Changes to the Payment System Risk (PSR) Policy
- Announcement
- Implementation Timeline
- Planned Enhancements Supporting Implementation of the PSR Policy Revisions
Announcement
The Board of Governors of the Federal Reserve System has adopted revisions to Part II of the PSR Policy to enhance intraday liquidity and the flow of payments, while also helping to mitigate the credit exposures to the Reserve Banks from daylight overdrafts. This new approach:
- explicitly recognizes that the Federal Reserve has an important role in providing intraday balances to foster the smooth operation of the payment system;
- provides temporary, intraday balances to healthy depository institutions predominantly through collateralized intraday overdrafts; and
- aims to reduce over time the reliance of the banking industry on uncollateralized daylight credit if this can be done without significantly disrupting the operation of the payment system or causing other unintended adverse consequences.
Frequently Asked Questions
Implementation Timeline
- An interim policy change concerning streamlined max cap and augmented deductible procedures for certain FBOs will become effective March 26, 2009
- Other revisions to Part II of the PSR Policy will be implemented between the fourth quarter of 2010 and the first quarter of 2011. A specific date will be announced by the Board at least 90 days in advance.
Planned Enhancements Supporting Implementation of PSR Policy Revisions
The Federal Reserve has prepared a paper [PDF, 223K] to outline planned enhancements to its collateral and information systems and procedures, which complement revisions to the PSR Policy. The Federal Reserve gathered information from several sources, including following up on public comments regarding the revised PSR Policy, to determine which enhancements to pursue to support financial institutions.
The document provides a high-level description of current processes and time needed to pledge, revalue, and withdraw collateral for each pledging arrangement and outlines the planned enhancements to these arrangements and collateral information. The document also highlights which changes may have implications to DI systems. Leading up to implementation of the revised PSR policy in late 2010 or early 2011, this document will be updated and other supplementary information, such as technical specifications, will become available.
If you have questions regarding this document or the revised PSR policy implementation, please e-mail frbdiscountwindow@chi.frb.org.