The Federal Reserve Board has requested public comment on proposed changes to the methodology for calculating the imputed costs, collectively known as the private sector adjustment factor (PSAF), that are considered when setting fees and measuring cost recovery for certain payment services provided to depository institutions. Specifically, the Board requests comment on its proposal to replace the current correspondent bank model underlying the PSAF calculation with a model based on elements derived from publicly traded firms more broadly.
The Monetary Control Act of 1980 requires the Federal Reserve to set fees for the services it provides to depository institutions at a level sufficient to recover, over the long run, the actual costs of providing these services, as well as the imputed costs and profits. The PSAF is an allowance for imputed costs, including financing costs, return on equity capital, taxes and certain other expenses that are not explicitly incurred by the Reserve Banks but would be incurred by a private business firm providing the services.
The methodology underlying the PSAF is reviewed periodically to ensure that it is appropriate and relevant in light of changes that may have occurred in Reserve Bank priced-services activities, accounting standards, finance theory, and regulatory and business practices.
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