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Federal Reserve Board requests comment on proposed changes to the Payment System Risk Policy

December 12, 2017 / Source: FRB

Press Release

December 11, 2017

Federal Reserve Board requests comment on proposed changes to the Payment System Risk Policy

For release at 12:00 p.m. EST

The Federal Reserve Board on Monday requested public comment on proposed policy changes to procedures governing the provision of intraday credit to U.S. branches and agencies of foreign banking organizations (FBOs). The changes are intended to refine the methods for determining the level of intraday credit that these branches and agencies can receive from the Federal Reserve Banks.

Part II of the Board's Payment System Risk Policy (PSR policy) governs the provision of intraday credit (or daylight overdrafts) in accounts at the Reserve Banks. The PSR policy recognizes that the Federal Reserve has an important role in providing intraday balances and credit to foster the smooth functioning of the overall payment system and also seeks to control the risks assumed by the Reserve Banks in providing this intraday credit, which is made available to meet temporary needs at healthy depository institutions.

Although the PSR policy's intraday credit provisions generally apply similarly to FBOs and U.S. institutions, certain procedures for determining the level of intraday credit that FBOs can receive from the Federal Reserve Banks differ. Where the procedures are different for FBOs, the PSR policy relies on an FBO's strength of support assessment (SOSA) ranking and its status as a financial holding company (FHC) to determine the level of intraday credit that U.S. branches and agencies of the FBO can receive from the Federal Reserve Banks. The Board has announced that the SOSA ranking will be eliminated; additionally, the Board believes that an FBO's status as an FHC should not affect the FBO's access to intraday credit.

The Board proposes to adopt alternative methods for determining FBOs' level of intraday credit that do not rely on SOSA rankings or FHC status. The Board believes that FBOs' resulting net debit caps would be better tailored to FBOs' use of intraday credit and would not constrain FBOs' U.S. operations.

Comments on the proposed changes to the PSR policy are requested within 60 days of publication in the Federal Register, which is expected shortly.

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Last Update: December 12, 2017