Modifying the policy on payment system risk (PSR) to expand access to collateralized capacity and clarifying terms for accessing and retaining uncollateralized capacity were proposed by the Federal Reserve Friday.
The PSR governs the provision of intraday credit (also known as daylight overdrafts, when a bank’s Federal Reserve account has a negative balance at any point during the business day) at healthy financial institutions. The policy, according to the Fed, establishes limits on the value of a bank’s uncollateralized daylight overdrafts. The various Federal Reserve banks provide intraday balances by supplying temporary, intraday credit to banks, the Fed said, to foster smooth operation of the payments system.
The policy also allows banks that might be constrained by those limits to request additional collateralized capacity, the Fed said.
Under the proposal, expansion of options for higher levels of intraday credit capacity would be targeted, the Fed said. No reductions of the current terms for providing uncollateralized access is proposed, the agency stressed.
The proposal also modifies the PSR and overnight overdrafts policies to, the Fed said, “align them with the deployment of the FedNow Service and its 24x7x365 payment environment.” FedNow is the Fed’s round-the-clock electronic payments system under development.
A comment period of 60 days was set for the proposal.