The Federal Reserve Board on Monday said that the 12 regional Fed banks will cut overall fees by about 3 percent in 2011 for priced services to banks, while still earning a profit on them above their targeted return on equity.
The Fed said in a statement that the price reductions are made possible by the increasing proportion of checks that are processed electronically.
On average, the effective fees paid to collect checks using the Federal Reserve Banks' Check 21 system are expected to decline, on average, by 14 percent. Average fees for electronic check returns will fall by 20 percent.
The 2011 fee schedule, effective Jan. 3, will include some price increases. Fees for Reserve Banks' FedACH services, Fedwire Funds and Fedwire Securities services and National Settlement Services, will increase about 3 percent.
The reserve banks project that they will recover 102 percent of their priced services costs in 2011, including imputed expenses. The Fed Board's pricing structure includes a 2011 private sector adjustment factor for priced services of $39.5 million.
The adjustment factor is an allowance for income taxes and other imputed expenses that would have been paid and profits that would have been earned if the Reserve Banks' priced services were provided by a private business. It is required by law to promote competition between the Reserve Banks and private sector.
The Fed has earned record profits in the past two years s largely due to the expansion of its balance sheet to support the economy, through increased term lending to banks and purchases of more than $1.75 trillion of U.S. Treasury debt and mortgage backed securities. It is widely expected to announce another round of purchases on Wednesday in an attempt to push down borrowing rates.
In the 2010 fiscal year ended Sept. 30, Treasury said the Fed's profits hit $75.8 billion, more than double the previous year.
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