Automated Clearing House News - Second Quarter 1987
Original Publication Date: 1987-Jan-01
Included in the Prior Art Database: 2015-Oct-07
ACH newsletter from 1987
Page 01 of 4
Automated Clearing House News
Second Quarter 1987
New York Automated Clearing House 100 Broad Street ·
New York, N.Y. 10004 (212) 612-9200
The NYCH cautions against hasty action on Federal Reserve proposals
In an April letter to the Federal Reserve Board, New York Clearing House executive vice president John F. Lee responded to the recent proposals for reducing payment system risk. The letter explains that while NYCH supports the efforts to control risk, it does not favor all of the pro- posals, and it objects particularly to the suggested ten- month time frame for making the proposed changes.
The Federal Reserve's proposals would affect government book entry (GBE) securities transfers, debit caps, ACH trans- actions, and limits on inter-affiliate Fedwire transfers.
NYCH believes that each proposed change would effec- tively reduce banks' ability to function under sender net debit caps. Because of the impact of implementing all the proposals within a few months, many institutions might have to delay funds transfers until a late hour, when their credit positions could cover them. Wit.h so many institutions trying to mµke large transfers late in the day, one system failure or operating error could lead to gridlock throughout
· the payment system.
Specific NYCH suggestions on implementation timing are:
• Whatever changes are enacted should be made one at a time, at intervals of 9-12 months, so that each can be in- dividually evaluated before the next is made.
• If the Board decides to implement its GBE proposal, it should do so before deciding on any of the others, since this change would probably have the greatest effect on the payment system. The Board should next consider its proposals on inter-affiliate transfers, and then the ACH proposals.
• No reduction in debit cap levels should be considered until the other proposals that the Board decides to adopt have been implemented and their effects evaluated.
Of the Fed's recommendations, NYCH opposes:
• Limiting or prohibiting inter-affiliate Fedwire transfers: NYCH believes such restrictions would have little effect on payment risk and would significantly increase opera- tional risk. It recommends that if the Board does impose limits on inter-affiliate transfers, the controls should apply only to financially troubled institutions.
• Revising "ex post" moni(oring procedures: The Fed has proposed that net credits resulting from ACH debit trans- actions be posted at 1:00 p.m. instead of at the beginning of the business day. Most NYACH members oppose posting debits and credits at different times, because it would require expensive operational changes and un- necessarily complex monitoring procedures, and would reduce net debit caps.
• Changes in procedure for granting finality: The Fed pro- poses to grant finality to transactions of $5,000 or less at 1:00 p.m. on their settlement dates, and to larger trans- actions when the Reserve Banks have received "actually and finally...