Financial Update (Second Quarter 2006)


 Guynn Notes Growth,
 Some Uncertainties

 Conference Explores
 Markets, Institutions

 Economists Propose
 Fannie, Freddie
 Portfolio Limits

 Kohn Nominated
 as Fed’s
 Vice Chairman

 Atlanta Fed 2005
 Annual Report
 Remembers Katrina

 Fed Announces
 Changes to Cash
 Inventory Services

 Agencies Issue
 Advisory About Flu

 Exploring Credit,
 Debit Cards’
 Payment Process

 Atlanta Fed to
 Maintain Presence
 in Birmingham

 Barron: Community
 Banks Face

 Fed Gov. Olson
 Addresses Importance
 of Banks

 Board Launches
 Web Site
 Geared to Kids

 New Fed Product
 Helps Mitigate
 ACH Risk

 FDIC Ups Insurance
 Limits on Some


  Data Bank

  Circular Letters



Fed Announces Changes to Cash Services

cash inventory

Providing cash to financial institutions has long been an important service provided by the Federal Reserve Banks, and recirculating currency between the Fed and banks keeps cash flowing even in times of national emergencies, such as Sept. 11, 2001, and last year’s hurricane season.

Providing cash efficiently to meet the cyclical demands of financial institutions is a fluid process, and on March 17 the Fed’s Board of Governors revised its cash services policy to streamline the process and reduce related expenses.

New program seeks greater efficiency
One component of this revision is the launch of the Custodial Inventory program, which provides depository institutions with an incentive to increase currency recirculation. Federal Reserve Financial Services began accepting applications to participate in the Custodial Inventory program on May 15, 2006.

Press release
Federal Reserve Financial Services’ Cash Services Web site
Custodial Inventory Program fact sheet

Under this program, which will begin operation in July 2006, a bank can transfer currency in its vault to the Federal Reserve Bank’s books but retain physical control of the currency in its secured facility. This practice allows participating institutions to reduce the size and frequency of their deposits of currency into and orders from Reserve Banks. Participating institutions that deposit fit $10 or $20 notes at a Reserve Bank and order the same denomination, above a certain amount, during the same business week will be assessed a fee.

The program’s benefits include reduced use of central bank services, encouragement of best practices procedure for currency recirculation at the depository institution, and reduction of the societal cost of providing fit currency.

Rollout targets high-volume institutions
The Custodial Inventory program applies only to $10 and $20 notes, and to qualify for participation, a depository institution must demonstrate that it recirculates a minimum of 200 bundles of $10 and $20 notes per week in a Federal Reserve Bank zone or subzone. Reserve Banks estimate that the changes to the cash services policy could affect around 150–225 depository institutions with high-volume operations.