63592 Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Notices 

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

forma income statement for Federal Reserve priced 

services published in the Board’s Annual Report. 

Effective December 31, 2006, the Reserve Banks 

implemented Financial Accounting Standards No. 

158: Employers’ Accounting for Defined Benefit 

Pension and Other Postretirement Plans (FAS 158), 

which resulted in recognizing a reduction in equity 

related to the priced services’ benefit plans. 

Including this reduction in equity results in cost 

recovery of 95.5 percent for the ten-year period. 

This measure of long-run cost recovery is also 

published in the Board’s Annual Report. 

2FedACH and Fedwire are registered 

servicemarks of the Reserve Banks. 

FR Y–9CS is a supplemental report that 

may be utilized to collect additional 

information deemed to be critical and 

needed in an expedited manner from 

BHCs. The items of information 

included on the supplement may 

change as needed. 

2. Report title: Financial Reports of 

Foreign Banking Organizations. 

Agency form number: FR Y–7Q. 

OMB control number: 7100–0125. 

Frequency: Quarterly and annually. 

Reporters: Foreign banking 

organizations (FBOs). 

Annual reporting hours: FR Y–7Q 

(quarterly): 325; FR Y–7Q (annual): 118. 

Estimated average hours per response: 

FR Y–7Q (quarterly): 1.25; FR Y–7Q 

(annual): 1.0. 

Number of respondents: FR Y–7Q 

(quarterly): 65; FR Y–7Q (annual): 118. 

General description of report: This 

information collection is mandatory (12 

U.S.C. 1844(c), 3106(c), and 3108). 

Confidential treatment is not routinely 

given to the data in these reports. 

However, confidential treatment for 

information, in whole or in part, on any 

of the reporting forms can be requested 

in accordance with the instructions to 

the form, pursuant to sections (b)(4) and 

(b)(6) of the Freedom of Information Act 

[5 U.S.C. 522(b)(4) and (b)(6)]. 

Abstract: The FR Y–7Q collects 

consolidated regulatory capital 

information from all FBOs either 

quarterly or annually. FBOs that have 

effectively elected to become FHCs file 

the FR Y–7Q on a quarterly basis. All 

other FBOs (those that have not elected 

to become FHCs) file the FR Y–7Q 

annually. 

Board of Governors of the Federal Reserve 

System, November 5, 2007. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. E7–21960 Filed 11–8–07; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

[Docket No. OP–1299] 

Federal Reserve Bank Services 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Notice. 

SUMMARY: The Board has approved the 

private sector adjustment factor (PSAF) 

for 2008 of $113.1 million and the 2008 

fee schedules for Federal Reserve priced 

services and electronic access. These 

actions were taken in accordance with 

the requirements of the Monetary 

Control Act of 1980, which requires 

that, over the long run, fees for Federal 

Reserve priced services be established 

on the basis of all direct and indirect 

costs, including the PSAF. The Board 

has also approved maintaining the 

current earnings credit rate on clearing 

balances. 

DATES: The new fee schedules and 

earnings credit rate become effective 

January 2, 2008. 

FOR FURTHER INFORMATION CONTACT: For 

questions regarding the fee schedules: 

Jack K. Walton II, Associate Director, 

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

Manager, Retail Payments, (202/728–

5801); Edwin J. Lucio, Senior Financial 

Services Analyst, (202/736–5636), 

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 Senner, Senior Financial 

Analyst, (202/452–2042), Division of 

Reserve Bank Operations and Payment 

Systems. For users of 

Telecommunications Device for the Deaf 

(TDD) only, please call 202/263–4869. 

Copies of the 2008 fee schedules for the 

check service are available from the 

Board, the Federal Reserve Banks, or the 

Reserve Banks’ financial services Web 

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

SUPPLEMENTARY INFORMATION: 

I. Private Sector Adjustment Factor and 

Priced Services 

A. Overview—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 the 

return on equity (profit) that would have 

been earned if a private business firm 

provided the services. The imputed 

costs and imputed profit are collectively 

referred to as the PSAF. Similarly, 

investment income is imputed and 

netted with related direct costs 

associated with clearing balances to 

estimate net income on clearing 

balances (NICB). From 1997 through 

2006, the Reserve Banks recovered 99.0 

percent of their total expenses 

(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 2006, 2007 

estimated, and 2008 budgeted cost 

recovery rates for all priced services. 

Cost recovery is estimated to be 101.5 

percent in 2007 and budgeted to be 

101.1 percent in 2008. The check 

service accounts for approximately 80 

percent of the total cost of priced 

services and thus significantly 

influences the aggregate cost recovery 

rate. The electronic services (FedACH, 

the Fedwire Funds Service and 

National Settlement Service (NSS), and 

the Fedwire Securities Service) 

account for approximately 20 percent of 

total costs.2

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] 

4d

Target 

ROE 

5e

Recovery 

rate after 

target ROE 

[1/(2+4)] 

(percent) 

2006 ......................................................................................................... 1,031.2 875.5 155.7 72.0 108.8 

2007 (estimate) ........................................................................................ 1,015.1 920.0 95.1 80.4 101.5 

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

[$ millions] 

Year 1b

Revenue 

2c

Total 

expense 

3 

Net income 

(ROE) 

[1-2] 

4d

Target 

ROE 

5e

Recovery 

rate after 

target ROE 

[1/(2+4)] 

(percent) 

2008 (budget) .......................................................................................... 897.1 821.3 75.8 66.5 101.1 

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. Clearing balances are assumed to be invested in a broad portfolio of investments, such 

as short-term Treasury securities, government agency securities, commercial paper, long-term corporate bonds, and money market 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. 

eThe recovery rates in this and subsequent tables do not reflect the unamortized gains or losses that must be recognized in accordance with 

FAS 158. Including these gains or losses, the recovery rate would have been 79.9 percent for 2006 and is estimated to be 103.0 percent for 

2007. Future gains or losses, and their effect on cost recovery, cannot be projected. 

Table 2 presents an overview of the 

2006, 2007 budgeted, 2007 estimated, 

and 2008 budgeted cost recovery 

performance by priced service. 

TABLE 2.—PRICED SERVICES COST RECOVERY

[percent] 

Priced service 2006 2007 

Budget 

2007 

Estimate 

2008 

Budget a

All services ....................................................................................................................... 108.8 101.9 101.5 101.1 

Check ............................................................................................................................... 109.3 101.8 100.4 100.3 

FedACH ........................................................................................................................... 104.3 102.5 105.8 102.0 

Fedwire Funds and NSS ................................................................................................. 111.4 102.5 107.0 105.5 

Fedwire Securities ........................................................................................................... 104.5 101.9 103.5 105.0 

a 2008 budget figures reflect the latest data from the Reserve Banks. The Reserve Banks will transmit final budget data to the Board in November 2007, for Board consideration in December 2007. 

1. 2007 Estimated Performance—The 

Reserve Banks estimate that they will 

recover 101.5 percent of the costs of 

providing priced services, including 

imputed expenses and targeted ROE, 

compared with a budgeted recovery rate 

of 101.9 percent, as shown in table 2. 

The Reserve Banks estimate that they 

will again exceed $1 billion in revenue 

and that all services will achieve full 

cost recovery. The Reserve Banks also 

estimate that they will fully recover 

actual and imputed expenses and earn 

net income of $95.1 million, compared 

with the target of $80.4 million. The 

greater-than-targeted net income is 

largely driven by the performance of the 

check service, which had greater-thanexpected volumes of paper return items 

and Check 21 substitute checks. 

The Reserve Banks have continued 

their efforts to downsize their paper 

check processing infrastructure as paper 

check volumes continue to decline 

nationwide. The Reserve Banks have 

already reduced the number of sites at 

which they process checks from fortyfive in 2003 to nineteen in 2007 and 

have announced that they will 

consolidate to four check processing 

offices by early 2011. These check 

restructuring efforts have helped the 

Reserve Banks to maintain full cost 

recovery by reducing costs in line with 

the decline in revenues associated with 

paper check processing. 

2. 2008 Private Sector Adjustment 

Factor—The 2008 PSAF for Reserve 

Bank priced services is $113.1 million. 

This amount represents a decrease of 

$19.4 million from the 2007 PSAF of 

$132.5 million. This reduction is 

primarily the result of decreases in both 

the amount of imputed equity and in the 

cost of equity. 

3. 2008 Projected Performance—The 

Reserve Banks project a priced services 

cost recovery rate of 101.1 percent in 

2008. The 2008 fees for priced services 

are projected to result in a net income 

of $75.8 million compared with the 

target of $66.5 million. The major risks 

to the Reserve Banks’ ability to achieve 

their budgeted targets are higher-thanexpected declines in paper check 

volume as well as increased competition 

from correspondent banks and other 

service providers. Other risks include 

lower-than-expected electronic 

payments volumes, and costs associated 

with unanticipated problems with check 

office restructurings or technological 

upgrades. In light of these risks, the 

Reserve Banks will continue to refine 

their business and operational strategies 

to improve efficiency and reduce costs 

and excess capacity. These efforts 

should position the Reserve Banks to 

achieve their financial and other 

payment system objectives and statutory 

requirements over the long run. 

4. 2008 Pricing—The following 

summarizes the Reserve Banks’ changes 

in fee schedules for priced services in 

2008: 

Check 

• The Reserve Banks will raise the 

fees for paper forward collection check 

products 12.1 percent, paper return 

check products 12.5 percent, and payor 

bank check products 13.8 percent. 

• The Reserve Banks will decrease 

Check 21 fees for FedForward products 

delivered to electronic endpoints 3.2 

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63594 Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Notices 

percent and increase Check 21 fees for 

FedForward products delivered to 

substitute check endpoints 10.3 percent. 

The Reserve Banks also will increase the 

FedReceipt Forward deposit discount by 

$0.001 for each check presented through 

FedReceipt products. 

• With the 2008 fee changes, the price 

index for the check service will have 

increased 75.4 percent since 1998. 

FedACH 

• The Reserve Banks will eliminate 

the input file processing fee. 

• With the 2008 fee change, the price 

index for the FedACH service will have 

decreased 61.7 percent since 1998. 

Fedwire Funds and National Settlement 

• The Reserve Banks will decrease 

the online transfer fee by three cents in 

the highest-priced tier, two cents in the 

midpriced tier, and one cent in the 

lowest-priced tier and increase the 

volume thresholds for each tier. 

• With the 2008 fee changes, the price 

index for the Fedwire Funds and 

National Settlement Services will have 

decreased 51.6 percent since 1998. 

Fedwire Securities 

• The Reserve Banks will not change 

prices. 

• The price index for the Fedwire 

Securities Service will have decreased 

44.4 percent since 1998. 

5. 2008 Price Index—Figure 1 

compares indexes of fees for the Reserve 

Banks’ priced services with the GDP 

price index. Compared with the price 

index for 2007, the price index for all 

Reserve Bank priced services is 

projected to increase 2.7 percent in 

2008. The price index for electronic 

payment services is projected to 

decrease 8.3 percent in 2008. The price 

index for paper check services is 

projected to increase 11.7 percent in 

2008. This increase mainly reflects the 

Reserve Banks’ continued efforts to 

encourage a shift from paper check 

services to Check 21 products. For the 

period 1998 to 2008, the price index for 

all priced services is expected to 

increase by 35.4 percent. In comparison, 

from 1998 through 2007, the GDP price 

index increased 24.3 percent. 

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BILLING CODE 6210–01–C B. Private Sector Adjustment Factor—

The method for calculating the 

financing and equity costs in the PSAF 

requires determining the appropriate 


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3A portion of clearing balances is used as a 

funding source for priced-services assets. Long-term 

assets are partially funded from core clearing 

balances, which are currently $4 billion. Core 

clearing balances are considered the portion of the 

balances that has remained stable over time without 

regard to the magnitude of actual clearing balances. 

4The FDIC requirements for a well-capitalized 

depository institution are (1) a ratio of total capital 

to risk-weighted assets of 10 percent or greater, (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 

priced services balance sheet has no components of 

Tier 1 or total capital other than equity; therefore, 

requirements 1 and 2 are essentially the same 

measurement. 

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

does not refer to the actual member banks of the 

Federal Reserve System, but rather to the implied 

shareholders who would have an ownership 

interest if the Reserve Banks’ priced services were 

provided by a private firm. 

5Other taxes, such as sales taxes, are included in 

priced-services actual or imputed costs. 

6The investment portfolio is composed of 

investments comparable to a BHC’s investment 

holdings, such as short-term Treasury securities, 

government agency securities, commercial paper, 

long-term corporate bonds, and money market 

funds. See table 7 for the investments imputed in 

2008. 

NICB is projected to be $125.8 million for 2008 

using a constant spread of 26 basis points over the 

three-month Treasury bill rate and applying this 

rate to the clearing balance levels used in the 2008 

pricing process. The 2007 NICB estimate is $135.7 

million. 

7 July 2007 rates and balances were used to 

project 2008 NICB. 

levels of debt and equity to impute and 

then applying the applicable financing 

rates. In this process, a pro forma 

balance sheet using estimated assets and 

liabilities associated with the Reserve 

Banks’ priced services is developed, and 

the remaining elements that would exist 

if these priced services were provided 

by a private business firm are imputed. 

The same generally accepted accounting 

principles that apply to commercialentity financial statements also apply to 

the relevant elements in the priced 

services pro forma financial statements. 

The portion of Federal Reserve assets 

that will be used to provide priced 

services during the coming year is 

determined using information on actual 

assets and projected disposals and 

acquisitions. The priced portion of these 

assets is determined based on the 

allocation of the related depreciation 

expense. The priced portion of actual 

Federal Reserve 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, long-term 

liabilities, and equity are not sufficient 

to fund long-term 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 by 

more than two percentage points.3

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. Imputed equity meets the FDIC 

requirements for a well-capitalized 

depository institution for insurance 

premium purposes and represents the 

market capitalization, or shareholder 

value, for Reserve Bank priced services.4

The equity financing rate is the target 

ROE rate produced by the capital asset 

pricing model (CAPM). In the CAPM, 

the required rate of return on a firm’s 

equity is equal to the return on a riskfree asset plus a risk premium. To 

implement the CAPM, the risk-free rate 

is based on the three-month Treasury 

bill; the beta is assumed to equal 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, an actual 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.5 To the extent that 

actual performance results are greater or 

less than the targeted ROE, income taxes 

are adjusted using an imputed income 

tax rate. Because the Reserve Banks 

provide similar services through their 

correspondent banking activities, 

including payment and settlement 

services, and the amount of imputed 

equity meets the FDIC requirements for 

a well-capitalized depository 

institution, the imputed income tax rate 

is the median of the rates paid by the 

top fifty bank holding companies 

(BHCs) based on deposit balances over 

the past five years adjusted to the extent 

that they invested in tax-free municipal 

bonds. 

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 

based on current FDIC rates and 

projected clearing balances held with 

the Reserve Banks. 

1. Net Income on Clearing Balances—

The NICB calculation is performed each 

year along with the PSAF calculation 

and is based on the assumption that the 

Reserve Banks invest clearing balances 

net of imputed reserve requirements and 

balances used to finance priced-services 

assets. Using these net clearing balance 

levels, the Reserve Banks impute a 

constant spread, determined by the 

return on a portfolio of investments, 

over the three-month Treasury bill rate.6

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.7 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. 

2. Analysis of the 2008 PSAF—The 

decrease in the 2008 PSAF is primarily 

due to an overall reduction in imputed 

equity and a slight decrease in the 

required ROE result provided by the 

CAPM. 

Estimated 2008 Federal Reserve 

assets, reflected in table 3, have 

decreased $2,279.8 million, mainly due 

to a decline in items in process of 

collection of $1,977.2 million. This 

reduction largely stems from the 

accelerated collection of items 

processed in the Check 21 environment. 

As shown in table 4, the portion of 

assets financed with clearing balances 

has increased. Short-term assets funded 

with clearing balances total $4.2 

million. This figure represents a $6.0 

million decline from the short-term 

assets funded in 2007, a decrease that 

results from the reduction in estimated 

short-term receivables. The amount of 

core clearing balances used to fund 

long-term assets has increased $68.5 

million primarily because of an increase 

in long-term assets and a lower amount 

of imputed equity, which also is used to 

fund long-term assets. 

As previously mentioned, clearing 

balances are available as a funding 

source for priced-services assets. Table 

4 shows that $72.7 million in clearing 

balances is used to fund priced-services 

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8 In December 2006, bank regulators (the Board of 

Governors of the Federal Reserve System, the FDIC, 

the Office of the Comptroller of the Currency, and 

the Office of Thrift Supervision) announced an 

interim ruling that excludes FAS 158-related 

accumulated other comprehensive income or losses 

from the calculation of regulatory capital. The 

Reserve Banks, however, elected to impute total 

equity at 5 percent of assets, as indicated above, 

until the regulators announce a final ruling. 

9Per FDIC rules, any remaining portion of the 

one-time assessment credit can offset up to 90 

percent of the assessment amount in subsequent 

years. For 2008, 90 percent of the total imputed 

assessment of $4.1 million was offset by the 

remaining assessment credit, resulting in a net 

assessment of $0.4 million. 

assets in 2008. The interest rate 

sensitivity analysis in table 5 indicates 

that a 200 basis point decrease in 

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

liabilities and decreases cost recovery 

by 1.5 percentage points, while an 

increase of 200 basis points in interest 

rates increases cost recovery by 1.4 

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. 

As shown in table 3, the amount of 

equity imputed for the 2008 PSAF is 

$628.9 million, a decrease of $114.0 

million from the imputed equity for 

2007. In accordance with FAS 158, this 

amount includes an accumulated other 

comprehensive loss of $328.4 million. 

The capital to total assets ratio and the 

capital to risk-weighted assets ratio both 

meet or exceed the regulatory 

requirements for a well-capitalized 

depository institution. Equity is based 

on 5 percent of total assets, and capital 

to risk-weighted assets is 10.1 percent.8

Following the final FDIC regulations 

regarding the assessment of insurance 

premiums, the Reserve Banks imputed a 

one-time priced services assessment 

credit of $16.6 million. In 2007, this 

imputed credit fully offset the imputed 

assessment for the priced services. For 

2008, the net FDIC assessment is 

imputed at $0.4 million.9

Table 6 shows the imputed PSAF 

elements, the pretax ROE, and other 

required PSAF costs for 2007 and 2008. 

The $20.7 million decrease in ROE is 

primarily caused by a lower amount of 

imputed equity and a slight decrease in 

the risk-free rate of return. Sales taxes 

increased from $8.5 million in 2007 to 

$8.9 million in 2008. The effective 

income tax rate used in 2008 decreased 

to 31.2 percent from 31.5 percent in 

2007. The priced-services portion of the 

Board’s expenses increased $0.5 million 

from $6.7 million in 2007 to $7.2 

million in 2008. 

TABLE 3.—COMPARISON OF PRO FORMA BALANCE SHEETS FOR FEDERAL RESERVE PRICED SERVICES

[Millions of dollars—projected average for year] 

2008 2007 Change 

Short-term assets: 

Imputed reserve requirement on clearing balances ........................................................... $799.7 $823.4 $(23.7) 

Receivables ........................................................................................................................ 64.3 70.1 (5.8 ) 

Materials and supplies ........................................................................................................ 2.0 1.1 0.9 

Prepaid expenses ............................................................................................................... 29.3 30.2 (0.9 ) 

Items in process of collection 10 ......................................................................................... 3,411.7 5,388.9 (1,977.2 ) 

Total short-term assets ............................................................................................... 4,307.0 6,313.7 (2,006.7 ) 

Imputed investments .................................................................................................................. 7,124.5 7,444.5 (320.0 ) 

Long-term assets: 

Premises 11 ......................................................................................................................... 393.9 395.2 (1.3 ) 

Furniture and equipment .................................................................................................... 131.0 138.7 (7.7 ) 

Leasehold improvements and long-term prepayments ...................................................... 86.7 56.6 30.1 

Prepaid pension costs ........................................................................................................ 384.2 349.1 35.1 

Deferred tax asset .............................................................................................................. 150.0 159.3 (9.3 ) 

Total long-term assets ................................................................................................. 1,145.8 1,098.9 46.9 

Total assets .......................................................................................................... 12,577.3 14,857.1 (2,279.8 ) 

Short-term liabilities:12

Clearing balances ............................................................................................................... 7,683.9 8,322.7 (638.8 ) 

Deferred credit items 10 ...................................................................................................... 3,724.7 5,300.3 (1,575.6 ) 

Short-term payables ........................................................................................................... 91.4 91.2 0.2 

Total short-term liabilities ............................................................................................ 11,500.0 13,714.2 (2,214.2 ) 

Long-term liabilities:12

Postemployment/postretirement benefits liability ............................................................... 448.4 400.0 48.4

Total liabilities .............................................................................................................. 11,948.4 14,114.2 (2,165.8 ) 

Equity 13 ..................................................................................................................................... 628.9 742.9 (114.0 ) 

Total liabilities and equity ............................................................................................ 12,577.3 14,857.1 (2,279.8 ) 

10 Represents float that is directly estimated at the service level. 11 Includes the allocation of Board of Governors assets to priced services of $1.2 million for 2008 and 2007. 12 No debt is imputed because clearing balances are a funding source. 13 Includes an accumulated other comprehensive loss of $361.0 million for 2007, which was reduced to $328.4 million for 2008 to reflect the 

ongoing amortization of the accumulated loss in accordance with FAS 158. Future gains or losses, and their effects on the pro forma balance 

sheet, cannot be projected. 

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TABLE 5.—2008 INTEREST RATE SENSITIVITY ANALYSIS 16

[Millions of dollars] 

Rate 

sensitive 

Rate 

insensitive Total 

Assets: 

Imputed reserve requirement on clearing balances ........................................................... .......................... $799.7 $799.7 

Imputed investments .......................................................................................................... $7,124.5 ........................ 7,124.5 

Receivables ........................................................................................................................ .......................... 64.3 64.3 

Materials and supplies ........................................................................................................ .......................... 2.0 2.0 

Prepaid expenses ............................................................................................................... .......................... 29.3 29.3 

Items in process of collection 17 ......................................................................................... (313.0 ) 3,724.7 3,411.7 

Long-term assets ................................................................................................................ .......................... 1,145.8 1,145.8 

Total assets ................................................................................................................. 6,811.5 5,765.8 12,577.3 

Liabilities: 

Clearing balances 18 ........................................................................................................... 5,851.6 1,832.3 7,683.9 

Deferred credit items .......................................................................................................... .......................... 3,724.7 3,724.7 

Short-term payables ........................................................................................................... .......................... 91.4 91.4 

Long-term liabilities ............................................................................................................. .......................... 448.4 448.4 

Total liabilities .............................................................................................................. 5,851.6 6,096.8 11,948.4 

200 basis 

point decrease 

in rates 

200 basis 

point increase 

in rates 

Rate change results: 

Asset yield ($6,811.5 × rate change) ............................................................................................................... (136.2) 136.2 

Liability cost ($5,851.6 × rate change) ............................................................................................................. (117.0) 117.0 

Effect of 200 basis point change .............................................................................................................. (19.2) 19.2 

2008 budgeted revenue ................................................................................................................................... 897.1 897.1 

Effect of change ............................................................................................................................................... (19.2) 19.2 

Revenue adjusted for effect of interest rate change ................................................................................ 877.9 916.3 

2008 budgeted total expenses ......................................................................................................................... 770.5 770.5 

2008 budgeted PSAF ....................................................................................................................................... 117.3 117.3 

Tax effect of interest rate change ($ change × 31.2%) ................................................................................... (6.0) 6.0 

Total recovery amounts ............................................................................................................................. 881.8 893.8 

Recovery rate before interest rate change ...................................................................................................... 101.1% 101.1% 

Recovery rate after interest rate change ......................................................................................................... 99.6% 102.5% 

Effect of interest rate change on cost recovery 19 ........................................................................................... (1.5)% 1.4% 

16The interest rate sensitivity analysis evaluates the level of interest rate risk presented by the difference between rate-sensitive assets and 

rate-sensitive liabilities. The analysis reviews the ratio of rate-sensitive assets to rate-sensitive liabilities and the effect on cost recovery of a 

change in interest rates of up to 200 basis points. 17The amount designated as rate-sensitive represents items collected prior to providing credit according to established availability schedules. 18The amount designated as rate-insensitive represents clearing balances on which earnings credits are not paid. 19The effect of a potential change in rates is less than a two percentage point change in cost recovery; therefore, no long-term debt is imputed 

for 2008. 

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BILLING CODE 6210–01–C 


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28Two adjustments are applied to the earnings 

credit rate so that the return on clearing balances 

at the Federal Reserve is comparable to what the 

depository institution (DI) would have earned had 

it maintained the same balances at a private-sector 

correspondent. The ‘‘imputed reserve requirement’’

adjustment is made because a private-sector 

correspondent would be required to hold reserves 

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

the correspondent would reduce the balance on 

which it would base earnings credits for the 

respondent because it would be required to hold a 

portion, determined by its marginal reserve ratio, in 

the form of non-interest-bearing reserves. For 

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

with a correspondent bank and the correspondent 

had a marginal reserve ratio of 10 percent, then the 

correspondent bank would be required to hold 

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

credits to the respondent based on 90 percent of the 

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

marginal reserve ratio of 10 percent to the Reserve 

Banks. 

The ‘‘marginal reserve requirement’’ adjustment 

accounts for the fact that the respondent can deduct 

balances maintained at a correspondent, but not at 

the Federal Reserve, from its reservable liabilities. 

This reduction has value to the respondent when 

it frees up balances that can be invested in interestbearing 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 

[ 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. 

29A band is established around the contracted 

clearing balance to determine the maximum balance 

on which credits are earned as well as any 

deficiency charges. The clearing balance allowance 

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

whichever is greater. Earnings credits are based on 

the period-average balance maintained up to a 

maximum of the contracted amount plus the 

clearing balance allowance. Deficiency charges 

apply when the average balance falls below the 

contracted amount less the allowance, although 

credits are still earned on the average maintained 

balance. 

TABLE 7.—COMPUTATION OF 2008 CAPITAL ADEQUACY FOR FEDERAL RESERVE PRICED SERVICES

[Millions of dollars] 

Assets Risk 

weighted 

Weight 

assets 

Imputed reserve requirement on clearing balances ............................................................................................ $799.7 0.0 $0.0 

Imputed investments: 

1-year Treasury note 25 26 ............................................................................................................................. 2,475.5 0.0 0.0 

Commercial paper (3-month) 25 .................................................................................................................... 4,249.5 1.0 4,249.5 

GNMA mutual fund 27 ................................................................................................................................... 399.5 0.2 79.9 

Total imputed investments .................................................................................................................... 7,124.5 ................ 4,329.4 

Receivables ......................................................................................................................................................... 64.3 0.2 12.9 

Materials and supplies ......................................................................................................................................... 2.0 1.0 2.0 

Prepaid expenses ................................................................................................................................................ 29.3 1.0 29.3 

Items in process of collection .............................................................................................................................. 3,411.7 0.2 682.3 

Premises .............................................................................................................................................................. 393.9 1.0 393.9 

Furniture and equipment ..................................................................................................................................... 131.0 1.0 131.0 

Leasehold improvements and long-term prepayments ....................................................................................... 86.7 1.0 86.7 

Prepaid pension costs ......................................................................................................................................... 384.2 1.0 384.2 

Deferred tax asset ............................................................................................................................................... 150.0 1.0 150.0 

Total ....................................................................................................................................................... 12,577.3 ................ 6,201.7 

Imputed equity for 2008 ....................................................................................................................................... 628.9 ................ ................

Capital to risk-weighted assets ............................................................................................................................ 10.1% ................ ................

Capital to total assets .......................................................................................................................................... 5.0% ................ ................

25The imputed investments are assumed to be similar to those for which rates are available on the Federal Reserve’s H.15 statistical release, 

which can be located at http://www.federalreserve.gov/releases/h15/data.htm. 26 Includes estimated amounts arising from the collection of items prior to providing credit according to established availability schedules. 

These amounts are assumed to be invested in a short-term Treasury security. 27The imputed mutual fund investment is based on Vanguard’s GNMA Fund Investor Shares fund, which was chosen based on the investment 

strategies articulated in its prospectuses. The fund returns can be located at https://personal.vanguard.com/VGApp/hnw/FundsByType. 

C. Earnings Credits on Clearing 

Balances—The Reserve Banks will 

maintain the current rate of 80 percent 

of the three-month Treasury bill rate to 

calculate earnings credits on clearing 

balances.28

Clearing balances were introduced in 

1981, as part of the Board’s 

implementation of the Monetary Control 

Act, to facilitate access to Federal 

Reserve priced services by institutions 

that did not have sufficient reserve 

balances to support the settlement of 

their payment transactions. The 

earnings credit calculation uses a 

percentage discount on a rolling 

thirteen-week average of the annualized 

coupon equivalent yield of three-month 

Treasury bills in the secondary market. 

Earnings credits, which are calculated 

monthly, can be used only to offset 

charges for priced services and expire if 

not used within one year.29

D. Check Service—Table 8 shows the 

2006, 2007 estimated, and 2008 

budgeted cost recovery performance for 

the commercial check service. 

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30Total forward Reserve Bank check volumes 

have dropped from roughly 11.0 billion in 2006 to 

10.1 billion in 2007 and are expected to fall to 9.2 

billion in 2008. 

TABLE 8.—CHECK SERVICE PRO FORMA COST AND REVENUE PERFORMANCE

[$ millions] 

Year 1 1 Revenue 2 Total 

expense 

3 Net 

income 

(ROE) [1–2] 

4 Target 

ROE 

5 Recovery 

rate after 

target ROE 

[1/(2+4)] 

(percent) 

2006 ......................................................................................................... 845.7 716.9 128.7 57.1 109.3 

2007 (estimate) ........................................................................................ 815.2 748.5 66.7 63.2 100.4 

2008 (budget) .......................................................................................... 701.5 647.2 54.4 51.9 100.3 

1. 2007 Estimate—For 2007, the 

Reserve Banks estimate that the check 

service will recover 100.4 percent of 

total expenses and targeted ROE, 

compared with the budgeted recovery 

rate of 101.8 percent. The Reserve Banks 

expect to recover all actual and imputed 

expenses of providing check services 

and earn net income of $66.7 million 

(see table 8). 

The lower-than-budgeted cost 

recovery is the result of costs that were 

$40.3 million greater than budgeted and 

are primarily attributable to the accrual 

of one-time costs associated with the 

next phase of check restructuring. 

Revenue was $29.7 million higher than 

expected, reflecting additional revenue 

associated with Check 21 deposits 

presented to non-electronic endpoints 

using substitute checks and helped to 

offset the unbudgeted costs. 

The number of checks deposited 

electronically has grown rapidly in 2007 

(see table 9). Year-to-date through 

September, 37.9 percent of the Reserve 

Banks’ volume was deposited through 

Check 21 products. Year-to-date figures, 

however, understate the current 

penetration rate of Check 21 products 

because volume has increased 

throughout 2007. In the month of 

September, for example, the proportion 

of checks deposited electronically with 

the Reserve Banks for collection rose to 

about 50.6 percent of total check 

deposits. 

The number of checks presented 

electronically using Check 21 products 

has also grown steadily in 2007 (see 

table 9). Year-to-date through 

September, 18.6 percent of the Reserve 

Banks’ volume was presented using 

Check 21 products, compared with a 

rate of 26.7 percent for the month of 

September. Before the end of the year, 

the Reserve Banks expect that nearly a 

third of all checks will be presented 

using Check 21 products. Depository 

institutions have been slower to accept 

check presentments electronically 

because financial incentives are 

generally stronger for electronic check 

deposit and because integrating 

electronic presentments into back-office 

processing and risk-management 

systems can be a complex and 

expensive undertaking. 

TABLE 9.—CHECK 21 PRODUCT PENETRATION RATES a

[PERCENT] b

2006 

September 

2007 Yearto-date 

September 

2007 

Deposit: 12.0 38.8 51.7 

FedForward ...................................................................................................................................... 11.4 37.9 50.6 

Paper to Check 21 ........................................................................................................................... 0.6 1.0 1.1 

Presentment: 4.1 18.6 26.7 

FedReceipt ....................................................................................................................................... 0.1 1.1 1.5 

FedReceipt Plus ............................................................................................................................... 4.0 17.5 25.2 

Return: .................... .................... ....................

FedReturn ......................................................................................................................................... 12.0 36.0 39.4 

aThe Reserve Banks’ Check 21 product suite includes FedForward, FedReturn, FedReceipt, and FedReceipt Return. FedForward is the electronic alternative to forward check collection; FedReturn is the electronic alternative to paper check return; FedReceipt is electronic presentment 

with accompanying images; and FedReceipt Return is the electronic return of unpaid checks. Under FedReceipt, the Reserve Banks electronically present only the checks that were deposited electronically or that were deposited in paper form and converted into electronic form by the 

Reserve Banks. Under FedReceipt Plus, the Reserve Banks electronically present all checks drawn on the customer. b Deposit and presentment statistics are calculated as a percentage of total forward collection volume. Return statistics are calculated as a percentage of total return volume. 

For full-year 2007, the Reserve Banks 

estimate that their total forward check 

volume will decline 8 percent.30 Paper 

forward-collection volume is expected 

to decline 35.3 percent for the full year 

compared with a budgeted decline of 

21.3 percent as more volume is 

deposited electronically (see table 10). 

This greater-than-expected decline in 

paper check volume is a result of more 

checks being deposited electronically. 

The Reserve Banks estimate that paper 

return volume will decline at a slower 

pace than forward paper volume, 27.1 

percent for the full year compared with 

a budgeted decline of 31.7 percent. 

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31 In February 2003, the Reserve Banks 

announced an initiative to reduce the number of 

sites at which they process checks from forty-five 

to thirty-two. The Reserve Banks announced further 

rounds of restructurings in August 2004, May 2005, 

and May 2006. As of October 2007, there are 

nineteen Reserve Bank check processing offices. 

The Reserve Banks have announced plans to 

consolidate to four check processing sites by early 

2011. 

32 In 2007, the Reserve Banks announced a sunset 

strategy for payor bank services. The Reserve Banks 

will discontinue offering these services by the end 

of 2009. 

TABLE 10.—PAPER CHECK PRODUCT VOLUME CHANGES

[Percent] 

Budgeted 

2007 

change 

Change 

through 

September 

2007 

Estimated 

2007 

change 

Total forward collection ............................................................................................................................ ¥21.3 ¥35.7 ¥35.3 

Returns .................................................................................................................................................... ¥31.7 ¥23.4 ¥27.1 

2. 2008 Pricing—In 2008, the Reserve 

Banks project that the check service will 

recover 100.3 percent of total expenses 

and targeted ROE. Revenue is projected 

to be $701.5 million, or about a $114 

million decline from 2007. This decline 

is driven by a $142 million drop in 

paper check and payor bank fee revenue 

that is partially offset by a $43 million 

increase in Check 21 fee revenue. Total 

expenses for the check service are 

projected to be $647.2 million, or about 

a $101 million decline from 2007. A key 

driver in the reduction of local check 

costs is the continued planned 

restructuring of the Reserve Banks’

check-processing sites, including a 

reduction in staff of approximately 20 

percent.31

For 2008, the Reserve Banks estimate 

that their total forward check volume 

will decline 9 percent. The Reserve 

Banks project that paper check volume 

for forward products will decrease about 

44 percent, volume for paper check 

return products will decrease 33 

percent, and volume for payor bank 

products will decrease 45 percent. 

These expected volume declines will be 

offset by a projected increase in Check 

21 volumes as the shift from paper to 

electronic check volume continues. The 

Reserve Banks project that FedForward 

volume will increase 42 percent, 

FedReceipt Plus volume will increase 

87 percent, and FedReturn volume will 

increase 39 percent (see table 11). The 

Reserve Banks’ projected increase in 

Check 21 volume will result in a more 

modest 17 percent increase in Check 21 

product revenue as the share of Check 

21 deposits presented to FedReceipt 

electronic endpoints grows. Board and 

Reserve Bank staff believe that the key 

to realizing Check 21 cost efficiencies 

for the System continues to be the 

widespread acceptance of electronic 

check presentments by paying banks, 

and by year-end 2008, the Reserve 

Banks expect that 75 percent of their 

check volume will be deposited using 

Check 21 services and that 55 percent of 

their check volume will be presented 

using Check 21 services. 

TABLE 11.—CHECK 21 VOLUME

2008 

Budgeted 

volume 

(millions of 

items) 

Growth 

from 2007 

estimate 

(percent) 

FedForward .......... 5,842 42 

FedReceipt Plus ... 3,841 87 

FedReturn ............. 60 39 

The Reserve Banks expect to see 

continued growth in their Check 21 

volumes in 2008, as market participants 

continue to replace their existing 

traditional check infrastructure to take 

advantage of more cost-effective 

electronic clearing. The Reserve Banks 

project volume losses from large banks 

that are expected to increase the number 

of check images exchanged among 

themselves. This volume loss, however, 

is expected to be offset through the 

expansion of customers using existing 

Check 21 products and the introduction 

of new Check 21 products. In addition, 

the Reserve Banks will further 

standardize their product offerings and 

will eliminate products that generate 

little volume. These actions will help 

the Reserve Banks achieve a more 

uniform product suite, leading to greater 

operational efficiencies. 

For 2008, the Reserve Banks are 

targeting an overall price increase for 

traditional check services of 12.5 

percent, including a 12.1 percent 

increase in forward check collection 

fees, a 12.5 percent increase in return 

service fees, and a 13.8 percent increase 

in payor bank services fees.32 For Check 

21 services, the Reserve Banks will 

decrease by 3.2 percent the fees for 

Check 21 deposits that are presented 

electronically. The fees for Check 21 

deposits that are presented as substitute 

checks, however, will increase 10.3 

percent. There will be no change in fees 

charged for the Check 21 FedReturn 

product (see table 12). 

TABLE 12.—2008 FEE CHANGES

[Percent] 

Product Fee change 

Traditional Check ...................... 12.5 

Forward collection ................. 12.1 

Returns .................................. 12.5 

Payor bank services ............. 13.8 

Check 21: 

FedForward (electronic 

endpoints) .......................... ¥3.2 

FedForward (substitute check 

endpoints) .......................... 10.3 

FedReturn ............................. (B) 

aFedReceipt customers currently receive a 

$0.003 discount per check presented electronically, which will increase to a $0.004 discount in 2008. This discount can be used to 

offset fees for checks deposited electronically 

with the Reserve Banks. b No changes. 

The major risks to meeting the 

Reserve Banks’ budgeted 2008 cost 

recovery are higher-than-expected 

declines in paper check volume as well 

as increased competition from 

correspondent banks and other service 

providers as they expand their Check 21 

service offerings. The Reserve Banks 

may also suffer greater Check 21 volume 

losses if large banks exchange images 

among themselves more quickly than 

anticipated. Other risks include 

unanticipated problems with check 

restructurings or other major initiatives 

that may result in significant cost 

overruns. 

E. FedACH Service—Table 13 below 

shows the 2006, 2007 estimated, and 

2008 budgeted cost recovery 

performance for the commercial 

FedACH service. 

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33FedEDI is a registered servicemark of the 

Reserve Banks. 

34 Depository institutions that use FedLine 

Advantage, FedLine Command, and FedLine Direct 

will also have access to FedEDI Plus and FedACH 

risk management services because FedLine Web 

functionality is included in these electronic access 

packages. 

TABLE 13.—FEDACH SERVICE PRO FORMA COST AND REVENUE PERFORMANCE

[$ millions] 

Year 1 Revenue 2 Total 

expense 

3 Net 

income 

(ROE) [1–2] 

4 Target 

ROE 

5 Recovery 

rate after 

target ROE 

[1/(2+4)] 

(percent) 

2006 ......................................................................................................... 91.4 80.1 11.3 7.5 104.3 

2007 (estimate) ........................................................................................ 101.7 87.3 14.3 8.8 105.8 

2008 (budget) .......................................................................................... 99.1 89.6 9.5 7.6 102.0 

1. 2007 Estimate—The Reserve Banks 

estimate that the FedACH service will 

recover 105.8 percent of total expenses 

and targeted ROE, compared with the 

budgeted recovery rate of 102.5 percent. 

The Reserve Banks expect to recover all 

actual and imputed expenses of 

providing FedACH services and earn net 

income of $14.3 million. Year-to-date 

through September, FedACH 

commercial origination volume is 13.6 

percent higher than during the same 

period last year, compared with a 

budgeted full-year growth of 12.4 

percent. For full-year 2007, the Reserve 

Banks estimate that FedACH 

commercial originations will grow 13.1 

percent because some of their customers 

will have migrated their business to 

EPN, the other automated clearing 

house (ACH) operator. 

2. 2008 Pricing—The Reserve Banks 

project that the FedACH service will 

recover 102.0 percent of total expenses 

and targeted ROE in 2008. Total revenue 

is budgeted to decrease $2.6 million 

from the 2007 estimate, primarily as the 

result of the elimination of the input file 

processing fee. Total expenses are 

budgeted to increase $2.3 million from 

the 2007 estimate. This increase reflects 

the additional resources needed to 

support the multiyear technology 

transition plan from a mainframecomputer to a distributed-server 

processing environment. 

The Reserve Banks expect FedACH 

commercial origination volume to grow 

11.2 percent in 2008. This expected 

growth is largely attributable to volume 

increases associated with electronic 

check conversion applications, 

including checks converted at lockboxes 

and at the point of sale. 

The Reserve Banks will also change 

their pricing approach for two existing 

ACH products. The first, FedEDI Plus, 

offers depository institutions the ability 

to provide corporate-level payment data 

to their customers.33 The second, 

FedACH risk management services, 

provides depository institutions the 

ability to better monitor the risks of 

their ACH transactions. Beginning in 

2008, the subscription fee for FedACH 

risk management services will be 

eliminated, and fees for monitoring 

criteria will be reduced and tiered. In 

addition, access to FedACH risk 

management services, along with 

FedEDI Plus, will be bundled with 

FedLine Web connectivity. Separate fees 

will also be charged for FedEDI Plus 

scheduled, secure delivery, and on 

demand reports.34

The primary risk to meeting the 

Reserve Banks’ budgeted 2008 cost 

recovery is the loss of large ACH 

originators to EPN. Other risks include 

the potential growth of direct ACH 

exchanges that bypass the ACH 

operators and unanticipated problems 

with technology upgrades that may 

result in significant cost overruns. 

F. Fedwire Funds and National 

Settlement Services—Table 14 below 

shows the 2006, 2007 estimated, and 

2008 budgeted cost recovery 

performance for the Fedwire Funds and 

National Settlement Services. 

TABLE 14.—FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES PRO FORMA COST AND REVENUE PERFORMANCE

[$ millions] 

Year 1 

Revenue 

2 

Total 

expense 

3 

Net income 

(ROE) 

[1–2] 

4 

Target 

ROE 

5 

Recovery 

rate after 

target ROE 

[1/(2+4)] 

(percent) 

2006 ......................................................................................................... 72.3 59.3 13.0 5.6 111.4 

2007 (estimate) ........................................................................................ 74.8 63.6 11.2 6.3 107.0

2008 (budget) .......................................................................................... 72.9 63.8 9.0 5.3 105.5 

1. 2007 Estimate—The Reserve Banks 

estimate that the Fedwire Funds and 

National Settlement Services will 

recover 107.0 percent of total expenses 

and targeted ROE, compared with a 

2007 budgeted recovery rate of 102.5 

percent. The greater-than-expected 

recovery rate is primarily attributed to 

higher-than-expected electronic 

connection and fee revenues and lowerthan-budgeted operating costs. Year-todate through September, online funds 

volume was 1.4 percent higher than 

during the same period last year. For 

full-year 2007, the Reserve Banks 

estimate that online funds volume will 

grow 1.4 percent, compared with a 

budgeted flat growth. With respect to 

the National Settlement Service, the 

Reserve Banks estimate that the volume 

of settlement entries processed during 

2007 will be 7.0 percent higher than the 

2007 budget projection of flat growth. 

The higher-than-budgeted National 

Settlement Service volume is due 

primarily to the Depository Trust & 

Clearing Corporation subsidiaries’

greater use of the National Settlement 

Service for settlement activity. 

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35The 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. 

36FedPhone, FedMail, and FedLine are registered 

servicemarks of the Reserve Banks. These 

connections may also be used to access non-priced 

services provided by the Reserve Banks. FedPhone 

is a free access option. 

37Federal Reserve Regulatory Service (FRRS) 9–

1558. 

2. 2008 Pricing—In 2008, the Reserve 

Banks expect the Fedwire Funds and 

National Settlement Services to recover 

105.5 percent of total expenses and 

targeted ROE. The Reserve Banks project 

2008 total revenue to decline $1.9 

million compared with the 2007 

estimate. The decline in total revenue is 

due to lower service revenue generated 

by the lower transfer fees. Total 

expenses for 2008 are budgeted to 

increase $0.2 million from the 2007 

estimate. Online volume for the Fedwire 

Funds Service for 2008 is budgeted to 

increase 1.9 percent compared with 

2007 estimates. Volume for the National 

Settlement Service for 2008 is budgeted 

to be unchanged from 2007 estimated 

volume. 

The Reserve Banks will decrease the 

online transfer fee by three cents in the 

highest-priced tier, two cents in the 

midpriced tier, and one cent in the 

lowest-priced tier. The Reserve Banks 

also will increase the volume thresholds 

for each tier. The fee reductions for 

online transfers are intended to better 

position the Reserve Banks to remain 

competitive with CHIPS. The Reserve 

Banks will not change the National 

Settlement Service fee schedule. 

G. Fedwire Securities Service—Table 

15 below shows the 2006, 2007 

estimated, and 2008 budgeted cost 

recovery performance for the Fedwire 

Securities Service.35

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

[$ millions] 

Year 1 

Revenue 

2 

Total 

expense 

3 

Net income 

(ROE) 

[1–2] 

4 

Target 

ROE 

5 

Recovery 

rate after 

target ROE 

[1/(2+4)] 

(percent) 

2006 ......................................................................................................... 21.9 19.1 2.7 1.8 104.5 

2007 (estimate) ........................................................................................ 23.5 20.6 2.8 2.0 103.5 

2008 (budget) .......................................................................................... 23.6 20.8 2.9 1.7 105.0 

1. 2007 Estimate—The Reserve Banks 

estimate that the Fedwire Securities 

Service will recover 103.5 percent of 

total expenses and targeted ROE, 

compared with a 2007 budgeted 

recovery rate of 101.9 percent. The 

higher-than-budgeted recovery is 

attributable to greater-than-expected fee 

revenue and lower-than-expected 

operating costs. Year-to-date through 

September, online securities volume 

was 6.4 percent higher than during the 

same period last year. For full-year 

2007, the Reserve Banks estimate that 

online securities volume will grow 6.4 

percent, compared with a budgeted flat 

growth. The higher-than-budgeted 

volume is due to the recent substantial 

growth in online volume driven by 

recent market volatility. 

2. 2008 Pricing—The Reserve Banks 

project that in 2008 the Fedwire 

Securities Service will recover 105.0 

percent of total expenses and targeted 

ROE. Total revenue and total expenses 

are expected to be only slightly higher 

than 2007. Online and offline securities 

volumes in 2008 are projected to be 

unchanged from 2007 estimates. The 

Reserve Banks will leave prices 

unchanged. 

H. Electronic Access—The Reserve 

Banks allocate the costs and revenues 

associated with electronic access to the 

Reserve Banks’ priced services. There 

are currently three types of electronic 

access channels through which 

customers can access the Reserve Banks’

priced services: FedLine, FedMail, 

and FedPhone.36 For 2008, the Reserve 

Banks will be adding new services to, 

and increasing the fees for, the FedLine 

packaged solutions. 

The Reserve Banks offer seven 

electronic access packages that are 

supplemented by a number of premium 

(or a` la carte) access and accounting 

information options. The first package 

provides access to information services 

through FedMail Email. The next two 

packages are FedLine Web packages, 

with either three or five subscribers, that 

offer access to basic information and 

check services. The next two packages 

are FedLine Advantage packages, with 

either three or five subscribers, that 

expand upon the FedLine Web packages 

to offer access to FedACH and Fedwire 

services. The final two packages are 

FedLine Command and FedLine Direct. 

FedLine Command can connect over the 

Internet or through a dedicated 

connection, while FedLine Direct 

exclusively connects through a 

dedicated connection. FedLine 

Command is designed for FedACH 

functionality, while FedLine Direct, 

which is the replacement channel for 

Computer Interface customers, has both 

FedACH and Fedwire functionality. 

Both FedLine Command and FedLine 

Direct expand upon the FedLine 

Advantage ackages and include most 

accounting information services. 

The increases to electronic access 

pricing for 2008 reflect enhanced 

services in the FedLine packages. 

Specifically, the Reserve Banks are 

including in the FedLine packages 

additional enhanced accounting 

information services, the FedEDI Plus 

service, and the FedACH risk 

management service. The Reserve Banks 

will charge an additional $5 per month 

for the FedLine Web packages, $10 per 

month for the FedLine Advantage and 

FedLine Command packages, and $100 

per month for the FedLine Direct 

packages. 

II. Analysis of Competitive Effect 

All operational and legal changes 

considered by the Board that have a 

substantial effect on payments system 

participants are subject to the 

competitive impact analysis described 

in the March 1990 policy, ‘‘The Federal 

Reserve in the Payments System.’’ 37

Under this policy, the Board assesses 

whether the changes would have a 

direct and material adverse effect on the 

ability of other service providers to 

compete effectively with the Federal 

Reserve in providing similar services 

because of differing legal powers or 

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63606 Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Notices 

constraints or because of a dominant 

market position deriving from such legal 

differences. If the changes create such 

an effect, the Board must further 

evaluate the changes 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 2008 fees, 

fee structures, and changes in service 

will not have a direct and material 

adverse effect on the ability of other 

service providers to compete effectively 

with the Reserve Banks in providing 

similar services. The changes should 

permit the Reserve Banks to earn an 

ROE that is comparable to overall 

market returns. 

FEDACH SERVICE 2008 FEE SCHEDULE—EFFECTIVE JANUARY 2, 2008 

[Bold indicates changes from 2007 fee schedule] 

Fee 

Origination (per item or record):38

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

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

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

Input file processing (per file): ......................................................................................................................................................... eliminated 

Receipt (per item or record):39

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

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

FedACH risk management: 

Risk service subscription .......................................................................................................................................................... eliminated 

Risk origination monitoring service.

Monitoring criteria:40

Per set of criteria for the first 20 sets per month .................................................................................................... 8.00 

Per set of criteria for additional sets up to 150 per month .................................................................................... 4.00 

Per set of criteria for every set over 150 per month ............................................................................................... 1.00 

Batch monitoring ........................................................................................................................................................................... 0.0025 

FedEDI Plus (per report): 

Scheduled report ........................................................................................................................................................................ 0.20 

On demand report ...................................................................................................................................................................... 0.75 

Secure delivery ........................................................................................................................................................................... 0.20 

Monthly (per routing number): 

Account servicing 41 ...................................................................................................................................................................... 25.00 

FedACH settlement 42 ................................................................................................................................................................... 20.00 

Information extract file .................................................................................................................................................................. 20.00 

FedLine Web origination returns and notification of change (NOC)43 ................................................................................................ 0.30 

Voice response returns/NOC 44 ........................................................................................................................................................... 2.00 

Non-electronic input/output: 45

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

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

Facsimile exception returns/NOC 46 ............................................................................................................................................. 15.00 

Canada service: 

Cross-border item surcharge 47 .................................................................................................................................................... 0.039 

Return received from Canada 48 ................................................................................................................................................... 0.77 

Same-day recall of item at receiving gateway operator .............................................................................................................. 4.00 

Same-day recall of item not at receiving gateway operator ........................................................................................................ 7.00 

Trace of item at receiving gateway .............................................................................................................................................. 3.50 

Trace of item not at receiving gateway ........................................................................................................................................ 5.00 

Mexico service: 

Cross-border item surcharge 47 .................................................................................................................................................... 0.67 

Return received from Mexico 48 .................................................................................................................................................... 0.69 

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

Transatlantic service: 

Cross-border item surcharge: 47

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

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

The Netherlands .................................................................................................................................................................... 2.00 

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

United Kingdom ..................................................................................................................................................................... 2.00 

Return received: 48

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

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

The Netherlands .................................................................................................................................................................... 5.00 

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

United Kingdom ..................................................................................................................................................................... 8.00 

38Small files contain fewer than 2,500 items and large files contain 2,500 or more items. These origination fees do not apply to items that the 

Reserve Banks receive from the private-sector ACH operator. 39 Receipt fees do not apply to items that the Reserve Banks send to the private-sector ACH operator. 40Sets of criteria are the combination of variables the originating depository financial institution (ODFI) will use to monitor ACH processing. For 

example, ODFIs can select which originators to monitor, set debit and credit caps, and receive e-mail notification. 41The account servicing fee applies to routing numbers that have received or originated FedACH transactions. Institutions that receive only 

U.S. government transactions or that elect to use the other operator exclusively are not assessed the account servicing fee. 42The FedACH settlement fee is applied to any routing number with activity during a month. This fee does not apply to routing numbers that 

use the Reserve Banks for government transactions only. 

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Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Notices 63607 

43The fee includes the transaction and addenda fees. 44The fee includes the transaction fee in addition to the voice response fee. 45These services are offered for contingency situations only. 46The fee includes the transaction fee in addition to the conversion fee. 47This per-item surcharge is in addition to the standard domestic origination fees. 48This per-item surcharge is in addition to the standard domestic receipt fees. 

FEDWIRE FUNDS AND NATIONAL SETTLEMENT SERVICES 2008 FEE SCHEDULE—EFFECTIVE JANUARY 2, 2008 

[Bold indicates changes from 2007 fee schedule] 

Fee 

Fedwire Funds Service 

Origination and receipt: 

Per transfer for the first 3,000 transfers per month ..................................................................................................................... $0.26 

Per transfer for additional transfers up to 90,000 per month ...................................................................................................... 0.17 

Per transfer for every transfer over 90,000 per month ................................................................................................................ 0.08 

Surcharge: 

Offline transfer originated or received .......................................................................................................................................... 30.00 

National Settlement Service 

Basic: 

Settlement entry ........................................................................................................................................................................... 0.80 

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

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

Minimum monthly charge (account maintenance) 49 ........................................................................................................................... 60.00 

Special settlement arrangements 50 Per day ...................................................................................................................................... 100.00 

49This minimum monthly charge will only be assessed if total settlement charges during a calendar month are less than $60. 50Special settlement arrangements use Fedwire funds transfers to effect settlement. Participants in arrangements and settlement agents are 

also charged the applicable Fedwire funds transfer fee for each transfer into and out of the settlement account. 

FEDWIRE SECURITIES SERVICE 2008 FEE SCHEDULE (NON-TREASURY SECURITIES)—EFFECTIVE JANUARY 2, 2008 

[Bold indicates changes from 2007 fee schedule] 

Fee 

Transfer or reversal, originated or received ........................................................................................................................................ $0.34 

Surcharge: 

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

Monthly maintenance: 

Account maintenance (per account) ............................................................................................................................................ 16.00 

Issues maintained (per issue/per account) .................................................................................................................................. 0.40 

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

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

ELECTRONIC ACCESS 2008 FEE SCHEDULE

[Effective January 2, 2008. Bold indicates changes from 2007 fee schedule] 

Electronic Access Packages (Monthly) 

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

FedLine Web W3 ........................................................................................................................................................................... $85.00 

Includes: 

FedMail E-mail 

FedLine Web with three individual subscriptions 

Service Charge Information (SCI) 

Account Management Information (AMI) 

FedACH risk management service 

FedEDI Plus service 

FedLine Web W5 ........................................................................................................................................................................... $130.00 

Includes: 

FedMail E-mail 

FedLine Web with five individual subscriptions 

Service Charge Information (SCI) 

Account Management Information (AMI) 

FedACH risk management service 

FedEDI Plus service 

Cash Management System Basic—Own report only 

FedLine Advantage A3 .................................................................................................................................................................. $310.00 

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63608 Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / Notices 

ELECTRONIC ACCESS 2008 FEE SCHEDULE—Continued 

[Effective January 2, 2008. Bold indicates changes from 2007 fee schedule] 

Includes: 

FedLine Web W3 package 

FedLine Advantage with three individual subscriptions 

Virtual Private Network (VPN) maintenance 

FedLine Advantage A5 .................................................................................................................................................................. $360.00 

Includes: 

FedLine Web W5 package 

FedLine Advantage with five individual subscriptions 

VPN maintenance 

Intraday search download feature within AMI 

FedLine Command ........................................................................................................................................................................ $660.00 

Includes: 

FedLine Advantage A5 package 

One dedicated unattended connection over the Internet for ACH services 

Billing data format file (BDFF) 

Intra-day file 

End of day file (FIRD) 

Statement of account spreadsheet file (SASF) 

FedLine Direct D56, D256, DT1 .................................................................................................................................................... D56 $2,100.00, 

D256 $3,100.00, 

and DT1 

$3,600.00 

Includes: 

FedLine Command package 

One dedicated unattended connection for Computer Interface or FedLine Direct 

Premium Options (Monthly) 51

Electronic Access 

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

Additional subscribers package (each package contains 5 additional subscribers) ..................................................................... $75.00 

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

Additional dedicated connections 52

Primary: 

56K .................................................................................................................................................................................. $750.00 

256K ................................................................................................................................................................................ $1,750.00 

T1 .................................................................................................................................................................................... $2,250.00 

Contingency: 

56K .................................................................................................................................................................................. $650.00 

256K ................................................................................................................................................................................ $1,650.00 

T1 .................................................................................................................................................................................... $2,150.00 

FedImage/Check 21 large file delivery .......................................................................................................................................... Various 

Accounting Information Services 

Cash Management System: 

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

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

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

Plus—Less than 10 respondent and/or subaccounts and SASF (per month) .......................................................................... $100.00 

Plus—10 or more respondent and/or subaccounts and SASF (per month) ............................................................................. $200.00 

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

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

Intra-day search download file (per month) .................................................................................................................................. $100.00 

51Premium options for FedLine Web W3 and FedLine Advantage A3 limited to FedMail Fax. 52 Network diversity supplemental charge of $1,000 a month may apply in addition to these fees. 

By order of the Board of Governors of the 

Federal Reserve System, November 5, 2007. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. 07–5602 Filed 11–8–07; 8:45 am] 

BILLING CODE 6210–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Disease Control and 

Prevention 

[30Day–08–07AC] 

Agency Forms Undergoing Paperwork 

Reduction Act Review 

The Centers for Disease Control and 

Prevention (CDC) publishes a list of 

information collection requests under 

review by the Office of Management and 

Budget (OMB) in compliance with the 

Paperwork Reduction Act (44 U.S.C. 

Chapter 35). To request a copy of these 

requests, call the CDC Reports Clearance 

Officer at (404) 639–5960 or send an email to omb@cdc.gov. Send written 

comments to CDC Desk Officer, Office of 

Management and Budget, Washington, 

DC or by fax to (202) 395–6974. Written 

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