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Release Date: October 23, 2003

For immediate release

The Federal Reserve Board on Thursday announced modifications to the method for imputing priced-service income from clearing balance investments. The Board approved these modifications at an open meeting on October 22, 2003. The Federal Reserve Banks impute this income when setting fees and measuring actual priced-service cost recovery each year. The Board requested comment on the changes in May 2003.

Clearing balances held at Reserve Banks are similar to compensating balances held at correspondent banks. Beginning in January 2004, Reserve Banks will impute the income from clearing balance investments on the basis of a broader portfolio of investments than the three-month Treasury bills used today, selected from instruments available to banks and subject to a risk-management framework that includes criteria consistent with those used by bank holding companies and regulators in evaluating investment risk.

The annual imputed investment return will be based on an underlying imputed investment portfolio, but will be implemented as a constant annual spread over the three-month Treasury bill rate.

The Board's notice is attached.

Attachment (100 KB PDF)

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Last update: October 23, 2003