21854 Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations 

provided in § 204.5(e), are subject to 

deficiency charges. Federal Reserve 

Banks are authorized to assess charges 

for deficiencies at a rate of 1 percentage 

point per year above the primary credit 

rate, as provided in § 201.51(a) of this 

chapter, in effect for borrowings from 

the Federal Reserve Bank on the first 

day of the calendar month in which the 

deficiencies occurred. Charges shall be 

assessed on the basis of daily average 

deficiencies during each maintenance 

period. 

(b) Reserve Banks may waive the 

charges for deficiencies except when the 

deficiency arises out of a depository 

institution’s gross negligence or conduct 

that is inconsistent with the principles 

and purposes of reserve requirements. 

Decisions by Reserve Banks to waive 

charges are based on an evaluation of 

the circumstances in each individual 

case and the depository institution’s 

reserve maintenance record. For 

example, a waiver may be appropriate 

for a small charge or once during a twoyear period for a deficiency that does 

not exceed a certain percentage of the 

depository institution’s reserve 

requirement. If a depository institution 

has demonstrated a lack of due regard 

for the proper maintenance of balances 

to satisfy its reserve balance 

requirement, the Reserve Bank may 

decline to exercise the waiver privilege 

and assess all charges regardless of 

amount or reason for the deficiency. 

* * * * * 

■ 9. Effective January 24, 2013, § 204.6 

is further amended by revising 

paragraphs (a) and (b) to read as follows: 

§ 204.6 Charges for deficiencies. 

(a) Federal Reserve Banks are 

authorized to assess charges for 

deficiencies at a rate of 1 percentage 

point per year above the primary credit 

rate, as provided in § 201.51(a) of this 

chapter, in effect for borrowings from 

the Federal Reserve Bank on the first 

day of the calendar month in which the 

deficiencies occurred. Charges shall be 

assessed on the basis of daily average 

deficiencies during each maintenance 

period. 

(b) Reserve Banks may waive the 

charges for deficiencies based on an 

evaluation of the circumstances in each 

individual case. 

* * * * * 

■ 10. Effective July 12, 2012, § 204.10 is 

amended by revising paragraphs (b)(1), 

(b)(3), (c), (d)(3) and (e)(2) to read as 

follows: 

§ 204.10 Payment of interest on balances. 

* * * * * 

(b) * * * 

(1) For balances maintained to satisfy 

reserve balance requirements, at 1⁄4

percent; 

* * * * * 

(3) For balances maintained to satisfy 

reserve balance requirements, excess 

balances, and term deposits, at any 

other rate or rates as determined by the 

Board from time to time, not to exceed 

the general level of short-term interest 

rates. For purposes of this paragraph (b), 

‘‘short-term interest rates’’ are rates on 

obligations with maturities of no more 

than one year, such as the primary 

credit rate and rates on term federal 

funds, term repurchase agreements, 

commercial paper, term Eurodollar 

deposits, and other similar instruments. 

(c) Pass-through balances. A passthrough correspondent that is an eligible 

institution may pass back to its 

respondent interest paid on balances 

maintained to satisfy a reserve balance 

requirement of that respondent. In the 

case of balances maintained by a passthrough correspondent that is not an 

eligible institution, a Reserve Bank shall 

pay interest only on the balances 

maintained to satisfy a reserve balance 

requirement of one or more 

respondents, and the correspondent 

shall pass back to its respondents 

interest paid on balances in the 

correspondent’s account. 

(d) * * * 

(3) Balances maintained in an excess 

balance account will not satisfy any 

institution’s reserve balance 

requirement. 

* * * * * 

(e) * * * 

(2) A term deposit will not satisfy any 

institution’s reserve balance 

requirement. 

* * * * * 

■ 11. Effective January 24, 2013, 

§ 204.10 is further amended by revising 

paragraphs (b)(1), (b)(3), and (c) to read 

as follows: 

§ 204.10 Payment of interest on balances. 

* * * * * 

(b) * * * 

(1) For balances up to the top of the 

penalty-free band, at 1⁄4 percent; 

* * * * * 

(3) For balances up to the top of the 

penalty-free band, excess balances, and 

term deposits, at any other rate or rates 

as determined by the Board from time 

to time, not to exceed the general level 

of short-term interest rates. For purposes 

of this subsection, ‘‘short-term interest 

rates’’ are rates on obligations with 

maturities of no more than one year, 

such as the primary credit rate and rates 

on term federal funds, term repurchase 

agreements, commercial paper, term 

Eurodollar deposits, and other similar 

instruments. 

(c) Pass-through balances. A passthrough correspondent that is an eligible 

institution may pass back to its 

respondent interest paid on balances 

maintained to satisfy a reserve balance 

requirement of that respondent. In the 

case of balances maintained by a passthrough correspondent that is not an 

eligible institution, a Reserve Bank shall 

pay interest only on the balances 

maintained to satisfy a reserve balance 

requirement of one or more respondents 

up to the top of the penalty-free band, 

and the correspondent shall pass back to 

its respondents interest paid on 

balances in the correspondent’s account. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, April 5, 2012. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. 2012–8562 Filed 4–11–12; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 210 

[Regulation J; Docket No. R–1434] 

RIN 7100 AD 84 

Collection of Checks and Other Items 

by Federal Reserve Banks and Funds 

Transfers Through Fedwire: 

Elimination of ‘‘As-of Adjustments’’ 

and Other Clarifications 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board is amending 

Regulation J (Collection of Checks and 

Other Items by Federal Reserve Banks 

and Funds Transfers through Fedwire). 

The final rule eliminates references to 

‘‘as-of adjustments’’ consistent with the 

Board’s final amendments to Regulation 

D to simplify reserves administration; 

clarifies that an institution’s 

Administrative Reserve Bank is deemed 

to have accepted deposit of a check or 

other item even if the institution sends 

the item directly to another Federal 

Reserve Bank; further clarifies that 

Regulation J continues to apply to a 

Fedwire funds transfer even if the funds 

transfer also meets the definition of 

‘‘remittance transfer’’ under the 

Electronic Fund Transfer Act; and 

makes other conforming revisions. 

DATES: This final rule is effective July 

12, 2012. 

FOR FURTHER INFORMATION CONTACT: Kara 

Handzlik, Senior Attorney (202) 452– 


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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations 21855 

1The proposed amendments to Regulation D were 

published in the Federal Register on October 18, 

2011 (76 FR 64250). The Board proposed to 

discontinue the use of as-of adjustments for deposit 

report revisions and to replace all other as-of 

adjustments with direct compensation, create a 

common two-week maintenance period for all 

depository institutions, create a penalty-free band 

around reserve balance requirements in place of 

carryover and routine waivers, and eliminate the 

contractual clearing balance program. 2 12 CFR 210.26(b). 

3Article 4A–506(b) states that if the amount of 

interest is not determined by an agreement or rule, 

the applicable federal funds rate would apply. 

3852, Legal Division; Margaret Gillis 

DeBoer, Assistant Director (202) 452– 

3139, or Heather Wiggins, Senior 

Financial Analyst (202) 452–3674, 

Division of Monetary Affairs; or Joseph 

Baressi, Project Leader, Division of 

Reserve Bank Operations and Payment 

Systems (202) 452–3959; for users of 

Telecommunications Device for the Deaf 

(TDD) only, contact (202) 263–4869; 

Board of Governors of the Federal 

Reserve System, 20th and C Streets, 

NW., Washington, DC 20551. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Subpart A of Regulation J governs the 

collection of checks and other items by 

the Federal Reserve Banks (Reserve 

Banks), including the types of checks or 

other items that may be sent to Reserve 

Banks, the order in which they are 

deemed to be handled, and the related 

warranties and indemnities. Subpart B 

of Regulation J sets forth the terms and 

conditions under which Reserve Banks 

receive and deliver payment orders from 

and to depository institutions over the 

Reserve Banks’ Fedwire® Funds Service 

(Fedwire). 

On October 18, 2011, the Board 

proposed amendments to Regulation J, 

including the elimination of references 

throughout Regulation J to a Reserve 

Bank’s use of ‘‘as-of adjustments’’ (76 

FR 64259). The Board proposed these 

amendments, in part, to conform to 

proposed amendments to Regulation D 

(12 CFR part 204) to simplify reserves 

administration.1 The Board also 

proposed amendments to subpart A of 

Regulation J to clarify where a check or 

other item is deemed to be accepted 

when it is sent to a Reserve Bank. 

Specifically, the proposal clarified that 

when an institution sends a check or 

other item for collection to a Reserve 

Bank, the institution’s Administrative 

Reserve Bank is deemed to have 

accepted deposit of the item even if the 

item was sent directly to another 

Reserve Bank. In addition, the Board 

proposed amendments to clarify that 

subpart B of Regulation J continues to 

apply to a Fedwire funds transfer even 

if that funds transfer also meets the 

definition of ‘‘remittance transfer’’ 

under the recently revised Electronic 

Fund Transfer Act (‘‘EFTA’’). After 

consideration of the comments received, 

the Board is adopting the amendments 

to Regulation J as proposed. 

II. Request for Public Comment and 

Summary of Comments Received 

The Board requested public comment 

on its October 2011 proposal to amend 

Regulation J. The Board received a total 

of eight comments from six financial 

institution trade associations, one 

depository institution, and one 

association of depository institutions. 

Commenters generally expressed 

support for the proposed amendments, 

although some were concerned with 

various aspects of the proposal and 

provided support contingent on certain 

conditions. These comments are 

discussed in more detail below. 

III. Analysis of Proposed 

Simplifications and Comments 

Eliminate References to As-of 

Adjustments 

Regulation J defines ‘‘as-of 

adjustment’’ for purposes of subpart B of 

the regulation as ‘‘a debit or credit, for 

reserve- or clearing-balance 

maintenance purposes only, applied to 

the reserve or clearing balance of a bank 

that either sends a payment order to a 

Federal Reserve Bank, or that receives a 

payment order from a Federal Reserve 

Bank, in lieu of an interest charge or 

payment.’’ 2 Regulation J currently 

permits a Reserve Bank to use either an 

as-of adjustment or direct compensation 

(at the federal funds rate) to compensate 

for an error in transaction processing or 

other damages owed in connection with 

a Fedwire funds transfer. Regulation J 

further provides in subpart A that a 

Reserve Bank’s operating circulars may 

include procedures for paying interest 

in the form of as-of adjustments in 

relation to the collection of checks and 

other items. 

As noted above, the Board proposed 

to amend Regulation D to simplify the 

rules governing the administration of 

reserve requirements. The proposed 

Regulation D amendments included 

discontinuing as-of adjustments related 

to deposit report revisions and replacing 

all other as-of adjustments with direct 

compensation in the form of either a 

debit or credit applied to an account to 

offset the effect of an error. Consistent 

with its Regulation D proposal, the 

Board proposed to amend Regulation J 

§§ 210.3(a), 210.26(b), and 210.32(b) 

(along with the corresponding 

commentary) to eliminate references to 

as-of adjustments. Under the Board’s 

Regulation J proposal, a Reserve Bank 

would continue to be able to pay direct 

compensation to a depository institution 

based on the federal funds rate in 

accordance with § 210.32(b), which 

incorporates by reference section 4A– 

506 of article 4A of the Uniform 

Commercial Code (UCC).3 The Board 

specifically requested comment on the 

following two items: whether use of the 

federal funds rate for the calculation of 

direct compensation is appropriate, and 

if not, the rate that the Board should 

use, and whether the Board should 

eliminate § 210.32(b)(1) of Regulation J 

entirely, as the Reserve Banks could 

simply pay direct compensation based 

on the provisions of UCC section 4A– 

506, which is already incorporated into 

Regulation J. 

The Board received eight comments 

concerning the elimination of references 

to as-of adjustments. Commenters 

generally supported this amendment. 

One commenter requested that the debit 

or credit entry post directly to the 

account bearing the routing number of 

the original transaction and that the 

supporting documentation be forwarded 

directly to the depository institution 

holding that account. Two commenters 

conditioned their support of this change 

on Reserve Banks continuing to provide 

depository institutions with information 

on the error that occurred and the 

calculation of the compensation 

amount. With respect to compensation 

at the federal funds rate, one commenter 

stated that the federal funds rate should 

be used while another commenter stated 

that the rate for calculating the 

compensation amount should be at least 

equal to the federal funds rate. With 

respect to the elimination of 

§ 210.32(b)(1), one commenter 

recommended that the Board eliminate 

this section entirely and allow the 

Reserve Banks to pay direct 

compensation based on the provisions 

of UCC section 4A–506, which is 

already incorporated into Regulation J. 

The Board is adopting §§ 210.3(a), 

210.26(b), and 210.32(b) as proposed 

(along with the corresponding 

commentary). These final amendments 

correspond to the Board’s adoption of 

final amendments to Regulation D to 

discontinue as-of adjustments related to 

deposit report revisions and to replace 

all other as-of adjustments with direct 

compensation. Under the final rules, the 

federal funds rate will be used for the 

calculation of direct compensation. The 

Board believes that the federal funds 

rate is the appropriate rate for direct 

compensation in order to ensure that a 


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21856 Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations 

4An institution’s Administrative Reserve Bank is 

the Reserve Bank in whose District the institution 

is located. 12 CFR 210.2(c), see section 204.3(g) of 

Regulation D, 12 CFR 204.3(g) (location of 

depository institutions). 

5 12 U.S.C. 342 and 360. 

6 12 CFR 210.25(b)(3). 

7 15 U.S.C. 1693a(6)(B). 

8See the Consumer Financial Protection Bureau’s 

final amendments to Regulation E (12 CFR part 

1005) to implement section 919 of the EFTA (77 FR 

6194 (Feb. 7, 2012)). 

9 77 FR 6194 (February 7, 2012). 

depository institution does not gain or 

lose in its position as a result of 

accounting or administrative errors or 

delays in transaction processing by 

Reserve Banks. The Board believes it is 

prudent to retain § 210.32(b)(1) to give 

appropriate context to the subsequent 

provision, § 210.32(b)(2), which 

concerns the pass-through of 

compensation to the appropriate party. 

Under § 210.32(b)(2), an institution that 

receives a compensation payment but is 

not the party entitled to compensation 

would continue to be required to pass 

the benefit of that payment through to 

the party entitled to compensation, 

computed as the value of the payment 

as if it had been passed through to the 

entitled party on the day the Reserve 

Bank effected payment to the 

institution. The Board anticipates that 

the Reserve Banks will make the 

appropriate information and 

documentation available to depository 

institutions as may be needed to permit 

institutions to reconcile accounts and 

allocate charges or payments. For 

example, information will be available 

that helps describe the calculation of 

direct compensation entries including 

the error amount, the start and end date 

of the error, and identification of the 

originating service area. The Board also 

anticipates that Reserve Banks will 

provide institutions with contact 

information for service areas processing 

direct compensation entries so that 

inquiries can be addressed. 

Acceptance of Deposits of Items 

Section 210.4 of Regulation J governs 

the sending and handling of checks and 

other items sent to Reserve Banks. The 

Reserve Banks have long permitted 

institutions to send checks to a Reserve 

Bank other than the institution’s 

Administrative Reserve Bank. These 

‘‘direct sends’’ facilitate a more efficient 

check-collection process. Section 210.4 

currently specifies the identity and 

order of the parties that are deemed to 

handle a check or other item, whether 

it is deposited electronically or in paper 

form, that is sent to a Reserve Bank for 

purposes of determining the rights and 

liabilities of the parties under 

Regulation J, Regulation CC (12 CFR 

part 229), and the UCC. Specifically, 

§ 210.4 provides that, for an item sent to 

a Reserve Bank for collection, the 

following parties are deemed to have 

handled the item in the following order: 

(1) The initial sender; (2) the initial 

sender’s Administrative Reserve Bank; 4

(3) the Reserve Bank that receives the 

item from the initial sender (if different 

from the initial sender’s Administrative 

Reserve Bank); and (4) another Reserve 

Bank, if any, that receives the item from 

a Reserve Bank. 

The Board proposed to amend 

§ 210.4(b)(1)(ii) to clarify that, when an 

Administrative Reserve Bank is deemed 

to have ‘‘handled’’ a check sent directly 

to another Reserve Bank, such 

‘‘handling’’ of an item includes 

accepting the item for deposit. Thus, for 

purposes of determining the rights and 

liabilities of parties that send and 

handle checks and other items sent to a 

Reserve Bank, the Administrative 

Reserve Bank is deemed to have 

accepted deposit of the item from the 

initial sender even if the sender sends 

the item directly to another Reserve 

Bank. The Board further proposed to 

clarify in § 210.4(b)(3) that, in addition 

to Regulation J, Regulation CC, and the 

UCC, the identity and order of the 

parties in § 210.4(b) also determines the 

relationships and the rights and 

liabilities of the parties for purposes of 

sections 13(1) and 16(13) of the Federal 

Reserve Act, which govern deposits to 

Reserve Banks.5

The Board received six comments 

supporting this clarification and no 

comments opposing the clarification. 

The Board is adopting this clarification 

as proposed. 

Application of Regulation J to 

‘‘Remittance Transfers’’ 

As noted above, Fedwire funds 

transfers are governed by subpart B of 

Regulation J. More specifically, subpart 

B of Regulation J currently ‘‘governs a 

funds transfer that is sent through 

Fedwire * * * even though a portion of 

the funds transfer is governed by the 

Electronic Fund Transfer Act [EFTA], 

but the portion of such funds transfer 

that is governed by the [EFTA] is not 

governed by’’ Regulation J.6 This 

provision is slightly different from (and 

supersedes) the scope of UCC Article 

4A–108, which provides that Article 4A 

does not apply ‘‘to a funds transfer, any 

part of which is governed by the 

[EFTA].’’ Prior to the adoption of the 

recently enacted Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Dodd-Frank Act), the exclusion 

from Regulation J and Article 4A of 

transactions governed by the EFTA did 

not create any gaps or overlap because 

the EFTA excluded from the definition 

of ‘‘electronic fund transfer’’ wire 

transfers over systems that are not 

designed primarily for consumer 

transfers (such as Fedwire).7 The DoddFrank Act, however, added new section 

919 to the EFTA, which defines 

‘‘remittance transfer’’ to include an 

electronic transfer of funds requested by 

a U.S. consumer sender through a 

remittance transfer provider, whether or 

not the remittance transfer is also an 

electronic fund transfer as defined in 

the EFTA. Therefore, a Fedwire funds 

transfer could potentially be part of a 

remittance transfer under the new 

section 919 of the EFTA.8 Consequently, 

under Regulation J’s current scope 

provision (§ 210.25(b)(3)), Fedwire 

funds transfers that meet the EFTA’s 

definition of ‘‘remittance transfer’’ could 

be viewed as ‘‘governed by’’ the EFTA 

and therefore not governed by 

Regulation J. 

To avoid a gap in coverage for 

Fedwire funds transfers, the Board 

proposed to amend § 210.25 of 

Regulation J to clarify that Regulation J 

continues to apply to ‘‘remittance 

transfers’’ as defined by the EFTA, to 

the extent there is not an inconsistency 

between Regulation J and section 919 of 

the EFTA (in which case section 919 

would prevail). The proposed 

clarification was intended to ensure that 

the provisions of Regulation J, and 

therefore Article 4A of the UCC, apply 

to all Fedwire funds transfers, except to 

the extent that section 919 of the EFTA 

and rules established thereunder apply. 

The proposal included clarifications in 

the commentary to § 210.25 as well. 

Commenters generally supported this 

clarification; however, three 

commenters requested that the Board 

coordinate with the Consumer Financial 

Protection Bureau (CFPB) before 

finalizing this rule due to outstanding 

issues regarding the ‘‘remittance 

transfer’’ final rule. Another commenter 

supported the proposal but pointed out 

that although this amendment will 

clarify the application of Regulation J 

for Fedwire transactions, the 

clarification will not apply to nonFedwire wire transfers governed by 

Article 4A. 

The Board is adopting the 

clarification to Regulation J as proposed. 

At the time the Board published the 

related proposal for this rulemaking, the 

CFPB had yet to finalize amendments to 

Regulation E to implement section 919 

of the EFTA. The CFPB has since 

finalized this rulemaking.9 The CFPB’s 

final rule includes a discussion on the 


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10 Id. at 6211–6212. 

11See ‘‘The Federal Reserve in the Payments 

System,’’ Fed. Res. Reg. Svc. ¶¶ 9–1550, 9–1558 

(Apr. 2009). 

relationship between the EFTA and 

Article 4A of the UCC.10

Conforming Revisions 

The Board is making non-substantive 

changes in §§ 210.2, 210.10, and 210.11 

to conform terminology to the final 

amendments in Regulation D 

concerning the use of various reserverelated terms. Regulation J § 210.2(a) 

currently defines the term ‘‘account’’ as 

an account with reserve or clearing 

balances on the books of a Federal 

Reserve Bank. Consistent with the 

Regulation D final rulemaking, the 

Board is amending § 210.2(a) to refer 

simply to balances on the books of a 

Federal Reserve Bank. In addition, 

Regulation J §§ 210.10 and 210.11, 

which concern the availability of credit 

to depository institutions, currently 

refer to ‘‘reserve.’’ Section 210.11(a), for 

example, states that a Reserve Bank 

shall provide credit of a noncash item 

when it receives payment in actually 

and finally collected funds and that the 

amount of such noncash item ‘‘is 

counted as reserve for purposes’’ of 

Regulation D. Consistent with the final 

amendments to Regulation D, the Board 

is amending §§ 210.10(a) and 210.11(a), 

(b), and (c) by replacing the term 

‘‘reserve’’ with ‘‘balance maintained to 

satisfy a reserve balance requirement.’’ 

Effective Date 

The Board proposed that the effective 

date for the elimination of references to 

as-of adjustments be the same as the 

effective date of the corresponding 

amendments to Regulation D (no earlier 

than the first quarter of 2012). The 

Board proposed an effective date of 30 

days after adoption of the final rule for 

the other clarifications. The Board 

received three comments concerning the 

proposed effective dates. Two of these 

commenters requested that the effective 

date of the changes be staggered, with a 

delayed effective date for the first 

change of at least nine months. One of 

these commenters stated that the 

elimination of references to ‘‘as-of 

adjustments’’ be made in conjunction 

with the changes in Regulation D and 

made effective no earlier than the first 

quarter of 2013. This commenter also 

recommended that the two clarifications 

be made effective no earlier than the 

first quarter of 2013 because banks have 

already established their change 

management plans for 2012 and the 

clarifications will require additional 

changes to policies and procedures. 

The Board is setting the effective date 

for the elimination of ‘‘as-of 

adjustments’’ and changes to reserve 

terminology as July 12, 2012. This is the 

same effective date as that which has 

been finalized for the corresponding 

amendments to Regulation D. The Board 

is setting the effective date for the other 

two clarifications also as July 12, 2012. 

Given that these amendments will not 

require institutions to take any action or 

incur any cost, the Board believes this 

date is appropriate. 

IV. Competitive Impact Analysis 

As a matter of policy, the Board 

subjects all operational and legal 

changes that could have a substantial 

effect on payment system participants to 

a competitive impact analysis.11

Pursuant to this policy, the Board 

assesses whether proposed changes 

‘‘would have a direct and material 

adverse effect on the ability of other 

service providers to compete effectively 

with the Federal Reserve in providing 

similar services due to differing legal 

powers or constraints or because of a 

dominant market position of the Federal 

Reserve deriving from such legal 

differences.’’ If as a result of this 

analysis the Board identifies an adverse 

effect on the ability to compete, the 

Board then assesses whether the 

associated benefits—such as 

improvements to payment system 

efficiency or integrity—can be achieved 

while minimizing the adverse effect on 

competition. 

The final amendments that eliminate 

the use of as-of adjustments require 

Reserve Banks to pay compensation in 

the form of explicit interest under UCC 

Article 4A–506, as is required of private 

sector service providers. The final 

amendments to section 210.4, clarifying 

the status of the Administrative Reserve 

Bank of a sender of a check, does not 

affect the competitive position of the 

Reserve Banks vis-a`-vis private-sector 

service providers. With respect to the 

final amendments to section 210.25 

(clarifying the applicability of 

Regulation J to remittance transfers as 

defined in the Electronic Fund Transfer 

Act), private-sector funds transfer 

systems may have the ability to adopt 

clearing-house rules that will vary the 

Uniform Commercial Code, although the 

extent to which this variation may occur 

remains unclear. Nevertheless, the 

Board does not believe this difference in 

certainty with respect to a small subset 

of funds transfers will have a material 

adverse effect on the ability of other 

service providers to compete with the 

Reserve Banks. Therefore, as noted in 

the proposal, the Board does not believe 

the amendments to Regulation J will 

have any direct and material adverse 

effect on the ability of other service 

providers to compete with the Reserve 

Banks. 

V. Final Regulatory Flexibility Analysis 

Congress enacted the Regulatory 

Flexibility Act (the ‘‘RFA’’) (5 U.S.C. 

601 et seq.) to address concerns related 

to the effects of agency rules on small 

entities and the Board is sensitive to the 

impact its rules may impose on small 

entities. The RFA requires agencies 

either to provide an initial regulatory 

flexibility analysis with a proposed rule 

or to certify that the proposed rule will 

not have a significant economic impact 

on a substantial number of small 

entities. In accordance with section 3(a) 

of the RFA, the Board reviewed the 

proposed regulation. In this case, the 

rule applies to all depository 

institutions. Based on current 

information, the Board believes that the 

rule would not have a significant 

economic impact on a substantial 

number of small entities (5 U.S.C. 

605(b)). Nonetheless, the Board 

prepared an Initial Regulatory 

Flexibility Analysis in accordance with 

5 U.S.C. 603 in order for the Board to 

solicit comment on the potential impact 

of the proposed rule on small entities. 

The Board received no comments on its 

request. 

1. Statement of the need for, 

objectives of, and legal basis for, the 

final rule. The final amendments to 

Regulation J eliminate references to ‘‘asof adjustments’’ consistent with the 

Board’s amendments to Regulation D 

(12 CFR part 204), which simplify 

reserves administration. The 

amendments also clarify that an 

institution’s Administrative Reserve 

Bank is deemed to have accepted 

deposit of a check or other item even if 

the institution sends the item directly to 

another Federal Reserve Bank. The 

amendments further clarify that 

Regulation J continues to apply to a 

Fedwire funds transfer even if the funds 

transfer also meets the definition of 

‘‘remittance transfer’’ under the 

Electronic Fund Transfer Act. The 

amendments also make conforming 

changes to terminology. 

2. Summary of significant issues 

raised by public comment on the 

Board’s initial analysis of issues, and a 

statement of any changes made as a 

result. The Board did not receive any 

public comments on the proposed rule 

addressing matters relating to the 

Board’s initial regulatory flexibility 

analysis. 

3. Small entities affected by the final 

rule. The rule affects all institutions that 


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21858 Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations 

use Federal Reserve Bank check or wire 

transfer services. Pursuant to regulations 

issued by the Small Business 

Administration (the ‘‘SBA’’) (13 CFR 

121.201), a ‘‘small banking 

organization’’ includes a depository 

institution with $175 million or less in 

total assets. Based on data reported as of 

December 31, 2011, the Board believes 

that there are approximately 10,313 

small depository institutions, 

approximately 2,754 of which have a 

master account with a Federal Reserve 

Bank. 

4. Record keeping, reporting, and 

other compliance requirements. The 

final rule eliminates references to as-of 

adjustments and replaces the use of asof adjustments with direct 

compensation based on the federal 

funds rate. As noted above, a depository 

institution should not be harmed by this 

amendment because the depository 

institution will continue to be 

compensated for the income effects of a 

transaction error; the payment will 

simply be in the form of direct 

compensation instead of an as-of 

adjustment. The other amendments to 

Regulation J are clarifications and do 

not impose new requirements on 

depository institutions. 

5. Identification of duplicative, 

overlapping, or conflicting Federal 

rules. The Board has not identified any 

Federal rules that duplicate, overlap, or 

conflict with the rule. The Board’s final 

clarification to § 210.25 that relates to 

Article 4A of the UCC actually avoids a 

potential conflict that might arise by 

operation of the EFTA and Regulation E. 

6. Significant alternatives to the 

proposed rule. The Board is unaware of 

any significant alternatives to the rule 

that accomplish the stated objectives of 

the Board. Commenters did not suggest 

any alternatives that would minimize 

the impact of the rule on small entities. 

VI. Paperwork Reduction Act Analysis 

In accordance with the Paperwork 

Reduction Act (PRA) of 1995 (44 U.S.C. 

3506; 5 CFR part 1320 Appendix A.1), 

the Board reviewed the final rule under 

the authority delegated to the Board by 

the Office of Management and Budget 

(OMB). No collections of information 

pursuant to the PRA are contained in 

the final rule. The Board received no 

comments on this analysis. 

List of Subjects in 12 CFR Part 210 

Banks, banking, Federal Reserve 

System. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Board is amending 

Regulation J, 12 CFR part 210, as 

follows: 

PART 210—COLLECTION OF CHECKS 

AND OTHER ITEMS BY FEDERAL 

RESERVE BANKS AND FUNDS 

TRANSFERS THROUGH FEDWIRE 

(REGULATION J) 

■ 1. The authority citation for part 210 

continues to read as follows: 

Authority: 12 U.S.C. 248(i), (j), and (o), 

342, 360, 464, 4001–4010, and 5001–5018. 

■ 2. In § 210.2, paragraph (a) is revised 

to read as follows: 

§ 210.2 Definitions. 

* * * * * 

(a) Account means an account on the 

books of a Federal Reserve Bank. A 

subaccount is an informational record of 

a subset of transactions that affect an 

account and is not a separate account. 

* * * * * 

■ 3. In § 210.3, paragraph (a) is revised 

to read as follows: 

§ 210.3 General provisions. 

(a) General. Each Reserve Bank shall 

receive and handle items in accordance 

with this subpart, and shall issue 

operating circulars governing the details 

of its handling of items and other 

matters deemed appropriate by the 

Reserve Bank. The circulars may, among 

other things, classify cash items and 

noncash items, require separate sorts 

and letters, provide different closing 

times for the receipt of different classes 

or types of items, provide for 

instructions by an administrative 

Reserve Bank to other Reserve Banks, 

set forth terms of services, and establish 

procedures for adjustments on a Reserve 

Bank’s books, including amounts, 

waiver of expenses, and payment of 

compensation. 

* * * * * 

■ 4. Section 210.4 is revised to read as 

follows: 

§ 210.4 Sending items to Reserve Banks. 

(a) Sending of items. A sender, other 

than a Reserve Bank, may send any item 

to any Reserve Bank, whether or not the 

item is payable within the Reserve 

Bank’s District, unless the sender’s 

administrative Reserve Bank directs the 

sender to send the item to a specific 

Reserve Bank. 

(b) Handling of items. (1) The 

following parties, in the following order, 

are deemed to have handled an item 

that is sent to a Reserve Bank for 

collection: 

(i) The initial sender; 

(ii) The initial sender’s administrative 

Reserve Bank (which is deemed to have 

accepted deposit of the item from the 

initial sender); 

(iii) The Reserve Bank that receives 

the item from the initial sender (if 

different from the initial sender’s 

administrative Reserve Bank); and 

(iv) Another Reserve Bank, if any, that 

receives the item from a Reserve Bank. 

(2) A Reserve Bank that is not 

described in paragraph (b)(1) of this 

section is not a person that handles an 

item and is not a collecting bank with 

respect to an item. 

(3) The identity and order of the 

parties under paragraph (b)(1) of this 

section determine the relationships and 

the rights and liabilities of the parties 

under this subpart, part 229 of this 

chapter (Regulation CC), section 13(1) 

and section 16(13) of the Federal 

Reserve Act, and the Uniform 

Commercial Code. An initial sender’s 

administrative Reserve Bank that is 

deemed to accept an item for deposit or 

handle an item is also deemed to be a 

sender with respect to that item. The 

Reserve Banks that are deemed to 

handle an item are deemed to be agents 

or subagents of the owner of the item, 

as provided in section 210.6(a) of this 

subpart. 

(c) Checks received at par. The 

Reserve Banks shall receive cash items 

and other checks at par. 

■ 5. In § 210.10, paragraph (a) is revised 

to read as follows: 

§ 210.10 Time schedule and availability of 

credits for cash items and returned checks. 

(a) Each Reserve Bank shall include in 

its operating circulars a time schedule 

for each of its offices indicating when 

the amount of any cash item or returned 

check received by it is counted toward 

the balance maintained to satisfy a 

reserve balance requirement for 

purposes of part 204 of this chapter 

(Regulation D) and becomes available 

for use by the sender or paying or 

returning bank. The Reserve Bank that 

holds the settlement account shall give 

either immediate or deferred credit to a 

sender, a paying bank, or a returning 

bank (other than a foreign 

correspondent) in accordance with the 

time schedule of the receiving Reserve 

Bank. A Reserve Bank ordinarily gives 

credit to a foreign correspondent only 

when the Reserve Bank receives 

payment of the item in actually and 

finally collected funds, but, in its 

discretion, a Reserve Bank may give 

immediate or deferred credit in 

accordance with its time schedule. 

* * * * * 

■ 6. Section 210.11 is revised to read as 

follows: 


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§ 210.11 Availability of proceeds of 

noncash items; time schedule. 

(a) Availability of credit. A Reserve 

Bank shall give credit to the sender for 

the proceeds of a noncash item when it 

receives payment in actually and finally 

collected funds (or advice from another 

Reserve Bank of such payment to it). 

The amount of the item is counted 

toward the balance maintained to satisfy 

a reserve balance requirement for 

purposes of part 204 of this chapter 

(Regulation D) and becomes available 

for use by the sender when the Reserve 

Bank receives the payment or advice, 

except as provided in paragraph (b) of 

this section. 

(b) Time schedule. A Reserve Bank 

may give credit for the proceeds of a 

noncash item subject to payment in 

actually and finally collected funds in 

accordance with a time schedule 

included in its operating circulars. The 

time schedule shall indicate when the 

proceeds of the noncash item will be 

counted toward the balance maintained 

to satisfy a reserve balance requirement 

for purposes of part 204 of this chapter 

(Regulation D) and become available for 

use by the sender. A Reserve Bank may, 

however, refuse at any time to permit 

the use of credit given by it for a 

noncash item for which the Reserve 

Bank has not yet received payment in 

actually and finally collected funds. 

(c) Handling of payment. If a Reserve 

Bank receives, in payment for a noncash 

item, a bank draft of other form of 

payment that it elects to handle as a 

noncash item, the Reserve Bank shall 

neither count the proceeds toward the 

balance maintained to satisfy a reserve 

balance requirement for purposes of part 

204 of this chapter (Regulation D) nor 

make the proceeds available for use 

until it receives payment in actually and 

finally collected funds. 

■ 7. In § 210.25, paragraphs (b)(1) and 

(b)(3) are revised to read as follows: 

§ 210.25 Authority, purpose, and scope. 

* * * * * 

(b) * * * 

(1) This subpart incorporates the 

provisions of article 4A set forth in 

appendix B to this subpart. In the event 

of an inconsistency between the 

provisions of the sections of this subpart 

and appendix B to this subpart, the 

provisions of the sections of this subpart 

shall prevail. In the event of an 

inconsistency between the provisions 

this subpart and section 919 of the 

Electronic Fund Transfer Act, section 

919 of the Electronic Fund Transfer Act 

shall prevail. 

* * * * * 

(3) This subpart governs a funds 

transfer that is sent through Fedwire, as 

provided in paragraph (b)(2) of this 

section, even though a portion of the 

funds transfer is governed by the 

Electronic Fund Transfer Act, but the 

portion of such funds transfer that is 

governed by the Electronic Fund 

Transfer Act (other than section 919 

governing remittance transfers) is not 

governed by this subpart. 

* * * * * 

■ 8. In § 210.26, paragraph (b) is 

removed and reserved. 

■ 9. In § 210.32, paragraphs (b)(1) and 

(b)(2) are revised to read as follows: 

§ 210.32 Federal Reserve Bank liability; 

payment of interest. 

* * * * * 

(b) * * * 

(1) A Federal Reserve Bank shall 

satisfy its obligation, or that of another 

Federal Reserve Bank, to pay 

compensation in the form of interest 

under article 4A by paying 

compensation in the form of interest to 

its sender, its receiving bank, its 

beneficiary, or another party to the 

funds transfer that is entitled to such 

payment, in an amount that is 

calculated in accordance with section 

4A–506 of article 4A. 

(2) If the sender or receiving bank that 

is the recipient of interest payment is 

not the party entitled to compensation 

under article 4A, the sender or receiving 

bank shall pass through the benefit of 

the interest payment by making an 

interest payment, as of the day the 

interest payment is effected, to the party 

entitled to compensation. The interest 

payment that is made to the party 

entitled to compensation shall not be 

less than the value of the interest 

payment that was provided by the 

Federal Reserve Bank to the sender or 

receiving bank. The party entitled to 

compensation may agree to accept 

compensation in a form other than a 

direct interest payment, provided that 

such an alternative form of 

compensation is not less than the value 

of the interest payment that otherwise 

would be made. 

* * * * * 

■ 10. In appendix A to subpart B: 

■ a. In Section 210.25, paragraph (b) is 

revised. 

■ b. In Section 210.26, paragraph (i) is 

revised. 

■ c. In Section 210.32, paragraph (b) is 

revised. 

The revisions read as follows: 

Appendix A to Subpart B of Part 210— 

Commentary 

* * * * * 

Section 210.25—Authority, Purpose, and 

Scope 

* * * * * 

(b) Scope. (1) Subpart B of this part 

incorporates the provisions of article 4A set 

forth in appendix B of this part. The 

provisions set forth expressly in the sections 

of subpart B of this part supersede or 

preempt any inconsistent provisions of 

article 4A as set forth in appendix B of this 

part or as enacted in any state. The official 

comments to article 4A are not incorporated 

in subpart B of this part or this commentary 

to subpart B of this part, but the official 

comments may be useful in interpreting 

article 4A. Because section 4A–105 refers to 

other provisions of the Uniform Commercial 

Code, e.g., definitions in article 1 of the UCC, 

these other provisions of the UCC, as 

approved by the National Conference of 

Commissioners on Uniform State Laws and 

the American Law Institute, from time to 

time, are also incorporated in subpart B of 

this part. Subpart B of this part applies to any 

party to a Fedwire funds transfer that is in 

privity with a Federal Reserve Bank. These 

parties include a sender (bank or nonbank) 

that sends a payment order directly to a 

Federal Reserve Bank, a receiving bank that 

receives a payment order directly from a 

Federal Reserve Bank, and a beneficiary that 

receives credit to an account that it uses or 

maintains at a Federal Reserve Bank for a 

payment order sent to a Federal Reserve 

Bank. Other parties to a funds transfer are 

covered by this subpart to the same extent 

that this subpart would apply to them if this 

subpart were a ‘‘funds-transfer system rule’’ 

under article 4A that selected subpart B of 

this part as the governing law. 

(2) The scope of the applicability of a 

funds-transfer system rule under article 4A is 

specified in section 4A–501(b), and the scope 

of the choice of law provision is specified in 

section 4A–507(c). Under section 4A–507(c), 

a choice of law provision is binding on the 

participants in a funds-transfer system and 

certain other parties having notice that the 

funds-transfer system might be used for the 

funds transfer and of the choice of law 

provision. The Uniform Commercial Code 

provides that a person has notice when the 

person has actual knowledge, receives 

notification, or has reason to know from all 

the facts and circumstances known to the 

person at the time in question. (See UCC § 1– 

201(25).) However, under sections 4A–507(b) 

and 4A–507(d), a choice of law by agreement 

of the parties takes precedence over a choice 

of law made by funds-transfer system rule. 

(3) If originators, receiving banks, and 

beneficiaries that are not in privity with a 

Federal Reserve Bank have the notice 

contemplated by Section 4A–507(c) or if 

those parties agree to be bound by subpart B 

of this part, subpart B of this part generally 

would apply to payment orders between 

those remote parties, including participants 

in other funds-transfer systems. For example, 

a funds transfer may be sent from an 

originator’s bank through a funds-transfer 

system other than Fedwire to a receiving 

bank which, in turn, sends a payment order 

through Fedwire to execute the funds 

transfer. Similarly, a Federal Reserve Bank 

may execute a payment order through 


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Fedwire to a receiving bank that sends it 

through a funds-transfer system other than 

Fedwire to a beneficiary’s bank. In the first 

example, if the originator’s bank has notice 

that Fedwire may be used to effect part of the 

funds transfer, the sending of the payment 

order through the other funds-transfer system 

to the receiving bank will be governed by 

subpart B of this part unless the parties to the 

payment order have agreed otherwise. In the 

second example, if the beneficiary’s bank has 

notice that Fedwire may be used to effect part 

of the funds transfer, the sending of the 

payment order to the beneficiary’s bank 

through the other funds-transfer system will 

be governed by subpart B of this part unless 

the parties have agreed otherwise. In both 

cases, the other funds-transfer system’s rules 

would also apply to, at a minimum, the 

portion of these funds transfers going through 

that funds transfer system. Because subpart B 

of this part is federal law, to the extent of any 

inconsistency, subpart B of this part will take 

precedence over any funds-transfer system 

rule applicable to the remote sender or 

receiving bank or to a Federal Reserve Bank. 

If remote parties to a funds transfer, a portion 

of which is sent through Fedwire, have 

expressly selected by agreement a law other 

than subpart B of this part under section 4A– 

507(b), subpart B of this part would not take 

precedence over the choice of law made by 

the agreement even though the remote parties 

had notice that Fedwire may be used and of 

the governing law. (See 4A–507(d).) In 

addition, subpart B of this part would not 

apply to a funds transfer sent through 

another funds-transfer system where no 

Federal Reserve Bank handles the funds 

transfer, even though settlement for the funds 

transfer is made by means of a separate net 

settlement or funds transfer through Fedwire. 

(4) Under section 4A–108, article 4A does 

not apply to a funds transfer, any part of 

which is governed by the Electronic Fund 

Transfer Act (EFTA) (15 U.S.C. 1693 et seq.). 

In general, Fedwire funds transfers to or from 

consumer accounts are exempt from the 

EFTA and Regulation E (12 CFR part 205). A 

funds transfer from a consumer originator or 

a funds transfer to a consumer beneficiary 

could be carried out in part through Fedwire 

and in part through an automated 

clearinghouse or other means that is subject 

to the EFTA or Regulation E. In these cases, 

subpart B would not govern the portion of 

the funds transfer that is governed by the 

EFTA or Regulation E. (See the commentary 

to section 210.26(i) in this appendix, 

‘‘Payment Order’’.) 

(5) Section 919 of the EFTA, however, 

governs ‘‘remittance transfers,’’ which may 

include Fedwire funds transfers. Section 919 

of the EFTA sets out the obligations of 

remittance transfer providers with respect to 

consumer senders of remittance transfers. 

Section 919 of the EFTA generally does not 

affect the rights and obligations of financial 

institutions involved in a remittance transfer. 

To the extent that a Fedwire funds transfer 

is a ‘‘remittance transfer’’ governed by 

section 919 of the EFTA, it continues to be 

governed by subpart B, except that, in the 

event of an inconsistency between the 

provisions of subpart B and section 919 of 

the EFTA, section 919 of the EFTA shall 

prevail. For example, a consumer may 

initiate a remittance transfer governed by 

EFTA section 919 from the consumer’s 

account at a depository institution, and the 

depository institution may initiate that 

transfer by sending a payment order to a 

Reserve Bank through the Fedwire funds 

system. If the consumer subsequently 

exercised the right to cancel the remittance 

transfer and obtain a refund under the terms 

of EFTA section 919, the depository 

institution would be required to comply with 

section 919 even if the institution does not 

have a right to reverse the payment order sent 

to the Reserve Bank under subpart B. 

(6) Finally, section 4A–404(a) provides that 

a beneficiary’s bank is obliged to pay the 

amount of a payment order to the beneficiary 

on the payment date unless acceptance of the 

payment order occurs on the payment date 

after the close of the funds-transfer business 

day of the bank. The Expedited Funds 

Availability Act provides that funds received 

by a bank by wire transfer shall be available 

for withdrawal not later than the banking day 

after the business day on which such funds 

are received (12 U.S.C. 4002(a)). That act also 

preempts any provision of state law that was 

not effective on September 1, 1989, that is 

inconsistent with that act or its implementing 

Regulation CC (12 CFR 229). Accordingly, the 

Expedited Funds Availability Act and 

Regulation CC may preempt section 4A– 

404(a) as enacted in any state. In order to 

ensure that section 4A–404(a), or other 

provisions of article 4A, as incorporated in 

subpart B of this part, do not take precedence 

over provisions of the Expedited Funds 

Availability Act, this section provides that 

where subpart B of this part establishes rights 

or obligations that are also governed by the 

Expedited Funds Availability Act or 

Regulation CC, the Expedited Funds 

Availability Act or Regulation CC provision 

shall apply and subpart B of this part shall 

not apply. 

* * * * * 

Section 210.26—Definitions 

* * * * * 

(i) Payment Order. (1) The definition of 

‘‘payment order’’ in subpart B of this part 

differs from the section 4A–103(a)(1) 

definition. The subpart B definition clarifies 

that, for the purposes of subpart B of this 

part, automated clearinghouse transfers and 

certain messages that are transmitted through 

Fedwire are not payment orders. Federal 

Reserve Banks and banks participating in 

Fedwire send various types of messages 

relating to payment orders or to other 

matters, through Fedwire, that are not 

intended to be payment orders. Under the 

subpart B definition, these messages, and 

messages involved with automated 

clearinghouse transfers, are not ‘‘payment 

orders’’ and therefore are not governed by 

this subpart. The operating circulars of the 

Federal Reserve Banks specify those 

messages that may be transmitted through 

Fedwire but that are not payment orders. 

(2) In some cases, messages sent through 

Fedwire, such as certain requests for credit 

transfer, may be payment orders under article 

4A, but are not treated as payment orders 

under subpart B because they are not an 

instruction to a Federal Reserve Bank to pay 

money. 

(3) This subpart and article 4A govern a 

payment order even though the originator’s 

or beneficiary’s account may be a consumer 

account established primarily for personal, 

family, or household purposes. Under section 

4A–108, article 4A does not apply to a funds 

transfer any part of which is governed by the 

Electronic Fund Transfer Act. That act, and 

Regulation E (12 CFR part 205) implementing 

it, do not apply to funds transfers through 

Fedwire (see 15 U.S.C. 1693a(6)(B) and 12 

CFR 205.3(b)), except that section 919 of the 

Electronic Fund Transfer Act may govern a 

Fedwire funds transfer that is a ‘‘remittance 

transfer.’’ Such remittance transfers that are 

Fedwire funds transfers continue to be 

governed by this subpart. Thus, this subpart 

applies to all funds transfers through Fedwire 

even though some such transfers involve 

originators or beneficiaries that are 

consumers. (See also § 210.25(b) and 

accompanying commentary.) 

* * * * * 

Section 210.32—Federal Reserve Bank 

Liability; Payment of Interest 

* * * * * 

(b) Payment of interest. (1) Under article 

4A, a Federal Reserve Bank may be required 

to pay compensation in the form of interest 

to another party in connection with its 

handling of a funds transfer. For example, 

payment of compensation in the form of 

interest is required in certain situations 

pursuant to sections 4A–204 (relating to 

refund of payment and duty of customer to 

report with respect to unauthorized payment 

order), 4A–209 (relating to acceptance of 

payment order), 4A–210 (relating to rejection 

of payment order), 4A–304 (relating to duty 

of sender to report erroneously executed 

payment order), 4A–305 (relating to liability 

for late or improper execution or failure to 

execute a payment order), 4A–402 (relating to 

obligation of sender to pay receiving bank), 

and 4A–404 (relating to obligation of 

beneficiary’s bank to pay and give notice to 

beneficiary). Under section 4A–506(a), the 

amount of such interest may be determined 

by agreement between the sender and 

receiving bank or by funds-transfer system 

rule. If there is no such agreement, under 

section 4A–506(b), the amount of interest is 

based on the federal funds rate. Section 

210.32(b) requires Federal Reserve Banks to 

provide compensation through an explicit 

interest payment. 

(2) Interest would be calculated in 

accordance with the procedures specified in 

section 4A–506(b). Similarly, compensation 

in the form of explicit interest will be paid 

to government senders, receiving banks, or 

beneficiaries described in § 210.25(d) if they 

are entitled to interest under this subpart. A 

Federal Reserve Bank may also, in its 

discretion, pay explicit interest directly to a 

remote party to a Fedwire funds transfer that 

is entitled to interest, rather than providing 

compensation to its direct sender or receiving 

bank. 

(3) If a bank that received an explicit 

interest payment is not the party entitled to 

interest compensation under article 4A, the 

bank must pass the benefit of the explicit 


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interest payment made to it to the party that 

is entitled to compensation in the form of 

interest from a Federal Reserve Bank. The 

benefit may be passed on either in the form 

of a direct payment of interest or in the form 

of a compensating balance, if the party 

entitled to interest agrees to accept the other 

form of compensation, and the value of the 

compensating balance is at least equivalent to 

the value of the explicit interest that 

otherwise would have been provided. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, April 5, 2012. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. 2012–8563 Filed 4–11–12; 8:45 am] 

BILLING CODE 6210–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. FAA–2012–0352; Special 

Conditions No. 25–462–SC] 

Special Conditions: Boeing, Model 

777F; Enhanced Flight Vision System 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions; request 

for comments. 

SUMMARY: These special conditions are 

issued for the Boeing Model 777F 

airplane. This airplane, as modified by 

the FedEx Express Corporation, will 

have a novel or unusual design feature 

associated with an advanced, enhanced 

flight vision system (EFVS). The EFVS 

consists of a head-up display (HUD) 

system modified to display forwardlooking infrared (FLIR) imagery. The 

applicable airworthiness regulations do 

not contain adequate or appropriate 

safety standards for this design feature. 

These special conditions contain the 

additional safety standards that the 

Administrator considers necessary to 

establish a level of safety equivalent to 

that established by the existing 

airworthiness standards. 

DATES: The effective date of these 

special conditions is March 22, 2012. 

We must receive your comments by May 

14, 2012. 

ADDRESSES: Send comments identified 

by docket number FAA–2012–0352 

using any of the following methods: 

• Federal eRegulations Portal: Go to 

http://www.regulations.gov/ and follow 

the online instructions for sending your 

comments electronically. 

• Mail: Send comments to Docket 

Operations, M–30, U.S. Department of 

Transportation (DOT), 1200 New Jersey 

Avenue SE., Room W12–140, West 

Building Ground Floor, Washington, DC 

20590–0001. 

• Hand Delivery or Courier: Take 

comments to Docket Operations in 

Room W12–140 of the West Building 

Ground Floor at 1200 New Jersey 

Avenue SE., Washington, DC, between 

8 a.m. and 5 p.m., Monday through 

Friday, except federal holidays. 

• Fax: Fax comments to Docket 

Operations at 202–493–2251. 

Privacy: The FAA will post all 

comments it receives, without change, 

to http://www.regulations.gov/, 

including any personal information the 

commenter provides. Using the search 

function of the docket Web site, anyone 

can find and read the electronic form of 

all comments received into any FAA 

docket, including the name of the 

individual sending the comment (or 

signing the comment for an association, 

business, labor union, etc.). DOT’s 

complete Privacy Act Statement can be 

found in the Federal Register published 

on April 11, 2000 (65 FR 19477–19478), 

as well as at http://DocketsInfo. 

dot.gov/. 

Docket: Background documents or 

comments received may be read at 

http://www.regulations.gov/ at any time. 

Follow the online instructions for 

accessing the docket or go to the Docket 

Operations in Room W12–140 of the 

West Building Ground Floor at 1200 

New Jersey Avenue SE., Washington, 

DC, between 9 a.m. and 5 p.m., Monday 

through Friday, except federal holidays. 

FOR FURTHER INFORMATION CONTACT: Dale 

Dunford, FAA, Transport Standards 

Staff, ANM–111, Transport Airplane 

Directorate, Aircraft Certification 

Service, 1601 Lind Avenue SW., 

Renton, Washington 98057–3356; 

telephone 425–227–2239; fax 425–227– 

1320; email: dale.dunford@faa.gov. 

SUPPLEMENTARY INFORMATION: The FAA 

has determined that notice of, and 

opportunity for prior public comment 

on, these special conditions are 

impracticable because these procedures 

would significantly delay issuance of 

the design approval and thus delivery of 

the affected aircraft. In addition, the 

substance of these special conditions 

has been subject to the public-comment 

process in several prior instances with 

no substantive comments received. The 

FAA therefore finds that good cause 

exists for making these special 

conditions effective upon issuance. 

Comments Invited 

We invite interested people to take 

part in this rulemaking by sending 

written comments, data, or views. The 

most helpful comments reference a 

specific portion of the special 

conditions, explain the reason for any 

recommended change, and include 

supporting data. 

We will consider all comments we 

receive on or before the closing date for 

comments. We may change these special 

conditions based on the comments we 

receive. 

Background 

On November 17, 2010, the FedEx 

Express Corporation applied for a 

supplemental type certificate for the 

installation and operation of a HUD and 

an EFVS in the Boeing Model 777F. The 

original type certificate for the 777F 

airplanes is T00001SE, Revision 28, 

dated August 5, 2011. 

The Boeing Model 777F is a transportcategory, cargo-carrying airplane that 

operates with a crew of two. It is 

powered by two General Electric GE90– 

110B1 or GE90–115B turbofan engines, 

has a maximum gross takeoff weight of 

766,800 pounds, and a maximum range 

of 4,900 nautical miles. 

The electronic infrared image 

displayed between the pilot and the 

forward windshield represents a novel 

or unusual design feature in the context 

of Title 14, Code of Federal Regulations 

(14 CFR) 25.773. Section 25.773 was not 

written in anticipation of such 

technology. The electronic image has 

the potential to enhance the pilot’s 

awareness of the terrain, hazards, and 

airport features. At the same time, the 

image may partially obscure the pilot’s 

direct outside compartment view. 

Therefore, the FAA needs adequate 

safety standards to evaluate the EFVS to 

determine that the imagery provides the 

intended visual enhancements without 

undue interference with the pilot’s 

outside compartment view. The FAA’s 

intent is that the pilot will be able to use 

a combination of the information seen 

in the image and the natural view of the 

outside scene, as seen through the 

image, as safely and effectively as a pilot 

compartment view without an enhanced 

vision system (EVS) image, and is 

compliant with § 25.773. 

Although the FAA has determined 

that the existing regulations are not 

adequate for certification of EFVSs, it 

believes that EFVSs could be certified 

through application of appropriate 

safety criteria. Therefore, the FAA has 

determined that special conditions 

should be issued for certification of 

EFVSs to provide a level of safety 

equivalent to that provided by the 

standard in § 25.773. 

Note: The term ‘‘enhanced vision system’’ 

(EVS) in this document refers to a system 

comprised of a head-up display (HUD), 

imaging sensor(s), and avionics interfaces 


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