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Recirculation Policy Frequently Asked Questions

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Federal Register Notice

  1. What is the intent of the Currency Recirculation Policy?

    Depository institutions (DIs) are expected to supply fit currency from their customers’ deposits to meet other customers’ needs before turning to Reserve Banks to obtain currency. DIs should deposit only surplus or unfit currency with Reserve Banks. As the nation’s Central Bank, the Federal Reserve plays an active role in the provision of cash services to DIs, particularly as an intermediary between DIs that have a surplus of fit currency and those that do not have enough to meet customer needs from an internal source.

  2. What denominations are covered by the Recirculation Policy?

    Cross-shipping is monitored for all denominations via cross-shipping reports, but fees are assessed on cross-shipping activity above the de minimis exemption only in the $10 and $20 denominations, and only $10s and $20s are allowed in a Custodial Inventory (CI). For more information on CIs, please consult the CI Program page.


  1. What is cross-shipping?

    Cross–shipping occurs when a DI deposits fit currency and orders the same denomination within the same business week (Monday–Friday) and within the same Federal Reserve zone or sub–zone. Cross-shipping is calculated as the lesser of fit deposits or orders.

    Example: In the first week of March, Bank X deposits 500 bundles of fit $10s to the Federal Reserve Bank of Boston. In that same week, Bank X ordered 230 bundles of $10s from the Federal Reserve Bank of Boston. Bank X has cross–shipped 230 bundles.

  2. What is the de minimis exemption?

    Under the policy, the first 875 bundles of combined $10s and $20s that an institution cross–ships in a given Federal Reserve Bank zone or sub–zone each quarter is not subject to the recirculation fee. This exemption is subtracted from total $10s and $20s cross–shipped within a Federal Reserve Bank zone/sub–zone. The exemption is subtracted from total cross–shipping in $10s and $20s at the end of the quarter. Any unused exemption expires at the end of the quarter and is not transferable.

    This exemption is intended to address three types of situations: 1) the scale of a DI's currency business is small enough that an investment in automated fitness sorting equipment cannot be cost–justified; 2) there are modest discrepancies between the fitness determinations made by a DI and the Federal Reserve; and/or 3) to allow DIs that experience unanticipated swings in customer demand to order or deposit currency without incurring a fee.

  3. Is the de minimis exemption applied monthly or quarterly?

    The Federal Reserve Banks provide cross–shipping reports monthly, but fees and the de minimis exemption are applied on a quarterly basis.

  4. What does it mean that the Federal Reserve monitors activity at the "institution level"?

    To track cross-shipping, the Federal Reserve aggregates all of the orders and deposits that a chartered financial institution makes in a Federal Reserve Bank zone or sub-zone, even if this activity occurs under different 9-digit ABAs or 13-digit endpoints. Reserve Banks expect that an institution will use currency generated from one business channel to meet the needs of another channel (e.g. use $20s from the deposits of retail customers to fill ATM canisters rather than having the central vault deposit and the armored carrier order $20s).

  5. Are depository institutions assessed fees for cross-shipping activity even during extraordinary events, such as a natural disaster or the introduction of a new series bank note?

    Billable cross–shipping activity may be waived during extraordinary events, which might include natural disasters, new note series introductions (involving covered denominations) and specified holiday currency ordering periods. All waivers are very short in duration, limited in scope and affect only the relevant denomination(s) and Federal Reserve Bank zones or sub–zones.

    Waivers are noted on cross-shipping reports, which show the specific cross-shipping activity being waived.

Cross-shipping Fees

  1. What happens if a DI cross-ships?

    Under the policy, institutions are charged a standard, national fee intended to cover the costs Federal Reserve Banks incur to process cross–shipped currency.

  2. How is the cross-shipping fee determined?

    The cross-shipping fee is based on Federal Reserve costs to receive, store, process and ship currency. It includes costs that vary with the volume of currency handled over time, including labor, equipment and supplies, as well as certain support costs like human resources. It excludes costs that the Federal Reserve Banks incur regardless of the volume level, such as facilities, protection and other overhead costs. This fee is the same for all Federal Reserve Offices, reflecting national average costs. Reserve Banks review the changes to these costs annually and will adjust the fee accordingly. Changes in fees will be announced 30 days in advance of the effective date of the change.

  3. When did the cross-shipping fee go into effect?

    Fees were assessed beginning in July 2007.

Cross-shipping Reports

  1. How do I sign up to receive cross-shipping reports?

    Monthly FedCash® Cross-shipping Reports are available via FedLine Web®. Visit FedCash Cross-shipping Reports via FedLine Web for more detailed information on how to receive your reports.

  2. How often are cross-shipping reports generated?

    Cross-shipping reports are generated monthly.

  3. How often are cross-shipping fees billed?

    Cross-shipping fees are billed on a quarterly basis.

  4. How are cross-shipping fees calculated?

    Cross–shipping activity in $10s and $20s is aggregated throughout a quarter in each Federal Reserve Bank zone or sub–zone in which a DI operates. An 875 bundle de minimis exemption is applied to each Federal Reserve Bank zone (sub–zone) for the quarter. A cross–shipping fee is applied to the remaining volume in each Federal Reserve Bank zone (sub–zone).

  5. What if a DI has a question about the cross-shipping report?

    Call your servicing Federal Reserve Office contact or send an email to the National Cash Product Office (CPO).

  6. Can a DI get reports that show selected Federal Reserve Bank Zones only?

    Cross–shipping reports show national activity, broken down by Federal Reserve Bank zone and sub–zone. Recipients can excerpt information from the national reports, but the Federal Reserve does not currently offer a limited subscription option.

  7. Can a DI get the reports even if it is not subject to cross-shipping fees?

    Yes. Any Federal Reserve customer can view the reports in FedLine Web. The reports show order and deposit totals that might be useful as a general management tool.

Zones / Sub-zones

  1. What is a Federal Reserve Bank zone?

    A Federal Reserve Bank zone is a geographic area designated by the Reserve Banks. For the purposes of this policy, cash depots are considered separate zones1. For example, Salt Lake City customers are in the Salt Lake City zone.

    1A cash depot is an alternative market presence for Federal Reserve cash services. With a cash depot, the Federal Reserve contracts with a third party, usually an armored carrier, which acts as a secure collection point for Federal Reserve currency deposits from the region's depository institutions. The depot also distributes currency orders that depository institutions have placed with the Federal Reserve. The work of counting deposits and preparing orders is done by a Federal Reserve Office in another city. The Federal Reserve pays for the transportation between the Reserve Bank Office and the depot operator. The operator follows strict procedures developed by the Federal Reserve.

  2. What is a sub-zone? How were they determined?

    The policy allows Reserve Banks to establish sub-zones where there are metropolitan areas that are very large and/or very far from the nearest Federal Reserve. The Federal Reserve monitors order and deposit activity for sub-zones separately from order and deposit activity in the rest of the Federal Reserve Bank zone. For example, a bank with activity in both the Los Angeles zone and San Diego sub-zone will have its San Diego cross-shipping calculated separately from its activity in the Los Angeles zone.

    All current sub–zones are listed below. As the table indicates, they were selected based on the combination of population and distance from the Federal Reserve. The Federal Reserve Banks will review sub–zones and make changes as necessary.

    FedCash Services order and deposit Sub-zone information
    Metropolitan Statistical Area Distance & Population Range Distance from Fed (Miles) Metropolitan Statistical Area (MSA)2 Federal Reserve Processing Office Population as of April 2010
    MSAs >1000 Miles from FRB w/population >250,000 2,387
    Honolulu, HI
    Anchorage, AK
    San Francisco
    MSAs >250 Miles from FRB w/population >500,000 275
    Las Vegas, NM
    Albuquerque, NM
    Central Florida (Sarasota-Bradenton, Orlando, Tampa)
    South Texas (McAllen-Mission, Brownsville-Harlingen)
    Los Angeles
    El Paso
    San Antonio
    MSAs >125 Miles from FRB w/population >1,000,000 125
    San Diego, CA
    Raleigh--Durham--Chapel Hill, NC
    Grand Rapids, MI
    Los Angeles
    MSAs >100 Miles from FRB w/population >1,500,000 114
    Indianapolis, IN
    Columbus, OH

    2MSA stands for Metropolitan Statistical Area

  3. How will endpoints be assigned to sub-zones?

    Endpoints are assigned to a sub–zone if their zip code is in the metropolitan area of the sub–zone, as defined by the Census Bureau3. Otherwise, they are assigned to the zone of the Federal Reserve Office that provides currency services to the endpoint.

    3Census Bureau Ranking Tables for Metropolitan Areas (Off-site): Population in 2000, and Population Change from 1990 to 2000, number PHC-T-3.

  4. How can a DI change endpoint designations?

    In order to have an endpoint’s Federal Reserve Bank zone or sub-zone designation changed, the institution must request that their local Federal Reserve cash office reclassify the endpoint and provide justification for the requested action. For example, an endpoint is on the border of the sub-zone, and the designated armored carrier services the endpoint from a location within the sub-zone.

    To have an endpoint added to or removed from a sub-zone, complete the request form (PDF) and return it to the local Federal Reserve Cash Office.

  5. The Federal Register notice indicates that a DI that circumvents the Recirculation Policy will be subject to the fee. What does this mean?

    A DI is expected to recirculate fit $10s and $20s within its own customer network. If, in the judgment of the Reserve Banks, a DI circumvents the Recirculation Policy by reducing its reported cross–shipping volume without increasing recirculation, such as would be the case if it alternated the weeks in which it orders and deposits currency, the Reserve Banks will apply the recirculation fee to fit notes in such deposits.

Custodial Inventory Program

  1. What is the Custodial Inventory program?

    The Custodial Inventory (CI) program is a component of the Recirculation Policy (PDF) whereby participating institutions can hold inventory in their vaults, but on the books of a servicing Federal Reserve Bank.

  2. What is the potential benefit of a Custodial Inventory?

    To comply with the Recirculation Policy and avoid cross-shipping fees, Depository Institutions (DIs) may need to hold more currency in their vaults. A CI may help mitigate the opportunity costs associated with holding additional currency in their vaults long enough to facilitate its recirculation.

  3. What are the eligibility requirements to participate in the Custodial Inventory program?

    The DI must:

    • Be financially sound, as determined by its Administrative Reserve Bank (The Reserve Bank that has oversight authority over the DI)
    • Be able to meet a minimum currency volume threshold by demonstrating that each vault in which it seeks to operate a CI has the ability to recirculate a minimum of 200 bundles of $10 and $20 notes per week on a regular basis in a Federal Reserve Bank zone or sub-zone. A depository institution can demonstrate that it meets the minimum threshold in any of the following three ways:
      1. By cross-shipping with the Federal Reserve Bank at least 200 bundles of $10 and $20 notes per week at the prospective CI Vault in a Federal Reserve Bank zone or sub-zone at the time of the appliztion4.
      2. By providing deposit and payment records for the prospective CI Vault demonstrating that it recirculates among its customers at least 200 bundles of $10 and $20 notes weekly in the Federal Reserve Bank zone or sub-zone.
      3. By demonstrating a combination of cross-shipping activity and recirculation among its customers a the prospective CI Vault totaling at least 200 bundles of $10 and $20 notes in the Federal Reserve Bank zone or sub-zone.
    • Sign the Custodial Inventory Agreement with the servicing Federal Reserve Bank, which includes the following requirements:
      • The DI must indemnify the Federal Reserve against theft or loss of Federal Reserve currency.
      • The DI must comply with Federal Reserve physical security guidelines for vaults, access control and video surveillance.
      • The DI must operate it facility in accordance with Federal Reserve guidelines for access and control.
      • The DI must segregate Federal Reserve currency from other currency.
      • The DI must allow full access by Federal Reserve Banks, the Board of Governors, the Government Accountability Office, and their agents for unannounced audits of any aspect of the CI operation.
    • Comply with all above mentioned requirements on an ongoing basis as a CI operator. Failure to comply with any of these requirements could result in the loss of eligibility to participate in the program.

    4Once the CI site is approved, the operator is expected to no longer cross-ship these deposits, but will instead begin using the CI to recirculate them.

  4. Are there any costs associated with operating a Custodial Inventory?

    The Federal Reserve does not apply any fees to operate a CI. However, as a CI operator, DIs may incur some costs associated with opening and operating custodial inventories. For example, DIs may have to modify their facilities to physically separate currency held on the books of the Federal Reserve from the currency held on the DI’s books, or to enhance physical security, perhaps by installing surveillance equipment. DIs may also have to enhance physical and procedural access controls and engage in additional sorting and other handling of the notes held in a CI. In some instances, DIs may also have to add staff to ensure the appropriate separation of duties.

  5. Will my bank be required to purchase insurance to participate in the Custodial Inventory program?

    No, DIs will not be required to purchase any additional insurance for the CI program. However, the Federal Reserve Bank will ask CI program applicants to provide certification of insurance coverage as part of the CI application process to help determine their eligibility for the CI program.

  6. What is an inventory "cap"?

    A CI operator is required to keep one day of average daily payments in $10s and $20s on its own books before putting any currency into the CI. The “cap” is the maximum amount that a participating DI is allowed to store in the CI. The cap is calculated on a weekly basis and is equal to four days of average daily payments to customers.

  7. What are "average daily payments"?

    An “average daily payments” is the average daily dollar amount of combined $10 and $20 notes that a CI site paid to its commercial customers (change orders), correspondent banks, and/or branches and the ATM network, but excluding deposits to the Federal Reserve during a previous 5 business day reporting period.

    Example: In week 1 Bank X pays its customers the following amounts in $10s and $20s:

    Example of Average Daily Payments
    Average Daily Payment Day
    Monday $5M
    Tuesday $3M
    Wednesday $2M
    Thursday $7M
    Friday $8M
    Week 1 Total $25M

    Average Daily Payments: $5M ($25M / 5 Days)
    What the DI must keep on its own books
    Cap in Week 3: $20M ($5M * 4 Days)

  8. What are the payments and vault holdings reporting requirements for a Custodial Inventory Site?

    A CI must report to its local Federal Reserve servicing office its vault holdings and payments to its customers on a daily basis via Custodial Inventory FedCash Services within the FedLine Web Solution. Payments to customers are defined as payments by the CI site to its commercial customers, ATM network, correspondents, and/or its branches, but do NOT include deposits to the Federal Reserve.

  9. What will be the Federal Reserve's involvement with my Custodial Inventory Site?

    The servicing Federal Reserve Bank must conduct a site inspection as part of the application and acceptance process. Once the CI is established, the servicing Federal Reserve Bank will monitor the daily transactions of the CI and will periodically perform on-site compliance reviews of the CI to ensure that it is in compliance with the program requirements. The servicing Federal Reserve Bank is also the contracting party for the CI agreement.

  10. What are the compliance review requirements?

    The Federal Reserve reserves the right to conduct periodic unannounced compliance reviews, at its expense, of the CI holdings and the site to determine whether it is conforming to the CI agreement and the Manual of Procedures (MOP) and OC2 Appendix (PDF). The MOP ensures that operations are conducted and carried out in accordance with prescribed procedures and under specific and sufficient security control conditions providing for the integrity of all operations.

  11. Can a DI sub-contract with a third-party vendor for vault services and have the vendor be a Custodial Inventory Site?

    Yes, a third party vendor such as an armored carrier subcontracted by the DI to perform vaulting services may operate a CI on a DI’s behalf. The CI agreement is still between the institution and the Federal Reserve, and the DI will remain responsible for all obligations under the CI agreement. The DI must make sure that the vendor operates the vault and the custodial inventory in accordance with the requirements of the agreement.

  12. How can a DI sign up for a Custodial Inventory?

    To begin the application process, please review the following:

    The application and associated CI documents are posted on the CI Program page. Note that applications require the name and title of the institution's official authorized officer who must be listed on the Official Authorization List (OAL) provided by the CI to the Federal Reserve Bank. An application will not be accepted without this information. To complete an OAL for you institution or to add authorized individuals to your institution's OAL, visit the Accounting Services Forms.

  13. Does a DI sign a single agreement with the Federal Reserve or is an agreement for each Custodial Inventory Site required?

    For each CI location, a DI will need to sign a separate agreement with the servicing Federal Reserve Bank in that location.


  1. Who can I contact if I have further questions?

    If you have further questions, please contact your local Federal Reserve Bank cash contacts.

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