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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)

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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,

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