29776 Federal Register / Vol. 86, No. 105 / Thursday, June 3, 2021 / Notices 

1See https://www.federalreserve.gov/ 

paymentsystems/psr_about.htm. 

2 Depository institutions include commercial 

banks, savings banks, savings and loan associations, 

and credit unions. 

3See section II.D.1 of the PSR policy. 

4 Id. The size of an institution’s net debit cap 

equals the institution’s ‘‘capital measure’’ 

multiplied by its ‘‘cap multiple.’’ An institution’s 

capital measure is a number derived from the size 

of its capital base. An institution’s cap multiple is 

determined by the institution’s cap category. Under 

section II.D.2 of the PSR policy, an institution’s 

‘‘cap category’’ is one of six classifications: The 

three self-assessed categories (‘‘high,’’ ‘‘above 

average,’’ and ‘‘average’’); ‘‘de minimis;’’ ‘‘exemptfrom-filing;’’ and ‘‘zero.’’ 

5To assist institutions in implementing part II of 

the PSR policy, the Federal Reserve has prepared 

two documents: The Overview of the Federal 

Reserve’s Payment System Risk Policy on Intraday 

Credit (Overview) and the Guide to the Federal 

Reserve’s Payment System Risk Policy on Intraday 

Credit (Guide). The Guide contains detailed 

eligibility standards for requesting and maintaining 

uncollateralized capacity. 

6See 73 FR 79109 (December 24, 2008). These 

changes were not fully implemented until 2011. 

7See section II.B of the PSR policy. 

received at the Reserve Bank indicated 

or the offices of the Board of Governors, 

Ann E. Misback, Secretary of the Board, 

20th Street and Constitution Avenue 

NW, Washington DC 20551–0001, not 

later than July 6, 2021. 

A. Federal Reserve Bank of Richmond 

(Adam M. Drimer, Assistant Vice 

President) 701 East Byrd Street, 

Richmond, Virginia 23219. Comments 

can also be sent electronically to or 

Comments.applications@rich.frb.org: 

1. Shore Bancshares, Inc., Easton, 

Maryland; to acquire Severn Bancorp, 

Inc., and thereby indirectly acquire 

Severn Savings Bank, FSB, both of 

Annapolis, Maryland, and thereby 

engage in operating a savings 

association pursuant to section 

225.28(b)(4)(ii) of Regulation Y. 

Board of Governors of the Federal Reserve 

System, May 28, 2021. 

Michele Taylor Fennell, 

Deputy Associate Secretary of the Board. 

[FR Doc. 2021–11685 Filed 6–2–21; 8:45 am] 

BILLING CODE P 

FEDERAL RESERVE SYSTEM 

[Docket No. OP–1749] 

Potential Modifications to the Federal 

Reserve Policy on Payment System 

Risk To Expand Access to 

Collateralized Intraday Credit, Clarify 

Access to Uncollateralized Credit, and 

Support the Deployment of the 

FedNow Service 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Notice; request for comment. 

SUMMARY: The Board of Governors of the 

Federal Reserve System (Board) is 

requesting comment on proposed 

changes to part II of the Federal Reserve 

Policy on Payment System Risk (PSR 

policy) that would expand access to 

collateralized intraday credit from the 

Federal Reserve Banks (Reserve Banks) 

and clarify the eligibility standards for 

accessing uncollateralized intraday 

credit from Reserve Banks. These 

proposed changes build upon the 

revisions to the PSR policy adopted in 

2008 and implemented in 2011, which 

the Board designed to improve intraday 

liquidity management and payment 

flows for the banking system while 

helping to mitigate the credit exposures 

of the Reserve Banks from daylight 

overdrafts. In addition, the Board is 

requesting comment on changes to part 

II of the PSR policy to support the 

deployment of the FedNowSM Service 

(FedNow Service). Relatedly, the Board 

is proposing to incorporate the Federal 

Reserve Policy on Overnight Overdrafts 

(Overnight Overdrafts policy) into the 

PSR policy. 

DATES: Comments on the proposed 

changes must be received on or before 

August 2, 2021. 

ADDRESSES: You may submit comments, 

identified by Docket No. OP–1749, by 

any of the following methods: 

• Agency Website: http://

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Email: regs.comments@

federalreserve.gov. Include docket 

number in the subject line of the 

message. 

• Fax: (202) 452–3819 or (202) 452– 

3102. 

• Mail: Ann E. Misback, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue NW, Washington, 

DC 20551. 

All public comments are available 

from the Board’s website at 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons or 

to remove personally identifiable 

information at the commenter’s request. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room 146, 1709 New 

York Avenue NW, Washington, DC 

20006, between 9:00 a.m. and 5:00 p.m. 

on weekdays. Please make an 

appointment to inspect comments by 

calling (202) 452–3684. 

FOR FURTHER INFORMATION CONTACT: 

Jason Hinkle, Assistant Director (202– 

912–7805), Michelle Olivier, Lead 

Financial Institution Policy Analyst 

(202–452–2404), Brajan Kola, Senior 

Financial Institution Policy Analyst 

(202–736–5683) Division of Reserve 

Bank Operations and Payment Systems, 

or Evan Winerman, Senior Counsel 

(202–872–7578), Legal Division, Board 

of Governors of the Federal Reserve 

System. For users of 

Telecommunications Device for the Deaf 

(TDD) only, please contact 202–263– 

4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Intraday Credit in the PSR Policy 

The PSR policy is intended to foster 

the safety and efficiency of payment and 

settlement systems.1 Part II of the PSR 

policy governs the provision of intraday 

credit (also known as daylight 

overdrafts) to depository institutions 2

(institutions) with accounts at the 

Reserve Banks. In particular, part II of 

the PSR policy outlines the methods 

used to provide intraday credit to 

ensure the smooth functioning of 

payment and settlement systems, while 

controlling credit risk to the Reserve 

Banks associated with intraday credit. 

To be eligible for intraday credit, the 

PSR policy requires that an institution 

be ‘‘financially healthy’’ and have 

regular access to the discount window.3

The PSR policy also establishes limits, 

or ‘‘net debit caps,’’ on the value of an 

institution’s daylight overdrafts.4 The 

Reserve Banks use an ex post system to 

measure daylight overdrafts in 

institutions’ Federal Reserve accounts. 

An institution’s eligibility for intraday 

credit depends on various factors 

including the institution’s most recent 

financial and supervisory information. 

An institution’s supervisory rating, as 

well as the ratings of its holding 

company and affiliate institutions, are 

key components of the process for 

determining an institution’s eligibility 

for intraday credit.5

In 2008, the Board approved changes 

to part II of the PSR policy to encourage 

greater collateralization of daylight 

overdrafts, recognizing that collateral 

reduces credit risk to Reserve Banks.6 In 

particular, the 2008 changes amended 

the PSR policy to state that ‘‘the Reserve 

Banks supply intraday balances and 

credit predominantly through explicitly 

collateralized daylight overdrafts to 

healthy institutions.’’ 7 In addition, the 

Board included explicit language that 

emphasized the role of the Reserve 

Banks in providing intraday credit to 

institutions in order to ensure the 


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Federal Register / Vol. 86, No. 105 / Thursday, June 3, 2021 / Notices 29777 

8See section II.C of the PSR policy. Collateral 

eligibility and margins are the same for PSR policy 

purposes as for the discount window. See http://

www.frbdiscountwindow.org/ for information on the 

discount window and PSR collateral acceptance 

policy and collateral margins. 

9Section II.E of the PSR policy notes that max 

caps are ‘‘intended to provide extra liquidity 

through the pledge of collateral by the few 

institutions that might otherwise be constrained 

from participating in risk-reducing payment system 

initiatives.’’ 

10See section II.E of the PSR policy. When the 

Board initially adopted the max cap program in 

2001, it recognized that collateral helps reduce risk 

to Reserve Banks and the public sector. See 66 FR 

64419, 64423 (December 13, 2001) (‘‘The Board 

believes that requiring collateral allows the Federal 

Reserve to protect the public sector from additional 

credit risk while providing extra liquidity to the few 

institutions that might otherwise be constrained.’’). 

11Section II.E.2 of the PSR policy allows U.S. 

branches or agencies of foreign banking 

organizations (FBOs) to use a streamlined 

procedure for requesting a max cap. An FBO that 

uses the streamlined procedure is not required to 

provide a business case for a max cap, nor is it 

required to obtain a board of directors resolution 

authorizing a max cap, so long as (a) the FBO has 

an FBO PSR capital category of ‘‘highly 

capitalized,’’ and (b) the requested total capacity is 

100 percent or less of the FBO’s worldwide capital 

times the self-assessed cap multiple. See section 

II.D.2 and n. 63 of the PSR policy for a discussion 

of FBO PSR capital categories. 

12See section II.D.a of the PSR policy and n. 4, 

supra, which discuss cap categories. The high, 

above average, and average cap categories require a 

self-assessment. 

13See ‘‘Service Details on Federal Reserve 

Actions to Support Interbank Settlement of Instant 

Payments,’’ 85 FR 48522 (August 11, 2020), 

available at https://www.federalregister.gov/ 

documents/2020/08/11/2020-17539/service-detailson-federal-reserve-actions-to-support-interbanksettlement-of-instant-payments. The FedNow 

Service will be available to customers in 2023 and 

further details on the timeframe for launch will be 

announced through established Reserve Bank 

channels once additional work is completed. See 

also ‘‘Federal Reserve updates FedNowSM Service 

launch to 2023,’’ (February 2, 2021), available at 

https://frbservices.org/news/press-releases/020221- 

federal-reserve-updates-fednow-service-launch-to2023.html. 

14The term ‘‘FedNow Service participants’’ 

encompasses those participating institutions that 

use the FedNow Service to send instant payments 

involving end users as well as institutions that may 

only use the FedNow LMT (described below) to 

make funds transfers for liquidity management 

purposes to other FedNow Service participants. The 

term ‘‘end users’’ encompasses individuals and 

businesses. 

15The Fedwire Funds Service closes at 7:00:59 

p.m. ET and re-opens for the next business day at 

9:00 p.m. See 84 FR 71940 (December 30, 2019) and 

85 FR 61747 (September 30, 2020). The schedule for 

funds transfers through Fedwire Funds is provided 

in the Reserve Banks’ Operating Circular 6. 

16 85 FR 48522, 48531. Both the Fedwire Funds 

and the FedNow Services will close at 7:00:59 p.m. 

ET. On weekends and holidays, when the Fedwire 

Funds Service is closed, the FedNow Service close 

will still align with this closing time. 

17The Board expects that participating 

institutions will record FedNow Service 

transactions in their customer accounts according to 

their own business day and accounting conventions 

(while still providing immediate access to funds 

received through the FedNow Service). 

efficient and effective functioning of the 

payment system. The Board also 

adopted a dual-pricing framework 

intended to provide a financial 

incentive to institutions to collateralize 

their daylight overdrafts. Under the 

dual-pricing framework, Reserve Banks 

charge no fee for collateralized daylight 

overdrafts, but charge a fee of 50 basis 

points for uncollateralized daylight 

overdrafts.8

In addition to incentivizing 

institutions to collateralize their 

daylight overdrafts, the PSR policy 

allows institutions that might otherwise 

be constrained by their uncollateralized 

net debit caps to request collateralized 

capacity under the ‘‘maximum daylight 

overdraft capacity’’ (max cap) program.9

Under the program, an institution’s max 

cap equals its uncollateralized net debit 

cap plus its additional collateralized 

capacity.10

Although the PSR policy’s dualpricing framework encourages 

institutions to collateralize their 

daylight overdrafts, collateralized 

capacity under the max cap program is 

not currently an option for institutions 

with lower levels of intraday capacity. 

Institutions that select the ‘‘exempt’’ or 

‘‘de minimis’’ net debit cap categories 

(which do not require a self-assessment) 

are ineligible to request collateralized 

capacity under the max cap program. 

Likewise, institutions with a voluntary 

zero net debit cap, and institutions that 

the Reserve Banks have assigned a zero 

net debit cap because of their account 

management or financial condition, 

cannot request collateralized capacity 

under the max cap program. 

Further, obtaining collateralized 

capacity under the max cap program 

requires certain administrative steps 

from and analysis by requesting 

institutions. First, institutions must 

provide a business case outlining their 

need for collateralized capacity, and 

must submit a board of directors 

resolution approving the collateralized 

capacity at least annually and whenever 

the institution modifies the amount of 

requested collateralized capacity.11

Second, the max cap program is limited 

to institutions that have already adopted 

a self-assessed net debit cap, which 

requires an institution to perform a selfassessment of its creditworthiness, 

intraday funds management and control, 

customer credit policies and controls, 

and operating controls and contingency 

procedures.12

In proposing the changes discussed 

below, the Board recognizes that the 

extension of intraday credit to 

institutions on a collateralized basis 

generally poses less risk to the Reserve 

Banks and the payment system than the 

extension of intraday credit on an 

uncollateralized basis. As such, the 

removal of some restrictions on access 

to collateralized intraday credit could 

improve the effectiveness of Reserve 

Bank intraday credit as a liquidity tool 

without a significant increase in credit 

risk to the Reserve Banks and the 

payment system. 

B. FedNow Service and the PSR Policy 

In 2020, the Board approved the 

FedNow Service, a new 24x7x365 realtime gross settlement service with 

clearing functionality to support end-toend instant retail payments in the 

United States.13 The FedNow Service 

will settle funds transfers between 

FedNow Service participants 14 through 

debit and credit entries to balances in 

master accounts held at the Reserve 

Banks. The new service will provide an 

infrastructure to promote ubiquitous, 

safe, and efficient instant retail 

payments in the United States. The 

FedNow Service will enable credit 

transfers that support a range of 

different types of payments for 

individuals and businesses, and will 

support the transfer of supplemental 

information, such as invoices, related to 

a payment. 

The PSR policy currently aligns the 

calculation of daylight overdrafts and 

the ‘‘business day’’ with the scheduled 

operating day for the Fedwire Funds 

Service.15 The FedNow Service will 

have a 24-hour business day, each day 

of the week, including weekends and 

holidays. The close of the FedNow 

Service will align on all calendar days 

with the close of the Fedwire Funds 

Service.16 If the close of the Fedwire 

Funds Service is extended on any given 

day, the close of the FedNow Service 

will also be extended to maintain 

alignment. Given the continuous, 24- 

hour nature of the FedNow Service, the 

opening time will occur immediately 

after the close of the FedNow Service. 

In addition, the Reserve Banks will 

implement a seven-day accounting 

regime as part of implementing the 

FedNow Service. Under this framework, 

an end-of-day balance will be calculated 

for each day of the week, with 

transactions occurring on weekends and 

holidays recorded and reported in the 

same way as transactions occurring 

Monday through Friday.17 End-of-day 

balances will be reported on Federal 

Reserve accounting records for each 

FedNow Service participant on each 

business day. 

Access to intraday credit will be 

available on a 24x7x365 basis to 

FedNow Service participants, including 

those that use the FedNow Service to 

send instant payments involving end 


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18 85 FR 48522, 48531–32. The FedNow LMT will 

enable participants in the FedNow Service to 

transfer funds between one another to support 

liquidity needs related to payment activity in the 

FedNow Service. The tool will also be available to 

support participants in private-sector instant 

payment services backed by joint accounts at a 

Reserve Bank by enabling transfers between the 

master accounts of such participants and their joint 

account. The FedNow LMT will be available during 

specific hours, for example, when such transfers are 

not currently possible through other Reserve Bank 

services. Controls related to the FedNow LMT, 

service terms, eligibility requirements, enrollment 

processes, and hours of availability will be 

announced prior to the launch of the FedNow 

Service through established Reserve Bank 

communication channels. 

19See Board of Governors of the Federal Reserve 

System, ‘‘Policy on Overnight Overdrafts,’’ 

(Effective July 12, 2012). Available at https://

www.federalreserve.gov/paymentsystems/oo_

policy.htm. The overnight overdraft penalty rate is 

equal to the primary credit rate plus 4 percentage 

points (annual rate). There is also a minimum 

penalty fee of 100 dollars per occasion, regardless 

of the amount of the overnight overdraft. 

20See ‘‘Federal Reserve announces FedNowSM

Pilot Program Participants,’’ (January 24, 2021), 

available at https://www.frbservices.org/news/pressreleases/012521-federal-reserve-announces-fednowpilot-program-participants.html. 

21Reserve Banks would require that an institution 

remain financially healthy and be eligible for 

regular access to the discount window to qualify for 

a max cap. 

22 12 U.S.C. 1831o. 

23See section II.D.2 of the PSR policy. 

24 Domestic institutions with a PCA designation 

of ‘‘significantly undercapitalized’’ or ‘‘critically 

undercapitalized’’ would not be eligible to request 

collateralized intraday credit under the max cap 

program. Similarly, FBOs with an FBO PSR capital 

category of ‘‘intraday credit ineligible’’ would not 

be eligible to request collateralized intraday credit 

under the max cap program. 

25Section II.B, infra, describes proposed changes 

to the Board’s standards for requesting and 

maintaining uncollateralized capacity. 

users or that use a liquidity management 

tool within the service (FedNow LMT) 

to make funds transfers to other 

FedNow Service participants.18 Access 

to 24x7x365 intraday credit will support 

the smooth functioning of the FedNow 

Service (including FedNow LMT). 

C. Overnight Overdrafts Policy 

Intraday overdrafts occur when an 

institution has a negative balance in its 

Federal Reserve account during the 

Fedwire Funds Service operating day. 

Overnight overdrafts occur when an 

institution has a negative account 

balance at the end of the Fedwire Funds 

Service operating day. While the PSR 

policy addresses daylight overdrafts, the 

Overnight Overdrafts policy addresses 

overnight overdrafts. 

To minimize Reserve Bank exposure 

to overnight overdrafts, the Overnight 

Overdrafts policy imposes a penalty fee 

to discourage institutions from incurring 

overnight overdrafts.19 If an institution 

has a negative balance at the end of the 

business day, Reserve Banks apply an 

overnight overdraft penalty for a 24- 

hour period. Currently, the penalty fee 

includes a multiday charge for overnight 

overdrafts over weekends and holidays. 

The penalty fee increases by one 

percentage point for each overnight 

overdraft after an institution’s third 

overnight overdraft in a rolling 12- 

month period. 

II. Discussion of Proposed Changes 

The Board is proposing to modify the 

PSR policy to expand access to 

collateralized capacity and reduce the 

administrative steps associated with 

requesting collateralized capacity. With 

these proposed changes, the Board 

intends to improve intraday liquidity 

management and payment flows while 

assisting the Reserve Banks in managing 

intraday credit risk. The proposed 

changes also seek to clarify the terms for 

accessing uncollateralized intraday 

credit and the circumstances under 

which an institution may remain 

eligible for uncollateralized capacity if 

its holding company or affiliate is 

assigned a low supervisory rating. 

Additionally, the Board is proposing 

changes to the PSR policy and the 

Overnight Overdrafts policy to align 

these policies with the deployment of 

the FedNow Service and a 24x7x365 

payment environment. Relatedly, the 

Board is proposing to incorporate the 

Overnight Overdrafts policy as part III of 

the PSR policy in order to reflect the 

close relationship between daylight 

overdrafts and overnight overdrafts in 

an institution’s account. 

The Board is also proposing several 

technical changes and corrections to the 

PSR policy. These changes are not 

substantive in nature and reflect current 

practices that the Reserve Banks use to 

administer the PSR policy. 

While the Board is collectively 

requesting comment on the proposed 

changes discussed below, the proposed 

changes may become effective at 

different times. The Board intends for 

the FedNow Service-related changes to 

the PSR policy and the Overnight 

Overdrafts policy to come into effect 

when the Reserve Banks begin 

processing transactions associated with 

the FedNow Pilot Program.20

A. Access to Collateralized Capacity 

As noted above, while the PSR policy 

incentivizes collateralization of daylight 

overdrafts, an institution requesting 

collateralized capacity above its net 

debit cap must provide a business case 

outlining its need and must submit an 

annual board of directors resolution 

approving its collateralized capacity. 

Additionally, collateralized capacity 

under the max cap program is available 

only to institutions that have first 

completed a self-assessment. The Board 

is proposing amendments to the PSR 

policy that would expand access to 

collateralized capacity and reduce the 

administrative steps associated with 

requesting collateralized capacity. 

1. Expanding Access To Collateralized 

Capacity 

The Board proposes to amend section 

II.E of the PSR policy to expand the pool 

of institutions eligible to request 

collateralized capacity. Specifically, 

while the max cap program is currently 

limited to institutions with self-assessed 

net debit caps,21 the Board is proposing 

to expand the max cap program by 

allowing institutions with a cap 

category of ‘‘zero,’’ ‘‘exempt,’’ or ‘‘de 

minimis’’ to request collateralized 

capacity from their Reserve Banks. A 

domestic institution would be eligible to 

request collateralized capacity if its 

Prompt Corrective Action (PCA) 

designation 22 is ‘‘undercapitalized,’’ 

‘‘adequately capitalized,’’ or ‘‘well 

capitalized.’’ Similarly, a U.S. branch or 

agency of a foreign banking organization 

(FBO) would be eligible to request 

collateralized capacity if its FBO PSR 

capital category 23 is 

‘‘undercapitalized,’’ ‘‘sufficiently 

capitalized,’’ or ‘‘highly capitalized.’’ 

So long as an institution remains at 

least ‘‘undercapitalized,’’ the institution 

would remain eligible to request 

collateralized intraday credit under the 

max cap program—even if the 

institution, the holding company, or an 

affiliate has a ‘‘fair,’’ ’’marginal,’’ or 

‘‘unsatisfactory’’ supervisory rating.24

Given the important role that collateral 

plays in reducing credit risk to Reserve 

Banks, the Board believes that the 

eligibility criteria for requesting 

collateralized capacity should be less 

restrictive than the criteria for accessing 

uncollateralized capacity. As a result, 

some institutions that are not eligible to 

establish a positive net debit cap would 

be eligible for collateralized capacity.25

The Board believes that these proposed 

changes would provide institutions 

greater flexibility in managing intraday 

credit, would assist institutions with 

liquidity and risk-management 

planning, and would not materially 

increase credit risk to Reserve Banks. 

2. Reducing Administrative Steps 

The Board is proposing to simplify 

the process for requesting and 

maintaining collateralized capacity 

under the max cap program. Under the 

current general procedure for requesting 

a max cap, an institution requesting 

collateralized capacity must provide a 


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26See n. 4, supra, for a discussion of cap 

categories and cap multiples. 

27See n. 74 of the PSR policy. 

28See section II.D.1 of the PSR policy. Institutions 

that may pose special risks to the Federal Reserve, 

such as those that are not eligible for regular access 

to the discount window, those incurring daylight 

overdrafts in violation of the Federal Reserve’s PSR 

policy, or those in weak financial condition, are 

generally assigned a zero cap. 

29See section II.D.2 of the PSR policy. Reserve 

Banks use information primarily from the Capital 

and Asset Report for Foreign Banking Organizations 

(FR Y–7Q) in order to determine an institution’s 

FBO PSR capital category. U.S. branches and 

agencies of FBOs based in jurisdictions that have 

not implemented capital standards substantially 

consistent with those established by the Basel 

Committee on Banking Supervision would be 

eligible to request any of the net debit cap 

categories, but the Reserve Banks would require 

that such institutions perform a full assessment of 

creditworthiness if the FBO requests a self-assessed 

or de minimis net debit cap. Reserve Banks may 

require a full assessment of creditworthiness if such 

FBOs are requesting an exempt-from-filing cap. 

business case outlining its need for 

collateralized capacity and must submit 

an annual board of directors resolution 

approving its collateralized capacity. 

The Board believes that simplifying this 

process would encourage more 

institutions to obtain collateralized 

capacity, which could promote further 

collateralization of daylight overdrafts. 

The Board is proposing to eliminate, 

in most circumstances, the requirement 

that institutions provide a written 

business case to their Reserve Banks 

when requesting collateralized capacity 

under the max cap program. 

Specifically, the Board proposes that an 

institution would need to provide a 

written business case only if (1) the 

institution’s requested max cap exceeds 

the institution’s capital measure 

multiplied by 2.25, which is the cap 

multiple associated with the ‘‘High’’ 

self-assessed cap category,26 or (2) the 

Reserve Bank exercises discretion to 

require that the institution submit a 

business case due to recent 

developments in the institution’s 

condition. 

The Board is also proposing to 

eliminate the requirement that an 

institution’s board of directors submit 

an annual resolution approving requests 

for collateralized capacity. Instead, the 

Board proposes that an institution’s 

board of directors would need to 

provide a resolution only when the 

institution initially requests 

collateralized capacity. Once a Reserve 

Bank has approved an institution’s 

collateralized capacity, the 

collateralized capacity would generally 

remain in place, without the need for 

further action by the institution, so long 

as the institution remains at least 

‘‘undercapitalized.’’ An institution 

would need to submit a resolution from 

its board of directors if the institution 

requests an increase to its previously 

approved collateralized capacity. 

An institution’s collateralized 

capacity, on any given day, will 

continue to equal the value of collateral 

the institution has pledged to the 

Reserve Bank, not to exceed the 

difference between the institution’s max 

cap and its net debit cap.27 An 

institution seeking to increase its max 

cap by pledging additional collateral to 

its Reserve Bank must request and 

receive approval from its Reserve Bank. 

The Board is not proposing any other 

changes to the process for obtaining 

collateralized capacity under the max 

cap program. 

B. Clarifying Access To Uncollateralized 

Capacity 

The Board is proposing to amend 

section II.D of the PSR policy to clarify 

the terms under which institutions 

would be eligible to maintain access to 

their uncollateralized intraday credit 

capacity. Currently, the PSR policy does 

not detail when an institution can 

request and maintain uncollateralized 

capacity; it states only that ‘‘[a]n 

institution must be financially healthy 

and have regular access to the discount 

window in order to adopt a net debit 

cap greater than zero.’’ 28 Separately, 

however, the Board’s Guide to the PSR 

policy establishes more detailed 

eligibility standards for requesting and 

maintaining uncollateralized capacity. 

The Board is proposing to simplify these 

eligibility standards and incorporate 

them directly into the PSR policy. 

The Board proposes to clarify in the 

PSR policy that an institution’s 

eligibility to adopt and maintain a 

positive net debit cap depends on an 

assessment of its creditworthiness, 

which results from the institution’s (1) 

PCA designation or FBO PSR capital 

category,29 and (2) most recent 

supervisory ratings. Specifically, the 

Board would incorporate into the PSR 

policy the following table to clarify 

when institutions can request a positive 

net debit cap. 

ELIGIBILITY CRITERIA FOR REQUESTING A POSITIVE NET DEBIT CAP

Domestic capital category/ FBO PSR capital 

category 

Supervisory rating 63

Strong Satisfactory Fair Marginal or 

unsatisfactory 

Well capitalized/Highly capitalized ................. Eligible ....................... Eligible ....................... Eligible ....................... Ineligible (Zero net 

debit cap). 

Adequately capitalized/Sufficiently capitalized Eligible ....................... Eligible ....................... Eligible ....................... Ineligible (Zero net 

debit cap). 

Undercapitalized ............................................. May be eligible subject to a full assessment of creditworthiness.May be eligible subject to a full assessment of creditworthiness.Ineligible (Zero net 

debit cap).

Ineligible (Zero net 

debit cap). 

Significantly or critically undercapitalized/ 

Intraday credit ineligible.

Ineligible (Zero net 

debit cap).

Ineligible (Zero net 

debit cap).

Ineligible (Zero net 

debit cap).

Ineligible (Zero net 

debit cap). 

As noted in the eligibility criteria, an 

institution requesting a ‘‘high,’’ ‘‘above 

average,’’ or ‘‘average’’ net debit cap, 

must perform a self-assessment of its 

creditworthiness, intraday funds 

management and control, customer 

credit policies and controls, and 

operating controls and contingency 

procedures. The Board proposes to 

clarify in the PSR policy that, if an 

institution seeks a self-assessed net 

debit cap, it would be ineligible for a 

positive net debit cap if its selfassessment results in the lowest 

possible rating for any one of the four 

components of the self-assessment in 

the Guide. 

The Board is also proposing revisions 

to the PSR policy that would clarify the 

impact of an institution’s holding 

company’s or affiliate’s supervisory 


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30For this purpose, a low supervisory rating for 

a holding company would include a Deficient-2 

rating in any of the components of the Large 

Financial Institution (LFI) rating system or an RFI 

rating of 4 or 5. A low supervisory rating for an 

affiliate institution would be defined as a CAMELS 

rating of 4 or 5. 

31See 85 FR 48522, 48531–32. Intraday credit on 

a 24x7x365 basis will also be available to support 

participants in a private-sector instant payment 

service backed by a joint account at a Reserve Bank 

by enabling transfers between the master accounts 

of those participants and the joint account. 

32The business day will align on all calendar 

days with the regularly scheduled close of the 

Fedwire Funds and the FedNow Service at 7:00:59 

p.m. ET. On weekends and holidays, when the 

Fedwire Funds Service is closed, the end of the 

business day would align with the close of the 

FedNow Service and the regularly scheduled close 

time of the FedNow Service. The next business day 

would begin at 7:01:00 p.m. ET. 

33The Fedwire operating day is currently 22 

hours, the effective annual rate is (22/24) multiplied 

by 50 basis points, or approximately 0.004583, and 

the effective daily daylight-overdraft rate based on 

a 360-day year is (0.004583/360), or 0.0000127. 

34Under a 24-hour business day, the effective 

annual daylight-overdraft rate would be (24/24) 

multiplied by 50 basis points, or 0.0050, and the 

effective daily daylight-overdraft rate on a 360-day 

year would be (.0050/360), or 0.0000138. 

35Certain institutions are subject to a daylightoverdraft penalty fee levied against the average 

daily daylight overdraft incurred by the institution. 

These include Edge and agreement corporations, 

bankers’ banks that are not subject to reserve 

requirements, and limited-purpose trust companies. 

36Under a 22-hour business day, the effective 

annual daylight-overdraft penalty rate is (22/24) 

multiplied by 150 basis points, or 0.002778, and the 

effective daily daylight-overdraft penalty rate on a 

360-day year is (.002778/360), or truncated to 

0.0000381. Under a 24-hour business day, the 

effective annual daylight-overdraft penalty rate will 

be (24/24) multiplied by 150 basis points, or 0.0150, 

and the effective daily daylight-overdraft penalty 

rate on a 360-day year would be (0.0150/360), or 

0.0000416. 

rating on the institution’s eligibility for 

a positive net debit cap. Currently, an 

institution can lose its net debit cap if 

its holding company or affiliate receives 

a low (marginal or unsatisfactory) 

supervisory rating. The Board proposes 

that, if an institution’s holding company 

or affiliate is assigned a low supervisory 

rating,30 the institution would be 

eligible to request the exempt, de 

minimis, or average cap categories but 

would not be eligible to request the 

above average or the high self-assessed 

cap categories. Additionally, Reserve 

Banks will assign an institution a zero 

net debit cap if supervisory information 

of the holding company or affiliated 

institutions reveals material operating or 

financial weaknesses that pose 

significant risks to an institution. 

The Board believes that the proposed 

change would provide greater certainty 

to institutions and would allow the 

Reserve Banks to tailor intraday credit 

access in response to supervisory 

developments. 

C. Changes To Support the Deployment 

of the FedNow Service 

The Board is proposing changes to the 

PSR policy and the Overnight 

Overdrafts policy to align these policies 

with the deployment of the FedNow 

Service. The proposed changes would 

modify the PSR policy to address 

changes associated with a 24x7x365 

payment environment. Currently, 

intraday credit is available only during 

the Fedwire Funds Service operating 

day. The Board recognizes that access to 

24x7x365 intraday credit would support 

the smooth functioning of the FedNow 

Service. Accordingly, the Reserve Banks 

will offer intraday credit on a 24x7x365 

basis to all FedNow Service 

participants, including those that use 

the FedNow Service to send instant 

payments between end users and users 

of the FedNow LMT.31 The Reserve 

Banks will assess daylight overdraft fees 

on FedNow Service participants seven 

days a week, including weekends and 

holidays. Institutions that settle the 

FedNow activity of respondents in their 

master accounts as correspondent banks 

will be assessed daylight overdraft fees, 

and therefore will need to manage their 

account balances to cover respondents’ 

FedNow activity, even if those 

correspondents do not directly use the 

FedNow Service. 

Reserve Banks expect that FedNow 

Service participants will manage their 

master accounts in compliance with 

Federal Reserve policies. As described 

further below, FedNow Service 

participants will need to avoid negative 

balances at the close of the business 

day. Negative balances not cured by the 

end of the business day result in 

overnight overdrafts. 

1. Definition of ‘‘Business Day’’ 

The Board is proposing to revise 

section II.A of the PSR policy to define 

the ‘‘business day’’ as the 24-hour 

duration beginning immediately after 

the previous day’s regularly-scheduled 

close of the Fedwire Funds Service and 

the FedNow Service, and ending with 

the regularly-scheduled close of the 

Fedwire Funds Service and the FedNow 

Service.32 The next business day would 

begin immediately after the scheduled 

close of the Fedwire Funds Service and 

the FedNow Service. 

Given the continuous, 24-hour nature 

of the FedNow Service, the opening of 

the FedNow Service will occur 

immediately after close. Because 

FedNow Service participants will have 

access to intraday credit on a 24-hour 

basis, the Board believes that daylight 

overdrafts should be based on a 24-hour 

business day for all institutions. 

2. Daylight Overdraft and Penalty Fee 

Calculations 

The Board is proposing to revise the 

daylight overdraft and the penalty fee 

calculations for all institutions in order 

to reflect the 24-hour business day. 

Currently, the daylight overdraft fee is 

calculated using an annual rate of 50 

basis points that is prorated to the 

scheduled duration of the Fedwire 

Funds operating day.33 The Board is 

proposing to change section II.C of the 

PSR policy so that the daylight overdraft 

fee would be based on the 24-hour 

business day. Due to this proposed 

change, the effective annual overdraft 

rate would continue to be 50 basis 

points, but the effective daily daylightoverdraft rate would increase from 

0.0000127 under the 22-hour business 

day to 0.0000138 under the 24-hour 

business day.34

Similarly, the Board is proposing to 

adjust the penalty rate for overdrafts 

under section II.F of the PSR policy to 

reflect the 24-hour business day.35 The 

annual rate used to determine the 

daylight-overdraft penalty fee is 

currently equal to the annual rate 

applicable to the daylight overdrafts of 

other institutions (50 basis points) plus 

100 basis points, prorated to the length 

of the scheduled Fedwire Funds 

operating day. The 150-basis point 

penalty rate applied to the 24-hour 

business day would increase the 

effective daily penalty rate slightly, from 

0.0000381 under a 22-hour business day 

to 0.0000416 under the 24-hour 

business day.36

An institution’s daily daylight 

overdraft charge (or penalty charge) 

equals the effective daily rate multiplied 

by the institution’s average daily 

uncollateralized daylight overdraft, 

which is calculated by dividing the sum 

of its negative uncollateralized Federal 

Reserve account balance at the end of 

each minute by the total number of 

minutes in the relevant business day. 

Currently, the relevant business day for 

this purpose is the Fedwire Funds 

operating day (1320 minutes under the 

22-hour operating day). Under the 

proposal, the total number of minutes in 

the relevant business day will increase 

to 1440 to reflect the 24-hour business 

day. The increase in the length of the 

relevant business day from 22 hours to 

24 hours will offset in part the increase 

to the effective daily rate. After 

accounting for changes to the fee rates 

and the average uncollateralized 

daylight overdraft calculation, the Board 

estimates that gross fees before 

application of fee waivers would 

increase by less than 0.4 percent with 


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37Analysis assumes that the size and duration of 

institutions’ daylight overdrafts remains unchanged 

between a 22-hour and 24-hour operating day. 

Institutions’ gross daily daylight overdraft fees are 

summed across a two-week reserve maintenance 

period and then reduced by a fee waiver of $150, 

which is primarily intended to minimize the 

burden of the PSR policy on institutions that use 

small amounts of intraday credit. 

38Currently, there are various transactions that 

post after the close of Fedwire Funds, including 

currency and coin shipments; noncash collection; 

term-deposit settlements; Federal Reserve Bank 

checks presented after 3:00 p.m. eastern time but 

before 3:00 p.m. local time; foreign check 

transactions; small-dollar credit corrections and 

adjustments; term deposit settlements; and all debit 

corrections and adjustments. 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. 

39The Reserve Banks will continue to use an ex 

post system to measure daylight overdrafts in 

institutions’ Federal Reserve accounts. As an 

example, if the close of the Fedwire Funds Service 

and the FedNow Service is extended from the 

regularly scheduled close of 7:00:59 p.m. ET to 

7:30:59 p.m. ET, a transaction occurring at 7:10 p.m. 

ET, would post at 7:00 p.m. ET for purposes of 

measuring daylight overdrafts. 

the move from a 22-hour business day 

to a 24-hour business day.37

3. New Posting Rule for FedNow Funds 

Transfers 

The Board is proposing to add a new 

posting rule in section II.A of the PSR 

policy to clarify that, for purposes of 

measuring daylight overdrafts, debits 

and credits to an institution’s master 

account for funds transfers over the 

FedNow Service, including FedNow 

LMT transfers, would post to an 

institution’s account balance as they are 

processed throughout the 24-hour 

business day. In this way, debits and 

credits to an institution’s master 

account related to transfers over the 

FedNow Service would be treated 

equivalently to debits and credits 

related to transfers over the Fedwire 

Funds Service, Fedwire Securities 

Service, and the National Settlement 

Service. 

4. Posting Certain Transactions at the 

Regularly Scheduled Close of the 

Business Day 

Currently, section II.A of the PSR 

policy identifies several transaction 

types that are processed earlier in the 

day but ‘‘[p]ost after the close of 

Fedwire Funds Service.’’ 38 The Board is 

proposing to revise this posting rule so 

that these specific transactions would 

post at the regularly scheduled close of 

the Fedwire Funds Service and the 

FedNow Service before the next 

business day begins. Posting these 

transactions at the regularly scheduled 

close of the Fedwire Funds Service and 

the FedNow Service would ensure that 

an institution’s account balance is 

updated before the next business day 

begins (immediately after the regularly 

scheduled close of the Fedwire Funds 

Service and the FedNow Service). 

The Board is also proposing to clarify 

that Fedwire Funds Service and 

FedNow Service transactions occurring 

during extensions of the Fedwire Funds 

Service and the FedNow Service would 

be backdated so that they post at the 

regularly scheduled close of the Fedwire 

Funds and the FedNow Service and not 

at the end of the extended hours. As a 

result, a funds transfer occurring during 

an extension of the Fedwire Funds 

Service and the FedNow Service would 

post to an institution’s account before 

the next regularly scheduled business 

day begins.39 This practice would 

ensure that Reserve Banks monitor 

daylight overdrafts based on a 

consistent 24-hour business day even on 

days when the Fedwire Funds and the 

FedNow Service are extended. 

5. Changes to the Policy on Overnight 

Overdrafts 

The Board is proposing to incorporate 

the Overnight Overdrafts policy as part 

III of the PSR policy. The Board believes 

that incorporating the Overnight 

Overdrafts policy into the PSR policy 

would underscore the close relationship 

between daylight overdrafts and 

overnight overdrafts. 

The Board is also proposing 

modifications to simplify the Overnight 

Overdrafts policy and align the 

Overnight Overdrafts policy with the 

deployment of the FedNow Service. The 

Board is proposing that all institutions 

would continue to be charged an 

overnight overdraft penalty fee rate 

equal to the primary credit rate plus 4 

percentage points (annual rate) if its 

Federal Reserve account has a negative 

balance at the end of the scheduled 

business day—that is, at the regularly 

scheduled close of the FedNow Service. 

Currently, the penalty fee includes a 

multiday charge for overnight overdrafts 

over weekends and holidays. FedNow 

Service participants that incur an 

overnight overdraft before a weekend or 

holiday will have the opportunity to 

achieve a positive balance before the 

close of business day on a Saturday, 

Sunday, or holiday. Accordingly, the 

Board proposes that a FedNow Service 

participant would not automatically 

incur a multiday charge for an overnight 

overdraft before a weekend or holiday. 

However, institutions that are not 

FedNow Service participants and incur 

an overnight overdraft before a weekend 

or holiday will not have the opportunity 

to achieve a positive balance before the 

end of the weekend or holiday. 

Accordingly, these institutions would 

automatically incur a multiday charge 

for an overnight overdraft before a 

weekend or holiday. 

The Board is proposing to eliminate 

the fee-escalation feature in the 

Overnight Overdrafts policy for all 

institutions. The current Overnight 

Overdrafts policy includes a feeescalation feature where the penalty fee 

for an overnight overdraft increases by 

one percentage point for each overnight 

overdraft after an institution has already 

experienced three overnight overdrafts 

in a rolling 12-month period. The 

escalation feature is rarely triggered 

since overnight overdrafts are 

uncommon. Additionally, Reserve 

Banks have other risk-mitigation tools 

for institutions that incur frequent 

overnight overdrafts. For example, 

Reserve Banks can counsel institutions 

that incur overnight overdrafts (by letter 

or phone) and, when necessary, can 

escalate the counseling to an 

institution’s senior management. 

Reserve Banks also have discretion to 

remove an institution’s access to 

intraday credit. Accordingly, the Board 

believes that maintaining the feeescalation feature once the FedNow 

Service launches would add 

unnecessary complexity to the 

Overnight Overdrafts policy and would 

not meaningfully reduce risk to the 

Reserve Banks. 

D. Technical Changes to Text of the PSR 

Policy 

The Board is also proposing technical 

changes to the PSR policy. First, the 

Board proposes to revise a sentence in 

footnote 61 of the PSR policy, which 

states that, for purposes of the PSR 

policy, the Reserve Banks evaluate U.S. 

branches and agencies of an FBO as a 

family ‘‘because these entities have no 

existence separate from the FBO.’’ The 

Board proposes to amend this provision 

to state that, because U.S. branches and 

agencies are part of a single FBO family, 

all the U.S. offices of FBOs (excluding 

U.S.-chartered bank subsidiaries and 

U.S.-chartered Edge subsidiaries) should 

be treated as a consolidated family 

relying on the FBO’s capital. 

Second, the Board proposes to revise 

a sentence in footnote 76 of the PSR 

policy, which discusses the streamlined 

procedure that highly capitalized FBOs 

can use to request a max cap. The 

amendment would clarify that the 

streamlined procedure is available to 


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40 Generally, the ‘‘highly capitalized’’ FBO capital 

category corresponds to the ‘‘well capitalized’’ PCA 

designation for domestic institutions. See n. 63 of 

the PSR policy. 

41 12 U.S.C. 248(j). 

42See The Federal Reserve in the Payments 

System (issued 1984; revised 1990), Federal Reserve 

Regulatory Service 9–1558. 

‘‘highly capitalized’’ FBOs, not ‘‘well 

capitalized’’ FBOs.40

III. Request for Comment 

The Board is seeking comment on all 

aspects of the proposed changes. The 

Board also requests comment on the 

following specific questions: 

1. Would the proposed changes help 

to clarify the conditions for maintaining 

access to intraday credit for purposes of 

your institution’s liquidity planning and 

risk management efforts? 

2. If the Board were to adopt the 

proposed simplifications to the 

procedure for requesting a max cap, 

should the Board eliminate the existing 

streamlined process for FBOs to request 

a max cap in section II.E.2 of the PSR 

policy? If not, how would FBOs 

continue to benefit from the streamlined 

process in section II.E.2? 

3. Should the supervisory ratings of 

an institution’s holding company and 

affiliate(s) continue, as proposed, to be 

key factors in a Reserve Bank’s 

evaluation of whether an institution is 

eligible for uncollateralized intraday 

credit? 

IV. Regulatory Flexibility Act 

Congress enacted the Regulatory 

Flexibility Act (RFA) (5 U.S.C. 601 et 

seq.) to address concerns related to the 

effects of agency rules on small entities, 

and the Board is sensitive to the impact 

its rules may impose on small entities. 

The RFA requires agencies either to 

provide an initial regulatory flexibility 

analysis with a proposed rule or to 

certify that the proposed rule will not 

have a significant economic impact on 

a substantial number of small entities. 

While the Board does not believe that 

the proposed changes would have a 

significant impact on small entities, and 

regardless of whether the RFA applies to 

the PSR policy per se, the Board has 

nevertheless prepared the following 

Initial Regulatory Flexibility analysis in 

accordance with 5 U.S.C. 603. The 

Board requests public comments on all 

aspects of this analysis. 

1. Statement of the need for, 

objectives of, and legal basis for, the 

proposed rule. 

Section 11(j) of the Federal Reserve 

Act 41 authorizes the Board to oversee 

the Reserve Banks’ provision of intraday 

credit to Reserve Bank account holders. 

The Board is issuing this proposal to 

better align the PSR policy with the 

Board’s objectives to reduce the reliance 

of the banking industry on 

uncollateralized intraday credit while 

ensuring the smooth operation of 

payment and settlement systems. The 

Board is also proposing changes that 

would support the deployment of the 

FedNow Service. 

2. Small entities affected by the 

proposed rule. Pursuant to regulations 

issued by the Small Business 

Administration (SBA) (13 CFR 121.201), 

a ‘‘small entity’’ includes an entity that 

engages in commercial banking and has 

assets of $600 million or less (NAICS 

code 522110). As of January 2021, 

nearly 3,200 institutions that maintain 

Federal Reserve accounts are small 

entities. Approximately 3,000 of those 

institutions maintain positive net debit 

caps. However, none of these 

institutions currently have a max cap. 

The proposal would only affect those 

entities, regardless of size, that choose 

to request additional collateralized 

capacity beyond their uncollateralized 

net debit cap. The proposed changes 

would clarify, but would not alter, 

institutions’ eligibility to request and 

maintain net debit caps. 

3. Projected reporting, recordkeeping, 

and other compliance requirements. 

The proposed changes would alter the 

procedures by which institutions obtain 

collateralized intraday credit from the 

Reserve Banks. As described above, the 

proposed changes would expand access 

to collateralized capacity, and would 

simplify and reduce the administrative 

steps associated with obtaining and 

keeping collateralized capacity. If an 

institution requests collateralized 

capacity for the first time or requests an 

increase in its collateralized capacity, it 

would need to submit a resolution from 

its board of directors. Generally, an 

institution would not need to provide a 

business case justifying its request for 

collateralized capacity, nor would it 

need to obtain a self-assessed net debit 

cap before it can request collateralized 

capacity. 

4. Identification of duplicative, 

overlapping, or conflicting Federal 

rules. The Board has not identified any 

Federal rules that duplicate, overlap 

with, or conflict with the proposed 

changes to the PSR policy. 

5. Significant alternatives. The Board 

does not believe that alternatives to the 

proposed changes would better 

accomplish the objectives of limiting 

credit risk to the Reserve Banks while 

minimizing the economic impact on 

small entities, but the Board welcomes 

comments on potential alternatives. 

V. Competitive Impact Analysis 

When considering changes to an 

existing service, the Board conducts a 

competitive impact analysis to 

determine whether there will be a direct 

and material adverse effect on the 

ability of other service providers to 

compete effectively with the Federal 

Reserve in providing similar services 

due to differing legal powers or the 

Federal Reserve’s dominant market 

position deriving from such legal 

differences.42 The Board believes that 

there would be no adverse effects to 

other service providers resulting from 

the proposed changes to the PSR policy 

and the Overnight Overdrafts policy. 

While the proposed changes could 

provide institutions with additional 

collateralized intraday credit in their 

Federal Reserve accounts, as well as 

access to uncollateralized intraday 

credit on a 24x7x365 basis, institutions 

could use this credit to fund payments 

activity using private-sector or Reserve 

Bank services, at their discretion. 

VI. Paperwork Reduction Act 

In accordance with section 3512 of 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521) (PRA), the Board 

may not conduct or sponsor, and a 

respondent is not required to respond 

to, an information collection unless it 

displays a currently valid Office of 

Management and Budget (OMB) control 

number. The OMB control number is 

7100–0217. The Board reviewed the 

PSR policy changes it is considering 

under the authority delegated to the 

Board by the OMB. Comments are 

invited on: 

(a) Whether the collections of 

information are necessary for the proper 

performance of the agencies’ functions, 

including whether the information has 

practical utility; 

(b) The accuracy of the estimates of 

the burden of the information 

collections, including the validity of the 

methodology and assumptions used; 

(c) Ways to enhance the quality, 

utility, and clarity of the information to 

be collected; 

(d) Ways to minimize the burden of 

the information collections on 

respondents, including through the use 

of automated collection technique or 

other forms of information technology; 

and 

(e) Estimates of the capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to provide information. 

All comments will become a matter of 

public record. Comments on aspects of 

this notice that may affect reporting, 

recordkeeping, or disclosure 

requirements and burden estimates 


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43 Institutions use these two resolutions to 

establish a capacity for daylight overdrafts above 

the lesser of $10 million or 20 percent of the 

institution’s capital measure. Financially-healthy 

U.S. chartered institutions that rarely incur daylight 

overdrafts in excess of the lesser of $10 million or 

20 percent of the institution’s capital measure do 

not need to file board of directors resolutions or 

self-assessments with their Reserve Bank. 

should be sent to the addresses listed in 

the ADDRESSES section of this document. 

A copy of the comments may also be 

submitted to the OMB desk officer: By 

mail to U.S. Office of Management and 

Budget, 725 17th Street NW, #10235, 

Washington, DC 20503; by facsimilie to 

(202) 395–5806; or by email to: aira_

submission@omb.eop.gov, Attention, 

Federal Banking Agency Desk Officer. 

Proposed Revisions, With Extension for 

Three Years, of the Following 

Information Collection 

(1) Title of Information Collection: 

Annual Report of Net Debit Cap. 

Agency Form Number: FR 2226. 

OMB Control Number: 7100–0217. 

Frequency of Response: Annually. 

Respondents: Institutions’ boards of 

directors. 

Abstract: Federal Reserve Banks 

collect these data annually to provide 

information that is essential for their 

administration of the Board’s Payment 

System Risk (PSR) policy. The reporting 

panel includes all financial institutions 

with access to the discount window that 

are eligible to request intraday credit. 

The Report of Net Debit Cap comprises 

three resolutions, which are filed by an 

institution’s board of directors 

depending on its needs. The first 

resolution is used to establish a de 

minimis net debit cap and the second 

resolution is used to establish a selfassessed net debit cap.43 The third 

resolution is used to establish 

simultaneously a self-assessed net debit 

cap and maximum daylight overdraft 

capacity. 

Current Actions: Currently, 

institutions with a self-assessed net 

debit cap may file the third resolution 

in order to obtain collateralized capacity 

under the max cap program. The 

proposed changes to the PSR policy 

would expand access to collateralized 

capacity under the max cap program to 

include all domestic institutions with a 

PCA designation of undercapitalized, 

adequately capitalized, or well 

capitalized. The proposed changes 

would also expand access to 

collateralized capacity under the max 

cap program to include all FBOs with an 

FBO PSR category of undercapitalized, 

sufficiently capitalized, or highly 

capitalized. Finally, the proposed 

changes would eliminate the 

requirements that an institution provide 

(i) a business case outlining its need for 

collateralized capacity and (ii) an 

annual board of directors resolution 

approving its collateralized capacity. In 

order the facilitate these proposed 

changes to the PSR policy, the third 

resolution would be amended so that an 

eligible institution could request 

collateralized capacity regardless of 

whether the institution has a selfassessed net debit cap. The proposed 

revision would not increase the 

estimated average hours per response to 

FR 2226 but would likely expand the 

estimated number of respondents 

requesting collateralized capacity under 

the max cap program. 

Estimated number of respondents: De 

Minimis Cap: Non-FBOs, 893 

respondents and FBOs, 18 respondents; 

Self-Assessment Cap: Non-FBOs, 106 

respondents and FBOs, 9 respondents; 

and Maximum Daylight Overdraft 

Capacity, 59 respondents. 

Estimated average hours per response: 

De Minimis Cap—Non-FBOs, 1 hour 

and FBOs, 1.5 hour; Self-Assessment 

Cap—Non-FBOs, 1 hour and FBOs, 1.5 

hours, and Maximum Daylight 

Overdraft Capacity, 1 hour. 

Estimated annual burden hours: De 

Minimis Cap: Non-FBOs, 893 hours and 

FBOs, 27 hours; Self-Assessment Cap: 

Non-FBOs, 106 hours and FBOs, 13.5 

hours; and Maximum Daylight 

Overdraft Capacity, 59 hours. 

The following portion titled ‘‘Federal 

Reserve Policy on Payment System 

Risk’’ will not publish in the Code of 

Federal Regulations. 

Federal Reserve Policy on Payment 

System Risk 

Revisions to Section II.A of the PSR 

Policy 

The Board proposes to revise section 

II.A of the PSR policy as follows: 

A. Daylight Overdraft Definition and 

Measurement 

A daylight overdraft occurs when an 

institution’s Federal Reserve account is 

in a negative position during the 

business day.33 The Reserve Banks use 

an ex post system to measure daylight 

overdrafts in institutions’ Federal 

Reserve accounts. Under this ex post 

measurement system, certain 

transactions, including Fedwire funds 

transfers, FedNow funds transfers, bookentry securities transfers, and net 

settlement transactions are posted as 

they are processed during the business 

day. Other transactions, including ACH 

and check transactions, are posted to 

institutions’ accounts according to a 

defined schedule. The following table 

presents the schedule used by the 

Federal Reserve for posting transactions 

to institutions’ accounts for purposes of 

measuring daylight overdrafts. 

————— 33For purposes of measuring daylight 

overdrafts, the business day is the 24-hour 

period of time that begins immediately after 

the regularly-scheduled close of the Fedwire 

Funds Service (on days when the Fedwire 

Funds Service is open) and the FedNow 

Service (on all days, including weekends and 

holidays). 

Procedures for Measuring Daylight 

Overdrafts 34

Opening Balance (Previous Business 

Day’s Closing Balance) 

Post throughout the business day: 

+/¥ FedNow funds transfers 

+/¥ Fedwire funds transfers 35

+/¥ Fedwire book-entry securities 

transfers 

+/¥ National Settlement Service 

entries. 

+ Fedwire book-entry interest and 

redemption payments on securities 

that are not obligations of, or fully 

guaranteed as to principal and interest 

by, the United States 36

+ Electronic payments for matured 

coupons and definitive securities that 

are not obligations of, or fully 

guaranteed as to principal and interest 

by, the United States.37

————— 34This schedule of posting rules does not 

affect the overdraft restrictions and overdraft 

measurement provisions for nonbanks 

established by the Competitive Equality 

Banking Act of 1987 and the Board’s 

Regulation Y (12 CFR 225.52). 35Funds transfers that the Reserve Banks 

function for certain international 

organizations using internal systems other 

than payment processing systems such as 

Fedwire will be posted throughout the 

business day for purposes of measuring 

daylight overdrafts. 36The GSEs include Federal National 

Mortgage Association (Fannie Mae), the 

Federal Home Loan Mortgage Corporation 

(Freddie Mac), entities of the Federal Home 

Loan Bank System (FHLBS), the Farm Credit 

System, the Federal Agricultural Mortgage 

Corporation (Farmer Mac), the Student Loan 

Marketing Association (Sallie Mae), the 

Financing Corporation, and the Resolution 

Funding Corporation. The international 

organizations include the World Bank, the 

Inter-American Development Bank, the Asian 

Development Bank, and the African 

Development Bank. The Student Loan 

Marketing Association Reorganization Act of 

1996 requires Sallie Mae to be completely 

privatized by 2008; however, Sallie Mae 

completed privatization at the end of 2004. 

The Reserve Banks no longer act as fiscal 

agents for new issues of Sallie Mae securities, 

and Sallie Mae is not considered a GSE. 

The term ‘‘interest and redemption 

payments’’ refers to payments of principal, 


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interest, and redemption on securities 

maintained on the Fedwire Securities 

Service. 

The Reserve Banks will post these 

transactions, as directed by the issuer, 

provided that the issuer’s Federal Reserve 

account contains funds equal to or in excess 

of the amount of the interest and redemption 

payments to be made. In the normal course, 

if a Reserve Bank does not receive funding 

from an issuer for the issuer’s interest and 

redemption payments by the established cutoff hour of 4:00 p.m. eastern time on the 

Fedwire Securities Service, the issuer’s 

payments will not be processed on that day. 37Electronic payments for credits on these 

securities will post according to the posting 

rules for the mechanism through which they 

are processed, as outlined in this policy. 

However, the majority of these payments are 

made by check and will be posted according 

to the established check posting rules as set 

forth in this policy. 

* * * * * 

Post at the close of the Fedwire Funds 

Service and the FedNow Service 51

+/¥ All other transactions. These 

transactions include the following: 

Currency and coin shipments; 

noncash collection; term-deposit 

settlements; Federal Reserve Bank 

checks presented after 3:00 p.m. 

eastern time but before 3:00 p.m. local 

time; foreign check transactions; 

small-dollar credit corrections and 

adjustments; term deposit settlements; 

and all debit corrections and 

adjustments. Discount-window loans 

and repayments are normally posted 

after the close of the Fedwire Funds 

Service 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. 

————— 51The posting of transactions that occur 

during extensions of the Fedwire Funds 

Service and the FedNow Service will be 

backdated to the regularly scheduled close of 

the Fedwire Funds Service and the FedNow 

Service. 

* * * * * 

Revisions to Section II.C of the PSR 

Policy 

The Board proposes to revise section 

II.C, paragraphs 3 and 4 of the ‘‘Federal 

Reserve Policy on Payment System 

Risk’’ as follows: 

C. Pricing 

* * * * * 

Daylight overdraft fees for 

uncollateralized overdrafts (or the 

uncollateralized portion of a partially 

collateralized overdraft) are calculated 

using an annual rate of 50 basis points, 

quoted on the basis of a 24-hour day and 

a 360-day year. The effective daily rate 

equals the annual rate divided by 360.57

An institution’s daily daylight overdraft 

charge is equal to the effective daily rate 

multiplied by the institution’s average 

daily uncollateralized daylight 

overdraft. 

An institution’s average daily 

uncollateralized daylight overdraft is 

calculated by dividing the sum of its 

negative uncollateralized Federal 

Reserve account balances at the end of 

each minute of the regularly scheduled 

business day by the total number of 

minutes in the 24-hour business day. A 

negative uncollateralized Federal 

Reserve account balance is calculated by 

subtracting the unencumbered, net 

lendable value of collateral pledged 

from the total negative Federal Reserve 

account balance at the end of each 

minute. Each positive end-of-minute 

balance in an institution’s Federal 

Reserve account is set to equal zero. 

Fully collateralized end-of-minute 

negative balances are similarly set to 

zero. 

————— 57The effective daily daylight-overdraft 

rate is truncated to 0.0000138. 

* * * * * 

Revisions to Section II.D of the PSR 

Policy 

The Board proposes to revise section 

II.D of the ‘‘Federal Reserve Policy on 

Payment System Risk’’ as follows: 

II. D. Net Debit Caps (Uncollateralized 

Intraday Credit Capacity) 

Each institution incurring 

uncollateralized daylight overdrafts in 

its Federal Reserve account must adopt 

a net debit cap, that is, a ceiling on the 

total uncollateralized daylight overdraft 

position that it can incur during any 

given day. An institution’s cap category 

and capital measure determine the size 

of its net debit cap. Specifically, the net 

debit cap is calculated as an 

institution’s cap multiple times its 

capital measure: 

net debit cap = cap multiple × capital 

measure 

Cap categories and their associated 

cap levels, set as multiples of an 

institution’s capital measure, are listed 

below: 

NET DEBIT CAP MULTIPLES

Cap category Cap multiple 

High ........................... 2.25. 

Above average .......... 1.875. 

Average ..................... 1.125. 

De minimis ................ 0.4. 

Exempt-from-filing 60 $10 million or 0.20. 

NET DEBIT CAP MULTIPLES— 

Continued 

Cap category Cap multiple 

Zero ........................... 0. 

60The net debit cap for the exempt-from-filing category is equal to the lesser of $10 million or 0.20 multiplied by the capital measure. 

Pledging collateral does not increase 

an institution’s net debit cap, although 

certain institutions may be eligible to 

obtain additional collateralized capacity 

in excess of their net debit caps (see 

section II.E). For the treatment of 

overdrafts that exceed the net debit cap, 

see section II.G. 

While capital measures differ, the net 

debit cap provisions of this policy apply 

similarly to foreign banking 

organizations (FBOs) as to U.S. 

institutions. Consistent with practices 

for U.S.-chartered depository 

institutions, the Reserve Banks will 

advise home-country supervisors of the 

daylight overdraft capacity of U.S. 

branches and agencies of FBOs under 

their jurisdiction, as well as of other 

pertinent information related to the 

FBOs’ caps. The Reserve Banks will also 

provide information on the daylight 

overdrafts in the Federal Reserve 

accounts of FBOs’ U.S. branches and 

agencies in response to requests from 

home-country supervisors. 

1. Eligibility 

An institution must have regular 

access to the discount window in order 

to adopt a net debit cap greater than 

zero. Granting a net debit cap, or any 

extension of intraday credit, to an 

institution is at the discretion of the 

Reserve Bank. As detailed in the 

following matrix, an institution’s 

eligibility to adopt and maintain a 

positive net debit cap depends on the 

institution’s creditworthiness as 

determined by (1) its Prompt Corrective 

Action (PCA) designation 61 or FBO PSR 

capital category,62 and (2) the 

supervisory rating. 

————— 61An insured depository institution is (1) 

‘‘well capitalized’’ if it significantly exceeds 

the required minimum level for each relevant 

capital measure, (2) ‘‘adequately capitalized’’ 

if it meets the required minimum level for 

each relevant capital measure, (3) 

‘‘undercapitalized’’ if it fails to meet the 

required minimum level for any relevant 

capital measure, (4) ‘‘significantly 

undercapitalized’’ if it is significantly below 

the required minimum level for any relevant 

capital measure, or (5) ‘‘critically 

undercapitalized’’ if it fails to meet any 

leverage limit (the ratio of tangible equity to 

total assets) specified by the appropriate 

federal banking agency, in consultation with 

the FDIC, or any other relevant capital 


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measure established by the agency to 

determine when an institution is critically 

undercapitalized (12 U.S.C. 1831o). 62The four FBO PSR capital categories for 

FBOs are ‘‘highly capitalized,’’ ‘‘sufficiently 

capitalized,’’ ‘‘undercapitalized,’’ and 

‘‘intraday credit ineligible.’’ To determine 

whether it is highly capitalized or 

sufficiently capitalized, an FBO should 

compare its risk-based capital ratios to the 

corresponding ratios in Regulation H for 

well-capitalized and adequately capitalized 

banks. 12 CFR 208.43(b). Additionally, an 

FBO must have a leverage ratio of 4 percent 

or 3 percent (calculated under home-country 

standards) to qualify as, respectively, highly 

capitalized or sufficiently capitalized. To 

determine whether it is undercapitalized, an 

FBO would compare its risk-based capital 

ratios to the corresponding ratios in 

Regulation H. Additionally, an FBO would be 

deemed undercapitalized if its home-country 

leverage ratio is less than 3 percent. Finally, 

to determine whether it is intraday credit 

ineligible, an FBO should compare its riskbased capital ratios to the corresponding 

ratios in Regulation H for significantly 

undercapitalized banks. Additionally, an 

FBO would be deemed intraday credit 

ineligible if its home-country leverage ratio is 

less than 2 percent. 

ELIGIBILITY CRITERIA FOR REQUESTING A POSITIVE NET DEBIT CAP

Domestic capital category/ 

FBO PSR capital category 

Supervisory rating 63

Strong Satisfactory Fair Marginal or Unsatisfactory 

Well capitalized/Highly 

capitalized.

Eligible ............................... Eligible ............................... Eligible ............................... Ineligible (Zero net debit 

cap). 

Adequately capitalized/Sufficiently capitalized.Eligible ............................... Eligible ............................... Eligible ............................... Ineligible (Zero net debit 

cap). 

Undercapitalized ................ May be eligible subject to 

a full assessment of 

creditworthiness.

May be eligible subject to 

a full assessment of 

creditworthiness.

Ineligible (Zero net debit 

cap).

Ineligible (Zero net debit 

cap). 

Significantly or critically 

undercapitalized/Intraday 

credit ineligible.

Ineligible (Zero net debit 

cap).

Ineligible (Zero net debit 

cap).

Ineligible (Zero net debit 

cap).

Ineligible (Zero net debit 

cap). 

63Supervisory composite ratings, such as the Uniform Bank Rating System (CAMELS) and the RFI Rating System, are generally assigned on 

a scale from 1 to 5, with 1 being the strongest rating. Thus, a supervisory rating of 1 is considered Strong, a rating of 2 is considered Satisfactory, a rating of 3 is considered Fair, a rating of 4 is considered Marginal, and a rating of 5 is considered Unsatisfactory. An institution will not be 

eligible for uncollateralized capacity if a supervisory agency assigns a Marginal or Unsatisfactory supervisory rating to the institution. If an institution’s holding company has been assigned a Deficient-2 rating in any of the components of the Large Financial Institution (LFI) rating system or 

an RFI rating of 4 or 5, the institution will not be eligible to request the above average and high self-assessed net debit caps but may be eligible 

for a lower net debit cap. Similarly, if an institution’s affiliates are assigned a Marginal or Unsatisfactory supervisory rating, the institution will not 

be eligible to request the above average and high self-assessed net debit caps but may be eligible for a lower net debit cap. Reserve Banks will 

assign an institution a zero net debit cap if supervisory information of the holding company and affiliated institutions reveals material operating or 

financial weaknesses that pose significant risks to the institution. 

As described further in section 

II.D.2.a, an institution seeking to 

establish a net debit cap category of 

high, above average, or average must 

perform a self-assessment of its own 

creditworthiness, intraday funds 

management and control, customer 

credit policies and controls, and 

operating controls and contingency 

procedure. An institution that performs 

a self-assessment will be deemed 

ineligible for a positive net debit cap if 

its self-assessment results in the lowest 

possible rating for any one of the four 

components of the self-assessment 

process. 

2. Cap Categories 

* * * * * 

a. Self-Assessed 

In order to establish a net debit cap 

category of high, above average, or 

average, an institution must perform a 

self-assessment of its own 

creditworthiness, intraday funds 

management and control, customer 

credit policies and controls, and 

operating controls and contingency 

procedures.64 For domestic institutions, 

the assessment of creditworthiness is 

based on the institution’s supervisory 

rating and PCA designation.65 For U.S. 

branches and agencies of FBOs that are 

based in jurisdictions that have 

implemented capital standards 

substantially consistent with those 

established by the Basel Committee on 

Banking Supervision, the assessment of 

creditworthiness is based on the 

institution’s supervisory rating and its 

FBO PSR capital category.66 An 

institution may perform a full 

assessment of its creditworthiness in 

certain limited circumstances—for 

example, if its condition has changed 

significantly since its last examination 

or if it possesses additional substantive 

information regarding its financial 

condition. Additionally, U.S. branches 

and agencies of FBOs based in 

jurisdictions that have not implemented 

capital standards substantially 

consistent with those established by the 

Basel Committee on Banking 

Supervision are required to perform a 

full assessment of creditworthiness to 

determine their ratings for the 

creditworthiness component. An 

institution performing a self-assessment 

must also evaluate its intraday fundsmanagement procedures and its 

procedures for evaluating the financial 

condition of and establishing intraday 

credit limits for its customers. Finally, 

the institution must evaluate its 

operating controls and contingency 

procedures to determine if they are 

sufficient to prevent losses due to fraud 

or system failures. The Guide includes 

a detailed explanation of the selfassessment process. 

* * * * * 

————— 64This assessment should be done on an 

individual-institution basis, treating as 

separate entities each commercial bank, each 

Edge corporation (and its branches), each 

thrift institution, and so on. An exception is 

made in the case of U.S. branches and 

agencies of FBOs. Because these entities are 

part of a single FBO family, all the U.S. 

offices of FBOs (excluding U.S.-chartered 

bank subsidiaries and U.S.-chartered Edge 

subsidiaries) should be treated as a 

consolidated family relying on the FBO’s 

capital. 65See n. 61 supra. 66See n. 62 supra. 

* * * * * 

d. Zero 

Some institutions that could obtain 

positive net debit caps choose to have 

zero caps. Often these institutions have 

very conservative internal policies 

regarding the use of Federal Reserve 

intraday credit. If an institution that has 

adopted a zero cap incurs a daylight 

overdraft, the Reserve Bank counsels the 


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institution and may monitor the 

institution’s activity in real time and 

reject or delay certain transactions that 

would cause an overdraft. If the 

institution qualifies for a positive cap, 

the Reserve Bank may suggest that the 

institution adopt an exempt-from-filing 

cap or file for a higher cap if the 

institution believes that it will continue 

to incur daylight overdrafts or overdrafts 

in excess of its assigned cap limit. 

In addition, a Reserve Bank may 

assign an institution a zero net debit 

cap. Institutions that may pose special 

risks to the Reserve Banks, such as those 

without regular access to the discount 

window, those incurring daylight 

overdrafts in violation of this policy, 

those that are ineligible for intraday 

credit based on their supervisory rating 

and PCA designation/FBO PSR capital 

category (see section II.A), or those that 

are otherwise in weak financial 

condition are generally assigned a zero 

cap (see section II.F). Recently chartered 

institutions may also be assigned a zero 

net debit cap. 

Certain institutions with zero caps, 

including institutions that have been 

involuntarily assigned a zero cap by a 

Reserve Bank, may be eligible to request 

collateralized capacity from their 

Reserve Bank (see sections II.E). * * * 

* * * * * 

Revisions to Section II.E of the PSR 

Policy 

The Board proposes to revise section 

II.E of the ‘‘Federal Reserve Policy on 

Payment System Risk’’ as follows: 

E. Collateralized Intraday Credit 

Capacity 

Subject to the approval of its 

administrative Reserve Bank, an eligible 

institution may pledge collateral to 

secure collateralized daylight overdraft 

capacity in addition to uncollateralized 

capacity from its net debit cap.74 The 

resulting combination of 

uncollateralized and collateralized 

capacity is known as the maximum 

daylight overdraft capacity (max cap) 

and is defined as follows: 

maximum daylight overdraft capacity = 

net debit cap + collateralized 

capacity.75

Once approved, the Reserve Bank will 

monitor the institution to ensure that it 

does not exceed its max cap. Pledging 

less collateral reduces an institution’s 

effective maximum daylight overdraft 

capacity level, but pledging more 

collateral does not increase the 

maximum daylight overdraft capacity 

above the approved max cap level. 

1. Eligibility 

An institution that wishes to expand 

its daylight overdraft capacity by 

pledging collateral should consult with 

its administrative Reserve Bank. A 

domestic institution is eligible to 

request collateralized intraday credit if 

its PCA designation is 

‘‘undercapitalized,’’ ‘‘adequately 

capitalized,’’ or ‘‘well capitalized.’’ 76

Similarly, an FBO is eligible to request 

collateralized intraday credit if its FBO 

PSR capital category is 

‘‘undercapitalized,’’ ‘‘sufficiently 

capitalized,’’ or ‘‘highly capitalized.’’ 77

Provided that it meets these 

capitalization requirements, an 

institution is eligible to request 

collateralized capacity even if the 

institution is not eligible to adopt a 

positive net debit cap (see section 

II.D.1). 

————— 74The administrative Reserve Bank is 

responsible for the administration of Federal 

Reserve credit, reserves, and riskmanagement policies for a given institution. 

All collateral must be acceptable to the 

administrative Reserve Bank. The Reserve 

Bank may, at its discretion, accept securities 

in transit on the Fedwire Securities Service 

as collateral to support the maximum 

daylight overdraft capacity level. Collateral 

eligibility and margins are the same for PSR 

policy purposes as for the discount window. 

See http://www.frbdiscountwindow.org/ for 

information. 75Collateralized capacity, on any given 

day, equals the amount of collateral pledged 

to the Reserve Bank, not to exceed the 

difference between the institution’s 

maximum daylight overdraft capacity level 

and its net debit cap in the given reserve 

maintenance period. 76See n. 61, supra. 77See n. 62, supra. 

2. General Procedure for Requesting 

Collateralized Capacity 

If an institution is requesting 

collateralized capacity for the first time, 

it must submit a resolution from its 

board of directors indicating its board’s 

approval of the requested max cap. 

Increases to collateralized capacity 

previously approved by Reserve Banks 

will also require a board of directors 

resolution. In most cases, an institution 

will not have to provide to a Reserve 

Bank a business case justifying its 

request for collateralized capacity. 

However, an institution must provide a 

business-case justification if: 

• The institution requests a max cap 

in excess of its capital measure 

multiplied by 2.25; or 

• The administrative Reserve Bank 

exercises discretion to require that the 

institution submit a business-case 

justification due to recent developments 

in the institution’s condition. 

Once a Reserve Bank has approved an 

institution’s collateralized capacity, the 

collateralized capacity will remain in 

place, without the need for further 

action by the institution, provided that 

the institution maintains the eligibility 

standards outlined above. 

3. Streamlined Procedure for Certain 

FBOs 

An FBO that is highly capitalized 78

and has a self-assessed net debit cap 

may request from its Reserve Bank a 

streamlined procedure to obtain a 

maximum daylight overdraft capacity. 

These FBOs are not required to provide 

documentation of the business case or 

obtain a board of directors resolution for 

collateralized capacity in an amount 

that exceeds its current net debit cap 

(which is based on 10 percent 

worldwide capital times its cap 

multiple), as long as the requested total 

capacity is 100 percent or less of 

worldwide capital times a self-assessed 

cap multiple.79 In order to ensure that 

intraday liquidity risk is managed 

appropriately and that the FBO will be 

able to repay daylight overdrafts, 

eligible FBOs under the streamlined 

procedure will be subject to an initial 

and periodic review of liquidity plans 

that are analogous to the liquidity 

reviews undergone by U.S. 

institutions.80 If an eligible FBO 

requests capacity in excess of 100 

percent of worldwide capital times the 

self-assessed cap multiple, it would be 

subject to the general procedure. 

————— 78See n. 62, supra. 79For example, an FBO that is highly 

capitalized is eligible for uncollateralized 

capacity of 10 percent of worldwide capital 

times the cap multiple. The streamlined 

collateralized capacity procedure would 

provide such an institution with additional 

collateralized capacity of 90 percent of 

worldwide capital times the cap multiple. As 

noted above, FBOs report their worldwide 

capital on the Annual Daylight Overdraft 

Capital Report for U.S. Branches and 

Agencies of Foreign Banks (FR 2225). 80The liquidity reviews will be conducted 

by the administrative Reserve Bank, in 

consultation with each FBO’s home country 

supervisor. 

* * * * * 

Revisions to Section II.F of the PSR 

Policy 

The Board proposes to revise section 

II.F, paragraphs 3 and 4 of the ‘‘Federal 

Reserve Policy on Payment System 

Risk’’ as follows: 

F. Special Situations 

Certain institutions are subject to a 

daylight-overdraft penalty fee levied 

against the average daily daylight 


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overdraft incurred by the institution. 

These include Edge and agreement 

corporations, bankers’ banks that are not 

subject to reserve requirements, and 

limited-purpose trust companies. The 

annual rate used to determine the 

daylight-overdraft penalty fee is equal to 

the annual rate applicable to the 

daylight overdrafts of other institutions 

(50 basis points) plus 100 basis points. 

The effective daily overdraft penalty 

rate equals the annual penalty rate 

divided by 360.81 The daylight-overdraft 

penalty rate applies to the institution’s 

daily average daylight overdraft in its 

Federal Reserve account. The daylightoverdraft penalty fee for these 

institutions is charged in lieu of, not in 

addition to, the daylight overdraft fee 

that applies to other institutions. 

————— 81The effective daily daylight-overdraft 

penalty rate is truncated to 0.0000416. 

* * * * * 

Add Part III. Policy on Overnight 

Overdrafts as follows: 

Part III. Policy on Overnight Overdrafts 

An overnight overdraft is a negative 

balance in a Federal Reserve account at 

the close of the business day. The Board 

expects institutions to avoid overnight 

overdrafts. 

To minimize the Reserve Banks’ 

exposure to overnight overdrafts, which 

are not always collateralized, the Board 

authorizes Reserve Banks to discourage 

depository institutions from incurring 

overnight overdrafts by charging a 

penalty fee. Institutions that do not 

extinguish their daylight overdrafts and 

incur overnight overdrafts are subject to 

ex post counseling in addition to a 

penalty fee. 

The Board establishes the following 

penalty rate structure for overnight 

overdrafts: 

1. An overnight overdraft penalty rate 

of the primary credit rate plus 4 

percentage points (annual rate). 

2. A minimum penalty fee of 100 

dollars, regardless of the amount of the 

overnight overdraft. The minimum fee is 

administered per each occasion. 

3. A charge for each calendar day 

(including weekends and holidays) that 

an overnight overdraft is outstanding. 

————— 92See n. 33, which defines the term 

‘‘business day’’ for this purpose. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System. 

Ann Misback, 

Secretary of the Board. 

[FR Doc. 2021–11649 Filed 6–2–21; 8:45 am] 

BILLING CODE P 

FEDERAL RESERVE SYSTEM 

Formations of, Acquisitions by, and 

Mergers of Bank Holding Companies 

The companies listed in this notice 

have applied to the Board for approval, 

pursuant to the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841 et seq.) 

(BHC Act), Regulation Y (12 CFR part 

225), and all other applicable statutes 

and regulations to become a bank 

holding company and/or to acquire the 

assets or the ownership of, control of, or 

the power to vote shares of a bank or 

bank holding company and all of the 

banks and nonbanking companies 

owned by the bank holding company, 

including the companies listed below. 

The public portions of the 

applications listed below, as well as 

other related filings required by the 

Board, if any, are available for 

immediate inspection at the Federal 

Reserve Bank(s) indicated below and at 

the offices of the Board of Governors. 

This information may also be obtained 

on an expedited basis, upon request, by 

contacting the appropriate Federal 

Reserve Bank and from the Board’s 

Freedom of Information Office at 

https://www.federalreserve.gov/foia/ 

request.htm. Interested persons may 

express their views in writing on the 

standards enumerated in the BHC Act 

(12 U.S.C. 1842(c)). 

Comments regarding each of these 

applications must be received at the 

Reserve Bank indicated or the offices of 

the Board of Governors, Ann E. 

Misback, Secretary of the Board, 20th 

Street and Constitution Avenue NW, 

Washington, DC 20551–0001, not later 

than July 6, 2021. 

A. Federal Reserve Bank of Atlanta 

(Erien O. Terry, Assistant Vice 

President) 1000 Peachtree Street NE, 

Atlanta, Georgia 30309. Comments can 

also be sent electronically to 

Applications.Comments@atl.frb.org: 

1. United Bancorporation of Alabama, 

Atmore, Alabama; to acquire TownCountry National Bank, Camden, 

Alabama. 

Board of Governors of the Federal Reserve 

System, May 28, 2021. 

Michele Taylor Fennell, 

Deputy Associate Secretary of the Board. 

[FR Doc. 2021–11690 Filed 6–2–21; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Disease Control and 

Prevention 

[CDC–2016–0001; Docket Number NIOSH– 

260–A] 

Final Current Intelligence Bulletin 70: 

Health Effects of Occupational 

Exposure to Silver Nanomaterials 

AGENCY: National Institute for 

Occupational Safety and Health 

(NIOSH) of the Centers for Disease 

Control and Prevention (CDC), 

Department of Health and Human 

Services (HHS). 

ACTION: Notice of availability. 

SUMMARY: NIOSH announces the 

availability of the final Current 

Intelligence Bulletin (CIB) 70: Health 

Effects of Occupational Exposure to 

Silver Nanomaterials. 

DATES: The final document was 

published on May 26, 2021 on the CDC 

website. 

ADDRESSES: The document may be 

obtained at the following link: https://

www.cdc.gov/niosh/docs/2021-112/. 

FOR FURTHER INFORMATION CONTACT: Jay 

Vietas, (jvietas@cdc.gov), National 

Institute for Occupational Safety and 

Health, Centers for Disease Control and 

Prevention, Mailstop C–14, 1090 

Tusculum Avenue, phone (513) 533– 

8150 (not a toll free number). 

SUPPLEMENTARY INFORMATION: NIOSH 

first published a request on December 

19, 2012, for information on 

occupational exposure to silver 

nanomaterials, possible health effects in 

workers exposed to silver 

nanomaterials, toxicology studies of 

silver nanomaterials in animals and 

cellular systems, and information on 

exposure measurement methods, control 

measures, and other data in the Federal 

Register [77 FR 75169]. In January 2016, 

NIOSH released a draft of the CIB for 

external review and published notices 

of a public meeting and comment period 

on January 21, 2016 in the Federal 

Register [81 FR 342], and February 10, 

2016 [81 FR 7124]. A public meeting 

was held on March 23, 2016, and 

members of the public, stakeholders, 

and scientific peer reviewers were given 

the opportunity to provide comments by 

April 22, 2016. In response to those 

comments, NIOSH performed a second 

systematic review of the scientific 

literature through January 2017 to 

include additional publications on the 

occupational exposure to silver 

nanomaterials and possible health 

effects in humans and toxicology 


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