Academic journal article Federal Reserve Bulletin

Revisions to Policy Statement on Payments System Risk

Academic journal article Federal Reserve Bulletin

Revisions to Policy Statement on Payments System Risk

Article excerpt

The Federal Reserve Board on September 23, 2004, announced that it has revised its Policy Statement on Payments System Risk concerning interest and redemption payments on securities issued by government-sponsored enterprises (GSEs) and certain international organizations.

The Reserve Banks are currently processing and posting these payments to depository institutions' Federal Reserve accounts by 9:15 a.m. eastern standard time, the same posting time as for U.S. Treasury securities' interest and redemption payments, even if the issuer has not fully funded its payments.

The revised policy requires that, beginning July 20, 2006, Reserve Banks will release these interest and redemption payments as directed by the issuer provided the issuer's Federal Reserve account contains sufficient funds to cover them. Although the issuer will determine the timing of these payments during the day, each issuer will be required to fund its interest and redemption payments by 4:00 p.m. eastern standard time for the payments to be processed that day.

To promote a smooth transition to the new policy, the Federal Reserve will coordinate an industry working group through the Federal Reserve Banks' Wholesale Product Office in New York. Organizations that commented on the planned policy changes, members of those organizations, and fiscal principals to whom the policy applies will be invited to participate. …

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