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Federal Reserve Bank OF DALLAS W ILLIAM H. WALLACE PRES ENT FIRST V IC E PR ES ID ENT November 10, 1989 ’ DALLAS. TEXAS 75222 AND C H IE F O PER A TIN G O FFIC E R Circular 89-61 TO: The Cashier or Individual Responsible for Managing the Reserve/Clearing Account at the financial institution addressed SUBJECT Policy Change Regarding Overnight Overdrafts in Reserve/Clearing Accounts DETAILS The Federal Reserve System has recently revised its Overnight Overdraft Policy in its continuing effort to reduce payments system risk. The following changes have been made to the policy and will be effective January 2, 1990: The monetary penalty for an overnight overdraft will continue to be equal to [Federal funds rate plus 2 percent, or 10 percent, whichever is greater] x the amount of the overdraft/360; however, the minimum monetary charge per occurrence will be raised from $50 to $100. If an overdraft extends over a weekend or Bank holiday, the monetary charge normally would be assessed for only one day. However, at the discretion of Reserve Banks, a penalty for each day the negative balance is outstanding may be charged. Six overdrafts during a moving twelve-month period will Be~considered excessive. In the case of institutions incurring an excessive number of overdrafts, the monetary penalty may be increased by one-half of a percentage point per occurrence over the rate it would For additio nal copies of any circular please c o ntact the Public A ffairs D ep artm en t a t (214) 6 5 1 -6 2 8 9 . Banks and others are encouraged to use the following incoming W A TS num bers in c ontacting 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 - have otherwise been charged. This increase in the rate would apply to each occurrence over six in a moving twelve-month period. At the implementation of the revised policy, overdraft history will be deterimed by the number of occurrences six months prior to January 2, 1990, freezing the date July 1, 1989 and "phasing-in" additional months as the year progresses until twelve months have been phased in. At this point, the moving twelve months of history would be used. MORE INFORMATION For further information, please contact the Reserve Maintenance Division at (214) 651-6407. Sincerely yours,