Indicating outlook for coronavirus crisis, Fed sets six-month delay to changes for payment system risk policy on intraday credit

Changes to intraday credit procedure provisions affecting daylight overdrafts at depository institutions, scheduled to take effect April 1, will be delayed six months, the Federal Reserve said Tuesday in yet another regulatory response to the coronavirus crisis.

In a brief statement, the Fed said that the procedures governing the provision of intraday credit to U.S. branches and agencies of foreign banking organizations (FBOs) would be delayed to Oct. 1. The Fed said the change was made “in light of challenges posed by the coronavirus.”

Last year (on April 1), the Fed approved amendments to part II of its payment system risk (PSR) policy. That policy, the Fed said, establishes the maximum levels of daylight overdrafts at depositories may incur in their Federal Reserve accounts.

The Fed’s policy statement was aimed at changing the focus on procedures for determining the net debit cap and maximum daylight overdraft capacity of a U.S. branch or agency of an FBO. The changes remove references to the strength of support asssessment (SOSA) ranking; remove references to FBOs’ financial holding company (FHC) status; and adopt alternative methods for determining an FBO’s eligibility for a positive net debit cap, the size of its net debit cap, and its eligibility to request a streamlined procedure to obtain maximum daylight overdraft capacity.

Under part II of the PSR policy, an FBO’s SOSA ranking – which the Fed said assesses an FBO’s ability to provide financial, liquidity, and management support to its U.S. operations – can affect its daylight overdraft capacity. Similarly, an FBO’s status as an FHC can affect its daylight overdraft capacity, the Fed said.

Federal Reserve Board announces implementation delay for changes to its Payment System Risk Policy regarding intraday credit

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