Daylight overdraft

A daylight overdraft occurs at any point in the business day when the balance in an institution’s account becomes negative. Daylight overdrafts can occur in accounts at Federal Reserve Banks as well as at private financial institutions. Daylight credit can also arise in the form of net debit positions of participants in private payment systems. A daylight overdraft occurs at a Federal Reserve Bank when there are insufficient funds in an institution’s Federal Reserve Bank account to cover outgoing funds transfers or incoming book-entry securities transfers. An overdraft can also be the result of other payment activity processed by the Federal Reserve Bank, such as check or automated clearinghouse transactions.