The usually aloof and austere Federal Reserve Board is hinting that it may want to enter the 21st Century.
A little out of the blue, the Fed has announced that it wants public input about the creation of a real-time interbank settlement system for faster payments that could affect a wide variety of financial transactions.
“The potential actions, which would facilitate real-time interbank settlement of faster payments, build on collaborative work with the payment industry through the Federal Reserve System’s Strategies for Improving the U.S. Payment System (SIPS) initiative,” according to a statement from the Fed.
The Fed wants feedback on two potential actions that may support the further development of faster payments in the United States:
- “The development of a service for real-time interbank settlement of faster payments 24 hours a day, seven days a week, 365 days a year (24x7x365);”
- And the “the creation of a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments, regardless of whether those services are provided by the private sector or the Federal Reserve Banks.”
For now, board officials say they are not committing to “any specific action.” But it’s a safe bet the Fed wants to eventually take some kind of action.
“Consumers and businesses increasingly expect to be able to send and immediately receive payments at any time of the day, any day of the year,” says Lael Brainard, governor of the Federal Reserve Board, in a prepared statement. “A 24/7 economy with 24/7 real-time payments needs 24/7 real-time settlement. That is where we believe that the Federal Reserve and the private sector together need to make investments for the future.”
In addition, Fed officials argue that real-time settlement “avoids interbank credit risk by aligning the speed of interbank settlement with the speed of underlying payments. As a result, broad use of real-time settlement for faster payments could enhance the overall safety of the faster payments market in the United States.”
The Fed is also hoping that “a nationwide real-time interbank settlement infrastructure by the Federal Reserve could encourage more banks to develop faster payment services, creating more choice for consumers, households, and businesses,” officials say. “A liquidity management tool could improve the level of participation by banks in a real-time settlement infrastructure for faster payments, and hence public access to faster payment services, by mitigating risk that can arise for banks outside of standard business hours.”
Industry participants can submit comments, identified by Docket No. OP — 1625, the following ways:
- The Fed’s website.
- Send comments here.
- E-mail messages that include a docket number in the subject line: firstname.lastname@example.org
- FAX: (202) 452-3819 or (202) 452-3102
- Standard Mail: Ann Misback, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551.
By the way, Fed officials say that comments are due by Dec. 14, 2018.