OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
SUPERVISION AND REGULATION
July 03, 2001
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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 |
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| DIVISION OF BANKING SUPERVISION AND REGULATION |
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| SR 01-16 (SPE) July 03, 2001 |
The Board recently rescinded its policy governing third-party access to the Fedwire system.1 As a result, this letter revokes previously issued supervisory guidance on Fedwire Third Party Access Policy (SR letter 95-48) and Fedwire Third-Party Access Policy - Foreign Service Provider (SR letter 96-07). Fedwire is the Federal Reserve's payment system for funds and securities transfers. In 1987, the Board approved a set of terms and conditions under which an institution could designate another institution or other service provider to initiate, receive, or otherwise process Fedwire funds or securities transfers in the participant's account at the Federal Reserve. Certain of these conditions were reviewed or enforced through the supervisory process, as reflected in SR letter 95-48 and SR letter 96-07.2 After reviewing the experience with Fedwire third-party access arrangements, the Board determined that such arrangements have not adversely affected the ability of depository institutions to manage their Federal Reserve accounts or increased risk to the Federal Reserve. As a result, the Board has determined that a specific operational policy addressing Fedwire third-party access is no longer necessary. Institutions will, however, continue to be required to formally authorize any access by third-parties to process Fedwire transfers on their behalf through a written authorization submitted to the Federal Reserve. In addition, banking organizations are expected to continue to address and manage risks that may arise out of outsourcing of, or other third-party access to, their Fedwire operations. Supervisory guidance on outsourcing issued by the Federal Reserve (SR letter 00-04) reiterates this expectation and provides basic standards for outsourcing arrangements.3 Examiners should continue to review Fedwire third-party access arrangements in the course of risk-focused examinations. Such arrangements should be conducted in a manner consistent with the expectations laid out in SR letter 00-04. Institutions that outsource Fedwire or other critical payment operations are expected to retain responsibility for managing their Federal Reserve accounts, exercise appropriate control over any intraday credit granted, implement adequate contingency backup arrangements, and include the arrangement in their audit plan. Further, given the additional supervisory considerations that arise with respect to foreign outsourcing of critical operations, examiners should notify the Deputy Director, Division of Banking Supervision and Regulation, of any arrangements involving establishment of Fedwire operations in foreign jurisdictions. Reserve Banks are asked to send this letter to institutions supervised by the Federal Reserve in their district. Questions regarding this letter may be directed to Heidi Richards, Assistant Director, at (202) 452-2598. Questions regarding Fedwire policies may be directed to Sue Harris, Senior Financial Service Analyst, Division of Reserve Bank Operations and Payment Systems, at (202) 452-3490.
Richard Spillenkothen Supersedes: SR letters 96-07 and 95-48 Cross-reference: SR letter 00-04
Notes: 1. See Federal Register, Vol. 66, No. 72, pp. 19165-19166, April 13, 2001. Return to text 2. These requirements are also reflected in examination procedures found in the FFIEC Information Systems Examination Handbook, 1996 Edition, Chapter 18. These examination procedures will be updated to reflect the rescission of the third-party access policy. Return to text 3. See SR letter 00-04, "Outsourcing of Information and Transaction Processing," February 29, 2000. Return to text
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SR letters | 2001
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