District Circular Letters
August 2, 2001
BANKING SUPERVISION AND REGULATION:
FEDWIRE ® THIRD-PARTY ACCESS POLICY
To State Member Banks, Bank
Holding Companies, U.S. Branches
and Agencies of Foreign Banks,
and Others Concerned,
in the Twelfth Federal Reserve District
Rescission of Fedwire Third-Party Access Policy (SR
01-16 [SPE])
The Board has rescinded its policy governing third-party
access to the Fedwire system.
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. Some of these conditions were reviewed or enforced through the
supervisory process, as reflected in SR letter 95-48 and SR letter 96-07.
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.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 indicated
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.
Additional Information
All circulars and documents are available on the Internet
through the Federal Reserve Bank of San Francisco's Internet site, at
http://www.frbsf.org/banking/letters.
For additional information about the rescission of the
Fedwire third-party access policy, please call (415) 974-2593.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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