Reserve Account Management and Payment System Risk

How can financial institutions access information on reserve balances and the amount of interest earned?

Reserves Central provides resources and tools to help financial institutions access information on reserve balances and related calculations, such as the amount of interest earned on those balances. From Reserves Central, financial institutions can review their reserve balances and drill down into interest calculations.

What is the Term Deposit Facility?

The Term Deposit Facility (TDF) is a program under which the Federal Reserve offers term deposits to institutions that are eligible to receive interest on the balances they maintain at the Reserve Bank. An eligible institution may place funds at its Reserve Bank in a term deposit for an agreed upon number of days and reduce the amount of reserves it holds.

What are excess balance accounts?

Excess balance accounts are limited-purpose accounts for maintaining the excess balances of institutions that are eligible to earn interest on balances at Federal Reserve Banks. The participating eligible institutions ("participants") authorize another institution ("agent") to manage the excess balance account on their behalf.

Are reserve requirements still in effect?

On March 15, 2020, the Board of Governors reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

Effective March 11, 2021, the Reserves Central application has been modified to reflect the elimination of reserve requirements and streamline information for users. Links to Reservable liabilities will be disabled for maintenance periods after March 10, 2021. Additionally, Reserve Balance Requirement detail links will be disabled going forward as all reserve requirement ratios are set to zero percent.

Reserves resources

• An account management guide for depository institutions on opening and managing their accounts with the Federal Reserve
• Resources on Reserves Central to help financial institutions view account balances and the interest earned on those balance
• Information on excess balance account setup and frequently asked questions.
• Information on Term Deposit Facility setup operation results, and link to the Term Deposit Facility application

What is the Federal Reserve Board of Governors’ Payment System Risk (PSR) policy?

• The PSR policy addresses the risks that payment systems present to the Federal Reserve Banks, the banking system, and other sectors of the economy.
• One component of the PSR policy is to govern institutions’ use of Federal Reserve intraday credit, also referred to as “daylight overdrafts.”
• A daylight overdraft occurs when funds in an institution’s reserve account are insufficient to cover account debits Fedwire⁽¹⁾ funds transfers, incoming Fedwire securities transfers, or other payment activity processed by a Reserve Bank such as check or automated clearinghouse (ACH) transactions.

Payment System Risk resources

• The official Federal Reserve Policy on Payment System Risk
• General information and FAQs about the Payment System Risk policy
• An overview of the Federal Reserve’s Payment System Risk Policy on Intraday Credit
• Detailed information on the steps necessary for depository institutions to comply with the Federal Reserve’s policies on intraday credit can be found in the Payment System Risk Policy Guide