Federal Register / Vol. 63, No. 111 /Wednesday, June 10, 1998 / Notices 31777

1A settlement transfer is a payment order in

which the originator and the beneficiary are each

either: (i) a bank subject to Federal Reserve reserve

requirements (whether or not it actually maintains

reserve balances), or (ii) a participant in a net

settlement arrangement approved by a Reserve Bank

as an eligible originator or beneficiary of a

settlement payment order sent during the

settlement period. A settlement transfer sent during

the settlement period must be designated by type

code 16. For purposes of this notice, the term

‘‘bank’’ is used to refer to any depository

institution.

2For purposes of this notice, respondent transfers

are defined as Fedwire transfers in which there is

an intermediary bank between the originating bank

and the Federal Reserve or between the

beneficiary’s bank and the Federal Reserve.

3NYCHA members have indicated that their

concerns relate primarily to late-in-the-day transfers

on behalf of foreign respondent banks, and that

transfers on behalf of domestic respondent banks

are generally not performed after 6:15 p.m.

FEDERAL RESERVE SYSTEM

[Docket R–1014]

Federal Reserve Bank Services

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Request for comment.

SUMMARY: The Board is requesting

comment on whether the last fifteen

minutes of the Fedwire funds transfer

operating day, from 6:15 p.m. to 6:30

p.m. Eastern Time, should be restricted

to funds transfers sent and received by

banks for their own account in order to

facilitate banks’ end-of-day management

of their Federal Reserve accounts.

DATES: Comments must be submitted on

or before August 12, 1998.

ADDRESSES: Comments, which should

refer to Docket No. R–1014, may be

mailed to Ms. Jennifer J. Johnson,

Secretary, Board of Governors of the

Federal Reserve System, 20th Street and

Constitution Avenue, N.W.,

Washington, D.C. 20551. Comments

addressed to Ms. Johnson may also be

delivered to the Board’s mail room

between 8:45 a.m. and 5:15 p.m., and to

the security control room outside of

those hours. Both the mail room and the

security control room are accessible

from the courtyard entrance on 20th

Street between Constitution Avenue and

C Street, N.W. Comments may be

inspected in room MP–500 between

9:00 a.m. and 5:00 p.m., except as

provided in Section 261.8 of the Board’s

Rules Regarding the Availability of

Information, 12 CFR 261.8.

FOR FURTHER INFORMATION CONTACT:

Louise Roseman, Associate Director

(202/425–2789), Jeff Stehm, Manager

(202/452–2217), or Gina Sellitto,

Financial Services Analyst (202/728–

5848), 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: The

Fedwire funds transfer system operates

from 12:30 a.m. to 6:30 p.m. Eastern

Time (all times stated are Eastern Time),

with the last half hour of the operating

day reserved for settlement transfers.1

Settlement transfers are typically used

by banks to adjust their Federal Reserve

account positions, as well as their

account positions at correspondent

banks. Settlement transfers may be twoparty transfers sent and received by

banks for their own account, or they

may contain third-party respondent

bank information when a respondent

bank is the originator and/or beneficiary

of the payment order.2 To the extent that

Fedwire settlement transfers are

received or requested unexpectedly just

before the final close of Fedwire, a

bank’s ability to manage its reserve

position and end-of-day Federal Reserve

account position may be complicated. In

particular, last minute transfers received

during the settlement period for credit

to a respondent bank customer may not

be anticipated and cannot be controlled

by the receiving correspondent bank.

In response to the Board’s request for

comment on a return to a system of

lagged reserve requirements (62 FR

60671, November 12, 1997), the New

York Clearing House Association

(NYCHA) requested that the Board

reconsider a two-part settlement period

at the end of the Fedwire operating day,

in which the last fifteen minutes of the

Fedwire funds transfer operating day are

reserved exclusively for transfers sent

by and received for a bank’s own

account. Under this proposed

restriction, funds transfers sent by banks

on behalf of a respondent bank or funds

transfers received by banks for credit to

a respondent bank would be prohibited

during the last fifteen minutes of the

Fedwire day. NYCHA believes such a

restriction would facilitate reserve

management by allowing banks to

anticipate more fully last minute

payment flows from and into their

account at a Reserve Bank. In particular,

NYCHA believes that because

respondent banks are able to use the

entire Fedwire settlement period (6:00

p.m. to 6:30 p.m.) to move funds into

and out of accounts at their

correspondents, the correspondents

cannot know their reserve positions

with certainty until Fedwire has

closed.3 This uncertainty in late-day

funds movements adds to the difficulty

of reserve management for large money

center correspondents.

In October 1989, the Board requested

comment on a similar proposal to

segment the settlement period for the

Fedwire funds transfer service (54 FR

41681, October 11, 1989). Overall,

commenters were divided as to the

benefits of this earlier proposal. Several

commenters indicated that there were

no significant benefits to a segmented

settlement period and that restricting

receipt of transfers by affiliates and

respondent banks during the last fifteen

minutes would further impede their

ability to manage their accounts. Other

commenters believed that a segmented

settlement period would unnecessarily

complicate the processing of funds

transfers because new edit criteria and

type codes might be needed to monitor

and restrict respondent transfers,

requiring changes to programs and

operating procedures for both banks and

Reserve Banks. Commenters supporting

this proposal noted that, in contrast to

transfers sent or received on its own

behalf, a correspondent bank may not be

able to predict accurately transfers

involving its respondent accounts,

thereby complicating management of its

reserve position.

At that time, the Board did not adopt

a segmented settlement period given the

concerns expressed by commenters and

the lack of strong industry support (55

FR 18755, May 4, 1990). The Board,

however, indicated that it would

monitor developments with regard to

reserve account management and

determine whether segmenting the

settlement period should be

reconsidered at a later date.

NYCHA, in its February 5, 1998, letter

to the Board, argues that several

developments have occurred since 1990

that make it more difficult for banks to

manage their reserve positions. These

developments include: (1) a significant

reduction in reserve balances resulting

from reductions in reserve requirements

in 1990 and 1992 and the use of sweep

accounts starting in 1994; and (2) a

reduction in the pool of available buyers

of federal funds due to consolidation in

the banking industry. The unexpected

receipt of funds for a respondent bank

very late in the day could result in the

correspondent bank having more

reserves than planned, which may be

difficult to invest late in the day.

Likewise, a late-in-the-day request to

pay out funds on behalf of a respondent

bank may result in a reserve deficiency

at the correspondent bank that may be

costly and difficult for the

correspondent to fund. NYCHA argues

that unanticipated excess or deficit

reserve positions create uncertainty and

volatility in the federal funds market.

NYCHA believes that a segmented
31778 Federal Register / Vol. 63, No. 111 /Wednesday, June 10, 1998 / Notices

4As-of adjustments are adjustments made at the

discretion of the Reserve Bank to the amount of

calculated required reserves that sending and

receiving banks must maintain during a two-week

reserve maintenance period. As-of adjustments do

not affect the actual level of balances held by a bank

at its Reserve Bank, but rather the level of required

reserves a bank must hold during a maintenance

period.

5This is similar to the process used to

compensate banks for third-party customer transfers

sent after 6:00 p.m. as type code 16 messages. In

this case, the Reserve Banks will function as-of

adjustments to the sending and receiving banks

when the receiving bank notifies the Reserve Bank

of such a transfer. The use of as-of adjustments for

this purpose, however, occurs infrequently.

Fedwire funds transfer settlement

period would allow each bank to

calculate its reserve position with

greater precision and facilitate a more

efficient interbank funding market.

If a segmented settlement period were

adopted, it might be implemented

through one of several approaches.

Under one approach, if a bank received

an unanticipated respondent transfer

after 6:15 p.m., it could return the funds

the same day. If this was not possible

prior to the final close of Fedwire, it

could return the funds the next day and

request compensation from the sender

(if the sender and receiver had a

compensation agreement) and/or

request that the Federal Reserve

function an as-of adjustment to its

reserve position and the reserve position

of the sending bank.4 5 As-of

adjustments may not have value for

some receiving banks or provide a

disincentive to some sending banks. In

particular, a receiving bank with low

reserve requirements that maintains

balances at a Reserve Bank primarily for

payment clearing purposes would likely

receive little economic value from an asof adjustment. Likewise, a sending bank

with a low reserve requirement may not

consider an as-of adjustment to be a

sufficient incentive to stop sending

respondent transfers after 6:15 p.m.

Alternatively, compensation for

respondent transfers processed after a

6:15 p.m. deadline might be handled by

private agreement between the sending

and receiving banks. For example,

NYCHA has rules governing the

settlement of claims for compensation

between NYCHA member banks that

arise from interbank funds payments.

Under another approach, the Fedwire

funds transfer system might be modified

to incorporate new edit criteria to detect

and reject type code 16 funds transfers

received after 6:15 p.m. that contain

respondent information in the

beneficiary or originator message field

tags. Alternatively, a new funds transfer

message type code to identify two-party

bank-to-bank transfers could be

established by modifying the Fedwire

funds transfer system. If a transfer

received after the respondent transfer

cut-off time (6:15 p.m.) did not bear the

appropriate type code, it would be

rejected by the Fedwire funds transfer

system. This approach would likely

require changes to banks’ internal

systems in order to process a new

message type code and may require

significant modifications to the Fedwire

funds transfer system.

If a segmented settlement period is

desirable, Fedwire restrictions on

respondent transfers sent after 6:15 p.m.

may only need to be applied to transfers

sent by the Federal Reserve to a bank for

credit to its respondent bank’s account.

Correspondent banks could set their

own cutoff times for originating

transfers on behalf of a respondent bank

customer, but they are unable to set

similar controls over the receipt of

transfers for the benefit of their

respondent customers. The receipt of

transfers for the benefit of a respondent

bank customer, therefore, may require

Fedwire restrictions to assist the

receiving correspondent bank in

managing its reserve position toward the

end of the day.

If a segmented settlement period were

adopted, the Board proposes that the

Reserve Banks’ procedures for granting

an extension of Fedwire deadlines be

modified in order to preserve a thirtyminute settlement period at the end of

the Fedwire day, divided into two

fifteen-minute intervals—the first period

for all types of settlement transfers and

the second period exclusively for

settlement transfers sent and received

for banks’ own accounts. Today,

extensions of the third-party customer

transfer deadline past 6:00 p.m.

generally result in a fifteen-minute,

rather than thirty-minute, settlement

period. For example, of the fifty-six

extensions of the 6:00 p.m. third-party

customer deadline in 1997, fifty resulted

in a compressed fifteen-minute

settlement period. If a segmented

settlement period were adopted, any

extension of the third-party deadline

may require an extension of the final

closing time in order to preserve a thirty

minute settlement period at the end of

the day—fifteen minutes for all

settlement transfers and fifteen minutes

exclusively for settlement transfers for

banks’ own accounts.

Finally, if a segmented settlement

period were adopted, operational

changes to banks’ internal systems, and

possibly to the Fedwire funds transfer

system, may be required in order to

preclude respondent transfers after 6:15

p.m. These potential system changes

raise a question of the appropriate

timing for implementation given the

Reserve Banks’ and banks’ ongoing year

2000 readiness efforts and their desire to

limit the number of system changes

prior to the millennium cutover.

The Board requests comment on

whether the establishment of a

segmented settlement period at the end

of the Fedwire operating day in which

respondent transfers would not be

permitted during the last fifteen minutes

would enhance banks’ ability to manage

their reserve positions late in the day.

The Board requests comment on the

following questions:

1. What are the benefits of a 15-

minute period from 6:15 p.m. to 6:30

p.m. during which respondent transfers

would be prohibited? To whom would

these benefits likely accrue? Are there

any significant costs or other drawbacks

to a segmented settlement period?

2. Because correspondent banks could

manage unexpected outflows of funds

over Fedwire by setting their own

internal cut-off time for originating

transfers on behalf of respondent bank

customers, should the Federal Reserve

impose restrictions only on settlement

transfers where a respondent bank is the

beneficiary bank?

3. How liquid is the fed funds market

after 6:15 p.m.? Is the liquidity in the

fed funds market at that time of day

sufficient to allow the correspondent

bank to invest any large inflows or cover

any outflows of funds received over

Fedwire late in the day?

4. How would restrictions on

respondent banks’ ability to request or

receive Fedwire funds transfers late in

the day affect their ability to manage

their reserve position?

5. If the Board were to adopt a

segmented settlement period, what

responsibilities and/or penalties, if any,

should be placed on the sending bank

if it does not comply with the 6:15 p.m.

deadline? Should the receiving bank

have the ability to request an as-of

adjustment with a corresponding

adjustment to the sending bank if a

respondent transfer is received after the

6:15 p.m. deadline? Will as-of

adjustments provide sufficient incentive

for the sending bank to police its release

of respondent transfers after 6:15 p.m?

Would there be a significant cost or

drawback to the receiving bank if as-of

adjustments were not functioned for

these types of transactions?

6. Would it be preferable for the

Federal Reserve to modify the Fedwire

funds transfer system by implementing

a new message type code or edit criteria

to reject automatically transfers sent

after the 6:15 p.m. that contain

respondent bank information in the

originator and/or beneficiary fields?

What costs or other burdens would such
Federal Register / Vol. 63, No. 111 /Wednesday, June 10, 1998 / Notices 31779

operational modifications impose on

Fedwire participants?

7. If the Fedwire 6:00 p.m. deadline

for third-party customer transfers is

extended on a particular day, should a

thirty-minute settlement period be

maintained at the end of the day, with

the last fifteen minutes of the settlement

period reserved for settlement transfers

between banks for their own accounts?

8. If a segmented settlement period is

approved, what is the appropriate

timeframe for its implementation, given

banks’ ongoing year 2000 readiness

efforts?

9. Are there any other alternatives that

could be implemented to address this

issue? For example, instead of Fedwire

changes, could the originating bank

and/or receiving bank implement

internal controls, customer agreements,

or other changes (e.g., industry

agreements regarding a deadline for

respondent transfers) to restrict

respondent transfers toward the end of

the Fedwire operating day?

By order of the Board of Governors of the

Federal Reserve System, June 5, 1998.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 98–15407 Filed 6–9–98; 8:45 am]

BILLING CODE 6210–01–P

GENERAL SERVICES

ADMINISTRATION

Office of the Chief Information Officer;

Public Notice of Waiver of Federal

Information Processing Standards

SUMMARY: Under the waiver authority

granted by the Secretary of Commerce,

The General Services Administration

must make public all actions taken on

waivers of Federal Information

Processing Standards. The

Administrator of the General Services

Administration has granted the Agency

a waiver to acquire and use any

commercial-off-the-shelf product(s)

which meet the Agency’s requirement

for information technology security.

This notice serves to make this

information public.

FOR FURTHER INFORMATION CONTACT: For

further information on this notice,

contact L. Diane Savoy, Acting Assistant

Chief Information Officer, General

Services Administration, Room 3024,

18th & F Street, NW, Washington, DC

20405; telephone (202) 219–3062.

SUPPLEMENTARY INFORMATION: The

General Services Administration (GSA)

requires secure electronic

communication with private sector

vendors to perform its day-to-day

functions. The limited availability of

products employing FIPS compliant

security techniques produced many

incompatibilities with the vendor

community. To eliminate or reduce this

problem, the GSA Chief Information

Officer requested and was granted

Agency-wide authority to use

commercial-off-the-shelf products that

employ techniques for assuring identity,

authenticity, integrity, or confidentiality

in addition to those employing

techniques specified in the FIPS. The

waiver granted by the GSA

Administrator became effective on

September 29, 1997 and remains in

effect until July 31, 2002.

Dated: June 5, 1998.

Donald P. Heffernan,

Deputy Chief Information Officer.

[FR Doc. 98–15414 Filed 6–9–98; 8:45 am]

BILLING CODE 6820–34–M

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Office of the Secretary

Management and Budget Office, Office

of Information and Resources

Management; Statement of

Organization, Functions and

Delegation of Authority

Part A, of the Office of the Secretary,

Statement of Organization, Functions

and Delegation of Authority for the

Department of Health and Human

Services is being amended at, Chapter

AM, HHS Management and Budget

Office, Chapter AMM, Office of

Information Resources Management

(OIRM), as last amended at 61 FR 37902

July 22, 1996. The changes are to reflect

a realignment of functions within the

Office of Information and Resources

Management. The changes are as

follows:

Delete in its entirety Chapter AMM,

Office of Information and Resources

Management and replace with the

following.

Chapter AMM, Office of Information

and Resources Management

AMM.00 Mission. The Office of

Information Resources Management

(OIRM) advises the Secretary and the

Assistant Secretary for Management and

Budget (ASMB)/Chief Information

Officer (CIO) on information and

information technologies to accomplish

Departmental goals and program

objectives; exercises delegated

authorities and any other applicable

rules; promotes improved management

of Departmental information resources

and technology; provides efficient and

effective information and information

technology service to clients and

employees; and provides assistance and

guidance for technology-supported

business process reengineering,

investment analysis, performance

measurement, assurance of the

information and system integrity, and

strategic development and application

of information systems, infrastructure,

and policies to the Department and its

components.

The Office is responsible for the

overall quality of information resources

and technology management throughout

the Department; represents the

Department to central management

agencies (e.g., the Office of Management

and Budget); supports the development

of a robust information infrastructure

(including a departmental information

technology architecture and information

technology-based services for the Office

of the Secretary); and advocates rigorous

methods for analyzing, selecting,

developing, operating, and maintaining

information systems.

The Office collaborates with the

Operating and Staff Divisions of the

Department to resolve policy and

management issues, manages risks

associated with major information

systems, evaluates and approves major

investments in information technology

based on return on investment, and

measures and evaluates system

performance.

The Office exercises authorities

delegated by the Secretary to the

Assistant Secretary for Management and

Budget, as the CIO for the Department.

These authorities derive from the

Information Technology Management

Reform Act of 1996, the Paperwork

Reduction Act of 1995, the Computer

Matching and Privacy Act of 1988, the

Computer Security Act of 1987, the

National Archives and Records

Administration Act of 1984, the

Competition in Contracting Act of 1984,

the Federal Records Act of 1950, OMB

Circular A–130: Management of Federal

Information Resources, and Government

Printing and Binding Regulations issued

by the Joint Committee on Printing.

Section AMM.10 Organization. The

Office of Information Resources

Management (OIRM), under the

supervision of the Deputy Assistant

Secretary for Information Resources

Management/Deputy CIO, who reports

to the Assistant Secretary for

Management and Budget/CIO, consists

of the following component.

• Immediate Office (AMMA)

• Office of Information Technology

Policy (AMMJ)

• Office of Information Technology

Services (AMML)