Revisions to Policy Statement on Payments System Risk.

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.

Also beginning July 20, 2006, the revised policy will align the treatment of the general corporate account activity of GSEs and certain international organizations with the treatment of activity of other account holders that do not have regular access to the discount window and thus are not eligible for intra-day credit. Such treatment will include applying a penalty fee to daylight overdrafts resulting from these entities' general corporate payment activity.

The revised policy contains other modifications to reflect the recent changes to the operating hours of the online Fedwire Funds Service, and to clarify, update, or remove items that have become outdated. These revisions were effective immediately.

By law, Reserve Banks act as fiscal agents for the following GSEs and international organizations: Fannie Mae; the Federal Home Loan Mortgage Corporation; entities of the Federal Home Loan Bank System; the Farm Credit System; the Federal Agricultural Mortgage Corporation; the Student Loan Marketing Association; the Financing Corporation; the Resolution Funding Corporation; the World Bank; the Inter-American Development Bank; the Asian Development Bank; and the African Development Bank.