Notice2022-28095
Modifications to the Federal Reserve Policy on Payment System Risk To Accommodate Enhancement to the Automated Claim Adjustment Process
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Published
December 27, 2022
Issuing agencies
Federal Reserve System
Abstract
The Board of Governors of the Federal Reserve System (Board) is revising part II of the Federal Reserve Policy on Payment System Risk (PSR policy) to add a posting rule to facilitate the implementation of enhancements to the Automated Claim Adjustment Process (ACAP).
Full Text
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<title>Federal Register, Volume 87 Issue 247 (Tuesday, December 27, 2022)</title>
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[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79331-79332]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-28095]
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FEDERAL RESERVE SYSTEM
[Docket No. OP-1796]
Modifications to the Federal Reserve Policy on Payment System
Risk To Accommodate Enhancement to the Automated Claim Adjustment
Process
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is revising part II of the Federal Reserve Policy on Payment System
Risk (PSR policy) to add a posting rule to facilitate the
implementation of enhancements to the Automated Claim Adjustment
Process (ACAP).
DATES: Applicability Date: January 30, 2023.
FOR FURTHER INFORMATION CONTACT: Jason A. Hinkle, Deputy Associate
Director (202-912-7805) or Benjamin J. Hobbs, Senior Financial
Institution Policy Analyst (202-872-7549), Division of Reserve Bank
Operations and Payment Systems. Cody Gaffney (202-452-2633), Senior
Attorney, Legal Division, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, Washington, DC 20551. For
users of TTY-TRS, please call 711 from any telephone, anywhere in the
United States.
SUPPLEMENTARY INFORMATION:
I. Background
Part II of the PSR policy governs the provision of intraday credit
(also known as daylight overdrafts) in accounts at the Reserve
Banks.\1\ The PSR policy includes procedures, referred to as posting
rules, that are used to measure account balances. The posting rules
establish settlement times for debits and credits at Federal Reserve
accounts for different payment types.
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\1\ The Board's PSR policy is available at: <a href="https://www.federalreserve.gov/paymentsystems/psr_about.htm">https://www.federalreserve.gov/paymentsystems/psr_about.htm</a>.
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The ACAP is a feature of the Fedwire[supreg] Securities Service
(``Fedwire Securities'' or ``Service'') that offers Fedwire Securities
participants (participants) the option to automate principal and
interest (P&I) tracking and claim adjustments related to transactions
between participants that settle over Fedwire Securities.\2\ The
Reserve Banks, in their capacity as fiscal agents for issuers of
securities issued over Fedwire Securities, make P&I payments to record-
date holders of the securities.\3\ For some types of transactions
between participants, such as repurchase agreements (repos), the
participant identified as the record-date holder by the Service may not
be entitled to the P&I payment pursuant to a separate agreement between
the transaction participants. The ACAP offers an automated way for the
record-date holder to transfer a P&I payment from its master account to
the master account of the designated participant.
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\2\ An ACAP claim adjustment is a transfer of funds from one
Fedwire Securities participant to another participant over the
Service.
\3\ Issuers provide securities record dates and payment dates
information to the Fedwire Securities Service. As an operational
matter, a participant who is identified by the Service as the holder
of a security after the Service closes on the business day prior to
the security's record date is a record-date holder of the security.
A record-date holder of a security is entitled to payment of P&I on
that security, and the P&I payment is distributed to record-date
holders on the payment date associated with the record date
regardless of whether the participant still holds the security on
the payment date.
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In January 2022 the Federal Reserve Banks announced phased
enhancements to the Service that will expand ACAP tracking to all
coupon-paying securities issued over Fedwire Securities, add securities
lending as a transaction type, and shift the timing of settling claim
adjustments.\4\ Currently, ACAP adjustments are settled at
approximately 4:30 p.m. ET via the National Settlement Service (NSS).
Most, but not all claim adjustments are associated with that day's P&I
payment which are generally made earlier in the day. The shift in the
timing of settling claim adjustments is designed to narrow the timing
gap between P&I payments and the associated claim adjustments. To
effect this shift in timing, the ACAP enhancements include a design
change to utilize new Fedwire Securities messages to settle claims,
which result in claim adjustments being effected promptly after the
associated P&I payments are made. This design change will be
implemented January 30, 2023.
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\4\ See <a href="http://FRBServices.org">FRBServices.org</a>, New Implementation Plan for the
Automated Claim Adjustment Process Enhancements (Jan. 18, 2022),
<a href="https://www.frbservices.org/news/communications/011822-fedwire-securities-participants-service-providers">https://www.frbservices.org/news/communications/011822-fedwire-securities-participants-service-providers</a>. For the most recent
information regarding the ACAP enhancements, see <a href="https://www.frbservices.org/resources/financial-services/securities/acap">https://www.frbservices.org/resources/financial-services/securities/acap</a>.
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II. New Posting Rule To Accommodate the ACAP Enhancements
Currently, ACAP adjustments are not explicitly mentioned in the
posting rules of the PSR policy because ACAP adjustments are settled
using NSS, which has its own posting rule.\5\ The Board is adding a new
posting rule to part II of the PSR policy to reflect the fact that ACAP
adjustments will be made on a gross basis through Fedwire Securities
throughout the business day.
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\5\ NSS entries settle throughout the business day as the
Reserve Banks process NSS files.
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The ACAP enhancements and the new posting rule are not expected to
increase risk to the Reserve Banks or the payment system, even as the
ACAP expands to additional security and transaction claim types and as
claim adjustment volume increases. ACAP debit adjustments are small
compared to the participants' aggregate P&I credits on a given day and
analysis shows that they are not expected to significantly impact
participants' master account balances. In addition, all participants
will be notified of all claim adjustments before the adjustments are
processed.
III. Technical Changes to Text of the PSR Policy
In addition to the new posting rule to accommodate the ACAP
enhancements, the Board is modifying footnote 37 of the PSR policy by
adding a hyperlink to a frequently updated document containing a list
of securities issuers, including GSEs, rather than listing the
securities issuers directly in the footnote. This change is not
substantive in nature and reflects current practices that the Reserve
Banks use to administer the PSR policy.
IV. Federal Reserve Policy on Payment System Risk
[The following portion titled ``Federal Reserve Policy on Payment
System Risk'' will not publish in the Code of Federal Regulations.]
Federal Reserve Policy on Payment System Risk
Part II. Federal Reserve Intraday Credit Policies
Under ``Procedures for Measuring Daylight Overdrafts'', revise
``Opening balance (previous day's closing
[[Page 79332]]
balance)'', ``Post throughout business day'' as follows:
A. Daylight overdraft definition and measurement
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Procedures for measuring daylight overdrafts \34\
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\34\ This schedule of posting rules does not affect the
overdraft restrictions and overdraft measurement provisions for
nonbanks established by the Competitive Equality Banking Act of 1987
and the Board's Regulation Y (12 CFR 225.52).
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Opening balance (previous business day's closing balance)
Post throughout the business day:
+/- FedNow funds transfers
+/- Fedwire funds transfers \35\
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\35\ Funds transfers that the Reserve Banks function for certain
international organizations using internal systems other than
payment processing systems such as Fedwire will be posted throughout
the business day for purposes of measuring daylight overdrafts.
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+/- Fedwire book-entry securities transfers
+/- Fedwire book-entry automated claim adjustments \36\
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\36\ Claim adjustments are debits and credits associated with
the Fedwire Securities Service's Automated Claim Adjustment Process
(ACAP).
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+/- National Settlement Service entries.
+ Fedwire book-entry interest and redemption payments on securities
that are not obligations of, or fully guaranteed as to principal and
interest by, the United States \37\
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\37\ For a complete list of securities issuers, including GSEs,
please visit <a href="https://www.frbservices.org/resources/financial-services/securities/user-guide.html">https://www.frbservices.org/resources/financial-services/securities/user-guide.html</a>.
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+ Electronic payments for matured coupons and definitive securities
that are not obligations of, or fully guaranteed as to principal and
interest by, the United States.\38\
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\38\ Electronic payments for credits on these securities will
post according to the posting rules for the mechanism through which
they are processed, as outlined in this policy. However, the
majority of these payments are made by check and will be posted
according to the established check posting rules as set forth in
this policy.
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The term ``interest and redemption payments'' refers to payments of
principal, interest, and redemption on securities maintained on the
Fedwire Securities Service.
The Reserve Banks will post these transactions, as directed by the
issuer, provided that the issuer's Federal Reserve account contains
funds equal to or in excess of the amount of the interest and
redemption payments to be made. In the normal course, if a Reserve Bank
does not receive funding from an issuer for the issuer's interest and
redemption payments by the established cut-off hour of 4:00 p.m.
eastern time on the Fedwire Securities Service, the issuer's payments
will not be processed on that day.
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By order of the Board of Governors of the Federal Reserve
System, acting through the Director of the Division of Reserve Bank
Operations and Payment Systems under delegated authority.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2022-28095 Filed 12-23-22; 8:45 am]
BILLING CODE P
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