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Fedwire
Source:
Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order
it here)
The Federal Reserve's funds
and securities transfer service.
It connects Federal Reserve banks and branches, U.S. government
agencies such as the Treasury, and some 8,000 depository institutions. All Fedwire transfers are completed on the day they are initiated,
usually in a matter of minutes.
They are guaranteed final by the central bank when the receiving
institution is notified of the credit to its account. The Depository Institutions Deregulation and Monetary Control
Act of 1980 required pricing of funds and securities transfers as well
as other Fed services and gave non-member depository institutions direct
access to Fedwire. Fedwire
may be used by depository institutions to move funds resulting from the
purchase or sale of federal funds, to move balances to correspondent banks
and to send funds to other institutions on behalf of their customers. Transfers on behalf of bank customers include funds associated
with the purchase or sale of securities, the replenishment of business
demand deposits and other time-sensitive or large payments. The U.S. Treasury, the Federal Reserve, and other federal agencies
use Fedwire extensively to disburse and collect funds.
Because of potential
risk on the large-dollar funds transfer networks, the Board of Governors
of the Federal Reserve introduced a risk-reduction policy in March 1986.
The policy is aimed at controlling and reducing daylight overdrafts
which occur when an institution has sent funds over Fedwire in excess
of the balance in its reserve or clearing account, or has sent more funds
over the Clearing House Interbank Payment System.
As fiscal agent of the United States, the New York Fed provides
electronic payments services for the U.S. Treasury's ACH-based program
for direct deposit of federal recurring payments.
These payments include Social Security, Veterans Administration
benefits and federal salary payments.
Source:
Adapted from Fedwire, Federal
Reserve Bank of New York.
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