82 FR 40473 - Policy on Payment System Risk

FEDERAL RESERVE SYSTEM

Federal Register Volume 82, Issue 164 (August 25, 2017)

Page Range		40473-40474
FR Document		2017-17987
The Board of Governors of the Federal Reserve System (Board) has revised part II of the Federal Reserve Policy on Payment System Risk (PSR policy) related to the transaction posting times used for measuring balances intraday in institutions' accounts at the Federal Reserve Banks (Reserve Banks) to conform to enhancements to the Reserve Banks' same-day automated clearinghouse (ACH) service.
Federal Register, Volume 82 Issue 164 (Friday, August 25, 2017)
[Federal Register Volume 82, Number 164 (Friday, August 25, 2017)]
[Rules and Regulations]
[Pages 40473-40474]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-17987]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 82, No. 164 / Friday, August 25, 2017 / Rules 
and Regulations

[[Page 40473]]



FEDERAL RESERVE SYSTEM

12 CFR Chapter II

[Docket No. OP-1572]


Policy on Payment System Risk

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 revised part II of the Federal Reserve Policy on Payment System 
Risk (PSR policy) related to the transaction posting times used for 
measuring balances intraday in institutions' accounts at the Federal 
Reserve Banks (Reserve Banks) to conform to enhancements to the Reserve 
Banks' same-day automated clearinghouse (ACH) service.

DATES: Effective Date: September 15, 2017.

FOR FURTHER INFORMATION CONTACT: Jeffrey D. Walker, Assistant Director 
(202-721-4559), Jason Hinkle, Manager, Financial Risk Management (202-
912-7805), or Ian C.B. Spear, Senior Financial Services Analyst (202-
452-3959), Division of Reserve Bank Operations and Payment Systems; for 
users of Telecommunication Devices for the Deaf (TDD) only, contact 
202-263-4869; Board of Governors of the Federal Reserve System, 20th 
and C Streets NW., Washington, DC 20551.

SUPPLEMENTARY INFORMATION: 

Background

    The Board's PSR policy establishes the procedures for measuring 
balances intraday in institutions' accounts at the Reserve Banks by 
setting forth the times at which credits and debits for various types 
of transactions are posted to those accounts (``the posting 
rules'').\1\ The application of these posting rules determines an 
institution's intraday account balance and whether it has incurred a 
negative balance (daylight overdraft).
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    \1\ The Board's PSR policy is available at https://www.federalreserve.gov/paymentsystems/files/psr_policy.pdf.
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    On September 23, 2015, the Board approved enhancements to the 
Reserve Banks' FedACH[supreg] SameDay Service (FedACH SameDay Service) 
in light of amendments to NACHA--The Electronic Payments Association's 
Operating Rules and Guidelines.\2\ The first phase of the FedACH 
SameDay Service provided for same-day settlement of ACH credit 
transactions. As part of the implementation of the second phase of the 
FedACH SameDay Service, forward ACH debit transactions will be eligible 
for same-day settlement effective September 15, 2017.\3\ The PSR 
policy's posting rules for same-day ACH return transactions are being 
updated to conform to the associated changes in the Reserve Banks' 
service as described below.
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    \2\ 80 FR 58248 (Sep. 28, 2015). NACHA, whose membership 
consists of insured financial institutions and regional payment 
associations, establishes network-wide ACH rules through its 
Operating Rules and Guidelines. As an ACH operator, the Reserve 
Banks, through Operating Circular 4, incorporate NACHA's Operating 
Rules and Guidelines as rules that govern clearing and settlement of 
commercial ACH items by the Reserve Banks, except for those 
provisions specifically excluded in the Operating Circular.
    \3\ The NACHA amendments, as incorporated into Operating 
Circular 4, become effective in three phases, beginning with same-
day credits in September 2016, same-day debits in 2017, and faster 
funds availability in March 2018. Next-day settlement remains 
available.
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    Today, the Reserve Banks' offer an ACH derived returns function for 
institutions that connect to the Reserve Banks' ACH service through the 
FedLine Web[supreg] access solution. The derived return function allows 
an institution to generate returns via FedLine Web using information 
from the forward ACH items that an institution receives through FedACH. 
The function is designed primarily for institutions that lack the 
software or processing capability to generate returns themselves.
    The derived returns function uses information not available until 
the day after the processing day for forward ACH item and thus cannot 
be used to generate returns of items settled the same processing day. 
Given the phase two expansion of the FedACH SameDay Service to include 
ACH debits, the Reserve Banks will provide users of the derived return 
function an interim solution to return certain high-value same-day 
forward items for settlement on the same processing day. Specifically, 
the Reserve Banks intend to introduce a same-day paper return option 
for same-day forward entries greater than $10,000. This option will be 
added to the existing FedACH Facsimile Exception Return/NOC service.\4\ 
Return items initiated as part of that option will post at 5:30 p.m. on 
the same day as the forward item was processed.\5\ The introduction of 
the new paper-return option for same-day forward entries is intended to 
serve as an interim solution while the Reserve Banks complete their ACH 
platform modernization project. Once completed, the Reserve Banks 
anticipate providing users of FedLine Web derived returns the automated 
ability to derive returns for same-day forward entries to be settled 
the same processing day.
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    \4\ The FedACH Facsimile Exception Return/NOC service allows 
institutions to submit return/NOC items via a paper form when 
electronic methods are otherwise unavailable.
    \5\ ACH return items not initiated as part of the derived 
returns function but processed by the Reserve Banks will continue to 
post at the next available posting time or following the settlement 
of the associated forward transaction. Thus, credits and debits for 
return items will continue to post at 8:30 a.m., 1:00 p.m., 5:00 
p.m., or 5:30 p.m., with the specific posting time determined by 
when the item is received by the Reserve Banks.
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    In addition, the Board is updating the PSR policy to clarify that 
paper returns and paper notifications of change (NOCs) of prior-dated 
items will only post at 5:00 p.m., removing reference to an 8:30 a.m. 
posting time. These paper items are manually processed by Reserve Bank 
staff during normal business hours and not overnight, which an 8:30 
a.m. posting time would require. FedLine Web returns and FedLine Web 
NOCs will continue to post at 8:30 a.m. and 5:00 p.m., depending on 
when the item is received by Reserve Banks.

Policy on Payment System Risk

    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,'' ``Post by 1:00 p.m. 
eastern time,'' ``Post at 5:00 p.m. eastern time,'' and ``Post at 5:30 
p.m. eastern time,'' is amended as follows:

    Post at 8:30 a.m. eastern time:

+/- Term deposit maturities and accrued interest

[[Page 40474]]

+/- Government and commercial ACH transactions, including return items 
\6\
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    \6\ With the exception of paper returns and paper notifications 
of change of prior-dated items that only post at 5:00 p.m.; and 
paper returns of same-day forward items that only post at 5:30 p.m.
     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 will be 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.
    The federal government will not participate in the same-day ACH 
service upon initial implementation in September 2016. ACH forward 
transactions originated or received by the federal government will 
not be eligible for same-day settlement and will settle on the next 
business day, or on a future date as indicated by the effective 
settlement date.
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+/- Commercial check transactions, including returned checks \7\
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    \7\ 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.
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+ 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).\8\

    \8\ 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.
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    Post by 1:00 p.m. eastern time:

+/- Commercial check transactions, including returned checks
+/- FedACH SameDay Service transactions, including return items \9\
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    \9\ With the exception of paper returns and paper notifications 
of change (NOCs) of prior-dated items that only post at 5:00 p.m.; 
paper returns of same-day forward items that only post at 5:30 p.m.; 
and FedLine Web returns and FedLine Web NOCs that only post at 8:30 
a.m. and 5:00 p.m., depending on when the item is received by 
Reserve Banks.
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+ Same-day Treasury investments.

    Post at 5:00 p.m. eastern time:

+/- FedACH SameDay Service transactions, including return items \10\
---------------------------------------------------------------------------

    \10\ With the exception of paper returns of same-day forward 
items that only post at 5:30 p.m.
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+ 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

    Post at 5:30 p.m. eastern time:

+/- FedACH SameDay Service return transactions \11\
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    \11\ With the exception of paper returns and paper notifications 
of change (NOCs) of prior-dated items that only post at 5:00 p.m.; 
and FedLine Web returns and FedLine Web NOCs that only post at 8:30 
a.m. and 5:00 p.m., depending on when the item is received by 
Reserve Banks.
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+/- Commercial check transactions, including returned checks

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Director of the Division of Reserve Bank 
Operations and Payment Systems under delegated authority, August 21, 
2017.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2017-17987 Filed 8-24-17; 8:45 am]
 BILLING CODE P
40473

Rules and Regulations Federal Register
Vol. 82, No. 164

Friday, August 25, 2017

This section of the FEDERAL REGISTER account balance and whether it has same-day forward items for settlement
contains regulatory documents having general incurred a negative balance (daylight on the same processing day.
applicability and legal effect, most of which overdraft). Specifically, the Reserve Banks intend
are keyed to and codified in the Code of On September 23, 2015, the Board to introduce a same-day paper return
Federal Regulations, which is published under approved enhancements to the Reserve option for same-day forward entries
50 titles pursuant to 44 U.S.C. 1510. Banks’ FedACH® SameDay Service greater than $10,000. This option will be
The Code of Federal Regulations is sold by (FedACH SameDay Service) in light of added to the existing FedACH Facsimile
the Superintendent of Documents. amendments to NACHA—The Exception Return/NOC service.4 Return
Electronic Payments Association’s items initiated as part of that option will
Operating Rules and Guidelines.2 The post at 5:30 p.m. on the same day as the
FEDERAL RESERVE SYSTEM first phase of the FedACH SameDay forward item was processed.5 The
Service provided for same-day introduction of the new paper-return
12 CFR Chapter II settlement of ACH credit transactions. option for same-day forward entries is
[Docket No. OP–1572] As part of the implementation of the intended to serve as an interim solution
second phase of the FedACH SameDay while the Reserve Banks complete their
Policy on Payment System Risk Service, forward ACH debit transactions ACH platform modernization project.
will be eligible for same-day settlement Once completed, the Reserve Banks
AGENCY: Board of Governors of the effective September 15, 2017.3 The PSR anticipate providing users of FedLine
Federal Reserve System. policy’s posting rules for same-day ACH Web derived returns the automated
ACTION: Policy statement. return transactions are being updated to ability to derive returns for same-day
SUMMARY: The Board of Governors of the conform to the associated changes in the forward entries to be settled the same
Federal Reserve System (Board) has Reserve Banks’ service as described processing day.
revised part II of the Federal Reserve below. In addition, the Board is updating the
Policy on Payment System Risk (PSR Today, the Reserve Banks’ offer an PSR policy to clarify that paper returns
ACH derived returns function for and paper notifications of change
policy) related to the transaction posting
institutions that connect to the Reserve (NOCs) of prior-dated items will only
times used for measuring balances
Banks’ ACH service through the post at 5:00 p.m., removing reference to
intraday in institutions’ accounts at the
FedLine Web® access solution. The an 8:30 a.m. posting time. These paper
Federal Reserve Banks (Reserve Banks)
derived return function allows an items are manually processed by
to conform to enhancements to the
institution to generate returns via Reserve Bank staff during normal
Reserve Banks’ same-day automated
FedLine Web using information from business hours and not overnight,
clearinghouse (ACH) service.
the forward ACH items that an which an 8:30 a.m. posting time would
DATES: Effective Date: September 15, institution receives through FedACH. require. FedLine Web returns and
2017. The function is designed primarily for FedLine Web NOCs will continue to
FOR FURTHER INFORMATION CONTACT: institutions that lack the software or post at 8:30 a.m. and 5:00 p.m.,
Jeffrey D. Walker, Assistant Director processing capability to generate returns depending on when the item is received
(202–721–4559), Jason Hinkle, Manager, themselves. by Reserve Banks.
Financial Risk Management (202–912– The derived returns function uses
information not available until the day Policy on Payment System Risk
7805), or Ian C.B. Spear, Senior
Financial Services Analyst (202–452– after the processing day for forward The Federal Reserve Policy on
3959), Division of Reserve Bank ACH item and thus cannot be used to Payment System Risk, section II.A,
Operations and Payment Systems; for generate returns of items settled the under the heading ‘‘Procedures for
users of Telecommunication Devices for same processing day. Given the phase Measuring Daylight Overdrafts’’ and the
the Deaf (TDD) only, contact 202–263– two expansion of the FedACH SameDay subheadings ‘‘Post at 8:30 a.m. eastern
4869; Board of Governors of the Federal Service to include ACH debits, the time,’’ ‘‘Post by 1:00 p.m. eastern time,’’
Reserve System, 20th and C Streets Reserve Banks will provide users of the ‘‘Post at 5:00 p.m. eastern time,’’ and
NW., Washington, DC 20551. derived return function an interim ‘‘Post at 5:30 p.m. eastern time,’’ is
SUPPLEMENTARY INFORMATION: solution to return certain high-value amended as follows:
Post at 8:30 a.m. eastern time:
Background 2 80 FR 58248 (Sep. 28, 2015). NACHA, whose
+/¥ Term deposit maturities and
membership consists of insured financial
The Board’s PSR policy establishes institutions and regional payment associations, accrued interest
the procedures for measuring balances establishes network-wide ACH rules through its
intraday in institutions’ accounts at the Operating Rules and Guidelines. As an ACH 4 The FedACH Facsimile Exception Return/NOC

Reserve Banks by setting forth the times operator, the Reserve Banks, through Operating service allows institutions to submit return/NOC
Circular 4, incorporate NACHA’s Operating Rules items via a paper form when electronic methods are
at which credits and debits for various and Guidelines as rules that govern clearing and otherwise unavailable.
pmangrum on DSK3GDR082PROD with RULES

types of transactions are posted to those settlement of commercial ACH items by the Reserve 5 ACH return items not initiated as part of the

accounts (‘‘the posting rules’’).1 The Banks, except for those provisions specifically derived returns function but processed by the
application of these posting rules excluded in the Operating Circular. Reserve Banks will continue to post at the next
3 The NACHA amendments, as incorporated into available posting time or following the settlement
determines an institution’s intraday Operating Circular 4, become effective in three of the associated forward transaction. Thus, credits
phases, beginning with same-day credits in and debits for return items will continue to post at
1 The Board’s PSR policy is available at https:// September 2016, same-day debits in 2017, and 8:30 a.m., 1:00 p.m., 5:00 p.m., or 5:30 p.m., with
www.federalreserve.gov/paymentsystems/files/psr_ faster funds availability in March 2018. Next-day the specific posting time determined by when the
policy.pdf. settlement remains available. item is received by the Reserve Banks.

VerDate Sep<11>2014 13:35 Aug 24, 2017 Jkt 241001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\25AUR1.SGM 25AUR1
Document Created: 2018-10-24 12:40:14
Document Modified: 2018-10-24 12:40:14
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Policy statement.
Dates		Effective Date: September 15, 2017.
Contact		Jeffrey D. Walker, Assistant Director (202-721-4559), Jason Hinkle, Manager, Financial Risk Management (202- 912-7805), or Ian C.B. Spear, Senior Financial Services Analyst (202- 452-3959), Division of Reserve Bank Operations and Payment Systems; for users of Telecommunication Devices for the Deaf (TDD) only, contact 202-263-4869; Board of Governors of the Federal Reserve System, 20th and C Streets NW., Washington, DC 20551.
FR Citation		82 FR 40473