Financial Update (January-March 1998)

Federal Reserve Sets Fees for 1998

T he Federal Reserve's 1998 fees for priced services reflect cost-saving opportunities for financial institutions through reduced costs for electronic payments. The Fed estimates these pricing changes will save the banking industry an estimated $15.6 million and provide incentive for banks to further automate their payments systems.

The new fees went into effect Jan. 2. The 1998 fees represent an approximate 4 percent decline in priced services compared to a price decline of 3.7 percent in 1997. The cost of off-line funds transfers and some check collection/payor bank services transactions increased slightly. In areas where fees were raised, the increases reflect escalating costs associated with manual or labor-intensive paper payment processing.

The Federal Reserve System sets its prices annually to recover its actual and imputed costs for each payment service provided to depository institutions, based on an assessment of forecast volumes.

Fedwire Funds Transfer

For Fedwire funds transfers, two fees changed. Origination and receipt fees for basic funds transfers were reduced from 45 cents to 40 cents. The Fed projects that the decrease in these fees should yield $9 million in annual savings for the Fed's on-line customers. The fees for off-line funds transfers increased. This surcharge is now $12, an increase of $2. This increase reflects the higher cost of processing off-line funds transfer transactions and should provide incentive for institutions to consider moving toward electronic access.

ACH charges

Five fees changed for automated clearinghouse (ACH) transactions — four fees were reduced and one was eliminated. Per-item fees to originate small files were dropped to 0.8 cent and those for large files to 0.6 cent. Per-item fees for receipt of ACH items were reduced to 0.8 cent. Also, fees for ACH addenda records originated and received were reduced to 0.2 cent per item. Addenda records carry the information for financial electronic data interchange, which enables businesses to pay suppliers electronically rather than with paper checks. All four of the ACH fee reductions reflect a per-fee decrease of 0.1 cent. The fee to receive a composite receiver file directory has been eliminated.

The reductions in ACH fees are the result of centralized processing and the development of new software to increase efficiency. This is the fourth time the Fed has reduced ACH fees in the past 18 months.

Noncash and Other Items

Because of the systemwide centralization of noncash processing at the Jacksonville, Fla., office, out-of-region fees have been eliminated. All noncash items are charged at local fee levels, which remain the same as in 1997. Noncash items are definitive municipal bonds and coupons.

Fees for check collection/payor bank services continue to vary from branch to branch, but several District-wide fees changed.

Fees increased slightly for RCPC (regional check processing center) products (checks received from outside a branch's geographical city area) and selected group sorts.

Several other Fed product fees were raised slightly because of increased transportation costs. There were selected fee increases for unqualified dishonored items, or unpaid items that require additional handling by the Fed before they can be processed. The per-item fees for qualified items remain unchanged. Cash letter transaction fees increased slightly for most deposit types because of rising fixed costs. Forward fine-sort per-item fees increased 0.2 cent for both city and RCPC work types.

The fees for the Fedwire book-entry securities transfers, net settlement services, electronic connection and accounting information services remain at their 1997 levels.

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