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Federal Reserve Bank
OF DALLAS
TO N Y J . SA L V A G G tO

DALLAS, TE X A S
7 5 2 6 5 -5 9 0 6

FIR S T V IC E PR E S ID E N T

June 14, 1994
Notice 94-59
TO:

The Chief Operating Officer of
each financial institution in the
Eleventh Federal Reserve District
SUBJECT
Interpretation of the Payments S y stem Risk
Reduction Policy; Daylight Overdrafts of
Government- S p o n s o r e d Enterprises
DETAILS

As part of its payments system risk reduction program, the Board of
Governors of the Federal Reserve System is adopting an interpretation of its
Policy Statement on Payments System Risk.
Under the payments system risk reduction program, governmentsponsored enterprises that maintain accounts at Reserve Banks should not incur
daylight overdrafts in these accounts and are not permitted to adopt a
positive daylight overdraft net debit cap.
Furthermore, the Board interprets
the Policy Statement on Payments System Risk to include g o v e r n ment-sponsored
enterprises under the policy on daylight overdraft fees.
Until October 13,
1994, fees on daylight overdrafts in accounts of government - s p o n s o r e d e n t e r ­
prises will be waived.
A temporary exemption from daylight overdraft fees is
granted for daylight overdrafts in principal and interest accounts of g o v e r n ­
m e n t - s p o n s o r e d enterprises.
This interpretation supports the B o a r d ’s payments
system risk reduction program by providing a comprehensive policy toward
daylight overdrafts incurred by g overnment-sponsored enterprises.
The inter­
pretation also recognizes the unique nature of the fiscal agency relationship
between the Federal Reserve and these entities.
The interpretation became effective April 28, 1994.
ATTACHMENT
A copy of the B o a r d ’s notice as it appears on pages 25060-62,
Vol. 59, No. 92, of the Federal Register dated May 13, 1994, is attached.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

MORE INFORMATION
For more information, please contact Donna Gonzalez at (214)
922-5584 or James Smith at (214) 922-5585.
For additional copies of this
B a n k ’s notice, please contact the Public Affairs Department at (214) 922-5254.
Sincerely,

INTERPRETATION OF THE
PAYMENTS SYSTEM RISK REDUCTION POLICY;
OVERDRAFTS OF
GOVERNMENT-SPONSORED ENTERPRISES

25060

Federal Register / Vol. 59, No. 92 / Friday, May 13, 1994 / Notices

FEDERAL RESERVE SYSTEM
Interpretation of the Payments System
Risk Reduction Policy; Daylight
Overdrafts of Government-Sponsored
Enterprises

Board of Governors of the
Federal Reserve System.

AGENCY:

ACTION: I n t e r p r e t a t i o n .

Federal Register / Vol. 59, No. 92 / Friday, May 13, 1994 / Notices
As part of its payments
system risk reduction program, the
Board is adopting an interpretation of its
Policy Statement on Payments System
Risk. Under the payments system risk
reduction program, governmentsponsored enterprises that maintain
accounts at Reserve Banks should not
incur daylight overdrafts in these
accounts and are not permitted to adopt
a positive daylight overdraft net debit
cap. Furthermore, the Board interprets
the Policy Statement on Payments
System Risk to include governmentsponsored enterprises under the policy
on daylight overdraft fees. Until October
13,1994, fees on daylight overdrafts in
accounts of government-sponsored
enterprises will be waived, A temporary
exemption from daylight overdraft fees
is granted for daylight overdrafts in
principal and interest accounts of
government-sponsored enterprises. This
interpretation supports the Board’s
payments system risk reduction
program by providing a comprehensive
policy towards daylight overdrafts
incurred by government-sponsored
enterprises while at the same time
recognizing the unique nature of the
fiscal agency relationship between the
Federal Reserve and these entities.
DATES: Effective April 28, 1994.

Reserve Banks issue and redeem the
GSEs’ debt and asset-backed securities
over the Fedwire system, in addition to
providing other payment services
generally related to these fiscal agency
services.
The Board’s payments system risk
(PSR) policies and guidelines have
addressed daylight overdrafts by
government-sponsored enterprises that
maintain accounts with Federal Reserve
Banks only in certain limited instances.
In 1985, the Board determined that
Federal Home Loan Banks should not be
allowed a positive net debit cap and
should be discouraged from incurring
daylight overdrafts in their accounts
with the Reserve Banks. In June 1986,
the Board similarly determined that the
Farm Credit System Banks should be
discouraged from incurring overdrafts.
The Board has never addressed
daylight overdrafts of other GSEs,
including those for which the Reserve
Banks act as fiscal agents in issuing and
redeeming their securities. Further,
when the Board approved in 1992 the
policy of charging fees for daylight
overdrafts beginning in April 1994, it
did not address the question of whether
GSEs would be subject to the fees.
However, the policy did not exclude
GSEs or any other class of accountholders from the fees.1In addition, in
FOR FURTHER INFORMATION CONTACT:
1994, the Board adopted a penalty fee
Jeffrey C. Marquardt, Assistant Director
for daylight overdraft incurred by
(202/452-2360), Paul Bettge, Manager
institutions that do not have regular
(202/452-3174), Division of Reserve
Bank Operations and Payment Systems; discount window access, although GSEs
Stephanie Martin, Senior Attorney (202/ were not included in this penalty fee
policy.
452-3198), Legal Division; for the
The Federal Reserve is not obligated
hearing impaired only:
to provide intraday credit to the GSEs in
Telecommunications Device for the
the form of daylight overdrafts as part of
Deaf, Dorothea Thompson (202/452­
its fiscal agency functions; indeed, the
3544).
GSEs have generally agreed not to incur
SUPPLEMENTARY INFORMATION:
overdrafts in their accounts. However,
many of the GSEs have nonetheless
Background
incurred daylight overdrafts. The Board
The term “government-sponsored
believes that, with the advent of
enterprise” (GSE) is generally used to
daylight overdraft fees for depository
refer to corporations chartered by
institutions on April 14,1994, it is
Congress to perform certain financial
particularly important that the GSEs not
market functions deemed to be in the
be permitted unlimited free access to
public interest. These entities include,
intraday Federal Reserve credit. Such
but are not limited to, the Federal
access would represent a benefit not
National Mortgage Association (Fannie
available to depository institutions and
Mae), the Federal Home Loan Mortgage
could serve to undermine the Board’s
Corporation (Freddie Mac), the Student
payment system risk reduction program.
Loan Marketing Association (Sallie
As a result, the Board interprets the
Mae), and entities of the Federal Home
Policy Statement on Payments System
Loan Bank System and the Farm Credit
Risk to include GSEs under the policy
System. These GSEs are owned by
on daylight overdraft fees. In addition,
private shareholders and their
the Board has determined that a capitalobligations are not guaranteed by the
based fee deductible, as permitted for
U.S. government.
Congress authorized the Reserve
1The Board’s policy statement on daylight
Banks to act as depositaries, custodians, overdraft fees states that “each Reserve Bank will
and fiscal agents for these entities.
charge a fee for average daily daylight overdrafts in
Federal Reserve accounts lemoha«5e - J ied j.”
Under agreements with the GSEs, the

SUMMARY:

25061

depository institutions, will not be
permitted for the GSEs. These entities
do not have regular access to the
discount window and should not be
permitted the same access to intraday
credit as depository institutions.
However, because a number of these
entities have not been formally subject
to the PSR policy in the past and have
not previously been explicitly advised
that daylight overdraft fees would apply
to their accounts, the Board has
determined that they should be afforded
some period within which to make the
necessary adjustments to their payment
systems and practices. As a result,
daylight overdraft fees for daylight
overdrafts in GSEs’ accounts will be
waived until October 13,1994.
Furthermore, the Board recognizes
that, in large part, the GSEs’ daylight
overdrafts are related to regular
payments of principal and interest (P&I)
on securities that they issue through the
Federal Reserve. These payments are
initiated by the Reserve Banks, and the
Federal Reserve’s daylight overdraft
posting rules specify that these
payments will be made before 9:15 a.m.
Eastern time. These posting times were
primarily designed to grant depository
institutions the benefit of P&I payments
prior to debits being made to their
accounts from their purchases of new
issues of government securities. The
GSEs typically do not fund debits to
their accounts resulting from P&I
payments until they issue new
securities later in the day, causing
daylight overdrafts in their Federal
-Reserve accounts.
To eliminate these daylight
overdrafts, the Reserve Banks could
delay making P&I payments on the
GSEs’ securities until sufficient funds
were available in their accounts. This
would likely require that the P&I
payments be made later in the day.
Delaying the P&I payments might
increase the magnitude and duration of
daylight overdrafts for the depository
institutions that receive the
corresponding credits.
For this reason, the Board is
permitting a temporary exemption of
overdrafts incurred in GSEs’ P&I
accounts (special accounts which are
used only for the payment of principal
and interest), until the potential benefits
and drawbacks of shifting the timing of
P&I payments can be analyzed. This
analysis will be performed once the
initial impact of daylight overdraft fees
on depository institutions has been
assessed. In addition, the Board has not
ruled out future application of the
daylight overdraft penalty fee to GSEs'
daylight overdrafts.

25062

Federal Register / Vol. 59, No. 92 / Friday, May 13, 1994 / Notices

Interpretation of the Policy Statement
of the Board’s Regulation Y (12 CFR
A. Federal Reserve Bank of St. Louis
(Randall C. Sumner, Vice President) 411 225.23(a)(2) or (f)) for the Board’s
on Payments System Risk
Locust Street, St. Louis, Missouri 63166: approval under section 4(c)(8) of the
Under the Board’s payments system
1. Community First Financial Group,
Bank Holding Company Act (12 U.S.C.
risk reduction program, governmentInc., English, Indiana; to acquire at least 1843(c)(8)) and § 225.21(a) of Regulation
sponsored enterprises that maintain
17.50 percent of the voting shares of The Y (12 CFR 225.21(a)) to acquire or
accounts at Reserve Banks should not
New Washington State Bank, New
control voting securities or assets of a
incur daylight overdrafts in these
company engaged in a nonbanking
accounts and are not permitted to adopt Washington, Indiana.
Board of Governors of the Federal Reserve activity that is listed in § 225.25 of
a positive daylight overdraft net debit
System, May 9,1994.
Regulation Y as closely related to
cap. Furthermore, the Board interprets
W illia m W. W iles*
banking and permissible for bank
the Policy Statement on Payments
Secretary o f the Board.
holding companies. Unless otherwise
System Risk to include governmentnoted, such activities will be conducted
[FR Doc. 94-11648 Filed 5-12-94; 8:45 am]
sponsored enterprises under the policy
throughout the United States.
on daylight overdraft fees. A capitalBILLING CODE 6210-01-F
based fee deductible is not permitted for
The application is available for
government-sponsored enterprises.
immediate inspection at the Federal
First Bancshares of Texas, Inc.;
However, a temporary exemption from
Reserve Bank indicated. Once the
Change in Bank Control Notice
daylight overdraft fees is granted for
application has been accepted for
daylight overdrafts in principal and
processing, it will also be available for
Acquisition of Shares of Banks or
interest accounts of governmentinspection at the offices of the Board of
Bank Holding Companies
sponsored enterprises. Fees on daylight
Governors. Interested persons may
overdrafts in accounts of governmentThe notificant listed below has
express their views in writing on the
sponsored enterprises will be waived
applied under the Change in Bank
question whether consummation of the
until October 13,1994.
Control Act (12 U.S.C. 1817 (j)) and
proposal can “reasonably be expected to
By order of the Board of Governors of the
§ 225.41 of the Board’s Regulation Y (12 produce benefits to the public, such as
Federal Reserve System, May 9,1994.
CFR 225.41) to acquire a bank or bank
greater convenience, increased
W illiam W . W iles,
holding company. The factors that are
competition, or gains in efficiency, that
considered in acting on notices are set
Secretary o f the Board.
outweigh possible adverse effects, such
forth in paragraph 7 of the Act (12
[FR Doc. 94-11646 Filed 5-12-94; 8:45 am]
as undue concentration of resources,
U.S.C. 1817(j)(7)).
decreased or unfair competition,
BILLING CODE 6210-01-P
The notice is available for immediate
conflicts of interests, or unsound
inspection at the Federal Reserve Bank
banking practices.” Any request for a
Community First Financial Group, Inc.; indicated. Once the notice has been
hearing on this question must be
accepted for processing, it will also be
Formation of, Acquisition by, or
accompanied by a statement of the
available for inspection at the offices of reasons a written presentation would
Merger of Bank Holding Companies
the Board of Governors. Interested
not suffice in lieu of a hearing,
The company listed in this notice has persons may express their views in
identifying specifically any questions of
applied for the Board’s approval under
writing to the Reserve Bank indicated
fact that are in dispute, summarizing the
section 3 of the Bank Holding Company for the notice or to the offices of the
Act (12 U.S.C. 1842) and § 225.14 of the Board of Governors. Comments must be evidence that would be presented at a
hearing, and indicating how the party
Board’s Regulation Y (12 CFR 225.14) to received not later than June 2,1994.
commenting would be aggrieved by
become a bank holding company or to
A. Federal Reserve Bank of Dallas
approval of the proposal.
acquire a bank or bank holding
(Genie D. Short, Vice President) 2200
company. The factors that are
Comments regarding the application
North Pearl Street, Dallas, Texas 75201­
considered in acting on the applications 2272:
must be received at the Reserve Bank
are set forth in section 3(c) of the Act
indicated or the offices of the Board of
1. First Bancshares of Texas, Inc.,
(12 U.S.C. 1842(c)).
Employee Stock Ownership Plan,
Governors not later than June 6,1994.
The application is available for
Tomball, Texas; to acquire 0.33 percent
A. Federal Reserve Bank of St. Louis
immediate inspection at the Federal
for a total of 19.57 percent of the voting
(Randall C. Sumner, Vice President) 411
Reserve Bank indicated. Once the
shares of The First National Bank,
Locust Street, St. Louis, Missouri 63166:
application has been accepted for
Altanta, Texas, and thereby indirectly
1. First Banks, Inc., St. Louis,
processing, it will also be available for
acquire The Hamilton National Bank,
Missouri; to acquire St. Charles Federal
inspection at the offices of the Board of
Hamilton, Texas, and Bank of Tyler,
Bancshares, Inc., St. Charles, Missouri,
Governors. Interested persons may
Tyler, Texas.
and thereby indirectly acquire St.
express their views in writing to the
Board of Governors of the Federal Reserve Charles Federal Savings and Loan
Reserve Bank indicated for that
System, May 9,1994.
Association, St. Charles, Missouri, and
application or to the offices of the Board W illiam W. W iles,
thereby engage in acquiring and
of Governors. Any comment on an
Secretary o f the Board.
operating a savings association,
application that requests a hearing must
[FR Doc. 94-11649 Filed 5-12-94; 8:45 am]
pursuant to § 225.25(b)(9) of the Board’s
include a statement of why a written
Regulation Y.
presentation would not suffice in lieu of BILUNG CODE 6210-01-F
a hearing, identifying specifically any
Board of Governors of the Federal Reserve
questions of fact that are in dispute and
System, May 9,1994.
First Banks, Inc.; Acquisition of
summarizing the evidence that would
Company Engaged in Permissible
W illiam W . W iles,
be presented at a hearing.
Nonbanking Activities
Secretary o f the Board.
Comments regarding this application
[FR Doc. 94-11650 Filed 5-12-94; 8:45 am'
must be received not later than June 6,
The organization listed in this notice
1994.
BILUNG CODE 6210-01-F
has applied under § 225.23(a)(2) or (f)

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