67600 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 

Reason: Failed To Maintain a Valid 

Bond. 

Peter J. King, 

Deputy Director, Bureau of Certification and 

Licensing. 

[FR Doc. E6–19778 Filed 11–21–06; 8:45 am] 

BILLING CODE 6730–01–P 

FEDERAL MARITIME COMMISSION 

Ocean Transportation Intermediary 

License Rescission of Order of 

Revocations 

Notice is hereby given that the Order 

revoking the following license is being 

rescinded by the Federal Maritime 

Commission pursuant to section 19 of 

the Shipping Act of 1984 (46 U.S.C. 

chapter 409) and the regulations of the 

Commission pertaining to the licensing 

of Ocean Transportation Intermediaries, 

46 CFR Part 515. 

License Number: 015708N. 

Name: Blue Moon Express Limited. 

Address: Room 1901, 19/F., C C Wu 

Bldg., 302–308, Hennessy Rd, Wanchai 

Hong Kong 

Order Published: FR: 11/01/06 

(Volume 71, No. 211, Pg. 64281). 

Peter J. King, 

Deputy Director Bureau of Certification and 

Licensing. 

[FR Doc. E6–19780 Filed 11–21–06; 8:45 am] 

BILLING CODE 6730–01–P 

FEDERAL MARITIME COMMISSION 

Ocean Transportation Intermediary 

License Applicants 

Notice is hereby given that the 

following applicants have filed with the 

Federal Maritime Commission an 

application for license as a Non-VesselOperating Common Carrier and Ocean 

Freight Forwarder—Ocean 

Transportation Intermediary pursuant to 

section 19 of the Shipping Act of 1984 

as amended (46 U.S.C. Chapter 409 and 

46 CFR 515). 

Persons knowing of any reason why 

the following applicants should not 

receive a license are requested to 

contact the Office of Transportation 

Intermediaries, Federal Maritime 

Commission, Washington, DC. 20573. 

Non-Vessel—Operating Common Carrier 

Ocean Transportation Intermediary 

Applicants: 

Herbie & Son’s Brokers & Shipping Int. Co., 

6660 Sunset Strip, Unit #4, Sunrise, FL 

33313. Officer: Victor Thomas, President 

(Qualifying Individual). 

Aerocosta Global Systems, Inc., 189–33 46 

Road 1 FL, Flushing, NY 11358. Officers: 

Hyun Joon Chung, President (Qualifying 

Individual). 

DLR International, Foster Avenue Industrial 

Park 822 Foster Avenue, Bensenville, IL 

60606. Officer: Danna Rozehnal, President 

(Qualifying Individual). 

Aqualine International, Inc., 17326 Edwards 

Road, Suite A207, Cerritos, CA 90703–

2465. Officers: Makiko Yamamoto Nomoto, 

President (Qualifying Individual), Lo Hung 

Tien, Director. 

Platinum Ocean Logistics, Inc., 2285 Michael 

Faraday Drive, Suite 13, San Diego, CA 

92154. Officers: Jeffrey Wobbrock, 

President (Qualifying Individual). 

Trust Moving, Marketing & Logistics, Inc. dba 

TMM, Logistics, 3533 NW 58th Street, 

Miami, FL 33142. Officers: Jose Tarcisio De 

Oliveira, President (Qualifying Individual), 

Milton Cursage, Vice President. 

Sallaum Group SA, 47371 Darkhollow Falls, 

Sterling, VA 20165. Officers: Ghassan 

Sakallah, Vice President (Qualifying 

Individual), Ibrahim Sallaum, President. 

Global Advantage ALS, 161–18 59 Avenue, 

Fresh Meadows, NY 11365. Officer: Yichun 

Xu, President (Qualifying Individual). 

Lloyds Global Logistics, Inc. dba Lloyds 

Cargo, 615 N. Street, Suite #303, El 

Segundo, CA 90245. Officers: Uwe 

Steuernagel, Treasurer/CFO (Qualifying 

Individual), Renee Maser, President. 

IQ Global Logistics Corp, 22580 Glenn Drive, 

Suite 10, Sterling, VA 20164. Officers: Kirk 

Michael Weibel, President (Qualifying 

Individual). 

Non-Vessel—Operating Common Carrier and 

Ocean Freight Forwarder Transportation 

Intermediary Applicants: 

Stonepath Logistics Domestic Services, Inc., 

1150 Gateway Drive, Shakopee, MN 55379. 

Officers: Charles R. Cain, Vice President 

(Qualifying Individual), Dennis L. Pelino, 

Chairman. 

Stonepath Logistics Government Services, 

Inc., 45070 Old Ox Road, Suite 100, 

Sterling, VA 20166. Officers: Charles R. 

Cain, Chief Operating Officer (Qualifying 

Individual), Robert Arovas, President. 

RCB Logistics Corp., 67 West Merrick Road, 

Valley Stream, NY 11580. Officers: 

Salvatore DiStefano, President (Qualifying 

Individual), Vincenzo Matranga, Vice 

President. 

Global Transportation Management, LLC dba 

GTM-Global Transportation Management, 

LLC, 35790 Northline Road, Suite C, 

Romulus, MI 4817. Officer: Mark Brodie, 

Managing Member (Qualifying Individual). 

Midwest Motor Express, Inc. dba MME 

Global Lines, 314 North 27th Street, Fargo, 

ND 58102. Officers: Ronald I. Martin, Dir. 

Of Int’l. Logistics (Qualifying Individual), 

Martin Kling, President. 

Trans-Alliance International Forwarding Co., 

Inc. dba Nova Ocean Line, 310 Cedar Lane, 

Third Floor, Teaneck, NJ 07666. Officers: 

Enrique Vera, President (Qualifying 

Individual), Olga Vera, Secretary. 

Express Cargo USA LLC, 1675 York Avenue, 

Suite 31–B, New York, NY 10128. Officer: 

Ami Steinfeld, President (Qualifying 

Individual). 

Intercontinental Forwarding USA, Corp. dba 

ICF USA, 3671 NW 81 Street, Miami, FL 

33147. Officers: Byron Baez, Vice President 

(Qualifying Individual), Geovanny Coellar 

N., President 

Aerostar Global Logistics, Inc., 824 S. Kay 

Avenue, Addison, IL 60101. Officer: 

Anthony Flacchino, President (Qualifying 

Individual). 

Priority Freight Corp., 377 Oyster Point 

Blvd., Unit #14, So. San Francisco, CA 

94080. Officer: Bernard Liu, President 

(Qualifying Individual). 

Damca International, LLC, 9600 NW 25th 

Street, Suite 6B, Miami, FL 33172. Officers: 

Nils Ekman, President (Qualifying 

Individual), Nelson Montilla, Vice 

President 

Ocean Freight Forwarder—Ocean 

Transportation Intermediary Applicants: 

Denizabel Shipping, Inc., 6903 W. 36 

Avenue, Suite No. 2, Hialeah, FL 33018. 

Officers: Isabel Ramirez, Vice President 

(Qualifying Individual), Denizabel 

Ramirez, President. 

Jumar International Corp., 1890 NW 82nd 

Avenue, Suite 103, Miami, FL 33126. 

Officers: Marlen Estevez, Vice President 

(Qualifying Individual), Juan E. Estevez, 

President. 

Toptrans USA Inc., 777 E. Valley Blvd., Apt. 

#4, Alhambra, CA 91801. Officer: Fu-Chiu 

(Fred) Chou, President (Qualifying 

Individual). 

Dated: November 17, 2006. 

Bryant L. VanBrakle, 

Secretary. 

[FR Doc. E6–19776 Filed 11–21–06; 8:45 am] 

BILLING CODE 6730–01–P 

FEDERAL RESERVE SYSTEM 

[Docket No. OP–1269] 

Federal Reserve Bank Services 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Notice. 

SUMMARY: The Board has approved the 

private sector adjustment factor (PSAF) 

for 2007 of $132.5 million and the 2007 

fee schedules for Federal Reserve priced 

services and electronic access. These 

actions were taken in accordance with 

the requirements of 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. The Board 

has also approved maintaining the 

current earnings credit rate on clearing 

balances. 

DATES: The new fee schedules and 

earnings credit rate become effective 

January 2, 2007. 

FOR FURTHER INFORMATION CONTACT: For 

questions regarding the fee schedules: 

Jack K. Walton II, Associate Director, 

(202/452–2660); Jeffrey S.H. Yeganeh, 

Manager, Retail Payments, (202/728–

5801); Edwin J. Lucio, Senior Financial 

Services Analyst, (202/736–5636), 


pwalker on PROD1PC61 with NOTICES
Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 67601 

1The ten-year recovery rate is based upon the pro 

forma income statements for the Federal Reserve 

Banks’ priced services published in the Board’s 

Annual Report. 

2FedACH and Fedwire are registered 

servicemarks of the Reserve Banks. 

3As used in this context, the term ‘‘shareholder’’

does not refer to the actual member banks of the 

Federal Reserve System, but rather to the implied 

shareholders who would have an ownership 

interest if the Federal Reserve priced services were 

provided by a private firm. 

4Before FAS 158, generally accepted accounting 

principles (GAAP) required employers with 

pension and other postretirement benefit plans to 

disclose the funded status of the plans in their 

financial statement footnotes. 

Division of Reserve Bank Operations 

and Payment Systems. For questions 

regarding the PSAF and earnings credits 

on clearing balances: Gregory L. Evans, 

Assistant Director, (202/452–3945); 

Brenda L. Richards, Manager, Financial 

Accounting, (202/452–2753); Jonathan 

Mueller, Senior Financial Analyst, (202/ 

530–6291); or Jonathan Senner, Senior 

Financial Analyst, (202/452–2042), 

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 2007 fee schedules for the 

check service are available from the 

Board, the Federal Reserve Banks, or the 

Reserve Banks’ financial services Web 

site at http://www.frbservices.org. 

SUPPLEMENTARY INFORMATION: 

I. Private Sector Adjustment Factor and 

Priced Services 

A. Background—Each year, as 

required by the Monetary Control Act of 

1980 (MCA), the Reserve Banks set fees 

for priced services provided to 

depository institutions. These fees are 

set to recover, over the long run, all 

direct and indirect costs and imputed 

costs, including financing costs, taxes, 

and certain other expenses, as well as 

return on equity (profit) that would have 

been earned if a private business firm 

provided the services. The imputed 

costs and imputed profit are collectively 

referred to as the PSAF. Similarly, 

investment income is imputed and 

netted with related direct costs 

associated with clearing balances to 

estimate net income on clearing 

balances (NICB). From 1996 through 

2005, the Reserve Banks recovered 98.4 

percent of their total expenses 

(including special project costs and 

imputed costs) and targeted after-tax 

profits or return on equity (ROE) for 

providing priced services.1

B. Discussion—Table 1 summarizes 

2005, 2006 estimated, and 2007 

budgeted cost recovery rates for all 

priced services. Cost recovery is 

estimated to be 108.2 percent in 2006, 

which does not include the effects of 

FAS 158 discussed below, and budgeted 

to be 101.5 percent in 2007. The 

performance of the check service 

heavily influences the aggregate cost 

recovery rates because the check service 

accounts for approximately 80 percent 

of the total cost of priced services. The 

electronic services (FedACHSM, the 

Fedwire Funds Service and National 

Settlement Service (NSS), and the 

Fedwire Securities Service) account for 

approximately 20 percent of total costs.2

On September 29, 2006, the Financial 

Accounting Standards Board (FASB) 

issued a statement that significantly 

affects the Reserve Banks’ priced 

services pro forma balance sheet as well 

as cost recovery in 2006 and thereafter. 

Statement of Financial Accounting 

Standards No. 158: Employers’

Accounting for Defined Benefit Pension 

and Other Postretirement Plans (FAS 

158) requires affected employers to 

record the actual funded status of their 

benefit plans on their balance sheets 

effective December 31, 2006, and any 

changes to the funded status in 

subsequent years. FAS 158 does not 

change the method used to periodically 

recognize these changes to the funded 

status of employers’ benefit plans in the 

income statement. Because the Reserve 

Banks’ benefit plans have net 

unrecognized losses, the existing 

‘‘shareholders’’ will incur a loss of value 

upon the initial adoption of FAS 158, 

which will be reflected in cost recovery 

beginning in 2006.3, 4

These gains or losses that now must 

be recognized on the balance sheet stem 

from amendments to benefit plans, 

changes in actuarial and earnings 

assumptions, and differences between 

actuarial assumptions and actual 

experience. These factors can be highly 

volatile in any given year and, as a 

result, recognizing them could cause 

cost recovery to be significantly above 

or below 100 percent. To avoid shortrun volatility in priced-services fees and 

their impact on the financial industry, 

past changes to these unrecognized 

gains or losses under FAS 158 will not 

be considered when setting pricedservices fees, but they will continue to 

be factored into the fee setting process 

to the extent that they are recognized 

through the systematic approach 

required by GAAP. Future changes to 

these unrecognized gains or losses 

cannot be predicted and, therefore, 

cannot be considered in 2007 budgeted 

cost recovery. In light of the recent 

adoption of FAS 158, the Board will 

continue to study how incorporating 

these gains or losses affects its 

assessment of the Federal Reserve 

Banks’ compliance with MCA’s long-run 

cost recovery requirement. 

TABLE 1.—AGGREGATE PRICED SERVICES PRO FORMA COST AND REVENUE PERFORMANCE a

[$ millions] 

Year 1 b

Revenue 

2 c

Total expense 

3 

Net income 

(ROE) [1 ¥ 2] 

4 d

Target 

ROE 

5 e

Recovery rate 

after target 

ROE [1/(2 + 4)] 

(percent) 

2005 ................................................................. 994.7 834.7 160.0 103.0 106.1 

2006 (estimate) ................................................ 1,020.2 871.0 149.2 72.0 108.2 

2007 (budget) ................................................... 980.2 885.0 95.2 80.4 101.5 

a Calculations in this table and subsequent pro forma cost and revenue tables may be affected by rounding. 

b Revenue includes net income on clearing balances (NICB). Clearing balances are assumed to be invested in a broad portfolio of investments, 

such as Treasury securities, government agency securities, commercial paper, municipal and corporate bonds, and money market and mutual 

funds. To impute income, a constant spread is determined from the historical average return on this portfolio and applied to the rate used to determine the cost of clearing balances. NICB equals the imputed income from these investments less earnings credits granted to holders of clearing balances. The cost of earnings credits is based on the discounted three-month Treasury bill rate. cThe calculation of total expense includes operating, imputed, and other expenses. Imputed and other expenses include taxes, FDIC insurance, 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 pensions under FAS 87 are also included. dTarget ROE is the after-tax ROE included in the PSAF. 


pwalker on PROD1PC61 with NOTICES
67602 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 

5The cost of equity increased due to an increase 

in the ROE, which is slightly offset by a reduction 

in imputed equity. 

e Cost recovery is estimated to be 77.2 percent in 2006, including the estimated loss of $378 million resulting from the implementation of FAS 

158. Future changes to these unrecognized items cannot be estimated. 

Table 2 presents an overview of cost 

recovery by service line for 2005 

through 2007. 

TABLE 2.—PRICED SERVICES COST RECOVERY

[percent] 

Priced service 2005 2006 Budget 2006 Estimate a 2007 Budget b

All services ....................................................................................... 106.1 102.6 108.2 101.5 

Check ............................................................................................... 106.1 102.4 109.1 101.5 

FedACH ........................................................................................... 106.4 101.0 101.1 101.6 

Fedwire Funds and NSS ................................................................. 106.7 105.4 109.1 102.3 

Fedwire Securities ........................................................................... 104.7 105.6 103.7 101.6 

a Including the FAS 158 effect, the reported recovery rates are: All services—77.2%, Check—78.0%, FedACH—72.6%, Fedwire Funds and 

NSS—78.6%, and Fedwire Securities—65.1%. b 2007 budget figures reflect the most recent data from Reserve Banks. The Reserve Banks will transmit final budget data to the Board in November 2006, for Board consideration in December 2006. 

1. 2006 Estimated Performance—The 

Reserve Banks estimate that they will 

recover 108.2 percent (77.2 percent 

including the effects of FAS 158) of the 

costs of providing priced services, 

including imputed expenses and 

targeted ROE, compared with a 

budgeted recovery rate of 102.6 percent, 

as shown in table 2. The Reserve Banks 

estimate that they will exceed $1 billion 

in revenue for the first time and that all 

services will achieve full cost recovery, 

excluding the effects of FAS 158. The 

Reserve Banks estimate that they will 

fully recover actual and imputed 

expenses and earn net income of $149.2 

million compared with the target of 

$72.0 million. The greater-thanexpected net income is largely driven by 

the performance of the check service, 

which had greater-than-expected Check 

21 and paper return volumes, as well as 

greater-than-expected net income on 

clearing balances. 

Other than the effects of FAS 158, 

greater-than-expected Check 21 volume 

has been the single most significant 

factor influencing priced services cost 

recovery as additional fee revenue has 

exceeded the costs of processing the 

unexpected volumes. The Reserve 

Banks have also continued their efforts 

to downsize their paper checkprocessing infrastructure as paper check 

volumes continue to decline 

nationwide. The Reserve Banks have 

already reduced the number of sites at 

which they process checks from fortyfive in 2003 to twenty-two in 2006 and 

will discontinue processing checks at 

four other offices by early 2008. These 

check restructuring efforts have enabled 

the Reserve Banks to return to full cost 

recovery by reducing costs in line with 

the decline in revenues associated with 

paper check processing. 

2. 2007 Private Sector Adjustment 

Factor—The 2007 PSAF for Federal 

Reserve priced services is $132.5 

million. This amount represents an 

increase of $14.8 million from the 2006 

PSAF of $117.7 million. This increase is 

primarily due to an increase in the cost 

of equity.5

3. 2007 Projected Performance—The 

Reserve Banks project a priced services 

cost recovery rate of 101.5 percent. The 

2007 fees for priced services are 

projected to result in a net income of 

$95.2 million compared with the $80.4 

million required to achieve full cost 

recovery. The major risks to the Reserve 

Banks’ ability to achieve their budget 

targets are a greater decline in the 

Reserve Banks’ paper check volume 

than the projected 24.0 percent, 

unanticipated problems with 

technological upgrades that could result 

in significant cost overruns, and lowerthan-expected electronic payments 

volumes due to competition. In light of 

these risks, the Reserve Banks will 

continue to refine their business and 

operational strategies to improve 

efficiency and reduce excess capacity 

and other costs. These efforts should 

position the Reserve Banks to achieve 

their financial and other payment 

system objectives and statutory 

requirements over the long run. 

4. 2007 Pricing—The following 

summarizes the changes in the Reserve 

Banks’ fee schedules for priced services 

in 2007: 

Check 

• The Reserve Banks will raise paper 

check fees for forward collection check 

products 5.0 percent, return check 

products 9.6 percent, and payor bank 

check products 8.1 percent. 

• The Reserve Banks will decrease 

Check 21 fees for FedForward products 

delivered to electronic endpoints 12.5 

percent but to increase Check 21 fees for 

FedForward products delivered to 

substitute-check endpoints 3.1 percent. 

The Reserve Banks also will offer a 

restructured deposit discount of $0.003 

for each check presented through 

FedReceipt products. FedReturn fees 

will remain unchanged. 

• With the 2007 fee changes, the price 

index for the check service will have 

increased 57 percent since 1997. 

FedACH 

• The Reserve Banks will increase the 

monthly subscription fee for the 

Informational Extract File from $10 to 

$20. 

• With the 2007 fee change, the price 

index for the FedACH service will have 

decreased 65 percent since 1997. 

Fedwire Funds and National Settlement 

Services 

• The Reserve Banks will raise the 

surcharge for offline funds transfers 

from $20 to $30 and to decrease the 

online transfer fee by one cent in all 

pricing tiers. 

• With the 2007 fee changes, the price 

index for the Fedwire Funds and 

National Settlement Services will have 

decreased 55 percent since 1997. 

Fedwire Securities Service 

• The Reserve Banks will increase the 

online transfer fee by two cents, the 

monthly maintenance fee from $15 to 

$16, and the surcharge for offline 

securities transfers from $50 to $60. 

• With the 2007 fee changes, the price 

index for the Fedwire Securities Service 


pwalker on PROD1PC61 with NOTICES
Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 67603 

6 In the first half of 2006, the GDP price index 

grew at an annualized rate of 3.3 percent. 

will have decreased 46 percent since 

1997. 

5. 2007 Price Index—Figure 1 

compares indexes of fees for the Reserve 

Banks’ priced services with the GDP 

price index. The price index for all 

Reserve Bank priced services is 

projected to increase 1.0 percent in 

2007, compared with the 2.3 percent 

growth anticipated in 2006. The price 

index for paper check and electronic 

payment services in 2007 are projected 

to increase 6.0 percent and 0.1 percent, 

respectively. Based on 2006 data 

available to date, the price index for all 

priced services is expected to increase 

an estimated 20.3 percent from 1997 to 

2006, compared with an estimated 22.0 

percent growth in the GDP price index 

over the same period.6

BILLING CODE 6210–01–P 

FIGURE 1 

PRICE INDEXES FOR FEDERAL 

RESERVE PRICED SERVICES 


pwalker on PROD1PC61 with NOTICES
67604 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 

C. Private Sector Adjustment Factor—

The method for calculating the 

financing and equity costs in the PSAF 

requires determining the appropriate 

levels of debt and equity to impute and 

then applying the applicable financing 


pwalker on PROD1PC61 with NOTICESEN22NO06.013</GPH>
Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 67605 

7A portion of clearing balances is used as a 

funding source for priced-services assets. Long-term 

assets are partially funded from core clearing 

balances, which are currently $4 billion. Core 

clearing balances are considered the portion of the 

balances that has remained stable over time without 

regard to the magnitude of actual clearing balances. 

8As mentioned in footnote 3, the term 

‘‘shareholder’’ does not refer to the actual member 

banks of the Federal Reserve System, but rather to 

the implied shareholders who would have an 

ownership interest if the Federal Reserve priced 

services were provided by a private firm. 

9The FDIC requirements for a well-capitalized 

depository institution are (1) a ratio of total capital 

to risk-weighted assets of 10 percent or greater; and 

(2) a ratio of Tier 1 capital to risk-weighted assets 

of 6 percent or greater; and (3) a leverage ratio of 

Tier 1 capital to total assets of 5 percent or greater. 

The Federal Reserve priced services balance sheet 

has no components of Tier 1 or total capital other 

than equity; therefore, requirements 1 and 2 are 

essentially the same measurement. 

10Other taxes, such as sales taxes, are included 

in priced-services actual or imputed costs. 

11The investment portfolio is composed of 

investments comparable to a BHC’s investment 

holdings, such as short-term Treasury securities, 

government agency securities, commercial paper, 

long-term corporate bonds, and money market 

funds. See table 7 for the investments imputed in 

2007. 

12NICB is projected to be $139.6 million for 2007 

using a constant spread of 29 basis points over the 

three-month Treasury bill, and applying this rate to 

the clearing balance levels used in the 2007 pricing 

process. The 2006 NICB estimate is $113.2 million. 

13 July 2006 rates and balances were used to 

estimate the 2007 NICB. 

14Previously, GAAP required employers with 

pension and other postretirement benefit plans to 

disclose these deferred elements in their financial 

statement footnotes. 

rates. In this process, a pro forma priced 

services balance sheet using estimated 

Reserve Bank assets and liabilities 

associated with priced services is 

developed, and the remaining elements 

that would exist if the Reserve Banks’

priced services were provided by a 

private business firm are imputed. The 

same generally accepted accounting 

principles that apply to commercial 

entity financial statements also apply to 

the relevant elements in the priced 

services pro forma financial statements. 

The amount of the Reserve Banks’

assets that will be used to provide 

priced services during the coming year 

is determined using Reserve Bank 

information on actual assets and 

projected disposals and acquisitions. 

The priced portion of assets is 

determined based on the allocation of 

the related depreciation expense. The 

priced portion of actual Reserve Bank 

liabilities consists of balances held by 

Reserve Banks for clearing pricedservices transactions (clearing balances), 

and other liabilities such as accounts 

payable and accrued expenses. 

Long-term debt is imputed only when 

core clearing balances and long-term 

liabilities are not sufficient to fund longterm assets or if the interest rate risk 

sensitivity analysis, which measures the 

interest rate effect of the difference 

between interest rate sensitive assets 

and liabilities, indicates that a 200 basis 

point change in interest rates would 

change cost recovery more than two 

percentage points.7 Short-term debt is 

imputed only when short-term 

liabilities and clearing balances not 

used to finance long-term assets are 

insufficient to fund short-term assets. 

Equity is imputed to meet the FDIC 

definition of a well-capitalized 

depository institution for insurance 

premium purposes and represents the 

market capitalization, or shareholder 

value, for priced services.8 9

1. Financing rates—Equity financing 

rates are based on the target return on 

equity (ROE) result of 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 riskfree asset plus a risk premium. To 

implement CAPM, 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 monthly 

returns in excess of the risk-free rate 

over the most recent 40 years are used 

as the market risk premium. The 

resulting ROE influences the dollar level 

of the PSAF because this is the return 

a shareholder would expect in order to 

invest 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, a specific income tax expense is 

not calculated for Reserve Bank priced 

services. Instead, the Board targets a 

pre-tax ROE that would provide 

sufficient income to fulfill its income 

tax obligations.10 To the extent that the 

actual performance results are greater or 

less than the targeted ROE, income taxes 

are adjusted using an imputed income 

tax rate. Because the Reserve Banks 

provide similar services through their 

correspondent banking activities, 

including payment and settlement 

services, and equity is imputed to meet 

the FDIC requirements of a wellcapitalized depository institution, the 

imputed income tax rate is the median 

of the rates paid by the top fifty bank 

holding companies (BHCs) based on 

deposit balance over the past five years 

adjusted to the extent that they invested 

in tax-free municipal bonds. 

2. Other Costs—The PSAF also 

includes the estimated priced servicesrelated expenses of the Board of 

Governors and imputed sales taxes 

based on Reserve Bank estimated 

expenditures. An assessment for FDIC 

insurance, when required, is imputed 

based on current FDIC rates and 

projected clearing balances held with 

the Federal Reserve. 

3. Net Income on Clearing Balances—

The NICB calculation is made each year 

along with the PSAF calculation and is 

based on the assumption that Reserve 

Banks invest clearing balances net of 

imputed reserve requirements and 

balances used to finance priced-services 

assets. Using these net clearing balance 

levels, Reserve Banks impute a constant 

spread, determined by the return on a 

portfolio of investments, over the threemonth Treasury bill rate.11 12 The 

calculation also involves determining 

the priced-services cost of earnings 

credits (amounts available to offset 

service fees) on contracted clearing 

balances held, net of expired earnings 

credits, based on a discounted Treasury 

bill rate. Rates and clearing balance 

levels used in the NICB estimate are 

based on the most-recent rates and 

clearing balance levels.13 Because 

clearing balances are held for clearing 

priced-services transactions or offsetting 

priced-services fees, they are directly 

related to priced services. The net 

earnings or expense attributed to the 

investments and the cost associated 

with holding clearing balances, 

therefore, are considered net income for 

priced services activities. 

4. Adopting FAS 158—On September 

29, 2006, FASB issued FAS 158: 

Employers’’ Accounting for Defined 

Benefit Pension and Other 

Postretirement Plans. This statement, 

effective for fiscal years ending after 

December 15, 2006, requires affected 

employers to show the actual funded 

status of their benefit plans by 

recognizing the deferred elements 

related to pension and postretirement 

accounting as adjustments to the related 

assets or liabilities on their balance 

sheets. These deferred elements include 

unrecognized gains or losses (resulting 

from changes in actuarial assumptions, 

such as the discount rate, and 

differences between these assumptions 

and actual experience) and prior service 

costs or credits (resulting from 

amendments to existing benefit plans).14

FAS 158 does not change the method 

used to periodically recognize these 

deferred elements in the income 

statement. 

Because the Reserve Banks offer 

employees defined benefit pension and 

other postretirement benefits, the 

adoption of FAS 158 will affect the 

Reserve Banks’ 2006 balance sheets and 

financial statement disclosures. Given 

that these benefits are provided to 

employees involved in priced services, 


pwalker on PROD1PC61 with NOTICES
67606 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 

15The costs associated with pension and 

postretirement benefits as recognized under GAAP 

have always been allocated to the priced services 

income statement as direct or indirect expense 

items. 

16Although recognizing the deferred elements 

will result in a decrease to the pension asset and 

equity in 2006, the Reserve Banks could have 

increases or decreases to these balance sheet items 

in future years. 

17Other financial accounting standards require 

that future tax consequences of events be 

recognized in an entity’s financial statements. FAS 

158 requires employers to compute the AOCI 

adjustment net-of-tax. 

18Although recognizing the deferred elements 

would result in an increase to the benefits liability 

and decrease to equity in 2006, the Reserve Banks 

could have increases or decreases to these balance 

sheet items in future years. 

19Under current reporting requirements, FAS 158 

adjustments to equity via AOCI would be included 

in the calculation of Tier 1 capital for regulatory 

purposes, thus reducing priced-services equity to 

below the well-capitalized threshold. 

20The Federal Reserve priced services could elect 

to restore equity to an adequate, but less than wellcapitalized, level and incur the resulting FDIC 

assessment. 

21The value of equity reported in the pro forma 

priced services balance sheet is assumed to equal 

the market value of equity. Because priced-services 

fees are set to maintain this implied shareholder 

value (that is, not to substantially over or 

underrecover), the targeted ROE equals the market 

return these shareholders would expect priced 

services to earn, or recover, each year. 

the effects of the new accounting 

standard must also be included in the 

pro forma priced services balance 

sheet.15 The current estimate is net 

unrecognized losses for the December 

31, 2006, deferred elements. 

To reflect the funded status of the 

Reserve Banks’ benefit plans on the 

2006 pro forma priced services balance 

sheet as required by FAS 158, the 

Reserve Banks will record a reduction in 

the prepaid pension asset.16 The offset 

to the asset reduction will be twofold: 

The amount by which the pension asset 

is reduced, net-of-tax, will be reported 

as a negative component of equity called 

accumulated other comprehensive 

income (AOCI), while the remainder 

will be reported as a deferred tax 

asset.17 Similarly, the full unfunded 

status of the postretirement benefits 

liability must be recognized by 

increasing the liability on the priced 

services pro forma balance sheet, with 

the offsetting net-of-tax portion of this 

entry reflected in AOCI and the balance 

assigned to the deferred tax asset.18

Because priced-services equity is 

imputed at the minimum level 

necessary to meet the FDIC definition of 

a well-capitalized depository 

institution, any direct reduction to 

equity through AOCI as a result of FAS 

158 will require the Reserve Banks to 

impute additional equity.19, 20

It is unclear whether a private firm 

with a similar balance sheet would 

actually raise additional equity to offset 

the FAS 158 balance sheet changes. 

Because most BHCs hold capital 

balances in excess of the minimum level 

to be considered well-capitalized, and 

because their pension assets and 

liabilities represent a comparatively 

small share of total equity, they may be 

able to absorb the FAS 158 adjustments 

and still maintain adequate regulatory 

capital levels. 

For the purpose of measuring pricedservices cost of equity, the Reserve 

Banks assume that existing shareholders 

will sustain an economic loss of value 

as a result of implementing the FAS 158 

accounting changes.21 This assumption 

implies that these shareholders will 

expect a return on only the remaining 

portion of their investment (original 

investment amount less AOCI 

reduction) and that the new equity 

investors will expect a similar return on 

their investment. This will leave the 

cost of equity, and overall PSAF, 

virtually unchanged from what it was 

before the application of FAS 158, 

because the existing shareholder 

investment that was eliminated by the 

AOCI reduction will be replaced by the 

new equity required to replenish total 

equity to 5 percent of total assets and 

remain well-capitalized according to 

FDIC guidelines. NICB will increase, 

however, because this new equity will 

be available for investment. 

Because the Reserve Bank benefit 

plans have net unrecognized losses, the 

Reserve Bank priced services will 

recognize this reduction in value in cost 

recovery for 2006. The Reserve Bank 

priced services assume that existing 

shareholders incur these losses upon the 

initial implementation of FAS 158, with 

the losses flowing to the shareholders 

rather than to the firm itself. Prices for 

2007 and thereafter, however, will be set 

to achieve full cost recovery over the 

long run before the annual FAS 158 

adjustments, with a measure of costrecovery performance provided for each 

year that includes the FAS 158 

adjustment. This approach will limit the 

increased year-to-year price volatility 

that would result from including annual 

FAS 158 adjustments in the setting of 

priced-services fees. It is also consistent 

with the FASB’s systematic approach of 

deferring recognition of prior service 

costs or credits and actuarial gains or 

losses to reduce the inherent volatility 

of these deferred items on current 

expense. 

Including the annual FAS 158 

adjustment in a measurement of priced 

services cost recovery, however, could 

produce highly variable actual cost 

recovery results from year-to-year that 

exceed or fall short of 100 percent. One 

component of the annual FAS 158 entry 

is unrecognized prior service cost, 

which arises from certain amendments 

to existing benefit plans and is 

amortized according to GAAP over a 

specific period (usually twelve to fifteen 

years). This factor will have a negligible 

effect on reported long-run cost recovery 

because the initial recognition of prior 

service cost (a negative adjustment to 

cost recovery) should eventually be 

offset by positive adjustments to cost 

recovery as this cost is amortized over 

time and incorporated into the pricesetting process. The other component of 

the annual FAS 158 entry, unrecognized 

gains or losses, results from changes in 

actuarial assumptions (discount rates, 

return on plan assets, demographic 

changes, and so on) and differences 

between these assumptions and actual 

experience. These actuarial gains or 

losses could be highly volatile and may 

or may not offset each other for as long 

as the Federal Reserve continues to offer 

pension and postretirement benefits. For 

this reason, GAAP does not require the 

recognition of these gains or losses until 

they exceed a corridor of 10 percent of 

the greater of the benefit obligations or 

assets. In addition, because these factors 

and the resulting year-to-year changes in 

the associated assets and liabilities are 

not measured until after year-end and 

cannot be estimated for pricing 

purposes, long-run cost recovery could 

be greater or less than 100 percent 

depending on the amount of the 

actuarial gains or losses that are 

recognized each year. 

5. Analysis of the 2007 PSAF—The 

increase in the 2007 PSAF is primarily 

due to an increase in the required ROE 

result provided by the CAPM, which 

offsets an overall reduction in imputed 

equity. 

a. Asset Base—The estimated 2007 

Federal Reserve assets, reflected in table 

3, have decreased $1,303.0 million. 

There is a decline in imputed 

investments in marketable securities of 

$1,118.1 million and in imputed reserve 

requirements of $163.5 million, which 

are imputed based on the estimated 

level of clearing balances held, and in 

the prepaid pension asset of $446.9 

million as a result of the FAS 158 

accounting changes. These declines are 

slightly offset by an increase in items in 

process of collection of $262.2 million, 

due to higher estimated float 

receivables, and in the deferred tax asset 

associated with implementing FAS 158 

of $159.3 million. 

As shown in table 4, the assets 

financed through the PSAF have 

decreased. Short-term assets funded 

with short-term payables and clearing 


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balances total $10.2 million. This 

represents an $18.2 million decrease 

from the short-term assets funded in 

2006 due to an increase in expected 

short-term payables. Long-term 

liabilities and equity are greater than 

long-term assets; therefore, no core 

clearing balances are used to fund longterm assets. 

b. Debt and Equity Costs and Taxes—

As previously mentioned, core clearing 

balances are available as a funding 

source for priced-services assets. Table 

4 shows that $10.2 million in clearing 

balances is used to fund priced-services 

assets in 2007. The interest rate 

sensitivity analysis in table 5 indicates 

that a 200 basis point decrease in 

interest rates affects the ratio of ratesensitive assets to rate-sensitive 

liabilities and produces a decrease in 

cost recovery of 1.4 percentage points, 

while an increase of 200 basis points in 

interest rates increases cost recovery by 

1.5 percentage points. The established 

threshold for a change in cost recovery 

is two percentage points; therefore, 

interest rate risk associated with using 

these balances is within acceptable 

levels and no long-term debt is imputed. 

Table 6 shows the imputed PSAF 

elements, the pretax ROE, and other 

required PSAF costs for 2006 and 2007. 

The increase in ROE is primarily caused 

by an increase in the risk-free rate of 

return. Sales taxes increased from $7.7 

million in 2006 to $8.5 million in 2007. 

The effective income tax rate used in 

2007 increased to 31.5 percent from 29.8 

percent in 2006. The priced-services 

portion of the Board’s expenses 

decreased $0.8 million from $7.5 

million in 2006 to $6.7 million in 2007. 

c. Capital Adequacy and FDIC 

Assessment—As shown in table 3, the 

amount of equity imputed for the 2007 

PSAF is $742.9 million, a decrease of 

$65.1 million versus the imputed equity 

for 2006. This includes additional 

imputed equity of $361.0 million to 

offset the FAS 158 reduction to AOCI. 

In 2007, the capital to total assets ratio 

and the capital to risk-weighted assets 

ratio both meet or exceed regulatory 

guidelines as required by the FDIC 

definition of a well-capitalized 

depository institution for insurance 

premium purposes. Equity is based on 

5 percent of total assets, and capital to 

risk-weighted assets is 15.0 percent. 

Based on the final regulations recently 

adopted by the FDIC, the Reserve Bank 

priced services estimate a one-time 

assessment credit of $16.6 million. 

Because the estimated assessment for 

2007 does not exceed the one-time 

assessment credit, no net FDIC 

assessment is imputed for 2007. 


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39Two adjustments are applied to the earnings 

credit rate so that the return on clearing balances 

at the Federal Reserve is comparable to what the 

depository institution (DI) would have earned had 

it maintained the same balances at a private-sector 

correspondent. The ‘‘imputed reserve requirement’’

adjustment is made because a private-sector 

D. Earnings Credits on Clearing 

Balances—The Board has approved 

maintaining the current rate of 80 

percent of the three-month Treasury bill 

rate to calculate earnings credits on 

clearing balances.39 The Reserve Banks 


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correspondent would be required to hold reserves 

against the respondent’s balance with it. As a result, 

the correspondent would reduce the balance on 

which it would base earnings credits for the 

respondent because it would be required to hold a 

portion, determined by its marginal reserve ratio, in 

the form of non-interest-bearing reserves. For 

example, if a DI held $1 million in clearing balances 

with a correspondent bank and the correspondent 

had a marginal reserve ratio of 10 percent, then the 

correspondent bank would be required to hold 

$100,000 in reserves, and it would typically grant 

credits to the respondent based on 90 percent of the 

balance, or $900,000. This adjustment imputes a 

marginal reserve ratio of 10 percent to the Reserve 

Banks. 

The ‘‘marginal reserve requirement’’ adjustment 

accounts for the fact that the respondent can deduct 

balances maintained at a correspondent, but not the 

Federal Reserve, from its reservable liabilities. This 

reduction has value to the respondent when it frees 

up balances that can be invested in interest-bearing 

instruments, such as federal funds. For example, a 

respondent placing $1 million with a correspondent 

rather than the Federal Reserve would free up 

$30,000 if its marginal reserve ratio were 3 percent. 

The formula used by the Reserve Banks to 

calculate earnings credits can be expressed as 

e = [ b * (1¥FRR) * r] + [ b * (MRR) * f] 

Where e is total earnings credits, b is the average 

clearing balance maintained, FRR is the assumed 

Reserve Bank marginal reserve ratio (10 percent), r 

is the earnings credit rate, MRR is the marginal 

reserve ratio of the DI holding the balance (either 

0 percent, 3 percent, or 10 percent), and f is the 

average federal funds rate. A DI that meets its 

reserve requirement entirely with vault cash is 

assigned a marginal reserve requirement of zero. 

40This calculation adjusts earnings credits as 

though account holders could adjust their reserve 

requirement for a ‘‘due from deduction’’ for clearing 

balances held with a Reserve Bank. 

41A band is established around the contracted 

clearing balance to determine the maximum balance 

on which credits are earned as well as any 

deficiency charges. The clearing balance allowance 

is 2 percent of the contracted amount, or $25,000, 

whichever is greater. Earnings credits are based on 

the period-average balance maintained up to a 

maximum of the contracted amount plus the 

clearing balance allowance. Deficiency charges 

apply when the average balance falls below the 

contracted amount less the allowance, although 

credits are still earned on the average maintained 

balance. 

42The Reserve Banks also offer non-Check 21 

electronic presentment products. In August 2006, 

26.0 percent of the Reserve Banks’ deposit volume 

was presented to paying banks using these 

products. The majority of checks presented through 

non-Check 21 electronic presentment products are 

delivered to the paying banks. 

43The Reserve Banks’ Check 21 product suite 

includes FedForward, FedReturn, and FedReceipt. 

FedForward is the electronic alternative to forward 

check collection; FedReturn is the electronic 

alternative to paper check return; and FedReceipt 

products are electronic receipt of Check 21 items. 

Under FedReceipt, the Reserve Banks electronically 

present only the checks that were deposited 

electronically or that were deposited in paper form 

and converted into electronics by the Reserve 

Banks. Under FedReceipt Plus, the Reserve Banks 

electronically present all checks drawn on the 

customer. 

will continue to calculate earnings 

credits (amounts available to offset 

service fees) for the marginal reserve 

requirement adjusted portion of clearing 

balances at the federal funds rate.40

Clearing balances were introduced in 

1981, as a part of the Board’s 

implementation of the Monetary Control 

Act, to facilitate access to Federal 

Reserve priced services by institutions 

that did not have sufficient reserve 

balances to support the settlement of 

their payment transactions. The 

earnings credit calculation uses a 

percentage discount on a rolling 

thirteen-week average of the annualized 

coupon equivalent yield of three-month 

Treasury bills in the secondary market. 

Earnings credits, which are calculated 

monthly, can be used only to offset 

charges for priced services and expire if 

not used within one year.41

E. Check Service—Table 8 below 

shows the 2005, 2006 estimate, and 

2007 budgeted cost recovery 

performance for the commercial check 

service. 

TABLE 8.—CHECK PRO FORMA COST AND REVENUE PERFORMANCE

[$ millions] 

Year 1 

Revenue 

2 

Total 

expense 

3 

Net income 

(ROE) 

[1¥2] 

4 

Target 

ROE 

5 

Recovery rate 

after target 

ROE 

[1/(2 + 4)] 

(Percent) 

2005 ..................................................................................... 817.5 688.7 128.7 82.0 106.1 

2006 (estimate) .................................................................... 837.4 710.8 126.6 57.1 a 109.1 

2007 (budget) ....................................................................... 784.3 709.9 74.4 63.2 101.5 

a Including FAS 158, the estimated cost recovery for the check service is 78.0%. 

1. 2006 Estimate—For 2006, the 

Reserve Banks estimate that the check 

service will recover 109.1 percent of 

total expenses and targeted ROE, 

compared with the budgeted recovery 

rate of 102.4 percent. The Reserve Banks 

expect to recover all actual and imputed 

expenses of providing check services 

and earn net income of $126.6 million 

(see table 8). 

The higher-than-budgeted cost 

recovery is the result of revenue that 

was $103.0 million higher than 

expected, which was partially offset by 

expenses that were $50.7 million greater 

than budgeted. The higher revenue is 

due to greater-than-budgeted electronic 

check collection and paper check return 

volumes, as well as greater-thanexpected NICB. The higher costs were 

largely due to greater-than-budgeted 

personnel and materials costs related to 

Check 21 substitute check printing, 

pension costs, and imputed taxes. 

The greater-than-expected electronic 

check volume can be attributed to fasterthan-anticipated adoption of Check 21 

products. The number of checks 

deposited and presented electronically 

has grown steadily in 2006 (see table 9). 

Year-to-date through August 2006, 10.3 

percent of the Reserve Banks’’ volume 

was deposited and 2.2 percent was 

presented using Check 21 products.42

Depository institutions have been 

slower to accept check presentments 

electronically because financial 

incentives are generally stronger for 

electronic check deposit and because 

integrating electronic presentments into 

back-office processing and riskmanagement systems can be a complex 

and expensive undertaking. 

Year-to-date figures, however, 

understate the current penetration rate 

of Check 21 products, as volume has 

increased throughout 2006. In August 

2006, the Check 21 deposit penetration 

rate rose to 16.6 percent. This volume 

represents 42 percent of the value of 

checks collected through the Reserve 

Banks because many depository 

institutions are using Check 21 products 

to collect their higher value checks more 

rapidly. Recent trends, however, 

indicate that the average value of checks 

deposited using Check 21 products will 

decline because an increasing number of 

depository institutions are choosing to 

clear all of their checks using these 

products. 


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44 In February 2003, the Reserve Banks 

announced an initiative to reduce the number of 

sites at which they process checks from forty-five 

to thirty-two. The Reserve Banks announced further 

rounds of restructurings in August 2004, May 2005, 

and May 2006. By the end of these announced 

restructurings in early 2008, the Reserve Banks will 

have eighteen check processing sites. 

TABLE 9.—CHECK 21 PRODUCT PENETRATION RATES 43

[Percent] a

2005 August 2006 

year-to-date 

August 2006 

actual 

Deposit ......................................................................................................................................... 1.9 10.3 16.6 

FedForward .......................................................................................................................... 1.6 9.4 15.5 

Paper to Check 21 ............................................................................................................... 0.3 0.9 1.0 

Presentment ................................................................................................................................. 0.0 2.2 4.8 

FedReceipt ........................................................................................................................... 0.0 0.1 0.1 

FedReceipt Plus ................................................................................................................... 0.0 2.1 4.7 

Return: 

FedReturn ............................................................................................................................. 3.7 14.5 21.4 

a Deposit and presentment statistics are calculated as a percentage of total forward collection volume. Return statistics are calculated as a percentage of total return volume. 

For full-year 2006, the Reserve Banks 

estimate that paper forward-collection 

volume will decline 17.1 percent 

compared with a budgeted decline of 

14.0 percent as more volume is 

deposited electronically (see table 10). 

Through August, paper forwardcollection volume has decreased 16.6 

percent compared with the same period 

in 2005. Through August, paper return 

check volume has decreased 17.5 

percent from the same period in 2005. 

The Reserve Banks estimate that paper 

return volume will decline 21.2 percent 

for the full year compared with a 

budgeted decline of 31.7 percent. 

TABLE 10.—PAPER CHECK PRODUCT VOLUME CHANGES

[Percent] 

Budgeted 

2006 change 

Actual change 

through 

August 2006 

Estimated 

2006 change 

Total forward collection ................................................................................................................ ¥14.0 ¥16.6 ¥17.1 

Returns ........................................................................................................................................ ¥31.7 ¥17.5 ¥21.2 

2. 2007 Pricing—In 2007, the Reserve 

Banks project that the check service will 

recover 101.5 of total expenses and 

targeted ROE. 

Revenue is projected to be $784.3 

million, a decline of 6.2 percent 

compared with the 2006 estimate. This 

decline is driven by a $121.7 million 

drop in paper check fee revenue that is 

partially offset by a $52.7 million 

increase in Check 21 fee revenue. 

Total expenses for the check service 

are projected to be $709.9 million, 

representing a $0.9 million decline. 

Increases in the pension costs and onetime expenses associated with the 

Check 21 initiative and the 

consolidation of check-processing 

offices will be offset by ongoing cost 

savings associated with projected 

declines in paper-check volume and 

efficiency improvements at 

restructuring sites. These cost 

reductions should enable the Reserve 

Banks to maintain full cost recovery. A 

key driver in the reduction of local 

check costs is the planned restructuring 

of four more check-processing sites by 

the second quarter of 2008.44

The Reserve Banks project that papercheck volume for forward products will 

decrease 24.0 percent, volume for return 

products will decrease 21.3 percent, and 

volume for payor bank products will 

decrease 5.5 percent. These expected 

volume declines will be partially offset 

by a projected increase in Check 21 

volumes (see table 11). The Reserve 

Banks project that FedForward volume 

will increase 97.1 percent, FedReturn 

volume will increase 112.3 percent and 

FedReceipt Plus volume will increase 

342.8 percent. The Reserve Banks’

projected increase in Check 21 volume 

will result in a 49.5 percent increase in 

Check 21 product revenue to about $159 

million. Board and Reserve Bank staff 

believe that the key to realizing Check 

21 cost efficiencies for the System 

continues to be the widespread 

acceptance of electronic check 

presentments by paying banks. 

TABLE 11.—CHECK 21 VOLUME

2007 Budgeted volume 

(millions of 

items) 

Growth from 

2006 estimate 

(percent) 

FedForward .............................................................................................................................................................. 2,636.4 97.1 

FedReturn ................................................................................................................................................................ 44.7 112.3 

FedReceipt Plus ...................................................................................................................................................... 1,686.8 342.8 


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45The Information Extract File provides 

depository institutions with a file containing 

financial electronic data interchange information if 

their service providers cannot process and translate 

such information. 

In 2007, the Reserve Banks will 

continue to encourage the adoption of 

electronic check collection and 

presentment alternatives through price 

increases to paper-check products and 

price reductions for strategic electronic 

products. The price increases for paper 

products generally are distributed across 

most product categories, with generally 

higher price increases for nonstrategic 

product lines. The Reserve Banks also 

will continue to narrow the price ranges 

for similar products across the System. 

In addition, the Reserve Banks will offer 

depository institutions greater 

incentives to deposit and accept checks 

electronically. As the use of Check 21- 

related products increases, the prices of 

paper products may be raised further to 

encourage adoption of electronic check 

collection and presentment alternatives. 

For 2007, the Reserve Banks are 

targeting an overall price increase for 

paper-check services of 6.0 percent, 

including a 5.0 percent increase in 

forward-check collection fees and a 9.6 

percent increase in return-services fees 

(see table 12). In addition, prices for 

payor bank services will increase 8.1 

percent. To encourage further the 

adoption of electronic presentment, the 

Reserve Banks will decrease 12.5 

percent the price for Check 21 items that 

are presented electronically, and 

increase 3.1 percent the price for Check 

21 items that are presented as substitute 

checks. In addition, the Reserve Banks 

will offer a $0.003 discount per check 

presented through FedReceipt products 

to further encourage their adoption. 

This discount will be applied to fees for 

checks deposited with the Reserve 

Banks. 

TABLE 12.—2007 FEE CHANGES

[Percent] 

Product Fee change 

Paper check .......................... 6.0 

Forward collection ......... 5.0 

Returns .......................... 9.6 

Payor bank services ............. 8.1 

Check 21: 

FedForward (electronic 

endpoints) .................. ¥12.5 

FedForward (substitute 

check endpoints) ........ 3.1 

FedReturn ...................... 0.0 

FedReceipt products ..... a¥$0.003 

aFedReceipt customers will receive a 

$0.003 discount per check presented. The discount can be used to offset fees for checks 

they deposit with the Reserve Banks. 

The primary risks to meeting the 

Reserve Banks’ budgeted 2007 cost 

recovery are higher-than-expected 

declines in paper check volume and 

slower-than-expected adoption by 

paying banks of FedReceipt products, as 

the manual processes associated with 

printing substitute checks and 

preventing duplicate checks from 

entering the processing environment 

will exert upward pressure on staffing 

levels and costs. Competitive pressure 

from direct electronic exchanges also 

poses a risk to the Reserve Banks’

projected cost recovery. Other risks 

include unanticipated problems with 

check office restructurings or other 

major initiatives that may result in 

significant cost overruns. 

F. FedACH Service—Table 13 below 

shows the 2005, 2006 estimate, and 

2007 budgeted cost recovery 

performance for the commercial 

FedACH service. 

TABLE 13.—FEDACH PRO FORMA COST AND REVENUE PERFORMANCE

[$ Millions] 

Year 1 

Revenue 

2 

Total expense 

3 

Net income 

(ROE) [1 ¥ 2] 

4 

Target ROE 

5 

Recovery rate 

after target 

ROE 

[1/(2 + 4)] 

(percent) 

2005 ..................................................................................... 87.4 72.2 15.2 10.0 106.4 

2006 (estimate) .................................................................... 89.7 81.2 8.5 7.5 a 101.1 

2007 (budget) ....................................................................... 99.9 89.5 10.4 8.8 101.6 

a Including FAS 158, the estimated cost recovery for the FedACH service is 72.6%. 

1. 2006 Estimate—The Reserve Banks 

estimate that the FedACH service will 

recover 101.1 percent of total expenses 

and targeted ROE, compared with the 

budgeted recovery rate of 101.6 percent. 

The Reserve Banks expect to recover all 

actual and imputed expenses of 

providing FedACH services and earn net 

income of $8.5 million. Through 

August, FedACH commercial 

origination volume is 11.9 percent 

higher than the same period last year. 

For full-year 2006, the Reserve Banks 

estimate that FedACH originations will 

grow 12.4 percent, compared with the 

budgeted growth of 7.6 percent, because 

of greater-than-expected volume from 

Electronic Payments Network (EPN), the 

other ACH operator. 

2. 2007 Pricing—The Reserve Banks 

will maintain processing and service 

fees at current levels with one 

exception. The monthly subscription fee 

for the Information Extract File will 

increase from $10 to $20.45 Pricing for 

this service has remained at $10 since 

its inception in 1998, and the higher 

price more accurately reflects the value 

of the file to the receiving depository 

institution. 

The Reserve Banks project that the 

FedACH service will recover 101.6 

percent of total expenses and targeted 

ROE in 2007. Total revenue is budgeted 

to increase $10.2 million from the 2006 

estimate. Nationwide ACH volumes are 

expected to continue growing at double 

digit rates. This expected growth is 

largely attributable to volume increases 

associated with electronic check 

conversion applications—including 

checks converted at lockboxes or at the 

point of purchase. In early 2007, ACH 

rule changes will permit checks to be 

converted in processing centers or back 

offices, spurring further growth in ACH 

check conversion volume. The Reserve 

Banks expect FedACH commercial 

origination volume to grow by 12.0 

percent. The primary risk to meeting the 

Reserve Banks’ budgeted 2007 cost 

recovery is the loss of large ACH 

originators to EPN. Total expenses are 

budgeted to increase $8.3 million over 

the 2006 estimate. The Reserve Banks 

have budgeted increased costs for 

product development and service 


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46The 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 nonTreasury 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. 

initiatives, such as FedACH risk 

management services. 

G. Fedwire Funds and National 

Settlement Services—Table 14 below 

shows the 2005, 2006 estimate, and 

2007 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

[$ Millions] 

Year 1 

Revenue 

2 

Total expense 

3 

Net income 

(ROE) [1 ¥ 2] 

4 

Target ROE 

5 

Recovery rate 

after target 

ROE 

[1/(2 + 4)] 

(percent) 

2005 ..................................................................................... 67.3 55.2 12.1 7.9 106.7 

2006 (estimate) .................................................................... 71.3 59.7 11.6 5.6 a 109.1 

2007 (budget) ....................................................................... 72.7 64.7 8.0 6.3 102.3 

a Including FAS 158, the estimated cost recovery for the Fedwire Funds and National Settlement Services is 78.6%. 

1. 2006 Estimate—The Reserve Banks 

estimate that the Fedwire Funds and 

National Settlement Services will 

recover 109.1 percent of total expenses 

and targeted ROE, compared with a 

2006 budgeted recovery rate of 105.4 

percent. The greater-than-expected 

recovery rate is primarily attributed to 

higher-than-expected electronic 

connection revenue and NICB, which 

offsets slightly lower-than-expected fee 

revenue, as well as lower-than-budgeted 

operating costs. Through August 2006, 

online funds volume was 1.2 percent 

higher than it was for the same period 

last year. For full-year 2006, the Reserve 

Banks estimate that online funds 

volume will remain flat, compared with 

a budgeted growth of 3.0 percent, as 

they lose market share to CHIPS, their 

primary competitor. With respect to the 

National Settlement Service, the Reserve 

Banks estimate that the volume of 

settlement entries processed during 

2006 will be 4.3 percent higher than the 

2006 budget projection of flat growth. 

2. 2007 Pricing—The Reserve Banks 

will decrease the online transfer fee by 

one cent in all pricing tiers and to raise 

the surcharge for offline transfers from 

$20 to $30. The one cent price reduction 

for online transfers should mitigate 

potential volume losses to CHIPS while 

the offline surcharge increase is 

intended to provide incentives for 

offline customers to migrate to online 

access. 

In 2007, the Reserve Banks expect the 

Fedwire Funds and National Settlement 

Services to recover 102.3 percent of total 

expenses and targeted ROE. The Reserve 

Banks project 2007 total revenue to 

increase $1.4 million compared with the 

2006 estimate. Total expenses for 2007 

are budgeted to increase $5.0 million 

from the 2006 estimate primarily 

because of security and technology 

investments, including the cost of 

network modernization and 

enhancements to resiliency. Online 

volumes for 2007 are budgeted to 

remain flat compared with 2006 

estimates. 

H. Fedwire Securities Service—Table 

15 shows the 2005, 2006 estimate, and 

2007 budgeted cost recovery 

performance for the Fedwire Securities 

Service.46

TABLE 15.—FEDWIRE SECURITIES SERVICE PRO FORMA COST AND REVENUE PERFORMANCE

[$ Millions] 

Year 1 

Revenue 

2 

Total expense 

3 Net income 

(ROE) [1 ¥ 2] 

4 

Target ROE 

5 

Recovery rate 

after target 

ROE 

[1/(2 + 4)] 

(percent) 

2005 ..................................................................................... 21.3 17.4 3.8 2.9 104.7 

2006 (estimate) .................................................................... 21.8 19.3 2.5 1.8 a 103.7 

2007 (budget) ....................................................................... 23.3 20.9 2.4 2.0 101.6 

a Including FAS 158, the estimated cost recovery for the Fedwire Securities Service is 65.1%. 

1. 2006 Estimate—The Reserve Banks 

estimate that the Fedwire Securities 

Service will recover 103.7 percent of 

total expenses and targeted ROE, 

compared with a 2006 budgeted 

recovery rate of 105.6 percent. The 

lower-than-budgeted recovery is 

attributable to lower-than-expected fee 

revenue. The shortfall in fee revenue, 

however, is partially offset by higherthan-expected NICB revenue and lowerthan-budgeted operating costs. Through 

August 2006, online securities volume 

was 3.3 percent lower than it was 

during the same period last year. For 

full-year 2006, the Reserve Banks 

estimate that online securities volume 

will be 3.0 percent lower than the 2006 

budget projection. The lower-thanbudgeted volume is due to a slowdown 

in mortgage financing. 

2. 2007 Pricing—The Reserve Banks 

will increase the online transfer fee by 

two cents, increase the monthly 

maintenance fee from $15 to $16, and 

raise the offline transfer origination and 

receipt surcharge from $50 to $60. The 


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Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 67617 

47Certain electronic access fees are recorded as 

recoveries that offset the cost of providing these 

services. These fees are for ancillary services, such 

as training and vendor pass-through charges. 

Therefore, these fees are not listed in the electronic 

access 2007 fee schedule below. 

48FedPhone, FedMail, and FedLine are registered 

servicemarks of the Reserve Banks. These 

connections may also be used to access nonpriced 

services provided by the Reserve Banks. FedPhone 

is a free access option. In 2007, Computer Interface 

will become part of the FedLine Direct package. 

49Federal Reserve Regulatory Service (FRRS) 9–

1558. 

increases will more closely align the fee 

and surcharges with the costs of 

providing these services. 

The Reserve Banks project that the 

Fedwire Securities Service will recover 

101.6 percent of total expense and 

targeted ROE in 2007. Total revenue is 

budgeted to increase $1.5 million from 

the 2006 estimate. Total expenses are 

expected to increase $1.6 million from 

the 2006 estimate. The Reserve Banks 

continue to invest in new technologies 

to migrate the Fedwire Securities 

Service applications to a distributed 

processing platform. Online and offline 

securities volumes in 2007 are projected 

to be unchanged against 2006 estimates. 

I. Electronic Access —The Reserve 

Banks allocate the costs and revenues 

associated with electronic access to the 

Reserve Banks’ priced services.47 There 

are currently four types of electronic 

access channels through which 

customers can access the Reserve Banks’

priced services: FedPhone, FedMail, 

FedLine, and Computer Interface 

(mainframe to mainframe).48 For 2007, 

the Reserve Banks will make changes to 

simplify the electronic access pricing 

structure by offering packaged solutions 

that include electronic access and 

accounting information services and 

eliminating a number of discrete service 

fees. 

The Reserve Banks will offer seven 

electronic access packages that are 

supplemented by a number of premium 

(or a` la carte) access and accounting 

information options. The first package 

provides access to information services 

through FedMail E-mail. The next two 

packages are FedLine Web packages, 

with three or five subscribers, that offer 

access to basic information and check 

services. The next two packages are 

FedLine Advantage packages, with three 

or five subscribers, that build upon the 

FedLine Web packages and offer access 

to FedACH and Fedwire services. The 

final two packages are FedLine 

Command and FedLine Direct, which 

allow for unattended connections over 

the Internet or through dedicated 

connections. FedLine Command is 

designed for FedACH functionality, 

while FedLine Direct, which is the 

replacement channel for Computer 

Interface customers, has both FedACH 

and Fedwire functionality. Both 

FedLine Command and FedLine Direct 

build upon the FedLine Advantage 

packages and include most accounting 

information services. The packaging of 

services will allow the Reserve Banks to 

eliminate many of the discrete fees 

associated with electronic access and 

accounting information services, such as 

setup fees, individual subscriber fees, 

and accounting report fees. The seven 

electronic access packages were 

developed based on current usage 

patterns and market studies. 

In addition to the packaging of 

electronic access and accounting 

information services, the Reserve Banks 

will offer other changes to electronic 

access pricing for 2007. In particular, 

the Reserve Banks will begin charging 

$15 per month for FedMail E-mail for 

customers who only use the FedMail Email channel to access the Reserve 

Banks’ priced services. Customers who 

access Reserve Banks’ priced services 

through a FedLine connection will 

receive FedMail E-mail as part of their 

packaged solution. FedMail Fax will 

increase from $15 to $25 and will be 

offered only as a premium option. The 

Reserve Banks also will increase fees on 

FedLine Direct customers. The fee 

increases will be used, in part, to 

recover the costs of building and 

deploying the new Internet Protocolbased FedLine Direct access channel. 

FedLine Direct and the access channel 

that it is replacing, Computer Interface, 

are used by high volume customers, 

which are typically the largest 

depository institutions. 

II. Analysis of Competitive Effect 

All operational and legal changes 

considered by the Board that have a 

substantial effect on payments system 

participants are subject to the 

competitive impact analysis described 

in the March 1990 policy, ‘‘The Federal 

Reserve in the Payments System.’’ 49

Under this policy, the Board assesses 

whether the 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 the change creates such 

an effect, the Board must further 

evaluate the change to assess whether 

its benefits—such as contributions to 

payment system efficiency, payment 

system integrity, or other Board 

objectives—can be retained while 

minimizing the adverse effect on 

competition. 

The Board believes that the 2007 fees, 

fee structures, or changes in service will 

not have a direct and material adverse 

effect on the ability of other service 

providers to compete effectively with 

the Reserve Banks in providing similar 

services. The changes should permit the 

Reserve Banks to earn an ROE that is 

comparable to overall market returns. 

FEDACH SERVICE 2007 FEE

SCHEDULE

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices] 

Fee 

Origination (per item or 

record): 50

Items in small files ......... $0.0030 

Items in large files .......... 0.0025 

Addenda record ............. 0.0010 

Input file processing fee (per 

file):.

2.50 

Receipt (per item or 

record): 51

Item ................................ 0.0025 

Addenda record ............. 0.0010 

Risk Product: 

Risk service subscription 20.00/RTN/ 

month 

Risk origination monitoring criteria.15.00/set of 

criteria/ 

month 

Risk origination monitoring batch.0.0025/batch 

Monthly fee (per routing number): 

Account servicing fee 52 25.00 

FedACH settlement 53 .... 20.00 

Information extract file ... 20.00 

FedLine Web origination returns and notification of 

change (NOC) fee: 54.

0.30 

Voice response returns/NOC 

fee: 55.

2.00 

Non-electronic input/output 

fee: 56

Tape input/output ........... 25.00 

Paper output .................. 15.00 

Facsimile exception returns/NOC 57.15.00 

Canadian cross-border fee: 

Cross-border item surcharge 58.0.039 

Return received from 

Canada 59.

0.77 

Same-day recall of item 

at receiving gateway 

operator.

4.00 

Same-day recall of item 

not at receiving gateway operator.

7.00 

Trace of item at receiving gateway.3.50 

Trace of item not at receiving gateway.5.00 

Mexico service fee: 

Cross-border item surcharge 58.0.67 

Return received from 

Mexico 59.

0.69 


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67618 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 

50Small files contain fewer than 2,500 items and 

large files contain 2,500 or more items. These 

origination fees do not apply to items that the 

Reserve Banks receive from the private-sector ACH 

operator. 

51Receipt fees do not apply to items that the 

Reserve Banks send to the private-sector ACH 

operator. 

52The account servicing fee applies to routing 

numbers that have received or originated FedACH 

transactions. Institutions that receive only U.S. 

government transactions or that elect to use the 

other operator exclusively are not assessed the 

account servicing fee. 

53The FedACH settlement fee is applied to any 

routing number with activity during a month. This 

fee does not apply to routing numbers that use the 

Reserve Banks for government transactions only. 

54The fee includes the transaction and addenda 

fees. 

55The fee includes the transaction fee in addition 

to the voice response fee. 

56These services are offered for contingency 

situations only. 

57The fee includes the transaction fee in addition 

to the conversion fee. 

58This per-item surcharge is in addition to the 

standard domestic origination and input file 

processing fees. 

59This per-item surcharge is in addition to the 

standard domestic receipt fees. 

60This minimum monthly charge will only be 

assessed if total settlement charges during a 

calendar month are less than $60. 

61Special settlement arrangements use Fedwire 

funds transfers to effect settlement. Participants in 

arrangements and settlement agents are also 

charged the applicable Fedwire funds transfer fee 

for each transfer into and out of the settlement 

account. 

FEDACH SERVICE 2007 FEE

SCHEDULE—Continued 

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices] 

Fee 

Item trace ....................... 11.50 

Transatlantic service fee: 

Cross-border item surcharge 58.

Austria ..................... 2.00 

Germany ................. 2.00 

FEDACH SERVICE 2007 FEE

SCHEDULE—Continued 

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices] 

Fee 

The Netherlands ..... 2.00 

Switzerland ............. 2.00 

United Kingdom ...... 2.00 

Return received 59.

Austria ..................... 5.00 

Germany ................. 8.00 

FEDACH SERVICE 2007 FEE

SCHEDULE—Continued 

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices] 

Fee 

The Netherlands ..... 5.00 

Switzerland ............. 5.00 

United Kingdom ...... 8.00 

FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES 2007 FEE SCHEDULE

[Effective January 2, 2007. Bold indicates changes from 2006 prices.] 

Fee 

Fedwire Funds Service 

Basic volume-based transfer fee (originations and receipts).

Per transfer for the first 2,500 transfers per month ..................................................................................................................... $0.29 

Per transfer for additional transfers up to 80,000 per month ...................................................................................................... 0.19 

Per transfer for every transfer over 80,000 per month ................................................................................................................ 0.09 

Surcharge for offline transfers (originations and receipts) .................................................................................................................. 30.00 

National Settlement Service 

Basic : 

Settlement entry fee ..................................................................................................................................................................... $0.80 

Settlement file fee ......................................................................................................................................................................... 14.00 

Surcharge for offline file origination ..................................................................................................................................................... 25.00 

Minimum monthly charge (account maintenance) 60 ........................................................................................................................... 60.00 

Special settlement arrangements 61.

Fee per day .................................................................................................................................................................................. 100.00 

FEDWIRE SECURITIES SERVICE 2007 

FEE SCHEDULE (NON-TREASURY SECURITIES) 

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices.] 

Fee 

Basic transfer fee.

Transfer or reversal 

originated or received $0.34 

Surcharge.

FEDWIRE SECURITIES SERVICE 2007 

FEE SCHEDULE (NON-TREASURY SECURITIES)—Continued 

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices.] 

Fee 

Offline transfer or reversal originated or received ......................... 60.00 

Monthly maintenance fees.

Account maintenance 

(per account) .............. 16.00 

FEDWIRE SECURITIES SERVICE 2007 

FEE SCHEDULE (NON-TREASURY SECURITIES)—Continued 

[Effective January 2, 2007. Bold indicates 

changes from 2006 prices.] 

Fee 

Issues maintained (per 

issue/per account) ..... 0.40 

Claim adjustment fee ............ 0.30 

Joint custody fee .................. 40.00 

ELECTRONIC ACCESS 2007 FEE SCHEDULE

[Effective January 2, 2007 (unless otherwise indicated). Bold indicates changes from 2006 prices.] 

Electronic Access Packages (monthly): 

FedMail E-mail .......................................................................................... $15.00 

FedLine Web W3 Includes: ...................................................................... 80.00 


pwalker on PROD1PC61 with NOTICES
Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 67619 

ELECTRONIC ACCESS 2007 FEE SCHEDULE—Continued 

[Effective January 2, 2007 (unless otherwise indicated). Bold indicates changes from 2006 prices.] 

FedMail E-mail.

FedLine Web with three individual subscriptions.

Service Charge Information (SCI).

Account Management Information (AMI).

* Premium options limited to FedMail Fax and electronic access 

training.

FedLine Web W5 Includes: ...................................................................... 125.00 

FedMail E-mail.

FedLine Web with five individual subscriptions.

Service Charge Information (SCI).

Account Management Information (AMI).

Cash Management System Basic—Own report only.

FedLine Advantage A3 Includes: ............................................................. 300.00 

FedLine Web W3 package.

FedLine Advantage with three individual subscriptions.

Virtual Private Network (VPN) maintenance.

* Premium options limited to FedMail Fax and electronic access 

training.

FedLine Advantage A5 Includes: ............................................................. 350.00 

FedLine Web W5 package.

FedLine Advantage with five individual subscriptions.

VPN maintenance.

Intraday search download feature within AMI.

FedLine Command Includes: ................................................................... 650.00 

FedLine Advantage A5 package.

One dedicated unattended connection over the Internet for ACH 

services 

Billing Data Format File (BDFF) 

Intra-Day File 

End-of-Day File (FIRD) 

Statement of Account Spreadsheet File (SASF) 

FedLine Direct D56, D256, DT1 Includes: ............................................... D56 $2,000.00, D256 $3,000.00, and DT1 $3,500.00 

FedLine Command package 

One dedicated unattended connection for Computer Interface or 

FedLine Direct 

Premium Options: 

Electronic Access 

FedMail Fax (monthly per fax line) .......................................................... 25.00 

Additional subscribers package (each package contains 5 additional 

subscribers).

75.00 

Maintenance of additional VPN ................................................................ 50.00 

Additional dedicated connections 62

Primary: ............................................................................................. 56K—750.00 

256K—1,750.00 

T1—2,250.00 

Contingency: ...................................................................................... 56K—650.00 

256K—1,650.00 

T1—2,150.00 

FedImage/Check 21 Large File Delivery .................................................. Various 

Accounting Information Services 

Cash Management System 

Basic—Respondent and/or subaccount reports (per report/month) 7.00 

Basic—Respondent/subaccount recap report (per month) ............... 35.00 

Plus—Own report up to six times a day (per month) ....................... 50.00 

Plus—Fewer than 10 respondent and/or subaccounts and SASF 

(per month).

100.00 

Plus—10 or more respondent and/or subaccounts and SASF (per 

month).

200.00 

End-of-day reconcilement file (FIRD) (per month) ................................... 100.00 

Statement of account spreadsheet file (SASF) (per month) .................... 100.00 

Intraday search download file (per month) .............................................. 100.00 


pwalker on PROD1PC61 with NOTICES
67620 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 

62Network diversity supplemental charge of 

$1,000 a month may apply in addition to these fees. 

By order of the Board of Governors of the 

Federal Reserve System, November 14, 2006. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. 06–9333 Filed 11–21–06; 8:45 am] 

BILLING CODE 6210–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

Notification and Obligation of the 

Federal Employee Antidiscrimination 

and Retaliation Act of 2002 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Notice. 

SUMMARY: This notice announces the 

notification and obligation of the 

Federal Employee Antidiscrimination 

and Retaliation Act of 2002 (No Fear 

Act). This notice is in compliance with 

the notification provisions set forth in 

Title II of the Notification and Federal 

Employee Antidiscrimination and 

Retaliation Act of 2002. The No FEAR 

Act requires that all Federal agencies 

publish an initial notice in the Federal 

Register informing Federal employees, 

former Federal employees, and 

applicants of the rights and protections 

available to them under Federal 

antidiscrimination and whistleblower 

protection laws. 

EFFECTIVE DATE: This notice is effective 

on September 18, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Arlene E. Austin, Director, Office of 

Equal Opportunity and Civil Rights, at 

(410) 786–5110 (voice), (410) 786–9549 

(fax), or (410) 786–2456 (TTY); or Anita 

Pinder, Special Assistant, Office of 

Equal Opportunity and Civil Rights, at 

(410) 786–5493 (voice), (410) 786–9549 

(fax), or (410) 786–2456 (TTY) (These 

are not toll free numbers). 

Special Accomodations: This notice 

also is available in the following 

formats: Large print, audio tape, 

electronic file on computer disk, and on 

CMS’s Web page http:// 

www.cms.hhs.gov. Requests for this 

notice in an alternative format should be 

made to CMS’s Office of Strategic 

Operations and Regulatory Affairs, 

Regulations Development Group at 1–

800–743–3951 (voice), 1–866–226–1819 

(TTY), or (410) 786–3064 (fax) (The fax 

is not a toll free number). 

Additional Information: For 

additional information regarding the No 

FEAR Act regulations, refer to 5 CFR 

part 724, as well as the appropriate 

offices within your agency (for example, 

Office of Equal Opportunity and Civil 

Rights at 410–786–5110). Additional 

information regarding Federal 

antidiscrimination, whistleblower 

protection, and retaliation laws can be 

found at the EEOC Web site—http:// 

www.eeoc.gov and the OSC Web site—

http://www.osc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On May 15, 2002, the Congress 

enacted the ’’Notification and Federal 

Employee Antidiscrimination and 

Retaliation Act of 2002,’’ which is now 

known as the No FEAR Act. One 

purpose of the Act is to ‘‘require that 

Federal agencies be accountable for 

violations of antidiscrimination and 

whistleblower protection laws.’’ In 

support of this purpose, the Congress 

found that ‘‘agencies cannot be run 

effectively if those agencies practice or 

tolerate discrimination.’’ The No Fear 

Act also requires all agencies to provide 

this notice to Federal employees, former 

Federal employees, and applicants for 

Federal employment to inform 

employees or applicants of the rights 

and protections available under the 

Federal antidiscrimination and 

whistleblower protection laws. 

II. Antidiscrimination Laws 

A Federal agency cannot discriminate 

against an employee or applicant with 

respect to the terms, conditions or 

privileges of employment on the basis of 

race, color, religion, sex, national origin, 

age, disability, marital status or political 

affiliation. Discrimination on these 

bases is prohibited by one or more of the 

following statutes: 5 U.S.C. 2302(b) (1), 

29 U.S.C. 206(d), 29 U.S.C. 631, 29 

U.S.C. 633a, 29 U.S.C. 791, and 42 

U.S.C. 2000e–16. If you believe that you 

have been the victim of unlawful 

discrimination on the basis of race, 

color, religion, sex, national origin, or 

disability, you must contact an Equal 

Employment Opportunity (EEO) 

counselor within 45 calendar days of 

the alleged discriminatory action, or, in 

the case of a personnel action, within 45 

calendar days of the effective date of the 

action, before you can file a formal 

complaint of discrimination with this 

Agency. See, for example, 29 CFR 1614. 

If you believe that you have been the 

victim of unlawful discrimination on 

the basis of age, you must either contact 

an EEO counselor as noted above or give 

notice of intent to sue to the Equal 

Employment Opportunity Commission 

(EEOC) within 180 calendar days of the 

alleged discriminatory action. If you are 

alleging discrimination based on marital 

status or political affiliation, you may 

file a written complaint with the U.S. 

Office of Special Counsel (OSC) (see 

contact information below). In the 

alternative (or in some cases, in 

addition), you may pursue a 

discrimination complaint by filing a 

grievance through this Agency’s 

administrative or negotiated grievance 

procedures, if such procedures apply 

and are available. 

III. Whistleblower Protection Laws 

A Federal employee who has 

authority with respect to personnel 

actions must not take action against an 

employee or applicant because of 

disclosure of information by that 

individual that is reasonably believed to 

evidence violations of law, rule, or 

regulation; gross mismanagement; gross 

waste of funds; an abuse of authority; or 

a substantial and specific danger to 

public health or safety, unless 

disclosure of the information is 

specifically prohibited by law and the 

information is specifically required by 

Executive order to be kept secret in the 

interest of national defense or the 

conduct of foreign affairs. Retaliation 

against an employee or applicant for 

making a protected disclosure is 

prohibited by 5 U.S.C. 2302(b)(8). If you 

believe that you have been the victim of 

whistleblower retaliation, you may file 

a written complaint (Form OSC–11) 

with the U.S. Office of Special Counsel 

at 1730 M Street NW., Suite 218, 

Washington, DC 20036–4505 or online 

through the OSC Web site—http:// 

www.osc.gov. 

IV. Retaliation for Engaging in 

Protected Activity 

A Federal agency cannot retaliate 

against an employee or applicant 

because that individual exercises his or 

her rights under any of the Federal 

antidiscrimination or whistleblower 

protection laws listed above. If you 

believe that you are the victim of 

retaliation for engaging in protected 

activity, you must follow, as 

appropriate, the procedures described in 

the Antidiscrimination Laws and 

Whistleblower Protection Laws sections 

or, if applicable, the administrative or 

negotiated grievance procedures in 

order to pursue any legal remedy. 

V. Disciplinary Actions 

Under the existing laws, each agency 

retains the right, where appropriate, to 

discipline a Federal employee for 

conduct that is inconsistent with 

Federal Antidiscrimination and 


pwalker on PROD1PC61 with NOTICES