For immediate release

The Federal Reserve Board today announced revisions in its cash access policy on how cash shipments and deposits will be handled in an interstate branching environment. The policy is effective May 4, 1998. The revised policy provides flexibility to depository institutions to obtain cash services from any Reserve Bank office. The original policy adopted in 1996 mandates greater consistency in Reserve Bank cash service levels than currently exists by providing a base level of free currency access to all depository institutions, but with restrictions on the frequency and number of offices served. Offices of depository institutions that meet minimum volume thresholds will be able to obtain more frequent access. Fees will be charged for additional access beyond the base service level. The Board's notice is attached.

FEDERAL RESERVE SYSTEM [Docket No. R-0922] Federal Reserve Uniform Cash Access Policy AGENCY: Board of Governors of the Federal Reserve System. ACTION: Policy statement. SUMMARY: The Board has revised its cash access policy to clarify the base level of free currency access to all depository institutions in an interstate branching environment. Each depository institution will be able to designate up to ten endpoints to receive free currency access from each Reserve Bank office. The revised policy provides flexibility to depository institutions to make the most cost-effective arrangements for obtaining cash services from Reserve Bank offices. The Board has also delegated authority to the director of the Division of Reserve Bank Operations and Payment Systems to interpret the cash access policy. EFFECTIVE DATE: May 4, 1998. FOR FURTHER INFORMATION CONTACT: Jon J. Cameron, Manager (202/452-2220) or Kathleen M. Connor, Senior Financial Services Analyst (202/452-3917), Cash Section, Division of Reserve Bank Operations and Payment Systems; for the hearing impaired only: Telecommunications Device for the Deaf, Dianne Jenkins (202/452-3544).

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SUPPLEMENTARY INFORMATION: I. Background In April 1996, the Board approved a new cash access policy that becomes effective on May 4, 1998 (61 FR 19062, April 30, 1996). The policy provides greater consistency in Reserve Bank cash service levels than currently exists. The policy provides for a base level of free currency access to all depository institutions, but restricts the number of offices served and the frequency of access. Depository institution offices that meet minimum volume thresholds will be able to obtain more frequent free access. Fees will be charged for additional access beyond the free service level. The policy applies only to currency deposits and orders, and does not include coin deposits and orders. Since approval of the policy, issues have arisen regarding implementation in an interstate branching environment. The issues relate to the definition of endpoints eligible for free access. The April 1996 policy allowed each depository institution with a banking presence in a Federal Reserve office territory to designate up to ten offices to receive free cash access (deposit and order) from the local Reserve Bank office (i.e., the Reserve Bank office in whose territory the institution's office is located). Depository institutions asked Reserve Bank offices whether they could receive cash services from non-local Reserve Bank offices. It may be more economical for some depository institutions to use a non-local Reserve Bank office. For example, some depository institutions serve as correspondent banks for respondent banks in other Federal Reserve territories. There also are depository institutions that are geographically closer to non-local Reserve Bank offices. In addition, depository institutions asked if an automated teller machine (ATM) network or subset of a network could be designated as an office to receive free cash access. In order to address these issues, the Board has revised the April 1996 policy. II. Discussion The Board has revised its cash access policy within the following framework: (1) the policy continues to provide consistency in the cash service levels provided by Reserve Bank offices to depository institutions; (2) the base level of free cash services continues to be consistent with a wholesale role for the Reserve Banks, which implies that a large depository institution is responsible for servicing its own branch network; and (3) the policy provides flexibility to depository institutions to make the most cost-effective arrangements for obtaining cash services from Reserve Bank offices. Under the revised policy, each depository institution can designate up to ten endpoints to receive free cash access service from each Reserve Bank office. A depository institution may not designate an endpoint to receive free cash access from more than one Reserve Bank office. A designated endpoint may be a branch, head office, a money room and/or an armored carrier used by the depository institution to provide cash. Individual ATM locations are not eligible for designation as endpoints. If a depository institution uses an armored carrier to service ATMs, the armored carrier may be designated as an endpoint. Beyond the ten endpoints, Reserve Bank offices will continue to provide free cash access to large endpoints whose volumes exceed a specified threshold. The revised policy provides flexibility to depository institutions to make the most cost-effective arrangements for obtaining cash services from Reserve Bank offices. For some depository institutions, it may be more economical to use a non-local Reserve Bank office. The Board continues to believe that implementation of the policy will not materially affect the Reserve Banks' costs of providing cash services. Aggregate cash receipts and disbursements are expected to remain unchanged. The Board has delegated authority to the director of the Division of Reserve Bank Operations and Payment Systems to interpret the cash access policy, and has permitted the director to further delegate this authority to the Reserve Banks' Financial Services Policy Committee. Other aspects of the policy remain unchanged. III. Effective Date The revised cash access policy becomes effective on May 4, 1998. IV. Competitive Impact Analysis The Board assesses the competitive impact of changes that may have a substantial effect on payment system participants. In particular, the Board assesses whether a proposed change would have a direct and material adverse effect on the ability of other service providers to compete effectively with the Federal Reserve Banks in providing similar services and whether such effects are due to legal differences or due to a dominant market position deriving from such legal differences. It is highly unlikely that the revised policy will result in any significant shift to Federal Reserve cash services away from private-sector providers. Private-sector providers offer an array of value-added cash services that the Federal Reserve Bank offices do not provide. The revised policy also clarifies that armored carriers may be designated as endpoints. The Board's revised policy, therefore, does not adversely affect the ability of depository institutions or service providers to compete with the Federal Reserve Banks to provide cash services. V. Federal Reserve Cash Service Access Policy The Board has adopted the following Federal Reserve cash access policy: Number of endpoints eligible for free cash access. Each depository institution can designate up to ten endpoints to receive free cash access (deposit and order) service from each Reserve Bank office. A depository institution may not designate an endpoint to receive free cash access from more than one Reserve Bank office. A designated endpoint may be a branch, head office, a money room and/or an armored carrier used by the depository institution to provide cash services. Individual ATM locations are not eligible for designation as endpoints. If a depository institution uses an armored carrier to service ATMs, the armored carrier may be designated as an endpoint. Beyond the ten endpoints, Reserve Bank offices will provide free cash access to endpoints whose volumes exceed a specified threshold. Each Reserve Bank office will set a "high bundle threshold," within the range of fifty to one hundred bundles, to accommodate the needs of the geographic area being serviced within that Federal Reserve office territory. If a depository institution receives free access for more than ten endpoints, each endpoint must meet the high bundle threshold. Frequency of access. Normal free access for each designated endpoint of the depository institution will be one deposit and one order per week. Access more frequent than once per week will be available free of charge to each designated endpoint whose volume exceeds a twenty-bundle aggregate threshold and that satisfies the local Reserve Bank office's denomination bundle standard. Priced access. Reserve Bank offices may choose to accommodate additional access where the demand exists subject to the constraints of the physical facilities at each Reserve Bank office. Reserve Banks must price access to cash services beyond the free service described above, if offered. Delegation of authority. The director of the Division of Reserve Bank Operations and Payment Systems, under delegated authority, may (1) approve changes in the base number of free endpoints and the volume thresholds; (2) waive the policy for a limited period if warranted by special circumstances, such as a natural disaster or the introduction of new currency; and (3) interpret the cash access policy. The director may further delegate this authority to interpret the policy to the Federal Reserve Banks' Financial Services Policy Committee. By order of the Board of Governors of the Federal Reserve System, March 5, 1998. (signed) William W. Wiles William W. Wiles Secretary of the Board

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1998 Banking and consumer regulatory policy