Fed proposal: Banks, credit unions could use correspondents to send payments via FedNow

The Federal Reserve Board proposes to permit U.S. banks and credit unions to use intermediaries to transfer funds through the FedNow Service, the board announced.

In a release, the Fed said the measure, which would amend subpart C of Regulation J, would support new private sector use cases for the FedNow service.

“For example, it would allow U.S. banks to use FedNow to transact with correspondent banks to facilitate the international portion of a cross-border payment,” it said. “Currently, a transfer of funds sent through the FedNow Service can include only two U.S. banks.”

In a summary of the proposal, the Fed said this could “support private-sector cross-border payment solutions by allowing FedNow participants to leverage an intermediary (for example, a correspondent bank) for the international portion of a cross-border transaction and use the FedNow Service for the U.S. domestic portion.”

The proposal, announced Wednesday, is out for a 60-day public comment period.

Federal Reserve Board invites public comment on proposal that would allow U.S. banks and credit unions to use intermediaries to transfer funds through the FedNow Service