Federal Reserve Policy on Payment System Risk; Procedures for Measuring Daylight Overdrafts, 72112-72120 [2014-28664]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 79, Number 234 (Friday, December 5, 2014)]
[Rules and Regulations]
[Pages 72112-72120]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28664]


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FEDERAL RESERVE SYSTEM

12 CFR Part 210

[Docket No. OP-1472]


Federal Reserve Policy on Payment System Risk; Procedures for 
Measuring Daylight Overdrafts

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Policy statement.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
has adopted revisions to part II of the Federal Reserve Policy on 
Payment System Risk (PSR policy) related to the procedures for 
measuring balances intraday in institutions' accounts at the Federal 
Reserve Banks (Reserve Banks). The changes relate to the Board's 
procedures for posting debit and credit entries to institutions' 
Federal Reserve accounts for automated clearinghouse (ACH) debit 
transactions and commercial check transactions. Elsewhere in the 
Federal Register under Docket No. R-1473, the Board has adopted related 
changes to the Board's Regulation J that affect when paying banks 
settle for check transactions presented to them by the Reserve Banks. 
Additionally, in this document, the Board has adopted a set of 
principles for establishing future posting procedures for the Reserve 
Banks' same-day ACH service. The Board has also adopted a change in 
language of the PSR policy intended to clarify the Reserve Banks' 
administration of the policy for U.S. branches and agencies of foreign 
banking organizations. Finally, the Board has adopted two technical 
revisions to the posting procedures to reflect deposit deadlines 
already in effect for Treasury checks, postal money orders, local 
Federal Reserve Bank checks, and savings bond redemptions in separately 
sorted deposits.

DATES: Effective Dates: The policy changes related to the set of 
principles for establishing future posting procedures for the Reserve 
Banks' same-day ACH service, the Reserve Banks' administration of the 
policy for U.S. branches and agencies of foreign banking organizations, 
and the technical revisions to the posting procedures for Treasury 
checks, postal money orders, local Federal Reserve Bank checks, and 
savings bond redemptions will take effect on December 5, 2014. The 
policy changes to the Board's procedures for posting debit and credit 
entries to institutions' Federal Reserve accounts for ACH debit and 
commercial check transactions will take effect on July 23, 2015. All 
items scheduled to settle on this date and after will post according to 
the new posting rule procedures for these transactions, regardless of 
date of deposit.

FOR FURTHER INFORMATION CONTACT:  Susan V. Foley, Senior Associate 
Director (202/452-3596), Jeffrey D. Walker, Assistant Director (202/
721-4559), or Michelle D. Olivier, Senior Financial Services Analyst 
(202/452-2404), Division of Reserve Bank Operations and Payment 
Systems, Board of Governors of the Federal Reserve System; for users of 
Telecommunications Device for the Deaf (TDD) only, contact 202/263-
4869.

SUPPLEMENTARY INFORMATION: 

I. Background

    On December 10, 2013, the Board requested comment on several 
changes to part II of the PSR policy intended to enhance the efficiency 
of the payment system.\1\ Technology and processing improvements have 
enabled payment systems and depository institutions to achieve 
significant efficiencies since the Board first established the 
procedures, referred to as posting rules, to measure depository 
institutions' intraday Federal Reserve account balances. The proposed 
changes to these posting rules are intended to align them with current 
operations and processing times and to strategically position the rules 
for future advancements in the speed of clearing and settlement.
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    \1\ 78 FR 74130 (Dec. 10, 2013). The Board's PSR policy is 
available at www.federalreserve.gov/paymentsystems/psr_policy.htm.
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Commercial and Government ACH Debit Transactions

    The Board proposed moving the posting times for commercial and 
government ACH debit transactions processed overnight to 8:30 a.m. from 
11:00 a.m. eastern time (ET) to coincide with the posting time for ACH 
credit transactions processed overnight.\2\ Under the proposal, other 
types of ACH transactions, including same-day ACH and certain ACH 
return items, would not be affected and would continue to post at 5:00 
p.m.
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    \2\ All times are eastern time unless otherwise specified.
    In 2008, the Board requested comment on moving the posting time 
of ACH debit transactions from 11:00 a.m. to 8:30 a.m. to coincide 
with the posting of ACH credit transactions but decided not to 
pursue the change because of economic conditions at the time and the 
additional costs and liquidity pressures that could be placed on 
some institutions. The request for comment and the subsequent notice 
of the Board's decision not to pursue the proposed changes can be 
found, respectively, at 73 FR 12443 (Mar. 7, 2008) and 73 FR 79127 
(Dec. 24, 2008).
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    The Board outlined four potential benefits to shifting earlier the 
posting for ACH debit transactions. First, posting ACH debit 
transactions according to the proposed posting rules would simplify 
account management by allowing institutions to fund the net of all ACH 
activity at a single posting time, rather than funding debit and credit 
transactions separately. Second, the change would increase liquidity 
early in the day both for institutions that originate ACH debit 
transactions over the FedACH network and for those institutions that 
originate ACH debit transactions over the Electronic Payments Network 
(EPN), the other ACH operator, but have transactions delivered to 
receiving institutions over the FedACH network (interoperator 
transactions).\3\ Third, moving the posting time for ACH debit 
transactions to 8:30 a.m. would align the Reserve Banks' FedACH 
settlement times with those of EPN. The Board believes that this change 
would remove any potential competitive disparities between the two ACH 
operators and their participants arising from the different settlement 
times for ACH debit transactions. Fourth, the earlier posting of ACH 
debit transactions would increase the efficiency of the ACH network by 
aligning better the settlement of ACH debit transactions with their 
processing. Additionally, posting ACH debit transfers at 8:30 a.m. 
would better conform to the Board's principles for measuring daylight 
overdrafts, specifically the principle that encourages posting times to 
be as close as possible to the delivery of payments to the receiving 
institution.\4\
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    \3\ Liquidity refers to balances in Federal Reserve accounts to 
make payments. An increase in liquidity involves higher account 
balances, which could result in fewer daylight overdrafts.
    \4\ The Board's four principles for measuring daylight 
overdrafts are as follows: (1) The measurement procedures should not 
provide intraday float to participants. (2) The measurement 
procedures should reflect the times at which payor institutions are 
obligated to pay for transactions. (3) The users of payment services 
should be able to control their use of intraday credit. (4) The 
Reserve Banks should not obtain any competitive advantage from the 
measurement procedures. The Board developed the principles in the 
early 1990s; for the latest version, refer to 73 FR 12443 (Mar. 7, 
2008).

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[[Page 72113]]

Commercial Check Transactions

    The Board proposed several revisions to its posting rules for 
commercial check transactions to reflect today's nearly 100 percent 
electronic check-processing environment. Specifically, the Board 
proposed to post commercial check transactions, both credits and 
debits, at 8:30 a.m., 1:00 p.m., and 5:30 p.m., with the specific 
posting time depending on when a check is deposited with the Reserve 
Banks (for credit) or presented by the Reserve Banks (for debit).\5\ 
Credits associated with any commercial checks received by the Reserve 
Banks' deposit deadlines would post on a rolling basis at the next 
available posting time at least 30 minutes after receipt by the Reserve 
Banks.\6\ Similarly, debits associated with electronic check 
transactions would post on a rolling basis at the next available 
posting time that is at least 30 minutes after presentment to the 
paying bank. To accommodate the extra time required to make paper 
presentments, debits for the few remaining paper commercial check 
transactions, which account for less than one-tenth of 1 percent of 
checks processed by the Reserve Banks, would post at the final posting 
time of 5:30 p.m. on the day the paper check is presented to the paying 
bank.\7\
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    \5\ Under the current posting rules, commercial check credits 
post according to one of two options: (1) All credits post at a 
single, float-weighted posting time, or (2) fractional credits post 
between the hours of 11:00 a.m. and 6:00 p.m., depending on the 
institution's preference. The second option lets the institution 
receive portions of its available check credits on the clock hours 
between 11:00 a.m. and 6:00 p.m. The option selected applies to all 
check deposits posted to an institution's account. Both crediting 
options are based on surveys of check presentment times and vary 
across time zones. Commercial check debits are posted on the next 
clock hour at least one hour after presentment beginning at 11:00 
a.m. for paper checks and 1:00 p.m. local time for electronic 
checks, and ending at 3:00 p.m. local time.
    \6\ Immediate credit would not be passed for deferred-
availability deposit products. Customer availability for files 
deposited for these services would be the same as if the file were 
received at a deposit deadline before 8:00 a.m. the next business 
day.
    Currently, the Reserve Banks' electronic check deposit deadlines 
are 9:00 p.m. on the previous business day, and 1:00 a.m., 5:00 
a.m., and 10:00 a.m. on the settlement day. The paper check deposit 
deadline is 7:00 p.m. on the previous business day. As a result, 
depositing banks could expect credit for all electronic items 
deposited for the 9:00 p.m., 1:00 a.m., and 5:00 a.m. deposit 
deadlines to post at 8:30 a.m., and credit for electronic items 
deposited for the 10:00 a.m. deadline to post at 1:00 p.m. Paper 
items deposited by 7:00 p.m. on the previous day would post at 8:30 
a.m.
    \7\ The posting of debits associated with electronic 
presentments earlier than the debits associated with paper check 
presentments may contribute marginally to a given paying bank's 
incentive to require that checks be presented to it in paper form. 
Electronic check presentment is now pervasive, however, and the 
Board does not believe that a paying bank that receives presentments 
electronically would be swayed by the later posting time to return 
to paper presentment.
    Credits for checks presented in paper form would not be delayed 
to accommodate the extra time required for presentment and would 
post at the next available posting time at least 30 minutes after 
receipt by the Reserve Banks. The Reserve Banks will monitor the 
value of commercial checks presented in paper form, and should it 
increase materially, the Board may propose changes to the posting 
rules to reduce float.
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    Under the current posting rules and Regulation J, at least one hour 
must elapse between presentment and posting to allow limited 
verification of cash letters. The Board proposed reducing this 
requirement from one hour to 30 minutes. As a result of the widespread 
use of electronic check-handling methods and the extremely small value 
of paper presentments, the Board believes 30 minutes is now sufficient 
for institutions to verify cash letters.\8\ Additionally, as part of 
the proposed posting rules, the Reserve Banks would present multiple 
electronic cash letters per day to institutions that receive electronic 
presentments, with the first presentment by 8:00 a.m. for settlement at 
8:30 a.m.\9\
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    \8\ The Board issued a companion document requesting comment on 
proposed changes to Regulation J, under which a paying bank would be 
required to settle for an item by as early as 8:30 a.m. and as soon 
as one half-hour after it receives the item from the Reserve Banks. 
The request for comment can be found at 78 FR 74041 (Dec. 10, 2013). 
Elsewhere in the Federal Register under Docket No. R-1473, the Board 
adopted these changes to Regulation J.
    \9\ The timing and frequency of presentments is subject to 
change by the Reserve Banks to align better with processing 
advancements and product type.
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    The Board also proposed to revise the posting rules for large-value 
check corrections and adjustments amounting to $1 million or more.\10\ 
In alignment with the proposed posting times for commercial check 
transactions, the Board proposed to move the settlement of large-value 
credit corrections and adjustments to begin at 8:30 a.m. and hourly 
thereafter on the half-hour depending on when the discrepancy is 
detected.\11\ Additionally, the Board proposed to post large-value 
debit corrections after the close of the Fedwire Funds Service, the 
same time as large-value debit adjustments are posted.\12\
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    \10\ Corrections are account entries made to correct 
discrepancies detected by a Reserve Bank during the initial 
processing of checks. Adjustments are account entries made to 
correct discrepancies detected by an institution after entries have 
posted to Federal Reserve accounts.
    \11\ Currently, credit corrections and adjustments amounting to 
$1 million or more post at 11:00 a.m. and hourly thereafter, 
coinciding with the current posting rules for commercial checks.
    \12\ Currently, debit corrections amounting to $1 million or 
more post at 11:00 a.m. and hourly thereafter.
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    The Board outlined four potential benefits from the proposed 
changes to its commercial check posting rules. First, the proposed 
posting rules would give earlier availability for items deposited with 
the Reserve Banks based on an institution's deposit behavior and would 
provide earlier availability for credit adjustments and corrections. 
Second, these changes would simplify the posting rule structure and, as 
a result, reduce the administrative burden on institutions and Reserve 
Banks. Third, the proposed rules would reduce the amount of intraday 
float currently provided by the Reserve Banks as a result of posting 
rules that do not adequately reflect current operations.\13\ Fourth, 
the proposals would align the posting rules with the significant shift 
over the past decade from paper to electronic check clearing. The 
proposed commercial check posting rules would conform better to the 
Board's principles for measuring daylight overdrafts, specifically the 
principles that discourage providing intraday float and encourage 
posting times to be as close as possible to the delivery of payments to 
the receiving institution.
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    \13\ Under the current posting rules, check credits and paper 
check debits begin posting at 11:00 a.m., whereas electronic check 
debits begin posting at 1:00 p.m. local time. As a result, the 
current measurement procedures provide intraday float, which has 
increased over time as electronic deposits and presentments have 
expanded.
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    As part of its posting rule proposals, the Board assessed the 
effect of the ACH debit and commercial check transaction posting rule 
changes on institutions' account balances and daylight overdraft fees 
both separately and combined. The Board recognized that the combined 
effect of the changes would, on average, reduce institutions' Federal 
Reserve account balances at 8:30 a.m. for the majority of master 
accounts that settle ACH and commercial check activity (94 percent of 
approximately 3,500 master accounts) based on second-quarter 2013 
payment data.\14\ Less than 1 percent of

[[Page 72114]]

these institutions, only 33 institutions, would incur overdraft fees in 
any of the six two-week reserve maintenance periods within the quarter 
analyzed. The low incidence of fees can be attributed to the current 
levels of pledged collateral and collateralized daylight overdrafts 
receiving a zero fee, the $150 fee waiver covering modest amounts of 
uncollateralized overdrafts, and the high balances held in Federal 
Reserve accounts. Twenty-eight of the 33 institutions are eligible to 
incur daylight overdrafts and could avoid paying higher fees by 
pledging (additional) collateral, holding higher balances and receiving 
interest on their Federal Reserve balances, or arranging early-morning 
funding. The remaining 5 institutions are ineligible to receive 
intraday credit and would need to increase funding in their accounts 
either by holding higher balances (and in some cases potentially 
receiving interest on their Federal Reserve balances) or by arranging 
early-morning funding.\15\
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    \14\ Although most institutions that maintain master accounts 
are involved in both ACH and commercial check activity, 
approximately half of these institutions settle their activity 
through a correspondent rather than their own master account.
    In connection with the 2013 proposal, analysis reflects activity 
at the master account level from the second quarter 2013 and is 
intended to be illustrative only. All institutions should consider 
their own historical payment activity when evaluating the effect of 
the posting rule changes.
    The average balance calculation only includes days in the second 
quarter of 2013 for which institutions had ACH debit or commercial 
check payment activity. The simulation of balances focused only on 
balances held at 8:30 a.m., while the analysis of fees and 
collateral took into account balances held and collateral pledged 
over the entire 21.5-hour Fedwire operating day.
    \15\ These institutions include bankers' banks and Federal Home 
Loan Banks, and not all would be eligible to earn interest on their 
Federal Reserve balances.
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    For both the ACH debit and commercial check posting rule proposals, 
the Board proposed an effective date of no less than six months from 
the publication of the revised PSR policy to give institutions 
sufficient time to make any necessary changes.

Principles for Future Posting Rules for the Reserve Banks' Same-Day ACH 
Service

    Given the Board's expectations that the Reserve Banks' same-day ACH 
service will evolve, with the potential establishment of additional 
processing cycles that require new posting times for settlement, the 
Board proposed establishing a set of principles that would be applied 
to any new same-day ACH posting rules.\16\ Under the proposal, the 
Board would generally request public comment on changes to the posting 
rules only when the changes deviate from the principles. Such 
principles would apply to the Reserve Banks' voluntary (opt-in) same-
day ACH service and to any future same-day ACH service, such as a 
universal same-day ACH service covering all participants in the ACH 
network.\17\ These principles, which would apply in addition to the 
current four posting-rules principles, were proposed as follows:\18\
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    \16\ The current processing schedule has a 2:00 p.m. deadline 
for submitting same-day, forward ACH transactions for settlement at 
5:00 p.m. Return same-day ACH transactions post at 5:30 p.m.
    \17\ In 2011, NACHA, a not-for-profit association that manages 
the development, administration, and governance of the ACH network 
for participating depository institutions, proposed amendments to 
its operating rules to enable ACH debit and credit transfers to be 
cleared and settled on the same day that they are originated. The 
expedited service would require the participation of all receiving 
institutions in the ACH network, going beyond the Reserve Banks' 
voluntary service. Although the majority of NACHA's voting members 
were in favor of the proposal, NACHA did not receive the 75 percent 
positive votes required for passage. NACHA is currently evaluating 
modifications to its earlier proposal to address concerns expressed 
regarding it.
    \18\ These four posting-rule principles are outlined in a 
footnote earlier in this document.
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    (1) For each same-day ACH transmission deadline, the Reserve Banks 
will establish expected distribution times for the same-day ACH files.
    a. The Reserve Banks will post settlement for same-day ACH debit 
transactions no earlier than 15 minutes after the Reserve Banks' 
expected distribution times for the associated same-day ACH file.
    b. The Reserve Banks will post settlement for ACH credit and debit 
transactions associated with a particular same-day ACH file 
distribution time at the same time.
    (2) The Reserve Banks will not post settlement for same-day ACH 
transactions between 6:30 p.m. and 8:30 a.m. on the next processing 
day.
    (3) The Reserve Banks will post settlement for same-day ACH 
transactions exchanged with another operator to support universal same-
day ACH during the operating hours for the Reserve Banks' National 
Settlement Service (NSS).\19\
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    \19\ NSS is a multilateral settlement service owned and operated 
by the Reserve Banks. The service is offered to institutions that 
settle for participants in clearinghouses, financial exchanges, and 
other clearing and settlement groups. Settlement agents, acting on 
behalf of those institutions in a settlement arrangement, 
electronically submit settlement files to the Reserve Banks. Files 
are processed upon receipt, and entries are automatically posted to 
the institutions' Federal Reserve accounts. The NSS file submission 
window is currently 8:30 a.m. to 5:00 p.m.
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    The Board proposed that the principles for future posting rules for 
the Reserve Banks' same-day ACH service would be effective on final 
approval.

Language Clarification in Section II.G.3

    The Board proposed a language clarification to part II of the PSR 
policy to explain more clearly the Reserve Banks' administration of the 
PSR policy as it relates to U.S. branches and agencies of foreign 
banking organizations (FBOs). The proposed language would clarify that 
U.S. branches and agencies of the same foreign bank (also referred to 
as an FBO family) are expected to manage their accounts so that the 
daylight overdraft position in each account does not exceed the 
capacity allocated to that account from the FBO family's net debit 
cap.\20\ In the past, the Reserve Banks monitored the master accounts 
of FBO families on a consolidated basis rather than requiring an FBO 
family to allocate its net debit cap if it wanted to incur daylight 
overdrafts in more than one account across the Federal Reserve.
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    \20\ The previous language in the PSR policy that related to the 
administration of multiple master accounts was somewhat ambiguous 
and could have been interpreted to allow the Federal Reserve to 
administer these accounts as is the current practice (separate 
administration for the multiple master accounts) or the previous 
practice (consolidated administration).
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    The Board proposed that the language change clarifying the Reserve 
Banks' administration of the policy for U.S. branches and agencies of 
FBOs would be effective on final approval.

III. Summary of Public Comments and Analysis

    The Board received thirteen comment letters in response to its PSR 
policy proposals.\21\ Comments were submitted by seven depository 
institution trade organizations, one private-sector clearing and 
settlement system, one commercial banking organization, one bankers' 
bank, one government-sponsored enterprise, and two individuals. Most 
commenters expressed support for the posting-rule proposals' intent to 
improve the speed and efficiency of the payment system but also raised 
specific concerns. The Board considered these comments in finalizing 
its changes to the PSR policy, as discussed in more detail below.
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    \21\ The comment letters are available at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
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Effect on Credit Unions and Small Institutions

    Five commenters, including four depository institution trade 
organizations and a bankers' bank, expressed concerns regarding the 
effect of the ACH debit and commercial check posting rule proposals on 
credit unions and small institutions.\22\ The

[[Page 72115]]

commenters were supportive of the proposals' intent but believed that 
credit unions and smaller institutions might be disproportionately 
affected and the proposals could lead to more-frequent and larger 
daylight overdrafts and associated fees. Given the concerns raised by 
commenters related to these types of institutions, the Board performed 
additional analysis on the effect of the combined ACH debit and 
commercial check proposals on these institutions based on second-
quarter 2013 payment data, consistent with the 2013 proposal. Of the 
approximately 3,500 master accounts maintained by institutions that 
settle ACH and commercial check activity, almost 800 (22 percent) are 
maintained by natural person credit unions. The combined posting rule 
proposals would, on average, reduce account balances held in Federal 
Reserve accounts at 8:30 a.m. for 94 percent of these institutions. Out 
of those credit unions that would experience lower balances, only 1 
credit union would incur higher daylight overdraft fees as a result of 
the proposals, and this credit union was already incurring fees under 
the current posting rules. The average increase in fees over the 
quarter under the proposed posting rules would be $132 per reserve 
maintenance period.\23\ To avoid fee increases, this credit union could 
pledge on average $7 million of additional collateral.\24\
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    \22\ Commenters were the Credit Union National Association, 
Georgia Credit Union League, Missouri Credit Union Association, 
National Association of Federal Credit Unions, and Midwest 
Independent Bank.
    \23\ The average calculation includes all reserve maintenance 
periods in the quarter.
    \24\ The average calculation only includes reserve maintenance 
periods for which the credit union required (additional) collateral.
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    Excluding natural person credit unions, an additional 2,500 master 
accounts of the approximately 3,500 master accounts maintained by 
institutions that settle ACH and commercial check activity are 
maintained by institutions with assets of less than $10 billion. The 
combined posting rule proposals would reduce, on average, account 
balances held in Federal Reserve accounts at 8:30 a.m. for 95 percent 
of these institutions. Out of those small institutions that would 
experience lower balances, approximately 1 percent, only 25 
institutions, would incur higher fees as a result of the proposals. 
More than one-third of the 25 institutions were already incurring fees 
under the current posting rules, and the average increase in fees over 
the quarter under the proposed posting rules would be $66 per reserve 
maintenance period. To avoid fee increases, these 25 institutions could 
pledge on average $10 million of (additional) collateral.
    The Board recognizes that many institutions are holding higher 
balances in their Federal Reserve accounts today, and although second-
quarter 2013 payment data indicate that only a very limited number of 
credit unions and institutions with assets less than $10 billion would 
incur higher fees under the proposal, over time, more of these 
institutions may need to alter their account management in response to 
the posting rule changes. Nevertheless, the Board believes that 
institutions have the tools to mitigate any adverse impact. For each 
two-week reserve maintenance period, institutions receive a $150 fee 
waiver, which is intended to reduce the burden on institutions that 
incur a small amount of uncollateralized daylight overdrafts. Many 
institutions have considerable room for additional daylight overdrafts 
under the waiver. In addition, institutions could post (additional) 
collateral, hold higher balances overnight, or arrange early morning 
funding. Interest on balances in Federal Reserve accounts would help 
compensate those institutions that hold higher balances overnight in 
their Federal Reserve accounts.

Effect on Institutions Ineligible for Access to Intraday Credit

    One commenter, representing the interests of five Federal Home Loan 
Banks without regular access to the discount window and thus without 
access to intraday credit under the PSR policy because of their 
classification as government-sponsored enterprises, expressed concern 
that the proposed posting rule for ACH debit transactions would be 
excessively burdensome for institutions ineligible for access to 
intraday credit.\25\ The commenter believed that, in addition to 
account management changes necessary to avoid incurring daylight 
overdrafts, such as holding higher balances overnight or finding 
alternative liquidity sources, the proposal might require these 
institutions to reduce their income-generating investments of overnight 
funds. The commenter also believed that, if adopted, the new posting 
rule for ACH debit transactions might cause institutions ineligible for 
access to intraday credit to re-evaluate the provision of ACH services 
to their customers and the fees associated with ACH services. The Board 
acknowledges that institutions ineligible for access to intraday credit 
may face additional challenges as a result of the proposed posting rule 
for ACH debit transactions. Of the 26 institutions ineligible to incur 
daylight overdrafts that participate in FedACH, 22 on average would 
experience lower balances at 8:30 a.m. under the proposed posting rule 
for ACH debit transactions. Only 4 of these 22 institutions, however, 
would incur daylight overdrafts according to the Board's analysis of 
second-quarter 2013 payment data. The average maximum overdrafts 
incurred by these 4 institutions over the quarter analyzed ranged from 
just under $100,000 to slightly below $100 million, with an average of 
$33 million across the 4 institutions. These institutions would need to 
arrange early-morning funding or hold higher balances overnight based 
on expected settlement of ACH activity.\26\ The Board understands that 
there may be costs associated with these actions, and institutions 
would need to weigh the costs and benefits of their account-management 
options. In addition, the Board acknowledges that some institutions 
that would experience lower balances might also need to manage their 
Federal Reserve accounts more closely to avoid daylight overdrafts 
under the proposed posting rule for ACH debit transactions.
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    \25\ Edge and agreement corporations, bankers' banks that have 
not waived their exemption from reserve requirements, limited-
purpose trust companies, government-sponsored enterprises including 
Federal Home Loan Banks (FHLBs), and international organizations do 
not have regular access to the discount window and are not permitted 
to incur daylight overdrafts in their Federal Reserve accounts. 
Voluntary collateralization of daylight overdrafts and the $150 fee 
waiver are not available to these institutions.
    \26\ Only one of the four institutions is eligible to earn 
interest on its Federal Reserve account balance.
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    A limited number of institutions that are ineligible for access to 
intraday credit may need to manage their Federal Reserve accounts to 
avoid daylight overdrafts as a result of the earlier posting time for 
ACH debit transfers. The Board believes that these institutions can 
reasonably manage their Federal Reserve accounts for activity settling 
at 8:30 a.m. given the availability of Fedwire Funds beginning at 9:00 
p.m. the previous calendar day. The Board believes that the associated 
burden of closer account management by a small number of institutions 
is outweighed by the benefits of the earlier posting time discussed 
earlier, including the long-run efficiency of the payment system.

Competitive Disparity Between Reserve Bank and Private-Sector Services

    In response to the Board's ACH debit and commercial check posting 
rule proposals, The Clearing House (TCH), which owns EPN, was 
supportive of the Board's intent to align and modernize the posting 
rules but expressed several

[[Page 72116]]

short-term and long-term competitive disparity concerns. Specifically, 
TCH was concerned that the posting rules might give the Reserve Banks 
an unfair advantage over private-sector clearing and settlement systems 
as a result of underlying legal differences and the limited settlement 
hours of NSS. TCH also stated that in the long run, the Board should 
ensure that all processes related to the posting and settlement of 
Reserve Bank priced services do not provide an advantage to Reserve 
Bank priced services over those of other clearing and settlement 
systems. TCH stated that, in the short-term, the posting rules should 
avoid disrupting the settlement of clearing and settlement systems, 
specifically EPN's 8:30 a.m. settlement of ACH transactions over NSS. 
Two additional commenters, U.S. Bank and NACHA, endorsed and emphasized 
the importance of addressing TCH's concerns related to the proposed 
posting rules for ACH debit and commercial check transactions.
    Reserve Bank priced services settle transactions in participants' 
Federal Reserve accounts through direct entries to the Federal 
Reserve's accounting system whereas private-sector clearing and 
settlement systems typically use Fedwire Funds, ACH, or NSS to settle 
transactions in participants' Federal Reserve accounts. The Board has 
traditionally encouraged the use of NSS for multilateral settlement 
arrangements to mitigate counterparty credit risk. The establishment of 
posting rules outside of the NSS operating day could potentially create 
competitive disparities between Reserve Bank and private-sector 
clearing and settlement systems. The posting rules proposed for ACH 
debit and commercial check transactions occur within the NSS file 
submission window, with the exception of the final posting time for 
commercial check transactions at 5:30 p.m. and the posting of a limited 
number of check debit and small-dollar credit corrections and 
adjustments after the close of Fedwire. The Reserve Banks will extend 
the NSS file submission window until 5:30 p.m. beginning in January 
2015. In regard to the posting of debit corrections and adjustments 
after the close of Fedwire Funds, such late posting ensures that an 
institution could not receive a debit correction or adjustment before 
the associated transaction posted. Given the minimal occurrence of 
large-value check corrections and adjustments and the low value of 
other check corrections and adjustments, the Board does not believe 
posting these transactions after the close of Fedwire creates a 
significant competitive disparity between Reserve Bank and private-
sector service providers.\27\
---------------------------------------------------------------------------

    \27\ In addition to debit corrections and adjustments, small-
dollar credit corrections and adjustments also post after the close 
of the Fedwire Funds Service.
---------------------------------------------------------------------------

    Additionally, TCH was concerned that the Reserve Banks' priced 
services personnel could view participants' Federal Reserve account 
balances, daylight overdraft capacity, and placement on the real-time 
monitor and use that information to restrict transactions or payment 
services as a means of managing potential settlement failures.\28\ 
Although the Reserve Banks' priced services personnel may have the 
ability to view account balances in the normal course of business 
operations, they do not have access to daylight overdraft capacity or 
risk control information. The Reserve Banks, like other clearing and 
settlement systems, use a range of risk-management tools that may 
include requiring minimum balances and collateral to manage the 
inherent risk of providing services, but Reserve Bank priced services 
personnel do not influence the application of these controls to be able 
to affect the outcome of settlement and do not have the ability to 
apply such controls.\29\
---------------------------------------------------------------------------

    \28\ For the limited number of institutions that may expose the 
Federal Reserve and other payment system participants to risk of 
loss, the Reserve Banks have implemented tools, including the 
Account Balance Monitoring System (ABMS), which can monitor 
institutions' payment activity in real time. ABMS verifies that 
institutions have sufficient balances to fund their Fedwire Funds, 
NSS, and certain ACH credit transactions as these payment files are 
submitted and processed. ABMS may reject these transactions if there 
are insufficient funds to cover the associated payments, regardless 
of whether the payment files are processed by the Reserve Banks or 
submitted by private-sector clearing and settlement systems through 
NSS.
    Institutions that are monitored in real time must fund the total 
amount of their commercial ACH credit originations in order for the 
transactions to be processed. If the Federal Reserve receives 
commercial ACH credit transactions from institutions monitored in 
real time after the scheduled close of the Fedwire Funds Service, 
these transactions are currently processed at 12:30 a.m. the next 
business day, or by the ACH deposit deadline, whichever is earlier. 
ABMS provides intraday account information to the Reserve Banks and 
institutions and is used primarily to give authorized Reserve Bank 
personnel a mechanism to control and monitor account activity for 
selected institutions. For more information on ACH transaction 
processing, refer to the ``ACH Settlement Day Finality Guide'' 
available through the Federal Reserve Financial Services Web site at 
http://www.frbservices.org.
    \29\ The Federal Reserve's ``Standards Related to Priced-Service 
Activities of the Federal Reserve Banks'' states that ``No Reserve 
Bank personnel with responsibility for priced services, unless 
acting in the capacity of president or first vice president, will 
also be responsible for monetary policy, bank supervision, or 
lending areas. Priced-service personnel will not make policy 
decisions affecting monetary policy, bank supervision, or lending 
matters.'' http://www.federalreserve.gov/paymentsystems/pfs_standards.htm.
---------------------------------------------------------------------------

    TCH encouraged the Board to ensure that, in the long run, all 
processes related to the posting and settlement for Reserve Bank priced 
services more broadly do not provide an advantage to the Reserve Banks 
over the private-sector clearing and settlement systems as a result of 
legal or settlement differences between providers. In the normal 
course, the Board will continue to assess Reserve Bank priced service 
proposals for new products, pricing, or posting rules to determine if 
any competitive advantage is derived from legal differences. In the 
case of settlement, the Board believes that potential competitive 
disparities can be addressed by expanding NSS operating hours to 
encompass more of the Fedwire Funds day. Private-sector clearing and 
settlement systems would then generally have the ability if needed to 
settle transactions in participants' Federal Reserve accounts over 
similar hours as Reserve Bank priced services.\30\
---------------------------------------------------------------------------

    \30\ Commercial check debit and small-dollar credit corrections 
and adjustments post after the close of Fedwire. Given the minimal 
occurrence of large-value check corrections and adjustments and the 
low value of other check corrections and adjustments, the Board does 
not believe posting these transactions after the close of Fedwire 
provides a competitive advantage to the Reserve Bank priced 
services.
---------------------------------------------------------------------------

    In the short run, TCH also requested that the Board delay the 
posting of ACH debit transactions until after 8:30 a.m. to avoid 
potentially disrupting EPN's 8:30 a.m. settlement over NSS.\31\ TCH 
believed that posting FedACH debit transactions at 8:30 a.m. could 
lower EPN participants' Federal Reserve account balances and increase 
the likelihood that a participant would have insufficient funds to 
settle its activity over EPN. The Board believes there are several 
factors that minimize the likelihood of such an outcome. The posting of 
ACH debit and credit transactions simultaneously at 8:30 a.m. may 
result in an increase in balances held by institutions that are large 
originators of ACH debit transactions; many of the largest ACH debit 
originators are EPN customers. The posting-rule change benefits not 
only FedACH participants that originate debit transactions but also EPN

[[Page 72117]]

customers that originate debit transactions destined to FedACH 
customers, which settle according to the Board's posting rules. 
Institutions currently hold high balances, and most have access to 
daylight overdrafts, with total daylight overdraft capacity calculated 
as multiples of capital for healthy institutions, to ensure the smooth 
functioning of the payment system. Although high balances may not 
remain, balances are not likely to drop precipitously in the near term, 
giving institutions time to adjust account-management activity, if 
needed, to ensure sufficient balances for all payment activity settling 
at 8:30 a.m. In addition, the Reserve Banks debit funds to cover ACH 
credit transactions for any institution on the highest level of control 
under the real-time monitor at the time of file submission, not when 
the payments settle under the posting rules. The Reserve Banks also 
will extend the NSS file submission window from 7:30 a.m. to 5:30 p.m., 
beginning in January 2015, and are evaluating potential further 
expansion of NSS hours in the future. Given these factors, the Board 
continues to believe that posting ACH debit transactions at 8:30 a.m. 
is the best option for the long-run safety and efficiency of the 
payment system.
---------------------------------------------------------------------------

    \31\ TCH also requested a clarification on how FedACH debit and 
credit transactions would post simultaneously at 8:30 a.m. Under the 
proposed posting rules, both ACH debit and credit transactions would 
be assigned the same posting time, 8:30 a.m., and post exactly at 
the same time for purposes of measuring an institution's daylight 
overdraft balance. Debit and credit transactions would not be netted 
before posting; however, because all transactions would post exactly 
at the same minute, the institution's account balance would only 
change by the net of its activity.
---------------------------------------------------------------------------

    The Board acknowledges some of the competitive concerns expressed 
by TCH and agrees with the need to have settlement options available at 
the same time to avoid introducing potential competitive disparities. 
In the near term, the Board believes that extending the NSS file 
submission window from 7:30 a.m. to 5:30 p.m. mitigates any adverse 
competitive effect of the ACH debit and commercial check posting rule 
changes. In the long run, the Board believes that any competitive 
disparity concerns resulting more broadly from Reserve Banks' ability 
to settle transactions outside of NSS hours can be addressed by further 
expanding NSS operating hours, and potentially functionality.
    The Board has adopted the posting rules for ACH debit and 
commercial check transactions as proposed.

Effective Dates for Posting Rule Proposals

    As part of its posting rules proposals for ACH debit and commercial 
check transactions, the Board proposed a six-month implementation 
period before the new posting rules would become effective. Five 
commenters, including four depository institution trade associations 
and one government-sponsored enterprise, indicated that an effective 
date six months after the publication of the final rule in the Federal 
Register would allow enough time to make necessary operational 
changes.\32\ One commenter, the National Association of Federal Credit 
Unions, requested a one-year implementation period to allow 
institutions additional time to determine if they were affected by the 
proposed posting rules and, if so, to raise capital. Given commenters' 
feedback, the Board is adopting an implementation period of no less 
than six months as proposed, and the posting rule changes for ACH debit 
and commercial check transactions will take effect on July 23, 2015. 
All items scheduled to settle on this date and after will post 
according to the new posting rule procedures, regardless of the date of 
deposit.
---------------------------------------------------------------------------

    \32\ Commenters were the American Bankers Association, Credit 
Union National Association, Georgia Credit Union league, Missouri 
Credit Union Association, and a joint letter from five Federal Home 
Loan Banks.
---------------------------------------------------------------------------

    Elsewhere in the Federal Register under Docket No. R-1473, the 
Board also adopted necessary related changes to the Board's Regulation 
J (12 CFR part 210) regarding the timing of when paying banks settle 
for check transactions presented to them by the Reserve Banks effective 
on July 23, 2015.

Principles for Future Posting Rules for the Reserve Banks' Same-Day ACH 
Service

    Two commenters, TCH and U.S. Bank, raised account-management and 
competitive disparity concerns regarding the second principle proposed 
by the Board for future posting rules for the Reserve Banks' same-day 
ACH service. The principle stated that the Reserve Banks would not post 
settlement for same-day ACH transactions between 6:30 p.m. and 8:30 
a.m. the next processing day. Commenters' concerns related to the 
Reserve Banks' ability to settle same-day ACH transactions until 6:30 
p.m. Specifically, the commenters were concerned that posting these 
transactions up to the close of the Fedwire Funds Service would not 
allow sufficient time between the settlement of same-day ACH 
transactions and the close of Fedwire Funds for institutions to settle 
other positions amongst themselves, and that the period between 5:00 
p.m. and 6:30 p.m. was outside of current NSS operating hours, putting 
any future private-sector same-day ACH service providers at a potential 
disadvantage relative to the Reserve Banks' service. To address this 
concern, the Board has modified the second principle to read, ``The 
Reserve Banks will not post settlement for same-day ACH transactions 
between the close of the Reserve Banks' National Settlement Service and 
8:30 a.m. the next processing day.'' The modified principle requires 
that settlement post within the NSS operating day before the close of 
Fedwire Funds. As a result of the modification, the third proposed 
posting rule principle, which stated that the Reserve Banks will post 
settlement for same-day ACH transactions exchanged with another 
operator to support universal same-day ACH during the operating hours 
for the Reserve Banks' NSS, is no longer needed. The Board has removed 
the third principle from the final principles for establishing future 
posting rules for the Reserve Banks' same-day ACH service. The revised 
principles are as follows:
    (1) For each same-day ACH transmission deadline, the Reserve Banks 
will establish expected distribution times for the same-day ACH files.
    a. The Reserve Banks will post settlement for same-day ACH debit 
transactions no earlier than 15 minutes after the Reserve Banks' 
expected distribution times for the associated same-day ACH file.
    b. The Reserve Banks will post settlement for ACH credit and debit 
transactions associated with a particular same-day ACH file 
distribution time at the same time.
    (2) Settlement will not post between the close of the Reserve 
Banks' National Settlement Service and 8:30 a.m. on the next processing 
day.
    In addition, five commenters, including one commercial banking 
organization, one private-sector clearing and settlement system, and 
three depository institution trade organizations indicated their 
preference that the Board always request comment on new same-day ACH 
posting rule proposals, regardless of whether these rules conformed to 
the posting rule principles.\33\ Commenters believed it was important 
to request comment, given that future material considerations may 
emerge that may not be addressed by the principles and any alterations 
to the current same-day ACH service may require institutions to make 
significant changes. The Board continues to believe that the principles 
provide a reasonable gating mechanism to enable flexibility in the 
evolution of same-day ACH while still constraining settlement to the 
NSS operating day during core business hours. The Board expects that

[[Page 72118]]

institutions can reasonably manage their Federal Reserve accounts 
during the core business day. The Board will assess each future posting 
rule for same-day ACH to determine if public comment may be warranted 
based on the specific circumstances and the environment at that time 
and in conformance with the Board's ``Principles for Pricing of Federal 
Reserve Bank Services.'' \34\ Those principles provide that that the 
Board will request comment on proposed fee or service changes that 
would have significant longer-run effects on the nation's payment 
system.
---------------------------------------------------------------------------

    \33\ Commenters were U.S. Bank, TCH, Credit Union National 
Association, Georgia Credit Union League, and Missouri Credit Union 
Association.
    \34\ The Board's ``Principles for Pricing of Federal Reserve 
Bank Services'' are available at http://www.federalreserve.gov/paymentsystems/pfs_principles.htm.
---------------------------------------------------------------------------

    The Board has adopted the same-day ACH principles as revised 
earlier, effective on December 5, 2014.

Language Clarification to Section II.G.3

    The Board received no comments on its proposed language 
clarification to part II of the PSR policy regarding operational 
changes in the administration of the policy as it relates to U.S. 
branches and agencies of FBOs. The Board has adopted the proposed 
language changes to section II.G.3 of the PSR policy as proposed 
effective on December 5, 2014.

IV. Additional Technical Revisions to the Posting Rules

    The Board has revised the PSR policy's posting rules to conform to 
the current deposit deadline for Treasury checks, postal money orders, 
local Federal Reserve Bank checks, and savings bond redemptions in 
separately sorted deposits, which post at 8:30 a.m. The posting rule 
currently reflects a previous deposit deadline for these items at 12:01 
a.m. local time or the local deposit deadline, whichever is later.\35\ 
Additionally, the Board has revised the posting rules to conform to the 
current deposit deadline for Treasury checks, postal money orders, and 
savings bond redemptions in separately sorted deposits which post at 
5:00 p.m. The posting rule currently reflects a previous deposit 
deadline for these items at 4:00 p.m.\36\ The Board is removing these 
obsolete deposit deadline references and, in both cases, indicating 
that the posting time will apply to items deposited by the latest 
applicable deposit deadline preceding the posting time.
---------------------------------------------------------------------------

    \35\ At this time, for posting at 8:30 a.m., the electronic 
deposit deadline is 5:00 a.m. the same day and the paper check 
deposit deadline is 7:00 p.m. on the previous business day.
    \36\ At this time, the deposit deadline is 10:00 a.m. for items 
posting at 5:00 p.m.
---------------------------------------------------------------------------

    As the updated deposit deadlines are already in effect for the 
transactions described earlier, institutions' Federal Reserve account 
balances are not affected by these updates to the incorrectly stated 
deposit deadlines in the posting rules. These revisions are effective 
on December 5, 2014.

V. Competitive Impact Analysis

    The Board conducts a competitive impact analysis when it considers 
a rule or policy change that may have a substantial effect on payment 
system participants, such as that being proposed for the posting of ACH 
debit and commercial check transactions. Specifically, the Board 
determines whether there would be a direct and material adverse effect 
on the ability of other service providers to compete with the Federal 
Reserve due to differing legal powers or due to the Federal Reserve's 
dominant market position deriving from such legal differences.\37\ The 
Board believes that there are no adverse effects resulting from the 
changes due to legal differences.
---------------------------------------------------------------------------

    \37\ Federal Reserve Regulatory Service, 7-145.2.
---------------------------------------------------------------------------

    Shifting the posting of ACH debit transactions to 8:30 a.m. brings 
the settlement of ACH debit transactions processed by the Reserve 
Banks' FedACH service in line with the private-sector ACH operator, 
EPN. The posting-rule change benefits not only FedACH participants that 
originate debit transactions but also EPN customers that originate 
debit transactions destined to FedACH customers, which settle according 
to the Board's posting rules. The Board also believes that the 
implementation window will provide ample time for institutions to make 
account-management changes, if any.
    Under Regulation J, the Reserve Banks have the legal ability to 
obtain same-day settlement for checks they present before the paying 
bank's banking day cutoff hour through ``auto-charge,'' that is, a 
direct debit to the Federal Reserve account of the paying bank or its 
correspondent settlement agent.\38\ Under the amendments to Regulation 
J explained elsewhere in this Federal Register, the Reserve Banks will 
have the right to debit the account of the paying bank or its 
correspondent settlement agent on the next clock hour or half-hour that 
is at least one half-hour after presentment. In contrast, when a 
private-sector bank presents a paper check by 8:00 a.m. for same-day 
settlement, Regulation CC requires the paying bank to settle for the 
check by sending a Fedwire Funds transfer to the presenting bank by the 
close of Fedwire (or by another agreed upon method).\39\ Thus, Reserve 
Banks may present checks later in the day for same-day settlement than 
private-sector banks. In addition, Reserve Banks may obtain settlement 
earlier in the day than private-sector collecting banks and, in turn, 
may pass credits for deposited checks earlier in the day without 
incurring significant intraday float.
---------------------------------------------------------------------------

    \38\ 12 CFR 210.9(b)(1) and (b)(5).
    \39\ 12 CFR 229.36(f)(2).
---------------------------------------------------------------------------

    In March 1998, the Board requested comment on whether the legal 
differences between rights of the Reserve Banks and the private-sector 
presenting banks provided the Reserve Banks with a competitive 
advantage and whether the Board should take action to reduce the 
differences. Commenters generally concluded that the costs of further 
changes outweighed any advantage of the Reserve Banks.\40\ In 
particular, commenters noted the efficiency of the Reserve Bank's auto-
charge process for paying banks, and stated that moving the private-
sector presentment deadline to later in the day or eliminating the 
direct debit of Federal Reserve accounts for check presentments would 
result in higher costs to paying banks and their business customers in 
terms of account management, settlement funds transfer fees, and 
shortened processing windows, and that those costs would outweigh the 
benefits gained by presenting banks. Based on an analysis of the 
comments, the Board took no further action.
---------------------------------------------------------------------------

    \40\ The request for comment and the subsequent notice of the 
Board's decision can be found, respectively, at 63 FR 12700 (March 
16, 1998) and 63 FR 68701 (December 14, 1998).
---------------------------------------------------------------------------

    For the vast majority of checks presented by private-sector banks 
today, which are presented in electronic form, settlement occurs as 
agreed between the presenting bank and paying bank. Banks may 
determine, as part of the agreement between the presenting bank and 
paying bank, the time at which settlement for checks is required to be 
funded. Furthermore, for collecting banks and paying banks that opt to 
use a check clearinghouse, the clearinghouses have the option to use 
NSS to effect settlement of checks or may settle by directing their 
members to initiate funds transfers over the Reserve Banks' Fedwire 
Funds Service. Beginning in January 2015, the NSS file submission 
window will be 7:30 a.m. to 5:30 p.m. Fedwire Funds operating hours 
begin at 9:00 p.m. the previous calendar day and end at 6:30 p.m. As 
adopted in this Federal Register document, effective on July 23, 2015, 
the Reserve Banks will settle commercial check transactions at

[[Page 72119]]

8:30 a.m., 1:00 p.m., and 5:30 p.m. and debits from corrections and 
adjustments amounting to $1 million or more will settle after the close 
of Fedwire Funds Service. A limited number of commercial check debit 
and small-dollar credit corrections and adjustments post after the 
close of Fedwire. Such late posting ensures that institutions only 
benefit intraday from detected processing errors and that an 
institution could not receive a debit correction or adjustment before 
the associated check transaction posted. Given the minimal occurrence 
of large-value check corrections and adjustments and the low value of 
other check corrections and adjustments, the Board does not believe 
posting these transactions after the close of Fedwire creates a direct 
and material competitive disparity between Reserve Bank and private-
sector service providers.\41\
---------------------------------------------------------------------------

    \41\ In addition to debit corrections and adjustments, small-
dollar credit corrections and adjustments also post after the close 
of Fedwire Funds.
---------------------------------------------------------------------------

    Under the adopted posting rules, the bulk of the Reserve Banks' 
postings of credits to depositing banks and debits to paying banks for 
commercial check transactions will shift to earlier in the day. The 
value of checks a bank sends to the Reserve Banks could be higher or 
lower than the value it receives from the Reserve Banks. As a result, 
the earlier posting of commercial check transactions may be viewed as 
more or less attractive, depending on whether the value of an 
institution's check credits is higher or lower than the value of its 
check debits. Further, private-sector banks can achieve improvements 
similar to those provided by the proposed changes through private 
agreements among participants, as well as the use of the NSS.
    Given the factors discussed earlier, the Board does not believe 
that the changes to the posting rules would have a direct and material 
adverse effect on other service providers to compete effectively with 
Reserve Banks in providing similar services.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR part 1320 appendix A.1), the Board reviewed the PSR policy 
changes it is considering under the authority delegated to the Board by 
the Office of Management and Budget. No collection of information 
pursuant to the Paperwork Reduction Act are contained in the policy 
statement.

VII. Federal Reserve Policy on Payment System Risk

Technical Revisions to the Posting Rules

    Effective on December 5, 2014, the ``Federal Reserve Policy on 
Payment System Risk'' section II.A. under the heading ``Procedures for 
Measuring Daylight Overdrafts'' and the subheadings ``Post at 8:30 a.m. 
eastern time'' and ``Post at 5:00 p.m. eastern time'' is amended as 
follows.
    Post at 8:30 a.m. eastern time:
+/- Term deposit maturities and accrued interest
+/- Government and commercial ACH credit transactions \42\
---------------------------------------------------------------------------

    \42\ Institutions that are monitored in real time must fund the 
total amount of their commercial ACH credit originations before the 
transactions are processed by the Reserve Banks. If the Federal 
Reserve receives commercial ACH credit transactions from 
institutions monitored in real time after the scheduled close of the 
Fedwire Funds Service, these transactions are currently processed at 
12:30 a.m. the next business day, or by the ACH deposit deadline, 
whichever is earlier. The Account Balance Monitoring System provides 
intraday account information to the Reserve Banks and institutions 
and is used primarily to give authorized Reserve Bank personnel a 
mechanism to control and monitor account activity for selected 
institutions. For more information on ACH transaction processing, 
refer to the ACH Settlement Day Finality Guide available through the 
Federal Reserve Financial Services Web site at http://www.frbservices.org.
---------------------------------------------------------------------------

+ Treasury checks, postal money orders, local Federal Reserve Bank 
checks, and savings bond redemptions in separately sorted deposits; 
these items must be deposited by the latest applicable deposit deadline 
preceding the posting time.
+ Advance-notice Treasury investments
- Penalty assessments for tax payments from the Treasury Investment 
Program (TIP).\43\
---------------------------------------------------------------------------

    \43\ The Reserve Banks will identify and notify institutions 
with Treasury-authorized penalties on Thursdays. In the event that 
Thursday is a holiday, the Reserve Banks will identify and notify 
institutions with Treasury-authorized penalties on the following 
business day. Penalties will then be posted on the business day 
following notification.
---------------------------------------------------------------------------

    Post at 5:00 p.m. eastern time:
+/- FedACH SameDay Service transactions
+/- Immediate settlement ACH transactions; these transactions include 
ACH return items and check-truncation items.
+ Treasury checks, postal money orders, and savings bond redemptions in 
separately sorted deposits; these items must be deposited by the latest 
applicable deposit deadline preceding the posting time.
+ Local Federal Reserve Bank checks; these items must be presented 
before 3:00 p.m. eastern time

Revisions to Section II.G.3 of the PSR Policy

    Effective December 5, 2014, section II.G.3 of the ``Federal Reserve 
Policy on Payment System Risk'' is amended to clarify the Reserve 
Banks' administration of the policy for U.S. branches and agencies of 
foreign banking organizations as follows.
3. Multi-District Institutions
    An institution maintaining merger-transition accounts or an Edge or 
agreement corporation that accesses Fedwire through master accounts in 
more than one Federal Reserve District is expected to manage its 
accounts so that the total daylight overdraft position across all 
accounts does not exceed the institution's net debit cap. One Reserve 
Bank will act as the administrative Reserve Bank and will have overall 
risk-management responsibilities for an institution maintaining master 
accounts in more than one Federal Reserve District. For domestic 
institutions that have branches in multiple Federal Reserve Districts, 
the administrative Reserve Bank generally will be the Reserve Bank 
where the head office of the bank is located.
    U.S. branches and agencies of the same foreign bank (also referred 
to as an FBO family) are assigned one net debit cap per FBO family. FBO 
families that access Fedwire through master accounts in more than one 
Federal Reserve District are expected to manage their accounts so that 
the daylight overdraft position in each account does not exceed the 
capacity allocated to that account from the FBO family's net debit cap. 
The administrative Reserve Bank generally is the Reserve Bank that 
exercises the Federal Reserve's oversight responsibilities under the 
International Banking Act.\44\ The administrative Reserve Bank, in 
consultation with the management of the foreign bank's U.S. operations 
and with Reserve Banks in whose territory other U.S. agencies or 
branches of the same foreign bank are located, may recommend that these 
agencies and branches not be permitted to incur overdrafts in Federal 
Reserve accounts. Alternatively, the administrative Reserve Bank, after 
similar consultation, may recommend that all or part of the foreign 
family's net debit cap be allocated to the Federal Reserve accounts of 
agencies or branches that are located outside of the administrative 
Reserve Bank's District; in this case, the Reserve Bank in whose 
Districts those agencies or branches are

[[Page 72120]]

located will be responsible for administering all or part of this 
policy.\45\
---------------------------------------------------------------------------

    \44\ 12 U.S.C. 3101-3108.
    \45\ As in the case of Edge and agreement corporations and their 
branches, with the approval of the designated administrative Reserve 
Bank, a second Reserve Bank may assume the responsibility for 
administering this policy regarding particular foreign branch and 
agency families. This would often be the case when the payments 
activity and national administrative office of the foreign branch 
and agency family is located in one District, while the oversight 
responsibility under the International Banking Act is in another 
District. If a second Reserve Bank assumes management 
responsibility, monitoring data will be forwarded to the designated 
administrator for use in the supervisory process.
---------------------------------------------------------------------------

Changes to the Posting Rules for ACH Debit and Commercial Check 
Transactions

    Effective on July 23, 2015, the ``Federal Reserve Policy on Payment 
System Risk'' section II.A. under the heading ``Procedures for 
Measuring Daylight Overdrafts'' is amended as follows.

Procedures for Measuring Daylight Overdrafts \46\
---------------------------------------------------------------------------

    \46\ This schedule of posting rules does not affect the 
overdraft restrictions and overdraft-measurement provisions for 
nonbank banks established by the Competitive Equality Banking Act of 
1987 and the Board's Regulation Y (12 CFR 225.52).
---------------------------------------------------------------------------

Opening Balance (Previous Day's Closing Balance)
    Post at 8:30 a.m. eastern time:
+/- Term deposit maturities and accrued interest
+/- Government and commercial ACH transactions \47\
---------------------------------------------------------------------------

    \47\ Institutions that are monitored in real time must fund the 
total amount of their commercial ACH credit originations in order 
for the transactions to be processed. If the Federal Reserve 
receives commercial ACH credit transactions from institutions 
monitored in real time after the scheduled close of the Fedwire 
Funds Service, these transactions are currently processed at 12:30 
a.m. the next business day, or by the ACH deposit deadline, 
whichever is earlier. The Account Balance Monitoring System provides 
intraday account information to the Reserve Banks and institutions 
and is used primarily to give authorized Reserve Bank personnel a 
mechanism to control and monitor account activity for selected 
institutions. For more information on ACH transaction processing, 
refer to the ACH Settlement Day Finality Guide available through the 
Federal Reserve Financial Services Web site at http://www.frbservices.org.
---------------------------------------------------------------------------

+/- Commercial check transactions, including returned checks \48\
---------------------------------------------------------------------------

    \48\ For the three commercial check transaction posting times, 
the Reserve Banks will post credits and debits to institutions' 
accounts for checks deposited and presented, respectively, at least 
30 minutes before the posting time.
---------------------------------------------------------------------------

+ Treasury checks, postal money orders, local Federal Reserve Bank 
checks, and savings bond redemptions in separately sorted deposits; 
these items must be deposited by the latest applicable deposit deadline 
preceding the posting time.
+ Advance-notice Treasury investments
- Penalty assessments for tax payments from the Treasury Investment 
Program (TIP).\49\
---------------------------------------------------------------------------

    \49\ The Reserve Banks will identify and notify institutions 
with Treasury-authorized penalties on Thursdays. In the event that 
Thursday is a holiday, the Reserve Banks will identify and notify 
institutions with Treasury-authorized penalties on the following 
business day. Penalties will then be posted on the business day 
following notification.
---------------------------------------------------------------------------

    Post at 8:30 a.m. eastern time and hourly, on the half-hour, 
thereafter:
+/- Main account administrative investment or withdrawal from TIP
+/- Special Direct Investment (SDI) administrative investment or 
withdrawal from TIP
+ 31 CFR part 202 account deposits from TIP
+ Credit corrections amounting to $1 million or more \50\
---------------------------------------------------------------------------

    \50\ Corrections are account entries made to correct 
discrepancies detected by a Reserve Bank during the initial 
processing of checks.
---------------------------------------------------------------------------

+ Credit adjustments amounting to $1 million or more \51\
---------------------------------------------------------------------------

    \51\ Adjustments are account entries made to correct 
discrepancies detected by an institution after entries have posted 
to Federal Reserve accounts.
---------------------------------------------------------------------------

- Uninvested paper tax (PATAX) deposits from TIP
- Main account balance limit withdrawals from TIP
- Collateral deficiency withdrawals from TIP
- 31 CFR part 202 deficiency withdrawals from TIP
    Post at 11:00 a.m. eastern time and hourly thereafter:
+ Currency and coin deposits
    Post at 1:00 p.m. eastern time:
+/- Commercial check transactions, including returned checks
    Post at 5:30 p.m. eastern time:
+/- FedACH SameDay Service return transactions.
+/- Commercial check transactions, including returned checks
    Post after the close of Fedwire Funds Service:
+/- 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; 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.
    Equals:
    Closing Balance.
* * * * *

    Dated: December 1, 2014.

    By order of the Board of Governors of the Federal Reserve 
System,
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-28664 Filed 12-4-14; 8:45 am]
BILLING CODE 6210-01-P