DEFINITION of 'Private Sector Adjustment Factor - PSAF'

A method used by the Federal Reserve Board for calculating the costs of Federal Reserve banks providing services to depository institutions. The services provided include checks, Automated Clearing House, Fedwire funds and Fedwire securities.

The Monetary Control Act of 1980 requires the Fed to recover both the direct and indirect costs of providing these services plus the imputed costs that would have been incurred if the services were provided by the private sector.

BREAKING DOWN 'Private Sector Adjustment Factor - PSAF'

The Fed reviews its PSAF methodology periodically to make sure it is current with changes in the banking industry. In 2009, the Fed considered changing the current correspondent-bank model underlying the PSAF calculation.

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