The Federal Reserve Board on Friday requested comment on a proposal to modify the method for imputing priced-service income from clearing balance investments. Federal Reserve Banks impute this income when setting fees and measuring actual cost recovery each year.
The Board requests comment by July 14, 2003.
Clearing balances held at Reserve Banks are similar to compensating balances held by respondent banks at correspondent banks. Reserve Banks currently assume that all available clearing balances are invested in three-month Treasury bills. The Board proposes to impute the income from its clearing balance investments on the basis of a broader portfolio of investment instruments than used today. Imputed investments would be selected from instruments available to bank holding companies and would be subject to a risk management framework that includes criteria consistent with those used by bank holding companies and regulators in evaluating investment risk.
The Monetary Control Act requires Federal Reserve Banks to establish fees for priced services provided to depository institutions at a level necessary to recover, over the long run, all direct and indirect costs actually incurred and imputed costs. The Reserve Banks also impute income that would have been earned on the investment of clearing balances customers hold with the Reserve Banks had those balances been held by a private business firm.
The Board�s notice is attached.
Attachment (102 KB PDF)
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