Intraday Management of Bank Reserves: The Effects of Caps and Fees on Daylight Overdrafts

J. OF MONEY, CREDIT, AND BANKING, November 1996

Posted: 17 Sep 1996

See all articles by Diana Hancock

Diana Hancock

Federal Reserve Board - Division of Research and Statistics

James A. Wilcox

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

Abstract

The Federal Reserve System imposes caps and charges fees on the negative intraday balances in banks' reserve accounts, i.e., on daylight overdrafts. Our empirical results suggest that caps alone did little to reduce daylight overdrafts in the aggregate. By contrast, the 1994 imposition of fees reduced the average daily maximum overdraft on the Fedwire system by about $93 billion and the average aggregate overdraft at any time during the day by about $43 billion. We also found statistical evidence that higher beginning-of-day reserve balances, lower aggregate dollar values of securities-related transfers over Fedwire, and lower shares of banks' assets funded with federal funds and repurchase agreements reduced daylight overdrafts.

JEL Classification: G21

Suggested Citation

Hancock, Diana and Wilcox, James A., Intraday Management of Bank Reserves: The Effects of Caps and Fees on Daylight Overdrafts. J. OF MONEY, CREDIT, AND BANKING, November 1996, Available at SSRN: https://ssrn.com/abstract=7734

Diana Hancock (Contact Author)

Federal Reserve Board - Division of Research and Statistics ( email )

20th & C. St., N.W.
Washington, DC 20551
United States
202-452-3019 (Phone)
202-452-5295 (Fax)

James A. Wilcox

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-2455 (Phone)
510-643-1420 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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