• The Federal Reserve Board (Fed) has recently proposed changes to its Payment System Risk (PSR) Policy, and related changes to Regulation J. The Fed has noted these proposed changes are intended to align current operations and processing times with the PSR posting rules, account for technology and processing changes, and strategically position the rules for faster clearing and settlement in the future. The PSR Policy establishes posting rules for the settlement of debits and credits to depository institutions’ accounts at the Fed Banks for different payment types, and would determine an institution’s intraday account balance and whether it has incurred a negative balance or a daylight overdraft.
• Specifically, under the proposed PSR changes, the posting times for automated clearing house (ACH) debit and commercial check transactions would be earlier.
1. ACH Debits – The proposal would move the posting of ACH debits processed by the Fed Banks' FedACH service overnight to 8:30 a.m. Eastern Time (ET) from 11:00 a.m. ET to align with the posting of ACH credits. (The Fed previously proposed but did not adopt this change for ACH debits in 2008.)
2. Commercial Checks – The proposal would move the posting time for receiving most commercial check credits for deposits and debits for presentments to 8:30 a.m. ET, and establish two other posting times at 1:00 p.m. ET and 5:30 p.m. ET. Also, the Fed proposes to move the settlement of large-value credit corrections and adjustments to begin at 8:30 a.m. and hourly thereafter on the half-hour; and proposes to post large-value debit corrections at the same time as large-value debit adjustments after the close of Fedwire Funds Service. Currently, the posting times do not begin crediting or debiting for checks deposited and presented until 11:00 a.m. ET.
• CUNA is interested in how these proposed changes would affect credit union operations, payments processing, and account management with the Fed Banks.
• Comments for the proposed rules are due to the Fed by February 10, 2014; please submit your comments to CUNA by February 3, 2014.
• If you have any questions or comments, please contact CUNA Assistant General Counsel for Regulatory Research Dennis Tsang at firstname.lastname@example.org.
• Also, the Fed is proposing related amendments to Reg J to implement these changes with the Fed Banks. First, the proposal would permit the Fed Banks to require paying banks that receive presentment of checks from the Fed Banks to make proceeds of settlement for checks available to the Fed Banks as soon as one half-hour after receiving the checks. Second, Fed Banks would be permitted to obtain settlement from paying banks by as early as 8:30 a.m. ET for checks that Fed Banks present.
• Regarding effective dates, the proposed effective date of these changes is six months after the issuance of the final rules for the PSR Policy and Reg J changes.
• For further details, please see the Fed’s proposed PSR Policy and Reg J changes.