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Notice

Federal Reserve Bank Services: Notification of the 2021 Private Sector Adjustment Factor and 2021 Fee Schedules of Federal Reserve Priced Services and Electronic Access

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Start Preamble Start Printed Page 73037

AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Notification of 2021 private sector adjustment factor and fee schedules.

SUMMARY:

The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2021 of $16.4 million and the 2021 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 4, 2021.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

For questions regarding the fee schedules: David C. Mills, Associate Director, (202) 530-6265; Jason Kim, Financial Institution Policy Analyst, (202) 475-6665; Dean Friedberg, Financial Institution Policy Analyst, (202) 425-3525; Division of Reserve Bank Operations and Payment Systems. For questions regarding the PSAF: Casey Clark, Assistant Director, (202) 912-7978; Grace Milbank, Lead 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.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Private Sector Adjustment Factor, Priced Services Cost Recovery, and Overview of 2021 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 2010 through 2019, the Reserve Banks recovered 103.9 percent of their total expenses (including imputed costs) and targeted after-tax profits or return on equity (ROE) for providing priced services.[2]

The Board on July 21, 2020, announced its intent to maintain the current schedule of prices for most payment services that the Federal Reserve Banks provide to depository institutions (priced services) in 2021, in light of the uncertainties created by the COVID-19 pandemic and to support the business planning of users and providers of payment services.[3] Table 1 summarizes 2019 actual, 2020 estimated, and 2021 budgeted cost recovery rates for all priced services. Cost recovery is estimated to be 101.4 percent in 2020 and budgeted to be 98.7 percent in 2021.

Table 1—Aggregate Priced Services Pro Forma Cost and Revenue Performance a

[Dollars in millions]

YearRevenueTotal expenseNet income (ROE)Targeted ROERecovery rate after targeted ROE (%)
1 b2 c3 [1-2]4 d5 e f [1/(2+4)]
2019 (actual)$444.1$441.2$2.9$5.499.4
2020 (estimate)445.5433.412.15.9101.4
2021 (budget)438.4439.9−1.54.498.7
a Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding. Excludes amounts related to the development of the FedNow Service.
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).

Table 2 provides an overview of cost-recovery budgets, estimates, and performance for the 10-year period from 2010 to 2019, 2019 actual, 2020 budget, 2020 estimate, and 2021 budget by priced service.Start Printed Page 73038

Table 2—Priced Services Cost Recovery

[Percent]

Priced service2010-20192019 actual2020 budget a2020 estimate2021 budget b
All services103.999.4101.7101.498.7
Check109.0104.0104.3102.497.7
FedACH98.697.6100.697.697.4
Fedwire Funds and NSS102.297.3100.6105.1100.5
Fedwire Securities102.5100.3102.8101.9100.9
a The 2020 budget figures reflect the final budgets as approved by the Board in December 2019.
b The 2021 budget figures reflect preliminary budget information from the Reserve Banks. The Reserve Banks will submit final budget data to the Board in November 2020, for Board consideration in December 2020.

1. 2020 Estimated Performance—The Reserve Banks estimate that they will recover 101.4 percent of the costs of providing priced services in 2020, including total expense and targeted ROE, compared with a 2020 budgeted recovery rate of 101.7 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 $12.1 million, compared with the targeted ROE of $5.9 million. The Reserve Banks estimate that the Check Services, the Fedwire® Funds and National Settlement Services, and the Fedwire Securities Service will achieve full cost recovery; however, the Reserve Banks estimate that the FedACH® Service will not achieve full cost recovery in 2020. 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.[4] This investment is expected to enhance efficiency, the overall quality of operations, and the Reserve Banks' ability to offer additional services to depository institutions.

2. 2021 Private-Sector Adjustment Factor—The 2021 PSAF for Reserve Bank priced services is $16.4 million. This amount represents a decrease of $2.5 million from the 2020 PSAF of $18.9 million. This decrease is primarily the result of a decrease in imputed return on equity and sales tax.

3. 2021 Projected Performance—The Reserve Banks project a priced services cost recovery rate of 98.7 percent in 2021, with a net loss of $1.5 million and targeted ROE of $4.4 million. The Reserve Banks project that the price changes will result in a 2.7 percent average price increase for Check Services customers. The Reserve Banks project that each of the individual service lines, other than Check Services and FedACH, will fully recover their costs for 2021. The Check Services' underrecovery projections are largely driven by an anticipated decline in check volumes. FedACH is projected to underrecover because of the ongoing technology modernization project. The Fedwire Funds Service and Fedwire Securities Service are projected to recover more than 100 percent of costs in 2021. Check Services is projected to fully recover costs in the long run.[5] Although FedACH is not budgeted to fully recover its costs in 2021, the Reserve Banks expect to fully recover costs in the long run once the modernization project is complete.

The primary risks to the Reserve Banks' ability to achieve their targeted cost recovery rates are unanticipated volume and revenue reductions—which may be more likely than in other years because of the COVID-19 pandemic—and the potential for cost overruns from new and ongoing improvement initiatives such as the technology modernization for FedACH. In light of these risks, the Reserve Banks will continue to monitor the impacts of the pandemic and refine their business and operational strategies, which may include managing costs and adjusting prices as appropriate.

4. 2021 Pricing—With the exception of an increase to the fixed monthly Check 21 participation fee, the Reserve Banks will keep prices at existing levels for all existing priced services fees in 2021. The following summarizes the Reserve Banks' changes in fee schedules for priced services in 2021:

Check

The Reserve Banks will increase the fixed monthly Check 21 participation fee per parent customer from a fixed $25 to a new tiered pricing structure with fees ranging from $40 to $135.

FedACH

The Reserve Banks will keep prices at existing levels for all existing priced FedACH products.

Fedwire Funds

The Reserve Banks will keep prices at existing levels for all existing priced Fedwire Funds products.

National Settlement Service (NSS)

The Reserve Banks will keep prices at existing levels for all existing priced NSS products.

Fedwire Securities

The Reserve Banks will keep prices at existing levels for all the existing priced Fedwire Securities products.

FedLine® Solutions

The Reserve Banks will keep prices at existing levels for all the existing priced FedLine Solutions products.

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

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 Start Printed Page 73039amortization expenses of each asset class. The priced portion of actual Federal Reserve liabilities consists of postemployment and postretirement benefits, accounts payable, and other liabilities. The priced portion of the actual net pension asset or liability is also included on the balance sheet.[7]

The equity financing rate is the targeted ROE produced by the capital asset pricing model (CAPM). In the CAPM, the required rate of return on a firm's equity is equal to the return on a risk-free asset plus a market risk premium. The risk-free rate is based on 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 maintain equity of at least 5 percent of total assets and 10 percent of risk-weighted assets.[8] Any equity imputed that exceeds the amount needed to fund the priced services' assets and meet the minimum equity constraints is offset by a reduction in imputed long-term debt. When imputed equity is larger than what can be offset by imputed debt, the excess is imputed as investments in Treasury securities; income imputed on these investments reduces the PSAF.

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.[9] 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 2021 budget, six months of current operating expenses would be $47.5 million. In 2021, $26.6 million of equity was imputed to meet the FDIC capital requirements. No additional equity was necessary to meet the PSR policy requirement.

Effective tax rate. Like the imputed capital structure, the effective tax rate is calculated based on data from U.S. publicly traded firms. The tax rate is the mean of the weighted average rates of the U.S. publicly traded firm market over the past five 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 2021 PSAF is $16.4 million, compared with $18.9 million in 2020. The decrease of $2.5 million is attributable to a net $2.0 million decrease in the cost of capital and a $0.5 million decrease in sales tax. The net $2.0 million decrease in cost of capital resulted from an incremental $1.0 million decrease in the return on equity imputed to satisfy the FDIC requirements for a well-capitalized institution and a $1.0 million decrease in return on imputed equity necessary for PSR policy compliance.

The PSAF expense of $16.4 million, detailed in table 5, reflects $6.6 million for BOG expense, $5.9 million for capital funding, and $3.9 million in sales tax expense.

As shown in table 3, 2021 total assets of $790.6 million decreased by $50.6 million from 2020. The net decrease in total assets reflects an $88.8 million decrease in short-term assets and imputed investments partially offset by a $38.2 million increase in long-term assets.

The decrease in the short-term assets is primarily driven by a $67.0 million decrease in items in process of collection resulting from a reduction in high balances in the value of foreign transactions. The remaining net decreases in short-term assets reflect a $38.2 million decrease in 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, partially offset by a $16.5 million increase in imputed investments in Fed Funds.

The net long-term asset increase of $38.2 million primarily consists of a $66.8 million increase in the net pension asset partially offset by a Start Printed Page 73040combined $23.6 million decrease in Premises and in Leasehold improvements and long-term prepayments. The net pension asset increase reflects higher plan contributions over the past two years. The decreases in Premises and in 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 capital structure of the 2021 pro forma balance sheet, provided in table 4, is composed of equity of $51.8 million, or 10.0 percent of the 2021 risk-weighted assets detailed in table 6, and $9.1 million of long-term debt. The 2021 capital structure differs from that of 2020, which was composed of $56.0 million of equity and no long-term debt. Provided in table 5, the 2021 initially imputed equity required to fund assets and meet the publicly traded firm model capital requirements is $25.2 million. Long-term debt of $35.7 million was imputed at the observed market ratio of 58.7 percent. To meet the FDIC capital requirements for a well-capitalized institution, $26.6 million of imputed long-term debt was substituted for equity, and no additional equity was imputed. The resulting $51.8 million total level of equity was sufficient to satisfy the $47.5 million equity requirement for the PSR policy requirements.

The net Accumulated Other Comprehensive loss is $628.2 million, compared with $625.2 million in 2020. The slight decrease is primarily attributable to a lower priced percentage and lower tax rate partially offset by a lower 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.

Start Printed Page 73041

Start Printed Page 73042

Start Printed Page 73043

C. Check Service—Table 7 shows the 2019 actual, 2020 estimated, and 2021 budgeted cost-recovery performance for the commercial check service.

Start Printed Page 73044

Table 7—Check Service Pro Forma Cost and Revenue Performance

[Dollars in millions]

YearRevenueTotal expenseNet income (ROE)Targeted ROERecovery rate after targeted ROE (%)
123 [1-2]45 [1/(2+4)]
2019 (actual)$128.2$121.9$6.3$1.4104.0
2020 (estimate)114.4110.44.01.3102.4
2021 (budget)107.1108.5−1.51.197.7

1. 2020 Estimate—The Reserve Banks estimate that the check service will recover 102.4 percent of total expenses and targeted ROE, compared with a 2020 budgeted recovery rate of 104.3 percent.

Through August, total commercial forward and total commercial return check volumes were 14.9 percent and 24.6 percent lower, respectively, than they were during the same period last year. Consistent with anticipated fourth-quarter declines and combined with the uncertainties created by COVID-19, for full-year 2020, the Reserve Banks estimate that their total forward check volume will decline 13.6 percent (compared with a budgeted decline of 8.9 percent) and their total return check volume will decline 27.1 percent (compared with a budgeted decline of 8.7 percent) from 2019 levels.[23] The Reserve Banks expect that check volumes will continue to decline, although uncertainty remains as to the rate of decline into 2021. In particular, the Reserve Banks' check volumes are expected to decline because of 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 continued realization of operational efficiencies.

2. 2021 Pricing—The Reserve Banks expect Check Services to recover 97.7 percent of total expenses and targeted ROE in 2021. The Reserve Banks project revenue to be $107.1 million, a decline of 6.4 percent from the 2020 estimate. Total expenses for Check Services are projected to be $108.5 million, a decrease of $1.9 million, or 1.7 percent, from 2020 expenses, primarily because of reduced operating costs.

The Reserve Banks will increase the fixed monthly participation fee and introduce a new tiered pricing structure. The tier structure will align with the structure and volume thresholds of the existing FedForward® Standard Endpoint Tier Listing. In light of the ongoing volume declines, the changes are intended to continue to support revenue stability through fixed fees while minimizing the impact of fee increases on smaller institutions, taking into account higher network capacity costs associated with higher volumes from larger institutions. Table 8 shows the 2021 tiered participation fees.

Table 8—Check 21 Participation Fee Structure

Tier 24Monthly fee
1$135.00
290.00
360.00
440.00

The primary risks to the Reserve Banks' ability to achieve budgeted 2021 cost recovery for Check Services include greater-than-expected declines in check volume due to the general reduction in check writing and competition from correspondent banks, aggregators, and direct exchanges, which would result in lower-than-anticipated revenue.

D. FedACH Service—Table 9 shows the 2019 actual, 2020 estimate, and 2021 budgeted cost-recovery performance for the commercial FedACH service.

Table 9—FedACH Service Pro Forma Cost and Revenue Performance

[Dollars in millions]

YearRevenueTotal expenseNet income (ROE)Targeted ROERecovery rate after targeted rate ROE (%)
123 [1-2]45 [1/(2+4)]
2019 (actual)$153.1$154.8$−1.7$2.097.6
2020 (estimate)158.1160.2−2.11.997.6
2021 (budget)159.6162.3−2.71.697.4

1. 2020 Estimate—The Reserve Banks estimate that the FedACH service will recover 97.6 percent of total expenses and targeted ROE, compared with a 2020 budgeted recovery rate of 100.6 percent.

Through August, FedACH commercial origination and receipt volume was 4.6 percent higher than it was during the same period last year. For full-year 2020, the Reserve Banks estimate that FedACH commercial origination and Start Printed Page 73045receipt volume will increase 4.8 percent from 2019 levels, compared with a 2020 budgeted increase of 4.1 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 2020, the Reserve Banks are expected to fully recover FedACH costs following the finalization of the FedACH technology modernization project.

2. 2021 Pricing—The Reserve Banks expect the FedACH service to recover 97.4 percent of total expenses and targeted ROE in 2021. The Reserve Banks project revenue to be $159.6 million, an increase of 0.9 percent from the 2020 estimate. Total expenses are projected to be $162.3 million, an increase of 1.3 percent from 2020 expenses.

The Reserve Banks will not change existing FedACH fees. This approach is consistent both with a multiyear strategy of providing price stability for customers over the period of modernizing the FedACH processing platform and the more recent uncertainties due to COVID-19. Given the continued costs associated with the FedACH technology modernization project, the Reserve Banks project to under recover costs in 2021 at 97.4 percent. Following implementation of the FedACH technology modernization, the Reserve Banks expect to fully recover costs related to the provision of FedACH services.

The primary risks to the Reserve Banks' ability to achieve budgeted 2021 cost recovery for the FedACH service are unanticipated cost overruns associated with the FedACH technology modernization project and unanticipated volume reductions due to economic conditions.

E. Fedwire Funds and National Settlement Services—Table 10 shows the 2019 actual, 2020 estimate, and 2021 budgeted cost-recovery performance for the Fedwire Funds and National Settlement Services.

Table 10—Fedwire Funds and National Settlement Services Pro Forma Cost and Revenue Performance

[Dollars in millions]

YearRevenueTotal expenseNet income (ROE)Targeted ROERecovery rate after targeted ROE (%)
123 [1-2]45 [1/(2+4)]
2019 (actual)$135.6$137.7$−2.1$1.697.3
2020 (estimate)144.3134.99.42.4105.1
2021 (budget)145.7143.52.11.4100.5

1. 2020 Estimate—The Reserve Banks estimate that the Fedwire Funds and National Settlement Services will recover 105.1 percent of total expenses and targeted ROE, compared with a 2020 budgeted recovery rate of 100.6 percent.

Through August, Fedwire Funds Service online volume was 6.8 percent higher than it was during the same period last year. For full-year 2020, the Reserve Banks estimate that Fedwire Funds Services online volume will increase 5.4 percent from 2019 levels, compared with the 1.0 percent volume decrease that had been budgeted. Through August, the National Settlement Service (NSS) settlement file volume was 7.2 percent lower than it was during the same period last year, and settlement entry volume was 0.2 percent higher. For the full year, the Reserve Banks estimate that settlement file volume will decrease 5.3 percent (slightly more than the budgeted decrease of 4.3 percent) and settlement entry volume will increase 0.7 percent from 2019 levels (compared with a budgeted 0.7 percent decrease).

2. 2021 Pricing—The Reserve Banks expect the Fedwire Funds and National Settlement Services to recover 100.5 percent of total expenses and targeted ROE. Revenue is projected to be $145.7 million, an increase of 1.0 percent from the 2020 estimate. The Reserve Banks project total expenses to be roughly $8.6 million higher than 2020.The Reserve Banks will not change existing Fedwire Funds and National Settlement Service fees for 2021. This approach is consistent with the Reserve Banks' 2021 strategy of providing price stability for customers in light of uncertainties due to COVID-19.

The primary risk to the Reserve Banks' ability to achieve budgeted 2021 cost recovery for the Fedwire Funds and National Settlement Service is higher-than-anticipated operating costs associated with technology and resiliency initiatives.

F. Fedwire Securities Service—Table 11 shows the 2019 actual, 2020 estimate, and 2021 budgeted cost-recovery performance for the Fedwire Securities Service.[25]

Start Printed Page 73046

Table 11—Fedwire Securities Service Pro Forma Cost and Revenue Performance

[Dollars in millions]

YearRevenueTotal expenseNet income (ROE)Targeted ROERecovery rate after targeted ROE (%)
123 [1-2]45 [1/(2+4)]
2019 (actual)$27.1$26.7$0.4$0.3100.3
2020 (estimate)28.727.90.80.3101.9
2021 (budget)26.125.50.50.3100.9

1. 2020 Estimate—The Reserve Banks estimate that the Fedwire Securities Service will recover 101.9 percent of total expenses and targeted ROE, compared with a 2020 budgeted recovery rate of 102.8 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 50.9 percent higher than it was during the same period last year. For full-year 2020, the Reserve Banks estimate that Fedwire Securities Service online agency transfer volume will increase 38.3 percent from 2019 levels, compared with a budgeted increase of 3.4 percent. The volatility in online agency transfer volume is attributed to a combination of uncertainties generated by COVID-19, and the low interest rate environment spurring incentives to refinance mortgages.

For full-year 2020, volumes for two of the top three Fedwire Securities' largest revenue-generating services—account maintenance and issue maintenance—are expected to decline from 2019 levels. Through August, account maintenance volume was 3.6 percent lower than it was during the same period last year. For full-year 2020, the Reserve Banks estimate that account maintenance volume will decline 3.6 percent from 2019 levels, compared with a budgeted decline of 2.1 percent. Through August, the number of agency issues maintained was 3.3 percent lower than it was during the same period last year. For full-year 2020, the Reserve Banks estimate that the number of agency issues maintained will decline 3.5 percent from 2019 levels, compared with a budgeted decline of 1.0 percent.

2. 2021 Pricing—The Reserve Banks expect the Fedwire Securities Service to recover 100.9 percent of total expenses and targeted ROE in 2021. Revenue is projected to be $26.1 million, a decrease of 9.05 percent from the 2020 estimate. The Reserve Banks also project that 2021 expenses will decrease by $2.4 million from the 2020 estimate.

The Reserve Banks will not change Fedwire Securities Service fees for 2021. This approach is consistent with the Reserve Banks' 2021 strategy of providing price stability for customers in light of uncertainties due to COVID-19.

The primary risk to the Reserve Banks' ability to achieve budgeted 2021 cost recovery for these services is higher than anticipated operating costs associated with technology and resiliency initiatives. In addition, market volatility related to COVID-19 could introduce further uncertainty in forecasting revenue associated with online agency transfers.

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.[26] 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®.[27] The Reserve Banks bundle these channels into eleven FedLine packages, described below, that are supplemented by a number of premium (or à 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.

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.

The Reserve Banks will not change FedLine Solutions packages for 2021. This approach is consistent with the Reserve Banks' 2021 strategy of providing price stability for customers in light of uncertainties due to COVID-19.

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.” [28] Under this policy, the Board assesses Start Printed Page 73047whether 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 2021 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 Reserve Banks may experience overrecovery or underrecovery in the short run because of the unpredictability of COVID-19 and its implications for volumes. Broadly, holding prices flat offers price stability for customers facing unique challenges in 2021 and provides for full cost recovery over the long run.

III. 2021 Fee Schedules

FedACH Service 2021 Fee Schedule

[Effective January 4, 2021. Bold indicates changes from 2020 prices.]

Fee
FedACH minimum monthly fee:
Originating depository financial institution (ODFI) 29$50.00.
Receiving depository financial institution (RDFI) 30$40.00.
Origination (per item or record):
Forward or return items$0.0035.
SameDay Service—forward item 31$0.0010 surcharge.
Addenda record$0.0015.
FedLine Web-originated returns and notification of change (NOC) 32$0.35.
Facsimile Exception Return/NOC 33$45.00.
SameDay Exception Return$45.00.
Automated NOC$0.20.
Volume discounts (based on monthly billed origination volume) 34 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) 35 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.
Start Printed Page 73048
Volume discounts:
Non-Premium Receivers 36 per item when volume is:
750,001 to 12,500,000 items per month 37$0.0017 discount.
more than 12,500,000 items per month 38$0.0019 discount.
Premium Receivers, Level One 39 per item when volume is:
750,001 to 1,500,000 items per month 37$0.0017 discount.
1,500,001 to 2,500,000 items per month 38$0.0017 discount.
2,500,001 to 12,500,000 items per month 38$0.0018 discount.
more than 12,500,000 items per month 38$0.0020 discount.
Premium Receivers, Level Two 40 per item when volume is:
750,001 to 1,500,000 items per month 37$0.0017 discount.
1,500,001 to 2,500,000 items per month 38$0.0017 discount.
2,500,001 to 12,500,000 items per month 38$0.0019 discount.
more than 12,500,000 items per month 38$0.0021 discount.
FedACH Bundled Package Pricing Discount:
Monthly Bundled Service Package Discount 41$20.00 discount.
FedACH Risk® Management Services: 42
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.
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® 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 43$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): 43
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.
Start Printed Page 73049
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 44$65.00.
SameDay Service Origination Participation Fee 45$10.00.
FedACH Settlement Fee 46$55.00.
FedACH Information File Extract Fee$150.00.
IAT Output File Sort Fee$75.00.
Fixed Participation Fee—Automated NOCs 47$5.00.
Non-Electronic Input/Output fee: 48
CD/DVD (CD or DVD)$50.00.
Paper (file or report)$50.00.
Fees and Credits Established by NACHA: 49
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® ACH Payments: 50
Fixed Monthly Fee (per RTN): 51
Monthly origination volume more than 500 items$185.00.
Monthly origination volume between 161 and 500 items$60.00.
Monthly origination volume less than 161 items$20.00.
Per-item Origination Fee for Monthly Volume more than 500 Items (surcharge): 52
Canada service$0.50.
Mexico service$0.55.
Panama service$0.60.
Europe service$1.13.
Per-item Origination Fee for Monthly Volume between 161 and 500 items (surcharge): 52
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): 52
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 53$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 53$0.91 (surcharge).
Item trace$13.50.
Foreign currency to foreign currency (F3X) item originated to Mexico 52$0.67 (surcharge).
Panama service:
Return received from Panama 53$1.00 (surcharge).
Item trace$7.00.
NOC$0.72.
Europe service:
F3X item originated to Europe 52$1.25 (surcharge).
Return received from Europe 53$1.35 (surcharge).
Item trace$7.00.
Start Printed Page 73050
Exception Resolution Service:
Fixed Fee per RTN 54 (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): 55
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: 56
Case Open Fee$5.00.
Case Response Fee$5.00

Fedwire Funds and National Settlement Services 2021 Fee Schedule

[Effective January 4, 2021. Bold indicates changes from 2020 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 month0.250
Tier 3: Every transfer over 90,000 per month0.165
Volume-based transfer fee with the incentive discount (originations and receipts)—per eligible transfer for: 57
Tier 1: The first 14,000 transfers per month0.168
Tier 2: Additional transfers up to 90,000 per month0.050
Tier 3: Every transfer over 90,000 per month0.033
Surcharge for Offline Transfers (Originations and Receipt)65.00
Surcharge for End-of-Day Transfer Originations 580.26
Monthly FedPayments Manager Import/Export fee 5950.00
Surcharge for high-value payments:
>$10 million0.14
>$100 million0.36
Surcharge for Payment Notification:
Origination Surcharge 600.01
Receipt Volume 60 61N/A
Delivery of Reports—Hard Copy Reports to On-Line Customers50.00
Special Settlement Arrangements (charge per settlement day) 62150.00
National Settlement Service
Basic:
Settlement Entry Fee1.50
Settlement File Fee30.00
Surcharge for Offline File Origination 6345.00
Minimum Monthly Fee 6460.00

Fedwire Securities Service 2021 Fee Schedule (Non-Treasury Securities)

[Effective January 4, 2021. Bold indicates changes from 2020 prices.]

Fee
Basic Transfer Fee: 65
Transfer or reversal originated or received$0.98
Surcharge: 66
Offline origination & receipt surcharge80.00
Monthly Maintenance Fees: 65
Account maintenance (per account)57.50
Issue maintenance (per issue/per account)$0.77
Claims Adjustment Fee 65 671.00
GNMA Serial Note Stripping or Reconstitution Fee 689.00
Start Printed Page 73051
Joint Custody Origination Surcharge 65 6946.00
Delivery of Reports—Hard Copy Reports to On-Line Customers 6550.00

FedLine 2021 Fee Schedule

[Effective January 4, 2021. Bold indicates changes from 2020 prices.]

Fee
FedComplete Packages (Monthly)70 71
FedComplete 100A Plus 72 includes$825.00.
FedLine Advantage Plus package
FedLine subscriber 5-pack
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$900.00.
FedLine Advantage Premier package
Volumes included in the FedComplete 100A Plus package
FedComplete 100C Plus includes$1,375.00.
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
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$1,425.00.
FedLine Advantage Premier package
Volumes included in the FedComplete 200A Plus package
FedComplete 200C Plus includes$1,900.00.
FedLine Command Plus package
Volumes included in the FedComplete 200A Plus package
FedComplete Excess Volume and Receipt Surcharge 73
FedForward 74$0.03700/item.
FedReturn$0.82000/item.
FedReceipt$0.00005/item.
Fedwire Funds Origination$0.84000/item.
Start Printed Page 73052
Fedwire Funds Receipt$0.08400/item.
FedACH Origination$0.00350/item.
FedACH Receipt$0.00035/item.
FedComplete credit adjustmentvarious.
FedComplete debit adjustmentvarious.
FedLine Customer Access Solutions (Monthly)
FedMail 75 includes$85.00.
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 75 includes$40.00.
E-Payments Directory (via manual download)
FedLine Exchange Premier 75 includes$125.00.
FedLine Exchange package
E-Payments Directory (via automated download)
FedLine Web 76 includes$110.00.
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 76 includes$160.00.
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 76 includes$415.00.
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 76 includes$460.00.
Services included in the FedLine Advantage package
One VPN device
FedACH Risk Origination Monitoring Service
Start Printed Page 73053
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 76 includes$570.00.
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 includes$1,035.00.
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 77 includes$5,500.00.
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 77 includes$10,500.00.
FedLine Direct Plus package (new)
Two 2 Mbps dedicated WAN Connections
One Network Diversity
Two VPN devices
A la Carte Options (Monthly)78
Electronic Access:
FedMail—FedLine Exchange Subscriber 5-pack$15.00.
FedLine Subscriber 5-pack (access to Web and Advantage)$80.00.
Additional VPNs 79$100.00.
Additional 2 Mbps WAN connection 77$3,000.00.
WAN Connection Upgrade:
10 Mbps 80$1,700.00.
30 Mbps 80$3,000.00.
50 Mbps 80$4,000.00.
100 Mbps 80$7,000.00.
200 Mbps 80$11,000.00.
FedLine International Setup (one-time fee)$5,000.00.
FedLine Custom Implementation Fee 81 various
Network Diversity$2,500.00.
FedMail Email (for customers with FedLine Web and above) 82$40.00.
FedMail Fax 83$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 Codes) 84$75.00.
E-Payments Automated Download (6-20 Add'l Codes) 84$150.00.
E-Payments Automated Download (21-50 Add'l Codes) 84$300.00.
E-Payments Automated Download (51-100 Add'l Codes) 84$500.00.
E-Payments Automated Download (101-250 Add'l Codes) 84$1,000.00.
E-Payments Automated Download (>250 Add'l Codes) 84$2,000.00.
Accounting Information Services (monthly):
Cash Management System (CMS) Plus—Own report—up to six files with: 85
no respondent/sub-account activity$60.00.
less than 9 respondent and/or sub-accounts$125.00.
10-50 respondent and/or sub-accounts$250.00.
Start Printed Page 73054
51-100 respondents and/or sub-accounts$500.00.
101-500 respondents and/or sub-accounts$750.00.
>500 respondents and/or sub-accounts$1,000.00.
End-of-Day Financial Institution Reconcilement Data (FIRD) File 86$150.00.
Statement of Account Spreadsheet File 87$150.00.
Intra-day Download Search File (with AMI) 88$150.00.
Other:
Software Certification$0.00 to $8,000.00.
Vendor Pass-Through Feevarious.
Electronic Access Credit Adjustmentvarious.
Electronic Access Debit Adjustmentvarious.
Start Signature

By order of the Board of Governors of the Federal Reserve System.

Ann Misback,

Secretary of the Board.

End Signature End Supplemental Information

Footnotes

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-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.

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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 2010 to 2019 results in cost recovery of 100.7 percent for the 10-year period. This measure of long-run cost recovery is also published in the Board's Annual Report.

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4.  The Reserve Banks have been engaged in a multiyear technology initiative to modernize the FedACH processing platform capabilities.

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5.  From 2012-2021, Check Service's projected 10-year average recovery rate is 108.6 percent.

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

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

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

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

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10.  Credit float, which represents the difference between items in process of collection and deferred credit items, occurs when the Reserve Banks debit the paying bank for transactions before providing credit to the depositing bank. Float is directly estimated at the service level.

11.  Consistent with the Board's PSR policy, the Reserve Banks' priced services will hold 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 $47.5 million. In 2021, 26.7 million of equity was imputed to meet the regulatory capital requirements.

12.  Includes the allocation of Board of Governors assets to priced services of $2.4 million for 2021 and $3.1 million for 2020.

13.  Includes the allocation of Board of Governors liabilities to priced services of $1.0 million for 2021 and $0.8 million for 2020.

14.  Includes an accumulated other comprehensive loss of $628.2 million for 2021 and $625.2 million for 2020, 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.

15.  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.

16.  If minimum equity constraints are not met after imputing equity based on the capital structure observed in the market, additional equity is imputed to meet these constraints. The long-term funding need was met by imputing long-term debt and equity based on the capital structure observed in the market (see tables 4 and 6). In 2021, the amount of imputed equity met the minimum equity requirements for risk-weighted assets.

17.  Equity adjustment offsets are due to a shift of long-term debt funding to equity in order to meet FDIC capital requirements for well-capitalized institutions.

18.  Additional equity in excess of that needed to fund priced services assets is offset by an asset balance of imputed investments in treasury securities.

19.  Imputed short-term debt and long-term debt are computed at table 4.

20.  The 2021 ROE is equal to a risk-free rate plus a risk premium (beta * market risk premium). The 2021 after-tax CAPM ROE is calculated as 0.13% + (1.0 * 8.36%) = 8.50%. Using a tax rate of 20.8%, the after-tax ROE is converted into a pretax ROE, which results in a pretax ROE of (8.50%/(1 − 20.8%)) = 10.72%. Calculations may be affected by rounding.

21.  If minimum equity constraints are not met after imputing equity based on all other financial statement components, additional equity is imputed to meet these constraints. Additional equity imputed to meet minimum equity requirements is invested solely in Treasury securities. The imputed investments are similar to those for which rates are available on the Federal Reserve's H.15 statistical release, which can be located at http://www.federalreserve.gov/​releases/​h15/​data.htm.

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

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23.  Total Reserve Bank forward check volumes are expected to be 3.8 billion in 2020. Total Reserve Bank return check volumes are expected to be 19.8 million in 2020.

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24.  This fee is charged to financial institutions that have received any Check 21 electronic or substitute check volume (forward or return) from the Reserve Banks during the month. The fee is applied at the parent financial institution level, as defined in the Reserve Banks' Global Customer Directory (GCD). Each financial institution's tier assignment is determined by the criteria described in the FedForward Standard Endpoint Tier Listing.

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25.  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.

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26.  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.

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27.  FedMail, FedLine Exchange, FedLine Web, FedLine Advantage, FedLine Command, and FedLine Direct are registered trademarks of the Federal Reserve Banks.

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28.  Federal Reserve Regulatory Service (FRRS) 9-1558.

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29.  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.

30.  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.

31.  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.

32.  The fee includes the item and addenda fees in addition to the conversion fee.

33.  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.

34.  Origination volumes at these levels qualify for a waterfall discount which includes all FedACH origination items.

35.  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.

36.  RDFIs receiving through FedACH less than 90 percent of their FedACH-originated items.

37.  This per-item discount is a reduction to the standard receipt fees listed in this fee schedule.

38.  Receipt volumes at these levels qualify for a waterfall discount which includes all FedACH receipt items.

39.  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.

40.  RDFIs receiving through FedACH at least 90 percent of all of their ACH items originated through any operator.

41.  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.

42.  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.

43.  Premier reports generated on demand are subject to the package/tiered fees plus a surcharge.

44.  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.

45.  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.

46.  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.

47.  Fee will be assessed only when automated NOCs are generated.

48.  Limited services are offered in contingency situations.

49.  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.

50.  The international fees and surcharges vary from country to country as these are negotiated with each international gateway operator.

51.  A single monthly fee based on total FedGlobal ACH Payments origination volume.

52.  This per-item surcharge is in addition to the standard domestic origination fees listed in this fee schedule.

53.  This per-item surcharge is in addition to the standard domestic receipt fees listed in this fee schedule.

54.  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.

55.  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.

56.  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.

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57.  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.

58.  This surcharge applies to originators of transfers that are processed by the Reserve Banks after 5:00 p.m. eastern time.

59.  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.

60.  Payment Notification and End-of-Day Origination surcharges apply to each Fedwire funds transfer message.

61.  Provided on billing statement for informational purposes only.

62.  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.

63.  If your organization is a settlement agent, it may be able to use the NSS offline service if it is experiencing an operational event that prevents the transmission of settlement files via its electronic connection to the Federal Reserve Banks. The Federal Reserve Banks have limited capacity to process offline settlement files. As a result, while the Federal Reserve Banks use best efforts to process offline settlement file submissions, there is no guarantee that an offline settlement file, in particular one that is submitted late in the operating day or that contains a large number of entries, will be accepted for processing. Only those persons identified as authorized individuals on the NSS 04 Agent Contact Form may submit offline settlement files. For questions related to the NSS offline service, please contact NSS Central Support Service Staff (CSSS) at 800-758-9403, or via email at csss.staff@ny.frb.org.

64.  Any settlement arrangement that accrues less than $60 during a calendar month will be assessed a variable amount to reach the minimum monthly fee.

65.  These fees are set by the Federal Reserve Banks.

66.  This surcharge is set by the Federal Reserve Banks. It is in addition to any basic transfer or reversal fee.

67.  The Federal Reserve Banks offer an automated claim adjustment process only for Agency mortgage-backed securities.

68.  This fee is set by and remitted to the Government National Mortgage Association (GNMA).

69.  The Federal Reserve Banks charge participants a Joint Custody Origination Surcharge for both Agency and Treasury securities.

70.  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.

71.  FedComplete packages are all-electronic service options that bundle payment services with an access solution for one monthly fee.

72.  Packages with an “A” include the FedLine Advantage channel, and packages with “C” include the FedLine Command channel.

73.  Per-item surcharges are in addition to the standard fees listed in the applicable priced services fee schedules.

74.  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.

75.  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.

76.  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.

77.  Early termination fees and/or expedited order fees may apply to all FedLine Direct packages and FedLine Direct a la carte options.

78.  These add-on services can be purchased only with a FedLine Solutions packages.

79.  Additional VPNs are available for FedLine Advantage, FedLine Command, and FedLine Direct packages only.

80.  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.

81.  The FedLine Custom Implementation Fee is $2,500 or $5,000 based on the complexity of the setup.

82.  Available only to customers with a priced FedLine package.

83.  Limited to installed base only.

84.  Five download codes are included at no cost in all Plus and Premier packages.

85.  Cash Management Service options are limited to plus and premier packages.

86.  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.

87.  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.

88.  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.

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[FR Doc. 2020-25176 Filed 11-13-20; 8:45 am]

BILLING CODE P