WASHINGTON - Bankers will find it more expensive to overdraw their Fed Wire accounts under a fee schedule approved Wednesday by the Federal Reserve Board.
The Fed voted unanimously to raise overdraft fees from an annual rate of 10 cents per $100 of overdrafts to 15 cents per $100. The move, effective April 13, should cost the industry $9 million.
The vote cuts the fee schedule approved in September 1992. Under that plan, overdraft fees were to rise to 20 cents per $100 in April 1995 and to 25 cents in April 1996.
Instead, the Fed said the overdraft fee will remain at the 15- cent level for at least two years. The delay will give bankers more time to improve their systems, the Fed staff said.
It also should ease fears that financial institutions will move away from Fed Wire to other wire transfer systems that charge less.
The staff added that it feared that if one of these private systems could not settle accounts, systemic failures would follow.
The governors apparently were concerned with the loss of Fed Wire business as well. Fed Chairman Alan Greenspan asked the staff if the 10- cent fee had already caused banks to flee the Fed Wire. The staff said it had not found any evidence of that.
Overdrafts occur frequently during the 10 hours a day that the Fed Wire is open. Fed officials said bankers, who move $900 billion in commercial, repurchase, and other transactions a day over the system, often find it impossible to manage their balances.
This trouble was causing the Fed to extend $70 billion worth of credit a day to Fed Wire users.
This massive, and free, credit extension began worrying regulators in the early 1980s, causing the central bank to commission two studies on how to discourage financial institutions from overdrawing their accounts. Those studies said a modest overdraft fee would encourage bankers to overdraft less.
The Fed also issued a policy requiring institutions that overdrew their accounts to conduct self-evaluations, which were intended to create daylight overdraft limits.
Then, in September 1992, the governors approved the three-stage fee systems.
