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F ed er a l R e ser ve Ba n k

DALLAS. TEXAS

of

Dallas

75222
Circular No. 81-209
October 29, 1981

POLICY CHANGE REGARDING MONETARY CHARGES
FOR OVERDRAFTS IN RESERVE ACCOUNTS
AND CLEARING ACCOUNTS
TO THE DEPOSITORY INSTITUTION ADDRESSED
IN THE ELEVENTH FEDERAL RESERVE DISTRICT:
In the interests of achieving equitable reserve maintenance
procedures and of promoting sound banking practices, it is the policy of the
Federal Reserve Bank of Dallas that reserve accounts and clearing accounts
should be maintained on a positive daily settlem ent basis.
Overdrafts
(negative balances) are discouraged and are subject to a monetary charge.
However, in recognition of the fact that an occasional overdraft may be
unavoidable, this Reserve Bank may, at its discretion, waive such monetary
charge in consideration of the circumstances involved in each case.
Of
course, a negative balance resulting from a Federal Reserve error is not an
overdraft for purposes of this policy and is not subject to monetary charge.
To discourage overdrafts, this Bank implemented a policy calling
for the imposition of monetary charges on overdrafts in reserve accounts on
November 1, 1979. The monetary charge, in effect since that time, has been
calculated at a 10 percent annual percentage rate.
However, due to an
increased incidence of overdrafts, this Bank is revising the monetary charge
for overdrafts to a rate of ten percentage points or two percentage points
above the Federal funds rate on the date of the occurrence of each overdraft,
whichever is greater. This new rate is effective for all overdrafts occurring
on or after November 2, 1981. While only a few deposistory institutions
should be affected by the new policy, it will provide a specific and systematic
approach for dealing with overdrafts.
Printed on the reverse of this circular is this Bank's internal
guidelines on overdrafts which will apply under the revised policy. Questions
regarding this policy should be directed to Richard D. Ingram of this Bank,
Ext. 6333; William L. Wilson, El Paso Branch, (915) 544-4730; C.O. Holt, Jr.,
Houston Branch, (713) 659-4433; or Tony G. Valencia, San Antonio Branch,
(512) 224-2141.
Additional copies of this circular will be furnished upon request to
the Department of Communications, Financial and Community Affairs, Ext.
6289.
Sincerely yours,

William H. Wallace^
First Vice President

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140. (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

GENERAL GUIDELINES FOR THE
W AIVER OR IMPOSITION OF CHARGES ON OVERDRAFTS
Overdrafts (negative balances) in reserve accounts and clearing
accounts maintained with this Bank place the Bank in the position of making
inadvertent extensions of credit which are improperly secured. In order to
discourage overdrafts in accounts it maintains, effective November 2,
1 9 8 1 , the Federal Reserve Bank of Dallas will impose m o n e t a r y charges on
overdrawn accounts in accordance with the following policy:
-

Each overdrawn account for which a charge is not waived
will be assessed a m o n e t a r y charge calculated at a rate of ten
percentage points or two percentage points above the e f f e c ­
tive Federal funds rate on the date of the occurrence of each
o verdraft [charge per day = (a) (.10 x overdraft amount)/365
or 366 leap year, or (b) (effective Federal funds rate plus
two percentage points x overdraft amount)/365 or 366 leap
year], whichever is greater, except that no charge shall be
less than $50.

-

Overdrafts will be reviewed on a c a s e-by-case basis and
charges m a y be waived in consideration of the frequency of
overdrafts and the circumstances involved.
(The h i story of
overdrafts prior to November 1, 1979 will not be considered
in d etermining the imposition or waiver of charges.)

-

A m u l t i p l e - d a y overdraft extending over a weekend or bank
holiday m a y be considered as one occurrence; however, d e ­
pending upon the individual situation, a m u l t i p l e - d a y o v e r ­
draft m a y incur an overdraft charge for each day that the
overdraft is o utstanding at the discretion of this Bank.
In
addition, a m u l t i - d a y rate for m u l t i p l e - d a y overdrafts m a y be
assessed if circumstances warrant. Moreover, for an account
holder with zero reserve requirements and those m a intaining
vault cash in amounts sufficient to more than meet their
reserve requirements, the charge will be assessed for each
day that the negative balance is outstanding to insure that
such institutions do not gain from overdrafts.

-

A negative balance in a reserve account and clearing account
that is attributable to an error by a Federal Reserve Bank is
not an overdraft subject to a charge.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102