Mester acknowledged concerns that FedNow, a real-time, all-hours payment system the central bank is making available to banks, could exacerbate banking troubles by facilitating fast outflows from financial institutions, in effect super-charging a potential bank run. She said it will be up to the users of FedNow themselves to use transfer limits. "Future releases of the FedNow Service may allow configurable transaction limits by customer type, if such limits are deemed useful," she added. Mester said banks can also plan for how they can tap Fed emergency lending and private sources of liquidity, should they need it. Mester's comments on mitigating the financial stability risks of the real-time payment system were rooted in events in the spring, when trouble at a limited number of banks spooked the global financial system, and were in part rooted in anxious customers moving funds from affected banks very quickly.

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Persons: Loretta Mester, Mester, Banks, Michael S, Paul Simao Organizations: YORK, Cleveland Federal, National Bureau of Economic Research Summer Institute, Fed, Thomson Locations: U.S