The Federal Reserve Board on Friday finalized clarifying and technical updates to its policy governing the provision of intraday credit to healthy depository institutions with accounts at the Federal Reserve Banks. The updates expand access to collateralized intraday credit under the Policy on Payment System Risk (known as PSR policy) while providing greater clarity to institutions, streamlining administrative requirements, and supporting the launch of the FedNow℠ Service. The final updates are substantially similar to the proposal issued in May 2021.
To ensure the smooth functioning of payment and settlement systems, Reserve Banks provide temporary intraday credit to a healthy depository institution when its account has a negative balance during the business day. The PSR policy establishes limits on the amount of an institution’s uncollateralized intraday credit and allows certain institutions to request additional collateralized credit.
Like the proposal, the final updates expand the eligibility of institutions to request collateralized intraday credit and reduce the required administrative steps. They also clarify eligibility standards for accessing uncollateralized intraday credit. In addition, the final updates modify the PSR policy to support the launch of the FedNow Service, for example, by redefining the term “business day” to reflect the FedNow Service’s 24x7x365 operations. The final updates also simplify and incorporate the related Overnight Overdrafts policy into the PSR policy.
The final updates related to the deployment of the FedNow Service and the Overnight Overdrafts policy will become effective when Reserve Banks begin processing live transactions for the FedNow Service, which is targeted for launch in May-July 2023. The remaining updates are effective 60 days after publication in the Federal Register.