrease in Board of 
Governors expenses.
    3. 2020 Projected Performance--The Reserve Banks project a priced 
services cost recovery rate of 100.2 percent in 2020, with a net income 
of $6.7 million and targeted ROE of $5.9 million. The Reserve Banks 
project that the price changes will result in a 2.4 percent average 
price increase for customers. The Reserve Banks project that each of 
the individual service lines, other than the Fedwire Securities Service 
and the Fedwire Funds Service, will fully recover their costs for 2020. 
The Fedwire Services' underrecovery projections are largely driven by 
an anticipated decline in revenue due to a large Fedwire Funds 
participant's upcoming transition of its transfer origination activity 
off the Fedwire Funds Service, anticipated modest volume declines in 
certain product lines for the Fedwire Securities Service, and ongoing 
System investments in projects to increase technological resiliency. 
Both the Fedwire Funds Service and Fedwire Securities Service are 
projected to fully recover costs in the long run.\4\
---------------------------------------------------------------------------

    \4\ From 2011-2020, Fedwire Securities Service's projected ten-
year average recovery rate is 101.6 percent and Fedwire Funds 
Service's projected ten-year average recovery rate is 102.4 percent.
---------------------------------------------------------------------------

    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 from new and ongoing 
improvement initiatives. In light of these risks, the Reserve Banks 
will continue to refine their business and operational strategies to 
manage operating costs, to increase product revenue, and to capitalize 
on efficiencies gained from technology initiatives.
    4. 2020 Pricing--The following summarizes the Reserve Banks' 
changes in fee schedules for priced services in 2020:
Check
     The Reserve Banks will reassign the tier placement of 
1,607 and 124 return endpoints in the FedForward[supreg] and 
FedReturn[supreg] products, respectively.\5\ In addition, the Reserve 
Banks will adjust the frequency of endpoint tier reassignments from 
annual to every other year.
---------------------------------------------------------------------------

    \5\ The Reserve Banks evaluate and set tier assignments annually 
based on changes in the volume of items received by endpoints.
---------------------------------------------------------------------------

     The Reserve Banks will eliminate tier 0 for all 
FedForward[supreg] and FedReturn[supreg] Premium Daily deposit 
options.\6\
---------------------------------------------------------------------------

    \6\ Tier 0 consists of financial institutions with less than 10 
percent of their Reserve Bank return receipt volume deposited with 
the Reserve Banks by Premium Daily Fee depositors during the sample 
period.
---------------------------------------------------------------------------

     The Reserve Banks will decrease per-item fees for the 
FedForward Premium Daily A deposit option by $0.004 for tier 1. The 
Reserve Banks will decrease per-item fees for the FedForward[supreg] 
Premium Daily B deposit option by $0.002 for tier 1. The Reserve Banks 
will decrease per-item fees for Premium Daily A, B, and C deposit 
options by $0.003 for tier 3 and tier 4.
     The Reserve Banks will increase the Retail Payments 
Premium Receiver (RPPR) FedForward[supreg] discount by $0.001.\7\
---------------------------------------------------------------------------

    \7\ For eligible customers that deposit over two million items 
per month.
---------------------------------------------------------------------------

     The Reserve Banks will introduce 4:00 p.m. eastern time 
(ET) deposit deadlines for Standard FedReturn[supreg] and Premium 
FedReturn[supreg] and accompanying fee schedules, which include per-
item fees and fixed per-cash letter fees, as detailed in table 9 and 
10, respectively.
     The Reserve Banks will increase per-item fees for all 
other Standard FedReturn[supreg] deadlines (9:00 p.m. ET, 1:00 a.m. ET, 
and 12:30 p.m. ET) and Premium FedReturn[supreg] deadlines (1:00 a.m. 
ET and 12:30 p.m. ET) by $0.02.

[[Page 66407]]

     The Reserve Banks will increase per-item fees for paper/
legacy services between 10 to 17 percent, as detailed in table 11.
     The Reserve Banks will increase all fees for the 
FedImage[supreg] service 10 percent, as detailed in table 12.
     The Reserve Banks will implement a fixed monthly Check 21 
participation fee of $25 per parent customer.
     The Reserve Banks will increase the per-item fee for the 
FedReceipt[supreg] Premium Delivery 8:00 a.m. ET Target by $0.003, per 
item fees for the Premium Delivery 10:00 a.m. Target by $0.002, and 
Premium Delivery 12:00 noon Target by $0.001.\8\
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    \8\ The 8:00 a.m. delivery target is expressed in eastern time, 
while the 10:00 a.m. and 12:00 noon targets are local time.
---------------------------------------------------------------------------

FedACH
     The Reserve Banks will keep prices at existing levels for 
all existing priced FedACH products.
Fedwire Funds
     The Reserve Banks will increase the per-transfer fee for 
originations and receipts from $0.820 to $0.840 for tier 1 transfers, 
from $0.245 to $0.25 for tier 2 transfers, and from $0.160 to $0.165 
for tier 3 transfers.\9\
---------------------------------------------------------------------------

    \9\ Tiers are based on monthly total volume of originations and 
receipts. Tier 1 includes up to 14,000 transfers, tier 2 includes 
from 14,001 to 90,000 transfers, and tier 3 includes transfers over 
90,000.
---------------------------------------------------------------------------

     The Reserve Banks will increase the discounted (volume-
based) per-transfer fee for originations and receipts from $0.164 to 
$0.168 for tier 1 transfers, from $0.049 to $0.050 for tier 2 
transfers, and from $0.032 to $0.033 for tier 3 transfers.\10\
---------------------------------------------------------------------------

    \10\ The tiered pricing structure is complemented by a volume-
based incentive mechanism that provides discounts to customers that 
meet certain volume thresholds.
---------------------------------------------------------------------------

National Settlement Service (NSS)
     The Reserve Banks will keep prices at existing levels for 
the priced NSS products.
Fedwire Securities
     The Reserve Banks will keep prices at existing levels for 
the priced Fedwire Securities products.
FedLine[supreg] Solutions
     The Reserve Banks will increase the FedMail Fax fee from 
$100 to $150.\11\
---------------------------------------------------------------------------

    \11\ Limited to installed base only.
---------------------------------------------------------------------------

     The Reserve Banks will increase the FedMail Email (for 
customers with FedLine Web or above) fee from $20 to $40.\12\
---------------------------------------------------------------------------

    \12\ All customers with a FedMail Email (for FedLine customers) 
have a FedLine connection today. This service allows institution 
with a FedLine Web or higher solution to use FedMail Email, in 
addition to their FedLine solution.
---------------------------------------------------------------------------

     The Reserve Banks will increase the monthly fee for the 
legacy FedLine Direct Plus and Premier packages to $5,500 and $7,500, 
respectively. The Reserve Banks subsequently will increase prices for 
both packages to $10,000 in May and $20,000 in August.\13\
---------------------------------------------------------------------------

    \13\ The Reserve Banks will increase fees in mid-2020 for those 
customers who have not yet converted to new FedLine Direct network 
routers and circuits.
---------------------------------------------------------------------------

     The Reserve Banks will increase the monthly fee for 
Additional Legacy 256K and T1 Wide Area Network services connections to 
$3,500. The Reserve Banks subsequently will increase prices for these 
Additional Legacy connections to $5,000 in May and $10,000 in August.
     The Reserve Banks will increase the monthly fees for 
legacy Check 21 Large File Delivery (C21 LFD) 20 percent. The Reserve 
Banks subsequently will increase prices 50 percent in May and 100 
percent in August.\14\
---------------------------------------------------------------------------

    \14\ The monthly fees for legacy C21 LFD fee ranges from $1,680 
to $24,870 depending on the size, speed, and location of the 
connection. In order to avoid compounding increases, December 2019 
will be the baseline for all 2020 price increases for any connection 
still needing to convert.
---------------------------------------------------------------------------

     The Reserve Banks will update the FedComplete packages to 
incorporate other pricing and product changes.\15\
---------------------------------------------------------------------------

    \15\ FedComplete package pricing will be updated to include the 
Check participation fee and the 4:00 p.m. FedReturn[supreg] 
deadline. Additionally, the Reserve Banks will update the 
FedComplete Excess Volume and Receipt Surcharge to reflect the fee 
increase to Fedwire Origination and Receipt. FedComplete packages 
include a Fedwire Funds volume overage surcharge equivalent to the 
regular unit cost for originated items and one-tenth of the regular 
unit cost for received items.
---------------------------------------------------------------------------

    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.\16\ 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.
---------------------------------------------------------------------------

    \16\ 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 information for 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.\17\
---------------------------------------------------------------------------

    \17\ 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 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

[[Page 66408]]

maintain equity of at least 5 percent of total assets and 10 percent of 
risk-weighted assets.\18\ 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.
---------------------------------------------------------------------------

    \18\ 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 
Funds Service. The Board's PSR policy incorporates the 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 policy requires 
that the Fedwire Funds Service 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 Funds Service does 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 an amount 
equivalent to six months of the Fedwire Funds Service's current 
operating expenses as liquid financial assets and equity on the pro 
forma balance sheet.\19\ Current operating expenses are defined as 
normal business operating expenses on the income statement, less 
depreciation, amortization, taxes, and interest on debt. Using the 
Fedwire Funds Service's preliminary 2020 budget, six months of current 
operating expenses would be $56.0 million. In 2020, $41.6 million of 
equity was imputed to meet the FDIC capital requirements; however, an 
additional $7.1 million of equity was imputed to meet the PSR policy 
requirement and is allocated solely to the Fedwire Funds Service.
---------------------------------------------------------------------------

    \19\ 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 equity financing rate is described 
above. 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 2020 PSAF is $18.9 million, compared with $17.8 million in 
2019. The increase of $1.1 million is attributable to a net $0.7 
million increase in the cost of capital and a $0.7 million increase in 
sales tax, offset by a $0.3 million decrease in the Board's costs. The 
net $0.7 million increase in cost of capital resulted from an 
incremental $1 million increase in return on imputed equity necessary 
for PSR Policy compliance partially offset by a $0.3 million decrease 
in the return on equity imputed to satisfy the FDIC requirements for a 
well-capitalized institution.
    The PSAF expense of $18.9 million, detailed in table 5, reflects 
$7.9 million for capital funding, $6.7 million for BOG expense, and 
$4.4 million in sales tax expense.
    As shown in table 3, 2020 total assets of $841.2 million decreased 
by $5.4 million from 2019. The net decrease in total assets reflects a 
$29.7 million decrease in long-term assets partially offset by a $24.3 
million increase in short-term assets and imputed investments.
    The net long-term asset decrease of $29.7 million primarily 
consists of a $23.6 million decrease in the net pension asset and a 
combined $9.2 million decrease in Furniture and equipment and Leasehold 
improvements and long-term prepayments. The net pension asset decrease 
reflects lower plan contributions over the past two years, down from 
$240 million in 2018 to $180 million in 2019 and 2020, respectively. 
The decreases in Furniture and equipment and Leasehold improvements and 
long-term prepayments are mainly due to a lower allocation of Reserve 
Bank assets to the Federal Reserve's priced services.
    The increase in the short-term assets is primarily driven by the 
imputed investments in Treasury securities from imputed equity required 
to meet FDIC capital requirements for a well-capitalized institution 
and to comply with the PSR policy. The remaining net increases in 
short-term assets reflect a $34.1 million increase in items in process 
of collection resulting from relatively high balances in the value of 
foreign transactions offset by a $27.5 million decrease in imputed 
investments in Fed Funds.
    The capital structure of the 2020 pro forma balance sheet, provided 
in table 4, is composed of equity of $56.0 million, or 11.4 percent of 
the 2020 risk weighted assets detailed in table 6, and no long-term 
debt. The 2020 capital structure is similar to that of 2019, which was 
composed of $51.8 million of equity. The 2020 imputed equity required 
to fund assets and meet the publicly traded firm model capital 
requirements is $31.2 million. Long-term debt of $10.4 million was 
imputed at the observed market ratio of 58.4 percent. To meet the FDIC 
capital requirements for a well-capitalized institution, the $10.4 
million of imputed long-term debt was substituted for equity, and 
additional $31.2 million equity was imputed. The resulting $49 million 
total level of equity was not sufficient to satisfy the $56.0 million 
equity requirement for the PSR policy requirements. An additional $7.1 
million was imputed to comply with the PSR requirement.
    The net Accumulated Other Comprehensive Income loss is $625.2 
million, compared with $624.3 million in 2019. The slight increase is 
primarily attributable to a higher discount rate. AOCI is in a net loss 
position and does not reduce the total imputed equity required to fund 
priced services assets or fulfill the FDIC equity requirements for a 
well-capitalized institution.

[[Page 66409]]



         Table 3--Comparison of Pro Forma Balance Sheets for Budgeted Federal Reserve Priced Services a
                                [Millions of dollars--projected average for year]
----------------------------------------------------------------------------------------------------------------
                                                                       2020            2019           Change
----------------------------------------------------------------------------------------------------------------
Short-term assets:
    Receivables.................................................           $37.1           $36.7            $0.4
    Materials and supplies......................................             0.5             0.6           (0.1)
    Prepaid expenses............................................            10.8            11.1           (0.3)
    Items in process of collection \20\.........................           129.1            95.0            34.1
                                                                 -----------------------------------------------
        Total short-term assets.................................           177.5           143.4            34.1
Imputed investments: \21\
    Imputed investment in Treasury Securities...................            38.2            20.5            17.7
    Imputed investment in Fed Funds.............................           225.5           253.0          (27.5)
                                                                 -----------------------------------------------
        Total imputed investments...............................           263.7           273.5           (9.8)
Long-term assets:
    Premises \22\...............................................           111.5           104.2             7.3
    Furniture and equipment.....................................            30.2            32.8           (2.6)
    Leasehold improvements and long-term prepayments............            81.1            87.7           (6.6)
    Net pension asset...........................................  ..............            23.6          (23.6)
    Deferred tax asset..........................................           177.2           181.4           (4.2)
                                                                 -----------------------------------------------
        Total long-term assets..................................           400.0           429.7          (29.7)
                                                                 -----------------------------------------------
            Total assets........................................           841.2           846.6           (5.4)
                                                                 ===============================================
Short-term liabilities:
    Deferred credit items.......................................           354.6           348.0             6.6
    Short-term debt.............................................            13.0            13.5           (0.5)
    Short-term payables.........................................            35.5            34.9             0.6
                                                                 -----------------------------------------------
        Total short-term liabilities............................           403.1           396.4             6.7
Long-term liabilities:
    Pension liability...........................................             0.1  ..............             0.1
    Long-term debt..............................................  ..............  ..............  ..............
    Postemployment/postretirement benefits and net pension                 382.0           398.4          (16.4)
     liabilities \23\...........................................
                                                                 -----------------------------------------------
        Total liabilities.......................................           785.2           794.8           (9.6)
        Equity \24\.............................................            56.0            51.8             4.2
                                                                 -----------------------------------------------
            Total liabilities and equity........................           841.2           846.6           (5.4)
----------------------------------------------------------------------------------------------------------------
\a\ Calculations in this table and subsequent PSAF tables may be affected by rounding.

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

    \20\ 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 before 
providing credit to the depositing bank. Float is directly estimated 
at the service level.
    \21\ Consistent with the Board's PSR policy, the Reserve Banks' 
priced services will hold and amount equivalent to 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 $56.0 million. In 2020, $41.6 million of equity was 
imputed to meet the regulatory capital requirements and $7.1 million 
of equity was imputed to satisfy PSR policy funding requirements.
    \22\ Includes the allocation of Board of Governors assets to 
priced services of $3.1 million for 2020 and $2.9 million for 2019.
    \23\ Includes the allocation of Board of Governors liabilities 
to priced services of $0.8 million for 2020 and $0.8 million for 
2019.
    \24\ Includes an accumulated other comprehensive loss of $625.2 
million for 2020 and $624.3 million for 2019, which reflects the 
ongoing amortization of the accumulated loss in accordance with 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 4--Imputed Funding for Priced-Services Assets
                          [Millions of dollars]
------------------------------------------------------------------------
                                               2020            2019
------------------------------------------------------------------------
A. Short-term asset financing:
    Short-term assets to be financed:
        Receivables.....................           $37.1           $36.7
        Materials and supplies..........             0.5             0.6
        Prepaid expenses................            10.8            11.1
                                         -------------------------------
    Total short-term assets to be                   48.4            48.4
     financed...........................
        Short-term payables.............            35.5            34.9
                                         -------------------------------
    Net short-term assets to be financed            13.0            13.5

[[Page 66410]]

 
    Imputed short-term debt financing               13.0            13.5
     \25\...............................
                                         ===============================
B. Long-term asset financing:
    Long-term assets to be financed:
        Premises........................           111.5           104.2
        Furniture and equipment.........            30.2            32.8
        Leasehold improvements and long-            81.1            87.7
         term prepayments...............
        Net pension asset...............  ..............            23.6
        Deferred tax asset..............           177.2           181.4
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total long-term assets to be                   400.0           429.7
     financed...........................
        Postemployment/postretirement              382.0           398.4
         benefits and net pension
         liabilities....................
                                         -------------------------------
        Net long-term assets to be                  17.8            31.3
         financed.......................
                                         ===============================
        Imputed long-term debt \20\.....  ..............  ..............
        Imputed equity \20\.............            56.0            51.8
                                         -------------------------------
            Total long-term financing...            56.0            51.8
------------------------------------------------------------------------

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

    \25\ Imputed short-term debt financing is computed as the 
difference between short-term assets and short-term liabilities. As 
presented in table 5, the financing costs of imputed short-term 
debt, imputed long-term debt and imputed equity are the elements of 
cost of capital, which contribute to the calculation of the PSAF.
    \26\ 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 2020, the amount of imputed equity met the minimum equity 
requirements for risk-weighted assets.
    \27\ 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.
    \28\ Additional equity in excess of that needed to fund priced 
services assets is offset by an asset balance of imputed investments 
in treasury securities.
    \29\ Imputed short-term debt and long-term debt are computed at 
table 4.
    \30\ The 2020 ROE is equal to a risk-free rate plus a risk 
premium (beta * market risk premium). The 2020 after-tax CAPM ROE is 
calculated as 2.16% + (1.0 * 8.34%) = 10.50%. Using a tax rate of 
22.1%, the after-tax ROE is converted into a pretax ROE, which 
results in a pretax ROE of (10.50%/(1-22.1%)) = 13.48%. Calculations 
may be affected by rounding.

                                  Table 5--Derivation of the 2020 and 2019 PSAF
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                           2020                               2019
                                           ---------------------------------------------------------------------
                                                   Debt            Equity             Debt            Equity
----------------------------------------------------------------------------------------------------------------
A. Imputed long-term debt and equity:
    Net long-term assets to finance.......              $17.8           $17.8              $31.3           $31.3
    Capital structure observed in market..              58.4%           41.6%              58.3%           41.7%
                                           ---------------------------------------------------------------------
    Pre-adjusted long-term debt and equity              $10.4            $7.4              $18.2           $13.1
    Equity adjustments: \26\
        Equity to meet capital              .................            49.0  .................            51.8
         requirements.....................
        Adjustment to debt and equity                  (10.4)            10.4             (18.2)            18.2
         funding given capital
         requirements \27\................
        Adjusted equity balance...........  .................            17.8  .................            31.3
        Equity to meet capital              .................            31.2  .................            20.5
         requirements \28\................
                                           ---------------------------------------------------------------------
            Total imputed long-term debt                    $           $49.0                  $           $51.8
             and equity...................
                                           =====================================================================
B. Cost of capital:
    Elements of capital costs:
        Short-term debt \29\..............     $13.0 x 2.3% =            $0.3     $13.5 x 2.3% =            $0.3
        Long-term debt \29\...............         - x 4.0% =  ..............         - x 3.9% =  ..............
        Equity \30\.......................     49.0 x 13.3% =             6.6     51.8 x 13.3% =             6.8
                                                              ----------------                   ---------------
                                                                         $6.9  .................            $7.1
C. Incremental cost of PSR policy:
    Equity to meet policy.................     $7.1 x 13.5% =            $1.0      $ - x 13.3% =               $
                                                              ----------------                   ---------------
D. Other required PSAF costs:
    Sales taxes...........................               $4.4  ..............               $3.7  ..............
    Board of Governors expenses...........                6.7  ..............                7.0  ..............
                                           -------------------                -------------------

[[Page 66411]]

 
                                                                         11.1  .................            10.7
                                                              ----------------                   ---------------
                                                                        $18.9  .................           $17.8
                                                              ================                   ===============
E. Total PSAF:
    As a percent of assets................  .................            2.2%  .................            2.1%
    As a percent of expenses..............  .................            3.4%  .................            3.3%
F. Tax rates..............................  .................           22.1%  .................           22.2%
----------------------------------------------------------------------------------------------------------------


                Table 6--Computation of 2020 Capital Adequacy for Federal Reserve Priced Services
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                     Weighted
                                                                      Assets        Risk weight       assets
----------------------------------------------------------------------------------------------------------------
Imputed investments:
    1-Year Treasury securities \31\.............................           $38.2  ..............               $
    Federal funds \32\..........................................           225.5             0.2            45.1
                                                                 -----------------------------------------------
        Total imputed investments...............................           263.7  ..............            45.1
Receivables.....................................................            37.1             0.2             7.4
Materials and supplies..........................................             0.5             1.0             0.5
Prepaid expenses................................................            10.8             1.0            10.8
Items in process of collection..................................           129.1             0.2            25.8
Premises........................................................           111.5             1.0           111.5
Furniture and equipment.........................................            30.2             1.0            30.2
Leasehold improvements and long-term prepayments................            81.1             1.0            81.1
Deferred tax asset..............................................           177.2             1.0           177.2
                                                                 -----------------------------------------------
    Total.......................................................           841.2  ..............           489.7
                                                                 ===============================================
Imputed equity:
    Capital to risk-weighted assets.............................           11.4%  ..............  ..............
    Capital to total assets.....................................            6.7%  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    C. Check Service--Table 7 shows the 2018 actual, 2019 estimated, 
and 2020 budgeted cost-recovery performance for the commercial check 
service.
---------------------------------------------------------------------------

    \31\ 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.
    \32\ The investments are imputed based on the amounts arising 
from the collection of items before providing credit according to 
established availability schedules.

                          Table 7--Check Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
              Year                    Revenue      Total expense    Net income     Targeted ROE   after targeted
                                                                       (ROE)                          ROE (%)
                                               1               2               3               4               5
                                                                           [1-2]                     [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2018 (actual)...................          $132.9          $127.8            $5.1            $1.5           102.7
2019 (estimate).................           126.7           121.6             5.2             1.5           102.9
2020 (budget)...................           119.4           114.8             4.6             1.3           102.8
----------------------------------------------------------------------------------------------------------------

    1. 2019 Estimate--The Reserve Banks estimate that the check service 
will recover 102.9 percent of total expenses and targeted ROE, compared 
with a 2019 budgeted recovery rate of 101.9 percent.
    Through August, total commercial forward and total commercial 
return check volumes were 8.1 percent and 7.1 percent lower, 
respectively, than they were during the same period last year. 
Consistent with anticipated fourth-quarter declines, for full-year 
2019, the Reserve Banks estimate that their total

[[Page 66412]]

forward check volume will decline 7.8 percent (compared with a budgeted 
decline of 7.6 percent) and their total return check volume will 
decline 6.6 percent (compared with a budgeted decline of 7.7 percent) 
from 2018 levels.\33\ The Reserve Banks expect that check volumes will 
continue to decline, although uncertainty remains as to the rate of 
decline over the long term. In particular, the Reserve Banks' check 
volumes are expected to decrease because of competitive pressures in 
the check-clearing market, and substitution away from checks to other 
payment instruments. While these volume declines will affect budgeted 
total revenue, the Reserve Banks estimate that total expenses will also 
be lower given the decline in those expenses directly correlated with 
volumes as well as the continued realization of operational 
efficiencies. These factors have allowed for close alignment between 
budgeted and estimated 2019 cost recovery.
---------------------------------------------------------------------------

    \33\ Total Reserve Bank forward check volumes are expected to be 
4.4 billion in 2019. Total Reserve Bank return check volumes are 
expected to be 27.1 million in 2019.
---------------------------------------------------------------------------

    2. 2020 Pricing--The Reserve Banks expect the check service to 
recover 102.8 percent of total expenses and targeted ROE in 2020. The 
Reserve Banks project revenue to be $119.4 million, a decline of 5.8 
percent from the 2019 estimate. This decline is driven in part by an 
anticipated accelerating decline in the overall number of checks 
written, as well as by competition from correspondent banks, 
aggregators, and direct exchanges.\34\ Total expenses for the check 
service are projected to be $114.8 million, a decrease of $6.8 million, 
or 5.6 percent, from 2019 expenses, primarily because of reduced 
operating costs, including cost savings associated with the Reserve 
Banks' customer support services.
---------------------------------------------------------------------------

    \34\ The Reserve Banks estimate that total commercial forward 
check volumes in 2019 will decline 8.5 percent, to 4.0 billion, and 
total commercial return check volumes will decline 8.5 percent, to 
24.8 million in 2019.
---------------------------------------------------------------------------

    The Reserve Banks will introduce a fixed participation fee, which 
will be charged to any customer that receives FedReceipt volume on a 
monthly basis. In light of ongoing volume declines, the participation 
fee is intended to support revenue stability by increasing the 
proportion of fixed to variable fees. Additionally, this fee 
introduction aligns the check service with other priced services that 
offer similar monthly participation fees, such as FedACH and the 
Fedwire Funds Service.
    The Reserve Banks evaluate and set tier assignments annually based 
on changes in the volume of items received by endpoints. In 2020, the 
Reserve Banks will reassign the tier placement of 238 endpoints 
currently in tiers 1-4 to another tier.\35\ In addition, the Reserve 
Banks will eliminate tier 0 for all Forward and Return Premium Daily 
deposit options, and reassign all remaining tier 0 customers.\36\ This 
change is intended to reflect the fact that the Reserve Banks now have 
sufficient volume to appropriately assign the remaining 1,130 endpoints 
from tier 0 into tiers 1-4. In response to feedback from customers, the 
Reserve Banks will also evaluate and set tier assignments every other 
year instead of annually, to provide more certainty and price stability 
to the industry. As a result, the Reserve Banks will next reevaluate 
and set tier assignments in 2022.\37\
---------------------------------------------------------------------------

    \35\ The tiers for 2019 are available at https://www.frbservices.org/resources/fees/check-2019.html.
    \36\ Tier 0 was introduced as part of the Reserve Banks' 2016 
restructured FedForward and FedReturn fee schedules and is composed 
of routing numbers for which the Reserve Banks currently receive 
little to no volume from the specified subset of Reserve Bank 
customers (and which therefore cannot currently be assigned to the 
other tiers with sufficient predictability). Tier 0 was only 
available for FedForward and Return Premium Daily deposit options.
    \37\ The tiers for 2020 are available at https://www.frbservices.org/resources/fees/check-2020.html.
---------------------------------------------------------------------------

    Based on the 2020 tier assignments and the elimination of tier 0, 
the Reserve Banks will include changes to FedForward Premium Daily Fees 
and the Retail Payments Premium Receiver (RPPR) discount structure. The 
Reserve Banks will lower the FedForward Premium Daily Fee A per item 
fees by $0.004 for tier 1, lower the FedForward Premium Daily Fee B per 
item fees by $0.002 for tier 1, and lower the FedForward Premium Daily 
Fee A, B, and C per item fees by $0.003 for tiers 3 and 4. The Reserve 
Banks also will include an increase to the RPPR discount of $0.001 for 
eligible customers that deposit over two million items per month. Table 
8 shows the 2020 FedForward Premium Daily fees.

                                    Table 8--FedForward Premium Daily Deposit
                [Applicable to Premium Daily Fee A, Premium Daily Fee B, and Premium Daily Fee C]
----------------------------------------------------------------------------------------------------------------
                            Tier \38\                                Premium A       Premium B       Premium C
----------------------------------------------------------------------------------------------------------------
                                      Deposit Deadline of 5:00 a.m. EST M-F
----------------------------------------------------------------------------------------------------------------
0...............................................................             N/A             N/A             N/A
1...............................................................          $0.002          $0.002          $0.002
2...............................................................           0.014           0.012           0.010
3...............................................................           0.022           0.020           0.018
4...............................................................           0.036           0.034           0.032
5...............................................................           0.200           0.200           0.200
----------------------------------------------------------------------------------------------------------------
                                     Deposit Deadline of 12:00 p.m. EST M-F
----------------------------------------------------------------------------------------------------------------
0...............................................................             N/A             N/A             N/A
1...............................................................           0.012           0.012           0.012
2...............................................................           0.024           0.022           0.020
3...............................................................           0.032           0.030           0.028
4...............................................................           0.046           0.044           0.042
5...............................................................           0.200           0.200           0.200
----------------------------------------------------------------------------------------------------------------

    In response to customer demand for intraday return options to match 
other clearing option capabilities, the Reserve Banks will introduce a 
new 4:00 p.m. ET FedReturn[supreg] deposit deadline. The deadline will 
accelerate the speed of

[[Page 66413]]

payments by providing additional options for paying banks to return 
items earlier. The Reserve Banks will increase the tier pricing for the 
9:00 p.m. ET, 1:00 a.m. ET, and 12:30 p.m. ET FedReturn deposit 
deadlines. Table 9 lists the fees for the Standard FedReturn[supreg] 
product, inclusive of current and new deposit deadlines. Table 10 lists 
the fees for the Premium FedReturn[supreg] product, inclusive of 
current and new deposit deadlines.
---------------------------------------------------------------------------

    \38\ Tier 5 for FedForward Daily Deposit is also referred to as 
Substitute Check Endpoints.

                                  Table 9--Standard FedReturn Image Cash Letter
----------------------------------------------------------------------------------------------------------------
                    Tier \39\                      4:00 p.m. ET    9:00 p.m. ET    1:00 a.m. ET    12:30 p.m. ET
----------------------------------------------------------------------------------------------------------------
1...............................................          $0.120          $0.170          $0.470          $0.170
2...............................................           0.180           0.230           0.530           0.230
3...............................................           0.590           0.640           0.940           0.640
4...............................................           0.790           0.840           1.140           0.840
5...............................................           1.000           1.050           1.350           1.050
6...............................................           1.500           1.500           1.500           1.500
Cash Letter.....................................            4.50            4.50            6.50            6.50
----------------------------------------------------------------------------------------------------------------


                                  Table 10--Premium FedReturn Image Cash Letter
----------------------------------------------------------------------------------------------------------------
                            Tier \39\                              4:00 p.m. ET    1:00 a.m. ET    12:30 p.m. ET
----------------------------------------------------------------------------------------------------------------
0...............................................................             N/A             N/A             N/A
1...............................................................          $0.020          $0.070          $0.090
2...............................................................           0.070           0.120           0.140
3...............................................................           0.490           0.540           0.560
4...............................................................           0.690           0.740           0.760
5...............................................................           0.900           0.950           0.970
6...............................................................           1.500           1.500           1.500
Daily Fixed Fee.................................................          400.00          400.00          400.00
----------------------------------------------------------------------------------------------------------------

    The Reserve Banks will increase to the per-item fee for all paper-
related products, as well as large-dollar return item notification 
(LDRIN), and returns reclear services by 10 to 17 percent.\40\ The 
Reserve Banks will increase all FedImage[supreg] fees 10 percent. The 
Reserve Banks will continue increasing fees to encourage depositors to 
shift volume away from legacy paper-related products in light of 
today's electronic check-processing environment. Table 11 and 12 show 
these pricing changes.
---------------------------------------------------------------------------

    \39\ Tier 5 for FedReturn Daily Deposit is also referred to as 
PDF Endpoints. Tier 6 for FedReturn Daily Deposit is also referred 
to as Substitute Check Endpoints.
    \40\ LDRIN is a service in which the Reserve Banks, at the payor 
bank's request, notifies the bank of first deposit (BOFD) that an 
item of $5,000 or more is being returned to them, to satisfy the 
payor bank's Regulation CC requirement. Returns reclear is a service 
in which the Reserve Banks, at the BOFD's request, will make a 
second attempt to clear a check that has been returned during the 
first clearing attempt.

           Table 11--Paper Check Forward and Return Collection
------------------------------------------------------------------------
             Paper services                  Fixed fee     Per item fee
------------------------------------------------------------------------
Canadian Items--U.S. Funds..............          $15.00           $5.50
Canadian Items--Canadian Funds..........           15.00            5.50
Canadian Cash Letter Correction Fee.....  ..............           22.00
Canadian Amount Encoding................  ..............            1.65
Foreign Items--GBP and Euro.............           15.00           22.00
Foreign Items--All Other Items..........           15.00           22.00
Foreign Items--Collection Items.........           15.00           88.00
Mixed Forward Paper Deposits............           15.00            4.00
LDRIN--FedLine Web access solution......  ..............            4.00
LDRIN--Telephone........................  ..............           22.00
LDRIN--Physical Item....................  ..............           28.00
Returns Item Reclear--Level 1...........           10.00            0.70
Returns Item Reclear--Level 2...........           10.00            0.80
Returns Item Reclear--Level 3...........           10.00            0.90
Returns Item Reclear--Level 4...........           10.00            1.00
Canadian Item--Return...................  ..............           16.50
Foreign Item--Return....................  ..............           44.00
Mixed Return Paper Deposits.............           15.00            7.00
Return Item Qualification...............  ..............            8.25
------------------------------------------------------------------------


                            Table 12--FedImage and Electronic Check Services and Fees
----------------------------------------------------------------------------------------------------------------
                                                                    Fixed fee                      Per item fee
----------------------------------------------------------------------------------------------------------------
Image Archive:
    Image Capture + 7 business day archive....  $6.60...........................................          $0.010

[[Page 66414]]

 
    Image Capture On-Us Surcharge.............  ................................................          0.0233
    30 business day archive...................  ................................................          0.0012
    60 business day archive...................  ................................................          0.0014
    7-year archive/11-year archive............  ................................................          0.0022
    Dual archive (Transition period up to 120   ................................................          0.0013
     days).
    Extended dual archive (More than 120 days)  ................................................          0.0133
    Back File Conversion......................  $4.70...........................................          0.0133
    Electronic On-Us Service..................  $4.70...........................................          0.0133
Extended RAID Storage
        61 days to 6 months...................  ................................................          0.0011
        61 days to 12 months..................  ................................................          0.0026
        61 days to 24 months..................  ................................................          0.0067
Image Retrievals:
    Retrievals to view via FedLine Web[supreg]  ................................................          0.4700
     inquiry.
Retrievals to email via FedLine Web
        Request via FedLine Web inquiry.......  ................................................          0.4700
        Recurring request.....................  ................................................          0.4700
        Image Access and Retrievals through a   ................................................          0.4700
         Gateway.
        Subscription Retrievals...............  ................................................          0.0029
        Manual FedImage Requests (requests      ................................................          8.0000
         performed by FRB staff).
Image Delivery:
Physical Media
        CD-ROM Select Accounts Service--RAID..  $20.00/CD-ROM...................................          0.0210
        CD-ROM--Tape..........................  $20.00/CD-ROM...................................          0.1300
Truncation:
    Image Enhanced Truncation.................  $7.25...........................................          0.0120
    Return Item Retrieval--FedLine............  ................................................          1.4000
----------------------------------------------------------------------------------------------------------------

    The Reserve Banks will increase the per-item fee for the 
FedReceipt[supreg] Premium Delivery 8:00 a.m. ET Target by $0.003 to 
$0.026, for the 10:00 a.m. Target by $0.002 to $0.017, and for the 
12:00 noon Target by $0.001 to $0.012.\41\ The fee increases are 
intended to maintain cost recovery of the Premium Delivery service in 
light of declining check volume.
---------------------------------------------------------------------------

    \41\ FedReceipt services consist of the electronic presentment 
of an image cash letter to the paying bank that consists of all 
forward items deposited electronically. The 8:00 a.m. delivery 
target is expressed in eastern time, while the 10:00 a.m. and 12:00 
noon targets are local time.
---------------------------------------------------------------------------

    The primary risks to the Reserve Banks' ability to achieve budgeted 
2020 cost recovery for the check service include greater-than-expected 
declines in check volume due to the general reduction in check writing 
and increased competition from correspondent banks, aggregators, and 
direct exchanges, which would result in lower-than-anticipated revenue.
    D. FedACH Service--Table 13 shows the 2018 actual, 2019 estimate, 
and 2020 budgeted cost-recovery performance for the commercial FedACH 
service.

                         Table 13--FedACH Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
              Year                    Revenue      Total expense    Net income     Targeted ROE   after targeted
                                                                       (ROE)                          ROE (%)
                                               1               2               3               4               5
                                                                           [1-2]                     [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2018 (actual)...................          $149.7          $149.1            $0.6            $1.9            99.2
2019 (estimate).................           152.7           153.1            -0.4             1.9            98.6
2020 (budget)...................           157.6           155.3             2.3             1.9           100.3
----------------------------------------------------------------------------------------------------------------

    1. 2019 Estimate--The Reserve Banks estimate that the FedACH 
service will recover 98.6 percent of total expenses and targeted ROE, 
compared with a 2019 budgeted recovery rate of 101.3 percent. Through 
August, FedACH commercial origination and receipt volume was 5.4 
percent higher than it was during the same period last year. For full-
year 2019, the Reserve Banks estimate that FedACH commercial 
origination and receipt volume will increase 5.8 percent from 2018 
levels, compared with a 2019 budgeted increase of 3.3 percent. However, 
investment costs associated with a multiyear technology initiative to 
modernize the FedACH processing platform continue to drive the overall 
underrecovery rate. Although FedACH is estimated to not fully recover 
its costs in 2019, the Reserve Banks are expected to fully recover 
FedACH costs following the finalization of the FedACH technology 
modernization project.
    2. 2020 Pricing--The Reserve Banks expect the FedACH service to 
recover 100.3 percent of total expenses and targeted ROE in 2020. 
FedACH commercial origination and receipt volume is projected to grow 
4.2 percent, which is expected to contribute to an increase of $4.9 
million in total revenue

[[Page 66415]]

from the 2019 estimate. Total expenses are projected to increase $2.2 
million from 2019 expenses, primarily because of testing and 
implementation costs associated with the introduction of the new FedACH 
technology platform, which is now expected in 2020.
    The Reserve Banks will not change fees for existing FedACH priced 
services. This is consistent with a multiyear strategy of providing 
price stability for customers in light of ongoing investments to 
upgrade the FedACH processing platform.
    The primary risks to the Reserve Banks' ability to achieve budgeted 
2020 cost recovery for the FedACH service are unanticipated cost 
overruns associated with the FedACH technology modernization project 
and unanticipated volume reductions.
    E. Fedwire Funds and National Settlement Services--Table 14 shows 
the 2018 actual, 2019 estimate, and 2020 budgeted cost-recovery 
performance for the Fedwire Funds and National Settlement Services.

         Table 14--Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
              Year                    Revenue      Total expense    Net income     Targeted ROE   after targeted
                                                                       (ROE)                          ROE (%)
                                               1               2               3               4               5
                                                                           [1-2]                     [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2018 (actual)...................          $132.4          $123.6            $8.8            $1.5           105.8
2019 (estimate).................           136.4           131.6             4.8             1.6           102.4
2020 (budget)...................           139.9           140.0            -0.1             2.4            98.2
----------------------------------------------------------------------------------------------------------------

    1. 2019 Estimate--The Reserve Banks estimate that the Fedwire Funds 
and National Settlement Services will recover 102.4 percent of total 
expenses and targeted ROE, compared with a 2019 budgeted recovery rate 
of 100.5 percent. Through August, Fedwire Funds Service online volume 
was 4.0 percent higher than it was during the same period last year. 
For full-year 2019, the Reserve Banks estimate that Fedwire Funds 
Services online volume will increase 4.5 percent from 2018 levels, 
compared with the 2.1 percent volume increase that had been budgeted. 
Through August, the National Settlement Service (NSS) settlement file 
volume was 4.8 percent lower than it was during the same period last 
year, and settlement entry volume was 4.2 percent lower. For the full 
year, the Reserve Banks estimate that settlement file volume will 
decrease 5.0 percent (slightly more than the budgeted decrease of 3.5 
percent) and settlement entry volume will decrease 4.0 percent from 
2018 levels (compared with a budgeted 3.0 percent decrease).
    2. 2020 Pricing--The Reserve Banks expect the Fedwire Funds and 
National Settlement Services to recover 98.2 percent of total expenses 
and targeted ROE. Revenue is projected to be $139.9 million, an 
increase of 2.6 percent from the 2019 estimate. The Reserve Banks 
project total expenses to be roughly $8.4 million higher than 2019 
expenses, primarily reflecting investments in initiatives to improve 
resiliency and operational functionality.
    The Reserve Banks will increase the per-transfer fee for 
originations and receipts from $0.820 to $0.840 for tier 1 transfers, 
from $0.245 to $0.250 for tier 2 transfers, and from $0.160 to $0.165 
for tier 3 transfers.\42\ Correspondingly, the discounted per-transfer 
fee for originations and receipts will increase from $0.164 to $0.168 
for tier 1 transfers, from $0.049 to $0.050 for tier 2 transfers, and 
from $0.032 to $0.033 for tier 3 transfers.\43\ The Reserve Banks will 
increase the per-transfer fee in order to offset an anticipated decline 
in revenue due to a large Fedwire Funds participant's upcoming 
transition of its transfer origination activity off the Fedwire Funds 
Service, which is set to occur in 2020. This shift in volume is coupled 
with ongoing project costs associated with resiliency and operational 
objectives and increased investments in System technology 
infrastructure. The price increase has been structured to affect tier 3 
(that is, high-volume) customers proportionally more than lower-volume 
customers. The structure was chosen because the ongoing project costs 
incurred by the Fedwire Funds Service are expected to be of greater 
benefit to tier 3 customers. Overall Fedwire Funds participants will 
experience an average price increase of 3.7 percent.\44\
---------------------------------------------------------------------------

    \42\ Tiers are based on monthly total volume of originations and 
receipts. Tier 1 includes up to 14,000 transfers, Tier 2 includes 
from 14,001 to 90,000 transfers, and Tier 3 includes transfers over 
90,000.
    \43\ 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.
    \44\ The average price impact (increase) reflects both the price 
changes as well as an overall expected increase in the average 
benchmark volume required to receive discount pricing based on 
historic observed increases in customer benchmark volume year over 
year.
---------------------------------------------------------------------------

    The Reserve Banks will not change NSS fees for 2020.
    There are three primary risks to the Reserve Banks' ability to 
achieve budgeted 2020 cost recovery for these services. First, the 
Fedwire Funds Service could experience a potential overrun in costs 
from ongoing technology initiatives to improve resiliency and 
operational functionality. Second, the services could experience lower-
than-expected volume related to unforeseen market trends. Finally, the 
Fedwire Funds Service is reevaluating its current resource commitments 
and portfolio goals in order to better support any necessary strategic 
and development work related to emerging Systemwide initiatives, in 
addition to revisiting project implementation timelines in response to 
industry feedback.\45\ As a result, the Fedwire Funds Service future 
resource and project costs may shift and this may affect 2020 cost 
recovery.
---------------------------------------------------------------------------

    \45\ In response to industry feedback, the Federal Reserve Banks 
have decided to put on hold Phase 1 of the Fedwire Funds Service's 
ISO 20022 migration strategy (originally scheduled for November 
2020). The Federal Reserve will provide an update regarding its 
implementation plans after engaging with key stakeholders to 
reassess the Fedwire Funds Service's migration strategy. See 
official press release for additional details (https://frbservices.org/news/press-releases/092319-fedwire-funds-migration-iso20022-messages.html).
---------------------------------------------------------------------------

    F. Fedwire Securities Service--Table 15 shows the 2018 actual, 2019 
estimate, and 2020 budgeted cost-

[[Page 66416]]

recovery performance for the Fedwire Securities Service.\46\
---------------------------------------------------------------------------

    \46\ 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, reflected in 
this memorandum, 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.

                   Table 15--Fedwire Securities Service Pro Forma Cost and Revenue Performance
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Recovery rate
              Year                    Revenue      Total expense    Net income     Targeted ROE   after targeted
                                                                       (ROE)                          ROE (%)
                                               1               2               3               4               5
                                                                           [1-2]                     [1/(2 + 4)]
----------------------------------------------------------------------------------------------------------------
2018 (actual)...................           $27.5           $27.5            $0.0            $0.3            98.7
2019 (estimate).................            26.6            27.1            -0.5             0.3            96.8
2020 (budget)...................            26.1            26.2            -0.1             0.3            98.6
----------------------------------------------------------------------------------------------------------------

    1. 2019 Estimate--The Reserve Banks estimate that the Fedwire 
Securities Service will recover 96.8 percent of total expenses and 
targeted ROE, compared with a 2019 budgeted recovery rate of 95.1 
percent. The Reserve Banks estimate revenue to be $26.6 million, an 
increase of 0.8 percent from the 2019 budget. Total expenses are 
projected to be $27.1 million for full-year 2019, a decrease of 1.5 
percent from the 2019 budget.
    Through August, Fedwire Securities Service online agency transfer 
volume was 6.6 percent lower than it was during the same period last 
year. For full-year 2019, the Reserve Banks estimate that Fedwire 
Securities Service online agency transfer volume will decline 11.1 
percent from 2018 levels, compared with a budgeted decline of 4.7 
percent. This decrease in online agency transfer volume primarily 
reflects JP Morgan Chase's (JPMC) exiting the broker-dealer services 
business, which resulted in Bank of New York Mellon (BNYM) generally 
serving as the sole clearing bank for government securities. Activity 
between JPMC and BNYM that had previously settled over the Fedwire 
Securities Service is now concentrated within BNYM. The significant 
decline in agency transfer volume realized from JPMC's exit was 
partially offset by a reorganization of BNYM's broker-dealer activity 
and non-broker-dealer activity into separate securities accounts. This 
reorganization resulted in transfer activity that was previously 
conducted on BNYM's books shifting to the Fedwire Securities Service. 
The Reserve Banks do not expect that there will be further significant 
changes in 2020 in online agency transfer volume related to the JPMC 
exit.
    For full-year 2019, volumes for the Fedwire Securities' two largest 
revenue-generating services--account maintenance and issue 
maintenance--are expected to decline from 2018 levels. Through August, 
account maintenance volume was 2.8 percent lower than it was during the 
same period last year. For full-year 2019, the Reserve Banks estimate 
that account maintenance volume will decline 2.8 percent from 2018 
levels, compared with a budgeted decline of 5.8 percent. The account 
maintenance volume decline is largely the result of joint custody 
account closures. Through August, the number of agency issues 
maintained was 11.8 percent lower than it was during the same period 
last year. For full-year 2019, the Reserve Banks estimate that the 
number of agency issues maintained will decline 11.9 percent from 2018 
levels, compared with a budgeted decline of 19.7 percent.
    2. 2020 Pricing--The Reserve Banks expect the Fedwire Securities 
Service to recover 98.6 percent of total expenses and targeted ROE in 
2020. Revenue is projected to be $26.1 million, a decrease of 1.9 
percent from the 2019 estimate. The Reserve Banks also project that 
2020 expenses will remain relatively flat, decreasing by $0.9 million 
from the 2019 estimate. Significant drivers of 2020 operating costs 
include investments to advance initiatives to improve resiliency and 
operational functionality.
    The Reserve Banks will not change Fedwire Securities Service fees 
for 2020. This is largely the result of a stable near-term volume 
outlook across Fedwire Securities' core products. Relevant cost drivers 
include ongoing project costs associated with resiliency and 
operational objectives and increased Systemwide investment in 
technology infrastructure. Of particular note, however, operating costs 
for the Fedwire Securities Service are expected to decrease in 2021, 
primarily due to Fedwire Securities Modernization Program-related costs 
being fully amortized.
    The Reserve Banks project that online agency transfer volume will 
remain relatively flat, with a slight decrease of 1.4 percent in 2020. 
As interest rates decline, an expected increase in refinancing activity 
will likely lead to higher mortgage-backed securities (MBS) issuance 
and a corresponding higher level of online MBS transfers. Conversely, 
agency debt transfers will likely decrease since the Federal Housing 
Finance Agency (FHFA) has mandated a decline in government-sponsored 
enterprise retained portfolios. Thus, it is expected that there will be 
no significant volume changes in this category for 2020.
    The volume of accounts maintained will likely decrease 3.7 percent, 
and the volume of agency issues maintained will likely decrease 0.5 
percent.\47\ Account maintenance volume is expected to continue to 
decline in 2020 because of ongoing joint custody account closures.
---------------------------------------------------------------------------

    \47\ The online transfer fee, monthly account maintenance fee, 
and monthly issue maintenance fee accounted for more than 94 percent 
of total Fedwire Securities Service revenue through August 2019.
---------------------------------------------------------------------------

    The primary risk to the Reserve Banks' ability to achieve budgeted 
2020 cost recovery for these services is a potential overrun in costs 
from ongoing technology initiatives to improve resiliency and 
operational functionality

[[Page 66417]]

or lower-than-expected volume related to unforeseen market trends.
    G. FedLine Solutions--The Reserve Banks charge fees for the 
electronic connections that depository institutions use to access 
priced services and allocate the costs and revenues associated with 
this electronic access to the priced services.\48\ There are currently 
six FedLine channels through which customers can access the Reserve 
Banks' priced services: FedMail, FedLine Exchange, FedLine Web, FedLine 
Advantage, FedLine Command, and FedLine Direct.\49\ The Reserve Banks 
bundle these channels into eleven FedLine packages, described below, 
that are supplemented by a number of premium (or [agrave] la carte) 
access and accounting information options. In addition, the Reserve 
Banks offer FedComplete packages, which are bundled offerings of 
FedLine connections and a fixed number of FedACH, Fedwire Funds, and 
Check 21-enabled transactions.
---------------------------------------------------------------------------

    \48\ FedLine Solutions provide customers with access to Reserve 
Bank priced services. As such, FedLine costs and revenue are 
allocated to the Reserve Banks' priced services on an expense ratio 
basis.
    \49\ FedMail, FedLine Exchange, FedLine Web, FedLine Advantage, 
FedLine Command, and FedLine Direct are registered trademarks of the 
Federal Reserve Banks.
---------------------------------------------------------------------------

    Eight attended access packages offer manual access to critical 
payment and information services via a web-based interface. The FedMail 
package provides access to basic information services via email, while 
the two FedLine Exchange packages are designed to provide certain 
services, such as the E-Payments Routing Directory, to customers that 
otherwise do not use FedLine for any payment services. The two FedLine 
Web packages offer 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, Internet 
Protocol (IP)-based interfaces. The FedLine Command package offers an 
unattended connection to FedACH as well as to most accounting 
information services. The two remaining options are FedLine Direct 
packages, which allow for unattended connections at multiple connection 
speeds to Check, FedACH, Fedwire Funds, and Fedwire Securities 
transactional and information services and to most accounting 
information services.\50\
---------------------------------------------------------------------------

    \50\ In 2019, the Reserve Banks began offering Check 21 Large 
File Delivery services as part of modernized FedLine Direct Plus and 
FedLine Direct Premier connections.
---------------------------------------------------------------------------

    In 2020, the Reserve Banks will increase the monthly fees for 
legacy FedLine Direct (FLD) Plus and Premier, Additional Legacy 256K 
and T1 Wide Area Network (WAN) services, and Check 21 Large File 
Delivery (C21 LFD). The fee for legacy FLD Plus (Legacy 256K) package 
will increase by $1,500, from $4,000 to $5,500, and FLD Premier (Legacy 
T1) will increase by $700, from $6,800 to $7,500. The Reserve Banks 
also will increase the [agrave] la carte monthly fee for the Additional 
Legacy 256K WAN by $1,000, from $2,500 to $3,500 and for the Additional 
Legacy T1 WAN by $300, from $3,200 to $3,500. In addition, the Reserve 
Banks will increase the C21 LFD fee by 20 percent.\51\ Starting in mid-
2020 the Reserve Banks will include additional fee increases for these 
packages, as shown in table 16, to encourage customers to move to more 
modern and secure technology that meets industry standards.\52\ As 
previously announced, the Reserve Banks intend to sunset legacy FLD and 
C21 LFD services after all customers have converted to the new 
solution.
---------------------------------------------------------------------------

    \51\ The monthly fees for legacy C21 LFD fee ranges from $1,680 
to $24,870 depending on the size, speed, and location of the 
connection. In order to avoid compounding increases, December 2019 
will be the baseline for all 2020 price increases for any connection 
still needing to convert.
    \52\ The Reserve Banks will increase fees further in mid-2020 
for those customers who have not yet converted to newer FedLine 
Direct network routers and circuits.
---------------------------------------------------------------------------

    Table 16 provides a summary of the services and 2020 pricing for 
FLD and C21 LFD services:

                Table 16--FedLine Direct and Check 21 Large File Delivery Legacy Price Increases
----------------------------------------------------------------------------------------------------------------
                                                                                       Fee structure
                                       2019 monthly     January 1, 2010  ---------------------------------------
              Services                      fee           monthly fee         May 1, 2020       August 1, 2020
                                                                              monthly fee         monthly fee
----------------------------------------------------------------------------------------------------------------
FedLine Direct Plus (Legacy 256K)...          $4,000     $5,500 (+37.5%)   $10,000 (+150.0%)   $20,000 (+400.0%)
FedLine Direct Premier (Legacy T1)..           6,800      $7,500 (10.3%)    $10,000 (+47.1%)   $20,000 (+194.1%)
Additional Legacy 256K WAN                     2,500     $3,500 (+40.0%)    $5,000 (+100.0%)   $10,000 (+300.0%)
 Connection.........................
Additional Legacy T1 WAN Connection.           3,200      $3,500 (+9.4%)     $5,000 (+56.3%)   $10,000 (+212.5%)
Check 21 Large File Delivery \53\...         Various              +20.0%            * +50.0%           * +100.0%
----------------------------------------------------------------------------------------------------------------
* (from Dec. 2019 fee).

    In addition, the Reserve Banks will increase the price for FedMail 
Fax and FedMail Email (for customers with FedLine Web or above).\54\ 
FedMail Fax will increase by $50, from $100 to $150. Additionally, 
FedMail Email (for customers with FedLine Web or above) will increase 
by $20, from $20 to $40. The price increases to FedMail Fax and FedMail 
Email are intended to move customers to more secure and contemporary 
solutions.
---------------------------------------------------------------------------

    \53\ To avoid compounding increases, the fee as of December 2019 
will serve as the baseline for all 2020 price increases for any 
connection still needing to convert.
    \54\ FedMail Email is only available to FedLine Web, Advantage, 
Command, and Direct customers.
---------------------------------------------------------------------------

    The Reserve Banks will also update the existing FedComplete 100 and 
200 (Plus and Premier) packages to incorporate other pricing and 
product changes.\55\ Although the Reserve Banks are not making changes 
to package fees, the content of the packages is being updated to 
reflect individual 2020 pricing and product changes. Specifically, the 
Reserve Banks will add the 2020 Check participation fee and the 4:00 
p.m. FedReturn[supreg] deadline to FedComplete packages. The Reserve 
Banks will update the FedComplete Excess Volume and Receipt Surcharge 
to reflect the fee increase to Fedwire Origination and Receipt.
---------------------------------------------------------------------------

    \55\ FedComplete packages bundle certain payment services and 
are designed for institutions with lower transaction volumes that 
are interested in processing their own payments.
---------------------------------------------------------------------------

    The Reserve Banks estimate that the price changes will result in a 
2.9 percent average price increase for FedLine customers.

[[Page 66418]]

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.'' \56\ Under this policy, the 
Board assesses whether proposed changes would have a direct and 
material adverse effect on the ability of other service providers to 
compete effectively with the Federal 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.
---------------------------------------------------------------------------

    \56\ Federal Reserve Regulatory Service (FRRS) 9-1558.
    \57\ Any ODFI incurring less than $50 for the following fees 
will be charged a variable amount to reach the minimum: Forward 
value and non-value item origination fees, and FedGlobal ACH 
origination surcharges.
    \58\ Any RDFI not originating forward value and non-value items 
and incurring less than $40 in receipt fees will be charged a 
variable amount to reach the minimum. 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.
    \59\ 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.
    \60\ The fee includes the item and addenda fees in addition to 
the conversion fee.
    \61\ The fee includes the item and addenda fees in addition to 
the conversion fee. Reserve Banks also assess a $45 fee for every 
government paper return/NOC they process.
    \62\ Origination volumes at these levels qualify for a waterfall 
discount which includes all FedACH origination items.
    \63\ Origination discounts based on monthly billed receipt 
volume apply only to those items received by FedACH receiving points 
and are available only to Premium Receivers.
    \64\ RDFIs receiving through FedACH less than 90 percent of 
their FedACH-originated items.
    \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 a waterfall 
discount which includes all FedACH receipt items.
    \67\ RDFIs receiving through FedACH at least 90 percent of their 
FedACH-originated items, but less than 90 percent of all of their 
ACH items originated through any operator.
    \68\ RDFIs receiving through FedACH at least 90 percent of all 
of their ACH items originated through any operator.
    \69\ To qualify for the discount, a financial institution must 
meet all of the following criteria in a given month: (1) Be charged 
the minimum monthly fee--forward origination (57208); (2) subscribe 
to FedLine Web Plus or any higher FedLine[supreg] access solution; 
and (3) subscribe to the FedPayments Reporter service, the FedACH 
RDFI Alert service, or the FedACH Risk Origination Monitoring 
service.
    \70\ 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.
    \71\ Premier reports generated on demand are subject to the 
package/tiered fees plus a surcharge.
    \72\ The fee applies to RTNs that have received or originated 
FedACH transactions during a month. Institutions that receive only 
U.S. government transactions or that elect to use a private-sector 
operator exclusively are not assessed the fee.
---------------------------------------------------------------------------

    The 2020 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 proposed 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. 2020 Fee Schedules

                    FedACH Service 2020 Fee Schedule
  [Effective January 2, 2020. Bold indicates changes from 2019 prices]
------------------------------------------------------------------------
                                                              Fee
------------------------------------------------------------------------
FedACH minimum monthly fee:
    Originating depository financial institution       $50.00.
     (ODFI) \57\.
    Receiving depository financial institution (RDFI)  $40.00.
     \58\.
Origination (per item or record):
    Forward or return items..........................  $0.0035.
    SameDay Service--forward item \59\...............  $0.0010
                                                        surcharge.
    Addenda record...................................  $0.0015.
    FedLine Web-originated returns and notification    $0.35.
     of change (NOC) \60\.
    Facsimile Exception Return/NOC \61\..............  $45.00.
    SameDay Exception Return.........................  $45.00.
    Automated NOC....................................  $0.20.
    Volume discounts (based on monthly billed
     origination volume) \62\ per item when
     origination volume is.
        750,001 to 1,500,000 items per month.........  $0.0008 discount.
        more than 1,500,000 items per month..........  $0.0010 discount.
    Volume discounts (based on monthly billed receipt
     volume) \63\ per item when receipt volume is.
        10,000,001 to 15,000,000 items per month.....  $0.0002 discount.
        more than 15,000,000 items per month.........  $0.0003 discount.
Receipt (per item or record):
    Forward Item.....................................  $0.0035.
    Return Item......................................  $0.0075.
    Addenda record...................................  $0.0015.
    Volume discounts:
        Non-Premium Receivers \64\ per item when
         volume is:.
            750,001 to 12,500,000 items per month      $0.0017 discount.
             \65\.
            more than 12,500,000 items per month \66\  $0.0019 discount.
        Premium Receivers, Level One \67\ per item
         when volume is:
            750,001 to 1,500,000 items per month \65\  $0.0017 discount.
            1,500,001 to 2,500,000 items per month     $0.0017 discount.
             \66\.
            2,500,001 to 12,500,000 items per month    $0.0018 discount.
             \66\.
            more than 12,500,000 items per month \66\  $0.0020 discount.
        Premium Receivers, Level Two \68\ per item
         when volume is:
            750,001 to 1,500,000 items per month \65\  $0.0017 discount.
            1,500,001 to 2,500,000 items per month     $0.0017 discount.
             \66\.
            2,500,001 to 12,500,000 items per month    $0.0019 discount.
             \66\.
            more than 12,500,000 items per month \66\  $0.0021 discount.
FedACH Bundled Package Pricing Discount:
    Monthly Bundled Service Package Discount \69\....  $20.00 discount.
FedACH Risk[supreg] Management Services: \70\
    Monthly Package Fee (a single fee based on total
     number of criteria sets):
        For up to 5 criteria sets....................  $35.00.
        For 6 through 11 criteria sets...............  $70.00.
        For 12 through 23 criteria sets..............  $125.00.

[[Page 66419]]

 
        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 584 criteria sets..............  $1,100.00.
    Batch/Item Monitoring (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[supreg] Reporter Service:
    FedPayments Reporter Service monthly package
     includes the following reports
        ACH Received Entries Detail--Customer and
         Depository Financial Institution
        ACH Return Reason Report--Customer and
         Depository Financial Institution
        ACH Originated Entries Detail--Customer and
         Depository Financial Institution
        ACH Volume Summary by SEC Code--Customer
        ACH Customer Transaction Activity
        ACH Death Notification
        ACH International (IAT)
        ACH Notification of Change
        ACH Payment Data Information File
        ACH Remittance Advice Detail
        ACH Remittance Advice Summary
        ACH Return Item Report and File
        ACH Return Ratio
        ACH Social Security Beneficiary
        ACH Originator Setup
        ACH Report Delivery via FedLine Solution
        On Demand Report Surcharge \71\..............  $1.00.
    Monthly Package Fee (counts reflect reports
     generated as well as delivered via a FedLine
     Solution):
        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.
        For 2,501 through 3,500 reports..............  $640.00.
        For 3,501 through 4,500 reports..............  $820.00.
        For 4,501 through 5,500 reports..............  $995.00.
        For 5,501 through 7,000 reports..............  $1,225.00.
        For 7,001 through 8,500 reports..............  $1,440.00.
        For 8,501 through 10,000 reports.............  $1,650.00.
        For more than 10,000 reports.................  $1,800.00.
    Premier reports (per report generated): \71\
        ACH Volume Summary by SEC Code Report--
         Depository Financial Institution:
            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.
        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.
        ACH Originated Batch Report (monthly):
            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.
        ACH Originated Batch Report (daily):
            Scheduled Report.........................  $0.65.
            On Demand Surcharge......................  $1.00.
    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 and Discounts:
    Monthly fee (per RTN):
        FedACH Participation Fee \72\................  $65.00.
        SameDay Service Origination Participation Fee  $10.00.
         \73\.
        FedACH Settlement Fee \74\...................  $55.00.
        FedACH Information File Extract Fee..........  $150.00.
        IAT Output File Sort Fee.....................  $75.00.
        Fixed Participation Fee--Automated NOCs \75\.  $5.00.
    Non-Electronic Input/Output fee: \76\
        CD/DVD (CD or DVD)...........................  $50.00.
        Paper (file or report).......................  $50.00.
    Fees and Credits Established by NACHA: \77\
        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)  $22.00.
        NACHA Admin Network fee (per entry)..........  $0.000185.
FedGlobal[supreg] ACH Payments: \78\
    Fixed Monthly Fee (per RTN): \79\
        Monthly origination volume more than 500       $185.00.
         items.
        Monthly origination volume between 161 and     $60.00.
         500 items.
        Monthly origination volume less than 161       $20.00.
         items.
    Per-item Origination Fee for Monthly Volume more
     than 500 Items (surcharge): \80\
        Canada service...............................  $0.50.
        Mexico service...............................  $0.55.

[[Page 66420]]

 
        Panama service...............................  $0.60.
        Europe service...............................  $1.13.
    Per-item Origination Fee for Monthly Volume
     between 161 and 500 items (surcharge): \80\
        Canada service...............................  $0.75.
        Mexico service...............................  $0.80.
        Panama service...............................  $0.85.
        Europe service...............................  $1.38.
    Per-item Origination Fee for Monthly Volume less
     than 161 items (surcharge): \80\
        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 \81\.........  $0.99
                                                        (surcharge).
            Trace of item at receiving gateway.......  $5.50.
            Trace of item not at receiving gateway...  $7.00.
        Mexico service:
            Return received from Mexico \81\.........  $0.91
                                                        (surcharge).
            Item trace...............................  $13.50.
            Foreign currency to foreign currency       $0.67
             (F3X) item originated to Mexico \80\.      (surcharge).
        Panama service:
            Return received from Panama \81\.........  $1.00
                                                        (surcharge).
            Item trace...............................  $7.00.
            NOC......................................  $0.72.
        Europe service:
            F3X item originated to Europe \80\.......  $1.25
                                                        (surcharge).
            Return received from Europe \81\.........  $1.35
                                                        (surcharge).
            Item trace...............................  $7.00.
Exception Resolution Service:
    Fixed Fee per RTN \82\ (monthly):
        Self-Managed Cases...........................  $10.00.
        Agent-Managed Cases..........................  $10.00.
        Offline Service Participant..................  $60.00.
    Variable Case Open Monthly Fees per Case (applies
     to self-managed and agent-managed cases only at
     the parent RTN): \83\
        1-50 cases...................................  $1.25.
        51-100 cases.................................  $1.00.
        101-500 cases................................  $0.75.
        501-1,000 cases..............................  $0.50.
        1,001-5,000 cases............................  $0.25.
        5,001-10,000 cases...........................  $0.20.
        10,001-99,999,999 cases......................  $0.10.
    Offline Service Participant--Case Fees: \84\
        Case Open Fee................................  $5.00.
        Case Response Fee............................  $5.00.
------------------------------------------------------------------------

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

    \73\ This surcharge is assessed to any RTN that originates at 
least one item meeting the criteria for same-day processing and 
settlement in a given month.
    \74\ The fee is applied to any RTN with activity during a month, 
including RTNs 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. This fee does not apply 
to RTNs that use the Reserve Banks for only U.S. government 
transactions.
    \75\ Fee will be assessed only when automated NOCs are 
generated.
    \76\ Limited services are offered in contingency situations.
    \77\ The fees and credits listed are collected from the ODFI and 
credited to NACHA (admin network) or to the RDFI (same-day entry and 
unauthorized entry) in accordance with the ACH Rules.
    \78\ The international fees and surcharges vary from country to 
country as these are negotiated with each international gateway 
operator.
    \79\ A single monthly fee based on total FedGlobal ACH Payments 
origination volume.
    \80\ This per-item surcharge is in addition to the standard 
domestic origination fees listed in this fee schedule.
    \81\ This per-item surcharge is in addition to the standard 
domestic receipt fees listed in this fee schedule.
    \82\ Any financial institution that opens at least 1,000 
Exception Resolution Service cases in a given month will receive a 
50% discount on its Exception Resolution Service fixed fees for that 
month.
    \83\ The per case fees are rolled up to the parent RTN, such 
that a customer that opens a total of 100 cases per month under two 
separate RTNs would pay a total of $112.50 ($1.25 for the first 50 
cases and $1.00 for the next 50 cases) in addition to the fixed 
fees.
    \84\ A depository institution may enroll in the Service as an 
offline Service Participant by designating the Reserve Bank to 
access and use the functionality of the application on behalf of the 
Offline Participant.

[[Page 66421]]



    Fedwire Funds and National Settlement Services 2020 Fee Schedule
  [Effective January 2, 2020. Bold indicates changes from 2019 prices]
------------------------------------------------------------------------
                                                                Fee
------------------------------------------------------------------------
                          Fedwire Funds Service
------------------------------------------------------------------------
Monthly Participation Fee...............................          $95.00
Basic volume-based pre-incentive transfer fee
 (originations and receipts)--per transfer for:
    Tier 1: The first 14,000 transfers per month........           0.840
    Tier 2: Additional transfers up to 90,000 per month.           0.250
    Tier 3: Every transfer over 90,000 per month........           0.165
Volume-based transfer fee with the incentive discount
 (originations and receipts)--per eligible transfer for:
 \85\
    Tier 1: The first 14,000 transfers per month........           0.168
    Tier 2: Additional transfers up to 90,000 per month.           0.050
    Tier 3: Every transfer over 90,000 per month........           0.033
Surcharge for Offline Transfers (Originations and                  65.00
 Receipt)...............................................
Surcharge for End-of-Day Transfer Originations \86\.....            0.26
Monthly FedPayments Manager Import/Export fee \87\......           50.00
Surcharge for high-value payments:
    >$10 million........................................            0.14
    >$100 million.......................................            0.36
Surcharge for Payment Notification:
    Origination Surcharge \88\..........................            0.01
    Receipt Volume \88 89\..............................             N/A
Delivery of Reports--Hard Copy Reports to On-Line                  50.00
 Customers..............................................
Special Settlement Arrangements (charge per settlement            150.00
 day) \90\..............................................
------------------------------------------------------------------------
                       National Settlement Service
------------------------------------------------------------------------
Basic:
    Settlement Entry Fee................................            1.50
    Settlement File Fee.................................           30.00
Surcharge for Offline File Origination \91\.............           45.00
Minimum Monthly Fee \92\................................           60.00
------------------------------------------------------------------------

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

    \85\ 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: $0.672 for transfers up to 14,000; $0.200 
for transfers 14,001 to 90,000; and $0.132 for transfers over 
90,000.
    \86\ This surcharge applies to originators of transfers that are 
processed by the Reserve Banks after 5:00 p.m. eastern time.
    \87\ 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.
    \88\ Payment Notification and End-of-Day Origination surcharges 
apply to each Fedwire funds transfer message.
    \89\ Provided on billing statement for informational purposes 
only.
    \90\ This charge is assessed to settlement arrangements that use 
the Fedwire Funds Service to effect the settlement of interbank 
obligations (as opposed to those that use the National Settlement 
Service). With respect to such special settlement arrangements, 
other charges may be assessed for each funds transfer into or out of 
the accounts used in connection with such arrangements.
    \91\ 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.
    \92\ Any settlement arrangement that accrues less than $60 
during a calendar month will be assessed a variable amount to reach 
the minimum monthly fee.

 Fedwire Securities Service 2020 Fee Schedule (Non-Treasury Securities)
  [Effective January 2, 2020. Bold indicates changes from 2019 prices]
------------------------------------------------------------------------
                                                                Fee
------------------------------------------------------------------------
Basic Transfer Fee: \93\
    Transfer or reversal originated or received.........           $0.98
Surcharge: \94\
    Offline origination & receipt surcharge.............           80.00
Monthly Maintenance Fees: \93\
    Account maintenance (per account)...................           57.50
    Issue maintenance (per issue/per account)...........            0.77
Claims Adjustment Fee \93 95\...........................            1.00
GNMA Serial Note Stripping or Reconstitution Fee \96\...            9.00
Joint Custody Origination Surcharge \93 97\.............           46.00
Delivery of Reports--Hard Copy Reports to On-Line                  50.00
 Customers \93\.........................................
------------------------------------------------------------------------

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

    \93\ These fees are set by the Federal Reserve Banks.
    \94\ This surcharge is set by the Federal Reserve Banks. It is 
in addition to any basic transfer or reversal fee.
    \95\ The Federal Reserve Banks offer an automated claim 
adjustment process only for Agency mortgage-backed securities.
    \96\ This fee is set by and remitted to the Government National 
Mortgage Association (GNMA).
    \97\ The Federal Reserve Banks charge participants a Joint 
Custody Origination Surcharge for both Agency and Treasury 
securities.

[[Page 66422]]



                        FedLine 2020 Fee Schedule
  [Effective January 2, 2020. Bold indicates changes from 2019 prices]
------------------------------------------------------------------------
                                                            Fee
------------------------------------------------------------------------
                FedComplete Packages (monthly) 98 99 100
------------------------------------------------------------------------
FedComplete 100A Plus...........................  $825.00.
includes:
    FedLine Advantage Plus package
    FedLine subscriber 5-pack
    Check Participation Fee
    7,500 FedForward transactions
    46 FedForward Cash Letter items
    70 FedReturn transactions
    14,000 FedReceipt[supreg] transactions
    35 Fedwire Funds origination transfers
    35 Fedwire Funds receipt transfers
    Fedwire monthly participation fee
    1,000 FedACH origination items
    FedACH monthly minimum fee--Forward
     Origination
    7,500 FedACH receipt items
    FedACH monthly minimum fee--Receipt
    10 FedACH web-originated return/NOC
    500 FedACH addenda record originated
    1,000 FedACH addenda record received
    100 FedACH SameDay Service origination items
    FedACH Participation Fee
    FedACH settlement fee
    FedACH SameDay Service origination
     participation fee
FedComplete 100A Premier........................  $900.00.
includes:
    FedLine Advantage Premier package
    Volumes included in the FedComplete 100A
     Plus package
FedComplete 100C Plus...........................  $1,375.00.
includes:
    FedLine Command Plus package
    Volumes included in the FedComplete 100A
     Plus package
FedComplete 200A Plus...........................  $1,350.00.
includes:
    FedLine Advantage Plus package
    FedLine subscriber 5-pack
    Check Participation Fee
    25,000 FedForward transactions
    46 FedForward Cash Letter items
    225 FedReturn transactions
    25,000 FedReceipt[supreg] transactions
    100 Fedwire Funds origination transfers
    100 Fedwire Funds receipt transfers
    Fedwire monthly participation fee
    2,000 FedACH origination items
    FedACH monthly minimum fee--Forward
     Origination
    25,000 FedACH receipt items
    FedACH monthly minimum fee--Receipt
    20 FedACH web-originated return/NOC
    750 FedACH addenda record originated
    1,500 FedACH addenda record received
    200 FedACH SameDay Service origination items
    FedACH Participation Fee
    FedACH settlement fee
    FedACH SameDay Service origination
     participation fee
FedComplete 200A Premier........................  $1,425.00.
includes:
    FedLine Advantage Premier package
    Volumes included in the FedComplete 200A
     Plus package
FedComplete 200C Plus...........................  $1,900.00.
includes:
    FedLine Command Plus package
    Volumes included in the FedComplete 200A
     Plus package
FedComplete Excess Volume and Receipt Surcharge:
 \101\
    FedForward \102\............................  $0.037/item.
    FedReturn...................................  $0.8200/item.
    FedReceipt..................................  $0.00005/item.
    Fedwire Funds Origination...................  $0.8400/item.
    Fedwire Funds Receipt.......................  $0.084/item.
    FedACH Origination..........................  $0.0035/item.
    FedACH Receipt..............................  $0.00035/item.
FedComplete credit adjustment...................  various.
FedComplete debit adjustment....................  various.
------------------------------------------------------------------------
               FedLine Customer Access Solutions (monthly)
------------------------------------------------------------------------
FedMail \103\...................................  $85.00.
includes:

[[Page 66423]]

 
    FedMail access channel
    Check FedFoward, Fed Return and FedReceipt
     Services
    Check Adjustments
    FedACH Download Advice and Settlement
     Information
    Fedwire Funds Offline Advices
    Daily Statement of Account (Text)
    Daylight Overdraft Reports
    Monthly Statement of Service Charges (Text)
    Electronic Cash Difference Advices
FedLine Exchange \103\..........................  $40.00.
includes:
    E-Payments Directory (via manual download)
FedLine Exchange Premier \103\..................  $125.00.
includes:
    FedLine Exchange package
    E-Payments Directory (via automated
     download)
FedLine Web \104\...............................  $110.00.
includes:
    FedLine Web access channel
    Services included in the FedLine Exchange
     package
    Check FedForward, FedReturn and FedReceipt
     services
    Check Adjustments
    FedACH Derived Returns and NOCs
    FedACH File, Batch and Item Detail
     Information
    FedACH Download Advice
    FedACH Settlement Information
    FedACH Customer Profile Information
    FedACH Returns Activity Statistics
    FedACH Risk RDFI Alert Service
    FedACH Risk Returns Reporting Service
    FedACH Exception Resolution Service
    FedCash[supreg] Services
FedLine Web Plus \104\..........................  $160.00.
includes:
    Services included in the FedLine Web package
    FedACH Risk Origination Monitoring Service
    FedACH FedPayments Reporter Service
    Check Large Dollar Return
    Check FedImage Services
    Account Management Information (AMI)
    Daily Statement of Account (PDF, Text)
    Daylight Overdraft Reports
    Monthly Account Services (SCRD) File
    Monthly Statement of Service Charges (PDF,
     Text)
    E-Payments Routing Directory (via automated
     download)
FedLine Advantage \104\.........................  $415.00.
includes:
    FedLine Advantage access channel
    One VPN device
    Services included in the FedLine Web package
    FedACH File Transmission To/From Federal
     Reserve
    FedACH Request Output File Delivery
    FedACH View File Transmission and Processing
     Status
    Fedwire Originate and Receive Funds Transfer
    Fedwire Originate and Receive Securities
     Transfer
    National Settlement Service Services
    Check Large Dollar Return
    Check FedImage Services
    Account Management Information with Intra-
     Day Download Search File
    Daily Statement of Account (PDF, Text)
    Daylight Overdraft Reports
    Monthly Account Services (SCRD) File
    Monthly Statement of Service Charges (PDF,
     Text)
FedLine Advantage Plus \104\....................  $460.00.
includes:
    Services included in the FedLine Advantage
     package
    One VPN device
    FedACH Risk Origination Monitoring Service
    FedACH FedPayments Reporter Service
    Fedwire Funds FedPayments Manager Import/
     Export (less than or equal to 250 Fedwire
     transactions and one routing number per
     month)
    FedTransaction Analyzer[supreg] (less than
     250 or equal to Fedwire transactions and
     one routing number per month)
    E-Payments Routing Directory (via automated
     download)
FedLine Advantage Premier \104\.................  $570.00.
includes:
    FedLine Advantage Plus package
    Two VPN devices
    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)
FedLine Command Plus............................  $1,035.00.

[[Page 66424]]

 
includes:
    FedLine Command access channel
    Services included in the FedLine Advantage
     Plus package
    One VPN device
    Additional FedLine Command server
     certificates
    Fedwire Statement Services
    Fedwire Funds FedPayments Manager Import/
     Export
    FedTransaction Analyzer
    Intra-Day File with Transaction Details (up
     to six times daily)
    Statement of Account Spreadsheet File (SASF)
    Financial Institution Reconcilement Data
     (FIRD) File (machine readable)
FedLine Direct Plus (Legacy 256K) \105\.........  $5,500.00.
includes:
    FedLine Direct access channel
    One VPN device
    256K Dedicated WAN Connection
    Services included in the FedLine Command
     Plus package
    Two FedLine Direct server certificates
    Daylight Overdraft Reports
    Treasury Check Information System (TCIS)
FedLine Direct Plus \106\.......................  $5,500.00.
includes:
    FedLine Direct access channel
    One VPN device
    2 Mbps Dedicated WAN Connection
    Services included in the FedLine Command
     Plus package
    FedLine Direct server certificates
    Treasury Check Information System (TCIS)
    Dual Vendors
    FedLine Direct Contingency Solution
    Check 21 Services
FedLine Direct Premier (Legacy T1) \105\........  $7,500.00.
includes:
    FedLine Direct Plus package (legacy)
    T1 dedicated WAN connection
    Two VPN devices
FedLine Direct Premier \106\....................  $10,500.00.
includes:
    FedLine Direct Plus package (new)
    Two 2 Mbps dedicated WAN Connections
    One Network Diversity
    Two VPN devices
------------------------------------------------------------------------
                   A la carte options (monthly) \107\
------------------------------------------------------------------------
Electronic Access:
    FedMail--FedLine Exchange Subscriber 5-pack.  $15.00.
    FedLine Subscriber 5-pack (access to Web and  $80.00.
     Advantage).
    Additional FedLine Direct Certificate \108\.  $100.00.
    Additional VPNs \109\.......................  $100.00.
    Additional WAN connections \106\
        256K (Legacy) \105\.....................  $3,500.00.
        T1 (Legacy) \105\.......................  $3,500.00.
        2 Mbps..................................  $3,000.00.
    WAN Connection Upgrade
        10 Mbps \110\...........................  $1,700.00.
        30 Mbps \110\...........................  $3,000.00.
        50 Mbps \110\...........................  $4,000.00.
        100 Mbps \110\..........................  $7,000.00.
        200 Mbps \110\..........................  $11,000.00.
    FedLine International Setup (one-time fee)..  $5,000.00.
    FedLine Custom Implementation Fee \111\.....  various.
    Network Diversity...........................  $2,500.00.
    FedLine Direct Contingency Solution \112\...  $1,000.00.
    Check 21 Large File Delivery \113\..........  various.
    FedMail Email (for customers with FedLine     $40.00.
     Web and above) \114\.
    FedMail Fax \115\...........................  $150.00.
    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      $75.00.
     Codes) \116\.
    E-Payments Automated Download (6-20 Add'l     $150.00.
     Codes) \116\.
    E-Payments Automated Download (21-50 Add'l    $300.00.
     Codes) \116\.
    E-Payments Automated Download (51-100 Add'l   $500.00.
     Codes) \116\.
    E-Payments Automated Download (101-250 Add'l  $1,000.00.
     Codes) \116\.
    E-Payments Automated Download (>250 Add'l     $2,000.00.
     Codes) \116\.
Accounting Information Services (monthly):
    Cash Management System (CMS) Plus--Own
     report--up to six files with \117\
    no respondent/sub-account activity..........  $60.00.

[[Page 66425]]

 
    less than 9 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              $150.00.
     Reconcilement Data (FIRD) File \118\.
    Statement of Account Spreadsheet File \119\.  $150.00.
    Intra-day Download Search File (with AMI)     $150.00.
     \120\.
Other:
    Software Certification......................  $0.00 to $8,000.00.
    Vendor Pass-Through Fee.....................  various.
    Electronic Access Credit Adjustment.........  various.
    Electronic Access Debit Adjustment..........  various.
------------------------------------------------------------------------


    By order of the Board of Governors of the Federal Reserve 
System, November 26, 2019.
---------------------------------------------------------------------------

    \98\ FedComplete packages are all-electronic service options 
that bundle payment services with an access solution for one monthly 
fee.
    \99\ Packages with an ``A'' include the FedLine Advantage 
channel, and packages with ``C'' include the FedLine Command 
channel.
    \100\ FedComplete customers that use the email service would be 
charged the FedMail Email a la carte fee and for all FedMail-FedLine 
Exchange Subscriber 5-packs.
    \101\ Per-item surcharges are in addition to the standard fees 
listed in the applicable priced services fee schedules.
    \102\ FedComplete customers will be charged $4 for each 
FedForward cash letter over the monthly package threshold. This 
activity will appear under billing code 51998 in Service Area 1521 
on a month-lagged basis.
    \103\ 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.
    \104\ 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.
    \105\ Limited to installed base only. All customers with 256K or 
T1 connections will need to upgrade to a minimum 2Mbps Ethernet line 
speed connection associated with the FedLine Direct packages 
Effective May 1, 2020, package price will increase to $10,000 for 
FedLine Direct[supreg] Plus (Legacy 256K) and FedLine Direct Premier 
(Legacy T1). Effective August 1, 2020, package price will increase 
to $20,000 for FedLine Direct[supreg] Plus (Legacy 256K) and FedLine 
Direct Premier (Legacy T1).
    \106\ Early termination fees and/or expedited order fees may 
apply to all FedLine Direct packages and FedLine Direct a la carte 
options.
    \107\ These add-on services can be purchased only with a FedLine 
Solutions packages.
    \108\ Fee applies only to customers in a legacy FedLine Direct 
package. Server certificates are included in the monthly fee for 
customers in the new FedLine Direct packages.
    \109\ Additional VPNs are available for FedLine Advantage, 
FedLine Command, and FedLine Direct packages only.
    \110\ These upgrades are only available for the new FedLine 
Direct packages and the Add'l 2M WAN connection. Fee is in addition 
to the FedLine Direct package fees or additional WAN fees.
    \111\ The FedLine Custom Implementation Fee is $2,500 or $5,000 
based on the complexity of the setup.
    \112\ Fee only applies to customers in a legacy FedLine Direct 
package. This feature is included in the monthly fee for customers 
in the new FedLine Direct packages.
    \113\ Limited to installed base only. The fee currently ranges 
from $1,400 to $20,725 depending on the size, speed, and location of 
the connection. All customers will eventually need to upgrade to a 
minimum 2 Mbps Ethernet line speed connection with the associated 
FedLine Direct package. Effective January 2, 2020, fees will 
increase by 20.0 percent for Check 21 Large File Delivery. Effective 
May 1, 2020, fees will increase by 50.0 percent for Check 21 Large 
File Delivery. Effective August 1, 2020, fees will increase by 100.0 
percent for Check 21 Large File Delivery. To avoid compounding 
increases, the fee as of December 2019 will serve as the baseline 
for all 2020 price increases for any Check 21 Large File Delivery 
connection.
    \114\ Available only to customers with a priced FedLine package.
    \115\ Limited to installed base only.
    \116\ Five download codes are included at no cost in all Plus 
and Premier packages.
    \117\ Cash Management Service options are limited to plus and 
premier packages.
    \118\ 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.
    \119\ The Statement of Account Spreadsheet 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.
    \120\ The Intra-day Download Search File option is available for 
the FedLine Web Plus package. It is available for no extra fee in 
FedLine Advantage and higher packages.
---------------------------------------------------------------------------

Ann Misback,
Secretary of the Board.
[FR Doc. 2019-26228 Filed 12-3-19; 8:45 am]
BILLING CODE P