TCH submitted a comment letter to the OCC in response to notice of proposed rulemaking (NPR) on the activities and operations of national banks and federal savings associations. The comment letter notes that TCH supports the current OCC framework for evaluating and addressing the risks posed by participation in payment systems and for notifying the OCC of such participation as workable and agrees that it should be incorporated into OCC regulations (12 C.F.R. Part 7), but suggests some potential improvements by, in part, recommending the OCC:

• Provide additional guidance as to which of the components articulated in IL 1140 may be the most important and under what circumstances individual components should be considered in a bank’s analysis;
• Clarify that due diligence and risk management activities should be appropriately directed to the Federal Reserve Bank (FRB) that is imposing an indemnity or open ended liability where the FRB is acting as a service provider to the payments system participant;
• Omit from the definition of “member” those “indirect members” that are not bound by the payment system’s rules;
• Revise the definition of “open ended liability” to accurately take into account liabilities imposed directly by FRBs acting as service providers to payment system participants; and
• Provide guidance relating to the considerations that a bank should take into account when applying the definition of “payment system” internationally to derivatives clearing organizations or clearing agencies that may operate in ways that would not allow them to be registered under U.S. law.

In addition, the letter conveys support for the removal of the word “electronic” from current section 7.5001 and a reorganization of the sections so the criteria may apply to any potential national bank activity, and not just those that are electronic in nature. Finally, TCH requested the OCC correct the erroneous description of its funds transfer system, CHIPS, in Banking Circular 235. Specifically, that the OCC note that CHIPS is a hybrid real-time netting system and not a “net settlement system” as represented in the circular.

To read the full comment letter click here.