An Examination of Concerns Expressed About the Federal Reserve's Pricing of Check Clearing Activities

GGD-85-9: Published: Jan 14, 1985. Publicly Released: Jan 14, 1985.

Additional Materials:


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO examined issues pertaining to the Federal Reserve System's check-clearing operations, focusing on: (1) concerns raised by the banking industry that the Federal Reserve enjoys unfair competitive advantages over the commercial check-clearing industry; and (2) progress made by the Federal Reserve in eliminating its subsidy of check-clearing operations.

GAO found that: (1) while the potential exists for the Federal Reserve to engage in abusive pricing of its check-clearing services, it has apparently not cut prices below costs in order to compete with the private sector; (2) if the Federal Reserve raised prices for some services to subsidize less profitable services, it could lose a part of its market share for those services; (3) pricing guidelines adopted by the Federal Reserve tend to limit its flexibility in setting below-cost prices; (4) the Federal Reserve's practice of presenting checks for payment later in the day than is customary enables it to collect useable funds sooner; (5) further study should be undertaken before the law is changed to permit the Federal Reserve to pay presentment fees, which are levied for presentation of checks later in the day; and (6) a new Federal Reserve policy may offset the disadvantage suffered by private sector institutions because they are required to maintain a reserve on check-clearing balances. In addition, GAO found that: (1) revenues generated by the Federal Reserve's check-clearing services appear to cover their cost; (2) the Federal Reserve appears to have reasonably allocated check-clearing revenues to operating costs; (3) there is no reason to increase the private sector adjustment factor built into the Federal Reserve's pricing guidelines to offset some of its competitive advantages; and (4) the Federal Reserve is making greater efforts to ensure the separation of personnel involved in competing with commercial banks from those involved in regulating them.

Sep 29, 2017

Sep 12, 2017

Sep 7, 2017

Apr 19, 2017

Mar 29, 2017

Feb 24, 2017

Dec 29, 2016

Dec 15, 2016

Nov 15, 2016

Looking for more? Browse all our products here