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74041

Proposed Rules

Federal Register
Vol. 78, No. 237
Tuesday, December 10, 2013

This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.

FEDERAL RESERVE SYSTEM
12 CFR Part 210
[Regulation J; Docket No. R–1473]
RIN 7100–AE06

Collection of Checks and Other Items
by Federal Reserve Banks and Funds
Transfers through Fedwire; Time of
Settlement by a Paying Bank for an
Item Received from a Reserve Bank
Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed rulemaking;
request for public comment.
AGENCY:

The Board of Governors
(Board) is requesting comment on
proposed amendments to subpart A of
its Regulation J, Collection of Checks
and Other Items by Federal Reserve
Banks and Funds Transfers through
Fedwire. The proposed rule would
permit the Federal Reserve Banks
(Reserve Banks) to require paying banks
that receive presentment of checks from
the Reserve Banks to make the proceeds
of settlement for those checks available
to the Reserve Banks as soon as one
half-hour after receipt of the checks. The
proposed rule would also permit the
Reserve Banks to obtain settlement from
paying banks by as early as 8:30 a.m.
Eastern time for checks that the Reserve
Banks present. These proposed
amendments to Regulation J are
necessary to implement the proposed
method for posting debits and credits to
banks’ Federal Reserve accounts to
measure daylight overdrafts under the
Federal Reserve Policy on Payment
System Risk (PSR policy), as proposed
in Docket No. OP–1472, elsewhere in
the Federal Register.
DATES: Comments must be submitted by
February 10, 2014.
ADDRESSES: You may submit comments,
identified by Docket No. R–1473, by any
of the following methods:
• Agency Web site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at

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SUMMARY:

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• http://www.federalreserve.gov/
apps/foia/proposedregs.aspx.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
• FAX: (202) 452–3819 or (202) 452–
3102.
• Mail: Robert deV. Frierson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at http://
www.federalreserve.gov/apps/foia/
proposedregs.aspx as submitted, except
as necessary for technical reasons.
Accordingly, your comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper in Room MP–500 of the Board’s
Martin Building (20th and C Streets
NW.,) between 9:00 a.m. and 5:00 p.m.
on weekdays.
FOR FURTHER INFORMATION CONTACT:

Susan V. Foley, Senior Associate
Director (202) 452–3596, Samantha J.
Pelosi, Manager (202) 530–6292, Edith
Collis, Senior Financial Services
Analyst (202) 453–3638, Division of
Reserve Bank Operations and Payment
Systems; or Kara Handzlik, Counsel
(202) 452–3852, Legal Division; for
users of Telecommunication Devices for
the Deaf (TDD) only, contact (202) 263–
4869.
SUPPLEMENTARY INFORMATION:

I. Background
Subpart A of Regulation J, Collection
of Checks and Other Items by Federal
Reserve Banks, governs the collection of
checks by the Reserve Banks and
applies to all parties interested in an
item handled by any Reserve Bank.
Among other things, the subpart
specifies the time and manner in which
paying banks must settle for items
presented to them by the Reserve Banks.
The subpart is supplemented by the
Reserve Banks’ Operating Circular 3,
Collection of Cash Items and Returned
Checks, which provides more specific
terms and conditions under which
Reserve Banks will handle checks and

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other cash items and noncash items.1
The Board’s Regulation CC, Availability
of Funds and Collection of Checks, also
governs the collection, presentment, and
return of checks, as do the provisions of
the Uniform Commercial Code (UCC), as
adopted in a state, to the extent those
provisions are not inconsistent with
Regulation J.2 Under the UCC, a paying
bank generally will be accountable for
the amount of a check if the paying bank
does not settle for or return the check
(or send notice of dishonor) before
midnight of the banking day on which
the paying bank received the check.3 A
paying bank that has settled for a check
before midnight of the banking day on
which it received the check,
nonetheless, may avoid accountability
for the check by returning the check (or
sending notice of dishonor) before
midnight of the next banking day (the
‘‘midnight deadline’’).4
Regulation J adopts similar rules for
checks presented by Reserve Banks.
Under § 210.9(b)(1), a paying bank must,
on the day it receives the check, settle
for the check by the close of Fedwire
Funds Service on that day, or return the
check by the later of the close of its
banking day or the close of Fedwire
(both of which are earlier than the UCC
deadline) in order to avail itself of the
ability to return the check and revoke
settlement within the midnight deadline
under the UCC.5 If a paying bank settles
with a Reserve Bank for a check on the
day that the Reserve Bank presents the
1 Operating Circular 3 is available at
www.frbservices.org/regulations/operating_
circulars.html.
2 12 CFR part 229.
Article 4 of the UCC, as adopted by each state,
governs the check collection process.
3 UCC § 4–302(a). Under the UCC, a ‘‘banking
day’’ is the part of a day that a depository
institution is open to the public for carrying on
substantially all of its banking functions. UCC § 4–
104. An institution may treat items received after
a cutoff hour of 2:00 p.m. local time or later as being
received on the next banking day. UCC § 4–108. For
example, if a paying bank establishes a cutoff hour
of 2:00 p.m. local time and a presenting bank,
including a Reserve Bank, presents an item to the
paying bank at 3:00 p.m. local time Monday, the
paying bank may consider an item to be received
on its Tuesday banking day.
4 UCC § 4–301(a). Section 229.30(c) of the Board’s
Regulation CC extends the UCC midnight deadline
(and Regulation J return deadline) to the time of
dispatch of the return or notice for expeditious
means of delivery (generally those that would result
in receiving institution’s receipt of the return or
notice before the cutoff hour on the receiving
institution’s next banking day after the otherwise
applicable midnight deadline). 12 CFR 229.30(c).
5 12 CFR 210.9(b)(1).

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Proposed Rules

check to the paying bank, the paying
bank may revoke settlement of a check
if it returns the check by midnight of the
next banking day. For purposes of
determining whether a paying bank will
be subject to any applicable overdraft
charges under the PSR policy,
§ 210.9(b)(2)(i) of Regulation J states that
the proceeds of the paying bank’s
settlement must be made available to its
administrative Reserve Bank by the
latest of (A) the next clock hour that is
at least one hour after the paying bank
receives the item; (B) 9:30 a.m.; or (C)
such later time as provided in the
Reserve Banks’ operating circulars.6
Under this provision, 9:30 a.m. is the
earliest possible time of day by which
the paying bank would be required to
settle for an item in order to avoid
overdraft charges, and there must be at
least one hour between the time the
item is presented to the paying bank and
the time the paying bank settles for the
item. For example, if a Reserve Bank
presents an item by 8:00 a.m., then the
paying bank would be required to settle
for the item at 9:30 a.m., unless a later
settlement time were called for in the
Reserve Banks’ operating circulars.
(Section 210.12(i) of Regulation J
provides that recipients of returned
checks must settle with Reserve Banks
in the same manner and by the same
time as checks presented for payment.)
In accordance with § 210.9(b), section
12.2 of the Reserve Banks’ Operating
Circular 3 sets forth 11:00 a.m. as the
earliest settlement time (later than the
9:30 a.m. set forth in Regulation J).
Under section 12.2, the proceeds of the
paying bank’s settlement must be
available to its administrative Reserve
Bank by the later of 11:00 a.m. or the
next clock hour that is at least one hour
after the paying bank receives the item,
but no later than 3:00 p.m. local time of
the paying bank.

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II. Proposed Amendments
Separately from this notice, the Board
is proposing changes to the PSR policy.7
The proposed changes relate to the
Board’s procedures for posting debit and
credit entries to depository institutions’
Federal Reserve accounts for automated
clearing house (ACH) debit and
commercial check transactions.
6 Section 210.9(b)(3)(i) sets forth similar times of
day if the paying bank closes voluntarily on a
Reserve Bank banking day. Section 210.9(b)(4)(i)
sets forth analogous times if the paying bank
receives an item on a banking day on which the
Reserve Bank is closed, i.e., a business day that is
not a banking day for the Reserve Bank. All times
are stated in Eastern time, unless otherwise
specified.
7 The Board’s current policy on payment system
risk is available at www.federalreserve.gov/
paymentsystems/psr_policy.htm.

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Therefore, the Board is proposing
changes to § 210.9(b) of Regulation J to
conform to the portions of the proposed
changes to the PSR policy that relate to
the Reserve Banks’ posting practices for
debits to paying banks’ accounts for
check presentments. Specifically, the
Board proposes to permit the Reserve
Banks to require a paying bank to settle
for an item presented by a Reserve Bank
as soon as one half-hour after it receives
the item from the Reserve Bank and by
as early as 8:30 a.m., in order to avoid
overdraft charges. The settlement
timeframe to preserve the right to return
the check (close of Fedwire) would not
be affected.
The Board proposes that
§ 210.9(b)(2)(i) be revised to state that
the paying bank shall settle for an item
by the latest of (A) the next clock hour
or clock half-hour that is at least one
half-hour after the paying bank receives
the item; (B) 8:30 a.m.; or (C) such later
time as provided in the Reserve Banks’
operating circulars.8 For example, if the
Reserve Banks present an item by 8:00
a.m., then the paying bank would be
required to settle for the item at 8:30
a.m. to avoid overdraft charges, unless
a later settlement time were provided
for in the Reserve Banks’ operating
circular. The Board proposes similar
changes in §§ 210.9(b)(3)(i) and (b)(4)(i).
A. Half-Hour Window Between
Presentment and Settlement
The Board adopted the current onehour window between presentment and
settlement in 1992.9 At that time, the
Board reasoned that decreasing to one
hour the amount of time a paying bank
has to examine the checks on the day of
presentment and decide whether to
settle for or return them would not
affect the cash letter (batches of checks)
verification processes of most
institutions. The Board noted that, prior
to the amendments, paying banks had to
settle for or return the checks by the
close of business, which permitted only
limited verification of the cash letters.
For example, a paying bank could verify
that a cash letter had been received, but
likely could not examine individual
checks prior to settling for the cash
letter by the close of business. Paying
banks generally did not examine checks
individually until after the close of
business on the day of presentment or
during the following day. Therefore the
Board determined that the one-hour
period between the paying bank’s

receipt of and settlement for the checks
was sufficient.10
When the Board adopted the one-hour
window between presentment and
settlement in 1992, depository
institutions handled most checks in
paper form. The Board believes that
several technological and operational
developments since that time justify
requiring paying institutions to settle as
soon as one half-hour after presentment.
In the wake of the Check Clearing for
the 21st Century Act of 2003 (Check 21
Act), banks now handle most checks
electronically.11 The Reserve Banks now
present virtually all (over 99.9 percent)
checks to paying banks electronically.
Electronic delivery of checks between
Reserve Banks and paying banks, and
computerized handling of those checks
within institutions, should facilitate
paying banks’ ability to verify the
receipt of cash letters sooner than when
presentment of checks was done
predominantly in paper form, such that
one half-hour between an institution’s
receipt of checks from the Reserve
Banks and the institution’s settlement
with the Reserve Banks for the checks
should be sufficient.
The Board requests comment on
whether one half-hour between receipt
of checks by a paying bank and the
paying bank’s settlement is a sufficient
amount of time for a paying bank to
perform a limited verification of cash
letters and determine whether to settle
for or return the cash letter.
Alternatively, the Board requests
comment on whether a shorter period of
time between presentment and
settlement would be appropriate (for
example, fifteen minutes).
The Board also proposes to define
‘‘clock half-hour’’ as a new term in
§ 210.2(p)(2) to mean a time that is on
the half-hour (e.g., 1:30 or 2:30). Section
210.2(p), which the Board proposes to
redesignate as § 210.2(p)(1), currently
defines the term ‘‘clock hour’’ as a time
that is on the hour (e.g., 1:00 or 2:00).
B. Earliest Settlement Time at 8:30 a.m.
In 1997, the Board revised § 210.9(b)
to explicitly refer to 9:30 a.m. (rather
than one hour after the opening of
Fedwire) as the earliest time a paying
bank could be required to settle for an
item. This revision to § 210.9(b) was
intended to ensure the earliest
settlement time for checks remained
unchanged when the scheduled opening
of Fedwire moved from 8:30 a.m.12
Id. at 46951.
Law 108–100, 117 Stat. 1177 (codified
at 12 U.S.C. 5001–5018) (2003). The act went into
effect on October 28, 2004.
12 62 FR 48166, 48169 (Sept. 15, 1997). Today, the
Reserve Banks’ Fedwire opening hour for a given
10

11 Public

8 The Reserve Banks would modify paragraph
12.2 of Operating Circular 3 to eliminate 11:00 a.m.
as the earliest posting time.
9 See 57 FR 46950 (Oct. 14, 1992).

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Proposed Rules

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Depository institutions will need to
have funding available by 8:30 a.m. to
settle for checks presented under the
proposal. Institutions may fund their
accounts by holding sufficient balances
overnight, arranging for funding before
the settlement time, or incurring
daylight overdrafts in their Federal
Reserve accounts (if eligible). The
Reserve Banks now pay interest on
institutions’ Federal Reserve account
balances, thereby reducing institutions’
opportunity cost (i.e., loss of interest)
associated with holding higher Federal
Reserve account balances overnight.13
Although an institution cannot know
the exact value of check presentments it
will receive on a given day, it should,
based on past trends, be able to predict
within a reasonable margin of error an
approximate amount it expects to
receive and to hold balances sufficient
to cover that amount. In addition, the
current PSR policy, implemented in
2011, allows eligible institutions to
collateralize their daylight overdrafts,
which would reduce or eliminate any
daylight overdraft fees associated with
the proposed posting rule change. For
each two-week reserve maintenance
period, eligible depository institutions
also receive a $150 fee waiver, reducing
the burden on institutions that might
incur small amounts of uncollateralized
daylight overdrafts resulting from the
proposed posting rule change.14
The posting rules were last updated in
2002, well before the Reserve Banks’
check processing became almost 100
percent electronic. Thus the proposed
change better aligns with today’s
electronic check-processing
environment in which about 90 percent
Reserve Bank banking day is even earlier than it
was in 1997; in 2004 it moved to 9:00 p.m. on the
preceding calendar day. For example, for the
Reserve Banks’ banking day of Tuesday, Fedwire
opens at 9:00 p.m. on Monday. See
www.newyorkfed.org/banking/circulars/11589.html.
13 12 CFR 204.10. The Board notes that Federal
Home Loan Banks (FHLBs) are not eligible to earn
interest on balances in Federal Reserve accounts,
but can act as pass-through correspondents. Per
section 204.10 of Regulation D, in cases of balances
maintained by pass-through correspondents that are
not interest-eligible institutions, Reserve Banks
shall pay interest only on the balances maintained
to satisfy a reserve balance requirement of one or
more respondents, and the correspondents shall
pass back to its respondents interest paid on
balances in the correspondent’s account (12 CFR
204.10).
14 The Board notes that voluntary
collateralization of daylight overdrafts and the $150
fee waiver are not available to Edge and agreement
corporations, bankers’ banks that have not waived
their exemption from reserve requirements, limitedpurpose trust companies, and governmentsponsored enterprises (including FHLBs) and
international organizations. These types of
institutions do not have regular access to the
discount window and, therefore, are expected not
to incur daylight overdrafts in their Federal Reserve
accounts.

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of checks, on average, are available to be
presented by 8:00 a.m. and prompt
settlement is possible for the majority of
the value of check activity.
The Board requests comment on
whether the Reserve Banks should be
permitted to obtain settlement from a
paying bank for a check by as early as
8:30 a.m. The Board also requests
comment on the feasibility of settlement
before 8:30 a.m., given the current
electronic check-processing
environment, and whether an earlier
posting time would even better align
presentment to settlement.
C. Effective Date
The effective date for these proposed
changes would correspond to the
effective date of the changes the Board
is proposing to the PSR policy, the final
versions of which the Board would
expect to announce contemporaneously.
The Board proposes that the changes to
the PSR policy, and thus these
conforming changes to Regulation J,
would become effective six months after
publication of the final changes in the
Federal Register. The Board requests
comment on whether six months
between publication of the Regulation J
final rule and the rule’s effective date
provides paying banks with sufficient
time to make any necessary operational
changes. Alternatively, the Board also
requests comment on whether a shorter
period, such as three months, would be
sufficient time.
III. Competitive Impact Analysis
The Board conducts a competitive
impact analysis when it considers a rule
or policy change that may have a
substantial effect on payment system
participants, such as that being
proposed for the posting of ACH debit
and commercial check transactions.
Specifically, the Board determines
whether there would be a direct or
material adverse effect on the ability of
other service providers to compete with
the Federal Reserve due to differing
legal powers or due to the Federal
Reserve’s dominant market position
deriving such legal differences.15 The
Board believes that there are no adverse
effects resulting from the proposed
changes due to legal differences.
Under Regulation J, the Reserve Banks
have the legal and operational ability to
debit paying banks for paper
presentments of checks earlier in the
day than private-sector collecting banks
and, in turn, can pass credits for
deposited checks earlier in the day
without incurring significant intraday
float. To obtain settlement from paying
15 Federal

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74043

banks for paper checks presented,
Regulation J permits the Reserve Banks
to debit directly the account of the
paying bank or its designated
correspondent.16 In contrast, a paying
bank settles for checks presented by a
private-sector bank for same-day
settlement by sending a Fedwire Funds
transaction to the presenting bank or by
another agreed upon method.17 In
addition, the Reserve Banks have the
right to debit the account of the paying
bank for settlement of checks on the
next clock hour that is at least one hour
after presentment, whereas a privatesector collecting bank may not receive
settlement until the close of Fedwire on
the day of presentment.18
In March 1998, the Board requested
comment on whether these legal
differences between the Reserve Banks
and the private sector provided the
Reserve Banks with a competitive
advantage. Most commenters
acknowledged that the regulation
governing the timing and settlement
favor Reserve Banks over private-sector
collecting banks. None of the
commenters, however, suggested an
alternative that eliminated the disparity
while maintaining a balance between
the needs of both the paying bank and
collecting banks to control some part of
the settlement process.19
Additionally, under Regulation J,
Reserve Banks can obtain same-day
settlement for checks presented to a
paying bank before the paying bank’s
cutoff hour, generally 2:00 p.m. local
time or later.20 The same-day settlement
rule for private-sector banks, however,
requires that they make their
presentments by 8:00 a.m. local time to
ensure that they receive same-day
settlement by Fedwire without being
assessed presentment fees. In March
1998, the Board also requested comment
on the effect of the difference in
presentment deadlines for Reserve
Banks and private-sector banks. Most
commenters did not believe that the sixhour difference in presentment
deadlines was a significant impediment
to the ability of private-sector banks to
compete with the Reserve Banks.
Based on the analysis of the
comments received, the Board
concluded then and continues to believe
that these legal disparities do not
materially affect the efficiency of or
competition in the check collection
16 12

CFR 210.9(b)(5).
CFR 229.36(f)(2).
18 12 CFR 210.9(b)(2); 12 CFR 229.36(f)(2).
19 The request for comment and the subsequent
notice of the Board’s decision can be found,
respectively, at 63 FR 12700 (March 16, 1998) and
63 FR 68701 (December 14, 1998).
20 12 CFR 210.9(b)(1).
17 12

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system. The costs to paying banks and
their customers associated with
reducing any remaining legal disparities
would outweigh any payment system
efficiency gains.
In addition, the Check 21 Act
facilitated the transformation of the
nation’s check collection system from
one that was largely paper-based to one
that is virtually all electronic, based on
agreements between the parties.
Institutions may determine, as part of
the agreements, the presentment and
settlement deadlines. Thus, privatesector presenting banks may be able to
obtain settlement times equivalent to
the Federal Reserve’s check posting rule
through clearinghouse rules or
individual agreements with paying
banks. Furthermore, for depositary and
paying banks that opt to use a check
clearinghouse rather than directly
exchange paper or electronic checks,
private-sector clearinghouses have the
option to use the Reserve Banks’
National Settlement Service (NSS) to
effect settlement of checks or may settle
by directing their members to initiate
funds transfers over the Reserve Banks’
Fedwire Funds Service.21 NSS’s
operating hours extend from 8:30 a.m. to
5:00 p.m., while Fedwire Funds
operating hours begin at 9:00 p.m. the
previous calendar day and end at 6:30
p.m. The Reserve Banks today settle
current check transactions (including
corrections and adjustments associated
with check-processing) from 11:00 a.m.
to 6:30 p.m. within the Fedwire Funds
operating day.
Under the proposed posting rules, the
bulk of the Reserve Banks’ postings of
credits to senders and debits to paying
banks for commercial check transactions
may shift to earlier in the day.
Depending on the number of checks an
institution sends to the Reserve Banks
and that it receives from the Reserve
Banks, the institution may receive either
a ‘‘net credit’’ or a ‘‘net debit’’ earlier in
the day. As a result, the earlier posting
of commercial check transactions may
be viewed as more or less attractive,
depending on changes to balances.
Given the factors discussed above, the
Board does not believe that the
proposed changes to Regulation J would
have any direct adverse effect on other
service providers to compete effectively
21 NSS is a multilateral settlement service owned
and operated by the Reserve Banks. The service is
offered to depository institutions that settle for
participants in clearinghouses, financial exchanges,
and other clearing and settlement groups.
Settlement agents, acting on behalf of those
depository institutions in a settlement arrangement,
electronically submit settlement files to the Reserve
Banks. Files are processed upon receipt, and entries
are automatically posted to the depository
institutions’ Federal Reserve accounts.

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with Reserve Banks in providing similar
services.
IV. Initial Regulatory Flexibility
Analysis
The Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.) requires agencies
either to provide an initial regulatory
flexibility analysis with a proposed rule
or to certify that the proposed rule will
not have a significant economic impact
on a substantial number of small
entities. In accordance with section 3(a)
of the RFA, the Board has reviewed the
proposed regulation. In this case, the
proposed rule would apply to all
depository institutions that receive
presentment or return of checks from
the Reserve Banks. Based on current
information, the Board believes that the
proposed rule would not have a
significant economic impact on a
substantial number of small entities (5
U.S.C. 605(b)). Nonetheless, an initial
regulatory flexibility analysis has been
prepared in accordance with 5 U.S.C.
603 in order for the Board to solicit
comment. The Board will, if necessary,
conduct a final regulatory flexibility
analysis after consideration of
comments received during the public
comment period.
1. Statement of the Need for, Objectives
of, and Legal Basis for, the Proposed
Rule
These proposed amendments to
Regulation J are necessary to conform
the required settlement times for checks
presented by Reserve Banks to the
proposed method for posting debits and
credits to institutions’ Federal Reserve
accounts to measure daylight overdrafts
under the PSR policy, as proposed in
Docket No. OP–1472, elsewhere in the
Federal Register. The Board believes
that the proposed posting rules better
align the settlement for checks with
actual deposit and presentment times,
reflecting the industry’s almost
complete shift from paper to electronic
check-processing.
The proposal would permit the
Reserve Banks to require a paying bank
to settle for an item by as early as 8:30
a.m. (one hour earlier than under the
current rule) and would require a
paying bank to settle for an item as soon
as one half-hour after it receives the
item from the Reserve Banks (currently,
paying banks are required to settle for
an item as soon as one hour after they
receive the item). Subpart A of
Regulation J is issued by the Board
pursuant to the following sections of the
Federal Reserve Act: Sections 11(i) and
(j), which grant the Board general
supervisory and rulemaking authority
over Reserve Bank activities; section 13,

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which authorizes the Reserve Banks to
engage in check collection on behalf of
depository institutions; and section
16(14), which authorizes the Board to
make regulations concerning the
transfer of funds among Reserve Banks
and to require Reserve Banks to exercise
the functions of a clearinghouse for
depository institutions.22
2. Small Entities Affected by the
Proposed Rule
The proposed rule would affect all
institutions that receive checks or
returned checks handled by the Reserve
Banks. The Board believes that virtually
all depository institutions receive
checks or returned checks handled by
the Reserve Banks on at least an
occasional basis. Pursuant to regulations
issued by the Small Business
Administration (SBA) (13 CFR 121.201),
a ‘‘small banking organization’’ includes
a depository institution with $500
million or less in total assets. Based on
data reported as of June 30, 2013, the
Board believes that there are
approximately 12,164 small depository
institutions.
3. Projected Reporting, Recordkeeping,
and Other Compliance Requirements
The proposed rule would permit the
Reserve Banks to require a paying bank
to settle for an item by as early as 8:30
a.m., instead of 9:30 a.m., and as soon
as one half-hour, instead of one hour,
after it receives the item from the
Reserve Banks. Paying banks may
choose to maintain sufficient overnight
Federal Reserve account balances to
fund checks debited at 8:30 a.m. The
Reserve Banks’ payment of interest on
institutions’ Federal Reserve account
balances reduces paying banks’
opportunity cost associated with doing
so. In addition, the PSR policy allows
eligible institutions to collateralize their
daylight overdrafts, which would
reduce or eliminate any daylight
overdraft fees that may occur from the
earlier settlement. Eligible institutions
also receive a $150 fee waiver for each
two-week reserve maintenance period,
which reduces the burden particularly
for smaller institutions if small amounts
of uncollateralized daylight overdrafts
occur.23 As noted earlier, under the
proposed posting rules, the bulk of the
Reserve Banks’ postings of debits to
paying institutions for commercial
check transactions may shift to earlier in
the day, allowing Reserve Banks to
provide credits to depositing
22 12 U.S.C. 248(i) and (j); 12 U.S.C. 342; 12
U.S.C. 248–1.
23 As previously noted, the Board recognizes that
these cost-mitigating options are not available to all
institutions.

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Proposed Rules
institutions earlier, thus mitigating
adverse effects on depository
institutions.
The Board seeks information and
comment on any costs that would arise
from the application of the proposed
rule.

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4. Identification of Duplicative,
Overlapping, or Conflicting Federal
Rules
Subpart C of the Board’s Regulation
CC (12 CFR part 229) sets forth
conditions under which a paying bank
must settle with a presenting bank for a
check on the same day the check is
presented to the paying bank in order
for the paying bank to avail itself of its
ability to return the check on its next
banking day under the UCC. Settlement
for checks presented by Reserve Banks
is governed by the provisions of subpart
A of Regulation J, and the same-day
settlement provisions of Regulation CC
do not supersede or limit the rules in
Regulation J.24
5. Significant Alternatives to the
Proposed Rule
As noted above, the proposed rule
would permit the Reserve Banks to
require a paying bank to settle for an
item by as early as 8:30 a.m., instead of
9:30 a.m., and as soon as one half-hour,
instead of one hour, after it receives the
item from the Reserve Banks. In
connection with the proposed changes,
the Board recognizes that an alternative
to the proposed rule would be a rule
that permits the Reserve Banks to
require a paying bank to settle for an
item at a time earlier than 8:30 a.m. The
Board believes the proposed time of
8:30 a.m. achieves the Board’s goal of
better aligning presentment to
settlement while imposing minimal
costs on paying banks. The Board is
seeking comment, however, on the
feasibility of settlement before 8:30 a.m.
and whether an earlier posting time
would even better align presentment to
settlement. (See discussion above in
section II.B.) In addition, in lieu of
proposing to permit the Reserve Banks
to require a paying bank to settle as soon
as one half-hour after it receives the
item from the Reserve Banks, the Board
could have proposed a shorter period of
time, such as fifteen minutes. The Board
believes the proposed time period of
one half-hour promotes the Board’s
objective of minimizing the window
between presentment and settlement to
reflect technological and operational
developments while continuing to
provide paying banks with sufficient
time to perform a limited verification of
24 See

12 CFR 210.3(f).

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cash letters. The Board is seeking
comment on whether one half-hour
between presentment and settlement is
appropriate or if a shorter window
would be sufficient. (See discussion
above in section II.A.)
V. Paperwork Reduction Act Analysis
In accordance with the Paperwork
Reduction Act (PRA) of 1995 (44 U.S.C.
3506; 5 CFR part 1320 appendix A.1),
the Board reviewed the proposed rule
under the authority delegated to the
Board by the Office of Management and
Budget (OMB). No collections of
information pursuant to the PRA are
contained in the proposed rule.
List of Subjects in 12 CFR Part 210
Banks, banking, Federal Reserve
System.
Authority and Issuance
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation J, 12 CFR part 210, as
follows:
PART 210—COLLECTION OF CHECKS
AND OTHER ITEMS BY FEDERAL
RESERVE BANKS AND FUNDS
TRANSFERS THROUGH FEDWIRE
(REGULATION J)
1. The authority citation for part 210
is revised to read as follows:

■

Authority: 12 U.S.C. 248(i), (j), and 248–1,
342, 360, 464, 4001–4010, and 5001–5018.

2. In § 210.2, revise paragraph (p) to
read as follows:

■

§ 210.2

Definitions.

*

*
*
*
*
(p) Clock hour and clock half-hour.
(1) Clock hour means a time that is on
the hour, such as 1:00, 2:00, etc.
(2) Clock half-hour means a time that
is on the half-hour, such as 1:30, 2:30,
etc.
■ 3. In § 210.9, revise paragraphs (b)(2),
(b)(3), and (b)(4) to read as follows:
§ 210.9

Settlement and Payment.

*

*
*
*
*
(b) * * *
(2) Time of settlement. (i) On the day
a paying bank receives a cash item from
a Reserve Bank, it shall settle for the
item so that the proceeds of the
settlement are available to its
administrative Reserve Bank, or return
the item, by the latest of—
(A) the next clock hour or clock halfhour that is at least one half-hour after
the paying bank receives the item;
(B) 8:30 a.m. Eastern Time; or
(C) such later time as provided in the
Reserve Banks’ operating circulars.
(ii) If the paying bank fails to settle for
or return a cash item in accordance with

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74045

paragraph (b)(2)(i) of this section, it
shall be subject to any applicable
overdraft charges. Settlement under
paragraph (b)(2)(i) of this section
satisfies the settlement requirements of
paragraph (b)(1) of this section.
(3) Paying bank closes voluntarily. (i)
If a paying bank closes voluntarily so
that it does not receive a cash item on
a day that is a banking day for a Reserve
Bank, and the Reserve Bank makes a
cash item available to the paying bank
on that day, the paying bank shall
either—
(A) on that day, settle for the item so
that the proceeds of the settlement are
available to its administrative Reserve
Bank, or return the item, by the latest of
the next clock hour or clock half-hour
that is at least one half-hour after it
ordinarily would have received the
item, 8:30 a.m. Eastern Time, or such
later time as provided in the Reserve
Banks’ operating circulars; or
(B) on the next day that is a banking
day for both the paying bank and the
Reserve Bank, settle for the item so that
the proceeds of the settlement are
available to its administrative Reserve
Bank by 8:30 a.m. Eastern Time on that
day or such later time as provided in the
Reserve Banks’ operating circulars; and
compensate the Reserve Bank for the
value of the float associated with the
item in accordance with procedures
provided in the Reserve Bank’s
operating circular.
(ii) If a paying bank closes voluntarily
so that it does not receive a cash item
on a day that is a banking day for a
Reserve Bank, and the Reserve Bank
makes a cash item available to the
paying bank on that day, the paying
bank is not considered to have received
the item until its next banking day, but
it shall be subject to any applicable
overdraft charges if it fails to settle for
or return the item in accordance with
paragraph (b)(3)(i) of this section. The
settlement requirements of paragraphs
(b)(1) and (b)(2) of this section do not
apply to a paying bank that settles in
accordance with paragraph (b)(3)(i) of
this section.
(4) Reserve Bank closed. (i) If a paying
bank receives a cash item from a
Reserve Bank on a banking day that is
not a banking day for the Reserve Bank,
the paying bank shall—
(A) settle for the item so that the
proceeds of the settlement are available
to its administrative Reserve Bank by
the close of Fedwire on the Reserve
Bank’s next banking day, or return the
item by midnight of the day it receives
the item (if the paying bank fails to
settle for or return a cash item in
accordance with this paragraph
(b)(4)(i)(A), it shall become accountable

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Proposed Rules

for the amount of the item as of the
close of its banking day on the day it
receives the item); and
(B) settle for the item so that the
proceeds of the settlement are available
to its administrative Reserve Bank by
8:30 a.m. Eastern Time on the Reserve
Bank’s next banking day or such later
time as provided in the Reserve Bank’s
operating circular, or return the item by
midnight of the day it receives the item.
If the paying bank fails to settle for or
return a cash item in accordance with
this paragraph (b)(4)(i)(B), it shall be
subject to any applicable overdraft
charges. Settlement under this
paragraph (b)(4)(i)(B) satisfies the
settlement requirements of paragraph
(b)(4)(i)(A) of this section.
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System, November 25, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013–28747 Filed 12–9–13; 8:45 am]
BILLING CODE P

DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
15 CFR Part 922
[Docket No. 130813710–3710–01]
RIN 0648–BD60

Gray’s Reef National Marine Sanctuary
Regulations and Management Plan
Office of National Marine
Sanctuaries (ONMS), National Ocean
Service (NOS), National Oceanic and
Atmospheric Administration (NOAA),
Department of Commerce (DOC).
ACTION: Proposed rule.
AGENCY:

NOAA is proposing to update
the regulations and management plan
for Gray’s Reef National Marine
Sanctuary (GRNMS or Sanctuary). The
regulations would be revised to clarify
the prohibition on anchoring and add an
exemption to allow the use of weighted
marker buoys that are continuously
tended and used during otherwise
lawful fishing or diving activities and
that are not attached to a vessel and not
capable of holding a boat at anchor. A
draft environmental assessment has
been prepared that includes analysis of
the consequences of this proposed
action. A draft management plan
outlining management priorities for
GRNMS for the next 5–10 years has also
been prepared. NOAA is soliciting
public comment on the proposed rule,

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SUMMARY:

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draft environmental assessment, and
draft management plan.
Comments will be considered if
received by February 10, 2014. A Public
hearing will be held as detailed below:

DATES:

(1) January 7, 2014, 5:30–7:30 p.m.,
Pooler Public Library, 216 S. Rogers
St., Pooler, Georgia
(2) January 8, 2014, 5:30–7:30 p.m.,
Statesboro Regional Library, 124 S.
Main St., Statesboro, Georgia
(3) January 9, 2014, 5:30–7:30 p.m.,
Marshes of Glynn Library, 208
Gloucester St., Brunswick, Georgia
You may submit comments
on this document, identified by NOAA–
NOS–2013–0160, by any of the
following methods:
• Electronic Submission: Submit all
electronic public comments via the
Federal e-Rulemaking Portal. Go to
www.regulations.gov/
#!docketDetail;D=NOAA–NOS–2013–
0160, click the ‘‘Comment Now!’’ icon,
complete the required fields, and enter
or attach your comments.
• Mail: Gray’s Reef National Marine
Sanctuary, 10 Ocean Science Circle,
Savannah, GA 31411, Attn: Greg McFall,
Superintendent.
Instructions: Comments sent by any
other method, to any other address or
individual, or received after the end of
the comment period, may not be
considered by NOAA. All comments
received are a part of the public record
and will generally be posted for public
viewing on www.regulations.gov
without change. All personal identifying
information (e.g., name, address, etc.),
confidential business information, or
otherwise sensitive information
submitted voluntarily by the sender will
be publicly accessible. NOAA will
accept anonymous comments (enter
‘‘N/A’’ in the required fields if you wish
to remain anonymous). Attachments to
electronic comments will be accepted in
Microsoft Word, Excel, or Adobe PDF
file formats only.

ADDRESSES:

FOR FURTHER INFORMATION CONTACT:

Becky Shortland at (912) 598–2381.
Copies of the proposed rule, draft
environmental assessment, and draft
management plan can be downloaded or
viewed on the internet at
www.regulations.gov (search for docket
# NOAA–NOS–2013–0160) or at http://
graysreef.noaa.gov. Copies can also be
obtained by contacting Resource
Protection Coordinator Becky Shortland,
Gray’s Reef National Marine Sanctuary,
10 Ocean Science Circle, Savannah,
Georgia; or, becky.shortland@noaa.gov.
SUPPLEMENTARY INFORMATION:

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I. Background
A. Gray’s Reef National Marine
Sanctuary
NOAA designated GRNMS as the
nation’s fourth national marine
sanctuary in 1981 for the purposes of:
Protecting the quality of this unique and
fragile ecological community; promoting
scientific understanding of this live
bottom ecosystem; and enhancing
public awareness and wise use of this
significant regional resource. GRNMS
protects 22 square miles of open ocean
and submerged lands of particularly
dense and nearshore patches of
productive live bottom habitat. The
sanctuary is influenced by complex
ocean currents and serves as a mixing
zone for temperate (colder water) and
sub-tropical species. The series of rock
ledges and sand expanses has produced
a complex habitat of caves, burrows,
troughs, and overhangs that provide a
solid base upon which temperate and
tropical marine flora and fauna attach
and flourish.
B. Need for action
The National Marine Sanctuaries Act
of 1972 (NMSA; 16 U.S.C. 1431 et seq.)
section 304(e) requires that NOAA
review and evaluate, among other
things, the site-specific management
techniques and strategies to ensure that
each sanctuary continues to fulfill the
purposes and policies of the NMSA.
Emerging issues, such as the effects of
invasive lionfish on sanctuary
resources, for example, are not
adequately addressed in the 2006 plan.
The new draft management plan reflects
some of these emerging issues and
presents management priorities for
GRNMS for the next 5–10 years. These
proposed regulatory changes would, in
the case of the anchoring prohibition,
clarify that attempting to anchor is also
prohibited because deployment of
anchors, even if the anchors do not set
on the bottom, can result in impacts to
the submerged lands. In the case of the
weighted marker buoys, these proposed
regulatory changes would allow the
placement of weighted marker buoys
used during otherwise lawful fishing or
diving activities. The purpose of
deployment of a weight on the bottom
is for safety or convenience while
conducting diving and recreational
fishing activities, since anchoring is not
allowed.
II. Summary of the Proposed Revisions
to GRNMS Regulations
The proposed regulatory action would
clarify a prohibition and add an
exemption.

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