Fed Seeks Feedback on Its Role in Faster Payments Settlement

The Federal Reserve System today issued a request for comments on potential Fed actions to accelerate interbank settlement of faster payments, including the idea of the Fed banks developing a 24/7/365 real-time settlement service and a liquidity management tool to support this service. The suggestion was made in the 2017 final report of the Faster Payments Task Force, which included more than 70 American Bankers Association member bankers.

Specifically, the Fed is seeking comment on whether the Federal Reserve Banks should consider developing a real-time gross settlement service for faster payments that would settle faster payments using participating banks’ balances in accounts at the 12 regional Fed banks. Meanwhile, the potential liquidity management tool would operate 24/7/365 to facilitate the movement of funds during evenings, weekends and holidays when traditional settlement systems are not open.

“The Fed has the unique ability to provide the infrastructure to reliably settle obligations between banks using balances at the central bank,” said Fed Governor Lael Brainard at an event today in Chicago. “As such, we have a responsibility to serve the broad public interest by providing a flexible and robust payment infrastructure on which the private sector can innovate.”

The task force’s 2017 report said that to be effective, a faster payments service would require interbank settlement within 30 minutes of an end user receiving a completed payments and that credit and liquidity risks arising from a settlement lag must be managed. Responses to the Fed’s request are due by Dec. 14. For more information, or to participate in developing ABA’s response, contact ABA’s Steve Kenneally.