Revisions to Policy on Payments System Risk
November 29, 2004
Circular No. 11662

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

In a press release, the Federal Reserve Board announced the approval of proposed revisions to its Policy on Payments System Risk (PSR Policy) addressing risk management in payments and securities settlement systems.

The revisions update the policy in light of current industry and supervisory risk management approaches as well as new international risk management standards for payments and securities settlement systems. In addition, they provide further clarification regarding the policy's objectives, scope, and application.

Among the key revisions are:

(1) an expansion of the policy’s scope to include those Federal Reserve Bank payments and securities settlement systems that meet the policy’s application criteria,
(2) revised general risk management expectations for systems subject to the policy, and
(3) the incorporation of both the Core Principles for Systematically Important Payment Systems (Core Principles) and the Recommendations for Securities Settlement Systems (Recommendations).

The Core Principles were developed by the Committee on Payment and Settlement Systems (CPSS) of the central banks of the Group of Ten countries. The Recommendations were developed by the CPSS and the Technical Committee of the International Organization of Securities Commissions. Both sets of standards are part of the Financial Stability Forum’s Compendium of Standards that have been widely recognized and endorsed by U.S. authorities as integral to strengthening global financial stability.

Revisions will take effect on January 2, 2005.

Further details are available in the Board’s press release and notice.

Press release
Board’s notice

Jeff Stehm
Assistant Director
Division of Reserve Bank Operations and Payment Systems

Douglas Conover
Senior Analyst
Division of Reserve Bank Operations and Payment Systems