Federal Reserve Bank Services; Imputed Investment Income on Clearing Balances

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The Board requests comment on a proposal to modify the method for imputing priced-service income from clearing balance investments. The Federal Reserve Banks impute this income when setting fees and measuring actual cost recovery each year. Specifically, the Board requests comment on a proposal to impute the income from its clearing balance investments on the basis of a broader portfolio of investment instruments than used today, selected from instruments available to banks and subject to a portfolio management framework. Selection of the portfolio mix 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 Board also requests comment on two different implementation methods for imputing this investment income. This proposal focuses on the imputed investment of clearing balances; it would not change the terms or conditions under which depository institutions hold clearing balances. If adopted, the changes would be effective for the 2004 fees for Federal Reserve priced services.