Same-Day Check Settlement Rule
March 26, 1998
Circular No. 11040

Comments Requested by July 17

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

The following is from a statement by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has requested comment on the benefits and drawbacks associated with its 1994 same-day settlement rule. The Board also is requesting comment on the implications of potential further rule changes to reduce legal disparities between the Federal Reserve Banks and private-sector banks in the presentment and settlement of checks.

Comments are requested by July 17, 1998.

The Board's same-day settlement rule enhanced the legal rights of private-sector banks to obtain same day settlement for checks presented to a paying bank by 8:00 a.m. local time at specified locations. The Board is evaluating marketplace experience under this rule and is considering further modifications to the rule pursuant to its responsibility under the Expedited Funds Availability Act.

The Board is also considering whether modifications to its Regulation J, which governs check collection by the Federal Reserve Banks, to reduce or eliminate legal disparities would enhance the efficiency of the interbank check collection market, the check collection process, and, more broadly, the payments system.

The Board believes that a reduction in the legal disparities between the Federal Reserve Banks and private-sector banks generally should promote competition in the provision of check collection services. This competition should, in turn, promote efficiencies and spur innovation.

The Board will also consider whether potential further rule changes would increase costs to paying banks and their check-writing customers, and the extent to which these costs represent increases in the overall cost of the check system or a shift in costs from other check system participants.

The Board's official notice on this matter, as published in the Federal Register of March 16 is available as a file (pdf - 54kb). Comments should be submitted to the Board, as specified in the notice, by July 17, 1998.