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Federal R eserve Bank




September 22, 1987
Circular 87-69


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

Implementation of recent changes in the Federal Reserve's Daylight
Overdraft Program— inter-affiliate Fedwire transfers and third-party initia­
tion of Fedwire transfers

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.
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 (




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
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.
The attachment contains sample wording for a board of directors'
resolution approving inter-affiliate Fedwire transfers.
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,

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.

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;


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.


that the Institution is authorized to extend credit during the day
(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.


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)
(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_ _ _ _ _ _ _ _ _ _ _

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