Changes in the Provision of Correspondent-Banking Services and the Role of Federal Reserve Banks under the DIDMC Act

This paper focuses on microeconomic incentives set in motion by Federal Reserve decisions about how to implement the reserve-requirement and pricing-of-service provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980 (the DIDMC Act). These incentives promise to reshape the production and character of correspondent-banking services, the margin of jurisdictional competition between state banking regulators and the Federal Reserve System, and ultimately the regional structure of the Federal Reserve itself.