Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices 30205

1U.S. branches and agencies of foreign banks are

entities contained within and controlled by a

foreign banking organization. For the definition of

‘‘branch’’ and ‘‘agency’’, refer to 12 U.S.C. 3101 and

12 CFR.

2The net debit cap classes and their associated

single-day multiples are a zero cap (0), an exemptfrom-filing cap (equal to the lesser of $10 million

or 0.2 times a capital measure), a de minimis cap

(0.4); and three self-assessed caps, average (1.125),

above average (1.875), and high (2.25). A net debit

cap is calculated for the FBO and then distributed

among its U.S. branches and agencies at the

discretion of the FBO and the Administrative

Reserve Bank.

3The Administrative Reserve Bank is responsible

for managing an institution’s account relationship

with the Federal Reserve.

4The BCA was developed by the Basel Committee

on Banking Supervision and endorsed by the

central bank governors of the Group of Ten

countries. The BCA provides a framework for

assessing the capital adequacy of a depository

institution by risk weighting its assets and offbalance sheet exposures primarily based on credit

risk.

5Liabilities to nonrelated parties include

acceptances, but exclude accrued expenses and

mounts due and other liabilities to offices,

branches, and subsidiaries of the foreign bank of

each agency or branch.

collected balances in its Federal Reserve

account, or, in extreme cases, taking the

institution off-line or prohibiting it from

using Fedwire.

By order of the Board of Governors of the

Federal Reserve System, May 30, 2001.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 01–13978 Filed 6–4–01; 8:45 am]

BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM

[Docket No. R–1108]

Policy Statement on Payments System

Risk; Daylight Overdraft Capacity for

Foreign Banking Organizations

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Request for comment on policy.

SUMMARY: The Board is requesting

comment on proposed changes to its

payments system risk (PSR) policy. The

proposal would modify the criteria used

to determine the U.S. capital

equivalency for foreign banking

organizations (FBOs). Specifically, the

proposed policy would (1) eliminate the

Basel Capital Accord (BCA) criteria used

in the current policy to determine U.S.

capital equivalency for FBOs, (2) replace

the BCA criteria with the strength of

support assessment (SOSA) rankings

and financial holding company (FHC)

status in determining U.S. capital

equivalency for FBOs, and (3) raise the

percentage of capital used in calculating

U.S. capital equivalency for certain

FBOs.

EFFECTIVE DATE: Comments must be

received by August 6, 2001.

ADDRESSES: Comments, which should

refer to Docket No. R–1108, may be

mailed to Ms. Jennifer J. Johnson,

Secretary, Board of Governors of the

Federal Reserve System, 20th and C

Streets, NW, Washington, DC 20551 or

mailed electronically to

regs.comments@federalreserve.gov.

Comments addressed to Ms. Johnson

also may be delivered to the Board’s

mailroom between 8:45 a.m. and 5:15

p.m. and to the security control room

outside of those hours. Both the

mailroom and the security control room

are accessible from the courtyard

entrance on 20th Street between

Constitution Avenue and C Street, NW.

Comments may be inspected in Room

MP–500 between 9 a.m. and 5 p.m.

weekdays, pursuant to § 261.12, except

as provided in § 261.14, of the Board’s

Rules Regarding Availability of

Information, 12 CFR 261.12 and 261.14.

FOR FURTHER INFORMATION CONTACT: Paul

Bettge, Associate Director (202/452–

3174), Stacy Coleman, Manager (202/

452–2934), Myriam Payne, Project

Leader (202/452–3219), or Adam

Minehardt, Financial Services Analyst

(202/452–2796), Division of Reserve

Bank Operations and Payment Systems,

Board of Governors of the Federal

Reserve System.

SUPPLEMENTARY INFORMATION: This is

one of five notices regarding payments

system risk that the Board is issuing for

public comment today. Two near-term

proposals concern modifications to the

procedures for posting electronic check

presentments to depository institutions’

Federal Reserve accounts for purposes

of measuring daylight overdrafts (Docket

No. R–1109) and the book-entry

securities transfer limit (Docket No. R–

1110). In addition, the Board is

requesting comment on the benefits and

drawbacks to several potential longerterm changes to the Board’s policy,

including lowering self-assessed net

debit caps, eliminating the two-week

average caps, implementing a two-tiered

pricing system for collateralized and

uncollateralized daylight overdrafts, and

rejecting payments with settlement-day

finality that would cause an institution

to exceed its daylight overdraft capacity

level (Docket No. R–1111). The Board is

also issuing today an interim policy

statement and requesting comment on

the broader use of collateral for daylight

overdraft purposes (Docket No. R–1107).

Furthermore, to reduce burden

associated with the PSR policy, the

Board recently rescinded the

interaffiliate transfer (Docket No. R–

1106) and third-party access policies

(Docket No. R–1100).

The Board requests that in filing

comments on these proposals,

commenters prepare separate letters for

each proposal, identifying the

appropriate docket number on each.

This will facilitate the Board’s analysis

of all comments received.

I. Background

In April 1985, the Board adopted a

policy to reduce risk on large-dollar

payments systems (50 FR 21120, May

22, 1985). This policy established

maximum amounts of uncollateralized

daylight credit, or net debit caps, that

depository institutions are permitted to

incur in their Federal Reserve accounts.

Net debit caps for U.S. branches and

agencies of foreign banks are calculated

in the same manner as for domestic

banks, by applying cap multiples from

one of the six cap classes to a capital

measure.1 2 A depository institution’s

cap class and associated cap multiple

either are determined through a selfassessment or a board-of-directors

resolution or are assigned by the

Administrative Reserve Bank.3 All net

debit caps, including those requested by

an institution’s board of directors, are

granted at the discretion of the Federal

Reserve. Under the current policy, the

Federal Reserve Banks apply the cap

multiple to 100 percent of domestic

depository institutions’ risk-based (or

equivalent) capital. The capital measure

used for an FBO, known as the U.S.

capital equivalency, however, is

substantially less than the FBO’s total

capital.

In 1987, the Board considered and

decided against changing the original

definition of U.S. capital equivalency

(52 FR 29255, August 6, 1987). At the

request of several FBOs, however, the

Board requested comment again in June

1989 on alternatives for determining

FBOs’ U.S. capital equivalency used in

calculating net debit caps for U.S.

branches and agencies of foreign banks

(54 FR 26108, June 21, 1989). After

further analysis, in 1991, the Board

adopted the current policy based on the

BCA distinction (55 FR 22095, May 31,

1990).4

FBOs from countries that adhere to

the BCA are currently eligible to use as

their U.S. capital equivalency the

greater of 10 percent of their capital or

5 percent of their liabilities to

nonrelated parties.5 FBOs from

countries that do not adhere to the BCA

may use as their U.S. capital

equivalency the greater of 5 percent of

30206 Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices

6The latter measure is not normally reported to

the Federal Reserve. If an FBO desires to use this

measure as its capital equivalency, the

Administrative Reserve Bank must be notified to

make special arrangements.

7 In this context, cap utilization is equal to an

FBO’s average daily peak daylight overdraft divided

by the FBO’s net debit cap.

8For additional information on payment system

initiatives, refer to the Payments Risk Committee’s

report entitled ‘‘Intraday Liquidity Management in

the Evolving Payment System: A Study of the

Impact of the Euro, CLS Bank, and CHIPS Finality,’’

New York, April 2000. http://www.ny.frb.org/prc/

intraday.html.

9CHIPCo is the affiliate of The New York Clearing

House Association L.L.C. that owns and operates

CHIPS.

their liabilities to nonrelated parties or

the amount of capital that would be

required of a national bank being

organized at each location.6 Under the

current policy, if the home country

supervisor of an FBO does not adhere to

the BCA, the U.S. branch or agency of

the FBO may still incur daylight

overdrafts above its net debit cap up to

a maximum equal to its cap multiple

times 10 percent of its capital, provided

that any overdrafts above the net debit

cap are collateralized.

In 2000, as part of a broad review of

the PSR policy, the Board again assessed

the determination of U.S. capital

equivalency for FBOs. The review

included analysis of trends of daylight

credit, consideration of supervisory

issues, analysis of new or emerging

payments system initiatives, and

discussions with FBOs.

II. Discussion

A. FBO Liquidity Issues

A few FBOs have indicated that their

net debit caps constrain their business

activity and place them at a competitive

disadvantage to U.S. depository

institutions. These FBOs assert that

certain U.S. depository institutions hold

a significant portion of their assets in

foreign markets but are able to use 100

percent of their total risk-based capital

in establishing their caps, while the PSR

policy does not recognize the FBOs’

worldwide financial strength. During

2000, approximately 35 percent of U.S.

branches and agencies of foreign banks

with nonzero net debit caps had cap

utilization levels of 75 percent or more.7

In contrast, less than 5 percent of

domestically chartered institutions use

more than 50 percent of their net debit

caps for their average daily peak

daylight overdrafts.

A number of FBOs have expressed

concern over being able to meet the

intraday liquidity requirements of the

Continuous Linked Settlement (CLS)

system and the new Clearing House

Interbank Payments System with

intraday finality (new CHIPS). CLS Bank

is being designed as a multi-currency

facility for settling foreign exchange

transactions. Under the proposed

procedures, participating institutions

will be required to make daily U.S.

dollar payments to CLS Bank over

Fedwire during the early hours of the

Fedwire funds transfer operating day.

Because U.S. financial money markets

are not currently active during those

hours, a number of CLS members assert

that they will use Federal Reserve

daylight credit to fund their CLS-related

payment obligations and have requested

that the Federal Reserve grant them

additional intraday credit.8

On January 22, 2001, the Clearing

House Interbank Payments Company

L.L.C. converted CHIPS from an end-ofday multilateral net settlement system

to one that provides real-time final

settlement for all payment orders as

they are released.9 To accomplish realtime final settlement, each CHIPS

participant must transfer (directly or

through another participant) a

predetermined amount into the CHIPS

‘‘prefunded balance account’’ on the

books of the Federal Reserve Bank of

New York. While new CHIPS settles all

of the payment orders when they are

released, some payment orders remain

unreleased at the end of the day. These

payment orders are netted and set off

against one another on a multilateral

basis, with each participant in a net

debit closing position transferring the

amount of its closing position

requirement into the prefunded balance

account. Many CHIPS participants use

Federal Reserve daylight credit to pay

their end-of-day closing position

requirements on CHIPS. Some of these

participants have stated that making

these Fedwire payments has, on

occasion, increased their demand for

intraday credit.

In addition to the concerns raised by

FBOs, the Board recognizes the

continued globalization of the financial

industry and that many FBOs have

established substantial operations

within the United States. Furthermore,

FBOs might increase their U.S. activities

with the business opportunities created

by the Gramm-Leach-Bliley Act (Public

Law 106–102) (GLB Act). As their U.S.

business expands, FBOs could have a

corresponding increase in their need for

use of the U.S. payments system and

daylight credit.

B. National Treatment Considerations

While the Board understands the

concerns of the foreign banking

community, FBO participants in the

payments system present risks that

domestic depository institutions do not

pose to the same extent and,

accordingly, some differential treatment

is warranted. Additional risks posed by

FBOs include increased legal risk in

pursuing claims against insolvent FBOs

under the laws of various countries and

increased supervisory risk in the

monitoring of FBOs.

FBOs present special legal risks to the

Federal Reserve because of the

differences in insolvency laws and

public policy associated with the

various FBOs’ home countries. In

international financial transactions, the

overall risk borne by each party is

affected not only by the governing law

set out in the contract, but also by the

law governing the possible insolvency

of its counterparty. The insolvency of an

international bank presents significant

legal issues in enforcing particular

provisions of a financial contract (such

as close-out netting or irrevocability

provisions) against third parties (such as

the liquidator or supervisor of the failed

bank). The insolvent party’s national

law also may permit the liquidator to

subordinate other parties’ claims (such

as by permitting the home country tax

authorities to have first priority in

bankruptcy), may reclassify or impose a

stay on the right the nondefaulting party

has to collateral pledged by the

defaulting party in support of a

particular transaction, or may require a

separate proceeding to be initiated

against the head office in addition to

any proceeding against the branch.

It is not practicable for the Federal

Reserve to undertake and keep current

extensive analysis of the legal risks

presented by the insolvency law(s)

applicable to each FBO with a Federal

Reserve account in order to quantify

precisely the legal risk that the Federal

Reserve incurs by providing intraday

credit to that institution. It is

reasonable, however, for the Federal

Reserve to recognize that FBOs

generally present additional legal risks

to the payments system and,

accordingly, limit its exposure to these

institutions.

In addition to the legal risks

associated with FBO failures, the

Federal Reserve faces elevated

supervisory risks when monitoring

FBOs. In some countries, supervisory

information available to U.S. regulators

may be less timely and not comparable

to similar information used in the

supervision of U.S. depository

institutions. U.S. bank supervisors also

lack a consolidated view of the FBO’s

risk management process and are unable

to test its implementation on a global

basis. Furthermore, FBO risk profiles

differ due to varying industry and

regulatory structures across countries.

Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices 30207

10The SOSA ranking is composed of four factors

including the FBO’s financial condition and

prospects; the system of supervision in the FBO’s

home country; the record of the home country’s

government in support of the banking system or

other sources of support for the FBO; and transfer

risk concerns. Transfer risk relates to the FBO’s

ability to access and transmit U.S. dollars, which

is an essential factor in determining whether an

FBO can support its U.S. operations. The SOSA

ranking is based on a scale of 1 through 3 with 1

representing the lowest level of supervisory

concern.

11The Reserve Banks may review other relevant

information when considering whether to permit

SOSA 3-ranked FBOs access to intraday credit. The

PSR policy allows Reserve Banks to deny any

depository institution access to Federal Reserve

intraday credit based on any applicable

information.

12The interim policy statement expands the prior

policy that permitted certain FBOs to pledge

collateral to reach a maximum daylight overdraft

capacity equal to their cap multiple times 10

percent of their capital.

13For full text, see SR Letter 00–14 (SUP),

Enhancements to the Interagency Program for

Supervising the U.S. Operations of Foreign Banking

Organizations, October 23, 2000.

14While applying for FHC status is voluntary, the

regulatory burden associated with applying is

minimal for most institutions.

III. Proposed Changes to PSR Policy

The Board is requesting comment on

the following policy changes related to

the determination of FBOs’ U.S. capital

equivalency used in calculating net

debit caps for their U.S. branches and

agencies. Specifically, the proposed

policy would allow

1. FBOs that hold an FHC

classification to use 35 percent of their

capital as their U.S. capital equivalency.

The Board believes that the capital and

management requirements for FHCs and

the heightened monitoring and

supervision to which FHCs are subject

justify permitting these FBOs to incur a

higher level of daylight overdrafts.

2. FBOs that are not FHCs and are

ranked SOSA 1 to use 25 percent of

capital as their U.S. capital equivalency.

The Board believes that achieving the

standards of the SOSA 1 ranking

provide sufficient support for increasing

the percentage of capital used for net

debit cap calculations to 25 percent.10

3. FBOs that are not FHCs and are

ranked SOSA 2 to use 10 percent of

their capital as their U.S. capital

equivalency.

4. FBOs that are not FHCs and are

ranked SOSA 3 to use 5 percent of the

FBO’s ‘‘net due to related depository

institutions.’’ 11 Recognizing that net

debit caps are granted at the discretion

of the Federal Reserve, the Reserve

Banks could require certain SOSA 3-

ranked FBOs to fully collateralize their

net debit caps.

The Board believes its proposal to

permit the use of higher percentages of

capital for FBOs that hold an FHC

classification or a SOSA 1-ranking will

provide sufficiently larger daylight

overdraft capacity to those institutions

whose payment activity is currently

constrained by their net debit caps. The

Board believes that the benefits to the

payments system of increasing the U.S.

capital equivalency for FBOs that hold

an FHC classification or a SOSA 1-

ranking outweigh the potential increase

in credit risk to the Federal Reserve.

In addition, an interim policy

statement (Docket No. R–1107) that was

published elsewhere in today’s Federal

Register allows depository institutions

that have self-assessed net debit caps to

pledge collateral to the Federal Reserve

Banks in order to incur additional

daylight overdrafts above their net debit

cap levels. An FBO whose U.S. branch

or agency has a self-assessed net debit

cap and is in need of additional capacity

may consult with its Administrative

Reserve Bank on pledging collateral for

this purpose.12

A. Supervisory Rankings

The Board considered how the SOSA

rankings might alleviate some concerns

about the timeliness and reliability of

supervisory information. SOSA rankings

reflect an assessment of an FBO’s ability

to provide financial, liquidity, and

management support to its U.S.

operations. In October 2000, SOSA

rankings were made available to the

FBOs’ management and home country

supervisor.13 Previously, SOSA

rankings were used for internal Federal

Reserve purposes only. SOSA rankings

provide broader information about the

condition of the FBO, its supervision,

and the home country, whereas the BCA

distinction provides information only

about the home country treatment of

bank capital adequacy. Furthermore, the

BCA designation reflects the one-time

adoption of BCA standards by a

country’s supervisory authority, while

U.S. bank supervisors update the SOSA

rankings regularly.

The Board also considered the FHC

status created by the GLB Act. The GLB

Act authorizes bank holding companies

(BHCs) and FBOs that are well

capitalized and well managed, as those

terms are defined in the statute and the

Board’s regulations, to elect FHC status

and thereby engage in securities,

insurance, and other activities that are

financial in nature or incidental to a

financial activity and that are otherwise

impermissible for BHCs. FHCs must

continue to meet the applicable capital

and management standards in order to

maintain their status and are subject to

enhanced reporting requirements. The

Board believes that, like the SOSA

ranking, FHC status is preferable to the

BCA distinction in determining the risk

posed by FBOs to the U.S. payments

system.14

The Board, therefore, proposes to

replace the current BCA distinction in

the PSR policy with a combined SOSAFHC structure and to increase the

percentage of capital used in calculating

net debit caps for certain U.S. branches

and agencies of foreign banks. The

Board believes that the SOSA ranking

provides more specific, more

comprehensive, and more timely

information than the BCA distinction.

As result, the Board believes that the

definition of U.S. capital equivalency

can be expanded further for FBOs that

are FHCs or have a SOSA 1 ranking.

B. Alternative Measure of U.S. Capital

Equivalency

Under the current policy, an FBO

from a country that does not adhere to

the BCA must use an alternative

measure for its U.S. capital equivalency

that is not based on total capital.

Currently, the alternative measure is 5

percent of ‘‘liabilities to nonrelated

parties’’ or the amount of capital that

would be required of a national bank

being organized at a specific location.

The Board believes that using an

alternative measure of U.S. capital

equivalency when an FBO’s home

country does not adhere to the BCA is

appropriate given concerns over the

potential lack of timely supervisory

information regarding these FBOs and

the Federal Reserve’s inability to

monitor each FBO’s non-U.S.

operations.

While the Board proposes to eliminate

the BCA criteria used in the current

policy, the Board continues to support

using an alternative measure of U.S.

capital equivalency for U.S. branches

and agencies of foreign banks that

represent the greatest levels of

supervisory concern. The Board believes

that this alternative measure should be

applied only to those FBOs that may

exhibit significant financial or

supervisory weaknesses, specifically

SOSA 3-ranked FBOs under the

proposed policy. In achieving this end,

the Board believes that the alternative

measure of U.S. capital equivalency for

SOSA 3-ranked FBOs should reflect the

capital investment of the FBO in its U.S.

operations rather than its total capital.

As an alternative measure for U.S.

capital equivalency, the Board intends

to replace the use of ‘‘liabilities to

nonrelated parties’’ with ‘‘net due to

30208 Federal Register / Vol. 66, No. 108 / Tuesday, June 5, 2001 / Notices

15Reporting Form FFIEC 002/002S. Report of

Assets and Liabilities of U.S. Branches and

Agencies of Foreign Banks. Schedule RAL—Assets

and Liabilities: Liabilities: item 4—‘‘Liabilities to

nonrelated parties’’ and item 5—‘‘Net due to related

depository institutions.’’ 16SOSA 3-ranked FBOs would not be required to

file FR 2225 because they would not be eligible to

base their U.S. capital equivalency on capital. 17 In 1998, the Board surveyed FBOs that filed FR

2225 to estimate the burden to the public of

completing the form. As a result of the survey, the

Board estimated the annual burden of completing

FR 2225 to be one hour per FBO.

18These assessment procedures are described in

the Board’s policy statement entitled ‘‘The Federal

Reserve in the Payments System’’ (55 FR 11648,

March 29, 1990).

related depository institutions.’’ 15

‘‘Liabilities to nonrelated parties’’ may

increase relative to assets when an

institution becomes financially weaker

and could unduly increase the

institution’s overdraft capacity. ‘‘Net

due to related depository institutions’’

reflects the amounts owed to the parent

by the branch and can be viewed as the

capital investment by the FBO parent in

its U.S. operations. In addition, the

Board notes that this policy change

would not affect any SOSA 3-ranked

FBOs at this time.

C. Capital Reporting

In order to comply with the proposed

policy changes, most U.S. branches and

agencies of foreign banks requesting a

net debit cap will need to complete the

form ‘‘Annual Daylight Overdraft

Capital Report for U.S. Branches and

Agencies of Foreign Banks’’ (form FR

2225) to report capital that is used as the

basis for their caps.16 Given that the

form is short and does not require any

calculations, the Board believes the cost

of completing this form is not

significant or burdensome. Currently,

only five FBOs that have nonzero net

debit caps do not file form FR 2225.

These five FBOs would have to submit

form FR 2225 to comply with the

revised policy.17

IV. Request for Comment

The Board requests comments on all

aspects of the proposed policy changes

outlined above. The Board is also

requesting comments on the following

questions:

1. If the proposed policy changes are

adopted, will the resulting net debit cap

levels combined with the broader use of

collateral outlined in the interim policy

statement also published today for

comment (Docket No. R–1107) provide

a reasonable and prudent level of

daylight overdraft capacity to address

the liquidity needs of FBOs?

2. Recognizing differences in risk

between FBOs and domestic depository

institutions, would the proposed policy

provide FBOs appropriate access to the

U.S. payments system?

3. With regard to calculating U.S.

capital equivalency, is ‘‘net due to

related depository institutions’’ an

appropriate proxy for SOSA 3-ranked

FBOs’ U.S. capital equivalency?

V. Competitive Impact Analysis

Under its competitive equity policy,

the Board assesses the competitive

impact of changes that have a

substantial effect of payments system

participants.18 The Board believes these

modifications to its payments system

risk program will have no adverse effect

on the ability of other service providers

to compete effectively with the Federal

Reserve Banks in providing similar

services.

VI. Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. ch.

3506; 5 CFR 1320 appendix A.1), the

Board has reviewed the request for

comments under the authority delegated

to the Board by the Office of

Management and Budget. The collection

of information pursuant to the

Paperwork Reduction Act contained in

the policy statement will not unduly

burden depository institutions.

VII. Federal Reserve Policy Statement

on Payments System Risk

The Board proposes to replace section

I.C.2. of the ‘‘Federal Reserve Policy

Statement on Payments System Risk’’ as

follows:

2. U.S. Branches and Agencies of

Foreign Banks

For U.S. branches and agencies of

foreign banks, net debit caps on daylight

overdrafts in Federal Reserve accounts

are calculated by applying the cap

multiples for each cap category to a

foreign banking organization’s (FBO’s)

U.S. capital equivalency.10

• For FBOs that are financial holding

companies (FHCs), U.S. capital

equivalency is equal to 35 percent of

capital.

• For FBOs that are not FHCs and

have a strength of support assessment

ranking (SOSA) of 1, U.S. capital

equivalency is equal to 25 percent of

capital.

• For FBOs that are not FHCs and are

ranked a SOSA 2, U.S. capital

equivalency is equal to 10 percent of

capital.

• For FBOs that are not FHCs and are

ranked a SOSA 3, U.S. capital

equivalency is equal to 5 percent of the

FBO’s ‘‘net due to related depository

institutions.’’

Given the heightened supervisory

concerns associated with SOSA 3-

ranked FBOs, a Reserve Bank may deny

a SOSA 3-ranked FBO access to intraday

credit. In the event a Reserve Bank

grants a net debit cap to a SOSA 3-

ranked FBO, the Reserve Bank may

require the net debit cap to be fully

collateralized.

lll10 The term U.S. capital equivalency is

used in this context to refer to the particular

capital measure used to calculate daylight

overdraft net debit caps and does not

necessarily represent an appropriate capital

measure for supervisory or other purposes.

By order of the Board of Governors of the

Federal Reserve System, May 30, 2001.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 01–13979 Filed 6–4–01; 8:45 am]

BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM

[Docket No. R–1111]

Policy Statement on Payments System

Risk; Potential Longer-Term Policy

Direction

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Request for comment on policy.

SUMMARY: The Board is requesting

comment on the benefits and drawbacks

of various policy options that it is

evaluating as part of a potential longerterm direction for its payments system

risk (PSR) policy. The longer-term

policy options include the following: (1)

Lowering single-day net debit cap levels

to approximately the current two-week

average cap levels and eliminating the

two-week average net debit cap, (2)

implementing a two-tiered pricing

regime for daylight overdrafts such that

institutions pledging collateral to the

Reserve Banks pay a lower fee on their

collateralized daylight overdrafts than

on their uncollateralized daylight

overdrafts, and (3) monitoring in real

time all payments with settlement-day

finality and rejecting those payments

that would cause an institution to

exceed its net debit cap or daylight

overdraft capacity level.

EFFECTIVE DATE: Comments must be

received by October 1, 2001.

ADDRESSES: Comments, which should

refer to Docket No. R–1111, may be

mailed to Ms. Jennifer J. Johnson,

Secretary, Board of Governors of the

Federal Reserve System, 20th and C

Streets, NW., Washington, DC 20551 or

mailed electronically to

regs.comments@federalreserve.gov.