[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] ----------------------------------------------------------------------- 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. ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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