[Federal Register Volume 62, Number 220 (Friday, November 14, 1997)]
[Notices]
[Pages 61127-61128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29962]


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FEDERAL RESERVE SYSTEM

Docket No. R-0989


Policy Statement on Payments System Risk; Modification to the 
Time Credits are Posted to Federal Reserve Accounts for Checks Drawn on 
Local Federal Reserve Banks for Purposes of Measuring Daylight 
Overdrafts

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Policy Statement.

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SUMMARY: The Board has modified the daylight overdraft measurement 
rules to accommodate an earlier afternoon presentment deadline for 
checks drawn on local Federal Reserve Banks.

EFFECTIVE DATE: November 14, 1997.

FOR FURTHER INFORMATION CONTACT: Myriam Payne, Senior Financial 
Services Analyst (202/452-3219), or Stacy Panigay, Financial Services 
Analyst (202/452-2934), Division of Reserve Bank Operations and Payment 
Systems; for the hearing impaired only: Telecommunications Device for 
the Deaf, Diane Jenkins (202/452-3544).

SUPPLEMENTARY INFORMATION:

Background

    When the Board modified the Payments System Risk Reduction policies 
in 1992 (57 FR 47093, October 14, 1992), it adopted a set of ``posting 
rules'' which comprise a schedule for the intraday timing of debits and 
credits to institutions' Federal Reserve accounts for different types 
of payments. With the implementation of these rules along with the 
imposition of fees for daylight overdrafts, the Board was interested in 
inducing behavioral changes to control risk and increase efficiency in 
the payments system. Under the daylight overdraft measurement rules 
that became effective on October 14, 1993, depository institutions that 
deposit in separately sorted cash letters Checks Drawn on Local Federal 
Reserve Banks

[[Page 61128]]

(i.e., Federal Funds checks), U.S. Treasury Checks, Postal Money 
Orders, and U.S. Savings Bonds Deposited under the EZ-Clear Program by 
4 p.m. ET receive credit for these items at 5 p.m. ET.

Analysis of Federal Funds Checks Presentment Deadline

    The Board believes that establishing a consistent presentment 
deadline for Federal Funds checks in all Federal Reserve districts will 
help reduce the routine use of Federal Funds checks.<SUP>1</SUP> 
Federal Funds checks are an inappropriate means of providing regular 
access to an institution's Federal Reserve account and their routine 
use is contrary to the Federal Reserve's strategy of promoting 
efficient and effective methods of payment. In almost all cases where 
Federal Funds checks are used as the payment instrument, the 
transaction could have been made through a more secure and efficient 
method, such as a funds transfer network. To discourage the use of 
Federal Funds checks and encourage depository institutions' use of more 
efficient means of payment, a 3 p.m. local time presentment deadline 
for Federal Funds checks will be implemented.
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    \1\ Federal Funds checks are drafts drawn by a depository 
institution against its account at a Federal Reserve Bank. These 
funds represent immediately available funds when presented for 
payment, and thus, when used, the checks are most often used to 
settle same-day securities transactions, interbank transfers, 
international transactions, real estate transactions, payments to 
state and local governments, Federal Reserve Bank transactions and 
for other situations where a bank check is required for legal 
reasons.
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Policy Statement on Payments System Risk

    The Federal Reserve Board has adopted the following changes to the 
``Federal Reserve System Policy Statement on Payments System Risk,'' 
under the heading ``I. Federal Reserve Policy'':

Modified Procedures for Measuring Daylight Overdrafts

    Post at 5:00 p.m. Eastern Time:
    <bullet> Treasury checks, postal money orders, and EZ-Clear Savings 
Bond redemptions in separately sorted deposits. These items must be 
deposited by 4:00 p.m. Eastern Time.
    <bullet> Local Federal Reserve Bank checks. These items must be 
presented before 3:00 p.m. Eastern Time.
    <bullet> Processed manual letters of credit. +/- Same-day ACH 
transactions. These transactions include ACH return items, check 
truncation items, and flexible settlement items.
    Post after the close of Fedwire funds transfer system:
    +/- All other non-Fedwire transactions. These transactions include 
the following: local Federal Reserve Bank checks presented after 3:00 
p.m. Eastern Time but before 3:00 p.m. local time; noncash collection; 
credits for U.S. Treasury and government agency definitive security 
interest and redemption payments if the coupons or securities are 
received on or after the maturity date; Treasury Tax and Loan (TT&L) 
calls; subscriptions for SLGS; currency and coin shipments; small-
dollar credit adjustments; all debit adjustments; and small-dollar 
check collections. Discount window loans and repayments are normally 
posted after the close of Fedwire as well; however, in unusual 
circumstances a discount window loan may be posted earlier in the day 
with repayment 24 hours later, or a loan may be repaid before it would 
otherwise become due.

    By order of the Board of Governors of the Federal Reserve System, 
November 7, 1997.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 97-29962 Filed 11-13-97; 8:45 am]
BILLING CODE 6210-01-P