Federal Reserve Release, Press Release; image with eagle logo links to home page
Release Date: August 20, 2002

For immediate release

The Federal Reserve Board announced on Tuesday that it will not, over the near term, incorporate two policy options into its longer-term Payments System Risk (PSR) policy plan. The Board will, however, continue to analyze the benefits and potential drawbacks of a two-tiered pricing regime for daylight overdrafts.

For the foreseeable future, the Board will not pursue a policy that: 1) lowers self-assessed net debit caps and eliminates two-week average caps or; 2) rejects all payments with settlement-day finality that would cause an institution to exceed its daylight overdraft capacity level.

A daylight overdraft occurs when a depository institution's Federal Reserve account is in a negative position at any time during the business day. An institution's net debit cap refers to the maximum dollar amount of uncollateralized daylight overdrafts that it may incur in its Federal Reserve account.

The Board will continue to study a two-tiered pricing regime for daylight overdrafts in which institutions that pledge collateral to the Reserve Banks would pay a lower fee on their collateralized daylight overdrafts than on their uncollateralized daylight overdrafts.

The Board requested comment on these proposed modifications in June 2001 following a broad review of its PSR policy. At the conclusion of the comment period, the Board made several changes to the policy including allowing depository institutions to pledge collateral to the Federal Reserve in order to access additional daylight overdraft capacity above their net debit cap levels and modifying the criteria used to determine a foreign banking organization's U.S. capital equivalency measure.

The Board is now focusing on the potential longer-term direction for the PSR policy.

The Board's notice is attached.

Policy statement on payments system risk (59 KB PDF)

2002 Banking and consumer regulatory policy

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Last update: August 20, 2002