I do not agree. As I indicated earlier in talking about our Fedwire transfer of funds operations, a Reserve Bank incurs credit risk when it debits an account that does not contain a sufficient balance. In a Fedwire transfer, if we reject a Fedwire payment instruction because of insufficient funds, only the originating bank knows. That bank can attempt to purchase funds in the market or borrow at the discount window. But when an agent, such as the operator of a clearing arrangement, sends in a settlement sheet and we reject that sheet because we cannot post all of the net debits, we may communicate the constraints placed on the institution through our response.
Banking is an industry where confidence in the institution is crucial.
A lack of confidence can result in a run on the bank. Runs today do not consist of lines of depositors. By number, most depositors have FDIC-insured deposits. We need to structure our net-settlement services to minimize the risk of contributing to any announcement of problems. Another factor to consider is that we need to manage our credit risk arising out of a net-settlement arrangement.