The Federal Reserve Board on Thursday requested comment on potential modifications to the Federal Reserve Banks’ National Settlement Service (NSS) and Fedwire® Funds Service to support enhancements to the same-day automated clearinghouse (ACH) service. The Board also requested comment on corresponding changes to the Federal Reserve Policy on Payment System Risk related to a new posting time for transactions and an increased daylight overdraft fee.
On September 13, 2018, NACHA, the rules and standards body for the ACH network, announced that its voting members had approved amendments to the NACHA Operating Rules & Guidelines to establish a third same-day ACH processing and settlement window. Currently, there is a morning window with a submission deadline of 10:30 a.m. ET and settlement at 1:00 p.m. ET and an afternoon window with a submission deadline of 2:45 p.m. ET and settlement at 5:00 p.m. ET. The new window, with a submission deadline of 4:45 p.m. ET and settlement at 6:00 p.m. ET, would allow originating depository financial institutions to submit same-day items later in the business day. A third same-day ACH window aligns with the Federal Reserve’s ongoing objective to support improvements in the safety and efficiency of payment systems in the United States as well as public interest in greater availability of payment services. In particular, the later same-day ACH window would allow more institutions to use same-day ACH services during a greater portion of their business day and may promote greater adoption of same-day ACH and availability of the service to originators and end-users.
The NACHA rules changes require adjustments to Federal Reserve services so that the private-sector ACH operator, The Clearing House, can settle same-day ACH transactions later in the day via the NSS. These changes include:
- Extending the closing of NSS by one hour to 6:30 p.m. ET
- Extending the cutoff time for Reserve Bank accountholders to initiate transfers on behalf of third parties via the Fedwire Funds Service (Fedwire Funds third-party cutoff) by 45 minutes to 6:45 p.m. ET
- Extending the closing of the Fedwire Funds Service by 30 minutes to 7:00 p.m. ET.
Collectively, these proposed changes are intended to allow sufficient time between the closing of NSS and the Fedwire Funds third-party cutoff, and between the Fedwire Funds third-party cutoff and the closing of the Fedwire Funds Service for depository institutions and their customers to reposition balances and manage liquidity. However, these potential modifications to NSS and the Fedwire Funds Service may increase certain risks and costs for Reserve Bank accountholders and their customers, including risks and costs related to compression of end-of-day processing activities, decreased availability of extensions to operating hours, and more frequent delays to the reopening of the Fedwire Funds Service. As such, the Federal Reserve has proposed options to manage any increased risks from the proposed operating hours. The Board requests comment on all aspects of these potential changes, including the Board’s analysis of the potential public benefits and the potential options to mitigate the risk of more frequent delays to the reopening of the Fedwire Funds Service.
The Board is not at this time directly addressing the comments received on the November 2018 notice regarding potential actions the Federal Reserve could take to support faster payments in the United States. Rather, the notice issued today is narrowly focused on whether the Reserve Banks should modify the operating hours for their wholesale services to support a third same-day ACH processing and settlement window. The Board continues to evaluate, and will separately respond to, comments on the November 2018 notice.
A copy of the Board’s Federal Register notice is attached. Comments are requested within 60 days of publication in the Federal Register, which is expected shortly.
For media inquiries, call 202-452-2955