12 USC 5018 - Depositary services efficiency and cost reduction

U.S Code last checked for updates: Nov 22, 2024

§ 5018.

Depositary services efficiency and cost reduction

(a)

Findings

The Congress finds as follows:

(1)

The Secretary of the Treasury has long compensated financial institutions for various critical depositary and financial agency services provided for or on behalf of the United States by—

(A)

placing large balances, commonly referred to as “compensating balances”, on deposit at such institutions; and

(B)

using imputed interest on such funds to offset charges for the various depositary and financial agency services provided to or on behalf of the Government.

(2)

As a result of sharp declines in interest rates over the last few years to record low levels, or the public debt outstanding reaching the statutory debt limit, the Department of the Treasury often has had to dramatically increase or decrease the size of the compensating balances on deposit at these financial institutions.

(3)

The fluctuation of the compensating balances, and the necessary pledging of collateral by financial institutions to secure the value of compensating balances placed with those institutions, have created unintended financial uncertainty for the Secretary of the Treasury and for the management by financial institutions of their cash and securities.

(4)

It is imperative that the process for providing financial services to the Government be transparent, and provide the information necessary for the Congress to effectively exercise its appropriation and oversight responsibilities.

(5)

The use of direct payment for services rendered would strengthen cash and debt management responsibilities of the Secretary of the Treasury because the Secretary would no longer need to dramatically increase or decrease the level of such balances when interest rates fluctuate sharply or when the public debt outstanding reaches the statutory debt limit.

(6)

An alternative to the use of compensating balances, such as direct payments to financial institutions, would ensure that payments to financial institutions for the services they provide would be made in a more predictable manner and could result in cost savings.

(7)

Limiting the use of compensating balances could result in a more direct and cost-efficient method of obtaining those services currently provided under compensating balance arrangements.

(8)

A transition from the use of compensating balances to another compensation method must be carefully managed to prevent higher-than-necessary transitional costs and enable participating financial institutions to modify their planned investment of cash and securities.

(b)

Authorization of appropriations for services rendered by depositaries and financial agencies of the United States

(c)

Orderly transition

(1)

In general

(2)

Post-transition use limited to extraordinary circumstances

(A)

In general

(B)

Report

(3)

Requirements for orderly transition

In transitioning to the use of the appropriations authorized in subsection (b), the Secretary of the Treasury shall take such steps as may be appropriate to—

(A)

prevent abrupt financial disruption to the functions of the Department of the Treasury or to the participating financial institutions; and

(B)

maintain adequate accounting and management controls to ensure that payments to financial institutions for their banking services provided to the Government as depositaries and financial agents are accurate and that the arrangements last no longer than is necessary.

(4)

Reports required

(A)

Annual report

(i)

In general

(ii)

Inclusion in budget

(B)

Final report following transition

(i)

In general

(ii)

Contents of report

The report submitted under clause (i) shall include a detailed analysis of—

(I)

the cost of transition;

(II)

the direct costs of the services being paid from the appropriations authorized in subsection (b); and

(III)

the benefits realized from the use of direct payment for such services, rather than the use of compensating balance arrangements.

(d)

Omitted

(e)

Effective date

(Pub. L. 108–100, § 19, Oct. 28, 2003, 117 Stat. 1191.)

cite as: 12 USC 5018