Alert March 04, 2008

FRB Proposes Changes to Its Payment Systems Risk Policy

The FRB issued proposed changes to its Payment Systems Risk Policy (the “Policy”).  The FRB stated that under the revised Policy, the FRB would supply intraday balances to healthy depository institutions “predominantly through explicitly collateralized daylight overdrafts provided at a zero fee.”  The proposed Policy would also encourage depository institutions to pledge collateral voluntarily to cover daylight overdrafts, because the FRB would substantially increase its fee for uncollateralized daylight overdrafts.  The FRB stated that it believes that the proposed changes to the Policy would “help loosen liquidity constraints and reduce operational risk” in financial markets.  Comments on the Policy are due no later than June 4, 2008.