FR2226_20200515_omb

Supporting Statement for the
Report of Net Debit Cap
(FR 2226; OMB No. 7100-0217)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years, with
revision, the Report of Net Debit Cap (FR 2226; OMB No. 7100-0217). Federal Reserve Banks
collect these data annually to provide information that is essential for their administration of the
Board’s Payment System Risk (PSR) policy. The reporting panel includes all financially healthy
depository institutions with access to the discount window. The Report of Net Debit Cap
comprises three resolutions, which are filed by a depository institution’s board of directors
depending on its needs. The first resolution is used to establish a de minimis net debit cap, the
second resolution is used to establish a self-assessed net debit cap,1 and the third resolution is
used to establish simultaneously a self-assessed net debit cap and maximum daylight overdraft
capacity.
The Board revised the FR 2226 by (1) removing references to the strength of support
assessment (SOSA) ranking, (2) removing references to foreign banking organizations’ (FBOs)
financial holding company (FHC) status, and (3) adopting alternative methods for determining
an FBO’s eligibility for a positive net debit cap, the size of its net debit cap, and its eligibility to
request a streamlined procedure to obtain maximum daylight overdraft capacity.
The current estimated total annual burden for the FR 2226 is 1,028 hours, and would
increase to 1,042 hours. The revisions would result in an increase of 14 hours.
Background and Justification
The model resolutions associated with the Report of Net Debit Cap address the use of
daylight credit pursuant to the Board’s PSR policy. Under the policy, institutions that maintain a
Federal Reserve account are assigned or may establish a net debit cap that represents a maximum
limit on uncollateralized daylight overdrafts incurred in that account.2 A daylight overdraft
occurs when the intraday balance in a depository institution’s Reserve Bank account becomes
negative. The net debit cap is calculated by applying a net debit cap multiple to a capital measure
(risk-based capital for a U.S. chartered institution and a U.S. capital equivalency measure for a
U.S. branch or agency of a foreign bank).3 An institution’s cap category and its reported capital
determine the size of the net debit cap. The six cap categories are (1) zero, (2) exempt-fromfiling, (3) de minimis, and the self-assessed categories, which include (4) average, (5) above
average, and (6) high. All cap categories are granted at the discretion of the Reserve Banks.
1

Institutions use these two resolutions to establish a capacity for daylight overdrafts above the lesser of $10 million
or 20 percent of the institution’s capital measure. Financially healthy U.S. chartered institutions that rarely incur
daylight overdrafts in excess of the lesser of $10 million or 20 percent of the institution’s capital measure do not
need to file board of directors’ resolutions or self-assessments with their Reserve Bank.
2
In December 2008, the Board published its revised Federal Reserve Policy on Payment System Risk. See 73 FR
79109 (December 24, 2008).
3
See 55 FR 22095 (May 31, 1990).

Financially healthy institutions that incur peak daylight overdrafts up to $10 million or 20
percent of their risk-based capital or U.S. capital equivalency measure may be assigned a cap,
called an “exempt-from-filing cap,” by the Reserve Bank. However, if an institution wishes to
increase its daylight overdraft capacity beyond the limits afforded by an exempt-from-filing cap,
it must file a board of directors’ resolution with its Administrative Reserve Bank authorizing a
higher capacity.4
The de minimis cap category allows institutions to incur peak daylight overdrafts up to a
cap of 40 percent of their risk-based capital or U.S. capital equivalency measure. Financially
healthy institutions that expect to incur daylight overdrafts in excess of the exempt-from-filing
limitations, but less than 40 percent of their capital measure, should file a board of directors’
resolution with their Administrative Reserve Bank. This category was designed to reduce the
burden of performing a self-assessment for those institutions incurring relatively small levels of
daylight overdrafts.
Financially healthy institutions that use Federal Reserve intraday credit in amounts that
exceed 40 percent of their capital measure must establish a cap through the self-assessment
process, which determines whether the risk profile of the institution allows it to obtain a higher
cap and whether it should be an average, above average, or high cap.
In 2001, the Board approved a policy change that allows depository institutions with selfassessed net debit caps to pledge collateral for the purpose of expanding their daylight overdraft
capacity beyond their net debit caps. Depository institutions that wish to pledge collateral to
expand their daylight overdraft capacity must provide justification for this additional capacity
and a board of directors’ resolution approving it. The institution will then be monitored at its net
debit cap plus the value of the collateral supporting the expanded capacity up to its Reserve
Bank-approved maximum capacity.
The Federal Reserve monitors the compliance of depository institutions with their net
debit caps by using the Federal Reserve Bank’s Account Balances Service ex post monitoring
system. An institution that exceeds its net debit cap may be counseled by its Reserve Bank. If an
institution continues to exceed its net debit cap or if it poses an excessive credit risk, the
institution’s payment activity may be monitored in real time using the Reserve Banks’ Account
Balance Services/Settlement Services application, where Fedwire funds transfers, net settlement
transactions, and ACH credit originations that would cause the institution’s account balance to
exceed its net debit cap would be rejected or delayed.
In 2007, the Board implemented minor revisions to the way in which the PSR policy is
implemented. In an effort to streamline the resolutions filed by institutions eligible for maximum
daylight overdraft capacity, two former resolutions were combined into one: resolution 3a,
collateralized capacity, and resolution 3b, in-transit securities. These resolutions were replaced
by the maximum daylight overdraft capacity resolution that combines the board of directors’

4

The Administrative Reserve Bank is responsible for the administration of Federal Reserve credit, reserves, and
risk-management policies for a given institution or other legal entity.

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approval of the institution’s self-assessment as well as its maximum daylight overdraft capacity
level.
Description of Information Collection
The reporting panel includes all financially healthy depository institutions with access to
the discount window that incur daylight overdrafts in their Federal Reserve accounts and wish to
establish capacity for daylight overdrafts greater than that afforded by an exempt cap. Depository
institutions that are assigned zero net debit caps or exempt net debit caps do not have to file
board of directors’ resolutions with their Administrative Reserve Banks. Institutions that apply
for and are allowed a de minimis net debit cap or a self-assessed net debit cap must file a board
of directors’ resolution. Institutions are required to submit the resolutions at least annually.
A de minimis cap can be adopted by an institution if it limits its daylight overdrafts to 40
percent of its capital measure. In this case, the institution files a de minimis cap resolution, the
first model resolution.
Depository institutions seeking capacity for daylight overdrafts greater than that afforded
by the exempt or de minimis caps must complete a self-assessment. The self-assessment takes
into consideration a depository institution’s creditworthiness, intraday funds management and
controls, customer credit policies, operating controls, and contingency procedures. (A selfassessment is required for average, above average, or high cap categories.) The results of the
self-assessment must be reviewed and approved by the institution’s board of directors. The
directors’ approval must be communicated to the Reserve Bank by submission of a board of
directors’ resolution, the second model resolution. The Reserve Bank will ensure that the cap
resolution is complete and the cap requested is appropriate. The work papers supporting the selfassessment and resolution should be retained by the institution for review by its primary
supervisor.
Depository institutions with self-assessed net debit caps that seek additional daylight
overdraft capacity must submit to their Administrative Reserve Banks a written business
justification to support the request for the additional capacity. In evaluating a depository
institution’s request, the Administrative Reserve Bank will review the institution’s daylight
overdraft levels, financial condition, and written business justification. In addition to ensuring
that the institution has explored other alternatives for addressing intraday liquidity problems, the
Administrative Reserve Bank will consult the institution’s primary regulator as well as Reserve
Bank staff from the discount window and legal areas. If the Administrative Reserve Bank
approves the request, the depository institution will need to file the maximum daylight overdraft
capacity resolution, which is resolution three. This resolution combines the board of directors’
approval of the self-assessment and the maximum daylight overdraft capacity amount in order to
ease the reporting burden of these institutions.
Respondent Panel
The FR 2226 panel comprises depository institutions’ board of directors.

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Revisions to the FR 2226
Under the PSR policy, an FBO’s SOSA ranking can affect its eligibility for a positive net
debit cap, the size of its net debit cap, and its eligibility to request a streamlined procedure to
obtain maximum daylight overdraft capacity. Additionally, an FBO’s status as an FHC can affect
the size of its net debit cap and its eligibility to request a streamlined procedure to obtain
maximum daylight overdraft capacity. The amendments to the PSR policy (1) removed
references to the SOSA ranking, (2) removed references to FBOs’ FHC status, and (3) adopted
alternative methods for determining an FBO’s eligibility for a positive net debit cap, the size of
its net debit cap, and its eligibility to request a streamlined procedure to obtain maximum
daylight overdraft capacity. The implementation date of the amendments to the PSR policy is
October 1, 2020.
Time Schedule for Information Collection
The PSR policy requires depository institutions to submit their resolutions annually, as of
the date on which the board of directors approved the resolution(s). Institutions file the
resolutions directly with their Administrative Reserve Banks and keep current copies of the
resolutions on file for examiner review. The Reserve Banks enter the net debit cap information
into an ex post monitoring system and forward the information to the institutions’ primary
supervisors for examination purposes.
Public Availability of Data
There is no data related to this information collection available to the public.
Legal Status
The FR 2226 is authorized pursuant to sections 11, 16, and 19 of the Federal Reserve Act
(12 U.S.C. §§ 248(i), 248-1, 464). The obligation to respond is required for the institution to
obtain the benefit of an increase in daylight overdraft capacity beyond the limit afforded by the
exempt-from-filing cap.
The Board has confirmed that the disclosure of information collected on the FR 2226
would likely cause substantial harm to the competitive position of the respondent institution.
Therefore, the FR 2226 is exempt from disclosure under exemption (b)(4) of the Freedom of
Information Act (FOIA), which exempts from disclosure “trade secrets and commercial or
financial information obtained from a person and privileged or confidential” (5 U.S.C. §
552(b)(4)). In addition, information reported in connection with the second and third resolutions
may be protected under section (b)(8) of FOIA, to the extent that such information is based on
the institution’s CAMELS rating, and thus is related to examination reports prepared by, on
behalf of, or for the use of an agency responsible for the regulation or supervision of financial
institutions (5 U.S.C. § 552(b)(8)).

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Consultation Outside the Agency
There has been no consultation outside the Federal Reserve System.
Public Comments
On December 14, 2017, the Board published an initial notice in the Federal Register
(82 FR 58764) requesting public comment for 60 days on the extension, with revision, of the
FR 2226. The comment period for this notice expired on February 12, 2018. The Board did not
receive any comments. On April 1, 2019, the Board published a final notice in the Federal
Register (84 FR 12049). On April 6, 2020, the Board published a notice in the Federal Register
(85 FR 19077) delaying the implementation date of the amendments to the PSR policy from
April 1, 2020, to October 1, 2020.
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR 2226 is 1,028
hours, and would increase to 1,042 hours with the adopted revisions. The revisions would
increase the estimated average hours per response for de minimis and self-assessment
respondents that are FBOs by half an hour. These reporting requirements represent less than 1
percent of the Board’s total paperwork burden.

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Estimated
Estimated
Annual
number of
average hours
frequency
respondents5
per response

FR 2226
Current
De minimis cap
Self-assessed cap6
Maximum daylight overdraft
capacity
Current Total
Proposed
De minimis cap Non FBOs
De minimis cap FBOs
Self-assessed cap Non FBOs
Self-assessed cap FBOs
Maximum daylight overdraft
capacity
Proposed Total

Estimated
annual burden
hours

911
115

1
1

1
1

911
115

2

1

1

2
1,028

893
18
106
9

1
1
1
1

1
1.5
1
1.5

2

1

1

Change

893
27
106
14
2
1,042
14

The total cost to the public is estimated to increase from the current level of $59,367 to
$60,176 for the revised FR 2226.7
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The annual cost to the Federal Reserve System for collecting and processing these data is
negligible. Responses are not automated nor are they transmitted to the Board. There is a
minimal amount of time involved in forwarding information to the institutions’ primary
supervisors.

5

Of these respondents, 407 are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $600 million in total assets), https://www.sba.gov/document/support--table-size-standards.
There are no special accomodations given to mitigate the burden on small entities.
6
Self-assessed cap figures do not include those self-assessed cap respondents with maximum daylight overdraft
capacity.
7
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $20, 45% Financial Managers at
$71, 15% Lawyers at $70, and 10% Chief Executives at $93). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2019, published March 31, 2020, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.

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