CUNA Regulatory Comment Call


October 22, 2004

Proposal to Withdraw from Noncash
Collection Service

(Not a Major Rule)

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com and to Assistant General Counsel Lilly Thomas at lthomas@cuna.com or mail them to Mary and Lilly in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6733, if you would like a copy of the proposed guidance, or you may access it on the Internet here.

BACKGROUND

Noncash items under Regulation J (12 CFR 210.2(k)) are registered definitive municipal securities or bearer bonds that have been issued with interest coupons in certificated or physical form by local governments, as well as by states and their political subdivisions and agencies. The Federal Reserve Banks provide a service to depository institutions for the collection of definitive municipal securities. The "noncash collection service" provided by the Reserve Banks accepts deposits of coupons or bonds from depository institutions, identifies the appropriate paying agent, and presents the items to the paying agent for collection.

Originally, Reserve Banks offered both safekeeping and collection services in the securities business. However, they withdrew from the safekeeping business in 1993. While continuing to provide the priced noncash collection service, the Reserve Banks reduced noncash collection operation sites from 22 to one because of a decline in volume.

The noncash collection service is a separate business and is the smallest Reserve Bank priced service. In 2004, it represents less than 0.2 percent of the total budgeted priced financial services costs.

PROPOSAL TO WITHDRAW FROM NONCASH COLLECTION SERVICE

The Reserve Banks have requested to withdraw from the noncash collection service. Besides a small amount of definitive municipal securities being held in safekeeping for the Treasury Tax and Loan and Discount collateral programs, the elimination of this service should have no material adverse effect on the Federal Reserve’s ability to discharge any other responsibilities. This proposal does not include or impact the redemption of Treasury coupons currently handled by the Reserve Banks. There are additional factors that are being considered in analyzing this proposal.

QUESTIONS TO CONSIDER REGARDING

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomast • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com