What is the purpose of implementing an exposure limit by an ODFI?

The purpose of implementing an exposure limit by an Originating Depository Financial Institution (ODFI) is primarily to control fraud and errors in the processing of Automated Clearing House (ACH) files. An exposure limit is a risk management tool that helps financial institutions set maximum thresholds on the amount of transactions they will process on behalf of each originator.

By establishing these limits, ODFIs can mitigate the potential impact of fraudulent activities or mistakes that could result in significant financial losses. This practice is essential in the ACH network, where large volumes of transactions occur, and it protects both the financial institution and its clients from excessive risk. The implementation of exposure limits demonstrates due diligence in maintaining the integrity of the payments system and ensuring compliance with regulatory standards regarding risk management.

Other options suggest benefits such as maximizing transaction volumes, encouraging diversity in financial services, or reducing operational costs, but these do not specifically address the critical function of exposure limits in preventing fraud and errors, which is the core reason for their implementation by ODFIs.