[Federal Register Volume 61, Number 223 (Monday, November 18, 1996)]
[Notices]
[Pages 58691-58692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29289]


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FEDERAL RESERVE SYSTEM
[Docket No. R-0937]


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

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Policy Statement.

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SUMMARY: The Board has adopted changes to the procedures for measuring 
daylight overdrafts. Posting times for Treasury investments resulting 
from electronic federal tax payments have been added to these 
procedures.

EFFECTIVE DATE: November 18, 1996.

FOR FURTHER INFORMATION CONTACT: Paul Bettge, Manager (202/452-3174), 
Heidi Richards, Senior Financial Services Analyst (202/452-2598), 
Division of Reserve Bank Operations and Payment Systems; for the 
hearing impaired only: Telecommunications Device for the Deaf, Dorothea 
Thompson (202/452-3544).

SUPPLEMENTARY INFORMATION:

Background

    The U.S. Department of the Treasury is currently implementing the 
Electronic Federal Tax Payment System (EFTPS) to facilitate electronic 
payment of taxes. The transition of taxpayers who are currently 
required to pay taxes electronically to the new EFTPS system is 
expected to occur over the next several months.
    Most tax payments processed through the EFTPS are expected to be 
settled through the Automated Clearinghouse (ACH). ACH tax payments 
processed through the EFTPS will be reinvested each day through the 
Federal Reserve's Treasury Tax and Loan (TT&L) system into depository 
institutions' TT&L accounts.1 Those banks choosing to receive 
Treasury funds as note option banks will receive EFTPS investments, 
which are TT&L credits to their Federal Reserve accounts for the amount 
of tax payments settled via ACH on a given day. Banks that do not 
choose to hold Treasury investments (remittance option and non-TT&L 
depository institutions) will not receive EFTPS investments. EFTPS 
investments provide a means for the Treasury Department to invest tax 
payments remitted to the Treasury electronically which, under the 
traditional paper-based tax payment system, would have been retained by 
depository institutions and credited to their TT&L accounts.
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    \1\ See Department of the Treasury, ``Treasury Tax and Loan 
Depositaries and Payment of Federal Taxes; Proposed Rule,'' 61 FR 
51185-51194, September 30, 1996.
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    The Board's initial policy statement aimed at controlling daylight 
overdrafts became effective in 1986 (50 FR 21120, May 22, 1985). The 
Board's Policy Statement on Payments System Risk establishes maximum 
limits (caps) and fees on daylight overdrafts in accounts of depository 
institutions at Federal Reserve Banks. Daylight overdrafts are measured 
according to a set of ``posting rules'' established by the Board, which 
comprise a schedule for the posting of debits and credits to 
institutions' Federal Reserve accounts for different types of 
payments.2 Currently, EFTPS investments are not explicitly 
included in this schedule, and thus would be posted after the close of 
the Fedwire Funds Transfer System (6:30 p.m. Eastern Time) unless the 
Board determined otherwise.3
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    \2\  See ``Federal Reserve Policy Statement on Payments System 
Risk,'' section I.A.
    \3\  Treasury investments for which advance notice is given are 
posted to depository institutions' accounts at the opening of the 
Fedwire Funds Transfer System (currently 8:30 a.m. Eastern Time), 
while same-day investments are posted as soon as they are processed, 
but by no later than 1:00 p.m.
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Analysis of Daylight Overdraft Posting Times

    The Board reviewed potential daylight overdraft posting times for 
EFTPS investments in light of its original objectives in designing the 
posting rules. These objectives included reducing intraday float, 
permitting straightforward monitoring and control of institutions' cash 
balances during the day, and reflecting the legal rights and 
obligations of parties to payments.
    Posting time options for EFTPS investments considered by the Board 
included (all times are Eastern Time): (1) post all EFTPS investments 
at the opening of the Fedwire Funds Transfer System (currently 8:30 
a.m.); (2) post EFTPS investments resulting from ACH credit tax 
payments at the opening of the Fedwire Funds Transfer System and those 
from ACH debit tax payments at 11:00 a.m.; (3) post all EFTPS 
investments at 11:00 a.m.; and (4) post all EFTPS investments at 1:00 
p.m.
    The Board has determined that the second option is most consistent 
with its objectives in establishing the daylight overdraft posting 
rules. This option would synchronize the EFTPS investments with the 
posting of the corresponding ACH tax payments (currently 8:30 a.m. for 
ACH credit originations and 11:00 a.m. for ACH debit 
originations).4 The impact of the EFTPS payments on the intraday 
Federal Reserve account balances and daylight overdrafts of depository 
institutions would be minimized, without creating intraday float or 
compromising the ability of institutions to monitor and control their 
account balances.
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    \4\  Posting times for payments currently posted at the opening 
of the Fedwire Funds Transfer System may require modification when 
this opening time is moved to 12:30 a.m. Eastern Time in 1997.
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Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
ch. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the policy 
statement under the authority delegated to the Board by the Office of 
Management and Budget. No collections of information pursuant to the 
Paperwork Reduction Act are contained in the policy statement.

Policy Statement on Payments System Risk

    The ``Federal Reserve Policy Statement on Payments System Risk,'' 
section I.A., under the heading ``Modified Procedures for Measuring 
Daylight Overdrafts'' (57 FR 47104, October 14, 1992) is amended as 
follows:
Opening Balance (Previous Day's Closing Balance)
    Post at the Opening of Fedwire Funds Transfer System:
    +/-Government and commercial ACH credit transactions.
    +Treasury Electronic Federal Tax Payment System (EFTPS) investments 
from ACH credit transactions.
    +Advance-notice Treasury investments.

[[Page 58692]]

    +Treasury state and local government series (SLGs) interest and 
redemption payments.
    +Treasury checks, postal money orders, local Federal Reserve Bank 
checks, EZ-Clear savings bond redemptions in separately sorted 
deposits.
* * * * *
    Post at 11:00 a.m. Eastern Time:
    +/-ACH debit transaction.
    +EFTPS investments from ACH debit transactions
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, November 8, 1996.
Barbara R. Lowrey,
Associate Secretary of the Board.
[FR Doc. 96-29289 Filed 11-15-96; 8:45 am]
BILLING CODE 6210-01-P