Financial Update (July-September 1996)

New Fed policy addresses
cash access discrepancies

Depository institutions continue to experience wide variations in access to Fed cash services. Each regional office offers differing policies and levels of service. But a new Fed Board of Governors policy aims to change all that. David Sutton reports.

ccess to Federal Reserve cash services varies widely at different Districts across the country. For example, some Reserve Bank offices limit access to as few as five offices per depository institution, while others allow unrestricted access (up to 400 offices). Some Reserve Bank offices permit unrestricted frequency of access, while others limit frequency based on parameters such as dollar values, volumes, and location. Why, you ask? There is no one reason. Most explanations relate to each District's different operational capabilities, standards, and practices.

However, the ever-evolving financial system increasingly shuns variation, instead demanding consistency in Fed policy. In an effort to address this trend, the Federal Reserve System Board of Governors recently approved a new Uniform Cash Access Policy for depository institutions. This policy aims to introduce greater uniformity across all Fed districts in terms of access to cash services. The policy will come into force on May 1, 1998.

The new policy is based on a three-tiered framework: the structure of cash services should include a common, base level of free services to achieve greater uniformity in Federal Reserve cash service levels; the base level of free cash services should be consistent with a wholesale role for the Federal Reserve Banks; Federal Reserve Banks that choose to provide cash services exceeding the base level may offer them as priced services.

The ever-evolving financial system increasingly shuns variation, instead demanding consistency in Fed policy.
The Uniform Cash Access Policy is basically a revision of the Uniform Cash Service Standards (UCSS) adopted by the Fed in 1984 and itself revised again in 1987. UCSS are designed to allow normal service to each depository institution or office once per week and also allow Reserve Bank offices to offer more frequent service to depositories that require it.

The Uniform Cash Access Policy will address service inconsistencies in several ways. Some of the important features include the following:

  • Each depository institution with a banking presence in a Federal Reserve office territory can designate up to ten endpoints to receive free cash access service from the local Federal Reserve office. An access is defined as one deposit and one order.
  • Normal free access for each designated endpoint of the depository institution will be one deposit and one order per week. More frequent access than once per week will be available to the ten designated endpoints free of charge, where volumes meet a minimum 20-bundle aggregate threshold and the local Fed office's denomination bundle standard is satisfied. (The Reserve Banks make payments and accept deposits in standard units as defined by the UCSS. Each Reserve Bank's denomination bundle standard is included in its cash operating circular.)
  • Federal Reserve Banks may accommodate additional access where the demand exists. Each Federal Reserve Bank will establish its price for extra cash accesses. The pricing will recover the cost of access to the vault only and will not include the costs of the central bank aspects of the Fed's cash services, such as vault storage, processing, and destruction of currency.
Under the Uniform Cash Access Policy, the Fed estimates that around 95 percent of depository institutions will continue to receive the current level of cash services free of charge. The Fed believes that the policy will primarily affect branch networks of large depository institutions.

For more information about the new policy, refer to Federal Register docket number R-0922 or call the Cash Services Officer at the following Federal Reserve Sixth District Offices: Atlanta (404) 498-8373; Birmingham (205) 731-8507; Jacksonville (904) 632-1005; Nashville (615) 251-7211; New Orleans (504) 593-3205; and Miami (305) 471-6453.

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