The National Clearing House Association has added five more banks, including Citicorp, boosting the number of participating bank holding companies to 48.
The new members are Citicorp, New York; First Empire State Corp., Buffalo; First Tennesee National Corp., Memphis; M&I Marshall & Ilsley Bank, Milwaukee; and Mercantile Bankcorp, St. Louis.
The association's check-clearing volume averages moore than 2.5 million items daily, up from an average of 700,000 items at this time last year. The association's highest item-volume day occured in mid-October when it handled just over 2.9 million checks.
The move by these institutions reflects the trend of shifting check-clearing volumes from the Federal Reserve's national check-clearing system to privately owned clearing houses, because they charge less.
Citibank South Dakota will be the money center bank's first branch to move volumes to the association. Brenda Huls, area director of remittance processing, said the bank will move approximately 3 million items a month to the clearing house from the Fed.
"The cost per item is lower than the Fed, so the moore you send to the private clearing house, the more the overall costs will go down," Ms. Huls said.
But Florence Young, assistant director of checks and ACH with the Federal Reserve, noted that the Fed has continued "looking at options to address cost controls."
"Reserve banks are reducing staff and increasing the use of electronics," Ms. Young said."
Through September 1994, the Fed lost 12% of its clearing volume compared to the same period last year. The central bank cleared approximately 19 billion items in 1993.
Ms. Young said the volume lost was attributable to several factors in addition to per-item costs. She said same-day-settlement regulations, which bars banks from assessing presentment fees, have resulted in more banks exchanging checks directly with each other. Another factor Ms. Young cited was the consolidation taking place in the baking industry.
To stem the loss, the Fed has recently embarked on belt-tightening measures, which can be seen in the Fed's per-item check clearing charges.
Ms. Young said the Board of Governor's recent per-item increase from 2.51 cents to 2.56 cents, or 1.2%, was "lower than the rate of inflation."
"We are hoping that the approach being taken to restructure the fees will be found attractive," Ms. Young said.
Costs of association membership is an initial $25,000 followed by annual dues of $10,000.
