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3.

Points on which checks are available in four days.

4. Points on which checks are available in eight days.

You are requested to sort checks into the four divisions, listing each division on a separate sheet. This will enable you to determine the day upon which the funds will be available as reserve in this bank.

STATEMENTS SHOWING AMOUNT OF UNCOLLECTED FUNDS-A transcript of account showing the gross balance, the amount of uncollected funds, and the actual reserve balance will be sent to each member bank on every day upon which there is a transaction in the account or a change in the amount of uncollected funds.

METHOD OF HANDLING THE ITEMS-Checks drawn on member banks of this district will be forwarded direct to the paying banks and will be charged to their accounts on the second business day after the date of sending, thus giving member banks time to provide funds to

cover.

Items drawn on non-member banks will be sent to such member banks as desire to receive them, or may be sent by arrangement direct to non-member banks.

Unpaid items not subject to protest must be returned on day of receipt. Protested items must be returned not later than the day after receipt. Unpaid items must not be held for any purpose whatsoever except for immediate protest.

DIRECT ROUTING-When time can be saved and the volume of items warrants, arrangements may be made with this bank for direct routing between member banks of this district or between member banks of this district and other districts, or between member banks of this district and other federal reserve banks.

How MEMBER BANKS MAY MAINTAIN BALANCES-Member banks may maintain their balances with us:

(a) By depositing Chicago exchange.

(b) By depositing out-of-town items, the proceeds of which will be available as reserve in accordance with the time schedule.

(c) By shipment to us at our expense of properly sorted lawful money or federal reserve notes when unable to supply checks or Chicago exchange in sufficient volume to offset the items sent to them.

(d) By rediscounting.

Member banks are required by the Federal Reserve Board to provide funds to cover at par all checks received from or for the account of their federal reserve bank; Provided, however, That a member bank may ship lawful money or federal reserve notes from its own vaults at the expense of the federal reserve bank to cover any deficiency which may arise because of and only in case of inability to provide funds to offset checks received by or for the account of the federal reserve bank.

SERVICE CHARGE-As it is optional with each member bank whether it will collect checks through the federal reserve bank or through other channels, the cost of operating the system of check clearing and collec

tion will be borne exclusively by the banks that use it and in exact proportion to the extent of its use by the individual banks.

The actual cost of operation will be assessed monthly on a per item basis upon the member banks depositing items. The service charge for the present will be one and one-half cents per item. Should the cost per item decrease as the system develops the service charge will be reduced accordingly. No service charge for the present, at least, will be made for collecting items drawn on Chicago banks.

COLLECTIBLE AT PAR THROUGH THE FEDERAL RESERVE BANK OF CHICAGO-Member banks are entitled to place the words, "Collectible at par through the Federal Reserve Bank of Chicago," on their own checks and the checks used by their depositors. Your attention is called to the desirability of availing of this privilege.

DISTRICT NUMBER ON CHECKS-To facilitate the sorting of checks by member banks and by federal reserve banks, it is requested that you have clearly imprinted on all your checks and drafts the figure 7, preferably in a large skeleton figure in the center of the check.

TRANSFERS OF FUNDS-It is suggested that member banks desiring to transfer funds should request their correspondents to make such transfers and should not, for that purpose, send for credit their drafts drawn on their correspondents.

PENALTY FOR IMPAIRMENT OF RESERVES-With the inauguration of the collection system, the penalty for impairment of reserves provided by the Federal Reserve Act will be imposed. You will be requested to report monthly the average reserve required to be kept with the federal reserve bank. Impairment of the reserve, if any, will be ascertained by comparing the amount of the average reserve required with the average actual reserve as shown by our books. The penalty for the present, to be figured on the deficiency in reserve, will be an interest charge fixed by the Federal Reserve Board at a per annum rate of two per cent. above the maximum discount rate in this district, but in no case less than six per cent.

CONDITIONS UNDER WHICH MEMBER BANKS MAY USE SYSTEMEvery member bank sending items to us, after the inauguration of the collection and clearing system, will be understood to have agreed to the terms and conditions set forth in this bulletin and to have thereby specifically agreed that in receiving such items the Federal Reserve Bank of Chicago will act only as the collecting agent of the sending bank; will assume no responsibility other than due diligence and care in forwarding such items promptly; and will be authorized to send such items for payment direct to the bank on which drawn or to another agent for collection at discretion.

COOPERATION OF MEMBER BANKS DESIRED-The new collection system is based upon the provisions of the Federal Reserve Act, and the details herein outlined are the result of careful study of the problems

involved and of experience gained in operating the existing intradistrict system.

The plan as presented is subject to modification in the future, if experience in operating proves that changes are desirable or necessary. It is our desire that the system be conducted in such manner as to render valuable service to those who use it, and to this end your coöperation is requested.

We invite suggestions from member banks and shall cheerfully respond to any inquiries in regard to the details of the plan, either through correspondence or by personal interview.

Very respectfully,

JAMES B. McDougal, Governor.

CHECKS ON NON-MEMBER BANKS

July 1, 1916, the Federal Reserve Bank of San Francisco announced in its circular that it will receive from member banks items on all non-member banks in District No. 12.

SHIPMENTS OF LAWFUL MONEY AND FEDERAL RESERVE NOTES

In carrying out the provisions of the board's circular permitting member banks to ship lawful money or federal reserve notes to the federal reserve bank at its expense, the Federal Reserve Bank of Atlanta has also indicated its willingness to have National bank notes shipped in this manner, but is not prepared to pay the cost of shipment of gold or silver coin. The Federal Reserve Banks of Atlanta, Minneapolis and San Francisco have stipulated that they will not pay the cost of shipment of funds to cover cashier's checks or drafts on a federal reserve bank issued by a member bank.

SERVICE CHARGE

There is practical uniformity in the service charge to be imposed by the different federal reserve banks. All except the Federal Reserve Banks of Dallas and San Francisco will charge one and one-half cents per item and make no charge for items on banks in their own federal reserve city. The

Federal Reserve Bank of Dallas will impose a charge of two cents per item and the Federal Reserve Bank of San Francisco will make a charge on cash items payable at points other than San Francisco, New York City and Chicago of two cents per item. The Federal Reserve Banks of St. Louis, Kansas City, Dallas and San Francisco will make no charge on drafts drawn on other federal reserve banks.

BANK TRANSFERS

The Federal Reserve Banks of Chicago, Minneapolis and San Francisco have indicated their wish to have bank transfers effected by an order between the banks rather than by the issuance of bank drafts. The Federal Reserve Bank of Minneapolis will make a charge at the market rate of exchange for drafts on a federal reserve bank issued and sent out of the district, provided they amount to more than $10,000 in one day.

PENALTY FOR IMPAIRMENT OF RESERVES

The penalty for impairment of reserves is practically uniform in all cases, being fixed by the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland and Richmond at two per cent. above the discount rate for ninety-day paper. The Federal Reserve Banks of Chicago, Minneapolis and Kansas City fix the rate at two per cent. above their maximum discount rates. The Federal Reserve Bank of San Francisco has fixed the rate three per cent. above its ten-day discount rate, while the Federal Reserve Banks of Atlanta, St. Louis and Dallas have not announced the rate at which the penalty will be imposed.

AVAILABILITY OF UNCOLLECTED FUNDS

Four banks-those at Atlanta, St. Louis, Kansas City and San Francisco-have stated in their circulars that uncollerted items in the hands of the federal reserve bank, while not available to count as reserve required to be held

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with the federal reserve bank, can be counted as part of the optional reserve which member banks are permitted to hold either in vault, in the federal reserve bank, or with approved reserve agents.

INDORSEMENTS BY MEMBER BANKS OF ITEMS SENT

Two federal reserve banks. those at Richmond and Kansas City, have requested that the indorsement stamp used by member banks to indorse checks to the federal reserve bank also carry the indorsement from the federal reserve bank to "any federal reserve bank or member bank." This is designed to relieve those federal reserve banks of the necessity of indorsing the large number of checks which will pass through their hands.

DEALINGS IN EXCHANGE ON FEDERAL RESERVE CITIES

The Federal Reserve Bank of St. Louis, anticipating that the development by the federal reserve banks of a national clearing system will create an active market for exchange on the various federal reserve cities, announces that it will publish rates at which it will buy and sell exchange on such cities. The Federal Reserve Bank of San Francisco in its circular establishes rates for business of this kind, and also announces that drafts issued by its member banks will be receivable at other federal reserve banks for immediate credit at par, and that a charge will be made against the drawer of drafts in excess of $1,000 each at the current rate for sale of interdistrict telegraphic transfers. It also announces that it will accept drafts drawn on other federal reserve banks for immediate credit at par without service charge.

FEDERAL RESERVE BANK OF BOSTON TAKES OVER BOSTON
COUNTRY CLEARING HOUSE

July 1, 1916, the Federal Reserve Bank of Boston announced in its circular that it has entered into an agreement with the Boston Clearing House Association to take over

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