Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Notices 60339 

1The Check 21 Act also directs the Federal 

Reserve to include in its report to the Congress any 

recommendations for legislative action. 

FEDERAL RESERVE SYSTEM 

Agency Information Collection 

Activities: Announcement of Board 

Approval Under Delegated Authority 

and Submission to OMB 

SUMMARY: 

Background 

Notice is hereby given of the final 

approval of a proposed information 

collection by the Board of Governors of 

the Federal Reserve System (Board) 

under OMB delegated authority, as per 

5 CFR 1320.16 (OMB Regulations on 

Controlling Paperwork Burdens on the 

Public). Board-approved collections of 

information are incorporated into the 

official OMB inventory of currently 

approved collections of information. 

Copies of the OMB 83-Is and supporting 

statements and approved collection of 

information instrument(s) are placed 

into OMB’s public docket files. The 

Federal Reserve may not conduct or 

sponsor, and the respondent is not 

required to respond to, an information 

collection that has been extended, 

revised, or implemented on or after 

October 1, 1995, unless it displays a 

currently valid OMB control number. 

FOR FURTHER INFORMATION CONTACT: 

Federal Reserve Board Clearance 

Officer—Michelle Long—Division of 

Research and Statistics, Board of 

Governors of the Federal Reserve 

System, Washington, DC 20551 (202–

452–3829); OMB Desk Officer—Mark 

Menchik—Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, New 

Executive Office Building, Room 10235, 

Washington, DC 20503, or e-mail to 

mmenchik@omb.eop.gov. 

Final approval under OMB delegated 

authority to conduct the following 

survey: 

Report title: Check 21 Act Survey. 

Agency form number: FR 3080. 

OMB control number: 7100–0279. 

Effective date: October 31, 2005. 

Frequency: one-time. 

Reporters: Depository institutions. 

Annual reporting hours: 15,000 hours. 

Estimated average hours per response: 

10 hours. 

Number of respondents: 1,500. 

General description of report: This 

information collection is voluntary (12 

U.S.C. 5015) and may be accorded 

confidential treatment under the 

Freedom of Information Act (5 U.S.C. 

552 (b)(4)). 

Abstract: Section 16 of the Check 

Clearing for the 21st Century Act (Check 

21 Act) requires the Federal Reserve to 

study the implementation of the law 

and its effect on various aspects of 

check processing, including funds 

availability, and to report the results of 

the study to the Congress by April 28, 

2007.1 Specifically, the Congress 

directed the Federal Reserve to study 

and report to them on: 

(1) The percentage of total checks 

cleared in which the paper check is not 

returned to the paying bank; 

(2) The extent to which banks make 

funds available to consumers for local 

and nonlocal checks prior to the 

expiration of maximum hold periods; 

(3) The length of time within which 

depositary banks learn of the 

nonpayment of local and nonlocal 

checks; 

(4) The increase or decrease in checkrelated losses over the study period; and 

(5) The appropriateness of the time 

periods and amount limits applicable 

under sections 603 and 604 of the 

Expedited Funds Availability Act 

(EFAA), as in effect on the date of 

enactment of the Check 21 Act. 

To fully address the issues raised by 

the Congress, the Federal Reserve 

proposed to conduct a survey to ensure 

the accurate characterization of the 

nation’s evolving check processing 

system. The survey would gather data 

from a nationally representative sample 

of depository institutions, including 

commercial banks, savings institutions, 

and credit unions. 

Further, the availability for 

withdrawal of funds deposited by check 

is governed by the Federal Reserve’s 

Regulation CC, which implements the 

EFAA. The EFAA and Regulation CC set 

maximum permissible hold periods for 

checks deposited into transaction 

accounts at depository institutions. The 

EFAA directs the Federal Reserve to 

reduce the statutory funds availability 

schedules as the check clearing system 

improves, while also ensuring that the 

reduced schedules provide depositary 

banks a reasonable opportunity to learn 

of the nonpayment of most checks in 

each category (such as ‘‘nonlocal’’

checks and ‘‘local’’ checks). The results 

of the proposed survey would be used 

to determine whether reducing the hold 

periods in Regulation CC is warranted. 

Current Actions: On May 10, 2005, the 

Federal Reserve issued for public 

comment a proposal to conduct the 

Check 21 Act survey (70 FR 24581). The 

comment period ended on July 11, 2005. 

The Federal Reserve received seven 

comment letters from: three trade 

associations, two banks, one corporate 

credit union, and one credit union. 

Summary of Comments 

All commenters agreed that a survey 

is appropriate to obtain the information 

necessary to address the Check 21 Act 

requirements. Notwithstanding their 

support of the survey, nearly all asserted 

that the adoption of Check 21 is taking 

place relatively slowly; thus, it is too 

early to study its benefits to the check 

collection system. Two commenters 

expressed concern about the amount of 

detail requested from survey 

respondents. In addition, two 

commenters stated that the survey, in its 

proposed form, did not adequately serve 

its stated purpose. One commenter 

expressed concern regarding whether 

responses to the survey would be kept 

confidential. Two commenters 

recommended that the Federal Reserve 

provide adequate notice to selected 

survey participants and extend the 

submission deadline. Commenters also 

requested an optional narrative section 

to enable respondents to comment on 

various issues and clarification on 

particular terms in the survey. 

Reporting Burden 

All commenters addressed the 

estimated burden to depository 

institutions for completing the survey 

and stated that the actual burden to 

depository institutions would be greater 

than the Federal Reserve had estimated 

because institutions in many cases do 

not currently maintain data in the form 

and categories contemplated by the 

survey. (For example, some banks’

systems do not distinguish between 

original and substitute checks.) 

Consequently, depository institutions 

may need to make programming 

changes or gather the data manually, 

either of which would be costly and 

time consuming. The Federal Reserve 

recognizes that the burden for each 

survey respondent will vary based on an 

institution’s size and recordkeeping 

practices. Given that the survey has 

been substantially shortened and 

simplified in response to the comments, 

the Federal Reserve believes that the 

estimate of an average of ten hours per 

respondent is reasonable, especially 

given that respondents have the option 

to respond by providing an estimate or 

by indicating ‘‘don’t know.’’

As previously noted, many 

commenters cautioned that it is 

premature to gauge the effects of the 

Check 21 Act. Based on Reserve Bank 

experiences and anecdotal industry 

information, it appears that, to date, 

relatively few depository institutions 

have taken advantage of the new check 

processing methods made possible by 

the Check 21 Act and that check 

60340 Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Notices 

2Section 1 of the survey requests basic 

information such as institution name, address, and 

phone number. Section 3, which contains two 

questions, requests information regarding the 

overall volume and value of checks that banks 

handle. These sections remain largely unchanged. 

collection and return times have not 

materially improved since the Act 

became effective. Accordingly, and in 

light of commenters’ statements that it 

would be quite burdensome to respond 

to the survey as initially proposed, the 

survey has been shortened and 

simplified, where possible: 

• Four questions (out of seven) were 

deleted from the check losses section of 

the survey (Section 2); 

• Four questions (out of five) were 

deleted from the funds availability 

section of the survey (Section 4); and 

• Two questions (out of three) were 

deleted from the returned items section 

of the survey (Section 5).2

Survey Methodology 

Three commenters raised questions 

about the survey methodology, 

postulating that the proposed survey 

would produce unrepresentative results 

because participation is voluntary and 

depository institutions have the option 

of providing estimates. Two 

commenters recommended that the 

survey focus on published funds 

availability policies (i.e., instances 

where depository institutions’

published policies provide for faster 

funds availability than is required by 

Regulation CC), believing that such 

focus would provide the Federal 

Reserve with enough information to 

determine whether the maximum hold 

periods in Regulation CC should be 

shortened. Additionally, two 

commenters encouraged the Federal 

Reserve to augment the survey by using 

data collected by industry organizations 

and the Federal Reserve Banks. 

The Federal Reserve believes that the 

survey methodology is sound. The 

survey panel would be a stratified 

random sample of approximately 3,000 

depository institutions, including 

commercial banks, savings institutions, 

and credit unions. While an earlier 

survey on check losses conducted by the 

Federal Reserve in 1996 achieved only 

a 30 percent response rate, the response 

rates for recent voluntary surveys of 

check payments conducted by the 

Federal Reserve (with outside 

consultants) have been about 50 percent 

with nearly all the largest 100 panel 

members responding. The Federal 

Reserve believes that modifications to 

the current survey, such as simplifying 

the survey, will improve the response 

rate and that the survey is likely to 

achieve a higher response rate than the 

1996 survey. If the response rate in the 

more recent surveys is achieved, survey 

items such as the number and value of 

checks deposited at banks and the 

number and value of checks paid by 

banks can be estimated with a sampling 

standard error of about 1 percent. 

Sampling standard errors for other items 

may be higher depending on the 

variability of the item across banks, and 

the item response rate. While published 

availability schedules may be easier for 

depository institutions to report, actual 

funds availability practices for check 

deposits to consumer accounts that do 

not qualify for exception holds under 

Regulation CC will provide better 

information for the Federal Reserve in 

considering whether to shorten the 

maximum hold periods. Assuming an 

improved response rate from that of the 

1996 survey, that the item response 

rates are high, and that the probability 

of responding is uncorrelated with the 

variables being estimated (e.g. fraud 

experience), the study will provide 

statistically valid national estimates that 

are not available from existing industry 

or trade sources. 

Confidentiality 

One commenter raised a concern over 

the confidentiality, availability, and 

accessibility of some of the requested 

information, and suggested that lack of 

assurance of confidentiality would 

diminish the response rate for voluntary 

compliance. The commenter states that 

much of the information sought in the 

proposed survey is considered 

proprietary and confidential by 

respondents, particularly information 

regarding check losses, internal systems 

tracking mechanisms, and the results 

determined by these mechanisms. While 

the commenter indicates it has 

protected many of its internal processes 

by patenting them or obtaining 

trademark protection, the commenter 

raises concerns whether other trade 

secret and high level security 

information would be subject to 

protection. 

First, the information collected in the 

survey will be treated and maintained as 

confidential by the Board’s Division of 

Reserve Bank Operations and Payment 

Systems (RBOPS). RBOPS will not share 

this information, or otherwise make this 

information available to, any other 

Federal Reserve staff or to any third 

parties. Second, the information that is 

collected will be aggregated before it is 

submitted to the Congress. No 

confidential information will be 

disclosed, and care will be taken to 

ensure that individual respondents are 

not identified and that their identities 

cannot be deduced from any 

information that is disclosed. Third, the 

Federal Reserve regards the information 

requested on the form as confidential 

and generally subject to protection from 

disclosure under exemption 4 of the 

Freedom of Information Act (FOIA), 5 

U.S.C. 552(b)(4). Exemption 4 exempts 

from disclosure ‘‘trade secrets and 

commercial or financial information 

obtained from a person and privileged 

and confidential.’’ In the event of a 

FOIA request for the information, the 

Federal Reserve would claim exemption 

4 as a basis for withholding and decline 

to produce it. If, for any reason, the 

Federal Reserve believes that particular 

information cannot be withheld from 

disclosure under exemption 4, the 

Federal Reserve will inform the 

respondent of its views and give the 

respondent an opportunity to object and 

to provide additional information 

supporting withholding, as required 

under section 261.16 of the Board’s 

‘‘Rules Regarding the Availability of 

Information,’’ 12 CFR 261.16. 

Adequate Notice About the Final Survey 

and Extension of the Submission Date 

Two commenters recommended that 

the Federal Reserve provide notice of 

the survey to selected participants no 

later than October 1, 2005, and that the 

Federal Reserve extend the submission 

deadline from May 2006 to July 2006 to 

afford sufficient time for depository 

institutions to implement processes and 

system changes to facilitate the data 

collection. The Federal Reserve is 

publishing the final survey in October 

and plans to contact survey participants 

directly in November 2005. Based upon 

prior data collections of this size and 

complexity, the Federal Reserve 

believes that the submission deadline 

provides ample time for depository 

institutions to respond to the survey. 

The Federal Reserve will use the time 

between May 2006 and April 2007 to 

tabulate and analyze responses to the 

survey, to draft the required report to 

the Congress, and to assess whether any 

legislative recommendations are 

desirable. 

Optional Narrative Section and Other 

Clarifications 

A few commenters suggested that an 

optional narrative section be included 

in the survey to enable respondents to 

comment on various issues, including 

funds availability, consumer protection, 

and specific types of check losses, such 

as those resulting from fraudulent 

cashier’s checks and teller’s checks. 

Inclusion of such a narrative section 

would be infeasible given the survey’s 

sample size and scope. 

Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Notices 60341 

Five commenters suggested that 

certain language be clarified, and 

several of these suggestions have been 

incorporated into the survey document. 

For example, the survey now more 

clearly indicates that checks converted 

to ACH transactions should be 

excluded, clarifies which types of losses 

should be included as check losses, and 

explains the difference between 

electronic check presentment and paper 

check presentment. Additionally, the 

survey document more clearly indicates 

that a respondent should check an 

estimate box if an answer is an estimate, 

or enter ‘‘DK’’ (don’t know) if the 

respondent has volume of the type being 

measured, but is unable to report at least 

an estimate. 

Board of Governors of the Federal Reserve 

System, October 11, 2005. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. 05–20663 Filed 10–14–05; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

Formations of, Acquisitions by, and 

Mergers of Bank Holding Companies 

The companies listed in this notice 

have applied to the Board for approval, 

pursuant to the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841 et seq.) 

(BHC Act), Regulation Y (12 CFR Part 

225), and all other applicable statutes 

and regulations to become a bank 

holding company and/or to acquire the 

assets or the ownership of, control of, or 

the power to vote shares of a bank or 

bank holding company and all of the 

banks and nonbanking companies 

owned by the bank holding company, 

including the companies listed below. 

The applications listed below, as well 

as other related filings required by the 

Board, are available for immediate 

inspection at the Federal Reserve Bank 

indicated. The application also will be 

available for inspection at the offices of 

the Board of Governors. Interested 

persons may express their views in 

writing on the standards enumerated in 

the BHC Act (12 U.S.C. 1842(c)). If the 

proposal also involves the acquisition of 

a nonbanking company, the review also 

includes whether the acquisition of the 

nonbanking company complies with the 

standards in section 4 of the BHC Act 

(12 U.S.C. 1843). Unless otherwise 

noted, nonbanking activities will be 

conducted throughout the United States. 

Additional information on all bank 

holding companies may be obtained 

from the National Information Center 

website at www.ffiec.gov/nic/. 

Unless otherwise noted, comments 

regarding each of these applications 

must be received at the Reserve Bank 

indicated or the offices of the Board of 

Governors not later than November 10, 

2005. 

A. Federal Reserve Bank of Atlanta 

(Andre Anderson, Vice President) 1000 

Peachtree Street, N.E., Atlanta, Georgia 

30303: 

1. Flint Community Bancshares, Inc., 

Albany, Georgia; to become a bank 

holding company by acquiring 100 

percent of the voting shares of Flint 

Community Bank, Albany, Georgia (in 

organization). 

2. SBT Bancorp, Inc., Clarkesville, 

Georgia; to become a bank holding 

company by acquiring 100 percent of 

the voting shares of Southern Bank & 

Trust, Clarkesville, Georgia (in 

organization). 

B. Federal Reserve Bank of 

Minneapolis (Jacqueline G. King, 

Community Affairs Officer) 90 

Hennepin Avenue, Minneapolis, 

Minnesota 55480-0291: 

1. Citizens Development Company, 

Billings, Montana; to merge with 

Midwest Bancorporation, Billings, 

Montana, and thereby indirectly acquire 

Clarke County State Bank, Osceola, 

Iowa; Farmers and Merchants State 

Bank, Iroquois, South Dakota; and 

Farmers State Bank, Stickney, South 

Dakota. 

2. Citizens Development Company, 

Billings, Montana; to merge with United 

Bancorporation, Billings, Montana, and 

thereby indirectly acquire Lincoln 

County Bank, Merrill, Wisconsin; 

United Bank, Osseo, Wisconsin; Bank of 

Poynette, Poynette, Wisconsin; and 

Cambridge State Bank, Cambridge, 

Wisconsin. 

C. Federal Reserve Bank of Kansas 

City (Donna J. Ward, Assistant Vice 

President) 925 Grand Avenue, Kansas 

City, Missouri 64198-0001: 

1. Nebraska Bankshares, Inc., Farnam, 

Nebraska; to acquire up to 100 percent 

of the voting shares of First State Bank 

(also known as Holbrook Exchange 

Company, Holbrook, Nebraska (in 

organization). 

Board of Governors of the Federal Reserve 

System, October 12, 2005. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. E5–5691 Filed 10–14–05; 8:45 am] 

BILLING CODE 6210–01–S 

FEDERAL RESERVE SYSTEM 

[Docket No. OP–1229] 

Federal Reserve Bank Services Private 

Sector Adjustment Factor 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Notice. 

SUMMARY: The Board has approved 

modifications to the method for 

calculating the private sector adjustment 

factor, which imputes the costs that 

would have been incurred and profits 

that would have been earned, including 

the return on equity capital, had the 

Federal Reserve Banks’ priced services 

been provided by a private sector 

business. When setting prices in 2006, 

the Board will use only the capital asset 

pricing model to determine the target 

return on equity capital. Rather than 

continuing the long-standing process of 

identifying a peer group to calibrate the 

target return on equity capital, the 

return on equity capital will be based on 

the rate of return for the equity market 

as a whole. The Board’s method for 

setting the level of equity capital 

imputed to priced services would 

continue to be based on the Federal 

Deposit Insurance Corporation 

guidelines for a well-capitalized 

depository institution for insurance 

premium purposes. In addition, the 

Board will continue using the financial 

data from the top fifty bank holding 

companies by deposit balance to 

determine the priced-services effective 

tax rate each year. 

DATES: This revised method will be used 

to calculate the targeted return on equity 

capital beginning with the 2006 price 

setting. 

FOR FURTHER INFORMATION CONTACT: 

Gregory L. Evans, Assistant Director 

(202/452–3945), Brenda L. Richards, 

Manager (202/452–2753), or Jonathan 

Mueller, Financial Analyst (202/530–

6291); Division of Reserve Bank 

Operations and Payment Systems. 

Telecommunications Device for the Deaf 

(TDD) users may contact 202/263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Monetary Control Act (MCA) 

requires that the Board establish fees for 

‘‘priced services’’ provided to 

depository institutions to recover, over 

the long run, all direct and indirect 

costs actually incurred as well as 

imputed costs that would have been 

incurred, including financing costs, 

taxes, and certain other expenses, and 

the return on equity (profit) that would 

have been earned, if a private business