Partnering with the Federal Reserve: the Fed & You. October 16, 2013

Transcription

1 Partnering with the Federal Reserve: the Fed & You October 16, 2013

2 The Pillars of the Fed Financial Services Monetary Policy Supervision and Regulation

3 Financial Services - Cash Currency and Coin Supply currency and coin to Eleventh District FIs Receive, sort and store excess currency and coin from FIs Maintain the quality of currency and coin in circulation

4 Financial Services - Cash Cash Facts The $1 and $20 are the two most commonly used bills Life expectancy of a $1 bill is 22 months; $20 bill is 25 months The Dallas Fed destroys about $15 million in unfit bills per day Unfit currency is replaced with notes from the Bureau of Engraving and Printing (BEP) in Washington, DC, or in Ft. Worth Unfit coins are sent to the Mint to be melted and re-struck Our high-speed processing machines process about 90,000 notes per hour The Dallas Fed detects about 300 counterfeit bills per month

5 Financial Services - Checks Check Collection/Clearing Consolidation of check processing operations 99%+ of our incoming items are deposited in image cash letters (ICLs) 99%+ of our outgoing items are sent to financial institutions and their processors in ICLs New FedReturn Mixed ICL Deposit Deadline

6 Financial Services Fedwire / FedACH Electronic transfer of funds among financial institutions nationwide Fedwire Funds Fedwire Extended Remittance Information FedACH One of two ACH networks in the country Direct Deposit/Direct Debit Other uses cash concentration/disbursement check conversion FedGlobal FedPayments Reporter FedACH SameDay

7 Financial Services - FedLine Connectivity to the Fed FedLine Web FedLine Advantage FedLine Command FedLine Direct

8 Business Continuity Business Continuity ACH Buddy Bank Fedwire Offline volume limitations

9 Emerging Trends in Payments Mobile Banking Mobile RDC Mobile Photo Bill Pay Mobile Account Opening Mobile Payments Mobile Wallets

10 Emerging Trends in Payments Person-to-Person (P2P) Payments PayPal, PopMoney, ClearXchange, PayNet Healthcare Payments FedPayments Reporter

11 Payments Fraud Positive Pay Corporate Account Takeover Anomaly Detection Out-of-Band Authentication Dual Control U.S. Adoption of the EMV Standard

12 Fed Strategic Plan Public Consultation Paper FedPaymentsImprovement.org Comments due by Dec. 13, 2013

13 Monetary Policy The Fed s primary mission is to ensure that enough money and credit are available to sustain economic growth without inflation. Reserve requirements Discount window Open market operations Interest rate on reserve balances TDF auctions/offerings

14 Monetary Policy Master Account Interest on Required & Excess Balances Reserves Term Deposit Facility (TDF) offering Discount Window

15 Monetary Policy: Master Account Interest Payments Opening Balance TT&L Cash Service Fees Closing Balance Funds / Securities ACH Checks Reserve Requirement

16 Monetary Policy: Reserve & Excess Balances Interest on Required Reserves Balances Interest on Excess Balances Excess Balance Account

17 Internal FR for Federal Reserve System; Not for Public Release Monetary Policy: Reserve & Excess Balances $2, Reserve Balances at Federal Reserve Banks $2, $1, $1, $ $ $-

18 Monetary Policy: Reserves Regulation D Reservable Liabilities FR2900

19 Monetary Policy: TDF Tool to drain reserve balances Small-value auctions No implications for near-term monetary policy TDF auctions and offerings held about every other month

20 Monetary Policy: The Discount Window Lending Programs Eligibility Access Collateral

21 Monetary Policy: The Discount Window Primary Credit - generally available for short periods, overnight to several weeks Secondary Credit - available to institutions not in satisfactory financial condition Seasonal Credit - available to small institutions with seasonal funding needs

22 Monetary Policy: The Discount Window In response to the financial crisis in 2009, System-wide lending activity increased significantly

23 Internal FR for Federal Reserve System; Not for Public Release Monetary Policy: Discount Window Number of Loans during the most recent financial crisis

24 Monetary Policy: The Discount Window Lending Programs Eligibility Access Collateral

25 Banking Supervision & Regulation One of six regulators of financial institutions Supervise state-member banks, bank holding companies, thrift-holding companies, and foreign banks with U.S. operations

26 Number of Banks Assets, Billions of Dollars Bank Failures 45 Number Assets

27 Deteriorating Financial Conditions Minimize risk of loss Federal Reserve U.S. Treasury Payments System

28 Managing Risk Review financial condition Utilize regulatory exams Analyze financial reports Communicate with regulators Contact DIs Monitor trends in payments system (ACH, checks, funds, etc.) Evaluate risk to affiliated DIs

29 Potential Risk Controls Daylight credit Real-time monitor Prefund cash shipments Discount window eligibility Require collateral Take custody of collateral Apply additional haircuts Restrict or deny services

30 Credit Risk Management Daylight Credit Overnight Credit

31 Payment System Risk (PSR) Policy Addresses the use of Daylight Credit Central Bank s role

32 PSR Policy Components - Net Debit Caps - Fees and Pricing

33 Collateral and Pricing for DLODs Voluntary Collateral margins & eligibility Collateralized DLODs $0 fee Uncollateralized DLODs 50 bps $150 fee waiver

34 Collateral Processing for DLODs and Discount Window Automated withdrawal requests DTC (The Depository Trust Company) FSS (Fedwire Securities Service)

35 Resources and Contacts Federal Reserve Financial Services Federal Reserve Discount Window General information regarding Payment System Risk Policy Overview of the PSR policy Information on PSR policy compliance for small users of intraday credit

36 Questions?