💸 TLDR it’s the bank’s problems to make sure they can instantly conjure the actual money matching these IOUs. Leveraged banks + fednow > Faster bank runs + larger bailouts ?
“$Step 8: Funds availability and notification to customer: As a term of participation in the FedNow Service, the Federal Reserve Banks anticipate requiring the Receiver FI to make funds available to the recipient immediately after step 7.”
“Liquidity Management
FIs that send credit transfers or provide settlement services in the FedNow Service will need a strategy to maintain liquidity for instant payments. As with settlement, this may involve either making internal adjustments, sourcing liquidity from the Discount Window, another Fl or via a correspondent.“
“Making Funds Available Immediately
As noted, participant FIs will be expected to make funds available immediately following receipt of an advice of credit. Under Regulation J and Operating Circular 8, this means that a Receiver Fl is required to make funds available as soon as is practicable and no more than a few seconds after receipt of an advice, with one exception (see Understanding Accept Without Posting below). The Federal Reserve Banks will not prescribe how Fis should make the funds available to their customers from an operational standpoint. A participant FI could meet the availability standard, for example, by memo-posting (where the funds are not yet posted but the funds are included in the customers' balance) or by opting to post the funds to a customer account directly, so long as the funds are available for their customer to use.”
“Liquidity Expectations
There are a few key points to keep in mind when thinking about liquidity management and the FedNow Service:
• FedNow participants or their correspondents will be expected to maintain balances in their master accounts to settle FedNow transactions, consistent with the Federal Reserve's Policy on Payment System Risk.
• Participants should not expect the FedNow Service, at initial launch, to reject payments based on a participant's insufficient balance or overdraft capacity, even if the Federal Reserve Banks do so for other services. However, standard intra-day and overnight overdraft fees will apply.
• The Federal Reserve Banks do not intend to open the Discount Window outside of standard hours. During its business day, the Federal Reserve Banks will provide intra-day credit to FedNow participants under the same terms and conditions as its other services.”
nico / Nico 🚨💀🚨
npub1w4…9quku
2023-03-26 10:00:02
in reply to nevent1q…g25w
Author Public Key
npub1w4yfhvlemcl6q3j3n9kvvcgtqreye28mkw6zwpgz7fn64sj3ph0sw9qukuPublished at
2023-03-26 10:00:02Event JSON
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"created_at": 1679824802,
"kind": 1,
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"content": "💸 TLDR it’s the bank’s problems to make sure they can instantly conjure the actual money matching these IOUs. Leveraged banks + fednow \u003e Faster bank runs + larger bailouts ?\n\n\n“$Step 8: Funds availability and notification to customer: As a term of participation in the FedNow Service, the Federal Reserve Banks anticipate requiring the Receiver FI to make funds available to the recipient immediately after step 7.”\n\n“Liquidity Management\nFIs that send credit transfers or provide settlement services in the FedNow Service will need a strategy to maintain liquidity for instant payments. As with settlement, this may involve either making internal adjustments, sourcing liquidity from the Discount Window, another Fl or via a correspondent.“\n\n“Making Funds Available Immediately\nAs noted, participant FIs will be expected to make funds available immediately following receipt of an advice of credit. Under Regulation J and Operating Circular 8, this means that a Receiver Fl is required to make funds available as soon as is practicable and no more than a few seconds after receipt of an advice, with one exception (see Understanding Accept Without Posting below). The Federal Reserve Banks will not prescribe how Fis should make the funds available to their customers from an operational standpoint. A participant FI could meet the availability standard, for example, by memo-posting (where the funds are not yet posted but the funds are included in the customers' balance) or by opting to post the funds to a customer account directly, so long as the funds are available for their customer to use.”\n\n“Liquidity Expectations\nThere are a few key points to keep in mind when thinking about liquidity management and the FedNow Service:\n• FedNow participants or their correspondents will be expected to maintain balances in their master accounts to settle FedNow transactions, consistent with the Federal Reserve's Policy on Payment System Risk.\n• Participants should not expect the FedNow Service, at initial launch, to reject payments based on a participant's insufficient balance or overdraft capacity, even if the Federal Reserve Banks do so for other services. However, standard intra-day and overnight overdraft fees will apply.\n• The Federal Reserve Banks do not intend to open the Discount Window outside of standard hours. During its business day, the Federal Reserve Banks will provide intra-day credit to FedNow participants under the same terms and conditions as its other services.”",
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