Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 68049

1These imputed expenses, such as taxes that 

would have been paid, and the return on equity that 

would have to be earned had the services been 

furnished by a private business firm, are referred to 

as the PSAF. The ten-year recovery rate is based 

upon the pro forma income statements for Federal 

Reserve Banks’ priced services published in the 

Board’s Annual Report.

2FedACh and Fedwire are registered 

servicemarks of the Reserve Banks.

A. Federal Reserve Bank of San 

Francisco (Tracy Basinger, Director, 

Regional and Community Bank Group) 

101 Market Street, San Francisco, 

California 94105-1579:

1. Ruh Capital, LLC; Eggemeyer 

Family Trust; William J. Ruh Trust; 

Castle Creek Capital Partners III, L.P.; 

Western States Opportunity LLC; 

Eggemeyer Capital LLC; and Castle 

Creek Capital III, LLC, all of Rancho 

Santa Fe, California; to acquire shares of 

Atlanta Bancorporation, Inc., 

Alpharetta, Georgia, and indirectly 

acquire Gibsonville Community Bank, 

Gibsonville, North Carolina, and thereby 

engage in operating a state savings bank, 

pursuant to section 225.25(b)(4)(ii) of 

Regulation Y.

Board of Governors of the Federal Reserve 

System, November 4, 2005.

Robert deV. Frierson,

Deputy Secretary of the Board.

[FR Doc.E5–6175 Filed 11–8–05; 8:45 am]

BILLING CODE 6210–01–S

FEDERAL RESERVE SYSTEM

[Docket No. OP–1241] 

Federal Reserve Bank Services

AGENCY: Board of Governors of the 

Federal Reserve System.

ACTION: Notice.

SUMMARY: The Board has approved the 

2006 fee schedules for Federal Reserve 

priced services and electronic access 

and a private-sector adjustment factor 

(PSAF) for 2006 of $117.7 million. 

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 become 

effective January 3, 2006, except the 

FedLine Select electronic connection 

fees, which become effective April 1, 

2006.

FOR FURTHER INFORMATION CONTACT: For 

questions regarding the fee schedules: 

Jack K. Walton II, Associate Director 

(202/452–2660); Jeremy R. Mandell, 

Financial Services Analyst (202/452–

2842), 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); or Jonathan Mueller, 

Financial Analyst (202/530–6291), 

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 2006 fee schedules for the 

check service are available from the 

Board, the Federal Reserve Banks, or the 

Reserve Banks’ financial services Web 

site at www.frbservices.org.

SUPPLEMENTARY INFORMATION:

I. Priced Services 

A. Discussion 

From 1995 through 2004, the Reserve 

Banks recovered 97.5 percent of their 

total expense (including special project 

costs and imputed expenses) and 

targeted after-tax profits or return on 

equity (ROE) for providing priced 

services.1

Table 1 summarizes 2004, 2005 

estimated, and 2006 budgeted cost 

recovery rates for all priced services. 

Cost recovery is estimated to be 103.6 

percent in 2005 and budgeted to be 

102.5 percent in 2006. The performance 

of the check service heavily influences 

the aggregate cost recovery rates and 

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

The noncash collection service 

represents a de minimis amount of total 

costs and, by year-end 2005, the Reserve 

Banks will exit the service.

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

[$ millions] 

Year 1b

Revenue 

2c

Total expense 

3

Net income 

(Roe) [1–2] 

41d

Target ROE 

5 Recovery 

rate after target ROE [1/

(2+4)] 

2004 ..................................................................................... 914.6 842.6 72.0 112.4 95.8% 

2005 (estimate) .................................................................... 958.2 821.8 136.4 102.9 103.6% 

2006 (budget) ....................................................................... 911.1 817.1 94.0 72.0 102.5% 

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. The 2006 target return on equity is lower than it has been historically because of a 

Board-approved change to the method used to calculate the targeted return on equity. 

Table 2 presents an overview of the 

2004, 2005 budget, 2005 estimate, and 

2006 budget cost recovery performance 

by priced service.

68050 Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 

3The Federal Reserve’s 2004 retail payments 

research indicated that the total number of checks 

paid declined at an average annual rate of 4.3 

percent from 2000 to 2003. This rate of decline is 

greater than 3.3 percent average annual rate 

estimated to have occurred from 1995 to 2000. See 

Gerdes, Geoffrey R. and Jack K. Walton II, ‘‘Trends 

in the Use of Payment Instruments in the United 

States,’’ Federal Reserve Bulletin, Spring 2005, pp. 

180–201. (See http://www.federalreserve.gov/pubs/

bulletin/2005/spring05_payment.pdf.)

TABLE 2.—PRICED SERVICES COST RECOVERY

[percent] 

Priced service 2004 2005 Budget 2005 Estimate 2006 Budgeta

All services ....................................................................................................... 95.8 100.1 103.6 102.5 

Check ............................................................................................................... 94.6 100.3 104.0 102.3 

FedACH ........................................................................................................... 103.0 100.4 102.2 101.0 

Fedwire funds and NSS .................................................................................. 99.4 100.1 101.4 105.6 

Fedwire securities ............................................................................................ 102.6 102.8 101.3 105.9 

Noncash collection ........................................................................................... 120.3 76.7 90.9 n.a. 

a 2006 budget figures reflect the latest data from Reserve Banks. The Reserve Banks will transmit final budget data to the Board in November 

2005, for Board approval in mid-December 2005. 

n.a.—not applicable 

1. 2005 Estimated Performance 

In 2005, the Reserve Banks estimate 

that they will recover 103.6 percent of 

the costs of providing priced services, 

including imputed expenses and 

targeted ROE, compared with a 

budgeted recovery rate of 100.1 percent, 

as shown in table 2. The Reserve Banks 

estimate that all services will achieve 

full cost recovery with the exception of 

the noncash collection service, from 

which the Reserve Banks will exit by 

year end. The Reserve Banks estimate 

that they will fully recover actual and 

imputed expenses and earn net income 

of $136.4 million compared with the 

target of $102.9 million. This greaterthan-expected net income is largely 

driven by greater-than-expected (1) 

check volumes, (2) cost savings 

associated with the Reserve Banks’

check restructuring efforts, and (3) net 

income on clearing balances (NICB). 

The decline in paper check volume 

continues to have a significant effect on 

the Reserve Banks priced services.3

Check use nationwide has been 

declining, in part because of the 

increased use of debit and credit cards, 

as well as the growing trend for 

merchants, billers, and others to covert 

checks into automated clearinghouse 

(ACH) transactions. These factors have 

led to a general decline in the interbank 

clearing of checks, including clearings 

through the Reserve Banks. In this 

environment, to meet their cost recovery 

objectives, the Reserve Banks have 

undertaken efforts to reduce the costs 

associated with the check service, 

including reducing the number of check 

processing sites from forty-five in 2003 

to twenty-two by the end of 2006.

2. 2006 Projected Performance 

For 2006, the Reserve Banks project a 

priced services cost recovery rate of 

102.5 percent. The 2006 fees for priced 

services are projected to result in a net 

income of $94.0 million, or $22.0 

million more than needed 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’ check volume than 

the projected 13.8 percent, 

unanticipated problems with check 

office restructurings that could result in 

significant cost overruns, and greaterthan-expected electronic payments 

volume loss to competitors. 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 strategies will 

position the Reserve Banks to achieve 

their financial and payment system 

objectives and statutory requirements 

over the long run. 

3. 2006 Pricing 

The following summarizes the 

changes in the Reserve Banks’ fee 

schedules for priced services in 2006: 

Check 

• The Reserve Banks will raise paper 

check fees for forward-collection check 

products 5.3 percent, return-check 

products 5.4 percent, and payor bank 

check products 5.3 percent. 

• The Reserve Banks will decrease 

Check 21 fees for FedForward products 

13.8 percent and to offer incentives to 

customers to use FedReceipt products. 

• With the 2006 fee change, the price 

index for the check service will have 

increased 49 percent since 1997. 

FedACH 

• The Reserve Banks will reduce the 

input file fee one-third and the FedLine 

Web origination returns and notification 

of change fee 40 percent. 

• With the 2006 fee change, the price 

index for the FedACH service will have 

decreased 63 percent since 1997. 

Fedwire funds and national 

settlement 

• The Reserve Banks will raise the 

surcharge for offline funds transfers by 

one-third. 

• With the 2006 fee change, the price 

index for the Fedwire funds and 

national settlement services will have 

decreased 57 percent since 1997. 

Fedwire securities 

• The Reserve Banks will raise the 

surcharge for offline securities transfers 

51.5 percent and the joint custody fee 

14.3 percent. 

• With the 2006 fee change, the price 

index for the Fedwire securities service 

will have decreased 47 percent since 

1997. 

4. 2006 Price Index 

Figure 1 compares indexes of fees for 

the Reserve Banks’ priced services with 

the GDP price deflator. Compared with 

the price index for 2005, the price index 

for all Reserve Bank priced services is 

projected to increase 3.0 percent in 

2006. The price index for electronic 

payment services, as well as electronic 

access to Reserve Banks’ priced services, 

is projected to decrease 1.0 percent in 

2006. The price index for the paperbased payments services is projected to 

increase 5.4 percent in 2006. When 

projecting out to 2006, the price index 

for all priced services has increased a 

total of 12.1 percent since 1997. In 

comparison, from 1997 through 2004, 

the GDP deflator increased 14.4 percent.

BILLING CODE 6210–01–P

Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 68051

4Two adjustments are applied to the earnings 

credit rate so that the return on clearing balances 

at the Federal Reserve is comparable to what the 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 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 noninterest-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 

Bank. 

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.

5This 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.

6A 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 $25,00, 

whichever is greater. Earnings credits are based on 

the period-average balance maintained up to a 

maximum of the contracted amount plus the 

clearinig balance allowance. Deficiency charges 

apply when the average balance fals below the 

contracted amount less the allowance, although 

credits are still earned on the average maintained 

balance.

B. 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.4 The Reserve Banks will 

continue to calculate earnings credits 

for the marginal reserve requirement 

adjusted portion of clearing balances at 

the federal funds rate.5

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. Beginning 

in 2004, the earnings credit calculation 

was changed from using the federal 

funds rate to using a percentage 

discount on a rolling thirteen-week 

average of the annualized coupon 

equivalent yield of three-month 

Treasury bills in the secondary market 

to better align Federal Reserve policy 

with market practice. Earnings credits 

can be used only to offset charges for 

priced services, are calculated monthly, 

and expire if not used within one year.6

C. Check Service 

Table 3 below shows the 2004, 2005 

estimate, and 2006 budgeted cost 

recovery performance for the check 

service.


EN09NO05.053</GPH>
68052 Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 

TABLE 3.—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)] 

2004 ..................................................................................... 760.2 709.6 50.2 93.6 94.6% 

2005 (estimate) .................................................................... 786.4 673.9 112.5 82.0 104.0 

2006 (budget) ....................................................................... 732.9 659.6 73.4 57.0 102.3 

1. 2005 Estimate 

For 2005, the Reserve Banks estimate 

that the check service will recover 104.0 

percent of total expenses and targeted 

ROE, compared with the budgeted 

recovery rate of 100.3 percent. The 

Reserve Banks expect to recover all 

actual and imputed expenses of 

providing check services and earn net 

income of $112.5 million (see table 3). 

The higher-than-budgeted cost 

recovery is the result of higher-thanexpected revenue of $53.7 million that 

was partially offset by higher-thanexpected expenses of $24.0 million. The 

higher revenue is due to greater-thanbudgeted check volumes, customer use 

of a higher priced product mix, greaterthan-expected NICB, and explicit float 

revenue. The higher costs were largely 

due to the cost of processing greaterthan-expected paper check volume and 

higher personnel costs related to Check 

21 substitute check printing.

The greater-than-expected paper 

check volume can be attributed to the 

slower-than-expected adoption of Check 

21 products and lower-than-anticipated 

volume losses resulting from check 

office restructurings. For full-year 2005, 

the Reserve Banks estimate that paper 

forward-collection check volume will 

decline 12.0 percent, compared with a 

budgeted decline of 14.6 percent. The 

Reserve Banks expect that paper return 

check volume will decline 24.4 percent 

for the full year, compared with a 

budgeted decline of 27.0 percent.

TABLE 4.—PAPER CHECK PRODUCT VOLUME CHANGES

[percent] 

Budgeted 

2005 change 

Actual change 

through

August 2005 

Estimated 

2005 change 

Total forward-collection a

Forward-processed ............................................................................................................... (14.7) (11.2) (10.9) 

Fine-sort a .............................................................................................................................. (10.1) (21.6) (31.9) 

Returns ........................................................................................................................................ (27.0) (19.5) (24.4) 

aThese rates exclude electronic fine-sort volume. Including the electronic fine-sort product, fine-sort volume was budgeted to decline 42.6 percent in 2005 and is now estimated to decline 33.7 percent. 

While electronic check presentment 

volumes are expected to decline for fullyear 2005 (see table 5), the share of 

electronic checks that the Reserve Banks 

present is expected to increase. Through 

August 2005, the Reserve Banks 

presented approximately 26.2 percent of 

their checks electronically, which 

represents an increase from 24.6 percent 

in 2004. In addition to electronic check 

presentment, through August 2005, the 

Reserve Banks captured images for 

about 12.3 percent of all checks they 

collected.

TABLE 5.—ELECTRONIC CHECK PRODUCT SHARE

[percent] 

2004 

2005 actual 

through August 

2005 estimated 

Truncation a .................................................................................................................................. 5.8 6.7 6.2 

Non-truncation (Electronic Check Presentment) a ....................................................................... 18.8 19.5 19.3 

Electronic check information ........................................................................................................ 6.3 6.0 6.1 

Images ......................................................................................................................................... 11.0 12.3 12.1 

aECP consists of truncated and non-truncated checks. Non-truncated checks include checks presented through the MICR presentment and 

MICR presentment plus products. 

2. 2006 Pricing 

In 2006, the Reserve Banks project 

that the check service will recover 102.3 

of total expenses and targeted ROE. 

The Reserve Banks plan to maintain 

full cost recovery by continuing to 

streamline check processing and 

administrative activities across the 

System as well as by increasing Check 

21 volume. A number of cost reduction 

initiatives have been identified and are 

currently in various stages of 

implementation. These initiatives 

include eliminating six more check 

processing sites by the end of 2006 and 

working to reduce various check 

support functions such as check 

adjustments and check automation 

Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 68053

7 In February 2003, the Reserve Banks announced 

an initiative to reduce the number of check 

processing locations from forty-five to thirty-two. In 

August 2004 and May 2005, the Reserve Banks 

announced two further rounds of restructurings. By 

the end of these announced restructurings in 2006, 

the Reserve Banks will have twenty-two check 

processing locations.

8The 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 return items; and FedReceipt is 

electronic receipt of Check 21 items.

services in response to the declining 

volume.7

Total expenses are projected to 

decline by $14.3 million, a decline of 

2.1 percent when compared with the 

2005 estimate. This decline is primarily 

attributable to lower local operating 

costs due to efficiency improvements at 

restructuring sites and declines in 

projected 2006 volumes. These lower 

costs are partially offset by higher 

temporary costs associated with further 

check restructuring and additional costs 

to support Check 21 products.

Revenue is projected to be $732.9 

million, a decline of 6.8 percent 

compared to the 2005 estimate. This 

decline is driven by a $75.9 million, or 

10.7 percent, decline in fee revenue that 

is offset by a $22.3 million increase in 

NICB. In 2006, the Reserve Banks 

project that paper check volume for 

forward products will decrease 13.9 

percent, volume for return products will 

decrease 23.9 percent, and volume for 

payor bank products will decrease 20.4 

percent. These expected volume 

declines will be partially offset by a 

projected increase in Check 21 volume. 

Check 21 products have been offered 

for about one year, and the Reserve 

Banks anticipate significant growth in 

2006 (see table 6).8 The Reserve Banks 

project that FedForward volume will 

more than double, FedReturn volume 

will more than triple, and FedReceipt 

volume will increase almost twelvefold. 

The Reserve Banks have projected an 

increase in the 2006 Check 21 volume 

that will result in a doubling of Check 

21 product revenue, to about $44 

million. Board and Reserve Bank staff 

believe that the key to realizing Check 

21 cost efficiencies for the System is the 

widespread acceptance of FedReceipt by 

paying banks.

TABLE 6.—CHECK 21 VOLUME

2006 Budgeted volume

[millions of 

items] 

Growth from 

2005 estimate

[percent] 

FedForward .............................................................................................................................................................. 431.8 138.5 

FedReturn ................................................................................................................................................................ 15.2 206.7 

FedReceipt ............................................................................................................................................................... 57.5 1,084.3 

In 2006, the Reserve Banks will 

continue to encourage the adoption of 

electronic check collection and 

presentment alternatives through 

modest price increases to paper check 

products and price reductions for some 

electronic products. The price increases 

for paper products generally are 

expected to be distributed across most 

product categories, with generally 

higher price increases for nonstrategic 

product lines. The Reserve Banks will 

also narrow the price ranges for similar 

products across the System. In addition, 

the Reserve Banks will offer depository 

institutions (DIs) greater incentives to 

deposit checks electronically and to 

accept image presentments. Longer 

term, as the use of Check 21-related 

products increases, the pricing of paper 

products may be strategically raised to 

encourage further adoption of electronic 

check collection and presentment 

alternatives. 

For 2006, the Reserve Banks are 

targeting an overall price increase for 

paper check services of 5.3 percent (see 

table 7). This increase consists of a 5.3 

percent increase in forward checkcollection fees, which is composed of a 

4.9 percent increase in forward cash 

letter fees and a 5.4 percent increase in 

per-item fees. Fees for return services 

will increase by 5.4 percent, which is 

composed of a 5.9 percent increase in 

return cash letter fees and a 5.3 percent 

increase in per-item fees. The average 

volume-weighted fees for payor bank 

services will increase 5.3 percent.

TABLE 7.—2006 FEE CHANGES

[percent] 

Product Fee change 

Paper Check ......................... 5.3 

Forward-collection ......... 5.3 

Cash Letter ............. 4.9 

Item ........................ 5.4 

Returns .......................... 5.4 

Cash Letter ............. 5.9 

Item ........................ 5.3 

Payor bank services ............. 5.3 

Truncation ...................... 1.8 

Non-truncation (electronic check presentment) .......................... 14.5 

Electronic check information ........................ 13.8 

TABLE 7.—2006 FEE CHANGES—

Continued

[percent] 

Product Fee change 

Images ........................... (1.0) 

Check 21 

FedForward ................... (13.8) 

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

FedReceipt .................... ($.002) a

aFedReceipt customers will receive a 

$0.002 discount per check presented. The discount can be used to offset other check service fees incurred by FedReceipt customers. 

The primary risk to meeting the 

budgeted 2006 cost recovery is higherthan-expected paper check volume 

declines. Other risks include 

unanticipated problems with check 

office restructurings or other major 

initiatives that may result in significant 

cost overruns. 

D. FedACH Service 

Table 8 below shows the 2004, 2005 

estimate, and 2006 budgeted cost 

recovery performance for the 

commercial FedACH service.

68054 Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 

TABLE 8.—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)] 

2004 ..................................................................................... 75.1 64.0 11.1 8.9 103.0% 

2005 (estimate) .................................................................... 84.7 72.8 11.8 10.0 102.2 

2006 (budget) ....................................................................... 86.7 78.3 8.4 7.6 101.0 

1. 2005 Estimate 

For 2005, the Reserve Banks estimate 

that the FedACH service will recover 

102.2 percent of total expenses and 

targeted ROE, compared with the 

budgeted recovery rate of 100.4 percent. 

Total revenue is estimated to be $2.6 

million greater than the amount 

budgeted, and total expenses exceed 

budget by about $1.3 million. Through 

August, FedACH commercial 

origination volume is 14.5 percent 

higher than the same period last year. 

For full-year 2005, the Reserve Banks 

estimate that FedACH originations will 

grow 12.7 percent, compared with the 

budgeted growth of 7.7 percent. 

2. 2006 Pricing 

The Reserve Banks will reduce the 

input file fee one-third, from $3.75 to 

$2.50. This change is consistent with 

the Reserve Banks’ long-term strategy to 

decrease file fees. In addition, the 

Reserve Banks will reduce the FedLine 

Web notification of change fee 40 

percent, from $0.50 to $0.30, to better 

align the fee with that of similar 

products. 

The Reserve Banks project that the 

FedACH service will recover 101.0 

percent of total expenses and targeted 

ROE in 2006. Total revenue is budgeted 

to increase $2.1 million from the 2005 

estimate, despite $1.6 million less in fee 

revenue. The decrease in fee revenue is 

offset by NICB revenue, which is $3.2 

million larger than the 2005 estimate. 

Based on industry projections, the 

Reserve Banks estimate national ACH 

commercial origination volume will 

grow approximately 18 percent in 2006. 

This growth is largely attributable to 

volume increases associated with 

electronic check conversion 

applications, including checks 

converted at lockboxes, and internet 

initiated payments. The Reserve Banks, 

however, have projected FedACH 

commercial origination volume growth 

of 7.6 percent in 2006 to reflect 

continued volume shifts to the privatesector ACH operator. 

Total expenses and targeted ROE are 

budgeted to increase $3.1 million over 

the 2005 estimate. The Reserve Banks 

have budgeted increased costs for 

product development and service 

initiatives, such as FedACH risk 

management services. 

E. Fedwire Funds and National 

Settlement Services 

Table 9 below shows the 2004, 2005 

estimate, and 2006 budgeted cost 

recovery performance for the Fedwire 

funds and national settlement services.

TABLE 9.—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

TABOET ROE 

5

Recovery rate 

after Target 

ROE [1/(2+4)] 

2004 .............................................................................. 57.1 50.6 6.5 6.8 99.4% 

2005 (estimate) ............................................................. 64.9 56.1 8.8 7.9 101.4 

2006 (budget) ............................................................... 69.3 60.0 9.3 5.6 105.6 

1. 2005 Estimate 

For 2005, the Reserve Banks estimate 

that the Fedwire funds and national 

settlement services will recover 101.4 

percent of total expenses and targeted 

ROE, compared with a 2005 budgeted 

recovery rate of 100.1 percent. Fedwire 

funds achieved full cost recovery 

despite lower-than-budgeted fee 

revenue. Although the Reserve Banks 

have experienced higher-than-expected 

growth for online funds volume for 

2005, most of the growth has been in the 

lowest-priced tier. Through August, 

online funds volume is 5.7 percent 

higher than it was for the same period 

last year. For full-year 2005, the Reserve 

Banks estimate that online funds 

volume will grow 5.3 percent, compared 

with a budgeted growth of 2.8 percent. 

Also offsetting the lower-than-budgeted 

fee revenue is higher electronic 

connection revenue and NICB, as well 

as lower operating costs. With respect to 

the national settlement service, the 

Reserve Banks estimate that the volume 

of settlement entries processed during 

2005 will be 1.4 percent higher than the 

2005 budget projection. 

2. 2006 Pricing 

The Reserve Banks will raise the 

surcharge for offline transfers one-third, 

from $15 to $20. The surcharge increase 

more closely aligns the fee with the 

costs of providing offline access to the 

Fedwire funds service. 

In 2006, the Reserve Banks project 

that Fedwire funds and national 

settlement services will recover 105.6 

percent of total expense and targeted 

ROE. The Reserve Banks project 2006 

total revenue to increase by $4.4 million 

over the 2005 estimate primarily 

because of the projected higher funds 

transfer volume and higher NICB and 

electronic connection revenue. Total 

expenses for 2006 are expected to 

increase $3.9 million from the 2005 

estimate primarily because of security 

and technology investments, including 

the cost to migrate from legacy systems 

to Internet protocol-based systems, and 

further enhance resiliency. Online funds 

transfer volume for 2006 is expected to 

increase 3.0 percent compared with the 

2005 estimate. National settlement 

Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 68055

9The 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.

10Certain 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 2006 fee schedule below.

11Fedline, FedMail, and FedPhone are registered 

servicemarks of the Reserve Banks. These 

connections may also be used to access non-priced 

services provided by the Reserve Banks.

service volume for 2006 is expected to 

remain flat compared with the 2005 

estimate. 

F. Fedwire Securities Service 

Table 10 below shows the 2004, 2005 

estimate, and 2006 budgeted cost 

recovery performance for the Fedwire 

securities service.9

TABLE 10.—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)]% 

2004 ..................................................................................... 20.4 17.0 3.4 2.9 102.6

2005 (estimate) .................................................................... 21.0 17.9 3.1 2.9 101.3 

2006 (budget) ....................................................................... 22.1 19.1 3.0 1.8 105.9 

1. 2005 Estimate 

For 2005, the Reserve Banks estimate 

that the Fedwire securities service will 

recover 101.3 percent of total expenses 

and targeted ROE, compared with a 

2005 budgeted recovery rate of 102.8 

percent. The lower-than-budgeted 

recovery is primarily attributable to $0.6 

million in lower-than-expected fee 

revenue associated with lower-thanexpected transaction volume. Through 

August, online securities volume was 

flat compared to the same period last 

year. For full-year 2005, the Reserve 

Banks estimate that online securities 

volume will grow 1.1 percent, compared 

with a budgeted growth of 2.0 percent. 

The shortfall in fee revenue was offset 

by higher-than-expected NICB revenue. 

2. 2006 Pricing 

The Reserve Banks will raise the 

offline transfer origination and receipt 

surcharge from $33 to $50, and the joint 

custody origination surcharge from $35 

to $40. The Reserve Banks will retain all 

other fees at their current levels. The 

surcharge increase more closely aligns 

the fees with the costs of processing 

these transactions. 

The Reserve Banks project that the 

Fedwire securities service will recover 

105.9 percent of total expense and 

targeted ROE in 2006. Total revenue is 

projected to increase $1.1 million from 

the 2005 estimate primarily because of 

higher NICB. Online securities volume 

in 2006 is budgeted to be flat against the 

2005 estimate. Offline securities volume 

is projected to fall 9.0 percent against 

the 2005 estimate. Total expenses are 

expected to increase $1.2 million from 

the 2005 estimate. In 2006, the Reserve 

Banks plan to continue to invest in 

security and technology projects to 

enhance resiliency, migrate from legacy 

systems to Internet protocol-based 

systems, and implement changes in 

payment system risk policy. 

G. Noncash Collection Service 

Table 11 below shows the 2004 and 

2005 estimated cost recovery 

performance for the noncash collection 

service.

TABLE 11.—NONCASH COLLECTION 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)]% 

2004 ..................................................................................... 1.9 1.4 0.5 0.2 120.3

2005 (estimate) .................................................................... 1.2 1.1 0.1 0.2 90.9 

1. 2005 Estimate 

For 2005, the Reserve Banks estimate 

that the noncash collection service will 

recover 90.9 percent of total expenses 

and targeted ROE, compared with the 

budgeted recovery rate of 76.7 percent. 

This greater-than-expected recovery is 

due to lower-than-expected costs of 

withdrawal. The Reserve Banks estimate 

that, in 2005, noncash collection 

volume will be 16.1 percent lower than 

expected. Effective September 30, 2005, 

the Reserve Banks stopped accepting 

deposits of definitive municipal 

securities from DIs. The Reserve Banks 

plan to complete withdrawal from the 

service effective December 30, 2005. 

2. 2006 Pricing 

The Reserve Banks will no longer 

offer the noncash collection service in 

2006. 

H. Electronic Access 

The Reserve Banks allocate the costs 

and revenues associated with electronic 

access methods to the Reserve Banks’

priced services.10 There are four types of 

electronic access methods through 

which DIs can access the Reserve Banks’

priced services: FedLine, FedMail, 

FedPhone, and computer interface 

(mainframe to mainframe).11 There are 

three ways DIs currently use FedLine to 

68056 Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 

12The fee for the computer interface frame relay 

56 kbps product is $1,000 per month. The fee for 

the full circuit backup single equipment set is $825 

per month which, when combined with the $175 

per month spare parts set fee, is consistent with the 

complete frame relay product.

13A portion of clearing balances is used as a 

funding source for priced services assets. Long-term 

assets are partially funded from core clearing 

balances, 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.

14The 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 

total capital has no components of Tier 1 or total 

capital other than equity; therefore, requirements 1 

and 2 are essentially the same measurement.

15 In October, the Board approved changes to the 

methodology used to derive the pretax ROE from 

using the average of the results of three analytical 

models, the comparable accounting earnings model 

(CAE), the discounted cash-flow model (DCF), and 

the CAPM, to using only the CAPM (70 FR 60341, 

October 17, 2005).

16Other taxes are included in price-services 

actual or imputed costs.

access the Reserve Banks’ services: 

FedLine Web, FedLine Advantage, or 

FedLine DOS. Information services are 

available through FedLine Web, while 

transaction services are available 

through FedLine Advantage or FedLine 

DOS. For 2006, the Reserve Banks will 

change to the FedLine DOS connection 

fees as well as ancillary changes to 

frame relay spare parts and training fees.

The Reserve Banks will discontinue 

access to their services via FedLine DOS 

effective September 30, 2006. The 

Reserve Banks are migrating their 

customers to a tiered, web-based access 

structure. This migration is scheduled to 

be completed by September 30. At that 

time, FedLine customers will only be 

able to access Reserve Banks services 

via FedLine Web or FedLine Advantage. 

In the interim, those customers that 

have not yet migrated to web-based 

access can continue to use FedLine 

DOS. For those customers, the Reserve 

Banks bundle a FedLine DOS 

connection and a FedLine Web 

connection into a single FedLine Select 

package. In this arrangement, customers 

use their FedLine DOS connection to 

access transaction services and FedLine 

Web to access information services. The 

Reserve Banks will increase the fee for 

FedLine Select from $200 to $400 per 

month, beginning April 1, 2006, to 

encourage customers to move to 

FedLine Advantage before the 

September 30, 2006, sunset date.

The Reserve Banks will also increase 

the frame relay spare parts set fee and 

in-person and over-the-phone training 

fees. The fee increase for the frame relay 

spare parts set, from $155 to $175, is 

intended to ensure fee consistency with 

the complete 56 kbps frame relay 

product.12 The fee increase for over-thephone and in-person training, from $100 

to $150 per session and $800 to $1,000 

per session respectively, is intended to 

encourage the use of online training 

options that are offered at no cost.

II. Private-Sector Adjustment Factor 

A. Background 

Each year, as required by the 

Monetary Control Act of 1980, 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. In a comparable 

fashion, investment income is imputed 

and netted with related direct costs 

associated with clearing balances to 

estimate NICB. 

B. 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 

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 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 priced 

services 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.13 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.14

1. Financing rates 

Equity financing rates are based on 

the target ROE result of the capital asset 

pricing model (CAPM).15 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 

pretax ROE that would provide 

sufficient income to fulfill its income 

tax obligations.16 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. 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. 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, using 

a tax rate based on the top fifty BHCs 

by deposit balance continues to be an 

applicable and reasonable approach.

2. Other Costs 

The PSAF also includes the estimated 

priced services-related 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 

Federal Register / Vol. 70, No. 216 / Wednesday, November 9, 2005 / Notices 68057

17The 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 16 for the investments imputed in 

2006.

18NICB is projected to be $102.8 million for 2006 

using a constant spread of 35 basis points over the 

three-month Treasury bill, and applying this rate to 

the clearing balance levels used in the 2006 pricing 

process. The 2005 NICB estimate is $73.8 million.

19 July 2005 rates and balances were used to 

estimate the 2006 NICB.

20Federal Reserve Regulatory Service (FRRS) 9–

1558.

based on current FDIC rates and 

projected clearing balances held with 

the Federal Reserve.

C. 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. Based on these net clearing 

balance levels, Reserve Banks impute a 

constant spread, determined by the 

return on a portfolio of investments, 

over the three-month Treasury bill 

rate.17 18 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.19 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.

D. Discussion 

The decrease in the 2006 PSAF is 

primarily due to the decrease in ROE, 

which results in a decrease in the cost 

of equity. Although clearing balances on 

which investments are imputed 

decreased, a similar offsetting increase 

in items in process of collection results 

in a small increase in total assets. 

Because equity is imputed at 5 percent 

of total assets, this small change in 

assets causes equity to remain 

unchanged from 2005. 

1. Asset Base 

The estimated 2006 Federal Reserve 

assets, reflected in table 12, have 

increased $0.3 million. The decline in 

imputed investments in marketable 

securities of $546.0 million and in 

imputed reserve requirements of $69.7 

million, which are imputed based on 

the estimated level of clearing balances 

held, are offset by an increase in items 

in process of collection due to higher 

estimated float receivables. As a result 

of consolidation and restructuring of 

several System priced services 

functions, furniture and equipment and 

bank premises assets are expected to 

decrease $59.5 million in 2006. 

As shown in table 13, the assets 

financed through the PSAF have 

decreased. Short-term assets funded 

with short-term payables and clearing 

balances total $28.4 million. This 

represents a $10.5 million decrease from 

the short-term assets funded in 2005 

due to an increase in expected shortterm payables. Long-term assets funded 

with long-term liabilities, equity, and 

core clearing balances are projected to 

total $291.1 million. This represents a 

decrease of $70.6 million from the longterm assets funded in 2005 because 

long-term assets have decreased. 

2. Debt and Equity Costs and Taxes 

As previously mentioned, core 

clearing balances are available as a 

funding source for priced service assets. 

Table 13 shows that $319.5 million in 

clearing balances is used to fund priced 

services assets in 2006. The interest rate 

sensitivity analysis in table 14 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 1.2 percentage points, 

while an increase of 200 basis points in 

interest rates increases cost recovery by 

1.1 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 15 shows the imputed PSAF 

elements, the pretax ROE, and other 

required PSAF costs for 2005 and 2006. 

The decrease in ROE lowers the 

estimated cost of equity in 2006. Sales 

taxes decreased from $8.2 million in 

2005 to $7.7 million in 2006. The 

effective income tax rate used in 2006 

increased to 29.8 percent from 29.6 

percent in 2005. The priced service 

portion of the Board’s expenses 

increased $0.9 million from $6.6 million 

in 2005 to $7.5 million in 2006. 

3. Capital Adequacy and FDIC 

Assessment 

As shown in table 12, the amount of 

equity imputed for the 2006 PSAF is 

$808.0 million, unchanged from the 

imputed equity in 2005. As noted above 

and shown in table 16, equity is based 

on 5 percent of total assets and is greater 

than 10 percent of risk-weighted assets, 

as required by the FDIC definition of a 

well-capitalized depository institution 

for insurance premium purposes. In 

2006, the capital to total assets ratio and 

the capital to risk-weighted asset ratio 

both meet or exceed regulatory 

guidelines. As a result, no FDIC 

assessment is imputed for 2006. 

III. 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.’’ 20

Under this policy, the Board assesses 

whether the proposed change 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 2006 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 will permit the 

Reserve Banks to earn an ROE that is 

comparable to the returns of the overall 

market.

BILLING CODE 6210–01–P

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By order of the Board of Governors of the 

Federal Reserve System, November 2, 2005. 

Jennifer J. Johnson, 

Secretary of the Board.

[FR Doc. 05–22224 Filed 11–8–05; 8:45 am]

BILLING CODE 6210–01–C

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

National Toxicology Program (NTP); 

Liaison and Scientific Review Office; 

Meeting of the Scientific Advisory 

Committee on Alternative 

Toxicological Methods (SACATM)

AGENCY: National Institute of 

Environmental Health Sciences 

(NIEHS), National Institutes of Health 

(NIH), HHS.

ACTION: Meeting announcement and 

request for comment. 

SUMMARY: Pursuant to section 10(a) of 

the Federal Advisory Committee Act, as 

amended (5 U.S.C. Appendix 2), notice 

is hereby given of a meeting of the 

SACATM on December 12, 2005. The 

meeting is scheduled from 8:30 a.m. to 

adjournment (~5 p.m.) and is open to 

the public with attendance limited only 

by the space available. SACATM 

advises the Interagency Coordinating 

Committee on the Validation of 

Alternative Methods (ICCVAM), the 

NTP Interagency Center for the 

Evaluation of Alternative Toxicological 

Methods (NICEATM), and the Director 

of the NIEHS regarding statutorily 

mandated duties of ICCVAM and 

activities of NICEATM. SACATM 

provides advice on priorities and 

activities related to the development, 

validation, scientific review, regulatory 

acceptance, implementation, and 

national and international 

harmonization of new, revised, and 

alternative toxicological test methods. 

Additional information about SACATM, 

including the charter, roster, and 

records of past meetings can be found at 

http://ntp.niehs.nih.gov/ see ‘‘Advisory 

Board & Committees.’’

DATES: The SACATM meeting will be 

held on December 12, 2005. All 

individuals who plan to attend are 

encouraged to register online at the NTP 

Web site by December 5, 2005, at http:/

/ntp.niehs.nih.gov/ select ‘‘Advisory 

Boards & Committees.’’ In order to 

facilitate planning for this meeting, 

persons wishing to make an oral 

presentation are asked to notify the 

Executive Secretary for SACTAM via 

online registration, phone, or e-mail by 

December 5, 2005, (see ADDRESSES

below). Written comments should also 

be received by December 5, 2005, to 

enable review by SACATM and NTP 

staff prior to the meeting.

ADDESSES: The SACATM meeting will 

be held at the Hilton Alexandria Old 

Town, 1767 King Street, Alexandria, VA 

22314. Public comments and other 

correspondence should be directed to 

Dr. Kristina Thayer, Executive Secretary 

for SACATM (NTP Liaison and 

Scientific Review Office, NIEHS, P.O. 

Box 12233, MD A3–01, Research 

Triangle Park, NC 27709; telephone: 

919–541–5021, fax: 919–541–0295; or email: thayer@niehs.nih.gov). Persons 

needing special assistance, such as sign 

language interpretation or other 

reasonable accommodation in order to 

attend, should contact 919–541–2475 

voice, 919–541–4644 TTY (text 

telephone), through the Federal TTY 

Relay System at 800–877–8339, or by email to niehsoeeo@niehs.nih.gov.

Requests should be made at least 7 days 

in advance of the event.

SUPPLEMENTARY INFORMATION: 

Preliminary Agenda and Availability of 

Meeting Materials 

A preliminary agenda is provided 

below. Additional background material 

will be posted on the NTP Web site as 

available at http://ntp.niehs.nih.gov/ see 

‘‘Advisory Board & Committees’’ or 

available upon request (see ADDRESSES

above). Following the meeting, 

summary minutes will be prepared and 

available at this Web site and upon 

request. 

Preliminary Agenda, Scientific 

Advisory Committee on Alternative 

Toxicological Methods, December 12, 

2005, Hilton Alexandria Old Town, 

1767 King Street, Alexandria, VA 22314. 

8:30 a.m. 

• Call to Order, Introductions, and 

Recognition of Retiring Members. 

• NICEATM and ICCVAM Update. 

• Overview of the May 2005 Ocular 

Toxicity Scientific Symposia. 

Æ Mechanisms of Chemically-Induced 

Ocular Injury and Recovery. 

Æ Reducing Pain and Distress in 

Ocular Safety Testing. 

• Performance Characteristics of the 

In Vivo Ocular Irritancy Test. 

Æ Public Comment. 

• ICCVAM Evaluation of In Vitro 

Methods to Identify Ocular Sever 

Irritants and Corrosives: Report from the 

Expert Panel (Presentation). 

Æ Bovine Corneal Opacity and 

Permeability (BCOP) Assay. 

Æ Isolated Chicken Eye (ICE) Assay. 

Æ Isolated Rabbit Eye (IRE) Assay. 

Æ Hen’s Egg Test—Chorion Allantoic 

Membrane (HET–CAM) Assay. 

Æ Reference Chemicals. 

12 p.m. 

LUNCH BREAK. 

1 p.m. 

• ICCVAM Evaluation of In Vitro 

Methods to Identify Ocular Severe 

Irritants and Corrosives: Report from the 

Expert Panel Continued. 

Æ Public Comment. 

• ICCVAM Nominations. 

Æ Public Comment. 

• ICCVAM–NICEATM–ECVAM 

Workshop on Validation Principles and 

Approaches for Toxicogenomic-based 

Method. 

Æ Public Comment. 

• ECVAM Update. 

• SACATM General Discussion. 

~5 p.m. 

ADJOURN. 

Request for Comments 

Public input at this meeting is invited 

and time is set aside for the presentation 

of public comments. Each organization 

is allowed one time slot per public 

comment period. At least 7 minutes will 

be allotted to each speaker, and if time 

permits, may be extended to 10 minutes. 

Registration for oral comments will also 

be available on-site, although time 

allowed for presentation by on-site 

registrants may be less than that for preregistered speakers and will be 

determined by the number of persons 

who register at the meeting. 

Persons registering to make oral 

comments are asked, if possible, to send 

a copy of their statement to the 

Executive Secretary for SACATM (see 

ADDRESSES above) by December 5, 2005, 

to enable review by SACATM and 

NIEHS/NTP staff prior to the meeting. 

Written statements can supplement and 

may expand the oral presentation. If 

registering on-site and reading from 

written text, please bring 40 copies of 

the statement for distribution and to 

supplement the record. Written 

comments received in response to this 

notice will be posted on the NTP Web 

site. Persons submitting written 

comments should include their name, 

affiliation, mailing address, phone, fax, 

e-mail, and sponsoring organization (if 

any) with the document. 

Background Information on SACATM 

The SACATM was established 

January 9, 2002, to fulfill section 3(d) of 

Public Law 106–545, the ICCVAM 

Authorization Act of 2000 [42 U.S.C. 

285l–3(d)] and is composed of scientists 

from the public and private sectors 

(Federal Register: March 13, 2002: Vol. 

67, No. 49, page 11358). The SACATM 

provides advice to the Director of the 

NIEHS, ICCVAM, and NICEATM 

regarding statutorily mandated duties of 

ICCVAM and activities of NICEATM. 

Additional information about SACATM,