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F ederal R eserve Bank OF DALLAS W ILLIAM H. WALLACE DALLAS, TEXAS 7 5 2 2 2 FIRST VIC E P R ES ID EN T AND CH IE F O PER ATING O FFIC ER Apri l 3, 1989 Circular 89-20 TO: The Chief Operating Officer at all financial institutions in the Eleventh Federal Reserve District SUBJECT Flexible Settlement of late ACH Files DETAILS On June 5, 1989, the Federal Reserve Bank of Dallas will implement a System policy for the processing and settlement of night cycle ACH files received from other Reserve Banks that meet certain criteria and are distributed late by an originating financial institution or an originating Federal Reserve Bank. Background In October 1984, a software change was made to the System standard ACH software to provide Reserve Banks the ability to process a late ACH night cycle file after close of the regular night cycle processing, but settle the file as if it had been processed in the regular night cycle. At that time, this was not a normal procedure, since files Federal Reserve offices receive after the close of the night cycle are usually not processed until the following day cycle. This additional cycle is termed a "flexible-settlement" cycle, and any file processed in this manner is called a flexible settlement file. Normally, the exchange of ACH files between Federal Reserve Banks is made until 12:30 a.m. Central Time for the night cycle, but on occasion there are files that are not available for transmission to receiving Reserve Banks until after the close of the regular exchange window. Reserve Banks attempt to accommodate those late files by extending their exchange window. For extended cycle processing purposes, each Reserve Bank has established a "latest" time for accepting late files from other Reserve Banks, depending on conditions in the Reserve Bank's ACH operations on the night that extended processing is requested. If the Reserve Bank is short of staff, must process unusually heavy volume, or has experienced computer system problems, then the Reserve Bank may refuse to extend for late processing; otherwise each Reserve Bank makes every effort to accept and process such late files. However, on For additional copies of any circu la r please con tact the Public A ffa irs Department at (214) 651-6289. Banks and others are encouraged to use the follow ing incom ing WATS numbers in c on tacting this Bank (800) 442-7140 (intrastate) and (800) 527-9200 (interstate). This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - occasion, even this extended processing is not sufficient to accommodate a file or files delivered late by either the originating institution or the originating Federal Reserve Bank, and it is for that reason that flexible-settlement processing of ACH files was implemented. The Federal Reserve instituted flexible ACH processing in order to reduce the number of delayed files in the ACH system and to reduce the volume and value of float resulting from delayed files. It was felt that-the improvement to the payments system and the reduction in float to be gained by extended processing and flexible-settlement processing would be worth the additional cost and effort, and that has proven to be the case. When the flexible-settlement processing program was implemented in October 1984, the Federal Reserve Bank of Dallas advised its financial institutions of the program and asked them to accept flexible-settlement files on a voluntary basis. Several institutions, primarily originators, expecting the same treatment for late files they may originate, agreed to accept these flexible-settlement files. However, the number of institutions that have voluntarily accepted flexible-settlement files has been small, which has put financial institutions around the rest of the country at a disadvantage in sending files to Eleventh District institutions, since the other eleven Reserve Banks mandate receipt of flexible-settlement files to a large number of their ACH receivers. New Pol icy In an attempt to provide a uniform level of service to ACH originators and receivers nationwide, the Federal Reserve Bank of Dallas will require that many institutions in the Eleventh Federal Reserve District receiving ACH files accept flexible-settlement files as described below. Each institution's account will be credited or charged for items processed and delivered to them on a "flexible-settlement" file. Before the Dallas Fed will process late files as flexible-settlement files, one or more of the following conditions will be met: 1) 2) 3) The file is received by 1:00 a.m. Central Time and the originating Reserve Bank requests that a late cycle be run. (The Dallas Bank will have few of these since we will normally extend our regular processing to 2:00 a.m. Central time rather than run a "flex-settlement" cycle.) The file is received by 4:00 a.m. Central Time and is estimated to have a net debit dollar value of $3 million or more. The file is received by 4:00 a.m. Central Time, contains critical credits (usually payroll items), and the originating Reserve Bank requests late cycle processing. Over the past several years, other Reserve Banks have contacted the Dallas Fed and made about two requests per month for late cycle processing. We expect that flexible-settlement files will be available for pickup or delivery by 8:00 a.m. at the latest, which should not inconvenience institutions using electronic connections or messenger delivery. - 3 - In addition to electronic and messenger pickup endpoints, most high-volume receivers will always be scheduled to receive a flexible settlement file, while others will receive flexible-settlement files depending on the dollar values of the files and our ability to deliver the files to institutions by the regular delivery time for that institution's ACH files. Institutions that can expect to receive a flexible-settlement file each time such processing is performed will be advised of their status prior to May 1. We will make every effort to broadcast notification of flexible-settlement processing to receivers who are connected to the RESPONSE network each time we perform such processing. Since most receiving institutions do not pick up or receive their regular night cycle file prior to 7:00 a.m., and even fewer institutions process their regular night cycle file prior to 9:00 a.m., we do not expect an additional file that is created and ready for distribution by 8:00 a.m. will inconvenience Eleventh District ACH receivers. MORE INFORMATION For further informaiton, please contact: Larry C. Ripley at the Dallas Office Local: (214) 651-6118 Toll Free: TX (800) 442-7140, LA (800) 527-9200 Tracy Whitten or B. B. Sessions at the Dallas Office Local: (214) 698-4349 or 651-6403 Toll Free: TX (800) 442-7140, LA (800) 527-9200 Eloise Guinn or Jane Pyke at the El Paso Office Local: (915) 544-4730 Toll Free: TX (800) 592-1631, NM (800) 351-1012 Louis Moore or Lilia Hice at the Houston Office Local: (713) 659-4433 Toll Free: (800) 392-4162 Carrie Perkins or Jennifer Pruitt at the San Antonio Office Local: (512) 224-2141 Toll Free: (800) 292-5810 Sincerely yours
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