This topic is an Addendum to the End of Day Settlement article Untimely Funds Settlement/Failure to Acknowledge Fees.
In addition, the following procedures apply when a Settling Bank does not timely satisfy its settlement balance. Unless these procedures indicate otherwise, each paragraph of these procedures applies whether a Settling Bank’s settlement balance is a net-net credit or a net-net debit (or a net credit or net debit if the Settling Bank settles only for itself). A reference in these procedures to the Participants that settle through a Settling Bank is also a reference to the Settling Bank itself as a Participant. As supplemented by these procedures, all DTC agreements, rules and procedures relating to Settling Banks and Participants remain in effect.
1. If a Settling Bank that is the designated Settling Bank for other Participants (“Subject Settling Bank”) does not timely settle with DTC on a given settlement date (“Due Date”) in accordance with the timeframes provided in the DTC Settlement Service Guide, DTC will notify each Participant that settles through the Subject Settling Bank. Each Participant must be prepared in advance to arrange for another bank to pay or receive funds via Fedwire® on the Participant’s behalf upon the instruction of DTC.
2. In its discretion, DTC may decide not to make payments on the Due Date to some or all of the Participants that settle through the Subject Settling Bank and have net credit balances. DTC will make such payments through the Subject Settling Bank on the next business day following the Due Date (“Next Business Day”) if, by 10 a.m. on the Next Business Day (the “SB Cure Time”), the Subject Settling Bank completes settlement with DTC and/or all Participants with net debit balances that would otherwise have settled through the Subject Settling Bank have wired payment to DTC in accordance with the preceding paragraph. If the Subject Settling Bank does not complete settlement by the SB Cure Time, DTC may make such payments to Participants only when DTC settles with all of the Participants that otherwise would have settled through the Subject Settling Bank and had net debit balances on the Due Date.
3. If the Subject Settling Bank and defaulting Participants complete settlement with DTC by the SB Cure Time, DTC will charge the Subject Settling Bank for any interest charges and other costs associated with liquidity costs of completing settlement. Once DTC has completed settlement with the Subject Settling Bank, each Participant that settles through the Subject Settling Bank will be deemed to have settled with DTC for purposes of its net settlement balance on the Due Date and, if any of these Participants also paid its settlement obligation to DTC directly by Fedwire®, those Participants must resolve their obligations with the Settling Bank and, to the extent, if any, that DTC has been overpaid, it will refund the amount directly to the affected Participant unless instructed otherwise by the affected Participant. DTC will not be responsible for any obligations of the Subject Settling Bank to or from such Participants.