WASHINGTON—Changes being proposed by the Federal Reserve to part II of its policy on payment system risk (PSR) are the subject of recommendations and concerns being raised in a letter from NAFCU.
"NAFCU has long been supportive of the Board's involvement in developing FedNow to facilitate adoption of real time payments," wrote Senior Counsel for Research and Policy Andrew Morris. "Accordingly, NAFCU supports amendments to the PSR policy that are designed to conform intraday credit and overnight overdraft policies with the 24x7x365 operating environment of FedNow."
Morris offered the association's support for updating the definition of a business day but asked that the Fed ensure that the definition reasonably accommodates interoperability with private settlement systems.
Morris also flagged concerns related to corresponding changes to daylight overdraft and penalty fee calculations impacting institutions that are not FedNow users. Specifically, Morris noted NAFCU is concerned imposing a higher fee for daylight overdrafts would be unfair to those credit unions that do not plan to take advantage of the 24-hour business day for settling FedNow transactions.
In addition, regarding the liquidity management tool (LMT) available for FedNow users, Morris noted that lack of access for nonparticipants would be disadvantageous for managing credit risk over weekends and holidays.