Re: Potential Modifications to the Federal Reserve Policy on Payment System Risk to Expand Access to Collateralized Intraday Credit, Clarify Access to Uncollateralized Credit, and Support the Deployment of the FedNow Service (Docket No. OP-1749)
Ann Misback
Secretary
Board of Governors of the Federal Reserve
20th Street and Constitution Ave
Washington, DC 20551
Dear Ms. Misback:
The American Bankers Association (ABA), representing banks of all charter types and sizes appreciates, the opportunity to comment on the Board of Governors of the Federal Reserve System’s (“Board”) Potential Modifications to the Federal Reserve Policy on Payment System Risk to Expand Access to Collateralized Intraday Credit, Clarify Access to Uncollateralized Credit, and Support the Deployment of the FedNow Service (“Proposal”). We strongly support the Board’s goal of ensuring the safety and efficiency of the payment and settlement system.
Broadly, the Proposal would change the current Payment System Risk policy (PSR) by expanding access to collateralized capacity and streamlining the associated request process. The Proposal would also clarify the terms for access to uncollateralized capacity. Finally, the Proposal would modify the PSR policy and the Policy on Overnight Overdrafts with respect the deployment of the FedNow Service expected in 2023.
ABA has concerns about the Proposal’s changes that would grant advantages to FedNow Services participants with regard to granting them the ability remedy overnight overdrafts quickly while blocking non-participants from this advantage. Similarly, the interest rate on daylight overdrafts, increased to reflect a 24-hour day, would be assessed against non-participant banks operating on the current 22-hour day cycle. This preferential treatment is not acceptable.
The proposal incorporates the Liquidity Management Tool (LMT) into FedNow Services to be ready in 2023. The LMT should be operated independently of FedNow Services and made available to all financial institutions as soon as possible.
Download the comment letter to read the full text.