FDIC, OCC finalize rule aligning securities transactions settlement cycles

Banks will be required to settle most securities transactions within the number of business days in the standard settlement cycle followed by registered broker dealers around the country — unless otherwise agreed to by the parties at the time of the transaction — under a rule issued by federal banking regulators Friday.

The result, according to the agencies, will be to align their respective settlement cycle requirements with those of the Federal Reserve.

In a joint bulletin issued by the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC), the agencies noted when proposing the rule change in September 2017 that the U.S. securities industry transitioned from a standard securities settlement cycle of three business days after the date of the contract, commonly known as T+3, to a two-business-day standard, or T+2.

“The OCC and FDIC understand that, consistent with the industry’s transition to T+2, OCC Bulletin 2017-22, and FDIC Financial Institution Letter 32-2017, banks are already complying with a two-business-day settlement standard,” the agencies stated in their bulletin.

The rule is slated to take effect the first calendar quarter date following 30 days from publication in the Federal Register.

Joint Final Rule: Securities Transaction Settlement Cycle