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Federal R eserve Bank OF DALLAS W IL L IA M H. WALLACE f i r s t v ic e DALLAS. TEXAS 75222 p r e s id e n t AND CH IE F O PER ATING O FFICER January 8, 1988 Circular 88-3 TO: The Daylight Overdraft Coordinator or the Chief Executive Officer of the financial institution addressed SUBJECT Implementation of recent changes in the Federal Reserve's daylight overdraft program — reduction of sender net debit caps DETAILS On July 30, 1987, the Federal Reserve Board adopted several changes in itsdaylight overdraft policy, one of which concerned the reduction of sender net debit caps. The text of these changes was provided to financial institutions in our Circular 87-54, dated August 4, 1987. This circular gives additional details about the upcoming cap reductions. Reduction of Sender Net Debit Caps The current levels of sender net debit caps will be reduced by 25 percent in two stages. An initial 15 percent reduction will become effective January 14, 1988. The remaining reduction to a level 25 percent lower than the original caps will become effective May 19, 1988. The cap levels, set as multiples of adjusted primary capital, will be as follows: January 14, 1988 through May 18, 1988 Net Debit Cap Cap Class Two-Week Avg. High Above Avg. Avg. No Cap 1.70 1.275 0.85 0.0 Plus Single-Day Avg. 0.0 2.55 2.125 1.275 For additional copies of any c ircu la r p lease c o n ta c t the Public A ffairs D ep artm en t at (214) 6 5 1 -6 2 8 9 . Banks and others are encouraged to use the follow ing incom ing W A TS num bers 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 - May 19, 1988 and After Net Debit Cap Cap Class Two-Week Avg. High Above Avg. Avg. No Cap Plus 1.50 1.125 0.75 Single-Day Avg, 2.25 1.875 1.125 0.0 0.0 An institution is expected to avoid incurring daylight overdrafts that, on average over a two-week period, exceed the two-week average cap, and, on any day, exceed the single-day cap. Since an institution establishes a cap category (i.e., high, above average, average) based on a self-evaluation, it will not be necessary to resubmit a board resolution in light of the cap reductions. The cap reductions do not affect de minimis caps. Other Matters Other recent changes in the Federal Reserve's daylight overdraft policy include a $50 million maximum transaction size limitation that will be imposed on the par value of book-entry securities transfers over Fedwire. Exceptions to the new policy include transactions where Reserve Banks act as fiscal agents, e.g., the delivery of new issues, redemptions, requests to change the form of a security, or to move a security to or from a pledged account on a Reserve Bank's books. This change will take effect January 14, 1988. For more information, please contact one of the following individuals: Dallas and El Houston San Antonio Paso Tyrone Gholson Luke E. Richards Tony G. Valencia (214) 651-6263 (713) 659-4433 (512) 224-2141 MORE INFORMATION For further questions concerning cap reductions, please contact Assistant Vice President John R. Phillips at (214) 651-6265, Robert G. Feil, Manager, at (214) 651-6690, or Paul T. Elzner, Daylight Overdraft Analyst, at (214) 698-4439. For general questions about the daylight overdraft program, please contact any of the above individuals or 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,