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Federal R eserve Bank OF DALLAS W IL L IA M H . W ALLACE DALLAS. TEXAS 75222 FIRST V IC E PR ES ID ENT AND C H IE F O PER ATING O FFIC ER September 22, 1987 Circular 87-69 TO: The Daylight Overdraft Coordinator or the Chief Executive Officer of the depository institution addressed, and the Chief Executive Officer of the bank holding company addressed SUBJECT Implementation of recent changes in the Federal Reserve's Daylight Overdraft Program— inter-affiliate Fedwire transfers and third-party initia tion of Fedwire transfers DETAILS On July 30, the Federal Reserve Board adopted several changes in its daylight overdraft policy. The text of these changes was provided to deposi tory institutions in our circular 87-54, August 4, 1987. This circular gives additional details about two of those changes. Inter-Affiliate Transfers After June 30, 1988, a depository institution which is a subsidiary of a holding company may not transfer funds over Fedwire to another subsidiary of the same holding company, if such transfers create or contribute to day light overdrafts, unless its board of directors approves the practice and sends a copy of its resolution to the Federal Reserve Bank. This rule applies even if the sending institution remains within its net debit cap. The attachment contains sample wording for such a resolution. It should be provided no later than June 30, 1988, to: Mr. Paul T. Elzner, Day light Overdraft Analyst, Financial Planning and Control Department, Federal Reserve Bank of Dallas, Station K, Dallas, Texas 75222. For these approvals there is no option of substituting the board of the parent holding company for that of the depository institution, though that remains an option for self-assessments and de minimis caps. For additional copies of any circular please contact the Public A ffairs D epartm ent at (214) 651 -6 2 8 9 . Banks and others are encouraged to use the follow ing in coming W A T S numbers in contacting this Bank (800) 4 4 2 -7 1 4 0 (intrastate) and (800) 5 2 7 -9 2 0 0 (interstate). This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - Third-Party Initiation of Fedwire Transfers The Federal Reserve Board has also decided to permit a depository institution or other entity to initiate Fedwire transfers from the Federal Reserve account of another depository institution, providing a number of safe guards are complied with. This action will permit centralized Fedwire transfers for subsidiar ies of a holding company. The attachment to circular 87-54, at pages 31-33, outlines the condi tions for such an arrangement, setting out the types of eligible institutions; the necessary contractual relationships and approvals; the requirements for monitoring, back-up, and audit; and the need for concurrence of supervisory agencies. Participants may also find it necessary to make substantial modifi cations to their software. While several matters remain to be resolved, depository institutions and holding companies interested in exploring such an arrangement should con tact one of the following individuals at our Dallas office for further infor mation: Vice President Lyne H. Carter, telephone 214-651-6175; or Assistant Vice President Larry C. Ripley, telephone 214-651-6118. Other Matters Other recent changes in the Federal Reserve daylight overdraft policy include cap reductions and a $50 million limit on book-entry securities trans fers over Fedwire. Both of these changes will take effect January 14, 1988. Subsequent circulars will be sent with details on implementation. ATTACHMENTS The attachment contains sample wording for a board of directors' resolution approving inter-affiliate Fedwire transfers. MORE INFORMATION For further questions concerning inter-affiliate transfer resolu tions, please contact Mr. Elzner at 214-698-4439 or a member of our Legal Department at 214-651-6228. For operational questions concerning inter affiliate Fedwire transfers, or any questions concerning third-party initia tion or centralization of Fedwire transfers, please contact Mr. Carter or Mr. Ripley, whose telephone numbers appear above. For general questions about the daylight overdraft program, please contact Senior Vice President George C. Cochran, III, 214-651-6257, Senior Vice President James L. Stull, 214-698-4286, Vice President Robert D. Hankins, 214-651-6120, or Vice President Larry M. Snell, 214-651-6199. Sincerely yours, ATTACHMENT MODEL DIRECTORS' RESOLUTION I hereby certify that the following resolutions were duly adopted at a meeting of the Board of Directors of the (Official name of the institution)_ _ _ _ , duly authorized and existing under the laws of _ _ _ _ _ _ _ _ _, which meeting was duly called and held on the _ _ _ _ day of _ _ _ _ _ _ _ , 19__ , and that those resolutions are now in full force and effect and are not in conflict with any provisions in the certificate of incorporation, statutes or bylaws of the institution. WHEREAS, the Federal Reserve Board has adopted a policy on reducing risks on large-dollar wire transfer systems which permits inter-affiliate Fedwire transfers resulting in daylight overdrafts, provided certain safeguards are observed; RESOLVED that whenever, during the business day of the Federal Reserve Bank of Dallas ("Reserve Bank"), this institution ("Institution") fails to maintain a balance of funds in its account at the Reserve Bank sufficient to cover the amounts of transfer items, transfer requests, or other debits charged to that deposit account, the Institution shall be indebted to the Reserve Bank to the extent that the balance of such account is negative, and that the Institution is hereby authorized to incur such indebtedness. RESOLVED that the Institution is authorized to extend credit during the day to (insert name of affiliate) _ _ by transferring to its __ account at the Federal Reserve Bank of _ _ _ _ _ _ _ _ an amount no greater than the entire balance of funds in the Institution's account at the Reserve Bank plus the Institution's indebtedness to the Reserve Bank up to an amount equal to the sender net debit cap adopted by the Institution under the policy regarding risks on large-dollar payment systems adopted by the Board of Governors of the Federal Reserve System. RESOLVED that these resolutions and all powers and authorizations hereby granted or confirmed shall continue in full force and effect until written notice of their revocation shall have been given to and received by the Reserve Bank; and that a duly certified copy of these resolutions, with seal of this Institution attached be furnished to the Reserve Bank. I, the undersigned Secretary of the Institution, do hereby certify that the foregoing resolutions are true and correct copies of resolutions of the Board of Directors of the Institution duly adopted in accordance with and as authorized by its charter and bylaws at a meeting of said board duly called and held on _ _ _ _ _ _ _ , 19__ , at which meeting a quorum of all of the directors was present and acting throughout, and that those resolutions have not been rescinded or modified and are now in full force and effect. IN WITNESS WHEREOF, I have hereunto subscribed by name and affixed the seal of the Institution. _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ (Signature of Secretary to the Board of Directors) (Stamp corporate seal in this space) (Name of Depository Institution) (Address) (City, State and Zip) — (Name and Title of Daylight Overdraft Coordinator) Mail to: Paul T. Elzner Daylight Overdraft Analyst Financial Planning & Control Dept. Federal Reserve Bank of Dallas Station K Dallas, Texas 75222_ _ _ _ _ _ _ _ _ _ _