The Wall Street Journal writes on "Banks' Newest Fed Headache: Nonstop Instant Payments," which says, "The Federal Reserve expects to launch a new system this month aiming to make payments in the U.​S. banking system available immediately, around the clock. Although it is a boon to consumers and many businesses, some analysts warn that FedNow could destabilize banks' reliance on customer cash, fanning the flames of deposit flight that became the bane of several regional banks this spring. Under an existing system called ACH (​automated clearinghouse), transactions typically take several days to settle. That can be frustrating for those waiting to receive their funds but often benefits banks that use the money in the interim. FedNow also allows smaller lenders to easily adopt the program, whereas another real-​time network built by big banks has struggled to gain traction." The piece continues, "FedNow'​s launch comes at a precarious time, during the Fed'​s year-​plus effort to raise interest rates and quell inflation. Banks are competing with money-​market funds and other higher-​yielding products for deposits, and paying up to borrow elsewhere. U.​S. commercial-​bank deposits were down $​705 billion in June from a year ago." It adds, "Big outflows from uninsured depositors -- those with accounts larger than $​250,​000 -- might be less likely via FedNow as well. Large withdrawals helped force regulators to swiftly shut down Silicon Valley Bank and its peers. FedNow limits transactions to $​500,​000 at a time, though instant transfers across more than one account could occur. The bottom line, said Ethan M. Heisler, editor in chief of The Bank Treasury Newsletter, is that '​banks will need to sit on a lot more cash than they are used to.'"

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