The Federal Reserve Board is seeking public comment on proposed changes to procedures related to the provision of intraday credit to U.S. branches of foreign banks.
The changes are designed to refine the Payment System Risk policy process which governs the level of intraday credit that Federal Reserve Banks can provide these branches.
The Federal Reserve provides intraday balances and credit to facilitate the smooth functioning of the overall payment system.
While the policy generally applies similarly to foreign and U.S. banks, certain procedures for determining the level of intraday credit that foreign banks can receive from the Fed differ.
For example, the policy relies on a foreign banks strength of support assessment (SOSA) ranking and its status as a financial holding company (FHC) to set the amount of intraday credit that U.S. branches can receive from Fed banks.
The Fed board announced that the SOSA ranking will be eliminated. Also, it says a foreign banks status as an FHC should not affect foreign banks access to intraday credit.
The board has proposed alternative ways to set foreign banks level of intraday credit that do not rely on SOSA rankings or FHC status. It believes that foreign banks’ resulting net debit caps would be better tailored to foreign banks use of intraday credit and would not limit the U.S. operations or foreign banks.
The proposed changes are open for comment for 60 days after publication in the Federal Register.