ABA Offers Feedback on Federal Reserve Faster Settlement Proposal

In a comment letter to the Federal Reserve today, the American Bankers Association offered feedback 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.

ABA’s comments reflected input received from a number of member bankers that participated in the association’s Faster Payments Working Group. The letter offered support for three key features of the Fed’s proposal, including the creation of a liquidity management tool, provided it could be used by both public and private sector faster payment services to manage funds balances dedicated to faster payments. ABA also noted that if the Fed were to create a new settlement system, it would need to be interoperable with existing private sector solutions. Finally, ABA emphasized the importance of maintaining the Fed’s policy position that allows only chartered financial institutions to have direct access to the payments system.

While the working group did not reach consensus on whether the Fed should create a real-time gross settlement service rather than allowing the private sector to develop solutions independently, ABA outlined the pros and cons of these approaches in its response. Regardless of what course the Fed ultimately chooses, ABA added that decisions should be made quickly, as “uncertainty created in the meantime will contribute to business decisions being delayed.”


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