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A: Depository institutions (DIs) are expected to supply fit currency from their customers’ deposits to meet other customers’ needs before turning to Reserve Banks to obtain currency. DIs should deposit only surplus or unfit currency with Reserve Banks. As the nation’s Central Bank, the Federal Reserve will continue to play an active role in the provision of cash services to DIs, particularly as an intermediary between DIs that have a surplus of fit currency and those that do not have enough to meet customer needs from an internal source.
A: Cross-shipping is monitored for all denominations via cross-shipping reports, but fees are assessed on cross-shipping activity above the de minimis exemption only in the $10 and $20 denominations, and only $10s and $20s are allowed in a Custodial Inventory (CI). For more information on CI’s, please consult the Custodial Inventory section of this document.
A: Cross–shipping occurs when a DI deposits fit currency and orders the same denomination within the same business week (meaning Monday–Friday) and within the same Federal Reserve zone or sub–zone. Cross–shipping is calculated as the lesser of fit deposits or orders.
Example: In the first week of March, Bank X deposits 500 bundles of fit $10s to the Boston Federal Reserve Bank. In that same week, Bank X ordered 230 bundles of $10s from the Boston Federal Reserve Bank. Bank X has cross–shipped 230 bundles.
A: Under the policy, the first 875 bundles of combined $10s and $20s that an institution cross–ships in a given Federal Reserve Bank zone or sub–zone each quarter is not subject to the recirculation fee. This exemption is subtracted from total $10s and $20s cross–shipped within a Federal Reserve Bank zone/sub–zone. The exemption is subtracted from total cross–shipping in $10s and $20s at the end of the quarter. Any unused exemption expires at the end of the quarter and is not transferable.
This exemption is intended to address three types of situations: 1) the scale of a DI's currency business is small enough that an investment in automated fitness sorting equipment cannot be cost–justified; 2) there are modest discrepancies between the fitness determinations made by a DI and the Federal Reserve; and/or 3) to allow DIs that experience unanticipated swings in customer demand to order or deposit currency without incurring a fee.
A: The Federal Reserve provides cross–shipping reports monthly, but fees and the de minimis exemption are applied on a quarterly basis.
A: To track cross-shipping, the Federal Reserve aggregates all of the orders and deposits that a chartered financial institution makes in a Federal Reserve Bank zone or sub-zone, even if this activity occurs under different 9-digit ABAs or 13-digit endpoints. Reserve Banks expect that an institution will use currency generated from one business channel to meet the needs of another channel (e.g. use $20s from the deposits of retail customers to fill ATM canisters rather than having the central vault deposit and the armored carrier order $20s).
A: Billable cross–shipping activity may be waived during extraordinary events, which might include natural disasters, new note series introductions (involving covered denominations), and specified holiday currency ordering periods. All waivers are very short in duration, limited in scope, and affect only the relevant denomination(s) and Federal Reserve Bank zones or sub–zones.
Waivers are noted on cross–shipping reports, which show the specific cross–shipping activity being waived.
A: Under the policy, institutions are charged a standard, national fee intended to cover the costs Federal Reserve Banks incur to process cross–shipped currency.
A: A relatively small number of institutions are subject to cross-shipping fees. Typically, these institutions have relatively large deposits to and orders from the Federal Reserve Bank.
Cash Services produces monthly cross-shipping reports that will help depository institutions to keep track of the institution’s potential fees. Sign up to receive cross-shipping reports.
A: The cross-shipping fee is based on Federal Reserve costs to receive, store, process, and ship currency. It includes costs that vary with the volume of currency handled over time, including labor, equipment and supplies, as well as certain support costs like human resources. It excludes costs that the Federal Reserve Banks incur regardless of the volume level, such as facilities, protection and other overhead costs. This fee is the same for all Federal Reserve offices, reflecting national average costs. Reserve Banks review the changes to these costs annually and will adjust the fee accordingly. Changes in fees will be announced 30 days in advance of the effective date of the change.
A: Fees were assessed beginning in July 2007.
A: Cash Services produces monthly cross-shipping reports. Sign up to receive cross-shipping reports.
A: Cross–shipping reports are produced and distributed monthly.
A: Cross–shipping fees are billed on a quarterly basis.
A: Cross–shipping activity in $10s and $20s is aggregated throughout a quarter in each Federal Reserve Bank zone or sub–zone in which a DI operates. An 875 bundle de minimis exemption is applied to each Federal Reserve Bank zone (sub–zone) for the quarter. A cross–shipping fee is applied to the remaining volume in each Federal Reserve Bank zone (sub–zone).
A: Call your local Federal Reserve office contact or send an email to the National Cash Product Office (CPO).
A: Cross–shipping reports show national activity, broken down by Federal Reserve Bank zone and sub–zone. Recipients can excerpt information from the national reports, but the Federal Reserve does not currently offer a limited subscription option.
A: If a DI would like to unsubscribe from the monthly report, please send an email to firstname.lastname@example.org with the exact email address that was used to subscribe. We encourage institutions to have multiple subscribers to ensure the institution can continue to monitor its cross-shipping activity.
A: Yes. Any Federal Reserve customer can subscribe. The reports show order and deposit totals that might be useful as a general management tool.
A: Fit currency is currency that the Federal Reserve has deemed suitable for further circulation. The Federal Reserve identifies and destroys notes that are soiled, worn or defaced with holes, tears, or graffiti, leaving only fit notes to be packaged and returned to circulation.
A: For detailed information on fitness standards, View the guidelines. (PDF)
A: Reserve Banks monitor the number of fit notes processed from each institution’s deposits as a percentage of total notes deposited by that institution during each month. Reserve Banks then apply this monthly average fitness rate by Federal Reserve Bank zone or sub-zone to an institution’s weekly deposits to determine how much currency it cross-shipped.
Example: In January 2014, Bank X’s deposits of $10s to the Boston Federal Reserve Bank were 65 percent fit. In the first week of January 2014, Bank X deposited 500 bundles of $10s to the Boston Federal Reserve Bank. Bank X deposited 325 bundles (500 * .65 = 325) of fit currency. The 65 percent fitness rate will be applied to Bank X’s deposits of $10s each week of January 2014.
A: The Federal Reserve has worked and continues to work with the vendors of commercially available currency fitness sensors to develop specifications that will enable them to calibrate their sensors with the Federal Reserve’s standards.
A: The Currency Quality Policy defines the threshold level of quality for each denomination that is “fit for commerce;” identifies a framework for monitoring quality; and specifies actions the Federal Reserve Banks would take to adjust the quality of currency in circulation to avoid inconvenience to the public, or increased risk of recirculating counterfeit notes.
The “fit-for-commerce” standard has two components, which may differ by denomination: 1) a minimum fitness threshold based on consumer acceptance and the technical tolerances of machines that handle currency, and 2) a maximum allowable incidence of below-threshold notes remaining in circulation. The goals of the standard are the following:
1The public's ability to recognize the security features of currency can diminish if notes are heavily soiled, torn, worn, or crumpled.
2 Automated currency handling equipment includes, for example, vending machines, fare card machines, and currency sorting machines.
For more information on the Currency Quality Policy, visit the Currency Quality Program page.
A: The Federal Reserve Banks implemented a currency quality policy before the cross-shipping fee took effect in July 2007.
A: A Federal Reserve Bank zone is a geographic area designated by the Reserve Banks. For the purposes of this policy, cash depots are considered separate zones3. For example, Salt Lake City customers are in the Salt Lake City zone.
3A cash depot is an alternative market presence for Federal Reserve cash services. With a cash depot, the Federal Reserve contracts with a third party, usually an armored carrier, which acts as a secure collection point for Federal Reserve currency deposits from the region's depository institutions. The depot also distributes currency orders that depository institutions have placed with the Federal Reserve. The work of counting deposits and preparing orders is done by a Federal Reserve office in another city. The Federal Reserve pays for the transportation between the Reserve Bank office and the depot operator. The operator follows strict procedures developed by the Federal Reserve.
A: The policy allows Reserve Banks to establish sub-zones where there are metropolitan areas that are very large and/or very far from the nearest Federal Reserve. The Federal Reserve monitors order and deposit activity for sub-zones separately from order and deposit activity in the rest of the Federal Reserve Bank zone. For example, a bank with activity in both the Los Angeles zone and San Diego sub-zone will have its San Diego cross-shipping calculated separately from its activity in the Los Angeles zone.
All current sub–zones are listed below. As the table indicates, they were selected based on the combination of population and distance from the Federal Reserve. The Federal Reserve Banks will review sub–zones and make changes as necessary.
|Distance from Fed (Miles)||Metropolitan Statistical Area (MSA)4||Federal Reserve Processing Office||Population as of April 2000|
|MSAs >1000 Miles from FRB w/ population > 250,000||2,387
|San Francisco Seattle||876,156
|MSAs >250 Miles & w/ population >500,000||275
|Las Vegas, NM Albuquerque, NM
Central Florida (Sarasota-Bradenton, Orlando, Tampa) South Texas (McAllen-Mission, Brownsville-Harlingen)
|MSAs >125 Miles & w/ population >1,000,000||125
|San Diego, CA
Raleigh--Durham--Chapel Hill, NC
Grand Rapids, MI
|MSAs >100 Miles & w/ population >1,500,000||114
4MSA stands for Metropolitan Statistical Area
A: Endpoints are assigned to a sub–zone if their zip code is in the metropolitan area of the sub–zone, as defined by the Census Bureau5. Otherwise, they are assigned to the zone of the Federal Reserve office that provides currency services to the endpoint.
5 Census Bureau Ranking Tables for Metropolitan Areas: Population in 2000, and Population Change from 1990 to 2000, number PHC–T–3, http://www.census.gov/population/www/cen2000/tablist.html (Off-site Link)
A: In order to have an endpoint’s Federal Reserve Bank zone or sub-zone designation changed, the institution must request that their local Federal Reserve cash office reclassify the endpoint and provide justification for the requested action. For example, an endpoint is on the border of the sub-zone, and the designated armored carrier services the endpoint from a location within the sub-zone.
To have an endpoint added to or removed from a sub-zone, complete the request form (PDF) and return it to the local Federal Reserve cash office.
A: A DI is expected to recirculate fit $10s and $20s within its own customer network. If, in the judgment of the Reserve Banks, a DI circumvents the Recirculation Policy by reducing its reported cross–shipping volume without increasing recirculation, such as would be the case if it alternated the weeks in which it orders and deposits currency, the Reserve Banks will apply the recirculation fee to fit notes in such deposits.
A: The Custodial Inventory (CI) program is a component of the Recirculation Policy (PDF) whereby participating institutions can hold inventory in their vaults, but on the books of a servicing Federal Reserve Bank.
A: To comply with the Recirculation Policy and avoid cross-shipping fees, Depository Institutions (DIs) may need to hold more currency in their vaults. A CI may help mitigate the opportunity costs associated with holding additional currency in their vaults long enough to facilitate its recirculation.
A: The DI must:
1Once the CI site is approved, the operator is expected to no longer cross-ship these deposits, but will instead begin using the CI to recirculate them
A: The Federal Reserve does not apply any fees to operate a CI. However, as a CI operator, DIs may incur some costs associated with opening and operating custodial inventories. For example, DIs may have to modify their facilities to physically separate currency held on the books of the Federal Reserve from the currency held on the DI’s books, or to enhance physical security, perhaps by installing surveillance equipment. DIs may also have to enhance physical and procedural access controls and engage in additional sorting and other handling of the notes held in a CI. In some instances, DIs may also have to add staff to ensure the appropriate separation of duties.
A: No, DIs will not be required to purchase any additional insurance for the CI program. However, the Federal Reserve Bank will ask CI program applicants to provide certification of insurance coverage as part of the CI application process to help determine their eligibility for the CI program.
A: A CI operator is required to keep one day of average daily payments in $10s and $20s on its own books before putting any currency into the CI. The “cap” is the maximum amount that a participating DI is allowed to store in the CI. The cap is calculated on a weekly basis and is equal to four days of average daily payments to customers.
A: An “average daily payments” is the average daily dollar amount of combined $10 and $20 notes that a CI site paid to its commercial customers (change orders), correspondent banks, and/or branches and the ATM network, but excluding deposits to the Federal Reserve during a previous 5 business day reporting period.
Example: In week 1 Bank X pays its customers the following amounts in $10s and $20s:
|Day||Average Daily Payment|
|Week 1 Total:||$25M|
Average Daily Payments: $5M ($25M/5Days)
What the DI must keep on its own books
Cap in Week 3: $20M ($5M * 4Days)
A: A CI must report to its local Federal Reserve servicing office its vault holdings and payments to its customers on a daily basis via Custodial Inventory FedCash Services within the FedLine Web access solution. Payments to customers are defined as payments by the CI site to its commercial customers, ATM network, correspondents, and/or its branches, but do NOT include deposits to the Federal Reserve.
A: The servicing Federal Reserve Bank must conduct a site inspection as part of the application and acceptance process. Once the CI is established, the servicing Federal Reserve Bank will monitor the daily transactions of the CI and will periodically perform on-site compliance reviews of the CI to ensure that it is in compliance with the program requirements. The servicing Federal Reserve Bank is also the contracting party for the CI agreement.
A: The Federal Reserve reserves the right to conduct periodic unannounced compliance reviews, at its expense, of the CI holdings and the site to determine whether it is conforming to the CI agreement and the Manual of Procedures (MOP) (PDF) and OC2 Appendix (PDF). The MOP ensures that operations are conducted and carried out in accordance with prescribed procedures and under specific and sufficient security control conditions providing for the integrity of all operations.
A: Yes, a third party vendor such as an armored carrier subcontracted by the DI to perform vaulting services may operate a CI on a DI’s behalf. The CI agreement is still between the institution and the Federal Reserve, and the DI will remain responsible for all obligations under the CI agreement. The DI must make sure that the vendor operates the vault and the custodial inventory in accordance with the requirements of the agreement.
A: To begin the application process, please review the following:
The application and associated CI documents are posted here. Note that applications require the name and title of the institution’s official authorized officer who must be listed on the Official Authorization List (OAL) provided by the CI to the Federal Reserve Bank. An application will not be accepted without this information. To complete an OAL for your institution or to add authorized individuals to your institution’s OAL, visit the Account Services Forms.
A: For each CI location, a DI will need to sign a separate agreement with the servicing Federal Reserve Bank in that location.
A: Yes. OC2 (PDF) was updated to reflect changes resulting from the recirculation policy and continues to be reviewed and updated.
A: No. Local UCAP fees still exist; there are no national fees at this time.
A: If you have further questions, please contact your local Federal Reserve Bank cash contacts.
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